Thirty Eight Years in the Business...and Still it Surprises Me

I had a new experience this weekend. My clients found a house that appealed to them, and we prepared to write an offer. We were to meet on Sunday, and offers were scheduled to be presented on Monday.
Yes, "offers." Almost every house for sale in our area is seeing multiple offers...even those in the million and up price range, as this one was. On Saturday night, the listing agent called me. The sellers had canceled the weekend open houses, and hinted that they wanted to move out of the retirement community where they had recently settled, and back into their long-time home.
I asked the listing agent what she thought that I should do, and she suggested that we still write the offer...just in case...which we did. But today, the MLS showed the listing as withdrawn. Back to square one.
Realtors from Sonoma to Carmel and San Francisco to Danville are noticing a surprising trend –a critical shortage of homes for sale. At the entry level, and in many mid-price level markets, we have plenty of people willing to buy, just not enough homes to go around. My how things have changed in the past year! To quote one of our managers, the new lament among local Realtors is, "so many buyers, so few listings.”
What’s happening? First-time buyers are rushing to take advantage of the federal tax credit before it expires this spring. Unfortunately, we aren’t seeing a commensurate number of sellers bringing homes to the market to capitalize on this. There are inventory shortages throughout the Bay Area. Open homes are attracting a flood of serious buyers. The result is that attractive, well-priced homes in good neighborhoods are getting lots of interest and, in some cases, multiple offers.
So by and large, it’s pretty much a conversation about inventory when you talk about our Bay Area real estate market. Even the luxury market, while admittedly slower than lower price points, has inventories trending down. Accuracy in pricing and attention to detail in showing condition remains critical in the luxury markets, but sales activity is picking up and inventories are going down.

Look Ma...I Can See

I haven't written in this blog for a week, but I've been busy taking care of some minor health problems. Thanks to wonderful Doctor Volpicelli and his staff in Mountain View...and two cataract surgeries... I am now able to see to read and drive without glasses again. What a pleasure! It's more than annoying for a Realtor not to be able to see house numbers. "Lola," my GPS finds the street and general location, but then I'm on my own. Last night, I bought my first pair of non-prescription sunglasses in years.
Anyway, I'm now back to my normal schedule of meeting with buyers and sellers and previewing properties, just in time for what is shaping up to be a busy real estate season.

A Positive Move

An item hit the business news this weekend that reflects a good change in the rules affecting real estate...for a change.
FHA is suspending the "Anti-Flipping" rule that has been on the books for ten years. It had required that investors hold a property for 90 days before it could be resold. This was originally written to eliminate fraud and 'serial' flipping of the same property.
With the large numbers of foreclosures in poor condition now coming on the market, though, this gives buyers with low down payments a chance to buy renovated homes. It usually takes 60 days or less for an investor to buy, rehab, and list a house for sale. Now FHA is making these homes available to buyers with small down payments, not just those who have 10% or more.

Is it Tax Season Already?

Even though it's not yet February, every day's mail seem to bring more statements needed for my 2009 taxes.
Nothing about taxes is easy, and deciding how to fill out your return is no exception. Should you hire a tax preparer or do it yourself? Go with one of the free online options or stick with the old-fashioned paper forms? If you’re like approximately 80% of tax filers, you’ll turn to tax software or a tax preparer. But that doesn’t mean the end result will be error-free. I have the newest version of Turbotax Deluxe installed on my computer, and combined with Quicken, that seems to work for me, but I have a background in tax preparation...admittedly many years ago.
When the Government Accountability Office sent secret shoppers to 19 storefront tax preparers, each and every one goofed up something. More mistakes were found in returns prepared by so-called tax experts than by individuals, the 2006 GAO report found.
The obvious solution is to simplify the tax code, but the IRS can’t change tax law; that’s up to Congress. So instead the IRS is focusing on the oversight of tax preparers. Currently, anyone can be paid to prepare tax returns without registering with the IRS, but the agency recently announced that in future tax seasons, all paid tax preparers will be required to register. Competency testing and 15 hours of annual education will also become a matter of course, although CPAs, attorneys and enrolled agents will be excluded because they already adhere to similar standards to keep the letters behind their names.
But some worry these new rules don’t go far enough.
It’s a valid concern, especially after recent reports of more than 100,000 suspicious claims relating to the first-time home buyer tax credit.
You are ultimately on the hook for your return, even if your tax preparer goofed it up.
So what can you do? Be careful, especially this year, since new tax breaks designed to stimulate the economy: energy-efficient home improvements, the home buyer credit, education tax changes to name a few, will make filing for tax year 2009 even more confusing.
Get recommendations. Ask your family, friends and business associates. Look for someone with experience preparing returns like yours. For instance, if you run a small business or own rental property, look for a preparer who understands the related tax code.
-Ask questions. How do they keep up with new tax laws? Do they have additional credentials? Will they be preparing your return or will they pass it off? Don’t hire a question-dodger.
Find a year-round preparer. For most of us, tax season ends on April 15. But the IRS is open year-round and might send taxpayers letters asking for additional documentation or announce an audit in the middle of summer.
The IRS suggests taxpayers avoid preparers who claim they can get you the most money back or base fees on the size of your refund. And only work with a taxpayer who will sign your return and provide a copy.

Will Major Support for Housing Be Ending?

If the government carries through with its plans, major support for the housing industry could end by April, leaving the sector to fend for itself. That could happen because of two critical decisions: the tax credit for home purchases that will end with contracts signed by April 30 (buyers have until June 30 to complete their purchases, and the possibility that the federal reserve will stop buying mortgages by the end of March.
The central bank indicated at its last rate-setting Fed Open Market Committee meeting that it intended to purchase $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt by the end of the first quarter of 2010, and to "gradually slow the pace of these purchases to promote a smooth transition in markets."
Both dates could be extended, depending on market conditions. The FOMC emphasized that it would continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in the financial markets. If the Fed doesn't see private money coming back into the mortgage market, it will either need to change its mind or let mortgage rates rise back to the 6%-plus range they were before the Fed started its intervention.
Mortgage rates are currently below 5%. If they jump back up to 6%, lots of people won't be able to afford a home that may have been within reach at the lower interest rate.
This Could Be Just a Test
Clearly, Congress got the message that the housing industry hadn't yet healed enough to go it alone. With foreclosures continuing to mount, there's no reason to think it will be ready on May 1. Considering the election that's looming this year, it's likely that Congress will decide to extend that tax credit as well.

FHA...Some Good News, Some Bad

Rising defaults on loans insured by the Federal Housing Administration have led the agency to impose future policy changes to its home loan program.
The FHA is federally mandated to maintain reserve funds at 2 percent or greater. As of November, the agency reported that its fund had declined to .53 percent. The funding is used to cover losses on mortgages insured by the FHA that go into default.
Loans insured by the FHA generally are less expensive to borrowers because of the lower down payment requirements. However, these loans also have fees, such as up-front mortgage insurance. To help the agency raise its cash reserves, the FHA is increasing the up-front mortgage insurance premium from its current 1.75 percent to 2.25 percent. HUD released a Mortgagee Letter today making the premium increase effective in the spring.
The agency also is raising the minimum credit score requirements. Currently, borrowers with FICO scores as low as 500 have been approved for FHA-insured loans. Under the policy changes, new borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent.
The new policy also will reduce the amount of money sellers can provide to home buyers at closing to 3 percent, down from its current 6 percent of the home’s price. The change brings the agency in line with industry standards and removes the incentive to inflate appraisals. The FHA expects these changes to take effect in early summer after it passes the normal regulatory process.
So what was the good news?
HUD/FHA eliminated the need for second appraisals on high balance loans in declining markets effective January 25, 2010.
Loan amounts that exceed $417,000 will no longer need two appraisals.
This benefits our clients reducing costs and increased efficiency in their loan processing. I guess that we should be happy for small favors.

What to Do With that Old Paint

When we are closing on a house sale, there are almost always paint cans and cleaning products left in the garage. If the house was recently painted to facilitate the sale, I ask the sellers to mark the cans and leave them for the new buyers, who usually appreciate the matching paint for any needed touch ups.
But what about the "mystery paint" that is piled in the corner, and may have been there for many years? This needs to go to hazardous waste centers.
I've often wondered what happens to all the latex paint that is dropped off at these centers. It turns out that it's recycled and is being resold at your local paint distributors, Dunn-Edwards and Kelly-Moore, for instance. Recycled paint sells for less, but the quality and viscosity is augmented by blending it with virgin materials. Check out this site for more information and a complete list of distributors.



For more green real-estate-related tips and discussion, visit C.A.R.’s green blog (http://blogs.car.org) and C.A.R.’s Green Web site (http://green.car.org).