What’s the Point?

As a method of assisting and enticing a buyer into a transaction, sellers often offer “points,” which refer to a percentage of the buyer’s loan amount. For example, if you borrow $1 million and pay “one point,” you would pay one percent, or $10,000. Why pay points? Depending on the lender and loan program, it can reduce your monthly mortgage payment. There is always a pay-back period, after which you can enjoy the savings. The problem is that many if not most buyers find that coming up with extra cash at closing time is difficult or next to impossible. On the other hand, the seller might have the cash to pay the buyer’s points and might be inclined to do so providing that the purchase price is the correct number.

At a recent meeting, Scott Bradley from First Capital Mortgage, got me thinking as to exactly what it would cost a seller and how much savings the buyer would realize. The chart (on page 53) reveals that, given the seller’s cooperation in paying points, the buyer can pay a higher purchase price for a house yet have lower monthly payments. The seller can understand that while paying points reduces his net, it might behoove him to pay points as an alternative to dropping his price.

Forced Sale

Have you ever wondered what would happen if you owned property with someone else and one of you wanted to sell while the other one did not? If you ever filed for, or have been served with a partition lawsuit, please e-mail me your story at Mark@RadioRealEstate.com..

Listing Update

The following information is derived from the Santa Barbara Multiple Listing Service and refers to single family residences only (no condos, vacant land, etc).

The number of sales in the first quarter of 2006 (213) was only 1.6% less than the first quarter of 2005 (218). That seemed encouraging considering that the number of sales in the fourth quarter of 2005 (201) had dropped 25% from the fourth quarter of 2004 (270). The fourth quarter 2005 number of sales (201) was the lowest number in any quarter since 2001, with the exception of the unusually low first quarter of 2003 (199). Unfortunately, the 220 second quarter 2006 sales represented a 32.5% drop from the second quarter of 2005.

The medium sales price was strong in the first quarter of 2006 ($1.17 million), having dipped only 1.6% from the first quarter of 2005 and only 3% from the previous quarter. The medium sales price in the second quarter of 2006 actually bumped up 1.9% from the prior quarter but again, the number of sales barely increased from the prior quarter. Contrast that to the second quarter of 2005 where the number of sales jumped 49% from the first quarter of 2005.

January through August 2006 saw a medium sales price of $1.21 million, only a 4.3% drop from the same 2005 period. Again, it was the 19.9% drop in the number of sales January through August 2006 compared to the same 2005 period that has more of an impact than price.

What is encouraging is that there are 211 sales for the yet unfinished 2006 third quarter (through September 20). This could make the 2006 third quarter the highest number of sales for the prior three quarters.

People had predicted that interest rates would hit 7% this year and so far it looks like that might not happen. That is very good news for buyers and sellers. There are still multiple offers for properties priced correctly. Although our inventory of houses for sale is substantially higher from last year, real estate agents with buyers are still out looking for that perfect house.