The San Francisco Peninsula Real Estate Blog

Curling up in front of a warm, crackling fireplace is a favorite thing to do for many people, especially for those homeowners who are lucky enough to still have a wood-burning fireplace in their homes.  Now that the weather is starting to get cooler at night, you’ll see more plumes of smoke coming from those chimneys.

But starting this past Wednesday, burning real wood in your fireplace could be a costly mistake if you do so on a designated “Spare the Air Day” in the Bay Area.   Inspectors from the Bay Area Air Quality Management District will be looking for violators and possibly writing citations.   And the fines won’t be cheap, either.  According to the San Jose Mercury News, fines could range from the hundreds of dollars to as high as thousands of dollars.

So how do you know if it’s a “Spare the Air Day”?    You can click on the above link to the Bay Area Air Quality Management District, or I have included their Air Quality banner on the right side of the blog.   So enjoy your fireplace, but be sure you have a green light to burn!

When the forward pass was first introduced in football, the naysayers predicted failure, claiming “there are 3 possible outcomes of the forward pass, and two of them are bad.” Well, we all know how that turned out. The forward pass completely revolutionized the game.

How does this apply to real estate? I apply the same logic to the question:

Why are buyers reluctant to write offers below the asking price?

Using my handy football analogy, what are the possible outcomes when you write an offer below the asking price? There are also three — your offer will be either,

1. Accepted
2. Counter-offered, or
3. Rejected

From the buyer’s standpoint, two out of the three outcomes are good, and the likelihood that a seller will flat-out reject an offer is low, especially if the home has been on the market for a long time. (Obviously, common sense dictates here — I’m assuming for this argument that the “below list” offer is not something totally absurd like 50% of the asking price.) So you’re already WAY ahead of the forward pass — so, why don’t more folks do it?

There are also three possible reasons that I can think of:

• They don’t like the property at any cost.
• They are afraid of insulting the seller or the seller’s agent.
• Their own agent refuses to write what they consider to be “low-ball” offer.

Let’s discuss these. The first one is easy — if the property is of no interest to you, you’re not going to want it at any price. #2 is easily solved. For homes that have been on the market for an extended period, the sellers will likely be thrilled to see ANY offer, even if it is substantially less than list. If they do get upset that the offer is low, tough…they can just say no.#3 is the one that amazes me. I have heard from numerous people that their agent refused to write up a low offer (or tried very hard to talk the buyer out of it.) If that’s the case, find a new agent. If your agent isn’t willing to put in the extra work (a whole hour or so) to fill out the paperwork for an offer, find an agent who is.

Much has been made lately in the press about the impending peril homeowners may be facing when their 5/1 or 7/1 Adjustable Rate Mortgages (ARMs) complete their fixed-period and covert to an ARM.   After all, when the first wave of mortgages indexed sharply upwards last year, it marked the beginning of the sub-prime meltdown that we’re still sorting through today.

But just because you have an ARM that’s due to index soon, does it mean you should be losing sleep at night waiting for your adjustment letter to arrive in the mail?  Not necessarily.   It all depends on which index your ARM is based on.   If you recall, the fully indexed interest rate is calculated by a simple equation:

Fully Indexed Rate = Margin + Current Index

Since the margin is a fixed figure that is set by the lender, the “variability” of an ARM will follow the behavior of the index.    While there are numerous indices that are used in ARM’s the two most common that are used are the London Inter Bank Lending Rate (LIBOR) or the Constant Maturity Treasury (CMT.)   Here’s a great site that keeps track of all of the most common index rates:

Mortgage Index Rates

These two indices have behaved VERY differently over the past 12 months.  LIBOR rates have risen significantly due to the tight money market, while CMT rates as yields have dropped.  Consequently, by understanding which index your ARM is based on, you can better anticipate what your loan is going to do when judgment day comes.

How do you know which index your loan is based on?   It is specified on your original loan documentation, or you can call your lender and find out.  Either way, knowing what your rate is going to do may buy you some much needed peace of mind.

To the surprise of few, the City of Burlingame announced that they will likely face a budget deficit of nearly $5M if they approve all of captial expenditures that are specified in the pending budget.    The San Mateo Daily Journal has outlined the details in this article:

Burlingame Faces Revenue Cuts

It’s not a surprise because other communities up and down the Peninsula have stubbed their toes in the same manner.  San Carlos recently announced that they are operating in a critical deficit mode, and consequently made difficult cuts to balance the budget.   While it’s not the primary culprit, the drop in real estate sales has helped exacerbate the problem in many communities.   City managers will project a certain amount of increased property tax revenue based upon anticpated sales volume — but we all know that this sales volume has not materialized this year, and the those homes that have sold are taking significant discounts.

So, like San Carlos and other communities on the Peninsula, Burlingame is going to have to make some tough decisions.   And like San Carlos, it will probably have to do more with less.