Tips for Increasing Your Home's Value

It's not unusual for a Realtor to hear a property owner say that their home is worth a certain amount because of a particular recent sale price of another house in their neighborhood. Many times the Realtor has a different opinion about the home's value than the property owner does, not because it ultimately couldn't, but because of the way it looks right now.

It's like selling a car: A prospective buyer is far more attracted to a pretty, shiny, vacummed-out, cleaned-up, polished car sitting out on the curb when they first pull up to take a look. They are far more ready to have a discussion about it, since it compares favorably or more favorably than most other cars they looked at, and a buyer is more ready at that point to believe the car has been well-maintained, which means it's worth more to them because there will be fewer repairs.  And this is the same approach owners need to take with their houses and yards. You probably wouldn't consider getting maximum value out of your car without putting some effort into its presentation--and you need to do the same with your home:

• Trim overgrown trees and bushes so that branches are at least 10 feet away from your roof -- and possibly include that same guideline for driveways, walkways, and outdoor sitting areas, or if vegetation visually obscures too much of your house so that it cannot be clearly seen from the street. Water your landscaping so that it looks green with no bare spots, and remove dead plants.
• Consider having the house power-washed--it may eliminate a paint job (unless you have the next issue). This should be done only by a professional.
• Touch up peeling paint. Not only is this an "attractiveness" issue, it signals negative messages about maintenance, and is also an FHA loan condition issue for an FHA buyer.
• Have a professional inspect your roof and replace curled or missing shingles. Remaining life-expectancy is important, especially if most of the nearby roofs are much newer looking. Stains and plant matter such as moss can be removed with a cleaning. Considering that total roof replacement could be up to $20,000, a roof in poor condition could make your house appraise lower.
• Routine maintenance and cleaning eliminates setting off alarms: repair gutters, obtain a pest/mold inspection report annually, replace missing bricks, repair exposed wood beams and window frames, remove or repair deteriorated gates and fencing.
• Colorful plantings in the are a minimal investment, but will do much to show off your yard and your home.

It's important to remember that the money invested now will help you obtain a higher price from the buyer, and will help to eliminate value issues when the buyer's appraiser comes out to see your property during escrow. Many times sellers overestimate the amount required to prepare -- this amount will also depend on how much deferred maintenance you have and your budget. Spending $2000-$5000 dollars may bring you another $10,000-$15,000 in price, or at least help your house sell faster if your market is sluggish. Attempting to sell without any preparation could affect offering price, impact negotations during escrow if the buyer discovers further issues through their physical inspection and decides to walk away, and/or impact the appraisal. 

You can find more information on the Landscaping checklist and at the HouseLogic tab at the top of this blog.

The Economic Impact from a California Home Sale

While at a meeting yesterday, I heard a statement from another attendee that somewhere between 30-50% of California's job market has been directly affected by the change in the housing market in this state--the local closings of some long-established independant businesses and the empty storefronts are a testimony to that.

When the prices of the housing market were out of reach of many buyers, I frequently heard and read statements about what a good thing it would be if housing prices dropped "back where they should be." But nothing happens in a vacuum, and when housing prices fell, so did the rest of the economy. The activity generated through the sale of one residential property conducted through a REALTOR® in California may impact up to 40 different occupations, starting with the buyer's lender and its employees and underwriters, appraisal services, escrow officer and affiliated company, title company representatives and employees, home warranty company, MLS employees, all the internet and print advertising services for marketing the property and which help to attract the buyer, accountants and attorneys connected to the transaction, home stagers whose services may be critical to helping sell the property at current market price, insurance agent, messenger companies, home construction contractors, moving truck services, property managers, car rental companies, to name some of those closer to the "ripple" effect. All of these occupations serve vital connections to a real estate transaction, and moreover, a Realtor usually has requirements to assist or coordinate with many of these participants, each of which has its own job to do. Without a home sale, many people are literally "out of the swim".

Information reported in 2009 from National Association of Realtors, Bureau of Economic Analysis and Harvard Joint Center for Housing Studies shows that when one home is sold in California, the income generated from real estate related industries $49,383.00, the additional expenditures on furniture, paint, and applicances is $5,331.00. Also, there is addtional economic multiplier impact as greater spending on charity, sports events and restaurants estimated to be $26,263.00. The new home production value, estimated at one new home constructed for 8 existing home sales,  is $68,588.  The total income derived from the sale of one California home (report used an earlier CA median price of $548,700--currently $311,950 for a single family home as of June, 2010) is $149,564. The National Association of Home Builders has estimated that nationally, approximately $8,900 is spent on home furnishings and improvements within 12 months following a home sale. In other words, what happens to the housing industry happens to a lot of people.

Houses in Long Beach for July: Prices Softer, Sales Volume Up

July in Long Beach was a pretty busy month for single family home sales but it also saw a lowering of the median price: 196 sold at an overall median of $360,000, down from $380,000 and $375,000 from the prior two months, and down 5% from July, 2009.  The July average for sold-price-to-list-price was 98%, with a low of 72%.

The peak for the last 12 months was $415,000 in November, 2009. The median list price, however, has steadily increased since December, 2009, and is up 4% from one year ago, with 1,234 single family homes currently on the market citywide. And, total number of SFRs in escrow is up 42% since one year ago and at 276 houses, is at the highest number under contract in the last 12 months. But, expired properties in all price ranges were at the highest number in the last 12 months, while the months' supply of inventory is at the lowest in the last 12 months. It has never been more important to price the house right and make the right improvements for showing.

A quick search on the MLS shows that today, there are 528 single family houses in escrow, and 434 of them are under $500,000, and 94 are listed over $500,001.  See the entire report for single family houses.

What Happens to Your Sale If You Don't Pay Your HOA Dues?

Many owners these days are having financial problems, and decide to stop making payments on both their mortgage and their homeowner association dues. They may later decide to sell as a short sale, do all their document submission to the lender, list their property, find an eligible buyer who is willing to wait, and look forward to opening escrow and getting it sold. And, common to many sellers, they stopped making payments several months prior, so now a significant dollar amount in delinquent HOA dues has built up--hundreds and even thousands of dollars are in arrears.

In California an HOA may initiate foreclosure on a property after 18 months of nonpayment (but then they take over all associated mortgage and other costs of that unit), but before that, an association after a few months of nonpayment may instruct its attorneys to file a lien. If a lien exists at the close of escrow, then it will raise the issue of getting it paid off prior to close, or delaying the close of escrow--and in a short sale, lenders may impose additional fees for not closing by the specified date. If the seller does not have the money to pay it off--this will include the dues, late fees and attorney fees--then perhaps the buyer would be willing to contribute, but if the buyer cannot or will not, then that particular escrow will not go forward. And if you have a Notice of Sale on your property already, the lender may no be willing to extend and wait for a new buyer--it just depends on the lender.

Another wrinkle for a closing is even if delinquent dues can be paid off at closing, the number of delinquent owners in the association may exceed the lender's guidelines, and now there's another reason it may not close escrow--for any owner. Non-payment of dues may force other HOA members to pay special assessments to make up for the loss of income, which may be a hardship for many owners who are struggling to stay current because of their own loss of income or job cutback issues. This may actually increase the number of delinquent owners.

Contrary to what many short sale sellers assume, lenders will not pick up all HOA costs, and many banks completely disallow any HOA costs in their approval, and that includes move-in, move-out fees, and provision of HOA documents to escrow as asked for in the contract, a total potential cost of up to $500 or more per transaction. Another potential outcome is that the owner will be pursued later by the association with a judgment filed against them. And I've also read that some bank approval terms are "requiring" buyers to pay the delinquency at closing, which is driving them away from the transaction.

So if the seller can't pay now because of all their financial problems, one option would be 1) to approach the association with a request to negotiate them down to what is possible, or 2) request a forbearance agreement and work out a payment plan over time. These are much better options for an owner who wants to do a short sale and avoid foreclosure.

The last piece of advice is that the homeowner should obtain legal advice. But unfortunately many people don't do that because that would be another bill to pay, so they look up information on the internet instead, which won't tell them about their specific situation. Find a legal clinic or some source of local legal advice which will be a resource. If you just decide to stop paying your HOA dues, it could ultimately cost you more than you think.

June's Median Price Showing An Increase in Long Beach/Lakewood Area

Single family median price in Long Beach

The median price in Long Beach for a single family home has gone up for June 2010 to $370,000, with a total of 205 homes sold in this category for the month. This is a general increase from the $353,000 median in June 2009. The number of days on the market is trending downward gradually, the current average is 66 days, compared to 72 last year. Of course, this is a broad figure designed only to show a general trend, since prices vary from local area averages of $250,000 to well over $1,400,000 in single family homes in Long Beach.

Lakewood single family median price

It's a similar story for the City of Lakewood, a smaller city conceived of through city planning in the 1950's and with not so much diversity in housing inventory and selling prices as Long Beach. In June of this year, the single family home median price was $400,000 compared to $375,000 last year.

Los Angeles County as a whole shows the same trend for single family homes: $342,000 this year, $326,000 last year, for the months of June (however, that's a drop from May 2010 median which was $350,000).

Condos in Long Beach are still not as strong as houses, but overall, offer a great investment while their prices are still lower. The median at $232,500 for the city has risen 2% from last year, but has fluctuated greatly in that time, with days on market currently at 96, lower than last year's 108.  The lowest days on market of 66 was in October 2009, matching end of year buying but mostly the 1st expiration of the $8000 tax credit. For Los Angeles County, the condo median dropped to $315,000 from $360,000 one year ago.

The Current Market is Offering Incredibly Low Interest Rates!

This afternoon I did an interesting calculation because I was playing around with a feature on my website. First of all, did you know interest rates are well below 5% on a 30-year fixed, even as low as 4.25%? Second of all, do you expect that to last forever? It's lower than any rate since the 1960's and before, and certainly lower than any rate in the last 15 years since I've been helping buyers and sellers.


I did this calculation for my 2 bedroom/2 bath condo in Bixby Knolls which is currently listed at $182,500. The default down payment was 20%, the default interest rate was 6%, so using those numbers for calculate principal and interest (only), the monthly payment came out to be $875.34. (That's the price of a one-bedroom rental in some areas.) But knowing that interest rates are much lower right now, I changed the assumptions to 4.25% and assuming an FHA buyer, I used 3.5% down, and based on a loan amount of $176,112.50, the monthly P&I payment came to approx $866.37!! (Please do not use this scenario for your final loan calculations as disclosed by a lender, this is intended for general information only.)

In other words, with lower interest rates right now a buyer could be saving the difference between $6387 and $36,500 to get the practically same payment for less money compared to the higher interest rates of just 1 and 2 years ago.

Back to my earlier point: it won't last forever, so why not take advantage of the market now if your only reason is that you're "waiting"?

I am here to help you with finding a new property, so I hope you'll let me do that, because you will be helping yourself!

Owners Have Options, But What is Best?

There have been numerous programs designed to assist the distressed homeowner launched under the Obama Administration. Most recent is the July 1, 2010 Home Affordable Unemployment Program (HAUP) designed to reduce, or suspend mortgage payments for at least 3 months, in coordination with the loan servicer's guidelines. The loan must be under $729,750 and originated on or before January 1, 2009, and must be in default already, or almost there. Monthly mortgage payment must be reduced to less than or equal to 31% of the borrower’s gross monthly household income and may be suspended in full. Borrowers who went through the Home Affordable Modification Program (HAMP) are not eligible, but a loan modification program may be put in place for the HAUP borrower once a job is found.

The programs available to borrowers are:

• Home Affordable Unemployment Program (HAUP)
• Home Affordable Refinance Program (HARP) - among the requirements is that the existing loan cannot be more than 125% of the current market value of the property, and must be an owner-occupied 1-4 unit property.
• Home Affordable Modification Program (HAMP) - A prime requirement, among several, is that it can be a property with either one or two loans on it, but the payment on the first loan (P.I.T.I.) must not exceed 31% of the gross monthly income of the borrower. Many borrowers have had trouble meeting that payment-to-income percentage figure, and then do not qualify for that loan mod.
• Home Affordable Foreclosure Alternative Program (HAFA) - This is a program with specific forms, guidelines and timelines and must be offered to the borrower by the participating bank if the HAMP loan mod has failed. There are certain protections and benefits to the qualified borrower under this program, but one problem has been the 2nd lien holders who refused to participate because they may not receive as high a payoff under this program. The buyer of such a property must also cooperate with certain timelines.

Lenders who chose to participate in one program are required to participate in all of them, which is currently about 140 lenders. IMPORTANT: To find out if your lender is, go to http://www.makinghomeaffordable.com/contact_servicer.html. Read about other aspects of these programs at http://www.makinghomeaffordable.com/.

If you have an FHA or VA loan, those loans will have their own version of this program.

Last, but definitely not least: Borrowers in distress who understandably do not want to give up their home, normally have a very difficult time "putting their foot down" on the subject of just how long they will attempt to pursue a loan modification with their bank before giving up. While some servicers are more responsive and are actively working with their borrowers, there are many others who are falling between the cracks.

 If a borrower has lost their job and is concurrently in a job search while attempting to pursue a loan mod that's already been started, or if a borrower keeps hearing that the bank needs an item that the borrower has already submitted, perhaps multiple times, or if the bank or servicer keeps adding new items required before it can give an answer to the borrower, my advice is: BORROWER BEWARE. The fact is, time is slipping away--you have no loan modification, plus you may now have a notice of default recorded on your property, and then the notice of sale will be posted to your door shortly before your 121 days are up. Some banks are taking their time recording a Notice of Default, but others are very unforgiving and will NOT extend your sale date without either the loan modification in place or an accepted contract from a buyer, because they need to move forward with that property. For most people, selling their property under short sale conditions has less severe long-term impact than going through foreclosure. Please contact me for more information about those conditions.

Please, don't let foreclosure sneak up on you while you keep telling yourself you're going to get the loan modification after you just send in one more piece of requested information. You must meet the servicer's requirements, and many people don't qualify due to financial circumstances. Before you get to that stage, investigate an optional short sale possibility early while you still have time to find a buyer, negotiate the contract, submit your short sale package, and get through escrow. This could make the difference between 2-3 years' impact on your credit record vs. 7 years' impact due to foreclosure.

There Ought To Be A(nother) Law

Short sales have been here and are here in large numbers for quite a while into the future. Many lenders are getting better in certain respects about speeding up their responses, even if it's not a HAFA program which does have numerous requirements, in their regular short sales. There can be many aspects and issues in a short sale depending on the bank or servicing company involved, if a notice of default has been filed, if a notice of sale date is already set, if the HOA dues are delinquent, how many lienholders there are, to name a few.

But what is one thing that's going on a lot? Second position mortgage lienholders who are refusing to accept the payoff from the first, and decide instead they would rather have their investors get nothing rather than something. So typically these 2nd lien negotiators, who are probably looking at a computer screen bearing instructions from their bosses, are allowing the entire property to go into foreclosure over a failure of $5,000-$10,000. Many do not want to deal with the HAFA program, due to the few thousand dollars obtainable under that program, nor even 10% payoff offers from the first, so their response is to say they will take nothing rather than something, and let it go into foreclosure, presumably under the belief they will be able to come back and get it later. What many servicers may not understand is that in certain states, such as California, they have no deficiency rights after foreclosusre when the loan was original purchase money mortgage on a principal residence.

And so what do we need? I know we have plenty of laws, but we need another one. We need another law that prevents junior lienholders from obstructing the successful completion of a short sale:

"...passing legislation barring junior lien holders from preventing a short sale and forcing a foreclosure would be wildly beneficial to the heart of America. It would keep homes occupied, free up capital, curb the slide in property values and it wouldn’t cost the taxpayers, or anyone else, a dime."

Also, as Lawrence Belland says on Foreclosure Radar:

"... in 37 other states the investor could accept the offer and still have the right to pursue the deficiency. That’s why forcing the foreclosure doesn’t make sense to me; it defies logic."

Second lienholders always knew they were just that, in second position. They were all too willing to make loans, and others have been very willing to buy them up, based on the continuing inflation in the subprime market. They just don't like to face reality now.
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Interest Rates at Mostly Lowest of Historic Lows--This is Money In Your Pocket

One perspective many buyers and sellers (who are able to sell now) could benefit from right now is the long-term historical perspective to realize just what this point in time can mean for them. While many articles may directly address buyers, the flip side is for the sellers who are looking for the right buyer, and the more buyers that fit in a seller's net, the greater chance each party has for a successful catch . . . I mean, sale!
I could hardly say the following points better, so I'm just going to give you Pat Zaby's post on buying,

You Can Afford to Buy and Haven't...Are You Crazy?

This may be the best buyer's market that we'll see in our lifetimes. There are lots of legitimate reasons why a person should be taking advantage of this market if they are able.
Obviously, if a person doesn't have the down payment or credit score, they won't be able to seize this opportunity. If a person is concerned about losing their job, that would be a valid reason for not buying now. If you are planning on relocating in the next year or two, maybe now isn't the time to buy.

On the other hand, if a person doesn't own a home, has good credit and job stability, they should seriously consider capitalizing on this unique combination of opportunities. A qualified real estate professional can explain all of the reasons and even suggest some very interesting financing alternatives.

Top Ten Reasons to Buy a Home NOW

Interest rates incredibly low – the rates are hovering at near historic lows. Interest rates play a huge part in the cost of housing together with the price and shouldn't be overlooked. The average mortgage interest rates for the past four decades were: 1970's 8.9%; 1980's 12.7%; 1990's 8.1%; 2000's 6.3%. Most experts agree that they're going to rise this year.

Lower Prices - Recent price adjustments have made good values that haven’t been available in some situations for years. Current buyers are able to take advantage of the discounted prices.

Selection is good – In a seller's market, buyers sometimes have to accept a home that may not meet their needs completely because of short supply. Inventories in most markets and certain price ranges are higher which allow buyers better choices.

Negotiate financing concessions – FHA, VA, and Conventional allow the seller to contribute towards financing concessions for the buyer. The money can be used for buyer's closing costs, pre-paid items or interest rate buy down.

Costs for FHA loan going up – Currently, a seller can pay up to 6% of the sales price in financing concessions but the number will be reduced to 3% later this year; the date has not been announced yet. The annual MIP for FHA loans will also probably be going up this year which will increase the monthly payment. Buyers who get in now will pay the lower fees.

Interest and property tax deduction – the U.S. is one of the few countries in the world that allow an interest and property tax deduction for homeowner/taxpayers.

Source of funds with deductible interest - a homeowner can borrow up to $100,000 above their acquisition debt and deduct the interest regardless of what purpose the money is used. This is a great opportunity to consolidate debt at a lower interest rate and be able to make the interest deductible that otherwise may not have been.

Capital gain exclusion – the U.S. allows qualified homeowners to make a profit on their home without having to pay tax on the gain.

Borrowing against equity is non-taxable event – taking money out of the equity in your home does not require recognizing capital gains income.

The combination of reasons to buy a home may never be stronger than now.

Interest rates are going up; it is just a matter of when. Inventories are starting to be absorbed by current demand. New home construction is down considerably which could lead to higher prices due to not enough annual housing units to keep up with the population. Prices have started to climb in some markets; others will surely follow.

A basic rule of investing is to buy low and sell high. There will be some buyers who take advantage of the current opportunities and will look back and remark how fortunate they were to act when they did. There will be others who look back on these conditions and say "We should have bought then." Hindsight is always 20/20. Evaluating the present and acting takes equally clear vision. The help of a trusted professional can make the difference. (reprinted with permission by Pat Zaby; emphases in bold and italics are mine)

In the meantime, the federal tax credit for $8000 is over, and the California tax credit is almost gone, the FHA seller negotiation cap will be reduced soon, but right now, a buyer with good credit will probably get an interest rate under 5% and even 4.5% in some cases, meaning over the life of a 30-year loan, you can save thousands of dollars.

And, most Americans just don't realize this, but this country is one of the few that allows a 30-year loan, most other countries require payment in 1/3 to 1/2 that time.
To easily find properties on the market, go to http://www.juliahuntsman.com/, "Find Properties".

Long Beach Has Several Farmers Markets, Find One Here

Sunday  from 9 a.m to 2 p.m. is a great time for visiting the Long Beach Farmer's Market at the Marina. Held weekly in the parking lot on Sundays, it's got vegetables, hot cooked food, orchids, fresh cut flowers, baked goods, and animal adoption opportunities too. To name a few. Plenty of parking as well. Farmers/vendors come from as far as Riverside and Bakersfield to set up booth every week. Prices are sometimes no cheaper (in my opinion) for some food items than the grocery store, but are a lot fresher and direct to the buyer, and one of the really great benefits is having a great variety of food to choose from.

This particular market is adjacent to the ongoing 2nd+PCH project still being planned and negotiated, so someday the landscape here might look very different with new development, especially across the street. Take advantage of this now and check other farmers markets at Bixby Knolls, Downtown and one at Marina Park on Wednesday afternoons (not on the link), and in the city of Cerritos. And it's BYOB, Bring Your Own Bag.
And, haven't we become so used to foods flown in from foreign countries that we might have forgotten our local growing seasons? See this crop calendar for California.