Archive for November, 2010
Will The Seller Throw In The Ski Boat To Clinch A Sale?
HOME LOANS, TIPS FOR BUYERS, TIPS FOR SELLERS
A couple weeks back, while showing a home in Redding, a buyer tossed out this question as he was eyeing the seller’s boat parked under a canopy in the backyard. He was surprised when I told him that was not a good idea. In fact, I give my clients this same advice even if they are asking about the fridge, washer and dryer. Mixing personal property with real property as bargaining chips can backfire on the buyer for a number of reasons.
First, the buyer will have the privilege of paying property taxeson the personal property rolled into the purchase price. Let’s say the seller agreed to throw in the $10,000 ski boat in lieu of a reduced price to appease the buyer. The buyer could have taken $10,000 off the price of the home but got a boat instead. Assuming the buyer is not securing a mortgage to make the purchase, the buyer will pay property taxes forever on the value of the boat because it was rolled into the purchase price. Once the buyer gets title to the boat, the assessor will levy a personal property tax on the boat, so the buyer pays taxes twice on that one boat. Adding furniture, appliances, hot tub, plasma TV’s or anything else considered personal property can cause the same problem for the home buyer.
Secondly, if the buyer is getting a loan, the buyer gets the additional privilege of paying interest on the boat purchase since it was rolled into the price of the real estate. If the lender finds out personal property was included in the sale, the appraiser may put a value on the personal property and make a deduction from the appraisal in that amount, potentially jeopardizing the loan.
Thirdly, the seller and real estate agents have a potential headache if the buyer discovers a major problem with the personal property item included in the purchase. If the boat takes on water or the compressor on the fridge fails, the seller or I get an angry call from the buyer.
Bottom line-keep personal property out of a real property purchase to keep the taxable value to a minimum, prevent unwanted interest expenses and warranty issues from arising. I’ve never had a buyer or seller disagree with this explanation as to why mixing the two types of property is a bad idea.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL SALES EXPERIENCE
Redding Home Prices Slip Further In October
HOME LOANS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
Redding City Hall
The average Redding home is a three bedroom , 2 bath home with about 1750 square feet. One local apprasier has tracked the value of the typical Redding home for the past couple years and his last report indicates the average cost per square foot took a big hit in October. The last quarter of 2009 and the first two quarters of 2010 showed signs of price stabilization. Then, the average cost per square foot for the typical home hovered around $127/square foot.
The same statistic for October showed a slip to $111/square foot, or a 13% drop. The descent started in the summer months after the federal tax credit expired. Coincidentally, the number of bank owned properties listed for sale on the Shasta MLS spiked during the spring and summer months. Beginning in May of this year, when 160 REO’s (Real Estate Owned or bank repo’s) were listed for sale, the number of REO’s steadily climbed to today’s level of 263 active listings out of 1445 total home listings. That represents a 39% increase of REO’s listed for sale in a 5 month time period.
David Benda reports monthly on the number of Notice’s of Default (NOD’s) filed in the Shasta County Recorder’s office. For October, that number of NOD’s, the first step in the foreclosure process, exceded 400. This is my crystal ball to what the future holds. Until the tide of foreclosure filings subsides, prices will continue to fall. Sellers need to take this information into consideration when pricing or negotiating a sale of their real estate.
The bad news for sellers is good news for buyers. Affordability has never been greater during the past several decades than today due to prices about half what they were at the peak and interest rates that have not been this low since 1951. Some financial experts believe fed actions to flood the market with $600 billion in securities will backfire and long term interest rates will rise, not fall. If that is true, now may be the time to make a move.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS OF LOCAL REAL ESTATE EXPERIENCE
California Voters Just Say Yes To New Taxes?
INDUSTRY NEWS, LOCAL GOVERNMENT
The votes have been counted and 111 of 194 measures and tax bonds in last week’s election passed. Flying in the face
of calls for reducing big government, a majority of Californians have approved school bonds, hotel taxes, parcel taxes, utility taxes and local vehicle taxes. Another 20 measures are too close to call according to the California Taxpayers Association.
Here is a short list of voter approved measures:
- 43 of 63 school bonds (nine too close to call)
- 7 of 17 hotel taxes
- 12 of 12 marijuana sales taxes
- 13 of 44 parcel taxes (seven too close to call)
- 13 of 21 sales taxes
- 12 of 21 utility user taxes
- 5 of 7 local vehicle registration taxes
Defeated measures include:
- San Diego 0.5% sales tax increase (voted down by 70% of voters)
- $69/year school tax voted down by 59% of Santa Clara voters
- 1% sales tax in Half Moon Bay voted down by 53% of voters
The results indicate voters are willing to pass tax increases that benefit their local communities despite all the rhetoric about overspending by bureaucrats.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL SALES EXPERIENCE
Mortgage-Aid Program For Californians Delayed
LOCAL GOVERNMENT, REAL ESTATE LEGISLATION, TIPS FOR SELLERS
According to a news release today from the California Association of Realtors, the $1.83 billion “Keep Your Home In California” program is on hold due to logistical difficulties. The California Housing Finance Agency (CalHFA), the lead government agency in California implementing the federal program, reported it was originally scheduled to launch Monday November 1st.
The government aid program is designed to pay down loan balances and provide cash assistance to struggling homeowners in California. Here are some program details:
- Program targets 100,000 low-to moderate-income homeowners
- Borrowers must have endured some sort of financial hardship resulting in a loss of income
- $875 million will be directed to unemployed homeowners who need help making their mortgage payments
- $790 million will be used to reduce mortgage loan balances
The delay was caused in part by Fannie Mae and Freddie Mac instructing their loan servicers to get on-board with the program. This greatly increases the number of eligible homeowners.
In the meantime, homeowners having financial difficulties are encouraged to contact their lender immediately instead of waiting several weeks for the program to launch. For more detailed information on the program, follow this link: www.keepyourhomecalifornia.org
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN DOWNTOWN REDDING
MORE THAN 25 YEARS LOCAL SALES EXPERIENCE
New FICO 8 Mortgage Score Announced
HOME LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
Credit scores are used as a tool by lenders to assess a borrower’s risk for many types of credit. FICO announced a new score developed specifically for analyzing prospective homeowners applying for mortgage loans. Dubbed FICO 8 Mortgage Score, this analytic technology provides a sharper assessment of a home buyer’s risk for possible loan default. The score can also be used by lenders to identify existing borrowers at risk for foreclosure allowing early intervention before an expensive foreclosure action is initiated.
In the past, lenders use a general-risk FICO scores to predict the likelihood a loan will be repaid. The new FICO 8 score assesses additional data in a consumers credit file in an effort to specifically predict mortgage repayment risk. As usual, FICO will not provide details as to how or what information is used in their new credit scoring technique in order to prevent consumers from manipulating their finances to achieve a higher score.
FICO indicates the score will have the same 300-850 range. Additional codes will be developed as per the Fair Credit Reporting Act so lenders understand the reasons for the score and can explain the scores to credit applicants. The new scoring system is available to all three major US credit reporting agencies-Trans Union, Equifax and Experian. FICO claims the new score has demonstrated up to 15% higher predictive ability than the general-risk FICO score.
Since the housing bubble burst, minimum credit score thresholds to lock in the lowest interest rate and terms for mortgage loans has risen. Fannie Mae and Freddie Mac set the ground rules for lenders by setting minimum underwriting standards for loans they will purchase. If lenders fail to keep pace with their belt-tightening, the lender may be unable to sell their loans to the secondary market which in turns limits their ability to make additional loans. Today, borrowers in general must have a credit score of 720 or higher to qualify for the lowest rate and best loan terms. That’s nearly 80 points higher than the scores required just three years ago.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEAQRS LOCAL REAL ESTATE EXPERIENCE
BBB Warns Of Mortgage Rescue Scams
The Better Business Bureau (BBB) cites a recent report from the US Government Accountability Office which found
numerous schemes perpetrated by scam artists to profit from distressed homeowners. In their desperation to save their homes, borrowers are falling for two popular foreclosure avoidance schemes:
- Advance fee scheme- the borrower is charged an upfront fee (illegal) in exchange for a promise to negotiate a deal with your lender for a loan modification. Some scammers even offer a money-back guarantee! The fee averages about $3,000 and for that the distressed homeowner gets little or no service and when asked for a refund, they refuse.
- Sale-Leaseback scheme-the scammer persuades you to deed the property to them in exchange for taking over payments as long as you pay rent to the scammers “while you get your affairs in order.” Then they promise to sell the property back to you once your financial situation improves. They don’t. They may take out another loan against the property or sell it to someone else.
A new variation of the advance fee scheme has gained traction dubbed the “forensic mortgage loan audit.” The scammers promise, for a sizable up-front fee, to find regulatory violations in your original mortgage which they claim will help you avoid foreclosure or cancel the debt altogether. There is no evidence any homeowner has succeeded in modifying their loan using this information. I spoke with one such firm on behalf of a client and he admitted he was a former loan officer that lost his job when the real estate bubble burst. Now he’s going back and victimizing clients he placed in bad loans!
I’ve blogged about the “red flags” before but here’s an expanded list of things to look out for:
- firm guarantee to stop a pending foreclosure-regardless of the reason your behind in payments
- insists you not contact your lender, an attorney, Realtor or credit counselor
- collects an upfront fee before providing any services (illegal)
- accepts payment only by wire transfer or cashier’s check
- suggests you lease your home so you can buy it back over time
- instructs you to make your mortgage payments to them, not your lender
- asks you to transfer title to them
- offers you cash for the home at a price not reflective of current market value at time of sale
- offers to complete paperwork on your behalf
- pressures you to sign paperwork you haven’t had a chance to read or don’t understand
The old adage “If it sounds to good to be true, it’s probably not” applies here. The housing crisis has generated millions of potential victims, and the scammers are poised to take advantage of vulnerable homeowners in distress. Don’t fall for these scams as so many already have. Call me for further information.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE
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