Grace Properties Newsletter
March 28, 2012
The local real estate market is heating up with some properties receiving multiple offers. The inventory is down and first-time buyers and investors are getting offers on the table. Loan underwriters are getting tighter in all areas of the lending process, however, and borrowers are facing closer scrutiny on their applications. For instance, in examining verification of borrower’s funds the paper trail of where the funds come from is tighter than in the past. If you are receiving a gift for part of the down payment or gifting to someone the money needs to be “seasoned” (in the account) for 60 days. Also, borrowers need to make sure they don’t incur any new credit during the 30 days prior to funding. If the correct steps aren’t followed then the loan goes back to the underwriter and that can take 1-2 weeks.
50% of the loans made in Sonoma County are FHA loans (think 3 ½% down payment) and they have some wrinkles you need to be aware of. Also, the cost is going up April 1 so talk to your loan broker about the loan that best fits your needs. One thing that most lenders are adamant about is Health and Safety issues. Things like peeling paint in a pre-1978 house (possibility of lead-based paint) and faulty decks etc. need to be fixed prior to close. With VA loans all Section 1 pest work needs to be completed prior to close. So the lending landscape has changed but if the borrower starts early and gets all his/her documents in, the process is easily managed. There are conventional loans (meaning non-FHA) with as little as 5% down. Each loan comes with its own set of criteria so take the time to peruse all that is available to you.
The process for a short sale is still time-consuming-total of 5.5 months and about 90 days to close after an offer is submitted to the lender. The process still requires all your financial and work data but more importantly still requires a Hardship letter. The short sale applicant has to have a “hardship” like illness, loss of job, job transfer etc. –it cannot be that the property is underwater on the loan.
However for owners looking to stay in their homes, the government has come out with HARP2 (Home Affordable Modification Program) to help them refinance even up to 200% loan-to-value. You need to be current on your payments, owner occupied, loan originated prior to June 1st 2009 and, be a Fannie Mae or Freddie Mac loan and not previously refinanced through HARP. Call your lender or broker to see if you are eligible…this is an outstanding chance to drop your payments and allow some owners to stay in their homes. Until there is a better solution for underwater borrowers this is a good program. You do not have to refinance with your original lender.
Remodeling Cost Recapture
According to Remodeling’s 2011-12 Cost vs. Value Report, many projects recoup 71% to 78% of cost. An attic bedroom addition would return 72.5%, a minor kitchen remodel 72.15% and siding replacement 78%. The following minor kitchen upgrades have a strong impact on buyers: cabinet hardware $80-800; a new faucet $200; adding LED under cabinets $40; simply organizing the kitchen with hooks, baskets and drawer organizers can be done for as little as $100; and countertops can sparkle but the homeowner can get 30 lineal feet of laminate top that mimics granite for about $1575 vs. $2400 for granite. The kitchen is usually the focal point in a house and warming it up and creating value without spending thousands of dollars can achieve good results.
Sales to Date for 2012
There have been 427 sales from $150,000 to $999,000 in Santa Rosa with an average price of $337,640 which is very close to last year’s first three months. What agents are experiencing today is more multiple offers and less inventory. Rates look likely to stay low for the near future so I think all of us in the real estate business are cautiously optimistic.
As always, call me if you have a question or a referral.
Mike Grace, Broker
1258 Parsons Dry
Santa Rosa, CA 95404