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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.
About Karen Magliocco
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:
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.
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.
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.
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.
The Napa Wine Auction weekend starting on May 31, 2012 –June 3, 2012 is the kickoff season event in the Napa Valley. With the sights of spring bring out the beautiful vineyard landscapes in the Napa Valley. The spring home buying season looks bright. If activity in St Helena, Napa & Calistoga is sustained near present levels, existing-home sales will see their best performance in five years. Now is the time to list your home as sales in St Helena, Calistoga and Napa are selling quickly. There is a limited inventory right now so finally it’s a seller’s market again. Home prices are coming back up in the valley. St Helena’s median home price is $745,000 and the land median being at $3,950,000. Like all statistics, those can be looked at in more than one way. We know that some numbers are more reliable than others. This particular index is based on an unusually large sample: about 20% of all transactions for existing home sales. It’s a forward-looking indicator: in the past, it has signaled coming trends before they materialize. This index seldom produces a straight line of activity because of seasonal and monthly ups and downs, but this time a trend is evident that is notably above the pattern from a year ago.
St Helena & Napa home sales patterns are not invariably tied to national trends — but they aren’t impervious to them, either. So we are pleased when our own impression that the spring market is looking up is borne out by the experts who deal in the broader picture. Based on all of the factors in the current market expect to see sales rising 7 to 10 percent in 2012.
Real estate is a famously local phenomenon, and although we keep an eye on the national and state markets, our real attention is always centered right here in St Helena. If you have questions about your own real estate outlook, call me anytime for a consultation focused on your neighborhood.