UPDATED: Should You Consider Refinancing Now?
March 26, 2009 by Debbie Bremner · View Comments
UPDATE 3/28/09:
The most interesting financial product to come out this week is a 1,5, 7, or 10 year interest only loan (becoming fixed at the end of the interest only term, due in 30 years) that gives you the option of converting to a 30 year fixed, with no points, at prime rate, at any point after 12 months, but during the first 5 years of the loan (up to month 60.) There is no reapplication, appraisal, or title insurance necessay; in other words, it is a built in modification of terms. (The loan term does not readjust; your term will be set at any portion of the loan still remaining. i.e., if you modify @ 12 months, your fixed rate loan would have a term of 29 years) If you were converting that loan today, you would be getting a 30 year fixed rate loan at about 4.78%. This product is available for jumbo loans as well. This is one of the best options I’ve seen in a long time, and could be a real value if you are considering a refinance now. If you are, read the rest of the post below. Questions? Contact us at The Bremner Group, 310-571-1364.
There is a silver lining to the cloud of uncertainty out there in the world of real estate. Buying and selling houses may be fraught with difficulties, but when it comes to refinancing, if you plan accordingly, you’re likely to come out way ahead in the current financial landscape. Certainly, the interest rates are worth looking into right now: at this writing, they are at record lows, and holding. Meeting with the senior advisor at California Association of Realtors (CAR) this week, his conclusion is that rates will stay down until mid-summer, and then begin to rise as the flood of foreclosures is stemmed.
In fact, despite refinancing recently declining to a 16-year low, Steve Eckhoff, a mortgage broker associated with The Bremner Group, is reporting that he is working diligently to keep up with the potential clientele. His pipeline of active applications has nearly quadrupled within the past month, with 80 percent of applicants looking to refinance.
Steve maintains that “with rates being low, everyone should be checking to see if they can improve their mortgage and monthly outlay.” He then answers the question everyone asks: “Yes, credit standards have tightened but it is not as hard as many of the news stories would lead you to believe.” (I had my meeting about a refinance just this week!)
Still, if you’re considering it, it’s a good idea to get a sense of what you’re about to get into. After all, refinancing hasn’t changed that much over the last couple years, but in subtle ways it’s harder, and more expensive, to refinance a house than it used to be.
Ask yourself some questions.
You can save some time and disappointment if you first evaluate your personal situation before meeting with your mortgage broker. First, check with your accountant, and get their advice. Then, shop for a broker, not for a loan. Why? Your focus should shift from shopping the price of the mortgage to shopping for the best broker. The broker will shop the market for you. Brokers shop lenders far better than you can, among other reasons, because they are in constant contact with many lenders, and know the niches where your situation fits. Then, ask yourself these questions:
How’s my credit score?
“If your FICO score is 740 or better, you’re golden,” says Eckhoff. “The next levels are generally at 720, 700, 680, 660, 640 and 620. You will find increased pricing for a given interest rate at these scores.”
But while 740 and above is the sweet spot, especially if your loan will be purchased by Fannie Mae or Freddie Mac, refinancing is worth investigating even if you have a credit score of, say, 620. Don’t get your hopes up, but many of the local and regional banks around the country still provide mortgages with competitive rates and often lower to borrowers that can’t meet these 740 credit score standards. In addition, you may be able to get an FHA-backed loan where rates are only about one-fourth point higher than non-FHA and you don’t need to have a good credit score, and they will provide financing sometimes as high as 96.5 percent.”
What’s the value of my home?
This is probably the biggest issue right now. (read my blog post about appraisals and the lack of comps.) You need to make sure the new loan balance will be equal to or less than 80 percent of the value of your home. Otherwise, you will be required to pay private mortgage insurance (PMI), which could wipe out the monthly savings of a lower interest rate. Your Realtor® will be able to get you a ballpark value on your home. A lender may also be able to obtain a ballpark value for you. It’s possible to go much higher on the loan-to-value ratio, but it should make sense for you to do so.”
How long have I been at my job?
If the answer is less than two years, know from the outset that the process will be more difficult for you.
Why do I want to do this?
If you want to refinance in order to take cash out, experts generally agree: Now is not the time, especially in this economic climate. Don’t ‘cash out’ in this market. Instead, only refinance if you can reduce your interest rate enough. In other words, you should only do this if refinancing is going to significantly lower your monthly payments.
What will I gain by doing this?
Typically, most experts agree to shoot for reducing your interest by at least one point; if someone tries to convince you that it’s a financially wise move to spend thousands of dollars in closing costs to bring your 6.5 percent interest rate down to 6.25 percent, this is probably not someone who is looking out for you. You should only consider refinancing if you plan to be in your house at least another 18 months to two years, because it almost takes about that long for the monthly savings from the lower interest rate to offset the transaction costs of your refinance.
Get your paperwork in order
You’re going to need to find every bit of paperwork that shows the worth of your house and what revenue you and, if you have one, your spouse are contributing to your budget. Gone are the days of “stated income” or no documentation loans. Locate the following documents to submit to your lender:
The past two years of W-2 statements
30 days’ worth of pay stubs
The most recent two months of all bank accounts, retirement accounts or other significant holdings
Copy of driver’s license
Copy of Social Security card
Proof of homeowner’s insurance
Take a look at your budget, and your calendar.
If you’re going to refinance, you want to do it as soon as possible, in case rates go up. But at the same time, if you’re planning a wedding that’s going to happen soon, if your baby’s due any week now or if this is just a really busy period in your life, remember that time doesn’t stand still when you’re refinancing.
Most rate locks are only good for 30 days. With the current market, underwriting now takes about 10 business days. Keep this in mind when trying to calculate a closing schedule.
That’s not the only thing you should be calculating. As the rates have gone down, the fees have gone up, including loan origination, title insurance, underwriting and document-processing charges. Typical closing costs for any mortgage, whether refinanced or a completely new one, have been around $3,000 and can run as high as $4,500. Points, based on the amount you refinance, will cost about 1 to 2 percent of the loan amount. And because the lender can’t always know what these fees are in the beginning, you should ask for a “good faith estimate,” which they’re required by law to provide within three days. Generally, those fees are often still rolled into the loan (which makes the monthly payment higher than it would be if you pay the closing costs upfront), but lenders are starting to ask for the appraisal costs up front, a fee that’s usually around $500-$750.
Like homeowners, lenders are now looking to protect themselves. They want to see that the borrower is committed to following through with repaying this loan. Commitment, in fact, is why it’s so important to be prepared. Understanding what you’re getting into is the key to emerging from the refinancing process a happy, healthy and wealthier person.
NOTE: Homeowners should seek professional advice based on their particular circumstances. This article is for information purposes only and is not is not to be substituted for the advice of your lender, accountant or tax professional.
Market Metrics and Year to Date Westwood Neighborhood Update
March 26, 2009 by Debbie Bremner · View Comments
Market Update for the Week of March 25, 2009
Higher Loan Limits are on the Way
- FHA Financing up to $729,750 with as little as 3% down is now available in the market
- Conventional financing up to $729,750 has been approved for the credit agencies but the final pricing and guidelines are still probably two weeks away.
Now, what does the Westwood market look like? Well, the data from CLAW, the Westside Multiple Listing Sevice, is tabulated up to end of February. Here is a brief look at some of the most important reports. You can download the full size PDF’s here.
* The Number of For Sale Properties by Month
* The Number of Sold Properties by Month
* The Number of Under Contract Properties by Month
* The Number of New Properties Listed by Month
* Sold Price by Month
* Supply & Demand by Month
* The Average Days on Market by Month
* Months Supply of Inventory
- *
- Units For Sale
The Number of For Sale Properties By Month
There are 16% more properties for sale this year as compared to the same time 1 year ago. (Feb. ‘08, 158 single family homes, Feb.’09, 183) The bad news: more supply= less demand. The good news, however, is that this number is down from its high point in November of 2008, when there were 210 single family homes for sale in Westwood. So it seems that we are trending toward absorbing some of the excess inventory that has been sitting on the market.
Units Sold by Month
The Number of Sold Properties by Month
The news is that we are right on target with the amount of units that normally sell at this time of year. That’s great news overall, because market conditions are not preventing buyers from venturing into the market, as they normally do in the spring. Simulus packages, along with lower prices, foreclosures and REO properties, and record low interest rates are driving this trend.
Units Under Contract
The Number of Properties In Escrow by Month
27 homes went into escrow last February, while only 13 went pending this February. This may be the start of a trend, but the small sample makes it difficult to assess. I’m waiting to see how March looks, before interpreting this small data sample. It may be that we will have a better picture by using the first quarter numbers, due out at the first part of April. Stay tuned!
New To Market
The Number of New Properties Listed by Month
Feb-08 vs. Feb-09: The number of new properties was up 25% from a year ago. What will this mean to the Westwood market? There certainly is pent up buyer demand, but a sharp rise in inventory could signal another wave of price reductions as sellers compete for the buyer’s attention. Again, first quarter numbers will give a more complete assessment; however, there does seem to be a rise in the number of signs in yards, and the length of time on the market for most listings.
Tomorrow we will look at the rest of the Westwood data, and next week we’ll take a look at a Brentwood market snapshot.
Reduction in Little Holmby; WW Market News
March 25, 2009 by Debbie Bremner · View Comments
The home at 911 Hilts Ave , LA CA 90024 received a price reduction of 8% yesterday, or $3,150,000, down to $2,900,000. The home was listed just 20 days ago on 3/05/09 for $3,150,000 and this is the first price reduction of the listing term. According to the MLS, the home is a 6 bedroom / 5.5 bath, 4400 square feet on a 7623 sq ft lot.
The property at 2201 Manning Ave., LA CA 90064 received a price reduction of 4.4% or $50,000, down to $1,079,000. The home was listed a little over 2 weeks ago for $1,129,000. According to the MLS, the home is a 4 bedroom / 3 bath, 2,182 sq ft home on a 6,750 sq ft lot.
The home at 2207 Camden Ave., LA CA 90064 received a price reduction of 9.11% or $99,850, down to $995,900. The home was listed on 1/28/09 for $1,095,750 and this is the first price reduction since the home came on the market. According to the MLS, the home is a 3 bedroom / 2 bath, on a 6,500 sq ft lot. This listing was previously purchased in 5/17/06 for $1,215,000. With this new reduction, the home is now listed 18% lower than the purchase price in 2006.
In other market news this week, 2341 Veteran Ave , LA 90064 closed escrow yesterday. It was on the market for 150 days, since 10/1/2008, originally listed for $850,000. It went into escrow on 3/3/09, after two price reductions, first to $789,000 and then to $750,000. It finally sold for $710,000.
In addition, 2046 Glendon Ave , LA 90025 is in escrow. It went pending on 3/6/09 after only 18 days on the market. The list price was originally $949,000, with a reduction to $879,000 after the first two weeks. Stay tuned to find out what this one sells for.
It’s becoming apparent that in order to get those offers coming in,sellers in the Lower Westwood area have needed strong price reductions. It will be interesting to see how this affects the Little Holmby and Westwood Hills market.
New Little Holmby Listing
March 21, 2009 by Debbie Bremner · View Comments
Sited atop a gently rolling hill at the corner of Warner Avenue and Hilgard sits 462 Warner Avenue, a stately traditional home with 4 bedrooms, 3. baths and a center hall floor plan. The living room has a bay window and French doors to pool, spa, and grassy play area. Formal dining room, den, and a breakfast room with garden windows. Master suite with a large balcony + 3 additional bedrooms upstairs. Other features includetwo fireplaces, hardwood floors, crown molding, recessed lighting, and central heat and air. 2 car detatched garage. UCLA adjacent. Warner Ave School. The lot is irregular, size is 8,276 sq. ft., and the house is 2,644 sq. ft., built in 1939. The current owners purchased the home in 1999 for $910,000.
In other Little Holmby news this week, the property at 515 Dalehurst was reduced from $3,395,000 to $3,095,000. (This marks a reduction of 8.8% of the list price) The home was listed back in December of 2008, and has been on the market apprximately 3 months. It is also on the market for lease, asking $9500 per month, reduced from $9750. The home is 5 bedrooms, 5 baths, 3,908 sq. ft. on a 9,539 sq. ft. lot. The house has been totally updated in a contemporary style. The current owner purchased in October of 2007 for $2,950,000.
New REO listing in Lower Westwood
March 20, 2009 by Debbie Bremner · View Comments
2326 Glendon Avenue, LA 90064
An REO foreclosure property is available in Lower Westwood, north of Pico Blvd. The home is a newer construction Mediterranean style home built, in 2005. The property is located at 2326 Glendon Ave., LA CA 90064. The home is a 5 bedroom, 5 bath with 3,894 sq ft on a 6,750 sq ft lot. Features include a large great room,custom kitchen, open floor plan. This house is ideal for someone wanting a good value in a good Westside location, with easy access to shopping, dining, and entertainment. I predict this will not last long, despite the condition, because it’s a great opportunity. (The prior owners tore out a lot of the cabinetry, fixtures, appliances, etc. prior to handing the property back to the lender. Bank owned properties have ofter been pillaged by their previous owners!) The bank notes that the property is being sold “As-Is”, without warranty. The home was previously sold new in 2006 for $1,985,000. The bank is now asking $1,700,000. Non FHA offers with 10% or less down and borrowers with FICO scores under 720 will not be considered by the bank. For more information, contact The Bremner Group at 310-571-1364.
Why You Should Care About Pocket Listings
March 18, 2009 by Debbie Bremner · View Comments
Secret Sales
I’ve been getting lots of mail recently, from homeowners and agents alike, asking why I bother to post information about “pocket listings”, those properties that are for sale, but not in the MLS. Even agents as far away as New York and Toronto have contacted me on Twitter and Facebook, asking why we seem to have so many pocket listings in Santa Monica, Brentwood, Westwood, and Beverly Hills.
But most importantly, what do all of these private sales mean to you, and the value of your home, as a seller, or as a buyer, or even just as a spectator? What do you need to know about the Westside market now?
In a recent blog post, “Appraisals Compromised due to Lack of Comps“, I spoke about the fact that appraisers in the Westside market have been hamstrung in their price justifications due to the dearth of good comparable sales. This has led to some questionable tactics in assessing value, not just for purchase money, but for refinances as well.
The Westside of Los Angeles has had a steadily percolating undercurrent of sales throughout the last 6 months, most of which have not made it into the MLS, a prime resource for appraisers and agents alike. If one is unaware of those private sales, they are missing vital information about the real complexion of the market now.
One interesting factor is the perception that “nothing is selling”, when in fact, quite a few homes sell each week through private sale. However, those properties will never have a sign, will never be advertised online or in the paper, so the general public may never know. There is more activity in the market than you may know. For you homeowners, this is a positive sign, and for you buyers, well, a change may be coming!
As a home buyer, you will want the opportunity to look at all properties on the market. You don’t want to be limited to re-sales, REO’s , or short sales. In fact, some of the best properties never see the general market. You must select a Realtor who knows intimately the specific areas you are looking for, and has access to those pocket listings. Regardless of what property you buy, you should have an accurate sense of the true value of the market and neighborhood, and knowing all of the sales s the only way to accomplish this.
As a homeowner, you must have this information to accurately assess your home’s value in this admittedly turbulent market. This is doubly true if you need to refinance your home, and your appraiser has no access to this hidden information. Before you select a mortgage broker, lender, or appraiser, as how they are tracking “pocket listings” and private sales. If you are about to put your home on the market, be sure the Realtor you choose has a good network that allows them to get access to this information. Ask the question up front, because the answer can be worth real dollars to you in the end.
New Comstock Hills Pocket Listing in Westwood
March 17, 2009 by Debbie Bremner · View Comments
This elegant four-bedroom Spanish Revival home, meticulously restored and enlarged, is situated in the highly coveted Comstock Hills neighborhood within minutes to Century City, Beverly Hills and UCLA. Its seamless addition respects every detail of the original craftsmanship, replicating intricate archways and creating a magnificently tiled staircase with custom ironwork that winds its way through a rotunda to the second floor.
Sun floods the majestic living room articulated with carved beams and an exquisite original art glass window looking out to the garden. A formal dining room and breakfast room with vintage leaded glass cabinets open to the outdoors with French doors offering easy flow for entertaining to the front terrace and lawn with its skyline view of Century City. The glamorous kitchen with Carrara marble and wood block counters features all the appliances that an accomplished chef demands. It opens to an inviting tiled terrace ready for comfortable al fresco dining. The cozy library/den and family room both have French doors opening to inviting tiled terraces. The downstairs bathrooms have vintage light fixtures and exquisite tile work with an original sunburst window showing off the delightful powder room.
Three bedrooms comprise the second floor with the generous master enjoying garden views from a Juliet balcony. The large master bathroom in blazing white tile has a separate tub, extra large shower and double Cararra marble-top sinks mounted in antique stands. The second upstairs bathroom is beautifully tiled and has a large tub and generous separate shower.
The home contains outstanding custom cabinetry and a state of the art entertainment and security system and dual zone heat and air conditioning. A separate outside studio has been created as a home office.
The Comstock Hills neighborhood, east of Beverly Glen Blvd, is not only close to hip restaurants, shops and theaters, but is proud of its outstanding Fairburn Elementary School, one of the best in the City.
The home is offered for $3,195,000. Total bedrooms, 4, total baths, 3.5. The house is approximately 4,000 sq. ft., and the lot is approximately 6882 sq. ft.
Little Holmby Pocket Listing Sold
March 16, 2009 by Debbie Bremner · View Comments
What did the pocket listing at 10708 Le Conte sell for?
Elegant Corner Traditional
This property is a perfectly elegant Westwood picket-fenced charmer on a beautiful, sweeping corner lot. This rare, larger one-story home, built in 1939, has a gracious living room, built for grand entertaining and a nicely sized formal dining room. The family room leads through French doors to patio and pool. Updated Carrara marble kitchen with separate breakfast room also leads out to the yard. Lovely master suite with newer Carrara marble bath and lots of closets. Two additional bedroom suites, each with its own bath. The property was asking $2,600,000 as a pocket listing, and sold for $2,525,ooo. The house was listed as 3345 square feet per assessor, and the lot was 11,880 per assessor.
The private sales in Little Holmby, Westwood, and Brentwood are helping appraisers, who have a dearth of new data with which to appraise local properties. (See Appraisals compromised due to lack of comps)
New Little Holmby Pocket Listing
March 15, 2009 by Debbie Bremner · View Comments
A new opportunity is here in Little Holmby, not in the MLS. This house, on the market as a private sale, is approximately 4300 square feet. The lot is 13,800 and is gated. The house sits back from the street and is very private. A long drive takes you to a garage and there is also parking in the motor court.
The house has been recently remodeled within the past year. It is contemporary but with warmth (dark wood floors, stainless kitchen, beautiful tile work and granite in kitchen and baths). The ceilings are high and the rooms are big. There is a sun room, formal dining room, media room, breakfast area, family room and living room with balcony and steps down to the pool.
The pool has an entertainment room that supports it. There is a spa and fireplace outdoors with a small bedroom down stairs. The house could be 5 bedrooms but one of the bedrooms is currently used as a media room. The master is stunning, with a big bath with spa tub, steam shower and big closets. Warner Avenue School.
Offered at $3,695,000
Call for more details or a private showing.
Appraisals compromised due to lack of comps
March 14, 2009 by Debbie Bremner · View Comments
One only needs to see the estimates for their homes on Trulia or Zillow.com to figure out that the valuations could be off in either direction due to a lack of comparable neighborhood sales. Apparently that same issue is also impacting the work that appraisers need to do to help underwrite loans.
From CNNMoney.com:
For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance. The main tool in the appraiser’s kit is the sale prices of homes in the area. If they can find similar houses nearby in similar condition that sold recently for, say, $300,000, they can assume that the home they are appraising is worth a comparable amount.
But with sales volume falling, there are fewer homes with which to compare. In fact, sales of new homes crashed in January to the lowest level in 45 years, and existing home sales fell to a 12-year low.
And even when there are recent sales figures, they often don’t hold up as a reliable baseline. Appraisals are estimates of market value at a given time, and with prices in free fall, values “age” quickly…
So in lieu of good sales figures, appraisers often consider contract prices, the ones first agreed to between buyers and sellers. But those are not much better because many sales don’t close.
During the boom, pressure was put on appraisers to inflate values so that sales would go through. Sellers, buyers, real estate agents, loan officers and mortgage brokers all had a vested interest in getting the sale completed. So if appraisers weren’t cooperative and raise their values, they often were not selected to appraise.
Now, there’s pressure on appraisers to be too conservative, so many homeowners are finding themselves unable to purchase a new home or refinance their existing mortgage.
“Lenders want the appraisal at the lower end of the range,” said Joni Herndon, a Tampa, Fla.-based appraiser. “The lender may want it at $100,000 and the appraiser thinks it’s worth closer to the high end of his or her range, say $115,000.”
If the lender does reject the appraisal, one of three things usually happens. “Lenders can order a second appraisal, the seller can lower the price on the house or the buyer can come up with more cash,” according to Jim Amorin, president of the Appraisal Institute, the industry’s professional standards organization. “In some cases, none of those happens and the loan doesn’t go through.”
One way appraisers are addressing stale comps is by using a “negative time adjustment.” If a comparable property sold for $200,000 three months ago in a market where prices are falling at a 12% annualized pace, the comp can be reduced in value by 3% to reflect the market.
Another option is an “automated valuation model,” which uses a mathematical formula to set home values. They establish a baseline home price by examining sales prices and the square footage of recently sold homes in the neighborhood. So if a house is 1,500 square feet in a community where the average home sells for $200 a square foot, the AVM puts the appraisal value at $300,000 and increases or decreases it as new sales data is recorded.
However, these valuations don’t take into consideration a home’s condition or appearance – or even verify the square footage – so the results can be very far off.
But finding accurate appraisals is more important than ever now that the Obama administration has announced its Homeowner Affordability and Stability Plan. The first prong of this program allows homeowners with Freddie Mac or Fannie Mae loans to refinance into current record-low rates even if they are slightly underwater, meaning they owe more on their mortgages than their homes are worth.
However, eligibility will directly hinge on appraisals: Anyone who owes more than 105% of the value of the home won’t qualify. That adds to the pressure appraisers may feel to “hit the number” so people on the bubble can slide in and refinance.
What does this mean to you? It is more important than ever to consult with your Realtor to interpret the raft of data coming from many sources. In addtion, SHOP FOR A BROKER, NOT A MORTGAGE, ask for references from Realtors as well as borrowers. Your focus should shift from shopping the price of the mortgage to shopping for the best broker. The broker will shop the market for you. Brokers shop lenders far better than you can, among other reasons, because they are in constant contact with many lenders, and know the niches where your situation fits. Your team of the Realtor in conjunction with your mortgage broker will help you develop the proper strategy to combat the difficulties of appraisal in today’s complex market.
Call today for a confidential and personal evaluation from the team of The Bremner Group.
