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6 Big Real Estate Changes For Benicia-Vallejo Home Buyers & Sellers This Month

April 5th, 2010 categories: Buying, Foreclosures / Short Sales, Loans / Financing, Selling, The Economy

Big ChangesIf you’re planning to buy or sell a home in Benicia, Vallejo or even anywhere else in Solano County, you may need a scorecard to keep track of all the changes that either already have occurred or will take place by the end of April.

I’ve been a real estate agent since 1995. And before that I worked in the title and new homes sectors of our business — dating all the way back to 1978. And in all the years I’ve been in the real estate business, I can’t remember another time when this many changes occurred in one single month.

So if you’ve got your scorecard ready, here’s a quick overview of some of the changes that are taking place in April:

1. Government’s MBS Buy-Back Program Ends

April 1 was the first day in over 14 months that the government wasn’t buying mortgage-backed securities, which it had been doing since Jan. ‘09 to keep mortgage money flowing and interest rates affordable.

Without Uncle Sam there to prop up the mortgage market, it’s now up to the free market to to decide just how high mortgage rates should really be.

Some experts have said that rates would skyrocket without the government’s help, while others expect the change to be very subtle.

For more details, see the post I wrote on the final day of the U.S. government’s MBS Buy-Back program.

2. Faster Short Sales Starting Today?

Today is the day the federal government’s Housing Affordable Foreclosure Alternatives (HAFA) program goes into effect.

The Obama administration announced the program last fall but wanted to allow plenty of time for mortgage lenders to prepare for participation in the program.

Among other things, the HAFA program enacts strict deadlines, requires banks to determine the minimum net proceeds they’ll accept up front and provides cash incentives for banks, sellers and even 2nd mortgage holders who participate in a short sale.

Sellers must meet eligibility requirements for the Home Affordable Modification Program (HAMP) in order to participate in HAFA. Lenders who are already participating in HAMP must agree to also participate in HAFA.

On paper, the program looks like it will expedite the process and take away much of the frustration and uncertainty that buyers, sellers and real estate professionals have endured over the past few years.

However, from what I’ve heard, many of the people working in the loss mitigation departments for many of the banks who are supposed to participate claim they’re not yet familiar with HAFA.

So implementation and compliance by the banks may not necessarily be an immediate thing.

3. Higher FHA Mortgage Insurance Costs As Of Today

Borrowers who are using an FHA loan to finance their purchase (which probably includes at least 90% of the first-time buyers in Solano County) will be subject to a costlier up-front mortgage insurance premium (up from 1.75% of the cost of the home to 2.25%). On a $200,000 home that works out to about a $1,000 increase.

However, since most buyers finance the up-front MIP, on a $200,000 home, increasing the loan amount by $1,000 really only adds about $6/mo. to the payment.

So in the big scheme of things, it’s not a big enough change to severely impact most FHA buyers.

4. Smaller FHA Seller’s Credits Starting Today, Too

This change could have a significant impact on many FHA borrowers. For starting today, the most a seller can credit the buyer in an FHA transaction is 3% of the purchase price, which is half of what it was yesterday.

Here in Benicia, Vallejo and vicinity, where so many homes continue to get multiple offers, those FHA buyers who were asking for large closing cost credits haven’t had a lot of success getting their offers accepted in recent times. So from a practical standpoint, the change may not be felt too much for right now.

But if the inventory continues to climb and gets to a point where multiple offers are no longer the order of the day, we could find some otherwise qualified FHA buyers exiting the market due to limited funds beyond their down payment.

5. Federal Tax Credit Going Bye-Bye

Barring a sudden change of heart by Congress, the federal home buyer tax credit will expire at the end of this month. The credit provides up to $8,000 for first-time buyers and $6,500 for move-up buyers.

In order to qualify, you must have entered into a purchase agreement by Apr. 30. You’re allowed an additional 60 days to close escrow. So the clock is definitely ticking.

If you’re not able to get into contract in time to get the federal credit, all may not be lost. For the day after the federal credit expires, California’s recently announced first-time buyer and tax credit goes into effect.

6. New Purchase Contract Coming

And finally, a new standard purchase contract is slated to come out at the end of April, which will change the way some parts of a real estate transaction are conducted.

The form is produced by our California Assn. of Realtors (CAR) and is used for most local real estate sales here in Solano County. It’s the first major change for this form in about 8 years.

One of the changes is that buyers will no longer have to write a deposit check up front. They’ll be able to wait to do so until after the seller has accepted the offer.

Another change: sellers will no longer be automatically on the hook to cover the cost of any lender-required repairs on FHA loans.

The new contract also does a good job of specifying what happens if a closing date or other contractual event falls on a weekend or a holiday.  Up until now, that’s always been subject to interpretation.

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This entry was posted on Monday, April 5th, 2010 at 6:31 pm and is filed under Buying, Foreclosures / Short Sales, Loans / Financing, Selling, The Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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