Electronic Signatures and Real Estate

As we were doing the paperwork on an offer the other day, my client asked me why we weren't using electronic signatures. The last couple of papers would have to be faxed or faxed to an email, and a straight email with an electronic signature sounded more logical to my engineer client.
The concept is simple: instead of physically signing documents, you sign a document electronically by typing your name, clicking with your mouse, or a variety of other methods. The question is whether the time has come to make the switch completely by using companies such as Docusign to remove pen and paper from the process entirely. In terms of ease of use, there’s no comparison.
In California, the Association of Realtors offers it members Winform Online, which lets us draft contracts right online. It’s integrated with Docusign, so you can create a contract and prep it for signing without printing anything at all. Clients are notified by email to sign, and you get an email as soon as they have. As an added bonus, they can’t accidentally miss any spots to sign, since the program highlights each area and checks for completion.
So what’s the downside? While for starters, it’s not free...but the cost is minor, considering the convenience. The biggest drawback is that not all brokerages and companies will accept electronic signatures. Also, according to the California Association of Realtors' website, and there are some documents where electronic signatures are not allowed.

One Warm Coat

...or sweater, or jacket. Still looking to help a charity in an easy way during the holidays? Keep the giving spirit going all year long. Please donate a “gently used” or new coat, jacket, or sweater (in any size) to keep the warm feeling of sharing alive! Take a minute to check your closet. . . .
The One Warm Coat drive is a national non-profit organization that assists in the distribution of coats to people in need. Our Realtor District will be giving your donations to a local center right here in our area.
You may take them directly to the SILVAR office during October through November 2009 or contact me for pick up. Your donations are greatly appreciated!
If you have questions, please call SILVAR (408 200-0100)

Will the New Loan Limits Hold?

So much is happening in real estate loan regulation...and not just the status $8000 credit, which does not have the support in congress that we had anticipated.
Interest rates have been rising in the past week, and this is a bad time for the new loan limits to be expiring. Unless the government extends the $729,000 limit again, we will revert back to a $625,500 limit on conforming loans that do not close by December 18 of this year. Last year, it took three months before the higher rates came back into effect.
A bit of good news: the HVCC (Home Valuation Code of Conduct) that has put a stranglehold on home appraisals, may be revoked soon.

Open House Madness

Are we headed back into a seller-driven market, or is it just the price point ($625,000), model (3 bedroom, 2 bath with around 1600 square feet), or location, (pleasant complex in west side Sunnyvale with Cupertino schools) that lured over a hundred groups to the weekend open houses at my Crescent Terrace listing?
This situation is not unique, though.
My office in Cupertino reports that things are hopping in other price ranges and areas. We had 27 offers on a home in Cupertino listed for $1,049,000. Needless to say, it went way over.
It will be interesting to see what happens when we look at offers on my listing Wednesday afternoon.

Are we an Oasis Again?

The Realtors' tour went well this morning. Everyone loved the townhouse and the staging and it looks as though several offers will be coming next week.
The newscasters may say that this is a down market, but no one has told the buyers around here. Inventory for the entire county is less than 3000, about 50% of homes on the market as a year ago. There are only 90 homes for sale in Sunnyvale, a city of nearly 150,000 people. This is a wonderful time to have a good listing for sale, but not great if you are representing a buyer.
This is difficult to understand.
The pressure is on the government to extend the first-time homebuyers' credit. Housing Secretary Donovan says that the end of the credit would not be "catastrophic" because of other actions the government is taking to support the flagging housing market. Interest rates are being kept low and the Federal Housing Administration is playing a more prominent role in lending to homebuyers.
He said there is clear evidence that the credit has had some positive benefits and that its expiration could have some negative implications for the housing market.
Whether or not the credit is extended, forecasters are expecting further price declines in many markets due to rising foreclosure and unemployment rates in 2010. Supporters of extending the credit believe it could help mute those price declines.

REO Buyer Can Now Select Escrow and Title Company

A new law called The Buyer's Choice Act prohibits an REO (bank-owned) lender selling residential property up to four units from requiring the buyer to purchase escrow services or title insurance from any particular company. This may not sound like a big deal, but we've seen many sales fall through because of bank-chosen escrow companies located in southern California (and even worse, somewhere across the country.) Customs vary from area to area, and these escrow and title companies don't understand how we do business locally. Generally, the buyers pay these fees anyway, and it's only fair that they should have the right to chose the company. Of course a buyer who has received written notice of the right to make an independent selection may agree to the REO lender's escrow or title recommendations. An REO lender that violates this law can be held liable for three times the charges the buyer incurred. This law expires on January 1, 2015

Another Result of Foreclosures

The Census Bureau's director recently said that foreclosures will make it tougher and more expensive to get an accurate census count in the U.S. next year as families move in with relatives or are left homeless. Director Robert Groves said he expects some of the census questionnaires mailed out in 2010 will land at empty homes in areas hard hit by the housing crisis. That means census workers will need to make more door-to-door visits to verify whether anyone lives at these addresses, and that costs more money. (The ten-year cost of the census has more than doubled to $14.7 billion from the last decennial period.) Despite the added costs, a census every ten years is mandated by the U.S. Constitution. Job losses have left more than 13 percent of American homeowners with a mortgage behind on their payments or in foreclosure, and worst trouble has been concentrated in California, Nevada, Arizona and Florida.
Groves said census workers will need to focus on reaching out to families that have doubled up with relatives until they can get back on their feet. He said many may believe their housing situations are only temporary, but they need to be counted wherever they are living next spring.

Short Sales and Credit

I've been working with a buyer lately in an area that includes many short sales.
These homeowners who have their homes sold in a short sale, where the lender agrees that the owner can sell the home for less than is owed on the mortgage, are advised to review their credit report as soon as possible for accuracy. If they have sold their home via a short sale, they should ensure that the account reflects a zero balance rather than the difference between the outstanding balance and the sales price. Also, consumers should not assume that a short sale carries no further obligations. Some lenders are filing deficiency judgments, while others are selling the debts to investors who then contact borrowers for repayment.
Staying current on credit card payments, applying for secured credit cards, and taking out and paying on small loans can all help to reestablish damaged credit.

We're Lucky Here

Despite headlines about foreclosures and bank owned properties, our Santa Clara Valley market has been relatively untouched by the drop in values when compared to Southern California and the Central Valley.
Last week, Realtors from all over the state were in San Jose for CAR (California Association of Realtors) meetings. Yes, we've seen a lowering of property values here, but agents are still selling houses, a large portion of which are neither bank-owned nor facing foreclosure. Because banks everywhere are slowly dribbling their inventory into the market, Realtors I met from other sections of the state complained that they had nothing to sell, and many of them were in rough shape financially.
They had a hard time believing that we are still seeing multiple offers.

It's All About Motivation

....especially when it comes to real estate sales.
I wrote an offer this past weekend for good clients. The house was a bit dated, but in a great neighborhood and it had an attractive yard. The property was in its second month on the market.We read and approved all the documentation, and brought in a very strong offer....30% down, fully preapproved, and as-is (despite the fact that there was fumigation and extensive chimney work needed). It turned out that we were the third offer that had come in at the same price...a "coincidence" that should have told the seller something. He had remained firm at his high listed price, and any counter offers he made have showed almost no flexibility. Why? The house that is listed at $1.5 million is costing him only $1600 a month, and he doesn't need the money, in fact, he closed on a new home worth several million without the need to sell this one. I guess that he can afford to stand on principal. Dian Hymer recently wrote an article in the SF Chronicla entitled, "Sellers can be too optimistic on home price." She described sellers who had refused a lower offer on a house that eventually came off the market. When they offered it for sale a year later, they ended up with more than $100,000 less than the earlier offer. She advised that sellers look at their houses with a buyer's eye (and an appraiser's), and that they be honest with themselves about the property's flaws. Wishful thinking doesn't work.

It Should Be a Busy Autumn

The Mercury news front page this morning featured an article about home loan interest rates, which are below 5% for the first time since last spring,(although jumbo loans are still slightly over 6%) Combine this news with the continually dropping inventory in Santa Clara County...3094 total this week, 3151 last week, and twice that a year ago...and you have the promise of a wild ride this fall.
We are already seeing quite a few multiple offers in the region, and not just on bank-owned properties. Pending sales are 475, but the percentage of transactions falling through is still high: 30-35%, mostly because of "short sales" and difficult appraisals.

California Association of Realtors Info

I spent the afternoon today at the C.A.R. tech show and meetings at the San Jose Convention Center, and came back with new information that will be helpful to me and my clients. A featured speaker today was Leslie Appleton Young. Her take on the market:
“With distressed properties accounting for nearly one-third of the sales in 2010, inventory will be relatively lean, under six months during the off-season months, and a roughly four-month supply during the peak season,” said C.A.R Vice President and Chief Economist, Leslie Appleton-Young. “We expect the median price to decrease slightly through the remainder of 2009 and into next year, then rise before leveling off next summer. For the year as a whole, home prices are forecast to reach $280,000. The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government.”

Sales Update and Some Good News

With all the news about home sales improving throughout the country, it's important to point out that this may not be a sharp “V” recovery with a sudden jump in prices or units. In all probability what we will see is a long “L” shaped broad base recovery, where there will most likely be very small gains in overall price for quite some time. In our San Francisco Bay Area market, this is shown in what we have been seeing for several months: entry level prices going up, and high end prices coming down.
Our office reports that the low end is extremely competitive. There are lots of unescorted potential clients visiting open houses, and morale is good. Los Altos reports the market is picking up with the normal Fall home buying season....but the lower end still has the most activity.
Now the good news for buyers with less down payment...We now have Mortgage Insurance at Princeton Capital, our in house lender, to do 90% loans up to $729,750 and 95%, to $417,000.
This is huge, since standard MI will only go to 85% Loan to value other than FHA.

Loan Modifications May Lead to Redefault

I just learned in a recent email from my sister that my niece in Florida and her husband are benefiting from a mortgage modification on their home loan. He is self employed and she works part time, so they have been struggling with the high interest. They should be without pressure for at least 5 years...the payment is only $1,100 now with taxes and insurance, and they get to keep the home they both love.
Stories like this one show the positive side of this program, and lenders are ramping up efforts to avoid home foreclosures, but a report by bank regulators says more than half of borrowers who get help fall behind again.
More than 50 percent of homeowners with loans modified in the first half of last year have missed at least two months of payments a year later, but the results were better among those who saw their payments drop substantially.
About one in three borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again within a year. That compares with more than 60 percent for borrowers whose loan payments were left unchanged or increased.
The administration's effort got off to a slow start, but has picked up speed in recent months. As of last month, about 360,000 borrowers, or 12 percent of those eligible, have signed up for three-month trial modifications. They are supposed to be extended for five years if the homeowners make their payments on time. There is currently no data on redefaults within the plan.
Previously, most lenders have offered payment plans that allowed borrowers to catch up on missed payments. But those modifications often do not involve an interest rate reduction and result in a higher monthly payment. All that does is set the borrower up for failure.
By contrast, under the administration plan, loans may be sustainable for homeowners. Borrowers' interest rates can go as low as 2 percent for five years under the new plan. Bank regulators say they have pressed lenders to shift their focus to modifications that reduced borrowers' payments. They made up nearly 80 percent of new modifications in the April-June quarter, up from about half in the first three months of the year. Still, borrowers are continuing to fall behind as job losses mount. More than 11 percent of borrowers covered by the report had missed at least one payment as of June 30, up from 10 percent in April.
Lenders offered help to about 440,000 borrowers in the April-June period, but they started foreclosure on about 370,000 homes, unchanged from the January-March period.