Arn Cenedella

Archive for the 'Real Estate' Category

It appears $15,000 tax credit for home purchases may not include income limits.

The current $7,500 tax credit for first-time buyers has income limits of $95,000 for individuals and $150,000 for couples. Due to our high housing prices, this credit has done little to spur our local market.

It appears the proposed $15,000 credit will not have income limits and will apply to all home purchases – personal residences only.

Calculated Risk gives good info on the details of the $15,000 Senate approved tax credit.

Bloomberg reports this credit will benefit higher income earners unlike the current $7,500 credit.

First-time buyers – this may be your opportunity to buy!

Yes, the economy is weak and yes, we may not have seen the worst.

But if you feel your employment is secure, if you buy within your financial means, and if you wish to make the San Francisco Peninsula your home, this is a good time to buy.

Long-term, I think we can have confidence that the economy will recover and that our area will continue to be a major employment center.

Prices are down in many areas – especially the more affordable entry-level neighborhoods.

30 year fixed rates are around 5%.

The Senate has passed a proposal for a $15,000 tax credit for home buyers. This is promising. But I caution everyone that this is NOT LAW. The House and Senate will need to agree on the bill and we need to see the exact final form of the bill. Will there be income limits? The current $7500 credit has a $95,000 limit for individuals and a $150,000 limit for couples. Will the new bill contain income limits? This issue will make a big difference in our area.

This is all good but I would like to bring it down to a personal level.

Some former tenants of mine (Rick and Beth) moved to LA a few years ago. Rick and Beth now want to move back and I met with them on Saturday January 17 to look at homes in East Palo Alto and east Menlo Park. We looked at 5 homes and found a real cute 2 bedroom 1 bath at 2230 Poplar Ave. listed at $199,950.

There were several offers and Rick and Beth went above list price a little but we had seller – a bank – pay all their closing costs.

Their total cash outlay to purchase will be about $10,000 and their monthly payments will be $1255 loan, $50 for insurance, $234 property taxes, and $100 mortgage insurance – total monthly payment $1639 per month.

So $10,000 plus $1639 per month buys a 2 bedroom 1 bath single family home on a 5000sf lot.

This house has fresh paint, carpet, vinyl, and new windows.

So basically with little cash outlay (I mean it costs $4000 to move into an apartment around here) plus basically a rent payment, Rick and Beth will become homeowners.

I believe it is reasonable to assume that in 5 to 10 years, this house will be worth more than the $225,000 paid for it. Do you agree? And even if it isn’t, they will be owners instead of renters. They can fix the house and yard up the way they want and enjoy living in this house.

If East Palo Alto isn’t for you (my first home was in East Palo Alto, BTW), then there are other areas where you can buy single family homes for under $500,000.

A home just closed in White Oaks San Carlos where I have lived for 23 years for $680,000.

That is a great price!

So first-time buyers, get moving to take advantage of the current opportunities.

I am confident – if you buy now - in 5 years you will be grateful – you did. 

One of my favorite loan agents, Linda Lunsman of Princeton Capital, handled the loan for Rick and Beth. Linda helped get their offer accepted since she knew the listing agent and got Rick and Beth’s FHA 3.5% down loan approved in 8 working days.

Rick and Beth will be moving into their home before the end of the month. Trust me, they are ecstatic!

I have been in the real estate business since 1978 and I have plenty of professional contracts that help my clients in all aspects of a purchase or sale. These allied professionals would include several excellent lenders, contractors, inspectors, accountant, landscapers, painters, and flooring contractors. I also offer property management.

Contact me if you wish to get started in a low-key no-pressure but professional manner.

Get moving you will not regret it.

Did you know you can buy real estate with your 401(k) or IRA funds?

With real estate values down, there are excellent buys in real estate for long-term investment – both here on the San Francisco Peninsula and elsewhere in the country. I have developed experienced real estate contacts in other areas of the country like Sacramento, San Diego, Phoenix, Dallas/Ft. Worth, Kansas City, Raleigh, NC, and elsewhere.

There are solid long-term investment opportunities available on the San Francisco Peninsula.

Would you prefer to have greater control over your retirement funds?

Would you prefer to invest your retirement funds in real estate – a tangible asset that people need for shelter?

Yes, real estate values in most areas of the country are down.
But I would submit that stock portfolios are down even more.

If you would like more information on investment opportunities and/or purchasing real estate with your 401(K) or retirement funds, please contact me for a FREE 50 page Q&A about self-directed IRA real estate investing.

I am happy to meet with you for a NO OBLIGATION consultation and explanation of the process.

For South County Real Estate Info, Contact Gretchen

Gretchen Merrick of Intero Real Estate provides regular and timely real estate market information for South Santa Clara County.

Check it out if you are interested in the communities south of San Jose – halfway to Monterey.

Solid Home Buying Advice for 2009

Luke Mullins from US News wrote a very good article “Top 5 Home-Buying Blunders for 2009“.

Luke gives excellent advice – check it out.

To express his advice in a positive manner, here are my top 5 home buying tips for 2009:

1. Buy for the long-term

I believe over the nexy year or so there will be many strong buying opportunities in many markets if one invests with the idea of a 5 to 10 year hold. The market may continue downward for another year or two but when the economy recovers – pent-up demand will be unleashed and prices will rise.

2. Know your local market

This is where an experienced knowledgeable realtor comes in. We see 20 to 30 houses a week minimum. We see what is selling and at what price. Colleagues in one’s office share their experiences with us. Look for an agent that has been in business 15 to 20 years – someone who has been through all sorts of market. If you work with an agent who has only been in the business for 5 years, you are working with agent whose majority of experience is only in hot markets until now.

3. Bargain aggressively for property

Look for deals – make low offers – look at foreclosures – you will find a seller that NEEDS to sell and not one that just WANTS to sell. As a buyer you need to be reasonable and you are not going to be able to buy things for 40 cents on the dollar in most cases – but 70 to 75 cents on the dollar from the peak is a pretty good purchase. (This of course varies from market to market – in hard hit foreclosure areas, you might get 50 cents on the dollar – in stronger areas – maybe 80 cents on the dollar). Again, it all comes down to local knowledge.

4. Understand the risks in buying a foreclosure

As a buyer of a foreclosure, you will probably be buying a property that has been “beat-up” – folks losing their homes do not take care of their homes – in fact, some folks trash the home on the way out. I once sold a foreclosure property in Portola Valley, CA years ago (average price $2,000,000 or so) where the owner losing her house took all the appliances out and went so far as to remove all the electrical outlet and switch plates from the house. She took the carpet. Basically she took anything that was not bolted down. The other issue with foreclosure purchases is that the lenders typically have no knowledge of the property – the person hadnling the sale for the bank may be 2000 miles away so any disclosure you get will be extremely limited and prone to error.

5. Buy only what you can afford

In my 30 years of real estate practice, just about the only people who ever got hurt buying something bought something they could not afford. If someone buys a house and moves in with their family as long as they can comfortably make the payments they can just happily enjoy living there regardless of what the current value is. Howver, if one buys something they can not afford then one could be faced with having to sell in a down market.

My prediction – 2009 will be a good year to buy real-estate for a long-term investor who purchases property in a market they understand and at a financially comfortable level.

Home sellers use this approach to sell your home !

Like most things in life, what was in vogue many years ago comes back into vogue after many years of being dormant. This applies to clothes, music and real estate !

For the past 6 or 7 years, interest rates have been so attractive, what used to be called “creative financing” has had little play in the recent market.

Now that the market has slowed down, some of these “creative” techniques are coming back.

Owners are now helping the buyers finance the purchase by carrying back a note as part of the purchase price. This could be a first loan or even a second loan.

There is another way, home sellers can help buyers obtain financing without the need to carry paper.

By buying down the buyers’ interest rate, the home seller can still obtain all cash for his property and keep the sales price up while bringing the buyers’ monthly payment down. It does cost a home seller money to buy down the buyers’ loan rate, but as I will show below; the cost of the interest rate buy down to the home seller is less than the price reduction required to bring to buyers’ monthly payments down to the same level.

Let’s look at a $750,000 purchase with 20% down ($150,000) for a $600,000 loan.

A typical 30 year fixed rate loan at 0 points might be 6.125%.

The loan payment would be $3,646.

If the home seller would pay 1 point towards the buyer loan, the rate would be reduced to 5.625% and the monthly payment would be $3,454.

1 point would cost the home seller 1% of $600,000 or $6,000 so effective sales price would be $744,000.

If the home seller was to just reduce the price to $744,000 and the buyer got an 80% loan with no rate buy down, his payment for 80% loan of $3,616 – which is a $30 reduction in the buyer monthly payment – whereas with the 1% buy down, the buyers’ monthly payment is reduced $192.

What price could a buyer pay for the house without a buydown and keep his monthly payment at the buy down payment of $3,454?

At 6.125%, $3,454 would borrow $568,456 and with the same $150,000 down, a buyer could buy a house for $718,456.

With this example….one can see….a home seller can pay $6,000 towards the buyers’ interest rate – generating a net sales price of $744,000 while the buyer will have a payment on a $744,000 house equivalent to a home purchase of $718,456 without the buy down.

Effectively the seller is able to obtain $25,544 ($744,000 less $718,456) more for his house while making his home more affordable for the buyer. This creates a win win situation for both the home seller and home buyer.

Please let me know if you have further questions.

You may also contact Linda Lunsman at Princeton Capital for more specifics.

Foreclosure opportunities on the San Francisco Peninsula

There are areas on the San Francisco Peninsula where there are many foreclosure opportunities currently for sale.  Foreclosures can often be found in Redwood City and San Mateo – especially east of El Camino and in East Palo Alto and east Menlo Park.

Excellent buys can be made on homes currently owned by the banks. 

Banks do not like own properties. Banks handle money.

 I am currently helping several clients purchase these homes.

I have 30 years experience in helping people buy homes on the San Francisco Peninsula, please give me a call for a free no-obligation consultation.

Many of these homes can be purchased at about 50% of their previous sales price.

Homes in East Palo Alto for $250,000 to $300,000.

Homes in Redwood City and San Mateo for $300,00 to $400,000.

You can complete a map-based search for foreclosure homes by going to:

 http://idx.diversesolutions.com/search/960/40

 Let me know when you want to get started!

Palo Alto Real Estate Market October 2008

What is happening in the Palo Alto real estate market during the month of October 2008?

Below you will find a list of all single family homes listed in Palo Alto between October 1, 2008 and October 31, 2008

 The average list price of the 54 single family homes listed in Palo Alto between October 1, 2008 and October 31, 2008 was $1,942,345.

 10 of the Palo Alto homes listed in October 2008 have sold.

4 were listed below $1,000,000.

5 were listed between $1,000,000 and $1,500,000.

1 was listed at $1,950,000.

As was the case in San Carlos, the entry level priced home seems to be selling more quickly and more foten than the higher price range homes. Again, my sense is buyers are taking advanatage of the current slow market to get into Palo Alto. Move-up buyers appear to be more cautious at the current time.

Any homeowner mortgage bail-out will not be fair and will not work!!!

I imagine we will hear quite a bit from Obama and McCain tonight about their plans to bail out homeowners who are “under water” – i.e. owe more on their mortgages than the property is worth – and those who can not afford to make the monthly payments required on these mortgages.

While I sympathize with homeowners who are under water and/or who can not make their payments, it is my belief that there is no plan that will actually solve the problem and that will be fair to ALL homeowners INCLUDING the large majority of Americans who are on time with their mortgage payments.

Let’s look at homeowner A and homeowner B. Both A & B purchased their home for $500,000 say 2 years ago. Homeowner A put $200,000 of their hard earned cash into a downpayment and took out a $300,000 loan. Homeowner B put ZERO money down and took out a loan for $500,000. Both bought the same house in the same development at the same time.

The market value of these homes is now $350,000.

Buyer A has actually lost $150,000 in equity – lost $150,000 of their hard earned $200,000 cash they put in to buy the property. But they are NOT under water – they now owe $300,000 on a house worth $350,000 AND they can still make payments on their $300,000 mortgage.

I am not aware of any plan that has been proposed to help homeowners like buyer A who have actually lost THEIR OWN MONEY as a result of their home purchase.

Let’s contrast this with buyer B.

Buyer B did not put ANY CASH of their own into the property so they have NOT LOST any of their money but this is the homeowner the US government is going to bail out assuming any homeowner bailout plan is passed. Of course, the overwhelming majority of Americans who pay their mortgages on time will pay for this bail out. Is that fair?

So let me understand this.

Buyer A who has actually lost money on the purchase get NO RELIEF while buyer B who puts no money into the purchase gets relief in the form of some sort of mortgage reduction to $350,000.

Does that seem fair?

My sense is to just let the market take care of it.

The lenders will foreclose, people will lose their homes (in most cases, they will not have lost any cash - most of these owners put zero money into the purchase or in other cases, many these buyers did put cash into to buy their homes years ago but since that time have taken out their equity in the form of a home equity loan), the lenders will foreclose and then sell the property at a loss. The lenders or the investors who bought these loans will suffer a loss – which is just the way it goes – they obtained very high interest rates on these loans because everyone knew they were risky loans and now their investments have gone south – so be it – that is the way it is – they took a risk in search of high profits and lost!

The buyers who purchased with no money down WILL NOT LOSE any of their own money and actually they will have just paid rent to live in their house for a few years.

Without a bailout, the US taxpyer will not be on the hook to bail out some homeowners and not others.

The other fact that most of these Washington DC politicians do not seem to get is that most of these homeowners in trouble could not afford the payments even if their mortgage balance was cut in HALF.

I imagine many my find me cold-hearted but honestly, I do not see any bailout that will work and that will be fair to ALL. Any bailout will only cost the US taxpayers lots of money and in the end, it is my belief that the bailout will actually help few if any borrowers.

Menlo Park real estate update

How is the market in Menlo Park? How does it compare to the market in San Carlos?

Here is the data – number of new listings per month compared to number of accepted offers/pending sales per month in Menlo Park, CA for both single family homes and condominiums/townhouses.

Single family homes:

There have been typically 45 to 60 single family homes listed in Menlo Park each month and monthly sales have typically been 25 to 45 per month. August had fewer accepted offers than every other month except for January.

Condominiums and townhouses:

 

The condominium townhouse market has been pretty stable throughout the year in MP.

10 to 15 new listings come on the market each month and there are 8 to 10 sales each month.

We again see an increase in September sales over August sales.