The Washington Post - Many homeowners who haven’t bought or sold a house in the past few years may find that many of the old “rules” have changed.

Read the full story 

• Occasionally, homeowners hoping to close a deal agree to purchase home warranties to give the home buyer peace of mind. However, prospective homeowners should do their homework to make sure the policies will actually help.
• Typical home warranties cover the major mechanicals and appliances in a home for one year after the sale. Warranties range in price from $350 to $800. If purchased from reputable companies, home warranties can help homeowners deal with broken appliances, malfunctioning air conditioning, and other problems.
• The policies usually require homeowners to contact the service company when something breaks. The company then sends out a repair person who provides an evaluation for a set fee, usually about $65. Once a professional has determined what the problem is, the warranty company pays for the broken items to be repaired or replaced.

Senator Chris Dodd, D-CT, has been negotiating for several weeks with Senator Johnny Isakson, R-GA., to craft an extended tax credit for homebuyers that would pass the Senate. Last Wednesday, they announced agreement on a bill that would extend the tax credit for first-time homebuyers and offer a reduced credit of $6,500 to repeat buyers who have owned their current homes for at least five years.

The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said last Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.

The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.

If the full Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.

It takes 45 to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, unless the tax credit is extended.

About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of REALTORS® estimates that 350,000 of them would not have purchased their homes without the credit.

A survey of first-time home buyers conducted by the California Association of REALTORS® shows that 40 percent would not have purchased a home without the tax credit. In tandem with organized real estate’s efforts to extend the current loan limits, both CAR and NAR are vigorously working to have the soon-to-expire federal First Time Home Buyer Tax Credit extended, and in that regard the assistance of every REALTOR® is needed.

Sometime today, please find time to contact your congressional representative today (Nancy Pelosi for San Francisco, Jackie Speier for the peninsula). In the Senate, an amendment offered by Senators Dodd, Lieberman, and Isakson will both extend the program into 2010 and expand the eligibility requirements. The amendment has been attached to a bill that will extend unemployment insurance benefits. It is expected that the bill will pass the Senate and then be voted on by the House of Representatives. It is critically important that every REALTOR® member of the San Francisco Association of REALTORS® contact either Nancy Pelosi or Jackie Speier to urge them to support the unemployment extension bill that contains the home buyer tax credit. Please respond to the National association of REALTORS® Call for Action http://takeaction.realtoractioncenter.com/campaign/hbtc?qp_source=actionsplash. Working together, REALTORS® can make a difference in Washington, D.C.

Purchasing a condo often is the first step in the homeownership process, and can be a good opportunity for first-time buyers.  However, as more homeowners living in community developments with homeowner associations find themselves in trouble, many are not paying their dues.  As a result, residents who do pay their HOA dues are seeing increases in their monthly bills or unexpected special assessments.  This is especially true for communities that do not have enough funds in reserves to pay for property maintenance and repairs.  Buyers considering the purchase of homes in community developments with HOAs are advised to closely monitor the homeowner association’s financial health. 

MAKING SENSE OF THE STORY FOR CONSUMERS

Buyers are advised to request all financial documents relating to the homeowners’ association during the home inspection period.  In most cases, buyers receive these documents one to two days before closing, or find they are incomplete.  Financial advisors recommend that buyers work with their REALTOR® to ensure the documents are received in a timely manner—preferably with at least three days to review. 

• When reviewing the financial documents, buyers should note that two-thirds of the association’s budget should be operating expenses such as water, lights, elevator maintenance, and landscaping; the rest should be set aside in a reserve fund for long-term maintenance and repairs. 
• If the expenses exceed revenues due to foreclosures, unpaid dues, or other reasons, buyers should ask the association’s manager or board of directors what its plans are to make up for the shortfall, and whether the association expects an assessment or higher dues.  It also is important to note if the financial deficit will be made up with shorter pool hours, or a reduction in landscaping and other community amenities, as these could affect not only the comfort of the community, but also the future marketability of the property.
• While the financial health of a homeowners’ association is an important factor in the purchasing decision, it shouldn’t deter home buyers from purchasing condos.  Many first-time buyers purchase condos to enable them to become homeowners.  Typically, condos are more affordable than single-family homes, offer community amenities, and may allow a buyer to purchase a home in a highly desirable area where they otherwise could not afford.
• Although not required, it is becoming more common for associations to hire outside firms to look at all long-term anticipated repairs and replacements within communities over a period of 30 years, add up the costs, and create a payment and maintenance schedule.  The monthly dues charged to each owner should reflect the amount of money needed to pay for the necessities.
• Associations ideally should save enough money over time to pay for every contingency, such as roof leaks, pipe bursts, sidewalk cracks, and the like.  However, most associations often deplete reserve funds to pay for operating costs and other expenses.  Although the percentage of funding necessary varies by the age and size of a community, in general, buyers should be concerned if funding is below 40 percent, as it could result in a special assessment in the future.

Los Angeles Times – If ever there was a great time buy a first home, it’s now.  Interest rates and housing prices are low, and the federal government is giving money to buyers in the form of an $8,000 tax credit.

From the Wall Street Journal - Buyers hoping to purchase deeply discounted homes may want to consider purchasing homes in the high end—especially those priced $2 million or more.  In some cases, buyers may be able to command even lower prices on these homes, as financing continues to be a challenge for buyers of luxury homes.

 MAKING SENSE OF THE STORY FOR CONSUMERS

• While data from the Federal Housing Finance Agency (FHFA) showed that average home prices rose 0.3 percent nationwide between June and July, including a 1.6 percent increase on the west coast, the data only relate to homes purchased with conforming loans guaranteed by the FHFA.  These loans are mortgages of up to $417,000 or up to $713,000 in the country’s most expensive regions.  The outlook for homes priced above that amount remains bleak.
• In many areas across the country there is a new level of value being established.  According to one broker, homes that used to sell for $8 million now are selling for $6 million, while homes previously priced in the $10 millions are selling for $8 million.  The price adjustment in the high end appears to be about 20- to 30 percent lower.
• A recent survey by Trulia.com showed that sellers listing homes for more than $2 million have reduced their asking prices by a total of $7 billion, with an average price reduction of 14 percent.
• Chip Case, economics professor at Wellesley College and coauthor of the Case-Shiller index, says that some of the markets finally may be catching up to the wider housing market downturn.  “That level was more in the hold-out category,” he says.  “Up until recently, the foreclosures weren’t hitting that level.  But they are now. There’s no question about that.  You’re seeing some contagion from the prime level to the luxury end.”
• Sooner or later, even high-end homeowners need to sell.  And, when they get tired of waiting, they reduce their asking prices.  Factoring in taxes, upkeep and the opportunity cost of keeping money in a non-performing asset, an empty luxury home may be costing owners a lot just by sitting there, giving them a powerful incentive to make a deal.

We are issuing an urgent plea for everyone to contact members of Congress immediately to urge them to extend the First Time Home Buyer Tax Credit to help keep the economy recovering. Some 1.2 million households have used the $8,000 tax credit since it was enacted earlier this year as part of the economic stimulus package. Without congressional action, the credit will expire on December 1. Since it takes 45-60 days to get to closing, if not longer, households have little time remaining to take advantage of the credit. That’s not good for markets. “Uncertainty about the future of the credit will dampen consumer demand,” says Charles McMillan, president of NAR. “The only way we can assure that the progress we’ve made can continue is to extend the credit and to do that now.”

You will need to contact your representative depending on your location. The best resource we have found for finding contact information on members of congress is here.

- Janis Stone
DRE #00517072

Instead of searching the paper for open houses, the San Francisco Association of Realtors has just launched a new website specifically for open house information. Go to:

www.sfopenhomes.com for the latest in open house information!

- Janis Stone

A reader asks: I am considering buying a home in San Francisco, but have all these fears that I will make the wrong choice or that once I am in, I won’t be able to afford it. How can I get past this?

Our reply: What you are experiencing is not uncommon, whether it is before you buy or after. If you had already purchased it would be called “buyer’s remorse”. And there are 5 things you can do to help you feel more comfortable with the decision.

1. See a lot of houses. Make sure you get a good idea of your needs and wants, write them down and compare them to the features of each property you look at. Of course, when there is a lot of inventory on the market this step is easier. But if you have what you want firmly fixed in your mind, it will make it easier to decide if you happen to find that “stale” listing with the features you want. In such a case, you might be able to negotiate a better price, even in a seller’s market.
2. Make sure you have been preapproved with a lender. Running the numbers will give you tremendous confidence that you are buying something you can afford.
3. Talk to friends and family who can help you reinforce your decision. Janis Stone has developed a property test that she puts in her open house booklets. It helps buyers to rate properties when they are out seeing so many open houses. The Excel spreadsheet can be downloaded here by right clicking this link and choosing “save target as” on your desktop. Print it out and rate the properties as soon as you leave the open house.
4. Make it personal. Picture changes you would make once you owned the home. Thinking about things you might do to add value or “make it your own” will go far to giving you confidence that this it the right house or condo for you.
5. Don’t over-think it! Tony Robbins calls it “looping” where you keep running different scenarios over and over again in your mind, never making a decision to do anything. If you’ve done your homework, you can be confident that your choice is perfect… for now. After all, no decision has to be permanent unless you want it to be.

MarketWatch by Dow Jones has a nice article covering these points in its latest “weekend edition” which may be found here. It is about “buyers remorse”, but we think you can see how it can apply to your situation as well.

Good luck.

- Mick Orton

David Lereah, chief economist for National Association of Realtors, was very optimistic for 2007 in his recent article, “As Sellers Get More Flexible, Buyers Get a Break”. In it he says what we were saying all last year… that there was no “bubble bursting” in San Francisco real estate, though there was a market correction. Sales were down, but there were not significant price reductions.

To quote:

…Let’s be clear, though. The sky never did actually fall in 2006— or, to use that phrase that the media love, there were no “bubbles” bursting. But air did come out of some inflated balloons. According to our National Association of REALTORS® latest estimates for last year, existing home sales were down 8.2 percent from a year earlier. Similarly, new home sales were down 17.4 percent and housing starts were down 12.5 percent. Our nation’s housing sector suffered a contraction, inhibiting overall GDP growth.

But 2007 is a new year and with it brings a cautious confidence and hopefulness. Home sales appear to have bottomed out, having reached a cyclical low in September of last year. And in recent months, home sales are inching up, not down. Existing-home sales experienced two consecutive monthly, albeit modest, gains from September to November. Inventories have stabilized, with the nation’s months’ supply hovering around 7.3 months since July of last year…

Read the entire article here.

- Mick Orton