My Pinole Real Estate

Sellers are looking for the deal and psychologically believe they are getting a deal by buying an REO. Whether they are or not, remains to be seen. I’ve seen a property with obvious foundation problems be listed at $240,000 close for $310,000. Another property listed at $325,000 closed for $360,000 and the buyer redid the entire foundation after purchase. The house is on a busy street and a corner and the other houses on this street are listing and closing closer to $300k. 

Many times, the bank owned homes need a lot of work and can be a worse deal than slightly more expensive ready to move into homes. Many people don’t realize that the difference between a $300,000 home and a $350,000 home is less than $300 a month difference in payment, including taxes and insurance. There are tax incentives to owning a home that can make that difference up in more take home pay. 

Many people looking for the deals think, they’ll buy it cheap and do all the work themselves over time. Well, my experience tells me that the work will never be done. For the entire time you live in the home, you will be working on the home. For a small group of people that might be a great idea but for the majority of people out there, they want to spend their weekends with family having fun not constantly working on their home.

Additionally, constantly having to fix your home is a costly decision. Many times doing repair items piece meal is much more expensive than doing the work in one fell swoop with a licensed contractor. You will probably spend that extra $300 a month payment on all the repairs you will be doing. 

So don’t be afraid of the slightly more expensive well maintained home. It’s probably a better deal than that cheaper REO next door.

If you are trying to sell your house and you are in the rare situation of having bought your property long enough ago that you have plenty of equity, you may be in the difficult situation of having to compete with the REO’s and shortsales out there that are listed well below market value. This means that even if a property is listed at $250k, it will mostly close above asking.  If you price your property at the market price, then you run the risk of no one looking at it.  Recently a client was listing his condo that he purchased 17 years ago.  The condo was priced well for the current market, but after three months, no offers came in and the home owner was unwilling to price the property any lower. 

The original plan was to rent the condo.  This client purchased a house and was going to keep the condo and rent it out.  He was going to rent it to a family member but unfortunately that plan fell through and the HOA rules precluded him renting it out to a non family member.  I continued to encourage him to be the squeaky wheel with the homeowners association and try to obtain special dispensation to rent the condo.  The client was the longest resident of this condo and I was certain he could get them to change their minds if he was persistent.  As it turned out, there is a financial hardship clause in the HOA rules and if nothing else, we are certainly in current financial hardship.  He was able to obtain temporary approval to rent the condo. 

If you are in a situation where you want or need to move and you have equity and would prefer not to sell your house right now, consider renting it out for the next few years until the market takes a turn towards more of a sellers’ market.

Based on my last posting, you might think that you should avoid FHA loans. On the contrary, FHA loans are a great option right now. Here are some of the benefits. The main thing to look for is a loan agent that has a good FHA appraiser and a good relationship with a direct FHA lender.

• Lower down payment (currently 3.5%)
• Down payment can be all gift from eligible source
• Seller may pay all closing costs up to 6% of the sales price
• Cash reserves not required for single family home purchase
• Higher and flexible qualifying ratios
• More leniency on derogatory credit than a conventional loan (minimum score is 580)
• Lower cost than a conforming loan if credit is less than perfect
• Monthly mortgage insurance cost is less than a conventional loan
• Blended ratios with a non- occupant co-borrower
• Up front Mortgage Insurance Premium can be financed or paid for by a seller credit (within the 6% limit).
• FHA loans are assumable
• No prepayment penalties
• No termite required if not called for in the contract and property is over 1 year old
• Loan amount for single family residence up to $625,500.00!