Archive for October, 2008
SHOULD I RENT OR BUY IN REDDING/SHASTA COUNTY?
Real estate agents are frequently accused of saying “it’s a great time to buy or sell”, regardless of how the housing market is really doing. For a renter considering a purchase, the current economic turmoil can cause confusion when trying to make a clear decision regarding a major investment such as a home or income property purchase.
The newspaper reported recently that the median price for a home in Redding has decreased to $212,750. Based on this information, let’s compare renting vs. owning a home at this price point. Let’s assume a home at this price will rent for $1200/month. Let’s also assume a buyer wishes to make a minimum down payment and wants a 30-year fixed rate loan.
The days of securing a loan approval with no money down and no verification of income are long gone. 
Anyone buying today should have a job, good credit and money saved for a down payment and closing costs. Full underwriting approval from a lender is a must in today’s market.
Utilizing city or county down payment assistance programs will not be factored in to this analysis, but may be a viable option for some first-time buyers.
FHA requires only a 3% down payment with a fixed interest rate at around 6%. The buyer would need about $6,400 down and payments will be $1,237/month. Add $260/month for taxes and insurance. The payment including principle, interest, taxes and insurance (PITI) is roughly $1500/month. The buyer should also budget $8,500 for closing costs including loan fees, title insurance, escrow fees, impounds, etc.. The seller can help with some or all of the closing costs and the down payment can be gifted to the buyer from a family member. At first glance, renting seems to be the better deal!
However, home ownership allows the buyer/borrower to take advantage of tax laws that reward owning your own home. Mortgage interest, property taxes and some upfront loan fees are tax deductible. In this example, the buyer can write off $12,382 in interest and $2,400 in property taxes yearly. That’s almost $15,000 total! Let’s assume the buyer is in the 28% tax bracket. That works out to $4,139 in net tax savings or $344/month. The net monthly payment for owning the median priced home in Redding is just under $1200/month. Sounds like a push!
The federal housing recovery package recently signed into law temporarily grants first-time buyers a $7,500 tax credit. Efforts are underway to expand this to all home buyers and to eliminate the requirement to pay the credit back over 15 years.
Add the fact that historically, real estate appreciates over the long run. Even if you conservatively estimate 3% per year appreciation, the home buyer could gain more than $30,000 in appreciation over a 5 year period. That works out to another $500/month in equity accumulation. Now, the advantage clearly falls on the side of home ownership. During this 5 year period, the renter will have handed the landlord $30,000 for rent with nothing to show for it (other than a nominal tax credit for renters).
Renters that become homeowners in their 20’s have a good chance of owning a home free and clear before they retire. One third of all homes in the US are owned outright. Renters will continue to pay rent until they buy or die. Retirees can utilize a reverse mortgage to supplement their retirement income with accumulated home equity. In a sense, the home is paying you back the money you invested. Handy homeowners can further enhance their investment by making improvements that add value (sweat equity).
Rents rise over time; buying with a fixed rate loan assures a homeowner a steady payment that will not increase over time. From time to time, a homeowner will need to replace or repair items that wear out. Renters can call the landlord and avoid the expense, but they may also see a rent increase or may be asked to move if the owner decides to sell the property. Renters that make improvements to their dwelling benefit the landlord.
Besides providing shelter, a home purchase can provide peace of mind and the ability to control your own destiny. Renters are at the mercy of their landlords, and instead of having an asset to add to their retirement portfolio, they fund their landlords retirement! The decline in home prices reported in the paper today has opened the door to home ownership for many Californians, especially Redding and Shasta County residents where the median price is more than $100,000 below the state median price!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
WEBSITE HELPS YOU REACH HUMANS
SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS, TIPS FOR SENIORS
Dial-A-Human claims to help visitors “avoid annoying 
computers.” You know, the ones that answer the phone with a myriad of options to direct your call to the appropriate department or attempt to answer your questions with automated responses.
Visit www.dialahuman.com and you can look up the business you wish to contact and find instructions on what buttons to push or what to say or not say to get to a live human being. In some cases it’s as simple as pushing 0 after the intro. Other times a series of numbers and symbols must be pressed to get out of the automated system to reach an operator or customer service representative.
Hundreds of companies and businesses are covered in their A-Z index. The 800 number is provided along with instructions on what to do and when, to talk to a live person quickly. It can be a push of a button, saying something or a combination of voice and button pushes. In rare instances, some company numbers will be answered by a human immediately. They include:
- Amtrak
- Allstate Road Service
- Anheuser-Busch
- Buy.com
- Beechnut
- Disney Shopping
- IBM
- LL Bean
- Sears Delivery
- Sprint
- Southwest
- Verizon Phone Repair
At the other end of the spectrum is Fidelity Net Benefits. To reach a human, you must press 1 then the pound sign 17 times!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
REDDING-TREE CITY USA!
LOCAL GOVERNMENT, REDDING LIFESTYLES, SHASTA COUNTY
In order to meet the standards as a TREE CITY USA town, a city must meet the following criteria:
- A tree Board or Department
- A tree care ordinance
- A community forestry program with an annual budget of at least $2/capita
- An Arbor Day Observance and Proclamation
The City of Redding meets all the standards and has done so since 1982. The effort put forth by our city to plant and maintain trees throughout the community becomes more evident as we enter the fall season. Even if our city doesn’t offer the palette of colors found in the Northeastern United States, driving down Sulfur Hill this time of year reveals a splendid array of yellows, reds and oranges on the hillsides of Redding.
The city adopted a tree preservation ordinance in 1990. In 1995, Redding’s REU was awarded a Tree Line USA award from the national Arbor Foundation for their efforts to care for trees in utility right-of-ways. The city maintains more than 20,000 trees along city streets and within city parks. The city arborist is proactive when it comes to selecting trees for specific sites. The big concern is planting inappropriate trees under or adjacent to electric utility wires.
The city’s comprehensive tree plan addresses:
- Street vs. Park trees
- Species and spacing
- Proximity to underground and overhead utilities
- Public tree care
- Tree topping (discouraged)
- Private tree care
- Removal of stumps and pruning roots
The city recently came under fire for planting palm trees on Hilltop Drive. Many 
argued palm trees are not representative of the north state and many citizens expressed their concerns. Ultimately, the palm trees were planted and the hub-bub seems to be fading away with summer temperatures.
For more information on Tree City USA and helpful bulletins regarding all aspects of tree selection, planting and maintenance, go to :
http://www.reupower.com/dist/tree.asp
Fall is the best time to plant a new tree. Let’s all continue the effort to make Redding a tree-friendly town!
530-941-7492 or 530-224-6767
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
LA MALFA REVIEWS STATE BUDGET NEGOTIATIONS WITH REALTORS
LOCAL GOVERNMENT, SHASTA COUNTY
State Assemblyman Doug LaMalfa addressed a group of Realtors this morning at the Shasta
Association of Realtors. His primary topic of discussion centered around the state budget that was 85 days late due to key philosophical issues between Republicans and Democrats to address a huge budget deficit.
One option, he explained, could have been to fund programs and services both parties agreed upon to minimize the impact of a delayed budget. However, Democrats wanted to keep the pressure on Republicans to increase revenue through a 1% sales tax hike. He went on to say such an increase represents a 14% increase in sales tax. In our area, this would encourage more Californians to cross the border to Oregon to buy durable goods and big ticket items to avoid the proposed 8.25% sales tax.
The Republicans dug in their heels and made it clear to the Democrats and the Governor that no tax increases would be approved. Around day 73 of the budget impasse, Senator Don Perata, finally understood the Republicans were serious about not raising taxes and worked toward closing the gap with accounting tricks and optimistic revenue projections.
Now California is using a check-into-cash scheme to fill the gap of dropping revenues by utilizing RAN’s or Revenue Anticipation Notes. Doug said the “state’s eyes are always bigger than their checkbook” balance. During the good years (2003-2004), revenues soared more than 40%, but spending increased by 44%, he said. Now, state budget analysts are predicting an $8 billion shortfall in revenue by year’s end despite nearly $700 million tax windfall from gasoline tax revenues which soared due to high gas prices this year.
The problem is due in part to one time expenditures being made permanent. He believes the state needs to get control of spending and increase reserves in a rainy day fund to smooth the ups and downs of revenues resulting from economic swings.
Doug has 32 days left before he is termed out. He plans to run for the Senate in 2010 at which time Senator Aanestad is termed out too.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
CAL-VET LOANS UNIQUE, REQUIRE VOTER APPROVAL
HOME LOANS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS
Most people are not familiar with land contracts of sale, but that is how the State of California handles 
loans to veterans using the Cal-Vet loan program. Unlike a deed of trust or mortgage, a land contract is an entirely different method of handling a home purchase.
Deeds of trust are three party instruments consisting of a borrower (trustor), lender (beneficiary), and a neutral third party (trustee) that is usually a title company. A mortgage is a two party instrument with the borrower (mortgager) and the mortgagee (lender). Curing a default under a mortgage is a lengthy process that has other pitfalls compared to Deeds of Trust (DOT’s). In California, mortgages are rare because lenders prefer DOT’s; they are faster and easier to foreclose upon when the loan goes into default.
Land contracts, used by Cal-Vet and occasionally by sellers, are entirely different. Under mortgages and deeds of trust title transfers to the borrower. Under a land contract, title is held or retained by the lender or seller, and is deeded to the buyer once the contract has been fulfilled.
In the instance of a Cal-Vet loan, the title of the property the veteran wishes to purchase is deeded from the seller to the Department of Veterans Affairs and is held until the loan is paid in full. This is analogous to a bank holding the title (pink slip) to a car until it is paid off.
Cal-Vet loans are financed by bonds periodically put up for a vote in state elections. My understanding is the program is self-sufficient and does not cost taxpayers any money in the form of tax subsidies. The loan interest and upfront processing fees paid by the veteran cover the cost of administering the program.
There are other factors that set Cal-Vet loans apart from other financing alternatives so be sure to ask questions and have a full understanding of how they differ from traditional loans before moving forward.
In the upcoming election, there is a ballot proposition to raise funds for loans to veterans. The eligibility requirements are revised from time to time to provide more and more veterans access to Cal-Vet loans thus the need for more money to fund the loans requested.
Years ago, these loans took a long time to process and some sellers would not wait the 3-4 months it took to get the loan in place. Today, Cal-Vet loans are efficiently processed and can usually be completed in 30-45 days. The interest rate is variable, but has been stable, and does not dramatically impact the borrower’s payment like many adjustable rate loans loans causing problems in the housing market today.
These loans are primarily for Veterans that have served active duty in wartime activities. Redding has a local Cal-Vet office for qualification information and applications. Some local mortgage bankers and brokers can also handle the loan packaging and processing of Cal-Vet loans. Contact me with any questions.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
NAR PRESIDENT WILL FIGHT FOR INDUSTRY AND HOMEBUYERS
Dick Gaylord, President of the National Association of Realtors (NAR), gave a keynote speech to 
California Realtors at Saturday morning’s Board of Directors meeting in Long Beach, the town where he lives and works. He said he will be part of a task force that will provide input for restructuring GSE’s (Fannie Mae and Freddie Mac), rule changes for FHA, VA, Cal Vet and conventional loan underwriting and implementing other elements of HR 3221. Other issues they will be focusing on include:
- Eliminating the obligation to repay the $7,500 tax credit provided to first-time home buyers under HR 3221. NAR also wants this extended to reward all home buyers who make a decision to buy during these uncertain times.
- Make higher loan limits permanent. Under HR 3221 loan limits have been temporarily raised to help homeowners refinance out of risky adjustable loans.
- Keep banks out of real estate. For many years now, banks have pushed for law changes to allow them to handle real estate sales. This crisis should end that debate once and for all!
- Require banks to develop loan programs that help first-time buyers attain the goal of home ownership. Currently, banks have tightened credit to such a degree, prospective home buyers with good jobs, credit and down payments are being locked out of home ownership.
Realtors at the local, state and national level will work toward policies that will help stabilize the national housing market. Clearly, this housing crisis has proven the housing industry is the backbone to this country’s economy. We can not have a healthy economy without a healthy housing market.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
MORE STATES ADOPT “MINIMUM-SERVICE” REQUIREMENTS FOR REAL ESTATE BROKERS
INDUSTRY NEWS, REAL ESTATE PRACTICE, TIPS FOR SELLERS
More and more states are passing laws that require real estate agents to provide mandated levels of service 
to consumers despite raising the ire of the Department of Justice (DOJ).
DOJ’s antitrust division has monitored this trend and has stated such practices limit consumer’s ability to pick and choose the services they want and don’t want.
Real estate trade groups have argued such laws are necessary to ensure an adequate level of service is delivered to consumers in real estate transactions and to prevent confusion about where to turn for services not provided by “minimum-service” brokers.
The following states have already adopted minimum-service laws:
- Alabama
- Idaho
- Illinois
- Indiana
- Iowa
- Missouri
- Texas
- Utah
The following states have recently adopted similar laws:
- Kansas
- Maine
- Oregon
- South Dakota
- Washington
- West Virgina
Other states have rebate restrictions and some states have both minimum-service laws and rebate prohibitions.
Some real estate brokers utilizing the minimum-service business model try to avoid establishing an agency relationship with the seller (they don’t represent buyers in most cases) so they do not have to obey laws concerning fiduciary duties. For a flat fee, some of these brokers will do nothing more than place a listing on the MLS. The seller is on their own as far as advertising, marketing, showing the property, negotiating a sale, running an escrow and closing the deal.
However, in California, state law requires listing and selling agents conduct a diligent visual inspection of the home and report those findings in writing to any prospective buyer. This, in my opinion, is where limited or minimum-service brokers fail to comply with the law. If the buyer finds a problem after the sale closes, the minimum-service agent could be sued along with the seller for fraud or concealment of pertinent facts.
Real estate is, in many cases, one of the largest assets in one’s personal portfolio, so I can not understand why some would want to avoid having a reputable agent represent them from start to finish. The commission paid to a full-service agent is worthwhile if future litigation is avoided due to a seller trying to navigate the complex process of marketing, selling and closing a sale ALONE. Time will tell if these minimum-service business models survive as a viable branch of the real estate industry.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
REALTORS USING CERTAIN URL’s MAY VIOLATE CODE OF ETHICS
INDUSTRY NEWS, REAL ESTATE PRACTICE, SHASTA COUNTY
An ongoing dispute involving a Realtor in Sarasota Florida and the Sarasota MLS involves alleged reverse 
domain name hijacking, cyber-squatting, trademark dilution and infringement of the Sarasota Association of Realtors trademark name of more than 50 years. Marc Rasmussen registered TheSarasotaMLS.com in 2003 and claims 90% of his new business came from the website that received 800 to 900 visits per day. The website has been redirected pending resolution of his lawsuit.
Here’s the problem: Marc is not the Sarasota MLS. The Sarasota MLS actually feeds their data to the Mid-Florida MLS. An arbitration panel concluded, according to Inman News, his website “misleads consumers to foster his own commercial advantage.” Basically, they assert he was taking advantage of the confusion.
MLS is not trademarked and can be used without fear of copyright infringement unlike the term “Realtor.” Attaching MLS to a city or county name to create a URL may put you in conflict with existing MLS’s if it is similar to an existing entity that provides data to real estate licensees. The Code of Ethics was revised this year to update Article 12, first written in 1913, that states in part “Realtors shall be careful at all times to present a true picture in their advertising and representations to the public.”
One defense Mr Rasmussen cited is the fact non-Realtors could play this game without fear of being accused of an ethics violation. True. However, non-Realtors might still be pursued under copyright and trademark laws. The majority of active, productive agents in this country are Realtors.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
FHA CHANGES RULE TO ADDRESS “BUY AND BAIL” PURCHASES
FHA LOANS, INDUSTRY NEWS, TIPS FOR BUYERS, TIPS FOR SELLERS
One strategy home sellers occasionally choose, to buy another home despite being unable to sell their existing home, is converting it to a rental. This will be more difficult to accomplish with a new rule change by the Federal Housing Administration (FHA). FHA insures loans underwritten to their specifications.
Lenders will no longer be allowed to count rental income on the house you are bailing out of to qualify for a loan to buy your new choice of digs. Basically, you must qualify to carry both mortgages on both homes without the benefit of claiming the rental income. Apparently, some buyers that over-bought have been purchasing more affordable homes, then allowing their previous home to go into foreclosure. This is dubbed “buy and bail.”
Another reason cited by FHA administration officials for implementing this rule change is the abandoned property that is foreclosed upon, could adversely impact value of nearby properties that may be FHA insured. FHA only insures owner-occupied principal residence purchases and not investment properties or vacation homes. They also insure loans for 1-4 units, as long as the buyer occupies one of the units.
The new rule took effect September 19 under a temporary order. After further study, FHA will decide whether it should become a permanent rule change.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
LAKE CALIFORNIA:NOT A “LAND PROJECT”
REDDING LIFESTYLES, TIPS FOR BUYERS, TIPS FOR SELLERS
Back in the 1960’s, Lake California began as a remote, large-scale subdivision situated on a prime piece of
real estate adjacent to Cottonwood Creek and the Sacramento River. Potential buyers were recruited from the Bay Area and flown in for a quick tour and high-pressure sales pitch. Since I have been selling property there beginning in the early 1980’s, the area has slowly developed and lots were cheap until 2004. Sales and prices soared for several years, along with everything else, and Lake California saw a huge number of homes built in a short time period.
In the late 1980’s, an auction took place to sell off hundreds of lots that were seized through default from the original developer. One wealthy investor bought hundreds of lots and later resold them through slick dinner promotions in the Bay Area. It seems the Filipino community was targeted because I have handled dozens of lot resales for individuals that attended these Bay Area dinners.
As a side note, many had or are having a problem clearing their title of loans that were provided by a 
company called Leviathan which owned, then resold many of these lots and in some cases financed these sales for buyers that could not pay all cash. Leviathan offered low down payment and easy financing to these buyers. Most of the buyers diligently made their payments and some even paid off their loans but never received the necessary paper work from Leviathan to clear the title of the lien. The Tehama County DA has been applying pressure with some success but everyone form real estate agents, title companies and lot purchasers have been baffled by her flagrant violation of the law by this individual and her company. Many wanted to sell their lots when the market peaked but could not do so because of her lack of communication and cooperation.
Otherwise, Lake California has become a well-established and growing community with many amenities including an airport, riding stables, clubhouse, pool, tennis, fishing, river access and a campground. At one time, it even had a restaurant overlooking the Sacramento River. I believe the development will continue to grow and will also struggle, mirroring the challenges facing its property owners. Parts of the development offer stunning views of the Mt Lassen Range, Mt. Shasta and the Sacramento River.
Many level, easy-to-build-on lots are available now for $30,000 or less. This is about half the price they were selling for 2 years ago. The first six months of 2008 only saw a handful of lot sales but the pace has picked up dramatically.
Many bank repos are also available. Newer, three bedroom homes can be had for under $200,000. Many make sense as rentals with rents over $1000/month in most cases.
530-941-7492 or 530-224-6767
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
PREMIER SERVICE® is the focus of Real Estate Professionals/GMAC. We are located in Redding, CA (at the North end of the Sacramento River Valley) in the midst of river, lake, ranch and mountain terrain.
Our Customer Satisfaction Rating, based on an independent survey, exceeds 97%. This is reflected in our 2008 "QUIE" Award recognizing the TOP 10 REAL ESTATE COMPANIES in NORTH AMERICA! REP/GMAC in #2.
