Mike Stone

I agree with and applaud the majority of "Newportfiji's" answer, but wanted to point out the following exceptions I have. (My opinion if formed from over 25 years of both Real Estate and Mortgage experience):

1) the current decline is very fast and steep. Our current market cycle showed the telltale signs of flattening by mid 2005. By 2006 we saw prices softening more noticeably....but at a modest pace. Now, since summer of 2007 we are in a full blown nose-dive. The 1990-1996 cycle was much more gradual. This means that although the current cycle went a lot more out of control than previous cycles, it is now declining in our area at a the fastest rate ever. This means that we could be near (within 5 or 10% of) the bottom sometime in mid to late 2009. We will probably be over halfway to the bottom by this summer.

2) Although the property taxes and loan interest adding up is a copletely valid point, let's not forget that people with a lot of taxable income can offset that in many cases with the tax deduction of those same items, compared with no deductions when you rent.

3) The future interest rates in 2009 and beyond are of course unknown, but could be substantially higher.

4) If someone is planning on staying in their home 7 years or more, it is arguable that they will be likey to come out either a little ahead, or around break even financially......in the end when you combine all of the factors (of which there are many) including closing costs for both buying and selling. There is also the possibility you will be living in a more desireable home than what you would have when renting.

5) Someone who starts looking now may find the right home at a good price in a month, three months, six months or a year......during which the inventory of available homes is always changing, along with the prices continuing to get lower along the way . When someones "Ideal property" that fits almost all of their needs comes on the market is anyones guess....drive around most neighborhoods (except Palmdale) and you will see at the most one home on each block with a for sale sign....with one every 2 or 3 blocks being more typical. Every 1-3 blocks you may pass a home and say "that one is kind of what I am looking for" but the chances are that is not the one with the for sale sign. Around 3% of the homes are up for sale at any one time on average.

Finding that perfect home in the neighborhood you would really like to be in doesn't come along very often....and if you are going to stay for many years, then yes, DO NOT buy at or near the top of a market cycle. By the time most people who are starting to think about buying actually find the perfect home and enter escrow....(which could take 2-3 months or could be in the later part of this year) they should be well past the halfway mark of this decline. - Thu Mar 20 2008, 18:42

Hi Estella,
Ever Buyers needs and budget are unique....so there are several key questions a good agent needs to ask you before even beginning to know what area to start looking in. If you would like accurate, honest and expert info. Without any pressure to buy.......please contact me at 818-481-8555 - Fri Feb 15 2008, 14:08

The limits are now raised in certain areas, Los Angeles, Ventura, San Diego, and Santa Clara counties are included to $729,750.00 HOWEVER...the maximum loan to values have been decreased, so there is a maximum LTV of 90% of your appraised value on Fixed rates and 80% on adjustable rates (Including the 3,5,7, and 10/1 ARM's that are fixed for the initial period of time). Since most of these areas are likely to be identified as declining value areas...then you lower the LTV to 85% on Fixed, and 75% on ARM's. Be aware of this....I always ask my appraiser to estimate the value range by looking at the data before wasting your money on an appraisal fee. If anyone has questions, please contact me at 818-481-8555 - Thu Mar 13 2008, 16:49

Hi Joyce,
Yes....the Increase has finally been approved, but no, it is not available as of yet..."we are working with our regulators and our lender partners to implement the change as quickly as possible" is the official announcement on the Fannie Mae website. Most likely your home in the San Jose area of California will y be considered a high cost area with a limit of $729,750....but it could be a couple of weeks, or even a couple of months (let's hope not). We could start processsing the application in anticipation that it will be official soon, but could not lock in the interest rate or get a loan approval until that time. I agree with Gabe and Michael (who gave great answers) that you should first consult with one of us. We'll estimate what the current market value of your house is, so we can estimate the loan to value ratio (LTV). Then we will compare the rate and terms you have now to the current available rates for conforming programs, with M.I. insurance included if the LTV is above 80%. Depending on how high your currrent rate is, it may not make sense to refinance. If the loan to value is above 90%, it gets questionable if you will be able to get a loan at all. Although many conforming programs allow up to 95% LTV on a refinance, most areas of California are flagged as being in "declining" market now and if so, the likely outcome will be they will reduce the LTV 5% (to 90% maximum). If you want cash out, after the 5% reduction the maximum LTV will be 75% of your appraised value. For more information, please call me at 818-481-8555, and good luck!!! Mike Stone - Thu Feb 14 2008, 18:00

Maverick,
I recommend you look at the responses below.....see who put the most thought and consideration into their answer(s), as well as who gave you the most insight. If you have further questions, I would direct them to that person (or persons). I hope this helps. - Wed Feb 27 2008, 15:10

It is funny how defensive agents get when you discuss their commissions. The Flat rate agents tell you they are saving you money....the full commission agents say they are saving you money. If the public wasn't confused enough already...they are now! I noticed I haven't seen hardly any super discount or flat rate brokers blogging at all. Goes to show how interested they are in knowing the real estate industry!

The assumption made below that their skills would make a seller go down another $25,000 because of repairs needed after having the home inspected is purely hypothetical.....and assuming that another agent (or the Buyer) wouldn't try to negotiate at all when there are that many repair issues is also a pretty big assumption. Alot of properties don't warrant any serious repair issues...and most that do have reflected that fact by having a lower asking price. Nevertheless, it was a very good illustration on the dangers of not having a really good Broker....but is was also a great play on numbers itself.

Let's get to the bottom line on this....everyone should agree that having a really good agent is very important. In my opinion, having a really good agent is alot less likely if they are working for a commission rebate type brokerage......or a flat fee brokerage, but not entirely impossible. Almost all of the agents I have dealt with from those types of companies didn't have much of a clue about what they do. They are typically very new to the industry...either brand new, or less than 2 or 3 years of experience.

To be clear, asking a really good full service agent to share a reasonable part of their commission should not present a problem in my opinion....as long as they are a really good agent!

I think ALL OF US AGREE on the fact, and have demonstrated the many good reasons that having a super good agent can easily save you 2 or 3 times the amount that you think you are saving by choosing an agent based on the size of the discount....or rebate.

If anyone would like more info., plese contact me at 818-481-8555

Mike Stone, Broker - Sat Feb 16 2008, 21:41

In my opinion having a good Broker is critical, and I do NOT recommend risking having a "bad" Broker and try to justify it by having an attorney review the contracts. The term "bad" could mean ignorance, inexperience, carelessness, laziness or just plain old bad intentions and only after the commission.

There are too many potentially detrimental things about a property that would never be known by simply reviewing the contracts. They could remain unknown by a Buyer, Seller, or their attorney until well after escrow closes.....because a "bad" agent doesn't find them, doesn't know what to look for, or chooses not to disclose them (because they don't want to risk losing the commission). They could be things discussed in the transaction between Buyers, Agents, Home inspectors, etc. that would not be known by the attorney simply by reviewing the contracts.

There are many so called "full service" Brokers/Agents who's knowledge and/or ethics aren't worth beans either. The Individual Broker is the key...and trying to make sure you have a really good one is my recommendation, and you could still ask them to credit you some of their commission......and you can still have an attorney review the contracts if you like . The standard purchase agreements and addendums in California have verbiage that states that it is strongly recommended you seek advise from an attorney, accountant, contractor, and/or other licensed professional regarding questions or advice in the area of expertise.

I happen to credit the Buyer (or Seller) with a good portion of my commission on most of my transactions. I'm also told by those clients that I had two or three times the knowledge and had delivered two or three times the level of service compared to what they experienced with other so called "full service" agents, plus they had a very nice credit for closing costs, and/or a good size rebate (or if it is a Seller, a discounted commission).

Of course, there are also many very good "full service" agents out there...but the point is that having a good agent is the key, and a good agent who offers you a nice piece of the pie (say 25 or 30% of their commission) is even better.

In my opinion, the "flat rate" or "discount" Brokers who are working for very little ($500-$5,000) are generally not going to have enough knowledge OR interest in your transaction for you to be well reperesented, and of course they may not know how to even if they wanted to represent you well. IF THEY CAN'T NEGOTIATE A DECENT COMMISSION FOR THEMSELVES......DO YOU REALLY WANT THEM NEGOTIATING FOR YOU??? There is much more to lose in my opinion...maybe even 20, 50, $100,000 or more because of not having a good, experienced agent.....between knowing how to negotiate price...knowing how to spot and jump on the hottest deals (the best ones come up far and few inbetween, and go into escrow within a few days)...knowing how to protect you when it comes to which home inspector they recommend....some inspectors downplay some potentially serious structural or repair needs (they are called "broker friendly" inspectors in the industry)....and then when discussing the Home inspection report with you they may minimize OR BE UNAWARE of some serious concerns....as well as many other potential pitfalls. as you can see, when you add all of this up.....you potentially have ALOT MORE to lose than a few thousand bucks. For more info., please call me at 818-481-8555 Mike Stone - Sat Feb 16 2008, 19:48

If this is a 2-unit property or larger, then it is likely to be under rent control in Los Angeles City...which has specific rules regarding rent increases and eviction. Also, on a multi-unit property it is unlikely any bank wants to remove the tenants even if they could.......the property is generally worth alot more when fully occupied than when not. - Sat Feb 16 2008, 23:10

Even if you could it is unlikely she would earn enough income alone to qualify for the mortage by herself. There are many loan programs available, and a good mortgage broker (Like Myself) can cut to the best ones.

Mike Stone
818-481-8555 - Sat Feb 16 2008, 23:05