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California home sales decline as rates increase

 
California home sales dipped for the second straight month in September. The California Association of Realtors blames this drop on a slight rise in interest rates and economic uncertainty, which is stalling housing demand. 

Furthermore, housing supply conditions continued to loosen as the housing market entered its off season.

The available supply of existing, single-family detached homes for sale rose in September to 3.6 months, up from August’s unsold Inventory Index of 3.1 months. The index was 3.7 months in September 2012.

“It’s encouraging that housing inventory has been steadily improving since May, when housing supply hit its recent bottom,” said C.A.R. President Don Faught. “While inventory remains constrained in the lower-priced home segment and primary home buyers continue to compete with investors, the number of properties for sale overall has been rising since March 2013 and is at its highest level since mid-2012.”

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Mortgages

Taking Over a Seller’s Loan

 
The New York Times

 

Homeowners with a mortgage insured by the FHAor the Department of Veterans Affairs should consider using their loan terms as a marketing tool when it comes time to sell.

Mortgage loans from both government agencies include a little-known feature known as assumability. In other words, the buyer of a home financed with an existing F.H.A. or V.A. loan may be able to take over, or assume, the seller’s loan, under the same terms, rather than take out a new mortgage.

During periods when interest rates are rising, homes offered for sale with an assumable, lower-rate mortgage may have extra appeal for certain buyers.

“You could now have a seller saying, ‘I have a great house to sell you and a great mortgage to go with it, which is better than my neighbor, who only has a great house,’ ” said Marc Israel, an executive vice president of Kensington Vanguard National Land Services and a real estate lawyer. “It’s a very clever idea.”

The savings for home buyers assuming a loan extend beyond a lower interest rate. Assuming a loan is cheaper than applying for a new one because there are fewer settlement fees. An appraisal is not required (though a buyer may want to obtain one anyway). And in New York, borrowers assuming a loan do not have to pay the hefty mortgage recording tax a second time, Mr. Israel said.  

F.H.A. loans do demand that the borrower pay for mortgage insurance over the life of the loan. But when assuming a loan, borrowers do not have to pay the upfront mortgage insurance premium required on a new loan, according to John Walsh, the president of Total Mortgage Services in Milford, Conn.

And, he noted, because the original mortgage holder would have been paying the loan for a number of years, the buyer assuming the loan will start at a point deeper into the amortization schedule than on a new loan. That means more of the monthly payment will go toward principal.

“In a rising rate environment, assumability is a very attractive option,” said Katie Miller, the vice president of mortgage products for Navy Federal Credit Union. “It ends up making homes that much more affordable.”

She emphasized, however, that loan assumptions are often not a viable option for first-time buyers if the seller has accumulated substantial equity in the home.

Say, for example, that the seller’s loan balance is $150,000, and the sale price for the property is $200,000. The borrower assuming the loan must come up with the $50,000 difference, either in cash or through some type of subordinate financing.

That can be too big a hurdle for first time buyers. The more attractive option at Navy Federal is the HomeBuyers Choice loan, which offers 100 percent financing. These loans currently account for about a quarter of the credit union’s purchase volume, and 65 percent of those borrowers are first-time buyers, Ms. Miller said.

Borrowers seeking to assume a loan must also prove their creditworthiness as they would for any F.H.A. or V.A. loan.

Under F.H.A. rules, once a new borrower is found to be creditworthy enough to assume a loan, the lender must release the seller from any future liability for payment of that loan.

Borrowers considering loan assumption should weigh the costs against other loan options, paying attention to the principal and interest payment, the amount of cash required upfront, and the private mortgage insurance premium. “At the end of the day,” Mr. Walsh said, “if the prospective buyer can come up with the down payment and qualify for the loan assumption, then it could be a huge benefit.”

 
More 'Whisper Listings' Than Ever Before?

Daily Real Estate News | Tuesday, September 24, 2013

In Manhattan, for example, "sellers feel cocky. Sellers feel like they have the ball," Brian K. Lewis, an associate broker at Halstead Property, told The New York Times. He says he has taken on seven whisper listings in the past six months from clients who did not want to list their apartments on the open market. The sellers, however, were still willing to accept offers from all potential buyers. "In an improving economy with no inventory, they have the asset people want," Lewis says.

Off-market listings seem to be rising most in markets with inventories that are particularly stretched thin, such as San Francisco, Los Angeles, and Miami, the Times reports. 

"There's more of it now than ever before," says Shaun Osher, CEO of New York brokerage CORE. "We as brokers know everything is always for sale at a price."

 

Some sellers are opting to go the route of pocket listings because they believe, by keeping their homes off the open market, they won’t have to deal with the hassle of constantly getting their homes ready for showings. 

New technology also is causing a growth in whisper listings. Yapmo, a mobile software company, is one such innovation. Its mobile app allows brokers to share information about properties with each other before the properties hit the market. Chicago firm @properties, which adopted the software in January, says an average of 41 properties per month — or 5 percent of the firm's transactions — have gone into contract before being put on the market. 

Still, some real estate professionals say they have a distaste for these under-the-radar deals. Those who represent buyers may like that there's less competition, but on the seller side, some brokerage firms argue that these deals inevitably shut some brokers out. Also, sellers hoping for a quick full-price sale are limiting their buyer pool and their chance of securing the highest price possible.  

"It's sort of like saying, 'Achieve this great price and do all of this, but don't tell anybody about it,'" says Brown Harris Stevens President Hall F. Willkie. 

But sometimes you just have to do what the client wants, other real estate professionals say. 

“It’s really up to the seller in terms of how they want a real estate broker to represent them,” says Neil Garfinkel, broker counsel to the Real Estate Board of New York. 

Source: “For Your Ears Only,” The New York Times (Sept. 20, 2013)