The Most HILARIOUS real estate advice from a San Mateo broker
I caught this little gem called How to Buy the Home You Want Without Insulting the Seller from Trulia. This was written by a Burlingame based mortgage broker about five months ago. Here are some highlights of this article.
“Let’s face it – most of us would like to buy more home than we can afford.”
This is how the article opens up. Really? Is that really true for most of us? Or is it just true for those who can’t really do math?
Next it goes on:
Suppose you see a house that you really like that is listed for sale for $800,000. You are going to make a 20% down payment. You want to offer $775,000.
….
You are worried that the seller is not going to accept this reduced price offer, and you certainly don’t want to insult them, because you truly want the house. So you decide to use the seller paid buydown strategy.
Lets do the math here. 775k on a 800k home is 96.9% of the listing price. In San Mateo/Burlingame/Belmont the average sale to list ratio is about 96% to 98% so I would say that 775k is a VERY reasonable offer, and I highly doubt that it would insult a seller. Seriously, some of the troubled sellers would be ecstatic to get such an offer.
Next this broker reveals the strategy he is proposing.
Instead of offering $775,000, you make a full price offer of $800,000, and you ask the seller to credit $25,000 toward your closing costs.
What do you do with this $25,000 credit? You buy the interest rate down to 4.25% by paying almost 4 points, for example.
By buying the rate down to 4.25%, your monthly payment has been reduced to $3149 per month. The property taxes are slightly higher, $733 per month. The down payment is $5000 more. But look at the impact this strategy has – a monthly savings of $397 per month!
Now, here is the icing on the cake – although the seller made a contribution to buy your rate down, you get the tax deduction for the $25,000 in points paid all in the year that you purchase (check with your tax preparer to verify)!
Wow! A savings of $397 per month!!! Guess how much money you just let the bank earn here. $25,000 on the 4 points upfront, and 30 years of interest on an extra $20000 of principal. Of course, a bigger loan is better for the mortgage broker if they are taking a fee from this. So this is very good for the broker, but not necessary great for the consumer. Seriously, who in their right mind does a 4 point buy down? It is much cheaper to offer the lower price, and then pay 1 point or less to do a refinance later if interest rates come down.
The bottom line is that I don’t think buyers should be worried that they will be insulting a seller with an offer lower than the listing price. I think everyone should always offer what you are comfortable with and what you can afford. If your offer isn’t accepted then just move on. In the example given by this broker, if an offer of $678,500 were accepted then that would also lower monthly mortgage by more than $400, and the buyer would save around 25k in downpayment. It is not like we haven’t seen homes drop more than $120k from their original listing prices here.
It’s not easy landlording in San Mateo
It seems that commercial properties are not doing well in the current climate because many commercial loans are quite short term and developers and property owners often have to refinance their loans to pay off older loans. One large property owner in East Palo Alto is Page Mill Properties, and they own around 1700 units in the city. The latest news is that they have not paid Wells Fargo a $50 million balloon payment. Additionally, the city of East Palo Alto has been suing the company for raising rents and evicting tenants.
Could this mean that many more apartments will come up for sale soon?
900 SOUTH Rd Belmont, CA 94002 – Realtor was foreclosed on
About half a year ago I wrote this post: 900 SOUTH Rd Belmont, CA 94002 – Realtor in Trouble?
It was the listing for a wooden shell for 1.3 million dollars owned and listed by a realtor based in Redwood City. It seems that the home actually got foreclosed on in June by JP Morgan Chase for the amount of $1,168,813 and went back on the market in late July for only $693,000. It is an REO and now it is pending without release so if it actually sold for asking the bank is taking a hit of almost $500k. I guess the lot is quite large, but the new pictures look like some people have been stealing wood from the place:
I hope the new owner finishes the home and enjoys it.
Real estate listings with main pictures of anything but the house
This is a funny thing I have been seeing here and there. Some real estate agents are listing pretty pictures of things other than the house as the main picture of the property. Here is a prime example at 212 Shoreview Ave, Pacifica where the first picture you see is:
This is definitely a nice picture of someone having fun, but does it really pump up the price of the small beach home to nearly a million dollars? Am I buying the ocean with that person in it? Granted, there are photos of the actual home on the listing, but it’s pretty confusing to put that picture up as the first thing.
512 Stanford Avenue – Up for grabs at auction
A bit over a year ago I posted about a triple homicide at the property at 512 Stanford Avenue in Redwood City. At that time the home was listing for $337k and the last sale price was 587k in January 2007. Now you have 8 days left to grab this property at auction.
According to the Hudson and Marshall website, the last highbid is only $167,500, and this is the description:
512 Stanford Avenue
Redwood City, CA 94063
Bed: 3 Only 8 Days Left
to Bid NowBath: 1 Bid Now! Sq. Ft.: 820 Comments:
Last High Bid $167,500
Agent disclosure requiring buyer signature regarding homicides at property
Buyers who are interested in purchasing this property prior to the auction must be pre-qualified for financing through Wells Fargo or Wachovia. (This is only a requirement to be pre-qualified; the final loan may be obtained through any financial institution)
Please call 1-877-937-9357 during the following times:
Monday – Friday, 7:00 am – 11:00 pm Central Time
Saturday, 8:00 am – 4:30 pm Central Time
Or online at: Wells Fargo Pre-Qualification Form
Would you buy this for $168k?
411 MIDWAY Ave San Mateo, CA 94402
411 MIDWAY Ave San Mateo, CA 94402
Price: $1,099,000
| Beds: | 2 |
| Baths: | 1 |
| Sq. Ft.: | 980 |
| $/Sq. Ft.: | $1,121 |
| Lot Size: | 10,004 Sq. Ft. |
| Property Type: | Detached Single Family |
| Style: | Cottage/ |
| Stories: | 1 |
| View: | Neighborhood |
| Year Built: | 1920 |
I have started a new category called “delusional sellers”. This tiny little house close to Hillsborough is listed at $1121 per square foot. What I love about the listing is that the real estate agent doesn’t seem too enthusiastic about it, either. Here is what he/she wrote:
A beautiful 10,000 square foot lot in much sought after San Mateo Park. The home is small with very little updating, but seems sound. There is a pool in back that doesn’t look too bad, but needs some repairs. It’s probably a tear down, but you be the judge. Marvelous opportunity.
So basically the realtor is saying that it is a good lot, and a crappy house. I’m glad this agent isn’t using words like “cozy” and “cute”. At this price chances are this will linger on the market for quite a while. Most of the homes in that neighborhood have very big lots, and 10000 square foot isn’t really that spectacular.
Offers
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