As news of fallout from the growing subprime lending and resulting foreclosure crisis continues to spread, I’m seeing more evidence of it impacting even our hallowed ground here in Palo Alto. The growing question and concern is “How much will this affect our local housing market?”

 Palo Alto and the surrounding communities have shown an amazing resilience in maintaining property values in the face of economic changes that crush other housing markets, even those within a few miles.

I was recently interviewed for an article in the Palo Alto Weekly regarding how changes in lending are affecting home buyers in Palo Alto and the surrounding communities. You can read the article here.

At our Keller Williams office meeting on Monday, Eric Trailer of Absolute Mortgage Bank in Palo Alto discussed the latest news regarding changes in lending and made the following recommendations to the assembled group of Realtors.

1) Buyers: Make multiple loan applications. Lenders are changing their guidelines constantly, and more than one transaction in the last month has been at risk because the lender has changed their mind on the loan, or the investor that they were planning to sell the loan to has stopped buying new loans. With a second approved application, the Buyer has a backup, and the transaction can proceed smoothly.

2) Sellers: Ask for backup offers. If your home goes into contract and then falls out because the buyer’s lending falls through, you will lose a significant amount through having to put your home back on the market. It will almost always sell for less, plus the additional time and expense associated with having the home on the market for longer.

3) Buyers: If you are in a multiple offer situation and don’t get the house, ask if the sellers are taking backup offers. In this time of upheaval in the lending industry, the chances that the winning offer falls through are greater than in several years. It doesn’t cost you anything to be in a backup position, and your chances of getting the house are better than ever.

The good news is that the consensus among lenders is that it will take about 6 - 9 months for this problem to work its way through the system. Hopefully, Mr. Bernanke will see the light and the Fed will bring back interest rates a bit, which will take some pressure off those people struggling to keep up with rising adjustable rate mortgages.

In the meantime, stay tuned.

Thanks for reading.

Tags: Real estate
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