condo (5)

 

While it may seem as if it is hard to determine what is happening in the downtown San Jose condo real estate market, there are some majors metrics that are quantifiable that can help you see where the market is going. These markers include:

 

  1.      Sales to list price ratio
  2.      Days on Market
  3.      Months of inventory
  4.      Number of active listings vs number of pending listings.

 

We can learn something from each of these metrics.

 

  1.      Sales to list price ratio: When the San Jose condo market is appreciating, the sales price will be higher than the list price. In Jan of 2017 the sales price of Downtown San Jose condos is 101% of the list price. This is obviously very healthy, but in Feb 2015 the sales price on average was 105% of the list price which was a much hotter market.
  2. San Jose Condo market
  3.      Days on market is a very good way to look at how the market is doing. The stronger the market the shorter the days on market. In Feb 2016 the average days on market was 15 and it increased to 28 in Jan 2017. Things are obviously slowing, but the San Jose condo market has not tanked.
  4. San Jose condo market
  5.      Months of inventory: Months of inventory tells you how long it would take to sell all the homes currently on the market at the current pace of sales. When months of inventory goes up it means the market is slowing, most of time.  The months of inventory in downtown San Jose has been less than 2 all through 2016 and into Jan 2017. It has gone up to 7 months in Feb., but there have only been 2 days so we can not count that yet.
  6. San Jose condo market
  7.      Number of active listings vs number of pending listings: this one is my favorite. You look at the number of active sales and compare to pending sales. When inventory is low and sales are brisk there will be more pending sales than active sales. When there are 4 or more times as many pending sales as listings it is a really hot market. When there are more active listings than pending sales it is a buyer’s market, or trending that way. There are currently 21 active listings and 32 pending  sales of downtown San Jose condos.

 

So how is the market of downtown San Jose condos?

 

Looking at all the metrics I would say it is good, but slower than in the first part of 2017.

 

If you have any questions about buying or selling a condo in downtown San Jose please feel free to call me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

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Buying A San Jose Condo That is in Litigation


Brickyard San Jose

Developers don’t build condos with the intention of sloppy work that they hope no one will notice. But never the less, they almost always get sued in about year 8-9.

 

In California, new construction comes with a 10 year warranty on latent defects on the structure. In plain terms home owners and homeowner associations have 10 years to sue a developer if they find problems with the structural components of a building such as the roof, walls, plumbing or electrical systems, garages, decks, etc.

 

So, around year 8, if no problems have emerged, many HOA communities will hire a company to look at the building and see if there are potential problems that can happen due to faulty construction. If there are known problems they hire someone to try to figure out the fixes to the issues.

 

The communities will approach the builder to fix the discovered issues, and if the builder does not feel there is a problem, or the problem is not their responsibility then a law suit may be filed.

 

Once the suit is filed most lenders will not make loans on the property. The few who do will charge interest rates 1 to 2 pts higher than a traditional lender.

 

This can put the brakes on sales in the development, and will temporarily depress the price.

 

If you are a cash buyer, buying a San Jose Condo in litigation for a rental property can be a good idea if you follow these steps:

 

  1.      Look at the report that explains what the problems are that need to be addressed. If the issues are ones that do not need immediate attention that is better. If the plumbing system has failed, or there is major water intrusion into the building the homeowners may be hit with a special assessment during the multi year lawsuit. Even if the HOA of the San Jose condo in litigation wins the individual homeowners may not be reimbursed.
  2.      Find out what the estimated cost to repair the issues are for the San Jose condo in litigation. Take that number and divide by the number of units, or if available the percentage of ownership the condo in question has. So if the estimate is 10 million dollars, and there are 500 units with equal shares then each unit would be responsible for about 20 thousand in repairs if all units pay condo fees equally.
  3.      Find the market value of the condo you are interested in by looking at the most recent sale of that model before the San Jose condo litigation.
  4.      Subtract the amount of potential assessment.
  5.      If the market is slowing down overall subtract more.
  6.      Explain that you are taking the risk that the HOA of the San Jose Condo in litigation will not prevail in court, and even if they do the homeowners may be assessed before then. You are taking that risk, and buying when most others are not able. You are betting that you will not be assessed.
  7.      Even in a very hot market, this is a good way to get a better price on a San Jose condo in litigation than you would otherwise be able to.
  8.      It is safest to do it when the builder is a very large and stable company, rather than a less well capitalized entity that is more likely to go bankrupt.

 

There is obviously risk involved, but since such a large percentage of builders get sued, it can be a good long term investment. For example, The Brickyard in San Jose was in litigation in 2011-2012. During 2011 one bedroom condos sold for $140,000-$180,000. The litigation was setteled and in 2016 one bedrooms condos sold for $365,000-$395,000. If you bought a condo for at The Brickyard with cash in 2011 for  you would have at least doubled your money in 5 years plus get an additional $800 to $1500 a month profit in rent over the last 5 years. And this was a building with serious problems that have now been fixed with proceeds from the successful law suit.

Most suits are settled, the deficiencies are fixed, and the San Jose condos in litigation go on to appreciate.

 

If you have any questions about buying a San Jose condo in litigation as a rental property please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

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East Palo Alto short sale

 

There is another conflict brewing between investors and first time home-buyers, and this time the home buyers may win. In the more affordable areas of the Silicon Valley distressed properties, ie short sales and reos have been popular with investors and first time buyers. Many would be owner occupiers lose out on great opportunities to investors who have all cash.  Since condos are the least expensive properties, have the fewest maintenance issue,  and tend to bring in more rent per dollar spent they are popular with investors. Coupled with the more restrictive lending practices on condos, many bay area developments are now in a position where the number of owner occupied units has fallen to a critical level. Owners of these properties are having trouble refinancing and buyers trying to get loans are being rejected by the lenders.  As a result, many complexes are starting to pass new HOA regulations limiting the number of rentals allowed in the condo development.

These restrictions can be a double edged sword.  If they occur in a building where the delinquency rate on the HOA dues is too high then a buyer will not be able to get a loan anyway and it will effectively cut off all sales.  In the future when the market has settled down the rental restriction could put a damper on future sales.  However, if they are not instituted it may become impossible for anyone but investors to purchase in some condo complexes, which in itself will lower values not to mention make things harder for the first time home buyer. It will also make it impossible for current homeowners to ever refinance in some of these buildings.

I do not have the answer here as to what is right or wrong here. I can only give some advise on what to do if you want to purchase or sell a condo and want to get the information about potential rental restrictions.

1. Ask your agent to find out if the HOA docs are available yet.  If it is an reo they most likely will not be and a

short sale very likely not

2. If the docs are not available before you make an offer ask your agent to ask the listing agent for the number of the HOA management company

3. Call the management company and ask about any current or contemplated rental restrictions

It is not that hard to find out and can save a lot of time and possibly money.

If you have any questions about short sales in San Mateo or Santa Clara Counties please feel free to contact me.

 

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

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Right now it is estimated that nationally 1 in 4 homeowners owes more on their mortgage than their home is worth. You may be be one of those homeowners.  While not everyone who owes more money than their home is worth is going to sell that home, if they do, it will have to go through the short sale process. If you decide that a short sale is the best option for your circumstances be sure and check with a lawyer and/or accountant to get the best legal and tax advice.  You may find yourself unable to make the payments on the mortgage at all. If you own a condo the situation can get a little more complicated.  

In California the HOA can initiate foreclosure proceedings against a homeowner who does not pay his/her HOA dues.  In addition to that, many banks who are very willing to allow a borrower to do a short sale will not pay any money for back due HOA dues.  

So, if you can not afford your home, if you can not afford your mortgage, if you want to try a short sale, try to find a way to pay the HOA dues. If you do not, you could get to the end of the short sale process and not be able to close because a few thousand dollars are owned to the HOA and since that is a lien against the property the sale will not close.

If you have any questions about short sales, please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E.  01191194

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2. Marcy Moyer of Keller Williams Realty is not associated with the government, and our service is not approved by the government or your lender; and 
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Marcy Moyer Keller Williams Realty Palo Alto, Ca. Specialist in Trust and Probate Sales

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RISMEDIA, January 21, 2010—(MCT)—In hopes of reviving one of the nation’s hardest-hit condominium markets, the giant mortgage backer Fannie Mae is making it easier for people to buy Florida condos that may not have met previous lending standards.Fannie Mae has started giving certain condo complexes in the state “special approval” designations, a sort of stamp of approval, even when the properties don’t meet one or more of the established rules relating to delinquent fees, financial reserves and percentage of owner-occupied units.Florida is the only state getting the special reviews, which are a first for Fannie Mae, officials with the government-backed corporation recently said.Teams are already reviewing complexes and granting the special approvals—which are a green light for mortgage lenders—in cases where the projects are considered stable even though they might violate a Fannie Mae lending standard. For example, under current rules, a project doesn’t qualify for Fannie Mae-backed mortgages if more than 15% of the unit owners are behind on their association fees—but a review team might decide to waive that rule, opening that complex to a much larger pool or prospective buyers.“This new initiative is geared toward providing maximum support for Florida’s distressed condo market as we continue to provide liquidity to the housing market more broadly,” said Karen Pallotta, executive vice president for the secondary-mortgage giant.The new reviews were prompted by the fact that home buyers, lenders and real-estate agents have been avoiding condos because many of the complexes do not meet existing lending criteria. With little or no financing available, condo prices have crashed, with units attracting mostly cash buyers. Fannie Mae had already been granting exceptions to its condominium guidelines, but only on a case-by-case basis, when requested by lenders.Even though Miami’s condo prices have not fallen as sharply as those in Orlando, condo complexes in South Florida appear to be getting most of the new program’s early attention. Fannie Mae has given its approval stamp for mortgages on more than 50 condo complexes, all of them in the Miami area. Miami real estate agent Maurice Veissi, first vice president of the National Association of Realtors, said that the real estate organization was key in educating Fannie Mae about Florida’s collapsing condo prices. “Fannie Mae and Freddie Mac recognize that south Florida, and southeast Florida in particular, have been uniquely hit,” Veissi said. “Any time you get some relaxation of what were some stringent rules and regulations, that will affect the market to some extent.”Condo prices have fallen more in Orlando than in most U.S. metro areas. The median price for a unit in the four-county Orlando area in November 2009 was $55,000, down 21% from a year earlier. In comparison, Miami’s median condo price was $149,000, down 14%.Fannie Mae officials said they will be adding more complexes to their list of approved projects, which can viewed at www.efanniemae.com under “frequently searched pages,” as six employees review properties across the state. They will be taking into consideration the quality of each project’s construction and maintenance as well as the financial health of the owners association.Whether loosening lending criteria for condominiums is the right thing to do now is a valid question, said Craig E. Polejes, president of Florida Bank of Commerce. “The question is: If they’re looking to make exceptions on a case-by-case basis, what are the parameters of the exceptions?” Polejes asked. He said he was skeptical of any move to finance mortgages for condo units in complexes that had been converted from apartments. The overriding issues, Polejes added, should be the quality of the building and the creditworthiness of the buyer.A board member of one Winter Park, Fla.-area condominium project that converted from apartments several years ago said only one-fourth of the residents were paying their fees, forcing the owners association to increase the fees to make mandatory insurance payments. The board member, who spoke only on condition of anonymity because of a pending foreclosure action, said he hoped something could be done to help revive the local condo market.Polejes said qualified buyers should not continue to be precluded from purchasing units in viable condominium complexes simply because the property doesn’t meet every single standard to allow financing. But he added: “If they start relaxing down payments, incomes, credit scores—that’s problematic.”Story by Mary Shanklin(c) 2010, The Orlando Sentinel (Fla.).Distributed by McClatchy-Tribune Information Services.
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