Summer 2013 Real Estate Q&A

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 certifi cate signed by the tenant confirming the terms of the tenancy and affi rming that no defaults or claims are outstanding against the Seller. Further, provisions 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.

 

Q: We are looking to purchase a home in the $500,000 range and are very qualified; however, we have only saved approximately $25,000 for a down payment. What are our loan options?

A: Assuming that you have good credit and acceptable debt to income ratios, there are several options available to you. The first option would be to utilize FHA financing, which only requires a 3.5% down payment. The second option would be to get a 5% gift from a family member and combine it with your 5% savings and utilize a 90% conventional loan. A third option would be to borrow 5% from an eligible 401K plan and combine the monies with your savings for a 10% down payment and 90% conventional loan. Lastly, if either you or your spouse is a qualified veteran, your required down payment would only be $10,000 on a $500,000 purchase price.

Q: I have made numerous offers and been beaten out each time by other buyers. Do you have any tips for getting my offer accepted in a multiple offer situation?

A: The real estate market in Napa County is very active right now with a low inventory of homes and a lot of interested buyers who are feeling better about the economy and their jobs. The upshot is multiple offers and homes selling at or above their asking price in many cases. The tactics that you should employ to position yourself for success in this type of market depend mostly on the specifics of the particular property that you want to offer on and they should be something that you develop in close consultation with your agent. For example, your agent will probably suggest different tactics for an offer to a traditional, non-distressed seller than he or she would if you were offering on a short sale or a bank owned repossession.

There are some general suggestions that I can make without knowing your situation. First is understanding the market for the home you are targeting so that you can offer a realistic price. Ask your real estate agent to provide you with MLS data that shows the most recent trend in price appreciation as opposed to relying solely on comparable sales. The market is moving fast and comparable sales are in many cases not indicative of current values. Second you should anticipate that at least some of the offers that you will be competing with will be “all-cash” with no loan contingency. Aside from offering a good price, the best way to compete with all-cash offers is to go through the underwriting process to be approved for a loan subject only to review of title and appraisal. Pre approval on your loan takes time and there are some roadblocks depending on the type of loan you seek, but doing so will make you look like a serious buyer and enable you to offer a shorter close of escrow period to the seller.

 

Q: I negotiated a 3% closing cost credit from the seller and want to know what closing costs can be covered by the credit?

A: A closing cost can be used for all recurring (interest, taxes and insurance) and nonrecurring (i.e: appraisal, title and escrow) closing costs associated with the purchase of your property. If the actual closing costs are less than the seller credit, the subject credit will be reduced to the amount of the true closing cost.

Napa Real Estate Q&A : Summer 2012

Q: I am in escrow to sell my house and my realtor is concerned about the buyer’s appraiser valuing the house at the contract price. Is there anything that I can do to insure a fair appraisal?

A: Your realtor is justified in his or her concern. Appraisers and lenders are currently being ultra conservative in their property valuations in reaction to the sub-prime debacle and the decline in property values. Plus, prices are now appreciating in many areas and this means that comps in a particular area might be low if they are more than a few weeks old. In addition, new federal regulations that seek to shield appraisers from undue influence by lenders and borrowers have resulted in more out-of-area appraisers being called in to appraise local properties. These factors have created problems on some appraisals.

There is good news however. In response to these problems the Federal Housing Finance Agency, Freddie Mac and Fannie Mae have issued guidelines to mortgage lenders encouraging the use of appraisers who have experience in the geographic area where the property is located. Further, they have made it clear that appraisers can consult with, and accept comparable sales data from, the realtors involved in the transaction. Based on these guidelines your agent should work in concert with the buyer’s agent to insure that the appraiser has local market knowledge and to provide the appraiser with relevant comparable sales data, and data on neighborhood appreciation rates, asking prices, days on market and frequency of multiple offer situations. So be proactive in the appraisal process rather than waiting in trepidation for the result.

 

Q: We are relocating to Napa from another state and wanted to know if we could utilize FHA financing to purchase a home in Napa even though we currently have a FHA loan and will be renting out that home once we make the move. Is this possible?

A: If a borrower owns a home with FHA financing that will not be sold, the borrower may not purchase another home utilizing FHA financing. The exceptions to the one FHA financed property are relocation and increase in family size, so based on your question, you would appear to be eligible for a second FHA loan. Contact Mortgage Solutions for more details regarding the exceptions.

2012 Silverado Country Club & Resort Membership Information

Interested in membership at Silverado Country Club Membership? Silverado’s two championship golf courses stand as the hallmark of the Napa Valley Golf experience. Designed by renowned architect Robert Trent Jones, Jr. and recently updated by Johnny Miller, both courses feature dozens of water crossings, elevation changes and routing through historic oak trees. The challenge, visual sensation, and special ambiance of Silverado set the standards by which all others are measured.

Golfers in search of the ultimate Napa golf experience are returning to Silverado to rediscover this historic gem. Contact us to schedule a site visit and we will provide you with the many benefits of Membership at Silverado.

Silverado Property Owners

Every residential parcel within the defined Silverado Community has a potential membership appurtenant to it.  At the time of purchase you will be required to pay the prevailing fee, either an Initiation Fee or a Transfer Fee.  A Transfer Fee is paid when membership has been maintained in a transferrable status by the seller.  A new buyer has 30 days from close of escrow to pay the Transfer Fee which maintains the viability of the appurtenant membership. If that fee is not paid, the transferable membership reverts to its potential and an Initiation Fee is then applicable to the owner wanting to activate membership or to any subsequent buyer.  Once the applicable fee is paid, the owner may activate the membership by submitting an application to the Board of Directors and, upon approval, begin paying dues.*

Initiation Fee: $60,000                                  Transfer Fee: $40,000

* It is not a requirement to activate a membership on a property that has been purchased.  A membership may be kept inactive indefinitely; however, once a membership has been activated, it can no longer be placed on an inactive status except upon special application based on serious impairment of health or death of a spouse.  Payment of a Transfer or Initiation Fee without membership activation does not entitle a property owner to use of the Silverado facilities including golf, tennis and pools.

As an owner of property at Silverado Country Club, there are multiple membership categories that are available for you to choose from.

Membership Categories for Silverado Property Owners

Membership Type

Monthly Dues

Food & Beverage Minimum

Resident (Full Golf)

$500

$260 per Quarter

Social

$360

$260 per Quarter

Non-Resident

$360

$520 Semi-Annual

Out-of-State

$225

$520 Semi-Annual

 

All Memberships include the member, his/her spouse or registered domestic partner, and any children 21 years of age or younger, living at home.  This entitles you unlimited use of the golf and tennis facility, as well as discounts in the Resort’s  Spa and Food and Beverage outlets.  Discounts on Food and Beverage are  15% and 25% respectively.  There is a $260 Quarterly or Semi-Annual Food & Beverage minimum, based on the calendar year.

Other Silverado Country Club Membership Options

If you do not own property within the Silverado Community, there are two membership options available for your consideration.

Invitational Memberships                                              Initiation Fee $60,000

Silverado Country Club offers a limited number of Full Golf Memberships to individuals who do not own property within the Silverado Community. Memberships include the member, his/her spouse or registered domestic partner, and any children 21 years of age or younger, living at home.

The monthly dues for an Invitational membership are currently $600.00. This entitles you unlimited use of the golf and tennis facilities, as well as discounts in the Resort’s Spa and Food and Beverage outlets. There is a $260 Quarterly Food & Beverage minimum, based on the calendar year.

 

Junior Executive Memberships                         Progressive Initiation Fee

Silverado Country Club offers a limited number of Junior Executive Memberships to individuals who are between the ages of 22 and 45.  These memberships do not require property ownership within the Silverado Community. Memberships include the member, his/her spouse or registered domestic partner, and any children 21 years of age or younger, living at home.

Silverado’s Progressive Initiation Fee Program allows Junior Executive Members to progressively pay their Initiation Fee and to apply their paid fees towards a Resident or Invitational Membership.

Age

Initiation Fee

Monthly Dues

(% of Resident Full Golf Dues)

22-25

$1,500

$300  (60%)

26-30

$3,000

$300  (60%)

31-35

$6,000

$300  (60%)

36-40

$9,000

$400  (80%)

41-44

$12,000

$500  (100%)

Junior Executive Members would also be responsible for a quarterly Food & Beverage Minimum of $260.


Corporate Membership Options

Silverado offers Corporate Membership options for both Property and Non-Property owners.

Property Owners
A legal entity that owns property within the Silverado Development Area and purchases a membership in the name of the corporation shall be a Corporate member. As a Corporate Member, you will designate one person from the corporation who is associated with the membership. That designee and his/her spouse or registered domestic partner and any children 21 years of age or younger living at home are the membership.  No other person will be entitled to the membership privileges. The designated person may be changed with the approval of the Board.

The Transfer/Initiation Fees, dues and other associated fees are identical to the Resident Membership options. There is a processing fee of $250 with a change in designation of the membership.

Non-Property Owners
A legal entity that does not own property within the Silverado Development but would like to purchase a membership at Silverado would purchase a Corporate Invitational membership. This membership is also a single designee membership as described above, with the ability to change the designee with Board approval.

The Initiation Fee, Dues and other associated fees are identical to the Invitational Membership. There is a processing fee of $250 with a change in designation of the membership.

Additional Membership Activities & Opportunities

We have an active tennis program which is under the direction of Peter Burwash International (PBI), the world’s premier tennis management company. Of course, there are regular Bridge, Mahjong and Dominos groups not to mention a busy social calendar of member functions. The membership is comprised of a wonderfully diverse group from all over the world who all have a couple of things in common – a shared love of the Silverado Country Club lifestyle and a deep appreciation for the beauty of its incredible Napa Valley setting! We’d love to have you join us.

 

A state-of-the-art, 16,000 square foot Spa is also available for your use when you are a member of Silverado. Spa membership is not a requirement of membership and members may choose what level of participation they would prefer when joining.

 

Miscellaneous Fees 2012

Golf Club Storage                                               $30

Golf Cart Rental                                                  $20

Golf Club Rental                                                 $60

Private Cart Permit                                          $590 Cart Inspection Fee

(Annual for Quarterly Inspections)          $95

Members Activity Fund (Annual)             $115

 

Green Fees 2012

Ladies’ Guest Day                                             $25

Men’s Guest Day                                              $25

Member-Guest

Weekdays Mon – Thu                                    $60

Weekends Fri – Sun & Holidays                 $70

Twilight                                                               $40

 

Social, Out of State, Senior NP Green Fees

Weekdays Mon – Thu                                     $60

Weekends Fri – Sun & Holidays                 $70

Twilight                                                               $40

 

Monthly Spa Membership fees 2012

SPA Membership Fee Single                      $75

Couple                                                                 $125

Family                                                                 $195

 

Tennis 2012

Guest Fee                                                            $10

Guest Day                                                           $5

Virtual Tours Help Sell Your Napa Valley Home 6/13/2012

If a picture is worth a thousand words, how many words might a video’s flood of pictures be worth? The scientists at George Washington University approached the topic a few years ago in connection with real estate virtual tour s. To those of us whose profession is helping our clients buy and sell homes in the Napa Valley, their findings were –to say the least– interesting:

 

They arrived at this conclusion: “Adding a virtual tour decreases the expected marketing time by about 20% and increases the expected sales price by about 2%.”  I’ve added the italics, but you get the idea: those are some serious stats. Since today’s fast-paced world rewards being able to get information quickly, it’s small wonder that video tours are so powerful. But to be useful, video tours need to be well executed. Napa Valley homeowners who are preparing for a video shoot can keep some general guidelines in mind.

 

For openers, it’s important to remember that the camera will be acting as the eyes of a first-time visitor, so prepare for virtual tour s as you would for an open house. Remove all personal effects like toothbrushes and medications from bathroom countertops, kid’s artwork from refrigerator doors, and collectibles throughout. Stage furniture to look inviting, making certain that rooms are not overfilled. Just as in an open house, clutter can give buyers the impression that the house is smaller than it actually is.

 

Today’s high-quality, 360-degree digital imaging can capture even tiny details, so be certain to thoroughly clean everywhere. Pay particular attention to reflective surfaces like mirrors, windows and appliances – the tiniest mark on these can pick up light and dominate an otherwise perfect scene.

 

Homes that are bright appear inviting and lead to greater buyer interest. Before shooting a virtual tour , be sure to replace any blown or dim light bulbs, clean all the windows, and open any window coverings to let in natural light. Don’t worry about too much light blinding the lens – the camera operator will ensure that doesn’t happen.

 

By keeping these ideas in mind, Napa Valley homeowners can help insure that their virtual tour encourages buyer interest — hopefully leading to the kind of shorter listing time and higher selling prices the university study indicated.  That’s why I always strive to include some form of virtual or online tour for your Napa Home listing. If you are thinking of offering your property this summer or fall, call me to discuss how we can market your home with a high quality video tour to get your home sold.

Silverado Country Club Developer Turns 100 Years Old – 6/3/2012

Ed Westgate celebrated his 100th birthday on May 15 at Silverado Resort, the destination resort that he created in the 1960s.

Westgate was feted by nearly 100 friends and family, surrounded by multicolored balloons floating on the ceiling, pictures dating back decades and newspaper articles on display, with Frank Sinatra playing in the background.

An avid golfer, Westgate was pictured with golfing legend Lee Trevino in 1968.

“If I’m in as good a shape as you are when I get to 100, I’ll be ahead of the game,” said brother-in-law Jack Rydman, who lives in Oakville.

Westgate, who now resides in St. Helena, started as a Stockton farmer and became a businessman who not only developed Silverado, but also built hotels and condos in Hawaii and Samoa.

Westgate’s wife Joan presided over the affair. Her children and grandchildren performed a song, adapting the “Boogie Woogie Bugle Boy” with words that described Westgate’s life.

Tony Kilgallin, who edited Westgate’s memoirs and interviewed him last month for his TV show on Napa’s Cable Channel 28, described him as the man who “built the first condominiums in California” as well as major leisure-residential projects in Hawaii.

Kilgallin said Westgate’s business career started at a young age. “At 10 years old, he needs some money,” he said. “He sends a story to Ripley’s Believe it or Not and gets $10. Now he’s a capitalist.”

Westgate went to University of the Pacific back when it was called College of the Pacific, then later to Stanford University. He became one of UOP’s major benefactors.

A contingent from UOP attended his birthday celebration.

“We are grateful to have him as a long-time supporter and friend of the university,” said Janet Dial, interim vice president of UOP. “He’s given a lot of support and visited the university.”

Westgate purchased the Silverado property in 1966 for $3 million as part of Westgate Factors. The new owners turned one golf course into two 18-hole championship links, the first courses designed by Robert Trent Jones Jr. who went on to become one of America’s top course designers.

Westgate built the first condos and other recreation amenities that made Silverado a destination resort. Westgate Factors sold Silverado in 1984 for a reported $19.2 million.

Napa Valley Real Estate Q&A Spring – 6/2/2012

Q: I have made numerous offers and been beaten out each time by other buyers. Do you have any tips for getting my offer accepted in a multiple offer situation?

A: The real estate market in Napa County is very active right now with a low inventory of homes and a lot of interested buyers who are feeling better about the economy and their jobs. The upshot is multiple offers and homes selling at or above their asking price in many cases. The tactics that you should employ to position yourself for success in this type of market depend mostly on the specifics of the particular property that you want to offer on and they should be something that you develop in close consultation with your agent. For example, your agent will probably suggest different tactics for an offer to a traditional, non-distressed seller than he or she would if you were offering on a short sale or a bank owned repossession.

There are some general suggestions that I can make without knowing your situation. First is understanding the market for the home you are targeting so that you can offer a realistic price. Ask your real estate agent to provide you with MLS data that shows the most recent trend in price appreciation as opposed to relying solely on comparable sales. The market is moving fast and comparable sales are in many cases not indicative of current values. Second you should anticipate that at least some of the offers that you will be competing with will be “all-cash” with no loan contingency. Aside from offering a good price, the best way to compete with all-cash offers is to go through the underwriting process to be approved for a loan subject only to review of title and appraisal. Pre approval on your loan takes time and there are some roadblocks depending on the type of loan you seek, but doing so will make you look like a serious buyer and enable you to offer a shorter close of escrow period to the seller.

 

Q: We are hoping to refinance our current mortgage utilizing the HARP2 loan program and understand the program contains restrictions in regard to the timing of our original mortgage. What are the timing restrictions?

A: To be eligible for the HARP2 program, Fannie Mae requires that your original loan have been delivered prior to June 1, 2009; while Freddie Mac’s delivery date is before May 31, 2009. Speak with your mortgage broker to find out more information and if you are HARP eligible.

 

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.

Contact Karen Magliocco for any questions at 707-249-1600 or email us

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.

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.

Napa Real Estate Homeowners Should Track This One. Banks with a heart?

3 weeks ago, Bank of America initiated a pilot program allowing homeowners facing foreclosure to remain in their homes as renters. There are important reasons why Napa Valley homeowners should be interested in the success or failure of BoA’s approach.

First, a note about the term “bank owned homes”. It’s not technically correct to say that there has been some huge rise in the number of them, because “bank owned homes” actually describes every home with a mortgage. The mortgage holder always technically “owns” the property, even when the homeowner retains title. However, what is true is that over the last four years, many homeowners learned the hard way just what it means to face the reality of your home being owned by someone else.

Enter Bank of America. Their press release quotes Ron Sturzenegger, a Legacy Asset Servicing executive with the Bank: “Our priority is designing a solution that helps our customer.” Although we might be justifiably skeptical of this as BoA’s sole motive, allowing homeowners to remain as renters in bank owned homes is hardly just a PR move.

The program certainly makes bottom-line financial sense for a whole host of parties, including Napa Valley real estate homeowners who have no difficulty meeting their own mortgage payments.

Under the program, a former homeowner who qualified would be able to continue working and contributing to the economy without the costs, loss of time, and anxiety involved in moving. For all property owners, the ultimate effect is to keep the market from being flooded with distress sales. Every neighborhood would benefit if home values stabilize.

Under the pilot model, bank owned homes convert to investor ownership in a much smoother transition than the foreclosure/short sale model. Instead of the lender being left with an empty property generating zero revenue in the interim, former homeowners simply become renters, making it easier for them to get back on their feet financially.

In my opinion, any move or policy that helps more people stay in homes is a policy worth discussing. BoA’s program is only in a limited test stage, but here in Napa we can hope that it will prove to have multiple beneficiaries: banks, investors, agents, homeowners and neighbors. Everyone benefits when his or her neighborhood’s real estate market is healthy!

Have a question about real estate in Napa Valley? Feel free to contact me anytime with questions. I represent Napa buyers and sellers, and am always available to chat about your own plans.

-Karen Magliocco

Napa Foreclosure Sales Flood Market

Foreclosures and other distressed properties account for more than a third of all home sales, and data released today suggests that figure may soon grow even bigger.

Lenders in January took back nearly 91,100 distressed properties, which includes foreclosures and short sales, up 29% from the previous month, according to data released this morning by LPS Applied Analytics, which tracks mortgage performance.  In the next few months, experts say those homes will make their way back to the market to join the already high percentage of distressed homes being snatched up by buyers.

That addition of distressed properties will likely lead to further drops in home prices, says Tom Popik, research director at Campbell Surveys, a real estate research firm. Foreclosures and short sales accounted for roughly 35% of total existing home sales in January — up 16% from June, according to the National Association of Realtors. Over that period, the median home price fell 8.5% to $154,700. “Prices are going to continue to go down for a long time,” says Popik

To be sure, distressed properties tend to make up a greater share of overall sales in the winter when investors are the predominant buyers, says Walter Molony, a spokesman for the National Association of Realtors. Families typically purchase a home in the spring and summer before the new school year begins. And because families tend to avoid buying foreclosures, distressed properties make up a smaller market share of home sales during that time, he says.

Still, as banks reclaim more foreclosed properties and put them back on the market, experts say homeowners are likely to feel the impact of a nearby foreclosure on their own property’s value. On average, home property values drop about 1% when they’re within one-eighth of a mile from a residence that’s received a foreclosure filing, according to the Woodstock Institute, which researches foreclosures, and the Georgia Institute of Technology. When the home is sold – whether in an auction or taken back by the lender – homes within a quarter mile lose up to around 4% of their value, which they’ll need between two and five years to recoup, according to a separate study in the Journal of Real Estate Finance and Economics.

For homeowners, more foreclosure sales in their neighborhood can lead to losing home equity at a time when millions already owe more on their home than it’s worth. Less equity will make it harder to borrow against homes for renovations, repairs, or other purposes, says Spencer Cowan, vice president at the Woodstock Institute.

Real estate pros say those who want to sell will likely end up getting less for their property than they expected. That’s because they’ll be competing with foreclosed homes that sell at a roughly 29% discount on average, according to RealtyTrac.com. Of course, these homes may stand out to buyers who prefer to buy a move-in ready home or at least one that doesn’t require extensive repairs like most foreclosures do.

What’s bad news for sellers, of course, is good news for buyers. In particular, experts say the spike in foreclosures means buyers have more leverage to negotiate a price on a non-distressed sale if it’s in a market where a significant number of homes are in foreclosure. They may also be able to purchase a foreclosed home at a relatively low price (though they’ll likely have to pump money into it for repairs).

During the last quarter of 2011, foreclosure sales in Las Vegas accounted for 59% of all home sales – among the highest in the country — according to RealtyTrac.com. Those homes sold for an average discount of 19%. In Sacramento, foreclosures made up 50% of all sales and sold at a 25% discount. But while they may get a deal, buyers shouldn’t count on turning a profit quickly especially if foreclosures continue to rise in the area dragging property prices further down.

Listing information deemed reliable but not guaranteed. Copyright © 2014 by Bay Area Real Estate Information Services, Inc.

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