Showing posts with label Investments. Show all posts
Showing posts with label Investments. Show all posts
Tuesday, February 16, 2010
Friday, January 1, 2010
What are agents thinking?
These comments were recently posted in a Q and A question on Trulia;
"I am working with an agent who showed me a house, I was a bit concerned about the cracks on the side of the exterior wall, my agent suggested I find someone to check it out before submitting an offer, if not I would have to get an inspector to look at it. She went ahead and scheduled the inspector. My dad ended up looking at it and stated it was merely the stucco. After I told her to cancel the inspector, she laughted and stated I needed the inspection anyways. Based on her guidance, I had the inspection done. My offer was not accepted, I feel as though I should not be stuck with the bill? Who pays for these types of situations?
When we were going to write the offer, I voiced my concerns to the agent. I notified her that I wondered if there were foundation problems but I told her we wanted the house. She told me to have someone look at it, that she wasn't going to waste any time putting an offer in if I was unsure. I reiterated to her that I wanted the house but that was my only concern, we didn't even make it to her office when she told me to go find someone to see it. She later called me and notified me she had scheduled an inspection, I agreed, but after I had my family member see it and he stated there were only cracks because the stucco was old. So, I told her I didn't need the inspection to be done, that I was comfortable. She was amused and told me we needed it anyway. So I said okay. This is why I agreed to it, she stated we should just do it, since it was required later. I guess I was just not thinking and should have just insisted on canceling it and/or asked more questions. The day of the inspection I realized the listing agent worked in the same firm as she did. We later wrote an offer and even though there were some obvious findings in the inspection, she suggested we not ask the bank to fix as they would probably not take my offer because of it. If anything, I must admit after reading some of the comments, I guess I do look gullible. I just really wanted that house and trusted her to guide me correctly. I truly just wanted to know, for future reference, who pays for inspections before or even after an offer has been accepted. Do I come out of pocket all the time, or do we wait for closing?
I know it sucks to spend money on a home and then not get it. That happens. When it comes to Inspections though you have to look at them like insurance policies. You pay for the protection in order to protect you from what can go wrong. Doing inspections before you write your contract is a good practice. Though it must be mentioned that some practices come with risks.
Agents often act in ways that are important to protect you but there are some things that should have been performed differently here. The question of preinspection comes up very often. It is an adviseable practice for sellers to preinspect theeir homes for maximum liability protection. In California, our disclosure law is based on the sellers expert knowledge of their property and any defects known are to be fully disclosed to buyers in a real estate transaction by law.
Many people are not experts in construction, building codes, and few people crawl around under their home and in attics, regularly inspect HVAC ducts, or clean out plumbing lines. People generally live in their homes and fix problems as they occur. Familiarity with a home also lulls people inot a false sense of security. A current homeowner may have bought thier home decades ago for tens of thousands of dollars and it may be worth hundreds of thousands of dollars now. Some minor quirk to the current homeowner could be a dealbreaker for the new buyer since the expectation level is commensurate with the investment in the home.
Let me make the point by imagining this transaction happening in a different way. Let's say dad said the home was fine and based on that the buyer elected to purchase the home. The bueyr is going to inspect that wall where the home inspector will advise the cracks are probably nothing but protects himself by advising you to perform an expensive destructive test of the wall. You decide its ok based dad's advice and close in 30 days.
Let's say the buyer moves in and in the next rainstorm water comes pouring into the home or worse in an earthquake occurs and the wall fails. Now whose fault is it? You're not going to sue dad, I mean he said the wall was ok, but he's your father. The home inspector(s) protected themselves by advisng the destructive test which few ever especially after having 3 seemingly competent people look at the wall. Where was your agent to protect you? That is the reason for the preinspection.
The agent here tried to do everything he could to protect his buyer from a nightmare scenario but did not do one thing. The agent did not inform the buyer of preinspection risk and did not let the buyer chose to assume the risk for the inspection or "insurance" protection. In this case, the buyer should have been advised the cost and the risks before being asked to pay for the inspection or simply moved on and continued to look.
The buyer should have been given the option to first lock up the home by writing the contract and getting the seller to accept it and the inspection could have been scheduled for the first day after seller acceptance. If the inspection came up badly, then the buyer could have immediately backed out. Agents do not like this way but somtimes it is the way it must be done. Especially if the buyer has little cash.
"I am working with an agent who showed me a house, I was a bit concerned about the cracks on the side of the exterior wall, my agent suggested I find someone to check it out before submitting an offer, if not I would have to get an inspector to look at it. She went ahead and scheduled the inspector. My dad ended up looking at it and stated it was merely the stucco. After I told her to cancel the inspector, she laughted and stated I needed the inspection anyways. Based on her guidance, I had the inspection done. My offer was not accepted, I feel as though I should not be stuck with the bill? Who pays for these types of situations?
When we were going to write the offer, I voiced my concerns to the agent. I notified her that I wondered if there were foundation problems but I told her we wanted the house. She told me to have someone look at it, that she wasn't going to waste any time putting an offer in if I was unsure. I reiterated to her that I wanted the house but that was my only concern, we didn't even make it to her office when she told me to go find someone to see it. She later called me and notified me she had scheduled an inspection, I agreed, but after I had my family member see it and he stated there were only cracks because the stucco was old. So, I told her I didn't need the inspection to be done, that I was comfortable. She was amused and told me we needed it anyway. So I said okay. This is why I agreed to it, she stated we should just do it, since it was required later. I guess I was just not thinking and should have just insisted on canceling it and/or asked more questions. The day of the inspection I realized the listing agent worked in the same firm as she did. We later wrote an offer and even though there were some obvious findings in the inspection, she suggested we not ask the bank to fix as they would probably not take my offer because of it. If anything, I must admit after reading some of the comments, I guess I do look gullible. I just really wanted that house and trusted her to guide me correctly. I truly just wanted to know, for future reference, who pays for inspections before or even after an offer has been accepted. Do I come out of pocket all the time, or do we wait for closing?
(End Question)
I know it sucks to spend money on a home and then not get it. That happens. When it comes to Inspections though you have to look at them like insurance policies. You pay for the protection in order to protect you from what can go wrong. Doing inspections before you write your contract is a good practice. Though it must be mentioned that some practices come with risks.
Agents often act in ways that are important to protect you but there are some things that should have been performed differently here. The question of preinspection comes up very often. It is an adviseable practice for sellers to preinspect theeir homes for maximum liability protection. In California, our disclosure law is based on the sellers expert knowledge of their property and any defects known are to be fully disclosed to buyers in a real estate transaction by law.
Many people are not experts in construction, building codes, and few people crawl around under their home and in attics, regularly inspect HVAC ducts, or clean out plumbing lines. People generally live in their homes and fix problems as they occur. Familiarity with a home also lulls people inot a false sense of security. A current homeowner may have bought thier home decades ago for tens of thousands of dollars and it may be worth hundreds of thousands of dollars now. Some minor quirk to the current homeowner could be a dealbreaker for the new buyer since the expectation level is commensurate with the investment in the home.
Let me make the point by imagining this transaction happening in a different way. Let's say dad said the home was fine and based on that the buyer elected to purchase the home. The bueyr is going to inspect that wall where the home inspector will advise the cracks are probably nothing but protects himself by advising you to perform an expensive destructive test of the wall. You decide its ok based dad's advice and close in 30 days.
Let's say the buyer moves in and in the next rainstorm water comes pouring into the home or worse in an earthquake occurs and the wall fails. Now whose fault is it? You're not going to sue dad, I mean he said the wall was ok, but he's your father. The home inspector(s) protected themselves by advisng the destructive test which few ever especially after having 3 seemingly competent people look at the wall. Where was your agent to protect you? That is the reason for the preinspection.
The agent here tried to do everything he could to protect his buyer from a nightmare scenario but did not do one thing. The agent did not inform the buyer of preinspection risk and did not let the buyer chose to assume the risk for the inspection or "insurance" protection. In this case, the buyer should have been advised the cost and the risks before being asked to pay for the inspection or simply moved on and continued to look.
The buyer should have been given the option to first lock up the home by writing the contract and getting the seller to accept it and the inspection could have been scheduled for the first day after seller acceptance. If the inspection came up badly, then the buyer could have immediately backed out. Agents do not like this way but somtimes it is the way it must be done. Especially if the buyer has little cash.
Wednesday, October 21, 2009
Yahoo News Link
Here is a quick news link from Yahoo on the state of the market.
http://finance.yahoo.com/news/Homes-About-to-get-much-cnnm-699910894.html?x=0
http://finance.yahoo.com/news/Homes-About-to-get-much-cnnm-699910894.html?x=0
Wednesday, September 9, 2009
Home Improvement Rules of Thumb.
On a zillow blog a poster asked about how much to invest in a kitchen remodel. Stan at Brandon Handyman.com, "Realtors_Fix It Guy" posted in response. "Cost of kitchen upgrade should be at or near 1/5th in porportion but not exceeding 25% of total home value... As for a bath redo, stay around 20% overall value divided by number of bathrooms... ie. 2 baths = 10% ea... or 12.5% and 7.5%, etc.
I like this advice it though it provides a very generous range. This rule of thumb I would further advise is for owners who are planning on being in their home more than 5 years. Another poster in the kithcen and bath busess elaborated further.
your remodel, and as with all things in life, you will usually get what you pay for. If you want the products with finer quality, or more options, or the better quality, the more costly the remodel is going to be.
"...I usually suggest a project budget starting point of 15-20% as this will allow you to select the better quality materials and products that you will invariably want. If this is your "dream home" and you want this to be your "dream kitchen" you can easily shoot right past the 25% end of the rule, but then you are doing this for yourself, it's your dream, and you deserve it now don't you!! If you are remodeling to sell or you are planning on being in the home less than 2 years, I recommend shooting for the 10% end of the rule. By staying around 10% you will still be putting in good quality materials but you will not be spending unnecessarily. And while it is possible to spend less (I help clients do it all the time), if you go too much below the 10% rule, you may then start to devalue the home instead of increasing it's value. (things look cheap for a reason)."
I have to put a serious issue with the other guy's comments.
If a seller came up to me and told me they were going to put 10% of the cost of their home into the kitchen. The first question I would ask is how long are you going to live there? The psoter said if the answer is 2 years then clsoer to the 10% is closer. I say that if the number is less than 2 years do a cosmetic remodel because you are more likely going to get 70 cents on the dollar return on your money. The lower one is on the home price range, the lower that return goes. This requires some elaboration.
If you live in a $300k home and put $30k into the kitchen then learned you had to sell right away. It is very resonable to expect $330k back right away but probaly more like $320k all other things equal. But I will share that if one planned to remodeled the kitchen with the intent to sell on the plannable horizon, I could put you in touch with people who could do it for $12k and we could sell the home for $330k. Sound good to you?
Most people don't know the difference between a "value" remodel or "quality" remodel. To he honest (and this is no disparaging any one here) I have seem the same quality of materials used for both a 15k and 30k remodel. The poster comes form San Ramon CA. I advised they go out to the new construction in the Dougherty Valley, an area where much development is happening, and look at the "quality" materials some builders are putting in those homes with masontie laminate covered drawer bottoms and laminate shelving. I ask would this be a 15k or 30k kitchen? Those builders use high end looking finishes which is what people want. They want nice looking and new.
If one is going to put in a kitchen in the 300k home would anyone really advise they spend 75k?
I would condition these statements by saying a homeowner should take the average cost of the home in their neighborhood then add the cost of the remodel. If that number is meaningfully over the most expensive recent sale in the area, then lower your budget.
I like this advice it though it provides a very generous range. This rule of thumb I would further advise is for owners who are planning on being in their home more than 5 years. Another poster in the kithcen and bath busess elaborated further.
your remodel, and as with all things in life, you will usually get what you pay for. If you want the products with finer quality, or more options, or the better quality, the more costly the remodel is going to be.
"...I usually suggest a project budget starting point of 15-20% as this will allow you to select the better quality materials and products that you will invariably want. If this is your "dream home" and you want this to be your "dream kitchen" you can easily shoot right past the 25% end of the rule, but then you are doing this for yourself, it's your dream, and you deserve it now don't you!! If you are remodeling to sell or you are planning on being in the home less than 2 years, I recommend shooting for the 10% end of the rule. By staying around 10% you will still be putting in good quality materials but you will not be spending unnecessarily. And while it is possible to spend less (I help clients do it all the time), if you go too much below the 10% rule, you may then start to devalue the home instead of increasing it's value. (things look cheap for a reason)."
I have to put a serious issue with the other guy's comments.
If a seller came up to me and told me they were going to put 10% of the cost of their home into the kitchen. The first question I would ask is how long are you going to live there? The psoter said if the answer is 2 years then clsoer to the 10% is closer. I say that if the number is less than 2 years do a cosmetic remodel because you are more likely going to get 70 cents on the dollar return on your money. The lower one is on the home price range, the lower that return goes. This requires some elaboration.
If you live in a $300k home and put $30k into the kitchen then learned you had to sell right away. It is very resonable to expect $330k back right away but probaly more like $320k all other things equal. But I will share that if one planned to remodeled the kitchen with the intent to sell on the plannable horizon, I could put you in touch with people who could do it for $12k and we could sell the home for $330k. Sound good to you?
Most people don't know the difference between a "value" remodel or "quality" remodel. To he honest (and this is no disparaging any one here) I have seem the same quality of materials used for both a 15k and 30k remodel. The poster comes form San Ramon CA. I advised they go out to the new construction in the Dougherty Valley, an area where much development is happening, and look at the "quality" materials some builders are putting in those homes with masontie laminate covered drawer bottoms and laminate shelving. I ask would this be a 15k or 30k kitchen? Those builders use high end looking finishes which is what people want. They want nice looking and new.
If one is going to put in a kitchen in the 300k home would anyone really advise they spend 75k?
I would condition these statements by saying a homeowner should take the average cost of the home in their neighborhood then add the cost of the remodel. If that number is meaningfully over the most expensive recent sale in the area, then lower your budget.
Tuesday, August 11, 2009
Maybe it’s time to let Bankruptcy Courts deal with Neg-Am Mortgages.
This blog should fall into the arena of gossip for some more educated source to follow up and provide better and more firm facts.
Someone I trust was talking to a banker and they started to discuss the problems with the banking system. After covering all the numerous talking points about who was to blame and pointing the usual fingers; the Community Investment Act, Fannie and Freddie Mac acting as irresponsible investor on bad loans, and the removal of the restriction preventing Investment Banks from engaging in real estate (Glass-Stegal). In other words the usual complaints. They then started to discuss possible solutions to the debacle, this is where I became interested.
Most real estate agents, and others who have attempted a loan modification, know what kind of a byzantine nightmare the process can be. Many calls, lost paperwork, and low level staff manning the phones that have no authority other than the right to tell you 'NO' and 'declined'.
They talked about the system. Once a bank receives the modification or short sale request, it has to go to its files and pull the loan documents, submit all the paperwork to an underwriter who was given a set of policies drafted by the banks attorney's who may also eventually research the loan. At the same time, if there is a second loan, a concurrent negotiation occurs with an institution that has their own phalanx of underwriters, attorneys, and guidelines.
Part of the bank's research is to determine if there was mortgage insurance and if there was an investor on the loan. Once it is discovered that these entities exist, there are yet another set of guidelines to deal with from corporations who have yet another series of underwriters, guidelines, and attorneys.
So lets review, under the ideal situation in any short sale or loan modification with one loan there
could be as few one and many as three institutions involved; the bank then additionally one insurer and/or one investor. If there are two mortgages, then there are two to six institutions.
Now let's complicate the matter, like the reality for most. No bank has one investor, nor do they use one insurer. So as the pool of loans grows and the number of vendors grows, and the process gets more and more complicated. Other complications arise when you consider the myriad of state laws and the fact that many of the investors are overseas. but then it gets really tricky.
Somewhere along the line, investment banks created these "so-called" risk hedges called the collateralized mortgage obligation or collateralized debt obligation (CMO's or CDO's). This was a new form of investment designed to reduce losses on bad mortgages. So the banks take their pool of assets backed by debt and people's incomes and they divide these obligations into investment vehicles, using another set of contracts (drafted by attorneys) and start trading them on Wall Street to institutional investors (who have their own attorneys).
So at the peak of the bubble we had we had little or no oversight from the Republicans, We had Democrats pushing banks to underwrite bad loans that were purchased by Fannie Mae and Freddie Mac. The Investment Banks poured money into the mortgage market. Banks wrote loans, sold some to investors, and insured others, all while packaging bundles of investments and selling them to insurance companies, other banks, foreign governments and hedge funds.
So now the banker gets to the end of his discussion. "Event's didn't work out so well." he says. "Real Estate agents are working the short sales and individuals are trying to perform loan modifications." He continued, "The reason most loan mod's and short sales do not get approved is because it is just cheaper to foreclose than to deal with all the various companies and their attorneys. Every bank can't come up with one set of guidleines to deal with all the different situations all these contracts and attorneys have created." Once the foreclosure occurs then it wipes the slate clean for the bank holding the loan at the core of this complex system of contracts. The homeowner is treated like one of the investors and gets wiped out with the foreclosure.
This is why it's so hard to do a short sale or loan mod.
Someone I trust was talking to a banker and they started to discuss the problems with the banking system. After covering all the numerous talking points about who was to blame and pointing the usual fingers; the Community Investment Act, Fannie and Freddie Mac acting as irresponsible investor on bad loans, and the removal of the restriction preventing Investment Banks from engaging in real estate (Glass-Stegal). In other words the usual complaints. They then started to discuss possible solutions to the debacle, this is where I became interested.
Most real estate agents, and others who have attempted a loan modification, know what kind of a byzantine nightmare the process can be. Many calls, lost paperwork, and low level staff manning the phones that have no authority other than the right to tell you 'NO' and 'declined'.
They talked about the system. Once a bank receives the modification or short sale request, it has to go to its files and pull the loan documents, submit all the paperwork to an underwriter who was given a set of policies drafted by the banks attorney's who may also eventually research the loan. At the same time, if there is a second loan, a concurrent negotiation occurs with an institution that has their own phalanx of underwriters, attorneys, and guidelines.
Part of the bank's research is to determine if there was mortgage insurance and if there was an investor on the loan. Once it is discovered that these entities exist, there are yet another set of guidelines to deal with from corporations who have yet another series of underwriters, guidelines, and attorneys.
So lets review, under the ideal situation in any short sale or loan modification with one loan there
could be as few one and many as three institutions involved; the bank then additionally one insurer and/or one investor. If there are two mortgages, then there are two to six institutions.
Now let's complicate the matter, like the reality for most. No bank has one investor, nor do they use one insurer. So as the pool of loans grows and the number of vendors grows, and the process gets more and more complicated. Other complications arise when you consider the myriad of state laws and the fact that many of the investors are overseas. but then it gets really tricky.
Somewhere along the line, investment banks created these "so-called" risk hedges called the collateralized mortgage obligation or collateralized debt obligation (CMO's or CDO's). This was a new form of investment designed to reduce losses on bad mortgages. So the banks take their pool of assets backed by debt and people's incomes and they divide these obligations into investment vehicles, using another set of contracts (drafted by attorneys) and start trading them on Wall Street to institutional investors (who have their own attorneys).
So at the peak of the bubble we had we had little or no oversight from the Republicans, We had Democrats pushing banks to underwrite bad loans that were purchased by Fannie Mae and Freddie Mac. The Investment Banks poured money into the mortgage market. Banks wrote loans, sold some to investors, and insured others, all while packaging bundles of investments and selling them to insurance companies, other banks, foreign governments and hedge funds.
So now the banker gets to the end of his discussion. "Event's didn't work out so well." he says. "Real Estate agents are working the short sales and individuals are trying to perform loan modifications." He continued, "The reason most loan mod's and short sales do not get approved is because it is just cheaper to foreclose than to deal with all the various companies and their attorneys. Every bank can't come up with one set of guidleines to deal with all the different situations all these contracts and attorneys have created." Once the foreclosure occurs then it wipes the slate clean for the bank holding the loan at the core of this complex system of contracts. The homeowner is treated like one of the investors and gets wiped out with the foreclosure.
This is why it's so hard to do a short sale or loan mod.
Friday, June 19, 2009
Buyer's Agency
For most people, buying a home is their single biggest investment. The process is filled with many complex details that may seem confusing and complicated if not properly understood. The rules are generally governed by the contracts agreed to between buyer and seller. These contracts are typically drawn up by the attorneys for the companies that make up each MLS association across the country. They draft these agreements to reconcile state laws and the court cases of each state where problems arise between buyer and seller.
In the past, agents were legally obligated to protect the interests of the home seller. Today, in our consumer oriented society, that model has been replaced. Agents who represent buyers have the legal duty to protect those buyers under state agency laws. The most recent changes to the business of real istate is the introduction of homebuyer agreements. Homebuyers are choosing to have their own real estate agent, a contracted buyer's agent, to legally represent them under a written agreement.
In every case where an agent is a buyer’s representative is involved, under contract or not, the agency law requires specific represenation for you, the buyer, not the seller, and has full fiduciary duties, including loyalty to the buyer. By definition and law, the buyer’s agent has your best interests in mind throughout the transaction. The percentage of homebuyers with buyer representation has grown significantly in the past decade. According to a recent National Association of Realtors® survey, nearly half (46%) of home buyers used the services of a buyer’s agent last year, and four out of every five buyer’s agent agreements were in writing.
The following points are presented at the beginning of every transaction on a document called the Agency Disclosure regardless of whether or not there is a contract between the buyer and his agent . The buyer’s agent and the homebuyer establish by mutual agreement and in writing, known as a buyer's agency agreement, that will entitle the homebuyer to:
Loyalty: The real estate agent has a fiduciary resposibility, the highest protection under the law, to act in the best interest of the buyer.
Reasonable Skill and Care: Performing the job of an Agent with the utmost care, integrity and honesty. Some of the tasks include; Assisting in the determing a purchase price, resourcing professionals in the discovery of material facts, and investigating the material issues important to the buyer.
Disclosure: All material facts such as relationships between agent and other parties, existence of other offers, status of deposits, and legal effect of important contract provisions.
Confidentiality: Any discussions, facts, or information that should not be revealed to others but does not include responsibility of fairness and honesty in dealings with all parties. Accounting in dealings. Negotiaing you your behalf without compromsing your position or disclosing unnecessary knowledge about you.
Buyers Agency Agreements
There are two types of buyers agency agreements. One is where the agent is compensated by the buyer regardless of what the buyer purchased and the other simply defines and clarifies the legal considerations between buyer and the agent. Buyers should be aware and ask the question about how the agent is compensated since there are legal remifications. For example, if the buyer under a buyers agent compensation agreement innocently discovers that his friend is selling a home he can purchase and makes an agreement to buy his house without agents. The buyer may be obligated to pay a commission to his buyers agent even when the agent was not involved in the process.
Using buyers brokerage agreements is helpful between buyers and their agents because they do make clear the duties and responsibilites of the agent and a buyer.
Monday, June 15, 2009
The ABC's of the Real Estate Market
I recently went to a seminar and the presenter had a great way to describe areas in an investment standpoint.
A residential housing market can be broken into 3 parts the "lower end", homes priced under the conforming loan maximum, and the "high end." The high end has two parts. One is the the market that requires leverage to purchase from the conforming lona limit to somehwere in the lo millions.
The lower end can again be broken into 3 parts. Grade A: The areas that had value 3 years ago and will have value again 3 years form now. Grade B : The areas that will improve in the next recovery. Grade C: The bottom and most challenging areas that are currently flooded with foreclosures.
Each area offers a unique opprotunity for different types of buyers. For example, first time home buyers who are interested in appreciation may be advised to purchase in category B areas if they are not financially able to purchase in category A areas since the B areas should improve in the next up cycle.
With regards to investments, this description should hold true as well. The most money would be expected in the category B areas. Category A markets will be tighter and from an investment standpoint will be characterized as good places to park money. Basically a place to preserve capital. The market may go down, but these category A area have historically been the first to recover in prior upswings, currently these markets are under pressure.
Category B areas have for the most part bottomed and should will hold, all other things being equal, being a good place for capital growth in the long term. The lower the price the more this characterization is true. Over the last few years, these homes have fallen further from their highs as a percentage of price and will recover quicker due to the homes being more affordable and in lower price points.
Category C areas are for cash buyers only and only make sense for LONG term holds (like a bond) the appreciation will be slow but the prices on a per square foot basis are generous making rental streams good only when unlevered and price is a factor.
Category A areas are closer to the top of the conforming loan range (629k). Category B and C areas are in the mid and lower price ranges.
In centreal and east Contra Costa County, places like San Ramon, Danville, Walnut Creek, are solid category A properties. Pleasant Hill starts in the lower end A range and moves into the upper end homes. Concord, Martinez and Livermore are solid B categories with category A components. Antioch, Pittsburg, Brentwood and outlying areas are in the solid C category.
A residential housing market can be broken into 3 parts the "lower end", homes priced under the conforming loan maximum, and the "high end." The high end has two parts. One is the the market that requires leverage to purchase from the conforming lona limit to somehwere in the lo millions.
The lower end can again be broken into 3 parts. Grade A: The areas that had value 3 years ago and will have value again 3 years form now. Grade B : The areas that will improve in the next recovery. Grade C: The bottom and most challenging areas that are currently flooded with foreclosures.
Each area offers a unique opprotunity for different types of buyers. For example, first time home buyers who are interested in appreciation may be advised to purchase in category B areas if they are not financially able to purchase in category A areas since the B areas should improve in the next up cycle.
With regards to investments, this description should hold true as well. The most money would be expected in the category B areas. Category A markets will be tighter and from an investment standpoint will be characterized as good places to park money. Basically a place to preserve capital. The market may go down, but these category A area have historically been the first to recover in prior upswings, currently these markets are under pressure.
Category B areas have for the most part bottomed and should will hold, all other things being equal, being a good place for capital growth in the long term. The lower the price the more this characterization is true. Over the last few years, these homes have fallen further from their highs as a percentage of price and will recover quicker due to the homes being more affordable and in lower price points.
Category C areas are for cash buyers only and only make sense for LONG term holds (like a bond) the appreciation will be slow but the prices on a per square foot basis are generous making rental streams good only when unlevered and price is a factor.
Category A areas are closer to the top of the conforming loan range (629k). Category B and C areas are in the mid and lower price ranges.
In centreal and east Contra Costa County, places like San Ramon, Danville, Walnut Creek, are solid category A properties. Pleasant Hill starts in the lower end A range and moves into the upper end homes. Concord, Martinez and Livermore are solid B categories with category A components. Antioch, Pittsburg, Brentwood and outlying areas are in the solid C category.
Monday, June 8, 2009
Stuck between a Mortgage Rock and a Hard Place?
You are not alone.
http://www.marketwatch.com/story/one-owners-tale-of-mortgage-modification-hell?pagenumber=1
Another Short Post.
http://www.marketwatch.com/story/one-owners-tale-of-mortgage-modification-hell?pagenumber=1
Another Short Post.
Friday, June 5, 2009
Quick Post on Bay Area Real Estate Market
Here is a online news story form CBS Marketwatch on Bay Area housing.
http://www.marketwatch.com/story/were-overlooking-signs-of-housing-comeback?siteid=nwhpf&sguid=vmtIvi8U2kmwaufqPiI3RQ
For more information e-mail me direct under the heading "Trough Bottom"
http://www.marketwatch.com/story/were-overlooking-signs-of-housing-comeback?siteid=nwhpf&sguid=vmtIvi8U2kmwaufqPiI3RQ
For more information e-mail me direct under the heading "Trough Bottom"
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