Dan Melson: January 2007 Archives

The Best Loan Right NOW



5.875% 30 Year fixed rate loan, 0.6 total points, and NO PREPAYMENT PENALTIES!. Assuming a $400,000 loan, Payment $2366, APR 5.973! This is not an Option ARM! This is a thirty year fixed rate loan. The payment and interest rate will stay the same on this loan until it is paid off! 30 year fixed rate loans as low as 5.375%! Zero points and zero closing costs loans also available!



Best 5/1 Loan tradeoff: 5.375% 1.625 total points. Assuming $400,000 loan, payment of $2240, APR 5.564. 5/1 ARM loans available as low as 5.00%! This is not an Option ARM! This is a real loan with a real payment that actually pays your loan down, and the rate is fixed for five years!



These are actual retail rates at actual costs available to real people!



No points and zero cost loans also available!



If you compare to last week's rates, these rates are definitely higher for 30 year fixed rate loans, but lower for 5/1 loans. We may be seeing the start of a return to a more normal yield curve.



All of the above loans are on approved credit, not all borrowers will qualify, based upon an 80% loan to value and a median credit score on a full documentation loan. Rates subject to change until rate lock.



I always guarantee the loan type, rate, and total cost as soon as I have enough information from you to lock the loan (subject to underwriting approval of the loan). I pay any difference, not you. If your loan provider doesn't do this, you need a new loan provider!



Interest only, stated income, bad credit and other options also available. If you need a mortgage, chances are I can do it faster and on better terms than you'll actually get from anyone else in the business.



100% financing a specialty.



Please ask me about first time buyer programs, including the Mortgage Credit Certificate, which gives you a tax credit for mortgage interest, and can be combined with either of the above loans!



Call me. EZ Home Loans at 619-449-0070, ask for Dan. Or email me: danmelson (at) danmelson (dot) com

Nice Lender Owned 3 Bedroom Condo



General: Urban East County, 3 bedroom 2.75 bath. Asking price between $325,000 and $350,000. I don't think they're going below $320k.



Why you should be interested: Attractive 3 bedroom condo in great location for the price of a two bedroom.



Selling Points: Mostly on one level (although it is up half a flight of stairs), each bedroom is good sized, and has at least 3/4 of a bath. Very close to freeway, very close to major park. This would be a great rental unit, or a way for someone just starting out to get their foot on the property ladder by renting out the spare rooms. Nice high cielings, and third bedroom would also be a great private office with its own bathroom!



Why I think it's a potential bargain: Others like it are going for $400k in the same complex. Plus, it's a nice place to live!



Obvious caveats: Kitchen could use an update, second bedroom is painted a funky color.



Why it hasn't sold already: Nobody else has found it?



If you keep it ten years and it averages only 5% annual average appreciation per year: Based upon a purchase price of $320,000, the property would be worth approximately $520,000. If you held it those ten years before selling, you would net about $250,000 in your pocket (not including increased value from updates!), assuming zero down payment. As opposed to renting the $1600 per month most comparable currently available rental and investing the difference at 10% per year tax free, you would be approximately $120,000 ahead of the renter, after the expenses of selling.



Fact you should be aware of: Laundry in the garage, under the third bedroom.



Obvious way to enhance value or appeal of property: Update the kitchen.



This property does appear to be eligible for a first time buyer Mortgage Credit Certificate provided your family income is not more than $82,800 or $96,600. Ask me for more details, on this or any other property.



I'm a buyer's Realtor®. I find places like this that can be gotten at bargain prices. I save you money while getting paid out of the listing agent's commission, not costing you a penny. Nor are these the only ones I find. In order to protect everyone's best interests, I require a Non-Exclusive Buyer's Agent Agreement. This is a standard California Association of Realtors form that leaves you are free to work with other agents, but if I find the property you want, I'm the agent you'll use. That's fair.



Contact me: Action Realty 619-449-0723, ask for Dan or email danmelson (at) danmelson (dot) com. Ask me to find a bargain that fits you!

The Best Loan Right NOW



5.875% 30 Year fixed rate loan, 0.5 total points, and NO PREPAYMENT PENALTIES!. Assuming a $400,000 loan, Payment $2366, APR 5.964! This is not an Option ARM! This is a thirty year fixed rate loan. The payment and interest rate will stay the same on this loan until it is paid off! 30 year fixed rate loans as low as 5.375%! Zero points and zero closing costs loans also available!



Best 5/1 Loan tradeoff: 5.625% 1.625 total points. Assuming $400,000 loan, payment of $2303, APR 5.817. 5/1 ARM loans available as low as 5.25%! This is not an Option ARM! This is a real loan with a real payment that actually pays your loan down, and the rate is fixed for five years!



These are actual retail rates at actual costs available to real people!



No points and zero cost loans also available!



If you compare to last week's rates, these rates are about the same, or ever so slightly better.



All of the above loans are on approved credit, not all borrowers will qualify, based upon an 80% loan to value and a median credit score on a full documentation loan. Rates subject to change until rate lock.



I always guarantee the loan type, rate, and total cost as soon as I have enough information from you to lock the loan (subject to underwriting approval of the loan). I pay any difference, not you. If your loan provider doesn't do this, you need a new loan provider!



Interest only, stated income, bad credit and other options also available. If you need a mortgage, chances are I can do it faster and on better terms than you'll actually get from anyone else in the business.



100% financing a specialty.



Please ask me about first time buyer programs, including the Mortgage Credit Certificate, which gives you a tax credit for mortgage interest, and can be combined with either of the above loans!



Call me. EZ Home Loans at 619-449-0070, ask for Dan. Or email me: danmelson (at) danmelson (dot) com

One of the consumer attitudes I encounter constantly is the feeling that if you cannot afford the loan, the lender will not loan you the money. This safety zone common sense sort of reliance upon lender policy as a backstop is not only false, but one of the best ways to get in trouble with real estate there is.



Once upon a time it may have been true. Back in the dim times fifty years ago, lenders required down payments, and retained their loans for the full duration. This provided at least two levels of protection for the lender. First, if people did default upon their loan, that down payment was a cushion for the lender in that the property was genuinely worth more than the lender had at risk. All real estate loans were done "full documentation", where the borrower proved they made enough money to make the payments and repay the loan. Underwriting rules were designed to filter out those whose employment was not stable enough, those who couldn't afford the loans, and those whose creditworthiness was marginal.



At the same time, however, real estate was far more affordable. The inability to get a loan on good terms meant that you were a little further away from the middle class house of your dreams, that you were going to have to save a little more, work a little harder, and perhaps settle for something less than you really wanted, but you could still have a good property. 800 square feet on a fifth of an acre, instead of 1200 square feet on half an acre. These really were typical property choices available then. You saved until you had forty or fifty percent down, instead of twenty, and then you maybe had to look a little bit harder, but it could be done, and people paid cash for their properties all the time. A three or five thousand dollar property was something that people could save the money to pay cash for, even at seventy five cents per hour.



That's not the case now. Even though people may make $40,000 per year, and the family has two incomes, they are not content with the lifestyle of fifty years ago that enabled people to save a down payment within a couple of years. Nor is employment as stable. People don't work forty years for The Company any longer.



The changes on the lender end have been even more profound. Lenders discovered making stock valuations rise as a primary method of becoming wealthy. Where once the most important thing to the stockholders was to have every single loan repaid in full, now it becomes more important to have portfolio growth, which makes potential investors willing to pay more for existing stock. Then it became unnecessary to actually hold loans until they ran their course, as investors were willing to pay more than the face value of the loan for the rights to receive payment! This nice dependable mortgage bonds were good as gold! Matter of fact, the money the lenders received by selling the loans was higher than they made by selling the loans. True, they might only make three to four percent from selling the obligation, as opposed to seven percent for the obligation itself, but they could do it in two to three months, as opposed to the entire year. In fact, they could go through the process four, five, or even six times per year: Receive a loan application, provide the funds on a short term basis, and then sell to investors for a three to four percent markup. Instead of earning seven to eight percent on their money per year, they were now earning twenty or twenty five. They could even retain servicing rights, as the investors had no idea how to run the loans, and make even more money. Stock prices would show the effects of growth, as investors expected them to be able to keep in up, and current stockholders could cash out for huge gains by selling part or all of their holdings.



However, you now have a new group of stockholders, who bought - or held existing investments - in the belief that this growth curve could be maintained. They want that growth to keep going - however are they going to sell for a big profit if it doesn't? If the growth doesn't continue, how are performance awards to management going to be paid?



And so it goes. Growth begets a need for more growth. Now there's nothing wrong with growth - quite the contrary - but when the expectations shift over time from a two or three percent annualized growth curve, to eight or ten or even thirteen percent, it creates an expectation that no one wants to fall short on. Furthermore, other people with money, seeing the rewards, join in the lending business. Joe made fifty percent in two years with Bank of Nowhere in Particular! Let's all invest in that bank! They'll double our money in three years!



The fact of the matter is that there is only so much revenue growth that can be had in any given set of economic conditions. When you try to overshoot that amount, it can come from very few places. First, it can come at the expense of the competition. Unfortunately for that hope, the lending market grows more competitive, not less. Second, it can come from places that weren't a part of the market previously - in other words, people who were not good credit risks or who would not have applied in previous markets. The reason most of those would not have applied is that they are less credit worthy, and they know it as well as the lenders do. Third, growth can come through individual loans being larger, being willing to loan more money per property. This has also happened, but you cannot loan more per property without subsequently having more at risk, although the lenders have learned how to solve this. Remember that we discussed them selling the loans? Well, that's how the lenders limit their risks - by selling to someone else for cash. Let them assume the risks!



So we have increased competition for borrowers, including those who may not have been as solidly credit worthy as a previous day's client. There are more lenders competing for limited pools of borrowers, and pressure to qualify the borrowers for increased loan amounts, because, after all, that's how the bank makes money.



Furthermore, shifts in consumer habits played into this. People don't live in the same house for as long, and they don't keep loans nearly so long as they once did. Where they once lived in the same house from the time they bought it until they died, now the first house they buy in their twenties is a "starter," and then they sell that and buy a trade-up when the family expands a little, then another when they move up the corporate ladder, and this leaves out the effects of transfers and changing employers. Furthermore, they refinance and take cash out when they want a bigger SUV or a European vacation, and then they take more money out when the rates go down because they can afford a larger loan on the same payments.



The increased prevalence and availability of the stated income loan has played right into this. Certainly, some people in your profession make that much, but what if you're not one of them? Simply say that you are! After all, you're in that profession, right? Furthermore, there is no payoff for telling people that they don't qualify. They've made up their mind that they want that three thousand square foot six bedroom house, and if you tell them they don't make enough, they're not going to give up their dream house! They'll just find another way to do it, so someone else will get that loan! That nice, wonderfully wonderfully large loan that means a huge commission check to the loan officer and a forty thousand dollar premium on the secondary market for the lender!



Traditionally, the check upon this was the fact that the borrower had to actually make the payments on the loan once they had it, which limits their ability and willingness to sign for more loan than they can handle. However, competition between lenders once again found a way: First, the interest only loan, and then the negative amortization loan solved that problem, particularly as sub-prime lenders make their qualification for the loan based solely upon the initial minimum payment. Whereas when A paper lenders underwrite a hybrid ARM that's interest only for a given amount of time, they will base their computations upon a fully amortized loan payment, and even assume the rate will rise slightly, that is not the case in the sub-prime world. Sure they've bought the property on a 2/28 interest only loan with a three year prepayment penalty, and they bought in a flat or declining market, and they are not going to pay the principal down any in two years, and the property isn't going to be worth any more, so it's unlikely they will be able to refinance, and they certainly won't be able to afford the payments when they adjust, so they're going to lose the house, but hey! You got a commission check and your lender sold the loan (at a fat markup due to the prepayment penalty), and your employer won't have any money at risk when they do default! What's not to like?



So how is a consumer going to protect themselves in this sort of environment? Obviously, you've got to start by figuring out a budget and sticking to it. This is hard. This is very unpopular, as far as real estate professionals go. When I sit down with people's finances and tell them what they can afford with a sustainable loan, the first words out of their mouths are usually, "I can't afford anything I want with that!" A certain percentage of them just walk out right there, sure that they can find someone else who will tell them they can afford more.



As I've just covered, they certainly can find someone who will tell them that they can afford more. However, the reason I sit down and go through the numbers, including today's rates, what they make, how much they spend, is to show them precisely what they can afford. When somebody shows you real numbers and you deny those numbers, and are certain you can afford more, you are essentially performing magical thinking. "I want it and I deserve it, and this other guy tells me I can just pull myself up by my bootstraps and fly!"



However, loans aren't magical. In fact, there is nothing magical about loans. You may get a negative amortization payment that you can afford for a while, but the money that you are not paying does not just vanish into thin air. It may be held in abeyance for a while, but it is there, and it will turn around and bite you. You wanted a $600,000 home for a $2000 monthly payment, and you got it for a little while. However, you now owe $680,000 and the property (which you put $50,000 down on) is now only worth $540,000. It doesn't take a genius to see what happens next. Even if the property increased in value by $100,000, it costs you $55,000 to sell the property and you have to pay $15,000 of their closing costs so that they can qualify for the loan, and that fifty thousand dollars you put down has turned into nothing.



A rapidly increasing market, such as we had for several years ending about the end of 2004, covers a multitude of sins and mistakes. If the property doubled in price over three years, you came away with $400,000 and you were very happy! Unfortunately, this is not the type of market we are in now, nor are we likely to have that sort of market any time again in the forseeable future. It's always a bad idea to bet on it, because you never know it's going to happen ahead of time.



So what are you going to have to do? As I said earlier, figure out what your real budget is and stick to it. If you can't afford anything you want, then want less. Insist upon sustainable loans, and qualifying for them full documentation. Full documentation loans have better interest rates anyway. Fully amortized loans, where you are paying principal and interest, have lower interest rates, as well, and if you stick with A paper guidelines (and 100 percent loans on A paper are possible for people with decent - not spectacular - credit), you get better interest rates and can usually avoid pre-payment penalties.



"I just won't buy anything if I can't afford what I want!" some of you are saying. Right now, with prices retreating somewhat, it may even make a limited kind of sense for those with strong credit and stable prospects. However, the market here locally is not going to retreat that much more. Indeed, where prices are is currently being masked by a stubborn type of seller and a not very competent stripe of real estate agent. It doesn't matter that three fourths of the sellers want $X for property of given characteristics, if the sales that are taking place are $100,000 lower. If this seller won't sell, someone else will, and it is the sale that actually happens that tells where the market is, not the hundred comparable properties where the asking price is $100,000 higher.



However, real estate, even in markets that are rising just slightly, is such a fantastic investment due the the effects of leverage, that I do not anticipate the local market going much lower. Indeed, very smart investors are swarming, intending to hold the property five years or so instead of flipping it. Yes, we've lost between twenty and thirty percent the last two years, but the statistics have been manipulated to make the decline seem much shallower. I'm starting to see evidence of a reversal in the not too distant future, and people who decide to sit on the sidelines because they can't afford anything that they want are likely to discover themselves being able to afford still less when they do decide to jump into the market - or nothing at all. If you've got a family of three and don't want a two bedroom condo, what are you going to do when you can't afford that?



Caveat Emptor

Lender Owned Fell Out of Escrow!



General: Urban East County, 3 bedroom 1 bath. Asking price between $350,000 and $375,000. A little bird told me it was in escrow for $345,000 net!



Why you should be interested: Detached 3 bedroom Single Family Home for the price of many condos!



Selling Points: Solid neighborhood!



Why I think it's a potential bargain: Other than the fact that a little bird told me what it was in escrow for?



Obvious caveats: Only one bathroom, and this property is a largely original 1950s vintage structure. The little bird also told me there are some noteworthy maintenance issues.



Why it hasn't sold already: It's not too far from an airport is the only thing I can think of.



If you keep it ten years and it averages only 5% annual average appreciation per year: Based upon a purchase price of $345,000, the property would be worth approximately $560,000. If you held it those ten years before selling, you would net about $270,000 in your pocket (not including increased value from updates!), assuming zero down payment. As opposed to renting the $1600 per month most comparable currently available rental and investing the difference at 10% per year tax free, you would be approximately $130,000 ahead of the renter, after the expenses of selling.



Fact you should be aware of: The little bird only told me that the inspector found some issues, but I would bet the roof and the wiring are among them.



Obvious way to enhance value or appeal of property: Update the wiring. Redo the roof. Add another bathroom. Spend a little money or a couple weekends landscaping the front yard. Update the existing kitchen and bathroom.



This property does appear to be eligible for a first time buyer Mortgage Credit Certificate provided your family income is not more than $82,800 or $96,600. Ask me for more details, on this or any other property.



I'm a buyer's Realtor®. I find places like this that can be gotten at bargain prices. I save you money while getting paid out of the listing agent's commission, not costing you a penny. Nor are these the only ones I find. In order to protect everyone's best interests, I require a Non-Exclusive Buyer's Agent Agreement. This is a standard California Association of Realtors form that leaves you are free to work with other agents, but if I find the property you want, I'm the agent you'll use. That's fair.



Contact me: Action Realty 619-449-0723, ask for Dan or email danmelson (at) danmelson (dot) com. Ask me to find a bargain that fits you!

The Best Loan Right NOW



5.875% 30 Year fixed rate loan, 0.6 total points, and NO PREPAYMENT PENALTIES!. Assuming a $400,000 loan, Payment $2366, APR 5.973! This is not an Option ARM! This is a thirty year fixed rate loan. The payment and interest rate will stay the same on this loan until it is paid off! 30 year fixed rate loans as low as 5.375%! Zero points and zero closing costs loans also available!



Best 5/1 Loan tradeoff: 5.375% 1.625 total points. Assuming $400,000 loan, payment of $2240, APR 5.564. 5/1 ARM loans available as low as 5.00%! This is not an Option ARM! This is a real loan with a real payment that actually pays your loan down, and the rate is fixed for five years!



These are actual retail rates at actual costs available to real people!



No points and zero cost loans also available!



If you compare to last week's rates, these rates are slightly higher. I think the upward trend will continue. Lock in a fixed rate loan before rates go up even more!



All of the above loans are on approved credit, not all borrowers will qualify, based upon an 80% loan to value and a median credit score on a full documentation loan. Rates subject to change until rate lock.



I always guarantee the loan type, rate, and total cost as soon as I have enough information from you to lock the loan (subject to underwriting approval of the loan). I pay any difference, not you. If your loan provider doesn't do this, you need a new loan provider!



Interest only, stated income, bad credit and other options also available. If you need a mortgage, chances are I can do it faster and on better terms than you'll actually get from anyone else in the business.



100% financing a specialty.



Please ask me about first time buyer programs, including the Mortgage Credit Certificate, which gives you a tax credit for mortgage interest, and can be combined with either of the above loans!



Call me. EZ Home Loans at 619-449-0070, ask for Dan. Or email me: danmelson (at) danmelson (dot) com

Just as a reminder, the First Time Buyer Seminar is tomorrow night, January 11 at 7 pm.



Judging from the level of reservations, (less than 1/4 of the small space) almost everybody knows everything they need to know about the first time buyer's programs that are out there.

The Best Loan Right NOW



5.75% 30 Year fixed rate loan, 1 point total, and NO PREPAYMENT PENALTIES!. Assuming a $400,000 loan, Payment $2334, APR 5.885! This is not an Option ARM! This is a thirty year fixed rate loan. The payment and interest rate will stay the same on this loan until it is paid off! 30 year fixed rate loans as low as 5.25%! Zero points and zero closing costs loans also available!



Best 5/1 Loan tradeoff: 5.375% 1.625 total points. Assuming $400,000 loan, payment of $2240, APR 5.564. 5/1 ARM loans available as low as 5.00%! This is not an Option ARM! This is a real loan with a real payment that actually pays your loan down, and the rate is fixed for five years!



These are actual retail rates at actual costs available to real people!



No points and zero cost loans also available!



If you compare to last week's rates, these rates are about the same, so if you waited, you got lucky. The dollar's slide is starting to influence long term rates. Lock in a fixed rate loan before rates go up even more!



All of the above loans are on approved credit, not all borrowers will qualify, based upon an 80% loan to value and a median credit score on a full documentation loan. Rates subject to change until rate lock.



I always guarantee the loan type, rate, and total cost as soon as I have enough information from you to lock the loan (subject to underwriting approval of the loan). I pay any difference, not you. If your loan provider doesn't do this, you need a new loan provider!



Interest only, stated income, bad credit and other options also available. If you need a mortgage, chances are I can do it faster and on better terms than you'll actually get from anyone else in the business.



100% financing a specialty.



Please ask me about first time buyer programs, including the Mortgage Credit Certificate, which gives you a tax credit for mortgage interest, and can be combined with either of the above loans!



Call me. EZ Home Loans at 619-449-0070, ask for Dan. Or email me: danmelson (at) danmelson (dot) com

House Thing

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November 18, 1992 to January 6, 2007



Thing was a gift to me from my step-mother, but it would be more accurate to say that he gave himself freely. He spent fourteen years, fifty days in the little shell that is no longer part of our lives; of those, he devoted himself to me, and later, my wife and children as they joined us, for fourteen years and three days of that time.



His name was an English translation of Domovoi, the somewhat animistic slavic god of the house, and such was the place he occupied until my wife entered the picture. He accepted his demotion without noticing, except that there were now four hands to accomplish the rituals of worship, petting and filling the food bowl.



The thing that stands out in my memories of Thing was always his energy. Newton's laws were modified for him; A Thing at rest did not tend to remain at rest. That and his utter devotion to his human, and as that human developed other attachments, he added them without hesitation to his pack. I was single at the time, and going through a bad period. I was depressed. This little dog snapped me out of the depression, gave me things to look forward to every day, and got me believing, once again, that maybe I had something to offer those around me. Why else would this wonderful little creature worship the space I occupied?



I credit him with the fact of my marriage to the world's only perfect woman; had he not taught me again how wonderful the world is, I would not have been the person she married.



He always was my dog, almost exclusively. He'd cuddle up to my wife and ask her for attention if she was home alone, but as soon as I got there, he was Daddy's Dog. I called him my wizard's familiar, an appellation with more truth than even I foresaw. A wizard, legend had it, was vulnerable to damage done his familiar, and now that he's gone, there's a Thing shaped hole that I don't think will ever go away. It's not the first such hole, but it is the newest and rawest. I don't presume to tell the universe how it should be run, but if there's anything to this concept of the immortal soul, he will be among those waiting when it's my turn. Faith is that which you believe without any evidence, and I have faith that his is one of the souls mine shall meet again.



In his earlier years, he was a crazed ball-dog. He'd chase a ball as long as I'd throw it for him. When I stopped, he'd chew on it. Dachshunds have very strong jaws; indeed they are half the ancestry of Dobermans (along with Rottweilers). It took me years to find a ball he wouldn't destroy in zero seconds flat. In recent years, he slowed down to where he'd only go after it a few times before he'd hunker down and start with the gnawing. Squeek! Squeek! Squeek! Squeek! You always knew when Thing had his ball. He gave concerts that lasted for hours.



He was a gorgeous little dog, perfectly proportioned. I could always tell how much people knew about dogs from which of mine they noticed first. Mellon caught your eye because of her unusual coloration. Thing would have been a champion show dog if I'd had the time and inclination. He was very happy being just Daddy's Dog, and I enjoyed the time spent playing with him too much to want to waste any of it on unnecessary training. Go outside or on the paper, come when I call you, stop what you are doing when I give the command. That was about all the training I needed him to have. The rest of the time we had was too precious to spend teaching him stuff to impress other people I didn't know.



He was also bright. It took him about three seconds to figure out that if he climbed the stairs behind the couch, he could walk down onto it, and that was only one of his many exploits. He tied much bigger dogs up with their own leash twice that I saw.



The last couple of years, he had become much more sedentary. He lost a lot of his teeth despite my best efforts, and eventually, most of his appetite with them. He also developed a bad heart murmur, to the point where the vet was concerned about sedating him to clean his teeth.



He had always been something of a Tongue Monster, but when the heart murmur prevented him from chasing his ball for us as much as he wanted to, he got to the point where he'd lick as long as you allowed him to. I was concerned that it might be a mineral deficiency, but the vet said not to worry about it. On the other hand, he became, if anything, a more dedicated petting sponge, and he was always willing to chase the ball as much as he could. Little dog, big heart described him perfectly.



A few months ago, the vet saw indication of kidney failure in some blood tests. We put him on a high-protein, low bulk diet to see if we could turn it around or at least keep it at bay, and he perked up a little, but even so his appetite wasn't reliable and he kept losing more weight. A month ago I still had hope that we weren't just fighting a delaying action, but by Christmas I knew he wasn't going to be with us much longer. He wasn't in pain, but he wasn't the active joyful little dog he had always been. Just as devoted, just as appreciative of attention, but the special spark of joyful light in his eyes began to flicker. A few days later, his appetite decreased further and he started bringing his food back up. Yesterday, he brought up everything he tried to eat, and even had trouble keeping water down, and I knew it was time to perform the duty I had agreed to in my heart the day I brought him home. I couldn't make him better; I could only make his misery stop. I spent the night on the couch with him, perhaps selfishly absorbing the last time I could with him. He seemed to appreciate it, cuddling right in, and it seemed to help a little. This morning I called the vet. I held him and cuddled him and petted him and praised him while he left this world. Hopelessly inadequate, but all I could do.



Goodbye, little one. I can only hope that we shall meet again.

The Best Loan Right NOW



5.75% 30 Year fixed rate loan, 1 point total, and NO PREPAYMENT PENALTIES!. Assuming a $400,000 loan, Payment $2334, APR 5.885! This is not an Option ARM! This is a thirty year fixed rate loan. The payment and interest rate will stay the same on this loan until it is paid off! 30 year fixed rate loans as low as 5.25%! Zero points and zero closing costs loans also available!



Best 5/1 Loan tradeoff: 5.375% 1.625 total points. Assuming $400,000 loan, payment of $2240, APR 5.564. 5/1 ARM loans available as low as 5.25%! This is not an Option ARM! This is a real loan with a real payment that actually pays your loan down, and the rate is fixed for five years!



These are actual retail rates at actual costs available to real people!



No points and zero cost loans also available!



If you compare to last week's rates, these rates are higher. The dollar's slide is starting to influence long term rates. Lock in a fixed rate loan before rates go up even more!



All of the above loans are on approved credit, not all borrowers will qualify, based upon an 80% loan to value and a median credit score on a full documentation loan. Rates subject to change until rate lock.



I always guarantee the loan type, rate, and total cost as soon as I have enough information from you to lock the loan (subject to underwriting approval of the loan). I pay any difference, not you. If your loan provider doesn't do this, you need a new loan provider!



Interest only, stated income, bad credit and other options also available. If you need a mortgage, chances are I can do it faster and on better terms than you'll actually get from anyone else in the business.



100% financing a specialty.



Please ask me about first time buyer programs, including the Mortgage Credit Certificate, which gives you a tax credit for mortgage interest, and can be combined with either of the above loans!



Call me. EZ Home Loans at 619-449-0070, ask for Dan. Or email me: danmelson (at) danmelson (dot) com

Prices are down 20% locally to me. It is possible, even likely, that prices may come down further. But right now, buyers have more power to make the deal they want than they will again for the next ten years. Even the ugliest buyer is looking very attractive right now. When more people come off the sidelines and are willing to buy, buyers are going to have a lot less power.



For instance, right now seller carry-backs are practically routine. People with truly putrid credit are able to leverage this fact into 100 percent financing. Sellers don't want to do carry-backs, ever! They want their cash, not a continued interest in the property, and particularly not from someone with putrid credit who can't get banks to lend that much! But the facts of the market are giving buyers the leverage to get that. Later on, when more buyers come off the sidelines, sellers will tell such buyers to take a hike.



If it looks like I'm telling you that now is the time for buyers to get off the sidelines because nobody else is willing, you've got the first piece of the puzzle.



The second piece of the puzzle is that those sellers who don't have to sell are figuring out that now is a lousy time to sell. Total local market inventory is down by 2000 units since the beginning of December, and 8000 units since the end of summer. People rented them out and took them off the market. In my office, various agents have made at least a dozen offers where the sellers took them off the market and rented them out instead. It's great for those sellers who have that option, but what about those sellers who do not?



The answer is that those properties still on the market is the ones that have to sell. They can't rent it out for enough to cover the mortgage, even if they add hundreds of dollars cash to it every month, and how many people want to add hundreds of dollars cash every month to a mortgage that they couldn't afford in the first place? Many of them have negative amortization loans that they couldn't afford, while others have 2/28 Interest Only loans where they could barely afford the interest only short term payment, and now the interest only period is over, the rate adjusted upwards, and there's no way they can afford it, as most of those payments increase by forty percent or more. The end result of either is pretty much the same as when Wile E. Coyote looks down. Bye bye.



So what does this all mean? Let's leave aside the fact that the ratio of sellers to buyer spiked to 55:1, as this was Christmas week. But the week before, the ratio was 45:1, and I'm pretty sure that's where it's going to be back to in a couple of weeks. Since January 1st, 2006, 30,413 properties have sold while 46,274 have failed to sell and 17,026 are still on the market. This means that for all properties listed for sale on the local market, there is only about a forty percent chance that any given property sold at all (30413/30413+46274=0.3966).



Now obviously, it's not pure chance as to who sold and who didn't. Attractive properties correctly priced did fairly well, but even there, the point of having some nice feature like hardwood floors wasn't that you could therefore sell the property for $25,000 more than the one down the street with carpet over a slab - it was the fact that the property with hardwood floors sold, where the one with carpet over a concrete slab is still sitting on the market, if not expired.



Most important of all attributes in getting a property sold is the seller's attitude. In a market like this, the seller who has made up their mind that they are going to get every last penny out of the house is wasting their time. $25k for the hardwood floors, $15k for the marble in the bathroom, $15k for the whirlpool spa? Not going to happen. It's okay if they can last until the next seller's market, but we've already established that the ones on the market now can not. What's going to get that property sold is the seller who swallows their ego and realizes that the odds of a better offer are against them, and decides to accept the offer that's the same or even less than the last property that sold in the neighborhood, even if it wasn't quite so blinged out as theirs. They know that the buyers out there now are bottom feeders looking for the best possible bargain, and they can spend their own weekends putting in the hardwood floors, the marble in the bathroom, and save themselves a lot of money doing so. If your house has the whirlpool spa, that might draw the offer where the property without doesn't get one, but they're not going to offer $15,000 more for it. They're going to offer the same price, because they'd rather have the house with the bling than without, but they're not willing to pay significantly more for it. Gone is the market where even the most marginal improvements meant you could expect to get more for the property. It might come back again, but in the mean time, the home improvement companies pushing the consumer to improve their homes based upon investment return are referring to a market that no longer exists. Double paned windows? Nice, and nice that I'll save some money off the heating bill also. But it's not worth $20,000 to cut your heating bill from $250 to $160 per month. The opportunity cost of that money is over twice the return, and a competently advised buyer knows it.



The point of all of this is that if one seller won't do what is necessary to deal with you as a potential buyer, the next one over will. If they don't, they don't sell, simple as that. Furthermore, with as many properties as are on the market for as few buyers as there are, amenities are not bringing increased sales prices like they were a couple years ago. They're back to the situation as it was before that seller's market, where the nice feature was the one that drew the offer in the first place, but the buyers are not offering enough extra to recover whatever the cost of that feature was. This has some really depressing implications for those who bought blinged out developer property, but that's the way it is right now. For buyers, research and patience and the willingness to walk away are paying major dividends right now, as is the willingness to be in the market at all. There are a lot of desperate sellers out there right now, and if you wait until prices are increasing again, you will have missed the best time to buy.



Caveat Emptor

 



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This page is a archive of recent entries written by Dan Melson in January 2007.

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