Marin Real Estate Pulse

Because of the prohibitive cost, I almost never use directory assistance, this is especially true of cell phones but it applies to home land lines as well.  This is a huge money maker for the telecommunications industries.  Google has come along to save the day with a free 411 service, here are the FAQ’s and a feature overview.

Simply dial 800-GooG-411 . so the full number looks like this:  800-466-4411.  There are a couple of cool features.  The first is the sophisticated voice recognition software, it understands English better than most call centers.  The other awesome feature is you can ask for businesses by category, for example “restaurants in San Rafael” as well as maps.

Remember: Call 800-466-4411 for Free Directory Assistance, even works on a cell phonel.

I was showing a friend of mine how cool this Google product is and when he called a recording answered saying the service was overloaded and to call back.  I have never experienced that so I can’t comment on how frequent that might occur.
We all like a bargain and this one is free, so let a friend know.

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.

March 10, 2008

Short Sales are relativity new to the real estate/banking world.   What is a short sale and how do they affect buyer’s, seller’s, and banks.  Simply put a short sale is where a home sells for less money than the seller owes the bank and/or private lender.

For example, if you owe $500,000 on a house but it sells for $350,000 you are short $150,000 of the amount needed to pay off your loans.  Usually, because of commission, taxes, late payments, and expense the “short” amount might add up to another eight or ten percent, in this example the seller might be short $190,000.  What happens now, doesn’t the bank still want all their money?  Of course they want all their money but what are they to do if the seller does not have any money and the house value has declined?  What they do is eat the difference, the short amount. 

The bank will usually forgive the borrower the short amount and write it off as a loss.  They made a bad business decision and have to pay for it.  Usually they lent the buyer %100 of the money needed to purchase the home, and often without supporting documentation on the buyer’s income or assists.  It is called loose underwriting and those days are over.  It really was a dumb idea; when you think about it, even if the value of the home remained stable the bank would have expenses if they took back the home to sell.  In a declining market it just makes it that much worse.  Is this predatory lending, yes in many examples it is.  Did the buyer’s lie on their loan application?  Sometimes they did but other times the mortgage broker filled in the numbers.  Did the buyer’s know their interest rate was going to jump in a few years?  Many did but maybe he was not given all the information up front.

Okay, so we learned the bank eats the lost money but what happens to the buyer?  In the vast majority of cases the buyer does not owe the bank any of the shortfall, however, in most cases the buyer has a bad credit score as a result of the short sale.  Better than a foreclosure but bad none the less. 

Prior to a new law moving its way through the system (I think it is finally in effect - consult with your accountant for details) buyer’s that shorted a bank on a sale would owe tax to the IRS and state on the amount of money forgiven.  In the example above the buyer would have owed income tax on an additional $190,000 of income. 

Warren Carreiro, Broker

 Most of Marin County Real Estate does not know what a bubble is.  Sure, the Novato market is soft with lower prices and Marin County Starter Homes have not prices like this in years but when you look at the whole picture we are doing quite well.  The chart below is for single family homes and does not include condominiums.  It looks at January BARIES MLS results for three years and was compiled by Warren Carreiro, a broker with Frank Howard Allen Realtors.  Looking at one month at a time does not show a tread, however, with three years running it suggest where the market stands.

Marin County Single Family Home Sales (using median for square feet, sales price and days on market: DOM)

Crazy market.  Below is commentary on what exactly is happening when the “Fed cuts rates.”

Yesterday’s Fed move caused folks to think back on what Fed Funds really are. Remember that “Fed Funds” is the rate that banks can borrow money from each other to keep their reserve amounts in line.  This is a one day, or overnight rate. The “Discount Rate” is the interest rate at which an eligible financial institution may borrow funds directly from the Federal Reserve when their reserves dip below the reserve requirement. The Discount Rate is considered the last resort for banks, which usually borrow from each other. The Federal Reserve can change either, but they can’t change mortgage rates. If a borrower asks you why their mortgage lock doesn’t drop .75%, here is the simplest answer.  Moves in overnight rates aren’t directly linked to mortgage rates.  They set the stage for lower rates, but usually weeks down the road.  I like to use the analogy of steering our economy with steering a huge tanker in the ocean.  If the captain of a big tanker wants to make a left, he turns the wheel a mile or so in advance.  Same thing with the economy.  Corrections made now usually do not manifest themselves for a month or two.

Mortgage rates are dependent upon many more complicated factors than the Fed raising or lowering them. The supply of mortgages, the demand by investors for them, the value of the servicing, the credit quality of the borrower, etc. all factor into mortgage rate.

Here is something to consider.  Yesterday’s stock market opened in a free fall.  The Fed had to make an emergency cut announcement to stop/avoid a stock market collapse.  The “stock market” liked the move, came back in the end, and only closed around 128 points down in the Dow.  Now here is the thing…If the Fed did not cut the Fed Funds rate and Discount Rate, our mortgage rates would have been lower.  A simple rule of thumb is if the stock market is up, rates can be up.  If the stock market is down, rates usually follow.  So, what do you think might happen if the Fed cuts again at next weeks meeting?  If the stock market perceives the cut as a good thing and goes up do rates follow?

For those “students of the game” who are still reading, you may wish to check out the links below.

 http://library.hsh.com/?row_id=91 may be a help to you.

Also check out http://biz.yahoo.com/cnbc/080122/22783168.html

Sales of residential real estate for all of Marin County were down 29% for the last quarter of 2007 compared to 2006.  I do not think that should come as a surprise to anyone.  Overall the median price is up which is somewhat misleading because there are many examples of homes that sold one or two years ago that are on the market again for a lower price. To help explain the seeming difference it is necessary to look at geographic regions within Marin County Real Estate.  Those numbers show that significantly fewer homes are selling in North and West Marin.  Home sales are also down from San Rafael South; however, the percentage decline is much smaller.  As you likely know, your Marin Realtor should tell you if you don’t, Central and Southern Marin Real Estate is more expensive than Novato and much of West Marin.

The statistics shown below are from BARIES, Marin MLS as of January 11, 2008.  I have divided Central and Southern Marin from Northern and West Marin to help explain this difference.

                                             4^th Q 2007            4^th Q 2006

All of Marin

Number of Sales                 484                         686        

Median Price*                     $878,000              $840,000

Median Square Feet          1,693                     1,677

West & Northern Marin

Number of Sales                110                         206        

Median Price*                   $630,000              $730,000

Median Square Feet         1,580                     1,635

Central & Southern Marin

Number of Sales                372                         475        

Median Price*                   $984,000              $900,000

Median Square Feet         1,773                     1,687

*Includes both Marin Single Family Homes and Condominiums.