Happy New Chico Homeowners!

There are days that I’m reminded of how much I LOVE my job of helping people buy and sell Chico real estate.

Heartfelt congrats go out to Shaun, Kristina and Julian!  Your patience and perseverance paid off!!

Happy new Chico homeowners

Some price ranges in the Chico real estate market are crazy competitive right now.  As a first time home buyer, it can be very difficult to get your offer accepted!  It seems there is always an investor with cash swooping in, or a buyer that’s willing to pay $20k over the actual market value of the house.  Yep….  that’s right.  We are seeing buyers bring in extra cash to close when a house doesn’t appraise for the sales price.

If you’re not an investor, and you don’t want to over pay for a house, how do you get your offer accepted?

1.  Make sure you are pre-approved. I don’t want to see a pre-qualification letter, I want to see a pre-approval letter from a reputable professional with a proven track record!  It’s important that the listing agent has confidence that you’re financially capable of closing, and that the lender is actually going to make it happen.  DO NOT UNDERESTIMATE the importance of this step.  My sellers sometimes ask me to make a judgement call between two very similar offers.  One of the first things I consider is the professionalism and capability of the lender, and  my past experience with them.  Putting the two lenders side by side can sometimes make what appears to be a difficult decision between offers VERY easy!

2.  Make sure you are working with a reputable Chico buyer’s agent. One of the factors the listing agent should be considering when advising their client is the reputation and skill level of the buyer’s agent.  The highest offer doesn’t always win!  If your offer is poorly written, poorly presented, your agent has a bad attitude or a reputation of not playing well with others, your high offer might hit the can and you’ll never understand why. It’s the seller’s prerogative to take the highest and/or BEST offer.  The seller wants to close the deal with the least headache possible.  The agent you choose to represent you is one of the most important decisions you will make in the process.

3.  Educate yourself on what is available in your price range. In order for you to be able to recognize a good deal when you see one, you need to know what is out there in your price range.  Sometimes it takes time.  You need to view the listings that your Realtor is sending you closely.  Take the time to drive by the ones that catch your interest.  Pay attention to the condition of the exterior.  Pay attention to the neighborhood and surrounding properties.  How close is the house to a major thoroughfare?  A grocery store?  A bar? A homeless shelter?  A school?  The neighborhood crack house?  At every opportunity, frequent open houses and tour the properties that interest you with your Realtor.   To make a rapid decision with confidence, you need to have a foundation of knowledge.

4.  You’ve carefully chosen a Realtor to represent you.  Now you need to trust them. It’s your agent’s job to know the nuances of negotiating REO, short sales, probate, auctions, and various retail transactions.  They may suggest that you offer over asking price, way below asking price, wait to present an offer, not offer at all,  or immediately drop everything to get your offer in!  Always trust your gut first.  After that, listen to your Realtor and heed the advice given.

Happy house hunting!

Ready to begin, but haven’t yet partnered with a Realtor?  The Sandi Bauman Team! at Chico Homes would consider it a pleasure and a privilege to assist you with the process.  Our dynamic team of buyer specialists will offer you highly personalized and professional service every step of the way.   Call Sandi 530-864-5407 or email [email protected] to get started!

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New Hope for Chico HomeOwners!

On the Brighter Side

by Mike Wiegert, broker Chico Homes

There’s new hope on the horizon for Chico homeowners saddled with ruinous adjustable rate loans that are threatening to convert happy homeowners to cheerless renters. Last week House Financial Services Committee Chairman Barney Frank announced new legislation to stem the significant rise in mortgage foreclosures by allowing the Federal Housing Administration to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. A summary of the proposed draft and the full text is available on the Financial Services Committee website. Mr. Frank cautioned interested readers that the text of the proposed legislation could change over the next few weeks and encouraged comments from all concerned parties.

The new program would permit FHA to provide up to $300 billion in new guarantees that would help to refinance at-risk borrowers into reasonable and affordable new loans. In consideration of a significant reduction of principal, the existing lender or mortgage holder would receive a short payment from the proceeds of a new FHA loan and subsequently the new loan would result in terms that the borrower can reasonably be expected to pay. The existing lender or mortgage holder would receive a cash payment and would agree to not harm or affect the credit of the borrower.

This proposal could potentially refinance between 1 and 2 million loans, thereby helping Chico families to stay in their homes, protect neighborhoods and help stabilize the housing market.

Under the proposed program, a homeowner or existing loan servicer would contact an FHA approved lender who would determine the eligibility and size of the loan consistent with the program’s guidelines. The lender would also evaluate and confirm the borrower’s ability to reasonably repay the new loan. If the current mortgage holder agrees to a write-down or discount of the existing principal balance in accordance with the requirements of the program and makes the new loan affordable, the FHA lender will pay of the existing mortgage.

In addition to the first lien, the newly proposed program grants the government a “soft” second lien to cover the FHA’s costs and preclude borrower misuse of the program such as “flipping” or speculative buying and selling of homes. When the borrower sells or refinances the home there would be a required payment from the profits. This payment would be the higher of a 3 percent exit fee or a declining percentage of any profits ranging from 100 percent in the first year to 20 percent in the fifth year. After the fifth year, the 3 percent exit fee would be the maximum.

Other requirements for eligibility to the program must be met. Eligible applicants are limited to owner occupied principal residences. There is no availability to rental homes, speculative homes or owner occupied second homes. The existing senior loan being refinanced must have been originated between January 1, 2005 and July 1, 2007. To avoid borrowers purposely defaulting on existing loans, the borrower must have a debt to income ratio of 40 percent or higher as of March 1, 2008 and must certify that he/she has not intentionally defaulted. Existing mortgage holders or investors wishing to participate must waive any penalties or fees associated with the existing mortgage and accept the proceeds of the new loan as payment in full. In order for the existing mortgage holder to participate in the program, a significant reduction of the existing loan balance must be “written off” so that the new FHA loan does not exceed 90 percent of the property’s current appraised value. Additionally, the principal reduction of the existing loan must provide for all up front fees for the new loan. Participating existing mortgage holders are limited to a payment of no more than 85 percent of the current appraised value of the property.

Distressed borrowers stuck with adjustable rate loans that are about to be or have been recently reset really need to pay attention to this program. Once enacted, this program will provide to eligible participants not only relief from a looming, excessive home loan, but the possibility of increased equity and a new loan tailored to a borrower’s realistic ability to repay.

Let’s hear it for this bold new step in the right direction by our Federal Legislators.

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Chico CA Real Estate Mortgage Meltdown

by guest writer Mike Wiegert, broker, Chico Homes

SUBPRIME! TEASER RATE! ADJUSTABLE RATE MORTGAGE!

Locally, these terms were once only known to those people that worked in the Chico CA real estate or mortgage business and a small percentage of people that took an actual interest in the workings of national mortgage markets. Today, these words are commonly known to anyone who reads a newspaper or watches a daily news program.

Our newfound familiarity with mortgage terminology is primarily due to the recent crisis surrounding a near collapse of the sub-prime mortgage markets. Why do they call it market? Because, essentially that is what it is, or was. In recent years, Chico homebuyers and those refinancing existing Chico home loans had a huge array of loan programs to choose from. Much like your favorite grocery store, some of these products were sensible and had value in the long run. Other products were just a quick way to get a new homebuyer, often with low or marginal credit scores into a Chico property with little regard for future events.

A commonly used mortgage in the sub-prime market is the 2/28 ARM. This is an adjustable rate mortgage where the rate is fixed for 2 years, and is then reset to equal the value of a rate index at that time, plus a margin. Because sub-prime margins are high, the rate on most 2/28s will rise sharply at the 2-year mark, even if market rates do not change during the period. This means that while the loan is affordable to the borrower at the initial rate, it may not be affordable after two years when the rate is reset. This type of mortgage is really only of value to borrowers who are assured of certain events that involve a significant increase of income, a situation that is unusual to most of us.

For the average wage earner, a dramatic increase in housing payment is a formula for disaster. Therein lies the problem: a sharp rise in mortgage defaults and foreclosures of those once euphorically happy homebuyers. So whom do we blame? We could blame the eager and enthusiastic Chico mortgage lenders who promoted the loans, rationalizing the validity with the forecasts of increasing appreciation of the homes. We might take a swing at aggressive Chico CA Realtors, also believing that these products were the only possible way for their customers to realize the great American dream of homeownership. We could hold responsible the Chico homeowners themselves for getting caught up in the buying frenzy with little or no regard for their own future.

How many people out there have ever bought a car that they couldn’t afford, only to have to sell it for a loss and absorb the shortfall? Why blame any particular person at all? We all got into this mess together, and we all are feeling the results as the issue resolves itself. So, how is this glob of knots going to untie itself? I don’t think that anyone has a convincing answer to that monumental question.

Treasury Secretary Henry Paulson discussed a plan at a meeting with top banking regulators and industry representatives last Thursday and is expected to announce details of the proposal this week.

The plan would freeze mortgage rates for stressed borrowers who took out loans with low teaser rates that are due to reset to a much higher level. The obvious benefit of such a plan would be that these borrowers would, for the time being, be able to hold on to their homes. At the same time, the lenders won’t be inundated with foreclosures, thereby forced to open large departments to deal with holding, maintaining and marketing these properties.

Many folks are really angry that the Federal Government would step in and bail out lenders that are experiencing high rates of foreclosures, and help individuals desperately unable to afford the higher payments of their newly reset mortgages.

Ultimately, they feel that these foolish lenders and borrowers will be sponsored by the American taxpayer and in truth, they are right. It’s always the taxpayer dollar that is used to support a national crisis, isn’t it?

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
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