LA and OC Housing Market Update

The recent statistics are in and home sales in the local areas have some definitive trends. Entry-level homes, currently defined by those at $350,000 and less have been the best selling housing demographic. How much better? Try 70% of the current home sales for last month!

We attribute this statistic to a few things:

• Most of the distress sales fit this price point
• FHA loans have increased in popularity helping buyers with smaller down payments
• Investors looking for best cash-on-cash opportunites are finding this market attractive
• Rents are still very strong for modest single family homes

With interest rates recent decline and many home shoppers finding rates around 4.5-4.7% for convential fixed 30 year financing we expect this to remain the strongest market segment in 2009.

The other hot selling segment has been the luxury property market. Less influenced by stringent financing and a sluggish economy, the ultra affluent are still buying expensive real estate. While market prices have had to become more competitive, luxury home owners are still finding sales chugging along.

The slowest market segments are the mid-range and upper mid-range homes which we are attributing to owners in the lower segment lacking home equity making "move up" sales tough. While sales are tough, they are not impossible, but home owners need to expect to be very aggressive with their pricing.

What to expect next?

• Prices to continue a slow creep downward
• Interest rates to slowly creep upward with inflationary pressures
• Sales to continue to increase in the lowest and highest segments
• More bidding wars for rock bottom priced bank owned property
• More lenders willing to workout short sales

Well, that's our crystal ball, well worth the price of admission!

Have a great month and as always, we're always here to discuss any of your real estate needs regardless of the challenging market.

FICO Scoring Formula Change – Will It Affect Your Ability To Buy A Home?

A new revision to the FICO scoring formula will soon be rolled out. In fact, two of the three credit bureaus have already admitted to the new rules. In effect the credit balances that you carry will matter more than ever to the scoring, but luckily your little missteps will count less.
This update to the credit scoring system (called FICO 08) has been delayed for several months, but it finally will be rolling out early in 2009. It offers a few advantages to the consumers but also includes some serious new risks. The new scoring system is supposed to do a better job of predicting defaults than the classic FICO that we are used to.

Somewhere between 75% and 90% of national lenders use the FICO system to evaluate the credit worthiness of applicants. It is reported that FICO 08 is even more sensitive than the classic FICO to how much of your available credit that you are actually using. If a credit card issuer reduces your credit limit then you could see your credit scores plunge, even if you are not carrying a balance over from month to month.

Also the new formula responds more negatively if your number of open accounts falls, as is the case currently when the card issuers are closing or deactivating accounts that are not used much (those accounts are not very profitable, but still offering risks to the card companies). Your FICO 08 scores can go down with just this reduction of open/available credit.

On the other hand, many changes to the new system are not bad . FICO 08 does provide some improvements, including:

Collections – The new formula does ignore some of the small collections (garbage) that can occur if the original debt is less than $100.00. This is a way overdue improvement.

Credit missteps – The new formula is less punishing to people who have had a repossession or account charge-off as long as the more recent activity is problem free.

Authorized users – The new formula will be factoring in some limited number of authorized user accounts (used by some to improve their own account scores), but supposedly ignore additional ones if they materially affect the score.

Installment loans – The new formula is even more sensitive to the mix of revolving credit (cards, etc) and installment loans (homes, cars). Preference is given to the installment type loans over the revolving type loans and the scores will reflect this preference.

Credit inquiries – This is still a confusing issue, with many experts on both sides. Some believe the new formula will allow more inquiries without punishing the score, while others say this is not true. The best path is still to be very conservative on who and how often your credit is searched

Closing Escrow – Finally, The House Is Yours!

An escrow closing is the pinnacle of the real estate transaction. It signifies legal transfer of title (ownership) from the seller to the buyer and the completion of all conditions set up as part of the escrow.

Generally, ownership is shown through a grant deed. This deed is recorded with the County within one working day of the escrow holder’s receipt of loan funds from the buyer’s lender. This recording completes the transaction and is what is commonly known as the “close of escrow.”

Prior to this and once all of the conditions of escrow have been satisfied, and escrow officer or your real estate agent will inform you of exactly the date escrow will close.

After the escrow officer has verified with the County Records Office that the documents have recorded and legal transfer of title has occurred, the final closing papers are disbursed (usually within one day of close). The final acts of closing the file, preparing statements, and the disbursing of any remaining funds is the end of the escrow. At this time you may or may not be receiving the keys. Depending on how the purchase contract was set up, it may be as long as three days before you are allowed to move in. Reference the first page of the purchase agreement, paragraph 3b, to determine when you will be given possession.

To obtain keys, we will contact you to arrange a drop off or pickup. We hope that you will take this time to check out the place, order a pizza, break out a bottle of wine, and spend some time warming up to your new home. There’s still plenty of work ahead with the move in but this is the perfect time for a little celebratory break. Congratulations, you’ve earned it!

Great Deals on Fullerton REO real estate

What do these homes all have in common?


First, they were all recent bank owned real estate sales sold at rock bottom prices in Fullerton, CA

Second, all of the buyers were represented by us

Third, all of the current owners have read
our guide to bank owned real estate and used it, our personal advice, and their own judgement to make it happen.


In today's market of bargain priced homes,
many buyers are missing out on the best opportunities. Our buyers are not.

If you haven't already, please use the tools available on the site as well as our own personal advice to take advantage of this downswing in the real estate market.

Make sure your not following the herd,
get in touch with us today to get representation that will put you in front of the pack.

Loan Funding- Show Us The Money!

During the process of buying or selling a piece of real estate, most buyers require a loan in order to purchase the property. There comes a time in the transaction when the money is ready to be exchanged for ownership of the property. Funding of the loan is essentially the transfer of money from the lender to the seller of the property. Actually it is transferred to our third party escrow but for simplicity purposes we can think of it as being transferred to the seller.

After you review and sign your loan documents, the escrow company will send them back to the lender. A final review by the lender’s underwriter takes place and if everything looks good according to the underwriter, the lender will notify the escrow company that they are ready for funding. In other words, the lender is ready to send over the money to complete the purchase of the real estate.

At this time or preferably before, the escrow company will instruct the buyer to bring all necessary closing money (i.e. closing costs and down payment) into escrow to be held until funding. Most of the time when the loan is funded the actual money for the loan is wired over in just a few minutes but in order to fund the loan all conditions and instructions set up in escrow must have been met. This dotting of the i’s and crossing of the t’s is usually what delays the actual funding from happening. Many times underwriters will take a hard second look at the borrower’s financials that may delay the funding a few days. For this reason, we encourage buyers to get their entire loan application and supplementary materials to the lender as quickly in the escrow process as possible.

As you can see, in most real estate transactions funding is a very significant event in the process and a critical component to purchasing your home. Now that you know what the funding process is all about, the only thing left is the closing and recording. You’ll learn about this final step in our next tutorial.

Purchase Agreement Contingencies - A Buyers Emergency Escape

When you wrote an offer to purchase your prospective home, you more than likely had a few safety nets put into action should the deal go sour. These safety nets are known as contingencies and are considered normal buyer protection in our purchase agreements.

The most common contingencies are to:

• See all disclosures from the seller


• Inspect the property


• Obtain acceptable financing for the property


• Have the property appraise at a value equal to or greater than the purchase price

If for any reason you are unable to obtain any of the above, or have an issue with them, no matter how small (ie unacceptable interest rate on loan, too many repairs, or low appraisal) within the first 17 days of the transaction, then you most likely will be able to cancel the entire agreement with zero penalty.

There does come a time in the transaction, usually after the 17th day, that the buyer will need to be ready to remove all of these contingencies of sale. We call this the "release of contingencies" and usually send the buyer a form to be signed stating that they are satisfied with respect to all of the above conditions, are electing to proceed with the transaction, and realize that backing out or failing to close escrow from this point forward could lead to the forfeiture of their deposit.

After the contingency release is complete, a buyer is starting to turn the home stretch toward owning this new piece of real estate. And while the remaining length of track may be short, it is the stretch where most deals are either made or broken. We'll do everything we can to make sure you are able to make it across the finish line with your new home.

Look for our next article on insurance for the first thing we can do to get you there.

Appraisals - How Much Is This Home Worth?

Appraisals are very easy and simple to understand so we are going to keep this one short. Within the first 17 days of escrow buyers will need to have their lender order an appraisal to prove to the bank's investors that the property is worth at least as much as the loan they will be writing on it. Appraisers work for the lender but are often paid by the buyer via closing costs. The cost for an appraisal can range from $300-$600 depending on size, type, and location of property.

Appraisers are licensed and will visit the house, look at recently sold homes in the area, and combine this information with general market trends to determine a fair market value for the home. There is no need for a buyer to meet an appraiser at the property.

Many buyers confuse appraisal with inspection. Think of it like this:
Inspectors check for physical defect in the property, work solely for the buyer, and do not discuss value of the property.

Appraisers work solely for the lender and speak mainly about the value of the home based on recent sales.

In order for you to get a loan to purchase your home, it will need to appraise at least at the value of the loan you are proposing taking out. If it doesn't, you will either have to make a larger down payment or need to renegotiate the purchase price. If none of the above are possible, you will need to cancel escrow.

Very rarely do appraisals come in way above the purchase price as this can create major problems if the seller then has second thoughts. Since they work for the lender, their main job is to ensure that the lender is secured by property value not to give the seller an accurate estimate of his properties value.

Now that appraisals are out of the way, we are excited to bring you our next article on real estate contingencies.