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You are here: Home » 2013 » July

Waiving Appraisal

When prices are flat, or moderately increasing or decreasing, it’s fairly easy for an appraiser to peg the value of a property, and they can “bracket” it by finding homes lower and higher than the subject property. But nowadays it seems like most homes are selling for $20-50K+ more than the last sold just a few months ago, and we are seeing many appraisals come in less than the purchase price.

If you are a buyer, you will be faced with a tough decision regarding the appraisal contingency. Sure, you’d like the contingency in place so you can ask the seller to drop the price if it appraises low. But in this multiple offer environment, odds are that another buyer may be willing to waive part or all of that appraisal contingency, which means their offer is more likely to be accepted, even if your offer is higher.

If you are a 100% cash buyer, you don’t HAVE to get an appraisal done, so this may be a moot issue. However, if you are a FHA 3.5% down buyer, or VA buyer with 0% down, then you need to be very careful waiving the appraisal contingency. If you do, and it appraises low, you will be expected to come to closing with more cash to make up the difference. One idea is instead of waiving the contingency entirely, you waive it up to the point that you CAN make up the difference in cash. So if you will have $10,000 left after your down payment, closing costs and required reserves, then you can say that you’ll pay up to $10,000 over the appraisal if needed. If you are a conventional buyer you may have a little more wiggle room. Let’s say you are putting 30% down on a $350,000 purchase price. Your lender will most likely give you a loan for 80% of the appraised value, so the home could appraise for as low as $306,250 before you’d have to bring any more cash to the table, so you could say you’ll pay up to $44,000 more than the appraised value if needed. The math is quite simple, just divide your loan amount by 80% to figure out how low the home can appraise for before you have to come to closing with more funds.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

BofA Principal Forgiveness

Bank of America may be willing to forgive some principal on your loan! See below for info from their website about this program:

“Bank of America has implemented an earned principal forgiveness approach to modifying certain loans eligible for its National Homeownership Retention Program (NHRP). The plan is designed for homeowners who are past due on their mortgage payments and owe considerably more on their loan than the current value of their home, when the loan is being considered for modification through the government’s Home Affordable Modification Program (HAMP).

How it works: In order to be eligible for principal forgiveness you must be at least 60 days late on your home loan payments. The remaining principal balance on your home loan must be more than 120% of the current value of your home. The maximum amount of principal forgiveness is 30% of the remaining principal balance on your loan, so long as this does not reduce your loan-to-value (LTV) ratio to less than 100%. The reason: the amount you owe is now equal to the value of your home and, moving forward, you’re ready to build positive equity.

Depending on your situation, the principal will be forgiven in equal amounts over 3 or 5 years. In the 5-year option, the amount forgiven in years 4 and 5 is conditional, based on the value of your home at that time. After being approved for principal forgiveness, it’s important to stay current on your new monthly payments, as falling behind could affect your eligibility.”

To find out if you qualify, go to: http://homeloanhelp.bankofamerica.com/en/nhrpannouncement.html

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Flopping

“Flipping” refers to someone buying a home for less than market value through legitimate means like at a foreclosure auction for cash and then fixing it up and selling it for more. “Flopping” is a new term that relates to flipping a short sale, but with the negative connotation that the home wasn’t fully exposed to the market, and that’s why it sold for less than market value, giving the “flopper” room to make a profit at the short sale lender’s expense. What we are seeing quite often is a home goes on the market as a short sale, but no showings are allowed, or gaining access to show is VERY difficult, and then soon after, literally sometimes minutes after it hits the market, the home goes pending. Then after a few months it closes escrow at less than market value, and even less than other offers that were submitted by other buyers. Soon after, it goes back on the market at a much higher price, sometimes with almost no fix-up work.

The “floppers” claim this is legal and ethical because no one is hurt, it’s up to the bank to determine if their offer is a good one or not, and no one ever gets caught. My argument would be that just because a bank is a faceless corporation doesn’t mean it’s OK to defraud them out of tens of thousands of dollars. There are actually state and federal laws against loan fraud, and concealing material facts (like the fact that the home wasn’t exposed to the market, or that the seller passed over much higher offers) is considered loan fraud. And while the bank will order an appraisal, there is no substitute for exposing the home to the market to find out what other buyers may be willing to pay. In addition, many lenders require all parties to sign a short sale addendum where they certify that the home was exposed to the market and that no material facts are hidden from the short sale lender. Lying on this form is also considered loan fraud. There are also many examples of people going to jail over this practice, and many more cases being investigated currently.

I AM NOT AN ATTORNEY. PLEASE SEEK LEGAL COUNSEL. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

What’s A Home “Worth”?

I get this question a lot nowadays. Seems like for several years there I almost NEVER got the question. Either someone was upside-down by several hundred thousand dollars, so it didn’t really matter to them, or they weren’t upside-down, but were scared to ask and frankly didn’t want to know! But now that the market has been appreciating rapidly the last 6-8 months, people want to know what their home is worth again

When they ask me, “What is my home worth?” I have to ask them another question in return, and that is, “Why do you want to know?” I’m not trying to be difficult, and I’m not trying to be a salesman and use some kind of “closing” technique on them. I’m actually asking a legitimate question, because my answer will differ depending on why they want to know. Some people are thinking of selling their home, and for that I can look at the data and give an estimate for what it may sell for now. Other people are thinking of selling later this year, and for that person, I need to give them a number based on what I think it would sell for now, and then add for what I’m guessing the appreciation will be at the time they want to sell. Other people have no inclination of selling, but rather they want to know if their home will appraise high enough for them to do a refinance to a lower interest rate. For them I have to give a more conservative number, because nowadays we can often get a buyer to pay more than what an appraisal will come in at. Other people need a value for what the home was worth in the past for either a divorce, or to settle a trust issue and they need to know what it was worth around the time of some event.

If you would like to know what your home is worth, send me an email with the address and a description of the property (upgrades, condition, etc.) and I’ll send you back a free estimate. Oh, and be sure to tell me WHY you want it!

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Inventory Update

I just saw the title of a book called, “How to lie using statistics.” I didn’t buy or read the book, and I’m hoping the title is being sarcastic. However, the point is that you can often make numbers say whatever you like. You are going to start seeing some really crazy numbers touted in the media. First, there are the rapid price appreciation numbers that do show prices are WAY up over the past couple of years. However, we are still well below the peak of the market back of 2004-2005.

But what I want to warn you about will be the inventory numbers. Looking at Brentwood, it is factually accurate to say that the number of homes for sale in Brentwood is up 130% so far this year. That’s not a typo, it’s up 130%. So is this the flood of inventory we’ve been warned about for the past few years? Hardly. Consider that we started the year with only 42 homes on the market. That’s the lowest I’ve ever seen, and I’ve been tracking this number a LONG time. So when inventory has recently risen to about 100 homes, that makes for some eye-popping percentage numbers, but that’s mostly because we started with such a low number. 100 homes is still historically an EXTREMELY low number. And when you consider that we have a lot more existing homes in Brentwood than we did 10 years ago, it looks even smaller.

So consider the math. We’ve gone up about 60 homes for inventory. If that happens again, because we are starting at 100 homes, the increase will only be 60%, not 130%. Same number of homes, but not quite so scary.

However, I will continue to monitor this number, and if inventory keeps jumping month after month, that could signal that we may finally see a return to a more “balanced” market. One where “overpriced” homes sit on the market and a sincere buyer can pick and choose among homes without battling 10-20 other offers which are over asking price.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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