THE SECOND STORY | September 17th, 2009

Mystery list….

(This is what I got to see two weeks ago, for the week I spent in Maui. The sunsets were a bit unusual due to a huge brush fire on Molokai for several days that week. Maui is upwind of Molokai so wasn’t affected adversely. No property was lost and people were safe…nonetheless it was spooky to see the flames rimming the outline of part of the island at night. The next photo is also from Maui and when I say the crowds went home, here is proof. This is from one of my favorite places for breakfast or lunch…The Gazebo at Napili Bay. It’s open air, with awesome views of the small bay and big Molokai, the most wonderful servers, and terrific food!

The Westin Villas at Ka’anapali, where I have two timeshares on Maui, were at 100% occupancy the week before Labor Day. It went down to 65% just before the holiday weekend. The beach was practically empty and I was given an ocean front studio for my stay. HEAVEN! The only sound was the lapping of the waves and the wind through the palms.

Last week at this time I was getting ready to jump over to Kauai and meet up with friends. I had not seen the Westin Princeville Villas and they are lovely too. I’ve got two units there. I think it has been 22 years since I was in Kauai with Carl after finishing the 1987 Transpac on one of his designs, an Express 37 – me and my 5 best boyfriends! After the race we took a couple of days and headed over to Poipu on Kauai.

Back to the present. This second week was all about the golf and 3 rounds were played in 5 days. I think that’s the most I’ve played in a week. The muni course there was great fun, and the Princeville championship course was the most challenging and intimidating I’ve yet seen. Well, maybe not as intimidating as Turnberry in Scotland last summer. Princeville has small hills, big hills, canyons, exotic bushes everywhere, sand traps/bunkers way below the greens, and some terrific views. We were thrilled with our scores on such a well-known tough course.

If you think you’d like to try a vacation at any of these, let me know…..they are lovely, well-located, have lots of amenities, are great for families, friends, groups, or solo trips. If I don’t use them I either trade them in for travel points or can rent them out at good rates.

I love ’em because I can still work (yep, I really do – got two properties into escrow while I was away, (but we canceled one because inspections got overwhelming), countered offers on some listings, did one blog post, and lots of work email). Where else can I work, have such a wonderful change of scenery, change of pace, few distractions, and walk over to the beach and snorkel most any time? YAY!)

Mystery List! Does it remind you of the phrase ‘mystery meat’ we used in school, referring to cafeteria lunches?

I’m referring to FHA loans. You know the ones where buyers can come in highly leveraged. These offer terrific opportunities for buyers who either want to hold on to their cash in order to do upgrades to a property or for those who don’t have loads of cash to put down.

FHA is a government insurance program for lenders who make these loans. What’s kind of funny right now it that it’s these types of highly leveraged loans that got us into the mess the credit community faces now!

Get this…. a lender told me today, they’ll loan on condo complexes (if the unit meets criteria, and after Nov 2nd if the whole complex meets their criteria), with only a 51% owner occupancy ratio. That’s kind of insane and a bit risky…..but I guess it would get owners into a complex that needs to have more owners living there (does that even make sense – it’s late).

Yet just a few short weeks ago, a condo listing I had received an FHA offer on it and it was rejected by FHA for unfunded liabilities, based on legally required reserve studies. That should be a wake up call for all owners who are part of homeowner associations. If they aren’t getting their cash reserves in order they are possibly losing a good portion of the buyer pool who otherwise could qualify for FHA financing.

There is a price to be paid for these loans….MIP (mortgage insurance premiums) is 1.75% of the loan amount, which is a big chunk of money OR it can be financed with the loan. FHA will allow recurring and non-recurring closing costs to be paid by the Seller, on behalf of the buyer. I think the limit is up to 6% of the sale price (haven’t gone there yet in the offers I’ve been working with).

When I got back from Hawaii, I put a call out to the agents in my office asking who had the mystery list for ‘lender required repairs” noted in the FHA clause on the first page of the contract. FHA says the seller must pay for “all lender required repairs.” Well, if you are a buyer, that’s swell! But gosh-golly, if you are a seller it’s a blank check. And now that we are seeing this type of financing being used to purchase some of our older housing stock in Alameda it is hard to know what that means to a seller.

Within 48 hours of putting the call out, I had talked with one appraiser who does lots of these loans out of the area and he sent me a guide that he had generated and then incorporates into his reports. The mortgage broker at Sterling Mortgage shared a list that his funding company uses and that was helpful. But leave it to my diligent client who after a couple of extensive google searches found today the 21 page guideline for determining the condition of a property. It’s actually interesting reading if you are so inclined or an insomniac.

Additionally, Peter Holmes at Sterling told our staff that a number of lenders will add their own conditions, a “lender overlay”, on top of the FHA list so borrowers and owners may want to explore just what kind of repairs are being required. Most called repairs are focused on health and safety issues: no peeling paint (fear of lead-based paint), water heater venting, roof leaks, pressure relief valves on water heaters, operating furnaces and appliances, no obvious leaks, broken windows, obvious rot, and so on.

Along with these loans come some interesting, and often unknown and/or unexpected conditions. The parties have to sign an FHA addendum that states if the property doesn’t appraise along the way (one or more appraisals and who knows what triggers more than one), even if the contingencies for financing and appraisal are removed, the deposit for the borrowers cannot be claimed.

Sellers are put into a position of not knowing if they are really moving or even closing! If the loan is delayed or funding commitments are just not being made, just how do they know they should be packing if they can’t count on contract timelines? That happened to some other sellers I worked for in May. It’s not comfortable.

Some FHA lenders are having a hard time meeting contract deadlines. An agent I spoke with tonight said that his listing should have closed a month ago but that the lender continued to pile on more conditions. Most recently the buyer is being required to have impound accounts for the taxes and insurance. What’s with that?

Another agent I spoke with on Wed said the first appraisal for her listing, originally list being 512K, contract with multiple offers took it up to 540K, came in at 540K. The next appraisal came in at 500K! That’s a little scary! The buyers decided they could add 12K to the 500K to bring it up to the list price and the parties settled on that price. Not many FHA buyers could do that!

So find out what items the appraiser is looking for when it comes to FHA “lender required repairs” hopefully before you are too far into the contract. I’d suggest putting a cap on the amount a seller would be willing to pay for those unknown items OR a clause that says the seller is to approve the work and dollar amount of the required repairs and if they are not approved, the transaction is dead but the surprises haven’t caused anybody to keel over.

As I’ve said before, the rules are changing daily. Buyers are super frustrated with the financing hassles which are way out of whack due to over-reactions by lenders to the credit mess. Sellers need to be forewarned about the issues, as best possible! Not easy…but the strong survive.

New subjects….I liked these articles.

Credit scores and short sales, loan modifications, foreclosures. Super interesting.

Credit line been cancelled? It’s been happening to lots of folks….watch out.

Alameda real estate this week….This report covers the past 2 weeks. My listings on Clinton and Regent have multiple offers at this moment. My listing on Otis at the St. Francis Condos is now 239K, down from 269K and the owner paid 359K not even two years ago. It’s not a short sale….just a sale. Cypress, the co-op unit, is pending. I’ve shown property 3 days this week. It was great to get on the bike and tour on Tues.

Active listings 149, 138 last report
Pending listings 109, 117 last report

Highest priced new listing

Lowest priced new listing

Tuesday tour
15 with 2 repeats

New
13

Price changes 5

BOM (back on market) 4

Pending 21

Sold 19

Expired 4

Withdrawn/cancelled 4

Alameda real estate awards this week….remember this is only my perspective!

Winner, Cute/charming
(I listed this 7 years ago and it was sold then)

Get me to Rehab already pending and just went on the market. I’ve seen worse!

Get me a (super) facelift

Bang for the buck a rather nice classic home with deep water dock….

That’s it! Good to be back…rarin’ to go!

best, marilyn

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Marilyn

I arrived in Alameda in 1973, as a new bride...with husband Carl Schumacher, both of us from Newport Beach. He was embarking on his career as a Naval Architect (i.e. yacht designer) under Gary Mull. Please see the 'ABOUT ME' page in this website! www.MarilynSchumacher.com to see how it has all turned out! I'm so blessed!