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Home Prices Climbing in the Napa Valley – 5/30/2012

According to the National Association of Realtors®, first quarter statistics again point to better home sales figures. This time it was the prices of single family homes that rose in half of the major cities in the United States. Because of the wide differences between regional and state conditions, these figures are never in 100% lockstep, but Napa Valley homeowners should be encouraged by the report’s breadth: prices rose in more than twice as many cities as it fell.

 

Of course, rising prices are always good news for homeowners who want to sell their homes; but beyond that, the effect of movement in that direction is welcome throughout the economy. Consumer confidence is strongly influenced when home sales prices stabilize (just as it is rocked when prices fall).

 

There are a multiple reasons for the upswing in prices for home sales:

 

Employment Rates Improve

Although unemployment rates are still relatively high, the U.S. Bureau of Labor reported that the overall rate fell to 8.1 percent in April. Even for those who are currently employed, the knowledge that more jobs are out there is encouraging. When the specter of prolonged joblessness recedes, financial confidence rises and home sales can be expected to follow.

 

Low Mortgage Rates

Mortgage rates are still at historical lows — and the effect on affordability is dramatic. Currently the national 30-year fixed rate is at 3.97% according BankRate.com. As I have discussed before, although lenders have raised the requirements to quality for a loan, such low interest rates make a mortgage more affordable for eligible homebuyers.

 

Fewer Homes Available

Despite the inventory of foreclosed properties, fewer homes were available for sale this year than during the same period in 2011. Nearly always, home sales register higher prices when the housing market tightens – and that did seem to be happening in a growing number of metropolitan areas.

 

Higher prices for single family homes is a strong indicator of an improving economy: one that bodes well for everyone in the housing market.  Statistics do vary by neighborhood, so if you are considering selling your Napa Valley home this summer and want up-to-date, personalized information, contact me for a market update.

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Napa Valley Real Estate Q&A : Spring 2012

Q: What should I watch out for when making an offer on a tenant occupied property?

A: I assume that you intend to take title to the house with the tenant still in possession of the premises, in which case you would become the tenant’s landlord. If this is the case then, in addition to all of the normal inspections that a buyer makes to determine the condition of the property, you must also determine the condition of the tenancy. First of all you should have made your offer using a standard form residential income property purchase agreement or a regular residential purchase agreement with a “Tenant in Possession” addendum (most agents will have access to these documents through the California Association of Realtors). Both documents require the seller, among other things, to provide the buyer with copies of all current leases, rental agreements, service contracts and other agreements regarding operation of the property. You should also receive an estoppel certificate signed by the tenant confirming the terms of the tenancy and affirming that no defaults or claims are outstanding against the Seller. Further, provision must be made for transfer of any existing, unused security deposit from seller to buyer because the buyer, as owner, will be responsible to the tenant for return of the security deposit to the tenant at the end of the tenancy, minus any allowable deductions. There should also be some sort of prohibition on the seller making changes to the terms of the tenancy prior to close of escrow.

As a general matter, if this is your first rental property you should speak with an eviction attorney or service regarding the procedures and costs of removing a tenant from the property should the need arise. Further, review a good book on Landlord-Tenant law so that you will know what you are getting yourself into.

 

Q: I own a small business. Can I use the funds in my business account for all or any portion of my down payment and closing costs?

A: Most lenders require that funds being used for down payment and closing costs be verified with two months of asset statements for personal checking, savings and/or retirement accounts. In most cases, using business funds is not allowed but can be done on a case by case underwriting exception basis. Consult with your lender before committing any business funds towards the purchase of residential property.

 

Q: I am buying a home and need every penny to make the purchase, so do I really need title insurance?

A: It is impossible to give a blanket answer to your question because just as every property is unique, so is the condition of title unique to each property. I suggest that you consult with both your escrow/ title company and with your legal counsel regarding the advisability of buying title insurance for your situation. There are however some practical reasons for obtaining title insurance. The first is that if you are borrowing money to make your purchase then your lender will almost assuredly require that you purchase title insurance to cover both yours and your lender’s interest in the property. Secondly, the title company will run a public records check on the property that should point out problems with the chain of title such as defects in deeds, encumbrances on the property such as easements in favor of adjoining property owners, and the existence of neighborhood conditions, covenants and restrictions that could affect your use of the property. You will want to find these things out early in the purchase process before you remove your inspection contingencies so that you can work out problems, or try to obtain title insurance to cover your particular situation. Finally, even if you don’t want title insurance, the person who you sell to years from now probably will and a continuously insured title can smooth your resale.

 

Q: What are the changes that HUD is making to the FHA loan program?

A: As part of ongoing efforts to strengthen the FHA Mutual Insurance Fund, FHA announced a new premium structure for FHA insured single family mortgages. FHA will increase its annual mortgage insurance premium (MIP) by 0.10% (new rate 1.25%) for loans under $625,500 and by 0.35% (new rate 1.50%) for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75% (new rate 1.75%).

The 0.10% increase is effective for case numbers assigned on or after April 1, 2012, while the 0.35% increase on loan amounts over $625,500 is effective for case numbers assigned on or after June 1, 2012. The upfront change is effective for case numbers assigned after April 1, 2012.

 

Call (707) 249-1600 with your real estate questions.