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Major Questions to Ask Yourself Before Deciding to Buy a Home

January 25, 2012 By George Sudol, San Francisco Bay Area Realtor Leave a Comment

Whether you’re currently in the process of buying a home or thinking about it for the future, this will be a very major commitment in your life and there are some key things to consider before making that purchase.

Here are some important questions you should ask yourself:

Am I likely to want to own it long term?

The most important thing to ask yourself before buying any property is whether you are likely to own it for a long time, such as 5 years or more. People buy property in hopes of increasing wealth and five years is about the break-even point for earning appreciation in value above the buying and selling transaction costs. Considering the uncertainty of the short term direction of homes values, if you don’t plan on holding the property for “at least” 3 years and you aren’t purchasing it to become a rental property, it probably isn’t worth considering.  Buying and selling a home quickly will often leave you worse off financially than if you just held off on becoming a homeowner and rented instead.

Do I truly love the home I want to buy?

It’s extremely important to consider whether you truly love the property you’re considering.  Real Estate should typically be held for the long term and your enjoyment of a property should perpetuate a happy and enduring ownership period. So don’t buy a property on impulse. Make sure that you truly do love it. Don’t buy a home just for the “sake” of “buying” because you’re envious of others who own a home or others who tell you it’s a good idea. Buy what you want and after careful consideration, when you are truly ready, buy a home that you will feel proud to own for many years to come.

Can I really afford it?

The cost of owning/maintaining a home is typically more than anyone anticipates going into it. You should to make sure that you’re comfortable with the mortgage payments, even if your lender tells you that you qualify for the given loan and purchase price. Lenders don’t take into account many day-today expenses like health care, child care, expensive lifestyles and habits, etc. Make sure that you can comfortably afford your home payments, still pay your other bills and expenses, and also still have a little left to save for retirement. Also, if you’re unsure of your long term employment situation for any reason, wait until your job situation is stable.

Is the home in good condition?

Be aware that fixer homes often don’t sell at enough of a discount to compensate for all the work that needs to be done. The cost of good quality construction and rehabilitation work can be astronomical and unless you are yourself a contractor, it typically will cost much more than you anticipate. You might want to leave the “needs TLC” or “fixer-uppers” property listings for the contractors out there and instead buy something in at least “Average” and “Livable” condition in order to avoid getting swept up in a disastrous rehab project.

How much do you know about the neighborhood?

Make sure that you do adequate research, look at enough properties, get a feel for the neighborhoods, and learn about property ownership with your Realtor before you made an offer. If you recently moved into town or don’t know the particular area, it might be a good idea to rent for a while and seek out the community that would be the most perfect for you within your financial means. This will be the biggest investment you ever make. You need to educate yourself in order to minimize the risk of the investment going wrong.

While there‘s no such thing as “risk-free” real estate, it would be wise to consider the questions above. Careful consideration of these key questions will increase your chances of experiencing a joyous, long-term property ownership experience. 

George Sudol  is the Broker/Owner of Bay Area Realty Services, a successful San Francisco Bay Area residential Real Estate firm. He also owns and operates Bay Area Mortgage Alliance, a California residential mortgage lending brokerage. See more at www.ba-realtyservices.com , Email george@ba-realtyservices.com, or Call 650-242-4079

 

SF Bay Area Real Estate

 

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State of the SF Bay Area Real Estate Market and Loans – January 2012

January 17, 2012 By George Sudol, San Francisco Bay Area Realtor Leave a Comment

Due largely to the lagging economy and the Euro crisis, Mortgage Rates remain at record lows to begin the year with the Avg 30-Yr fixed mortgage being at 4.18%, a # that is right between the low of 4.13% we saw at the beginning of October and the 4.23% Avg we saw throughout most of November and December. The Fed says it will keep the key federal funds rate near zero until mid-2013 and continues to reinvest in long-term securities to help keep rates low. However, a recent move by Congress will surprise some borrowers with higher mortgage fees in the coming weeks. On April 1st, the guarantee fee on loans that can be sold to Fannie Mae and Freddie Mac is set to increase by a minimum of 10 basis points and lenders have already started to pass that extra cost on to borrowers. Some lenders have plans to increase the price of their loans anywhere from 20 to 80 basis point, which translates to .125% – .25% in interest.

The Avg 30-Yr Fixed Conforming loan with 0 Pts is currently at 3.75% and the Avg 30-Yr fixed High Balance Conforming loan with 0 Pts is at 4.125%

Turning to the latest Real Estate trends, we finished up 2011 with another month of sales outpacing listings and inventory going down (for the 7th straight month) throughout most of the SF Bay Area. Overall, there was a net drop of ~40% of residential property inventory year-over-year from Dec 2010 to Dec 2011. Despite the trending of inventory reduction, SF Bay Area property values were flat through 2011 and we haven’t seen any appreciable gains in value since we hit the bottom of our current real estate cycle in the Winter of 2009.

The median price paid for all new and resale houses and condos sold in the SF Bay Area in November was $363,500. That was up 3.9% from $350,000 in October, but down 4.3% from $380,000 in November 2010. The median has declined on a year-over-year basis for the last 14 months. The low point of the current real estate cycle was $290,000 in March 2009. The peak was $665,000 in June/July 2007.

The median price of a SF Bay Area Single Family home was down 8.5% from Nov 2010 to Nov 2011 (from $511,140 to $467,680). San Mateo & Napa were the only SF Bay Area counties with a year-over-year “gain” for November (5.6% gain for San Mateo, 1.4% for Napa).

Just as in 2011, many will be trying to figure out where housing is headed for 2012.

While the housing market didn’t worsen in 2011, it didn’t stabilize either. This year, the story will be about local markets. While many housing markets rose and fell together, they’re recovering at difference paces. The key factors to effect the pace of recovery will be Confidence and Jobs, the Rental market, Mortgage Credit and Rates, and Foreclosures.

Housing is more affordable than it has been in decades and most SF Bay Area residents believe that this is a good time to buy, but some would-be buyers are worried about the short term direction of home values, some are worried about their job stability, and still others can’t qualify for a mortgage because of damaged credit and/or today’s tighter mortgage standards. However, if low mortgage rates aren’t enough to give urgency to would-be buyers, recent rent hikes could accelerate buyers’ decisions to take the plunge.

I believe the greatest degree of home value recovery will come out of significant reductions in distress sales. SF Bay Area foreclosure reslaes peaked at 52% in Feb 2009. In recent months, foreclosure resales have been accounting for ~25% of resales. However, short sales are as popular as ever, still accounting for ~21% of all resales, up from ~16% 2 years ago. Also, banks and other mortgage investors own around 440,000 foreclosed properties nationwide, but there’s another estimated 3.4 million loans in foreclosure or serious delinquency.

In the mean time, we enter 2012 on a positive note for the SF Bay Area housing market with low mortgage interest rates, a high level of housing affordability, and inventory trending down. February is typically the start of the biggest selling season here & we will know by April whether there are enough buyers lined up to keep pace with the many homes coming on the market in the new year.

To speak directly with George Sudol about SF Bay Area Real Estate Market please visit www.ba-realtyservices.com

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San Francisco Bay Area Housing Market Lost Traction in April as Sales Slipped to a 3-year Low and the Median Sales Price Fell Year-Over-Year For the 7th Straight Month

June 16, 2011 By George Sudol, San Francisco Bay Area Realtor Leave a Comment

June 2011 State of the Bay Area Real Estate Market & Loans

Interest rates have recently continued their downward movement and we are now back down to an Avg Rate of 4.375% for a 30-Yr Fixed Conforming Loan with 0 Pts and 4.5% for a 30-Yr Fixed High Balance Conforming Loan with 0 Pts.  Recently, the 10-year Treasury yield fell to its lowest level since November 2010, an indication that mortgage rates will fall even further.

Meanwhile, the Bay Area Housing market lost traction in April as sales slipped to a 3-year low and the median sales price fell year-over-year for the 7th straight month.  But there were also signs that the market is continuing it’s long road back to normalcy.  The percentage of homes purchased with adjustable rate and “jumbo” loans rose, while the percentage of sales involving foreclosures and investors fell.

The Bay Area Home Sale Price median has fallen year-over-year for 7 consecutive months, following 12 straight months of year-over-year gains.  The median peaked at $665,000 in June/July 2007 and dropped to a low of $290,000 in April/2009.  For April/2011 it was $360,000.

Locally, Peninsula and South Bay residential inventory rose slightly in May, but like all of 2011 so far, no “major” movement occurred.  The same can be said for Santa Clara and San Mateo County inventory as a whole. Peninsula Residential Property Sales rose 7% in May (from April), San Mateo County Sales rose 8% in May (from April), South Bay Sales rose 12% in May, San Jose Sales rose 2%, and Santa Clara County’s May Residential Sales were dead even compared to April.

Interestingly, the Avg Sale price of $1,040,343 for a San Mateo County Single Family home was the highest for any month since July/2008.  For Santa Clara County, the Avg Sale price of a single family home in May was $773,722,  3% higher than in April and 1% higher than May/2010.
It’s clear now that 2011 is off to a slow start. So far, market forces have balanced each other out and kept Bay Area home values from appreciating this year.  But there’s still time for that to turn around. Higher job growth and/or lower home prices, coupled with low mortgage rates and consumer confidence could still push sales well above today’s subpar level, even though there will still be those who won’t buy until they’re convinced that prices have hit rock bottom and those who can’t buy because they owe more on their existing home than they’re worth.

This Bay Area Real Estate Article was published by George Sudol/Broker of Bay Area Realty Services (in Palo Alto, CA) on 6-13-11 Website: www.ba-realtyservices.com Email: george@ba-realtyservices.com

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The Real Estate Insider Scoop on Short Sales

May 31, 2011 By George Sudol, San Francisco Bay Area Realtor 1 Comment

Whether you need to short sell your home (to avoid foreclosure and save at least “Some” of your credit) or are in the market to buy and are curious about buying a short sale property, there are some things you should know going into it.

Some key things that a Seller needs to know are:
1.It can be a long process because you may go through several buyers before you get one that sticks with it all the way

2.If you have 2 loans on your property, it is likely that whoever buys your home will have to come up with extra money to pay off the 2nd.  A good short sale listing agent will be savvy to navigate this potential pitfall.

3.Through 2012, the debt that is forgiven by your lenders in a short sale of your primary residence will not be considered taxable income by the State or Federal government.

This is a good thing.  After they lift this moratorium, the debt forgiven in a short sale (or foreclosure) will again become taxable income.

4. Most real estate loans used to originate the purchase of a home in California are non-recourse loans, which means that the lender cannot go after you for a deficiency judgment after the sale has completed.

5.Last but not least, you are expected to demonstrate hardship to your lender(s) as part of your application for acceptance of the short sale.  If you are financially sound and are up to date on your loan payments, it’s unlikely that your lender(s) will accept the short sale.

On the Buyer’s side, some key things to know are the following:

1.You will generally get the best deal when you purchase a short sale because the seller is the most motivated of all sellers and cares the least about what price they get.

2.The seller first needs to accept your offer and their acceptance of your offer is then subject to short sale lender approval.  If the short sale lender has already accepted a previously submitted purchase contract and you are coming in as a subsequent buyer, the process should go quicker, especially if the price you have agreed to is as least as high as in the previously accepted purchase contract.

3. While it is always best to “expect” 2-3 months for the short sale approval, it is sometimes completed (by the short sale lender) within a month.  It depends on the lender, how many loans there are (it always takes a little longer with a 2nd loan), how quickly the listing agent puts together the short sale package (including your seller-accepted offer), and how often the listing agent follows up on the short sale approval.

4.Your contract time period terms (days to close, earnest money deposit, contingencies, etc) generally don’t start when the seller accepts offer.  Instead, the days start ticking on the purchase contract once the short sale lender approves the purchase contract.  One exception is that sometimes the listing agent will ask that you deposit your earnest money right away (so that you have some “skin in the game” up front, lessening the chance of you backing out), although that deposit is still fully refundable throughout the entire process of short sale approval and through your subsequent purchase contract contingency period.

Overall, the Short Sale is a win-win for the buyer and seller as the seller gets a large mortgage off their hands and the buyer generally gets the property at a price that they know is a good/low one for today’s market.  Knowing these key things going into it will give you the right expectations for a successful short sale transaction from either side.

Written by George Sudol/Broker of Bay Area Realty Services in Palo Alto, California                                 (www.ba-realtyservices.com Email: george@ba-realtyservices.com)

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