Kenny Leather, Loan Consultant Extraordinaire

Now that the dust has settled a bit regarding what kinds of real estate purchase loans are available these days, I thought I'd check back in with Kenny Leather of Princeton Capital and find out what the buzz is all about regarding new FHA loans...

Bobbie: Can you give us the lowdown on the new FHA loans? Why would someone want to use this product?

Kenny: Well, it's one of the few games in town for a 3% down payment and less than perfect credit.

Bobbie: So, does that mean there are still other 3% down products for people with better credit?

Kenny: No... well, there are Cal HFA loans that do mostly the same thing...

Bobbie: But for people with less than perfect credit, FHA is the way to go?

Kenny: Yes. This is really taking the place of the subprime market products (that are no longer available).

Bobbie: I've heard compliance requirements for sellers are less strict than the old guidelines, in terms of the property including certain features like screens on windows and special floor furnace vents?

Kenny: Yes, that is true compared to the old FHA guidelines, but compared to non FHA loans, the properties have to be in slightly better shape. For example, when an appraiser appraises a house with a non-FHA loan, they are just making sure the house is there and the value holds up; when they visit an FHA house, they additionally have to make sure the furnace is working, the water is running, etc.

Bobbie: How else is it different?

Kenny: For starters, until the end of December, we can go up to a loan amount of
$729,750. Other advantages include no income limitations, and we can go a little bit higher on the debt to income ratios.

Bobbie: Can you explain debt to income ratios, for our readers?

Kenny: It's when you take your debt divided by your income and you get a ratio. The lower the ratio the better.

Bobbie: Ok, we've reached information overload.

Kenny: I know and I agree!


So readers, let this sink in, and I'll continue the interview in a part two later! There's always more to learn...

Oh by the way, Kenny works in the San Francisco East Bay Area and would be happy to talk with you if you need his financial expertise. Call him at (510)409-7232 and interview him yourself!

Sellers: Careful Pricing is Crucial!

I found this gem from the California Association of Realtors:

Before the torrid real estate market of recent years, a common pricing strategy was to list your home for between 2.5 to 5 percent more than the expected sale price. This way, you would have room to negotiate with the buyer.

If you used this approach today, you'd be lucky to receive any offers. Recently, listings that were priced at or under market value received offer--sometimes multiple offers. Over-priced listings sat on the market unsold.

One risk of pricing too high for the market is that you won't receive offers. Sellers often find this hard to believe. Why won't buyers just make an offer if they think a listing is priced too high?

The answer is two-fold. First of all, if a listing is priced too high in a market where well-priced listings are selling, this may indicate that the seller has unrealistic expectations. Making an offer involves a big emotional commitment and it takes a lot of time. Most buyers don't want to waste their time offering on a listing that's over-priced for the market, particularly when there are other listings to choose from.

Secondly, even though buyers might prefer to buy without competition, the fact that a listing is popular is a stamp of approval. A property that is in high-demand is one that is likely to have good resale value.

Another risk of over-pricing is that you could end up in downward price spiral. Here’s how this can happen: You bring your home on the market listed at a price that you're sure is right. After all, your home is better--in your estimation--than anything else on the market. Your agent cautions against this, but you're intent on getting your price. After a month or two, you aren't even getting a nibble from an interested buyer. Even so, other listings similar to yours are coming on the market and selling. In fact, buyer's agents are using your over-priced listing to help them sell the well-priced listings that come on the market.

The longer your home stays on the market unsold, the bigger the risk that it will develop a negative stigma. Your home becomes the white elephant on the market. Buyers wonder if there's something wrong with the property. In most cases, the only thing wrong is the price.

So, you reluctantly agree to lower the price. Your efforts could be fruitless if you reduce too little, too late. Meanwhile, more well-priced listings come on the market and sell.

If the market softens, as it has in many areas around the country, you might have to make further price reductions. Buyers tend to gravitate to the newer listings, not the ones that have been on the market for months. You'll have to offer a cut-rate price to be competitive.

HOME SELLER TIP: It's difficult for sellers to be objective about the value of their home. Although most sellers estimate high, some sellers, who can't believe how much their home has appreciated, underestimate the value. For best results, rely on a real estate professional for a realistic price assessment. The dynamic is changing in many real estate markets around the country. Sellers, in many cases, are no longer in the driver's seat. Keep this in mind when you select a list price for your home.

Comparable sales from a few months ago may be out of date for the current market. Even though your neighbor's home sold for an exceptional price, it may have been the only game in town at the time.

THE CLOSING: Today, you're much more likely to find competition from other sellers who want to cash in on the recent extraordinary home price appreciation.

Weekly Market Watch

I post these market updates from Larry Klapow when he sounds particularly brilliant:

April 27 – May 4

I read with interest earlier this week a Market Watch article entitled “Home price data has its flaws.” The article emphasized what we have been saying for months and what has become the basis of our Reality Check initiative: real estate consumers aren’t getting the full story and the indexes the media use to report on the housing market can be misleading because of the locations, prices, types of housing and the rates of increase these organizations track.

Just days later, Realty Times writer Blanche Evans followed that story up (http://realtytimes.com/rtpages/20080505_realtyviewpoint.htm) by slamming both Shiller’s Index and the Associated Press for being “Grim Reapers.” And, for the first time in our knowledge, S&P Index Committee Chairman David Blitzer “acknowledged his organization’s” overall and metro-market readings paint an incomplete picture.

NAR Chief Economist Lawrence Yun even weighed in noting “Just like saying the average nationwide temperature today is 57 degrees doesn’t tell you anything, the same is true for real estate prices. The only way to tell what your home is really worth is to look at local-market conditions, do Internet research and utilize professionals (such as licensed appraisers) to help determine the value of your home.”

So, with that said, let’s paint the local, Bay Area market picture. It remains one of various micro climates that are showing signs of recovery each and every day:

East Bay – The East Bay market, which has its own share of mini micro climates, seems to be flourishing this spring. The Berkeley offices reports “We’re still hungry for inventory,” while the Castro Valley offices reports that it is “extremely busy with REOs.” Fremont Manager Will Butler confirms that adage that “Properly priced listings that show well are generating activity while properties that don’t sell in the first 20 days tend to sit longer.”

North Bay – The North Bay is showing great signs of recovery. In fact, Santa Rosa Manager Rick Laws reports, “Close your eyes, click your heels and ‘Toto, something tells me we’re not in Kansas anymore.’ We’re in the spring of 2004 if you’re in the (entry level) market under $500,000. Crowded open houses and multiple offers. We have experienced a very busy week in our office. It’s good to be us.” Santa Rosa’s Marin neighbor seems to concur. In fact, Southern Marin Manager Alice Gray noted, “Things are definitely better. Multiple offers on well-priced properties. One property in Sausalito had four offers after its first open house.”

Peninsula – I hate to be a broken record, but the biggest challenge in the Peninsula remains a lack of quality inventory. Having said that, the last few weeks have shown even greater promise for this unique market. All Peninsula offices report steady listing inventory and the jury is out on sales activity with offices reporting mixed valuations of steady or increasing sales. Burlingame Manager Leigh Whitten reports that one Millbrae home had over 200 visitors and Menlo Park Santa Cruz Avenue Manager Dave Hobson reporting “a slight surge in sales activity the last few weeks.”

San Francisco – The City – which, thanks to its years of pent-up demand and its locale as a global destination, has never really felt the effects of a true real estate slowdown – seems to have received an even bigger booster shot in the last couple of weeks. One Agent in our Lombard office went in unsuccessful on 21 offers recently only to find client success two days later against 17 offers on another listing. Both homes were said to have gone over by 25-30% over asking. The Van Ness office continues to report “our activity continues at a fast pace all price ranges.”

Bulb 101

Since everyone wonders what to do once their bulbs are finished flowering, I thought I'd post a little bulb primer.

From Ed Hume;

Q: How do you care for lilies, gladiolas, and irises after they have flowered, and is it the same as for tulips and daffodils?

A: Immediately after flower, I think it is a good idea to feed the foliage of all bulbs with 0-10-10 fertilizer. This helps build strength back into the bulbs, roots and tubers for the following year. If you live in the NW or other moderate climate areas, these bulbs can be left in the ground year-round. All you need to do is dig and divide them every few years, then replant them immediately if you wish. Iris and gladiolas need full sun, while lilies need a little shade for best and longest flowering.