Buying a first home is not impossible anymore

More Bay Area households can afford starter homes this year than last., The San Francisco Chronicle reports. In a bleak real estate market, some Bay Area residents are finding a bright spot. People who thought they could never afford a home here are buying foreclosed houses at huge discounts, sometimes more than half off the stratospheric heights they reached just a couple of years ago.

Pockets of affordability are scattered around the Bay Area, in the same checkerboard pattern as foreclosures.

Read the full article: Silver Lining in Foreclosure Cloud

Real Estate Agent Acting As Loan Agent

Trust but Verify:

Real estate agent also acting as loan agent is a conflict of interest

In the last couple of years, we’ve noticed a dramatic increase in the number of agents representing buyers who also act as loan brokers. Likely, this is because there are so many new agents chasing a limited number of deals and originating the loan for the buyer is an efficient way to maximize one’s income from a given transaction. Lenders themselves have encouraged this with software packages and web links that make it easy for agents to originate loans.

But this practice represents a big problem from the listing agent’s point of view. When I am evaluating an offer on behalf of my seller, I need to assess the buyer’s ability to obtain financing. Normally, an offer is accompanied by a “pre-approval” letter from a lender or loan broker. If I don’t have any prior experience with the person who wrote the letter, I will most likely call them and ask a series of questions designed to see just how far the loan process has really gotten. Questions such as: Has she actually received a completed loan application? Has she verified the buyer’s source of down payment? Has she run a credit report yet?

You can start to see the problem now. If the person who is answering these questions is the same as the agent presenting the offer, I gain no independent verification. Like Ronald Reagan once said of the Soviet Union: “trust, but verify.” Without the ability to verify, I won’t be very confident in the offer. If my seller is lucky enough to have other offers to consider, preference will most definitely be given to the buyer with an independent loan source. If this is the only offer, then I warn the seller to “fasten their seat belt. We could be in for a bumpy ride.”

Not so coincidentally, the majority of offers we have seen coming from agent/lender combinations is in the lower end of the market, around here being $450k and less. And most frequently, the purchase price is 100% financed.  Is there also a correlation between this and the implosion of the sub-prime market? Duh!

Guest contributor: Brett Weinstein of Realty Advocates, Discount Brokerage

API Scores and Home Values

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A recent article on SFGate.com writes, “There’s no question that home prices and test scores are linked,” said Linda Strean, managing editor at greatschools.net. And although the housing market has cooled, realtors and others say homes with excellent schools are still a hot commodity.

The article also suggests prospective home buyers using the scores to help gauge the quality of a school, should take caution – people should also take into account annual improvement, visit the school, talk to other parents and look at everything from the building’s physical condition to programs offered.

As Bay Area home values have increased over the years and people have spent a greater percentage of their income on mortgage payments, many theorize people just don’t have the option of sending their kids to private school if they don’t like their local public school. So paying a premium to buy near an excellent school isn’t something many consider lightly.

Read the full article at SFGate.com – Home Values: Parents are drawn to neighborhoods where local school has high state test score.