Mark Wisterman's Paradise & Lake Oroville Real Estate Blog

After two consecutive days of “the sky is falling” reporting about the real estate market, I thought you all might appreciate some time meeting with our resident Lake Oroville Real Estate psychiatrist to help deal with this “tragic” news. 

Free Real Estate Market, meet Dr. I Told You So

Dr. I Told You So: What seems to be the problem today, Free Market

Free Market: I’m  just exhausted, Doc.

I Told You So: Really? Tell me why.

Free Market: Well, every time I try to do my job, something, or someone, interferes with me.

I Told You So: Didn’t we have this conversation about 10 years ago?

Free Market: Yes, when a bunch of meddlers forced me to loan money to people who would never have been approved for a loan, had they let me do my job. 

I Told You So:  So, how has it gone since then?

Free Market: Well, I hit my head real hard when I fell of the cliff. Since then they have been trying to put me on disability, thinking that I am no longer capable of doing my job.

I Told You So: Let me get this right, they attempted to disable you, Free Market.

Free Market: Yes.

I Told You So: Didn’t I tell you that there is no way to disable you? That the only way to stop you is to take you over?

Free Market: Yes, but how come nobody else seems to understand this?

I Told You So: Who is nobody? Read the rest of this entry »

We’ve all heard the old saying , “Give them an inch and they will take a mile.” Right?

Well, this has never held more true than it does today in this age of bank owned properties. No, this is not another one of those bank, bashing blog posts that seem to be everywhere these days. Quite frankly it is difficult to tell if the expanding trend of banks REQUIRING  more and more of a potential purchaser before accepting an offer, is the work of the banks or of some of the bank-employed REALTORS® that have hitched their fortunes to their bank-employer.

Let’s take a little walk down memory lane to see what I mean.

Inch #1-In the beginning, banks that owned foreclosed homes simply required that a buyer present a loan prequalification letter with any offer that was made on one of their homes. This seemed fair, as no seller wants to be dealing with a buyer that is not qualified for a loan.

Inch #2- It was then not good enough that the purchase contract stated that the buyer had given a deposit check to their agent. The bank wanted a copy of the check.

Inch #3-Next the major banks required that any prospective buyer be loan prequalified with their bank before they would consider the buyer’s offer. Great way for the bank’s loan officers to try and persuade a buyer to swtich their business to them. Yes, it is happening! Read the rest of this entry »

One of the biggest dilemmas facing potential sellers, in what is a very difficult market from their perspective, is what to do about making repairs, or performing upgrades to a home before placing it on the market.

Over my nearly 16 years in Oroville real estate market, I have consistently counseled sellers to be very careful about putting money into repairs and upgrades of their homes as it very rarely means that they will see all that money come back to them in the sales price of the home.

A recently released report by Remodeling Magazine provides some valuable data on what your expected return might be on monies used to  upgrade or repair your home. The information I am linking you to is for the Sacramento, California area as this is the closest area to the Lake Oroville area that the magazine rated.

While looking at these numbers keep in mind that this is a survey which only concerns itself with dollars spent vs. dollars recouped. Another major factor you should consider when judging the return on your investment is that, while almost none of the items surveyed paid for themselves, many of these items may actually help your home sell faster, which is of value in itself.  Remember: TIME IS MONEY!

Be sure to click here to see the report in its entirety.

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The Department of Housing and Urban Development announced today that The Federal Housing Administation (FHA) is making significant changes to its loan program which will have a direct impact on a buyer’s ability to obtain an FHA backed loan.

The  result of these changes, which are anticipated to be put in place sometime between the spring and summer months, will be that buyers are going to need more upfront cash than they are required to have today.

The change that will have the greatest impact on the current conditions of the Lake Oroville real estate housing market is the reduction in the maximum amount of closing costs that a seller may pay on behalf of the buyers. The new regulations will cut the buyers allowable credit from 6% of the purchase price down to 3%. Meaning that on a $150,000 purchase a seller will only be allowed to contribute  $4,500 towards a buyer’s closing costs as opposed to the $9,000 that they are now allowed to contribute.

Another change will require that upfront charges for mortgage insurance premiums be increase fron 1.75% to 2.25% of the loan value. This charge is normally financed as part of the loan, so in most cases the effect of this new regulation will be a small increase in the amount of a buyer’s loan payment. And although small it may be, it may be enough to keep some buyer’s from qualifiying for a loan.

And the party is over for those of you with marginal credit scores. If your credit score is less than 580 you will no longer be eligible for the 3.5% down payment program. The new guidelines call for these borrowers to put 10% on their purchase. For that same $150,000 purchase in the above example you will be required to have a down payment of $15,000 vs. $5,250 that you currently are required to have.

OK, all you buyer’s who are still sitting on the fence. Let’s look at what happens if you wait so long to buy a house that you end up buying a home under these new guidelines (sometime this summer) instead of buying now.  Assuming the price of your new home is $150,000 and your credit score is less that 580.

I think you will agree that no matter how you look at it, waiting is going to be very costly.

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• HUD/FHA Reduces Allowable Seller Concessions From 6% to 3% appraisalnewsonline.typepad.com)
• FHA Low on Funds, Raising Mortgage Insurance Premiums agentgenius.com)
• FHA Changes: A ‘Coup’ for the Building Industry blogs.wsj.com)
• FHA Mortgages Rising homeloans.org)
• See the HUD Site

Those of you who know me, whether you are a client, or another REALTOR®, or a friend, know that I take the business of negotiating and successfully completing real estate transactions very seriously. You also know that I do not believe for a moment, that just because someone may have a real estate license or calls themselves a REALTOR®, means that the particular someone is competent, or educated enough to properly represent their clients best interests. Let’s face it, it is way too easy to get a real estate license in this state.

It takes more than a license or the paying of dues to the National Association of REALTORS® (NAR)  to acquire the proper level of competence to do the job. Above all else it takes education and the desire to stay informed of the latest trends, rules, laws, etc.

This is why I am very pleased to announce that each of my associates have thought it important enough to spend the time necessary to join me in completing the educational requirements set forth by NAR  in order to obtain our Short Sales & Foreclosure Resource Certification. This is the ONLY “distressed property” certification recognized by NAR. A certification that, at the time we received ours, had been attained by only 2,500 of the nearly 1 million REALTORS® nationwide.

Through the attainment of this certification we have gained valuable knowledge and have access to the resources necessary to counsel and better guide our clients through the foreclosure and short sale processes. In fact, (here comes the commercial), we are the only office in the Lake Oroville real estate market, and maybe the entire Butte County real estate market, where every associate in the office has earned the certification. Are we “experts” yet? Nope. But, knowing my associates as I do, we are going to be as close as you can possibly be as this market begins to move away from foreclosures and more into the short sale arena.

Oh, just a side note regarding “experts”  in this business. If someone calls themselves that, in most cases you should probably run away as fast as you can. Case in point-There is one REALTOR® in town that claimed in her advertising that she was a “Short Sale Expert” and yet had never, ever negotiated a short sale transaction of any kind.!!!!!!!!!!!

With all the hoopla surrounding the extension of the first time home buyer tax credit, as well as the expansion of a smaller credit to existing home owners, I think it is time to develop a plan that actually addresses the LONG TERM needs of this market. I am talking about more than just the Lake Oroville real estate market here. We need a national solution.

As you know, I am not a big fan of using taxpayer dollars to pay people to buy homes. These handouts, in my view, are only band aid solutions where a tourniquet may be the better answer.  They do nothing to stabilize the market. In fact the tax credit is just going to delay the inevitable unless something is done soon to spur market demand for housing.

What I would like to do, over the next couple of blog posts, is to get your opinion on a plan that I think will finally put this real estate market back on the tracks, without government money.  And just so you know, it must be a great idea because I thought of it while taking a shower.  (If you have never heard of this theory before it must be because you take baths).

So let’s get started fixing this thing. Read the rest of this entry »

Bet that got your attention, huh? While, for now this is a simply an attention getting headline, the reality is that there is a chance this could actually happen.

A recent audit of the FHA loan progran recently revealed that the agency has fallen significantly short in the amount of loan reserves that it is required, by law, to have.  These loan reserves are used to pay claims from lenders when an FHA loans are foreclosed upon.

I don’t want to get overly technical about this but the law requires FHA to have an amount equal to 2% of the outstanding loans that they insure in a reserve account to pay for claims. The current reserves that the FHA has on hand is .53% . Barely a quarter of what is required.

With FHA financing being almost the only way to get a home loan these days, pressure has been mounting on the agency’s reserves.

There are a number of scenarios that, if accurate, could bring these reserves back into line. An article in a recent issue of the Washington Post goes into more details on these scenarios.

The potential impact of this on both buyers and sellers in the Lake Oroville real estate market could be dramatic. Among the solutions to the problem would be to raise the premium the FHA charges for mortgage insurance. This would help build the reserves but, at the same time, increase one’s house payment.

Another would be to raise the amount of money required as a down paymentfor the loan.  Currently an FHA loan requires a down payment of 3.5% of the purchase price, increased recently from 3%. On a $200,000 home a buyer of an Oroville home now needs to have a downpayment of $7,000. If the requirement is raised to 5% that same home will require a down payment of $10,000. A  42% increase! 

There is no doubt, should either or both of these scenarios be put in place, that it will slow the sales of homes. The end result should be that buyer’s will have to work and save a little bit more than they are now before buying a home. This, in my view is a good thing.  

The bottom line here is that the FHA is currently the lifeline to this housing market and it is vital that it stay solvent.

I don’t know about you, but I would much rather increase these requirements, even though it may temporarily sqeeze some buyer’s out of the market, than to have the whole prgram collapes under its own weight.

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President Obama signed into law the extension of the first time home buyer tax credit. Included in this extension was an expansion of the credit to current homeowners who have owned a home in 5 of the last 8 years.

The extension and expansion allow buyers in the Lake Oroville real estate market, and beyond,  to claim the credit as long as you are in a binding contract no later than April 30, 2009 and close not later than June 30, 2009.

And no ,you are not allowed, on May 5th, to back date your contract to April 30th.

Below are links to  further information from the National Association of REALTORS® (NAR) on the new rules for the credit. Please take the time to read and understand them as you are ultimately responsible for following the rules. And please let me know if you need any further explanation on how this credit works.

NAR Tax Credit FAQ

NAR Tax Credit Extension Chart

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My e-mail box and most of the social networking sites I belong to, including Facebook, are all abuzz with real estate agents trying to be the first to report that the first time home buyer tax credit has been extended.

It is great that they want to get news of the extension to the consumer as soon as posssible. The only problem? It hasn’t been extended yet.  What we actually have at this writing is an agreement in principle to extend and enhance the credit. An agreement that has yet to be voted on and an agreement that can possibly be changed before getting to the President’s desk for signature.

I have provided a link to an article published just hours ago by U.S. News and World Report that gives an in depth look at what is being considered and what the status is.

Click Here to See Report 

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Weekly sales of homes in the Oroville real estate market made a good comeback last week as the effects of the first time homebuyers tax credit continues to drive the number of sales.  Unfortunately for sellers, the tax credit is doing nothing to boost home values, as nearly 50% of sales are for “distressed” properties.

See Expanded Chart

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