Archive for the ‘Mortgage / Financing’ Category

Why construction building permits are so important

Wednesday, February 1st, 2012

Just a few years ago no one seemed to care if a home improvement or addition was done without permits.  Appraisers are now required to call out differences between square footage on tax records and actual measurements.  If the home has an addition that was done without permits some banks will not lend on the property, others reduce or eliminate the value of the addition.

When you buy a foreclosure permits are even more important because you don’t get any history of what improvements were done or who did the work.  When improvements are done by a homeowner or unskilled worker the results can be disastrous.  I have seen beautiful bathrooms with the marble falling off the shower walls because it was not installed correctly.  This is something you would not be able to see, and likely a home inspector would not be able to find until the damage was obvious.  I have also run into homes that had windows installed without permits and the windows did not have any headers (the beams that support the wall and roof above the window).  The windows in this same house were installed in such a fashion that the walls had no shear (support that would keep the home from falling down in strong winds or mild earthquake).

Electrical work done by homeowners is almost always done incorrectly and creates unsafe wiring and grounding, overloaded circuits, and unprotected wires.

We don’t like getting permits because it cost money, slows down the job, and of course the building inspector will see everything you are doing. Most people feel they are doing a good job and the permits are not necessary but building codes are designed for safety and are not always easy to follow.

If you buy a home that had work done without permits and you start a project with permits it is possible the building inspector will notice the other work that was done and make you get permits for the old work.  Remember, the responsibility follows the home so once you own the home you also own the improvements that were done by prior owners.

Most homes in Marin County are older and I would guess that many, if not most, of them have had work done without the proper permits.  When buying a home a full investigation of its permit history is in order.   Talk to the county or City, look at the permits and if the permit does not have a “final” stamp that means the work was not done or at least not signed off by the building inspector.  Buy the house if you like it but discount your price for work that may need to be redone.

More Home Loan Problems

Tuesday, November 16th, 2010

Getting loan approval is only half the battle.  Sure you need to have verifiable income and a down payment but even with that is does not necessarily mean you can get loan approval for the home you want.  Why, because the home you choose has to be approved by the bank as well.

Appraisers are often asked to make note of any of the following issues when appraising a home:

1)      Peeling paint

2)      Missing appliances

3)      Heat or hot water issues.

4)      Additions or improvements done without permits

5)      Major fixers

One of the newer issues is banks asking appraisers to make note of improvements done without permits.  Because most the homes in Marin are older it is not uncommon, over time, for something to be done without the benefits of permits.  Some banks do not want to lend on those homes unless the permit problems are resolved.  Usually something can be worked out with the city, if the seller has the time and money to get retroactive permits.  Historically, unpermitted remodel projects did not cause a problem with loans, maybe with the City but not with your lender.

Often REO (foreclosures) and Short Sale homes have deferred maintenance and in some cases have been trashed.  If it in very bad condition most banks will not lend on the property which often means cash investors are the only buyers.

Use the first time $8,000 tax credit for your down payment

Friday, May 15th, 2009

Tuesday HUD’s Federal Housing Administration said it would allow first time homebuyers to use the Federal tax credit of $8000 toward the down payment at closing on a purchase.  WOW!  They are going to allow approved lenders and local and state governments to issue short term bridge loans to buyers for their down payment.  Once the tax credit is received, the loan would be paid back.  BUT (isn’t there always a “but”??) lenders need to figure out how to create the qualification method, the proper and legal paperwork, and have all these details approved by FHA……..the tax credit expires December 1st so they better get moving!!  HUD predicts that 53% of the purchases in 2009 will be by first time home buyers.


PS: for a look at current Marin home sales stats follow this link.


Warren Carreiro, Broker

Who are Fannie Mae and Freddie Mac

Monday, July 14th, 2008

Fannie Mae & Freddie Mac have been in most major newspapers including The Wall Street Journal over the past couple of days but who are they and what do they do? If you Google Fannie Mae you are as likely to get the Chicago chocolate company Fannie May as you are the financial institution Fannie Mae. 

Fannie Mae and Freddie Mac have essentially the same federally charters which is to provide a market for your bank to sell their loans to. Once banks generate a loan they usually sell the loan in the secondary market to either Freddie or Fannie. Banks sell off the loans so they have a fresh supply of money to lend to someone else.

Both Fannie or Freddie are corporations owned by stockholders, not federal institutions. Once they buy have a portfolio of loans they package them into bonds and sell them to investors.  The bonds are guaranteed by Fannie or Freddie so investors feel comfortable buying them.  After the sale they have new money to buy loans from banks and the circle goes on. 

This system has worked well for years but with the financial crises in the United States both Fannie and Freddie are having problems raising enough capital to fund new loans.  This is why they have made newspaper headlines, the Fed is coming to the rescue by offering to lend them money and may even purchase some of their stock if needed. 

Warren Carreiro, Broker

Ten Marin Homes for Under $200,000

Monday, May 5th, 2008

No, this article was not written ten years ago, these are Marin condominiums from Sausalito, San Rafael and Novato all currently on the market with an asking price of less than $200,000.   The lower price point has taken a significantly larger hit than the average Marin house.

If you have an interest in looking at this type of investment property let me know.

While I am on the subject of lower priced homes there are 105 condos in Marin priced under $300,000 and what I find interesting is while 31 of those are in escrow the numbers don’t add up to all of them closing.  For example for February, March, and April 2008 an average of 3 units per month closed.  That would imply we have over 30 months of low priced condo inventory.  If you look at the over thirty in escrow the number should be closer to just over three months inventory.  So what gives here, is May going to be a super month or are these just not closing?  Because I have not been following this statistic I can’t say for sure but when probing a little deeper I find that the vast majority of these condos in escrow are short sales.

In prior post I have written about the large percentage of short sales that fall out of escrow.  Part of the reason for this is sellers and listing agents are not always realistic about the asking price.  After all, it is the bank that has to agree to take something less than the full loan payoff, they are the one short at the end of the day.  I am not defending banks or their prior practices by any streach, just pointing out that short sales fall apart for many reasons; lack of or untimely bank response to offers, and unrealistic asking and offer prices just to name a couple.  That being said, I feel if you are willing to put up with what it takes to close a short sale you better have gotten a very good price on the property.

Warren Carreiro, Broker

San Rafael & The Real Estate Meltdown

Wednesday, April 16th, 2008

Reading the newspaper and watching television I could assume that my home town of San Rafael, California has experienced a meltdown as well.  Well, I hate to pop your bubble but the Marin County B.A.R.I.E.S (MLS) statistics don’t show that has occurred as you can see from the chart below.

Does this mean this is the best time to buy San Rafael real estate? As a real estate broker you would expect me to say, don’t wait, this is the best time to buy Marin real estate.  Well, I don’t want to disappoint but I don’t know when the bottom (or top) of the market has hit.  I recently heard someone say that those who will make money in real estate in the next ten years will be buying in the next two years and I agree with that.

Additionally, why are you buying a home, is this going to be a place to put your roots down and stay for many years or are you trying to flip it with perfect timing?  When I purchased my home in 1992 prices were soft for a couple of years after.  If my intention was to flip it I would have lost money.  That was not my intention, I was looking for a home for my family. The home has increased in value tremendously and has been a fantastic investment. It really did not and does not matter if the value goes up or down for a few years because I am not selling, this is my home.

So, if you are in the market for a home and plan on spending over five years there, Marin history says it will also be a great investment. If interest rates were to rise, and they are still low, it would make that purchase all the more difficult.  If you are waiting for the “bottom” of the market we may already be there and if you wait until the market turns it is too late to negotiate while you still hold the cards. 

Here are the statistics for single family homes in Central San Rafael (zip 94901) for the past three years

Single Family Homes First Quarter2006 First Quarter2007 First Quarter2008
Number Sold 55 59 32
Median Price $956,000 $875,000 $982,500
Median Sq. Ft. 2,023 1,914 2,125
Days on Market 37 45 86


Homes are are taking longer to sell and if you can qualify for loan, you have great negotiating power.

Warren Carreiro, Broker 


What is a REO Home Sale?

Monday, March 10th, 2008

REO Hosue

REO House

March 10, 2008

REO is a real estate term which means “real estate owned”.  The real estate is owned by bank or lender, typically as a result of foreclosure.  When a bank lends you money to purchase a house, the home is collateral for the loan which means if you don’t make your payments the bank has the right to take ownership of the property.  Mind you, this is not property the bank wanted or wants to keep, it is a drag on their balance sheet and ties up money that could be used for other loans.

Once a bank owns the home they want to sell it a quickly as possible.  This does not mean a fire sale but often the prices are slightly under market price.  The banks will use a professional appraiser and a couple of real estate brokers to help determine market price.  The bank is not legally required to complete the usual disclosure documents because typically they don’t have enough information, though they still must disclose what they do know.  For buyer’s this means the home is purchase “as is” so it is especially important to get good inspections.

Warren Carreiro, Broker
Marin County Real Estate
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