The simple answer is LOANS and PRICES.
The low-end market has prices at 25% to 50% down from 3 years ago. We are back to around 2002-2003 prices and they are starting to look like bargains. The pendulum effect in market swings often leads to "overshoot" in market corrections. I think we are close to that territory now.
HOWEVER, that would not be important if loans were not available. Loans at this end of the market, and even up to $ 729,000 FHA, are there if you have good credit, and the interest rates are really low. First time buyer incentives are tremendous. Anyone who can buy right now should be doing so. A first time buyer may even end up with net payments after tax relief less than their rent !
The high-end market is tough. Why? 30 year loans over $ 729,000 are expensive and hard to get. So, if you want to buy a house for $ 2 million with a good loan, you need over $ 1.25 million in cash or equity. This is in a market where investors stocks are way down, business profits are down, and many people in this range used stated income loans to buy their present houses....stated income loans are almost impossible to get right now.
There are people in big houses who bought them on adjustable loans, and are now worried that when interest rates rise, they will not be able to pay. Some houses that were "Worth" $ 3 million 3 years ago, are now selling for half that. But who can buy them? That's the issue!
Thursday, April 30, 2009
What is a short-sale and how do I buy one?
A "short-sale" is where a house is sold, with lender approval, at a price which results in the lender not getting all the money they are owed. The lender agrees to take a loss, and the resident/owner of the house gets NOTHING! You cannot short-sell your house and walk away with money. You usually cannot short-sell your house if you have other assets which you could use to pay off the shortfall. A short-sale is designed for people who owe more than their house is worth, cannot make the payments, and do not have other liquid assets. Even then, lender agreement is not automatic. It is a tough and time-consuming process.
If you are looking to buy a short-sale, the price at which it is listed may be attractive, but it is probably at a price or even below the price it will sell for. Even then you may well be competing with multiple offers, and it may take months for the deal to be agreed and completed. If you like a short-sale house, you need to make an agressive offer, and then have a lot of patience. Your agent really needs to know what they are doing also....there are a lot of people operating in this bank-owned/short-sale environment who do things in very strange ways.
If you are looking to buy a short-sale, the price at which it is listed may be attractive, but it is probably at a price or even below the price it will sell for. Even then you may well be competing with multiple offers, and it may take months for the deal to be agreed and completed. If you like a short-sale house, you need to make an agressive offer, and then have a lot of patience. Your agent really needs to know what they are doing also....there are a lot of people operating in this bank-owned/short-sale environment who do things in very strange ways.
Tuesday, April 28, 2009
Problems with condo financing
As you can imagine, with so many people in financial trouble, there are many people behind on their HOA payments. Well, if the complex has more than 15% of it's units more than 30 days behind on HOA payments, the lender will probably NOT fund the loan for you to buy in that complex! Also the same applies if the complex is less than 51% owner-occupied.
This is a potential major problem as, when this occurs, the only buyers who can close the deal are CASH buyers. Some lenders are trying to get loans through but my information is that it is very, very difficult.
If these rules stay the same, the problem could get worse, as many cash buyers are investors, and this just makes the owner occupied ratio further away from lenders acceptable ratios.
Selling homes in these complexes is going to be very hard. On the other hand, if you are a cash investor, you may be in a very strong position.
The market at the moment is one of great opportunity, but it is NOT a simple market!
This is a potential major problem as, when this occurs, the only buyers who can close the deal are CASH buyers. Some lenders are trying to get loans through but my information is that it is very, very difficult.
If these rules stay the same, the problem could get worse, as many cash buyers are investors, and this just makes the owner occupied ratio further away from lenders acceptable ratios.
Selling homes in these complexes is going to be very hard. On the other hand, if you are a cash investor, you may be in a very strong position.
The market at the moment is one of great opportunity, but it is NOT a simple market!
Monday, April 27, 2009
Buying good deals in this crazy market
Many people do not realize that the market for houses under $ 500,000 in Orange County and LA now is very busy, and there is even a shortage of houses to buy !
There are many reasons for this. Surprised potential buyers think they can make lowball offers on houses where the prices are already low. WRONG! Most of the bank-owned and short sale houses on the market now are already priced low, and they will sell around asking price or even higher. They may also sell fast ! You have to be ready, find a place, or ideally a few, that you like, then make an aggressive offer. If you do not, a long period of confusion and frustration will be your result.
This is a great time to buy; prices are low, interest rates are low.......but don't think you are the only person who has realized this.
In 10 years everyone will wish they had bought now.The market over a million $ is a place for tremendous deals if you have access to cash. The market there is slow, and there are a lot of houses that just have to be sold. If you are in that fortunate position, buy now.
There are many reasons for this. Surprised potential buyers think they can make lowball offers on houses where the prices are already low. WRONG! Most of the bank-owned and short sale houses on the market now are already priced low, and they will sell around asking price or even higher. They may also sell fast ! You have to be ready, find a place, or ideally a few, that you like, then make an aggressive offer. If you do not, a long period of confusion and frustration will be your result.
This is a great time to buy; prices are low, interest rates are low.......but don't think you are the only person who has realized this.
In 10 years everyone will wish they had bought now.The market over a million $ is a place for tremendous deals if you have access to cash. The market there is slow, and there are a lot of houses that just have to be sold. If you are in that fortunate position, buy now.
Thursday, April 2, 2009
Avoid Closing Cost Sticker Shock
Buying a house involves a lot of costs that you may not initially expect. If you are buying a house for $ 400,000, and putting down a hard-saved 5% of $ 20,000 with a $ 380,000 FHA loan, you may think…..”Wow, we’ve got the $ 20,000 we need, isn’t that great! ”
It is quite possible that, when you are closing the deal, the escrow company will call you 2 days before close and say..,,, " send us $ 30,000"..... not $ 20,000! ................ouch!....... How much? ……………………What on earth can that be for?
Let’s have a look at why that might be true and how to prepare for it.
First of all, the escrow company is the only place you will get an exact number for your closing costs. However, they themselves cannot give you that number until the very last minute, so that does not help you very much.
The next best place to get an approximate number, and the most commonly used, is your lender. Your lender should give you what is called a “Good Faith Estimate” which lists all the costs with an approximate amount. If you don’t get one, ask! A good lender will work out all the costs associated with the purchase and put in a little extra for unexpected items.
Your realtor can also give you an estimate, but often will not have access to the loan costs, so the lender is the best place to get a reasonably accurate number.
Here are some of the costs that you will face:
1) Property taxes: You will have to pay some of the taxes paid by the previous owner for the period you are taking over; this varies according to when you buy the house. It can be a lot. Your bank may also insist that you “impound” you property taxes and could ask for as much as 6 months property taxes to be paid to them in advance! Ouch! Some of these may be based on the OLD tax rate for the house, not on your new tax rate based on your purchase price. You would get that back in the future, but right now, it is cash out of pocket.
2) Home Owners Association fees. You may have to pay some of this month and next month.
3) Insurance: you may have to have this impounded also and pay some in advance.
4) Escrow fees, title insurance fees, document fees, HOA transfer fees etc etc.
5) Loan fees. You hear about “No-cost” loans, but the costs are somewhere! Either you pay a higher interest rate, or you get fees and a lower rate. This can be a decision for you based on how long you intend to live in the house. The lowest rate will almost always have fees attached and these can be quite a lot if you want the lowest rate. No-one is out there doing this for nothing.
Get to grips with your closing costs early on so they do not bite you in the behind at the last minute.
It is quite possible that, when you are closing the deal, the escrow company will call you 2 days before close and say..,,, " send us $ 30,000"..... not $ 20,000! ................ouch!....... How much? ……………………What on earth can that be for?
Let’s have a look at why that might be true and how to prepare for it.
First of all, the escrow company is the only place you will get an exact number for your closing costs. However, they themselves cannot give you that number until the very last minute, so that does not help you very much.
The next best place to get an approximate number, and the most commonly used, is your lender. Your lender should give you what is called a “Good Faith Estimate” which lists all the costs with an approximate amount. If you don’t get one, ask! A good lender will work out all the costs associated with the purchase and put in a little extra for unexpected items.
Your realtor can also give you an estimate, but often will not have access to the loan costs, so the lender is the best place to get a reasonably accurate number.
Here are some of the costs that you will face:
1) Property taxes: You will have to pay some of the taxes paid by the previous owner for the period you are taking over; this varies according to when you buy the house. It can be a lot. Your bank may also insist that you “impound” you property taxes and could ask for as much as 6 months property taxes to be paid to them in advance! Ouch! Some of these may be based on the OLD tax rate for the house, not on your new tax rate based on your purchase price. You would get that back in the future, but right now, it is cash out of pocket.
2) Home Owners Association fees. You may have to pay some of this month and next month.
3) Insurance: you may have to have this impounded also and pay some in advance.
4) Escrow fees, title insurance fees, document fees, HOA transfer fees etc etc.
5) Loan fees. You hear about “No-cost” loans, but the costs are somewhere! Either you pay a higher interest rate, or you get fees and a lower rate. This can be a decision for you based on how long you intend to live in the house. The lowest rate will almost always have fees attached and these can be quite a lot if you want the lowest rate. No-one is out there doing this for nothing.
Get to grips with your closing costs early on so they do not bite you in the behind at the last minute.
Subscribe to:
Posts (Atom)