R.BRENDAN LEARY phone  650 207 2100 email   bleary@cbnorcal.com web      www.brendanleary.com Top 1% of Coldwell Banker Internationally #1 Agent in CB Palo Alto Offices 1997, 1998, 1999, 2001, 2002, 2004, 2005, 2007 FALL 2008 NEWSLETTER   wearing the colors proudly terrace dining on the canal with traditional Alsatian architecture THE JURY IS STILL OUT. I have been putting off this update for the simple reason that "the jury is still out". I have been waiting for some definitive news and direction in the market place, and also, as many have asked, regarding my health. None yet for the market; RBL status later on. What a mess and what is happening next? The real estate market in general is experiencing some difficult times. The volume of sales is way down and prices are on the downward path. Not good news. Unfortunately, this condition is here to stay for the foreseeable future. A bit of good news: the mid-Peninsula and San Francisco markets are holding on by their fingernails. We still have limited supply and there is a steady demand. Prices are staying flat, not falling in huge percentages as they are in surrounding counties and the rest of the nation. We are in a micro-market that lives in its own world. Buyers are being very selective and are price sensitive. Yet with good location and good schools, a fairly priced home in adequate condition will sell quickly. Missing one of these factors, there must be some compensation in the price equation. Having said this, the lower end of the market everywhere is very, very soft. The demand has been eliminated. How? It was artificially created. I will illustrate with several examples. When Jean and I bought our home 16 years ago, I remember thinking "how am I going to pay for this?" My answer was that if the bank said I was qualified I must be. Do not forget that in general your banker was a trusted individual. If you have purchased a home from me you will remember the qualification process. We determine how much the bank will loan you. Then we determine how much you really want to pay. The bank will always loan you more than you should be borrowing. Traditionally a buyer needed 20% down. In recent history it has been 10% then 5%. Five years ago I received a call from a first-time buyer who wanted to buy a house. After reviewing their finances I told them they could not afford to buy the home as they had no down payment, no ability to pay closing costs and no reserves. They told me that they had friends who had purchased a home with 100% financing. I called my bank/broker, who told me they had never heard of 100% financing but would check. I received a call back saying it did exist. I made sure this client could easily make the payments. They have done so and the equity in their home has increased dramatically. A happy ending. Fast forward to 2007. Last year a young man was referred to me by past clients. He had purchased a condominium in San Jose, and was struggling to get the financing done. This was "in-house" financing from a very large bank with America in the name. I went through his income, expenses and then calculated his loan payment. It was equal to his take-home pay. I asked how he was going to pay his closing costs and more importantly how he was going to pay his living expenses. He really did not know. He had not done the math himself. The loan agent had said it would work and he listened. I called the bank and asked how in good conscience they could lend him the money. The package was 100% financing and the seller was giving $10,000 cash to the buyer. How was he qualified? The bank was using his projection for future, non-guaranteed overtime and his statement that his girlfriend would move in and help pay expenses. You get the picture. If the bank says I’m qualified I must be. This story, and many others like it, has been repeated over and over again throughout the country. You can now understand the economic mess we are in. The stories above are mostly related to first-time homebuyers. They now have no way to borrow money, thus the demand is gone and low-end pricing will continue to fall. Those fortunate few with cash on hand are still there. Thus we do have upper-end demand. We have had multiple 2.5+ million dollar sales this year. (Our year is going very well). Due to tighter lending practices, even with 60-70% as a down payment, it is very hard to get a million dollar loan. Where does all of this sift out? Well, the jury is still out. Good news again, our mid-Peninsula market is holding its own. California poppies this is fun! AHHH, NOW FOR THE HEALTH QUESTION. A year ago on August 1st I was diagnosed with base of tongue cancer. On August 2nd I promised myself I would be cycling in France the next year. In July of this year I made the trip and felt as if I was riding with the strength of someone 15 years younger. I went with a few of my cancer bodyguards: Harper, Peter, Eryn and Andy. It was a wonderful time, as the photos will attest. Jean came over at the end and we spent a week experiencing the sights, food and wonderful people of Strasbourg. Yet it is always wonderful to be home. We love our home, our neighbors and our life. My recovery continues.I am officially cancer-free 9 months post-treatment. The 2-year mark is the big milestone. The side effects of treatment are with me constantly. It seems all too frequently that something else does not work quite right. I get so tired of going to the doctor that the thought of optional trips, like new glasses, is beyond me. Do not get me wrong – the docs are great. I just wish that the visits were social in nature. But I am told that I still have a sense of humor about it all and it does not get me down. Work is great. We have toned down our volume and we are happy with this so far. Add to this friends who are forever caring and Jean – I am so lucky. My best to all. Thank you for your personal support and business confidence. RBL FHA TO RESCUE HOMEOWNERS AND FIRST TIME BUYERS??? By now you have probably heard that the Housing Reform Act (HR 3221) has been approved by the U.S. House of Representatives, the Senate and now the President. The Rescue Bill is aimed at helping troubled homeowners avoid foreclosure by allowing at-risk borrowers to refinance their unaffordable mortgages into new, low-cost fixed-rate loans insured by the FHA. The program will allow the homeowner to refinance up to 90% of the current value of the home; the remaining monies would be forgiven by the existing Lender. The borrower can be up-to-date on their payments or in default, but either way the borrower must prove that they will not be able to keep paying their existing mortgage. An estimated 2,000,000 borrowers are eligible for help but experts predict only 400,000 homeowners will take advantage of this program within the next 24 months. One reason for such a low number is that only FHA Approved Lenders may offer this program. For first time buyers there will be an additional tax credit of up to $7,500. This tax credit is in addition to the existing tax benefits of homeownership. The theory is that this additional savings will bring many new buyers into the market and help stabilize the housing situation, although I disagree. For now down payment assistance programs are still available, but there is talk of doing away with seller-financed programs by the end of this year. With or without these programs FHA does not require the homebuyer to use any of his own money to buy a home. Rumors of a complete "overhaul" of FHA Underwriting Guidelines are spreading. My banker has assured us that this is incorrect! Although there have been some adjustments, the basic outline has not been altered. The most common questions we receive are about income, credit, debt ratio, loan limits, and down payment. Short of sending you a 140-page guideline book, here are the highlights of today’s FHA program: No Down Payment Required From Buyers Own Funds All Closing Costs May Be Paid For On Buyers Behalf Credit Scores As Low As Zero Debt To Income Ratios As High As 60% Non-Occupying Cosigners Allowed Gift Funds For Down Payment Allowed SFR, Condos, Town Homes, And Manufactured Homes No Prepayment Penalties 1 To 4 Unit Properties Does Not Have To Be A First Time Buyer my bodyguards hiking at Kirkwood sunrise at Kirkwood In my opinion this will have little impact on our market here due to home values. The loan amount is still low and the amount of dollars available is limited. We will keep you posted. RBL the newlyweds enjoying a trip out to the Loire Valley JAIME'S UPDATE This year has been very exciting so far. On April 19th Greg and I were married at Palo Alto Hills Golf & Country Club, where we enjoyed the perfect day with family and friends. The ceremony took place overlooking the golf course and the reception was in their main ballroom. For our honeymoon, we rented an apartment in the 6th district of Paris, France, where we stayed for two weeks. Some of the highlights included a day trip to Versailles, a dinner cruise on the Seine, a visit to the Musee D’Orsay and seeing the Louvre pyramid at night. Of course, we also enjoyed every meal to the fullest. I’d highly recommend renting an apartment for a trip like this, as we really felt like we had a “home” where we were able to cook and relax. In terms of business, we have slowed things down a bit from the usual routine, but we are still keeping busy. Brendan has been helping me improve my skills, particularly in presenting and negotiating offers, which has proved to be quite beneficial to our group. Jaime Chapin This information is deemed reliable, but is not guaranteed