Sunday, July 4, 2010
Wednesday, June 23, 2010
Buying from a position of strength
We are in a very active real estate market - lots of inventory, reasonable prices...and many buyers wanting to take the plunge. Herein is information that will bring you into the market from a point of strength...but it might burst a few bubbles. This post addresses California markets in Los Angeles and Orange County only, however you may find similar situations in your area.
Real estate markets are local, not national. You can probably find a great home in Virginia for $150K, but a great home in California might cost you double that. Know the values in your market. A great way to do this is searching online.
Realtors (agents) work on a commission basis. We are paid by the seller, and only when your escrow closes. It is a violation of state law to receive payment in any manner not prescribed in the listing contract and MLS postings. All expenses we incur as a result of selling you a property - insurance, professional licenses, auto and other expenses - are borne by us alone. You will spend a lot of time with your agent during the course of your home acquisition. You not only need to feel comfortable with your agent's personality, but confident in his/her skills and abilities. By the way, the difference between an agent and a Realtor is slight. Both have passed state mandated courses for licensure, however the name "realtor" is trademarked and designates membership in national, state and local professional organizations. Generally, this membership is incumbent with greater access to a knowledge base - training, networking, etc.
Asking a Realtor for a list of properties so you can look "on your own" is like calling your doctor to ask why you hurt. It's all about the examination. Window shopping is great for buying clothing or appliances, but with real estate, it is a waste of time for all concerned. Primarily, looking at homes without knowing your price point or desired features is of little benefit to you. You need to have access to the property, as few sellers greet the public when their home is on the market. And they want to see only qualified buyers. Then there is the trespassing issue, if you are viewing a home without proper permission. (Again, perusing listings online is a better way to start your home search if you are not ready to take the plunge.)
Realtors consider a buyer a client once they have consulted with them. This includes discussing your ability to purchase and how we can help. It usually starts with an introductory phone call stating your interest and followed up with a face-to-face meeting (or cell to cell if you are out of the area). Sometimes it is through a meeting at an open house. In almost 15 years in this business, I have never sold a property without this consultation, though often the buyer's criteria changes - especially once we get out in the field and they see how the inventory matches or misses their initial desires.
For the reasons already discussed as well as for security reasons, Realtors do not have the habit of meeting you in the field to show a property if you have not already become acquainted.
Many buyers fit into the FHA financing niche. It requires a lower down payment, the program tolerates lower FICO scores and less than stellar credit and it's often a super alternative for first time buyers. But there are lending guidelines - of mutual benefit. In a market heavy with foreclosures and few sellers wanting to make repairs, buyers need to be familiar with FHA condition guidelines. Even if you are a super handyman or DIY person, if a property does not qualify FHA due to condition - and that includes additions not installed in a "workman like" manner or without permits - FHA will not insure your loan. Yes, there is the 203K program that states funds are set aside for repairs and this may work for you, but it may not. Basically, the bank won't lend on a home that's falling down or unsafe for habitation. This also applies to most conventional financing.
Foreclosure and short sale listings comprise, on average, about 50% of the listed inventory in the Los Angeles market - this can shift neighborhood to neighborhood or even street to street. A foreclosure is the result of the bank repossessing the home due to the homeowner's default. A short sale means that the homeowner is marketing the property for less than is owed to the bank. It is ultimately the bank's decision, not the seller's, to accept the transaction as a short sale. Generally, a short sale means the seller has some hardship, is behind in payments and on the way to foreclosure. As foreclosure is often more expensive for the bank, short sale is a good option. However, the bank's decision usually does not come quickly. I have waited months for a reply, only to find that the bank would not accept my client's offer. It is important that buyers who write offers for short sales stay in the market - looking, writing offers - to increase your chances of having an offer accepted. Which brings up another point...
Well priced properties in good condition that look good to you also look good to the hundreds of other buyers in your same predicament. You will have competition. Two things to remember: (a) the seller wants to sell for the best price/terms and (b) most homes sell within 95% of the listed price. You and your Realtor should know the neighborhood statistics before writing an offer. If a property is a "good deal" - and good deal is a subjective term, as it can relate to the home itself or area amenities that increase perceived value - know that the property will receive a lot of attention from buyers who see the home the way you do.
Investor buyers are very active these days. Their goal may be to buy a fixer, repair it and return to market in excellent condition, or to keep the property as a rental. I have both types of investors in my client base and this has actually helped my buyers who loved a home that was ineligible for FHA financing. The investor bought it, repaired and sold it to them. This is a win-win but doesn't happen often. Timing is everything.
In this market, you will kiss a lot of frogs before you find the home that matters most to you. As it is said to be one of the most stressful life experiences, your approach to home buying should be smart, safe and tenacious. Know your limitations. Know your wants and needs. Dress casually with good, comfortable shoes and leave the kids at home until you figure out how the process works for you. Keep your energy up, keep an open mind, keep smiling and have fun with it!
Real estate markets are local, not national. You can probably find a great home in Virginia for $150K, but a great home in California might cost you double that. Know the values in your market. A great way to do this is searching online.
Realtors (agents) work on a commission basis. We are paid by the seller, and only when your escrow closes. It is a violation of state law to receive payment in any manner not prescribed in the listing contract and MLS postings. All expenses we incur as a result of selling you a property - insurance, professional licenses, auto and other expenses - are borne by us alone. You will spend a lot of time with your agent during the course of your home acquisition. You not only need to feel comfortable with your agent's personality, but confident in his/her skills and abilities. By the way, the difference between an agent and a Realtor is slight. Both have passed state mandated courses for licensure, however the name "realtor" is trademarked and designates membership in national, state and local professional organizations. Generally, this membership is incumbent with greater access to a knowledge base - training, networking, etc.
Asking a Realtor for a list of properties so you can look "on your own" is like calling your doctor to ask why you hurt. It's all about the examination. Window shopping is great for buying clothing or appliances, but with real estate, it is a waste of time for all concerned. Primarily, looking at homes without knowing your price point or desired features is of little benefit to you. You need to have access to the property, as few sellers greet the public when their home is on the market. And they want to see only qualified buyers. Then there is the trespassing issue, if you are viewing a home without proper permission. (Again, perusing listings online is a better way to start your home search if you are not ready to take the plunge.)
Realtors consider a buyer a client once they have consulted with them. This includes discussing your ability to purchase and how we can help. It usually starts with an introductory phone call stating your interest and followed up with a face-to-face meeting (or cell to cell if you are out of the area). Sometimes it is through a meeting at an open house. In almost 15 years in this business, I have never sold a property without this consultation, though often the buyer's criteria changes - especially once we get out in the field and they see how the inventory matches or misses their initial desires.
For the reasons already discussed as well as for security reasons, Realtors do not have the habit of meeting you in the field to show a property if you have not already become acquainted.
Many buyers fit into the FHA financing niche. It requires a lower down payment, the program tolerates lower FICO scores and less than stellar credit and it's often a super alternative for first time buyers. But there are lending guidelines - of mutual benefit. In a market heavy with foreclosures and few sellers wanting to make repairs, buyers need to be familiar with FHA condition guidelines. Even if you are a super handyman or DIY person, if a property does not qualify FHA due to condition - and that includes additions not installed in a "workman like" manner or without permits - FHA will not insure your loan. Yes, there is the 203K program that states funds are set aside for repairs and this may work for you, but it may not. Basically, the bank won't lend on a home that's falling down or unsafe for habitation. This also applies to most conventional financing.
Foreclosure and short sale listings comprise, on average, about 50% of the listed inventory in the Los Angeles market - this can shift neighborhood to neighborhood or even street to street. A foreclosure is the result of the bank repossessing the home due to the homeowner's default. A short sale means that the homeowner is marketing the property for less than is owed to the bank. It is ultimately the bank's decision, not the seller's, to accept the transaction as a short sale. Generally, a short sale means the seller has some hardship, is behind in payments and on the way to foreclosure. As foreclosure is often more expensive for the bank, short sale is a good option. However, the bank's decision usually does not come quickly. I have waited months for a reply, only to find that the bank would not accept my client's offer. It is important that buyers who write offers for short sales stay in the market - looking, writing offers - to increase your chances of having an offer accepted. Which brings up another point...
Well priced properties in good condition that look good to you also look good to the hundreds of other buyers in your same predicament. You will have competition. Two things to remember: (a) the seller wants to sell for the best price/terms and (b) most homes sell within 95% of the listed price. You and your Realtor should know the neighborhood statistics before writing an offer. If a property is a "good deal" - and good deal is a subjective term, as it can relate to the home itself or area amenities that increase perceived value - know that the property will receive a lot of attention from buyers who see the home the way you do.
Investor buyers are very active these days. Their goal may be to buy a fixer, repair it and return to market in excellent condition, or to keep the property as a rental. I have both types of investors in my client base and this has actually helped my buyers who loved a home that was ineligible for FHA financing. The investor bought it, repaired and sold it to them. This is a win-win but doesn't happen often. Timing is everything.
In this market, you will kiss a lot of frogs before you find the home that matters most to you. As it is said to be one of the most stressful life experiences, your approach to home buying should be smart, safe and tenacious. Know your limitations. Know your wants and needs. Dress casually with good, comfortable shoes and leave the kids at home until you figure out how the process works for you. Keep your energy up, keep an open mind, keep smiling and have fun with it!
Sunday, June 20, 2010
You can't make your house payment. What are you going to do?
This is a tough economy. Some of us are making it through, some of us not. In the beginning of what we are now calling the "bubble burst", mortgage defaults were said to be primarily the result of adjusted interest rates increasing payments to the extent that homeowners could not afford them. Some borrowers didn't realize how the adjustable rates would affect them, others just thought they'd be in a better place when the increases kicked in. As the economy worsened, job losses took hold of those borrowers who, up to that point, were managing to get by. As the decline continued, a lot of us had trouble "treading water".
Foreclosures were swift in the beginning - say 2008. As the numbers increased, let's face it, the banks simply couldn't keep up. It is not uncommon to hear of a homeowner who hasn't made a payment for a year or more. As government sanctions and programs change or new ones are introduced, the banks are not so quick to pull the trigger. The bank's hesitation is your opportunity to create an exit strategy. Think about these ideas:
1. If you haven't opened a dialog with your lender regarding loan modification, why are you waiting? The problem is not going away. When my office gets a bank listing and I do the research, I am amazed to find that about 50% of the time, the homeowner didn't try to sell or make any movements to avoid foreclosure. The result is that they lost their home and it may take years before their credit recovers. Bad credit affects your ability to rent a home, to get a job...or buy another home.
2. If you have attempted a loan modification and it didn't work out, try again. Bank's are known to change policies quickly. What didn't work this month may work next month.
3. If a reduction in income makes you ineligible for a loan modification, list the home at market price. The bank will either accept this as a short sale - less costly for the bank - or go for full blown foreclosure - more costly for the bank and usually netting the same result, price-wise. The big difference is, with a short sale you have some control over what happens to your life. And though your credit gets beaten up a bit, recovery is easier. This is not going to cost you anything, by the way. The bank pays the real estate commissions and closing costs. It is a virtually painless exit strategy.
4. Once you have an offer for your home and providing you are eligible on the income front, ask the bank to consider modifying the loan - for you - at market price. This works. It's a bummer for the person who wrote the offer to buy your home but hey, we're in survival mode here. What you have done is prove with the offer what the home is worth and challenged the bank to step up to the plate - for you. Did I tell you this works? I know - I did it.
5. If none of these tips work for your situation - and granted, "situations" vary substantially - you can still do the short sale and move on with your life. In a couple of years, provided you've kept your other credit in check, you can buy again.
6. As with any market, many solutions present themselves but one has to be careful. You'll want to discuss new options with qualified individuals - your Realtor, mortgage company or attorney. The latest solution that I think is viable comes from investor groups that buy non-performing loans and re-writes them. Income qualifying is a big part of the scenario, credit is not a large issue. The loan is bought at market price. Interest rates are typically higher than market. The bottom line, though, is that you get to keep your home. This solution is not for everyone. But it works.
There is a contingent of homeowners that are just bummed that the market has declined. Some feel as if they deserve a modification because "everybody's doing it". They have the ability to make their payments and have petitioned the banks for loan modifications. Let me be clear about my experience with loan modifications: successful modifications involve borrowers with a hardship. A decline in value is not in itself a hardship (that comes into play when other hardship criterion are met). Not having enough money to go to the beauty shop or on a great vacation is not a hardship. Having more than one home and trying to modify one of the mortgages is not typically viewed as a hardship. Attempting to subsist on less income due to job loss, injury or illness is a hardship and if you ask nicely, your bank will work with you. I believe the low point is the past and prices are holding...for now. It's a good time to explore your options.
I have several strategies for how to best navigate the maze called today's market opportunities. Call me if you need my assistance. 562-572-9870
Foreclosures were swift in the beginning - say 2008. As the numbers increased, let's face it, the banks simply couldn't keep up. It is not uncommon to hear of a homeowner who hasn't made a payment for a year or more. As government sanctions and programs change or new ones are introduced, the banks are not so quick to pull the trigger. The bank's hesitation is your opportunity to create an exit strategy. Think about these ideas:
1. If you haven't opened a dialog with your lender regarding loan modification, why are you waiting? The problem is not going away. When my office gets a bank listing and I do the research, I am amazed to find that about 50% of the time, the homeowner didn't try to sell or make any movements to avoid foreclosure. The result is that they lost their home and it may take years before their credit recovers. Bad credit affects your ability to rent a home, to get a job...or buy another home.
2. If you have attempted a loan modification and it didn't work out, try again. Bank's are known to change policies quickly. What didn't work this month may work next month.
3. If a reduction in income makes you ineligible for a loan modification, list the home at market price. The bank will either accept this as a short sale - less costly for the bank - or go for full blown foreclosure - more costly for the bank and usually netting the same result, price-wise. The big difference is, with a short sale you have some control over what happens to your life. And though your credit gets beaten up a bit, recovery is easier. This is not going to cost you anything, by the way. The bank pays the real estate commissions and closing costs. It is a virtually painless exit strategy.
4. Once you have an offer for your home and providing you are eligible on the income front, ask the bank to consider modifying the loan - for you - at market price. This works. It's a bummer for the person who wrote the offer to buy your home but hey, we're in survival mode here. What you have done is prove with the offer what the home is worth and challenged the bank to step up to the plate - for you. Did I tell you this works? I know - I did it.
5. If none of these tips work for your situation - and granted, "situations" vary substantially - you can still do the short sale and move on with your life. In a couple of years, provided you've kept your other credit in check, you can buy again.
6. As with any market, many solutions present themselves but one has to be careful. You'll want to discuss new options with qualified individuals - your Realtor, mortgage company or attorney. The latest solution that I think is viable comes from investor groups that buy non-performing loans and re-writes them. Income qualifying is a big part of the scenario, credit is not a large issue. The loan is bought at market price. Interest rates are typically higher than market. The bottom line, though, is that you get to keep your home. This solution is not for everyone. But it works.
There is a contingent of homeowners that are just bummed that the market has declined. Some feel as if they deserve a modification because "everybody's doing it". They have the ability to make their payments and have petitioned the banks for loan modifications. Let me be clear about my experience with loan modifications: successful modifications involve borrowers with a hardship. A decline in value is not in itself a hardship (that comes into play when other hardship criterion are met). Not having enough money to go to the beauty shop or on a great vacation is not a hardship. Having more than one home and trying to modify one of the mortgages is not typically viewed as a hardship. Attempting to subsist on less income due to job loss, injury or illness is a hardship and if you ask nicely, your bank will work with you. I believe the low point is the past and prices are holding...for now. It's a good time to explore your options.
I have several strategies for how to best navigate the maze called today's market opportunities. Call me if you need my assistance. 562-572-9870
Monday, April 19, 2010
Understanding the "fixer" market
The Southern California real estate market in which I am most active is in the Los Angeles and North Orange Counties. Currently, I am working with a number of buyers who will utilize FHA financing. This is great for first time buyers (if you have not owned in the last two years, you qualify as first time) with little capital for down payment (only 3.5% down required). What FHA buyers (and some using conventional financing - 10-20% down) need to understand is that the HOME you wish to buy must also qualify for financing. FHA has strict guidelines about condition and the property must be habitable. You may have little after-acquisition capital for improvements. Even if you are "handy", all the home's components and systems must be working upon accepting title to a property. Off-street parking, unbroken windows, working heat and other standard health and safety benefits must be in place in order for the property to qualify. Some foreclosure properties have unfinished improvements - those homes do not qualify for FHA financing unless the work is done in a workmanlike manner (and permit status is not always an issue). This is not meant to burst your bubble. Keep reading, I deliver good news!
I have a few buyers who get "antsy" when one after another property we preview is a waste of time because it doesn't qualify for financing. Many agents do not publish this info in the MLS - that's a drag, but it's the nature of the market to find objectionable properties only when we visit them in person. What we have is a number of properties in our inventory that are most suitable for cash investors - this is the perfect market for them - but this can eventually help FHA buyers. While many investors buy properties at a discount to repair and rent, a growing number buy properties to repair and SELL. This is good news for everyone - the repaired (rehabbed) property then qualifies for financing and the investor has a built-in, approved buyer!
I am in the fortunate position of having both FHA buyers AND cash investors. This means I can identify properties for the investors to buy, repair and sell, based on my buyers' needs. The benefit to the investor is that there is no "wait and see" period when the repairs are completed and ready for market. In fact, the investor may accept a project yielding a smaller profit margin without factoring in the lengthy, expensive marketing time, knowing there is a willing and able buyer "on deck". The benefit to the buyer is that there is no competition for the home (when the buyer acts within the recommended timeline), the property is in move-in condition and deferred maintenance issues are resolved - an FHA worthy property!
While this seems like a no-brainer, there are considerations: the investor needs to be able to purchase the property well below market values, estimation of repair costs have little room for error and neighborhood value changes must constantly be monitored through completion of the project. The buyer must be well qualified initially and the portfolio must remain unchanged (or improved, i.e. increase in wages) during the project. A buyer must also be committed to waiting for completion of the repairs as their primary interaction doesn't take place until the property is ready for market, when the offer is submitted.
Yes, this is a protracted affair (about 2-4 months, depending on the condition of the property). But so is a short sale, where you are purchasing a property with potential deferred maintenance, competing with other buyers and waiting for the bank to accept a price lower than what they are owed on the property. Unlike a short sale, investors typically have no committee to approve your offer. With my program, most likely, the investor knew you wanted it when he purchased it through me. And while it is possible that the investor will receive other offers, in most cases you will have no competition if the transaction was set-up properly.
This is just "out of the box" thinking, but it's working for me and my buyers. The bottom line is, if I know what you want, I can find it. You have to be up-front about your needs, you must be patient, you must be approved for your loan and you must sign a buyer/broker agreement with me. MY SERVICE IS FREE TO BUYERS, as it is paid by the seller. There are no hidden details and no hard work required of you. You have to take the time to speak with me, get approved and enrolled in the program. I don't know how long this will be a viable situation - it is highly dependent on market conditions - interest rates and price increases. Acting soon would be a good thing...
I am always looking for investors to be a part of this program! Let me know your parameters!
For more details about my "Fixer to FHA" program, please contact me at 562-572-9870.
I have a few buyers who get "antsy" when one after another property we preview is a waste of time because it doesn't qualify for financing. Many agents do not publish this info in the MLS - that's a drag, but it's the nature of the market to find objectionable properties only when we visit them in person. What we have is a number of properties in our inventory that are most suitable for cash investors - this is the perfect market for them - but this can eventually help FHA buyers. While many investors buy properties at a discount to repair and rent, a growing number buy properties to repair and SELL. This is good news for everyone - the repaired (rehabbed) property then qualifies for financing and the investor has a built-in, approved buyer!
I am in the fortunate position of having both FHA buyers AND cash investors. This means I can identify properties for the investors to buy, repair and sell, based on my buyers' needs. The benefit to the investor is that there is no "wait and see" period when the repairs are completed and ready for market. In fact, the investor may accept a project yielding a smaller profit margin without factoring in the lengthy, expensive marketing time, knowing there is a willing and able buyer "on deck". The benefit to the buyer is that there is no competition for the home (when the buyer acts within the recommended timeline), the property is in move-in condition and deferred maintenance issues are resolved - an FHA worthy property!
While this seems like a no-brainer, there are considerations: the investor needs to be able to purchase the property well below market values, estimation of repair costs have little room for error and neighborhood value changes must constantly be monitored through completion of the project. The buyer must be well qualified initially and the portfolio must remain unchanged (or improved, i.e. increase in wages) during the project. A buyer must also be committed to waiting for completion of the repairs as their primary interaction doesn't take place until the property is ready for market, when the offer is submitted.
Yes, this is a protracted affair (about 2-4 months, depending on the condition of the property). But so is a short sale, where you are purchasing a property with potential deferred maintenance, competing with other buyers and waiting for the bank to accept a price lower than what they are owed on the property. Unlike a short sale, investors typically have no committee to approve your offer. With my program, most likely, the investor knew you wanted it when he purchased it through me. And while it is possible that the investor will receive other offers, in most cases you will have no competition if the transaction was set-up properly.
This is just "out of the box" thinking, but it's working for me and my buyers. The bottom line is, if I know what you want, I can find it. You have to be up-front about your needs, you must be patient, you must be approved for your loan and you must sign a buyer/broker agreement with me. MY SERVICE IS FREE TO BUYERS, as it is paid by the seller. There are no hidden details and no hard work required of you. You have to take the time to speak with me, get approved and enrolled in the program. I don't know how long this will be a viable situation - it is highly dependent on market conditions - interest rates and price increases. Acting soon would be a good thing...
I am always looking for investors to be a part of this program! Let me know your parameters!
For more details about my "Fixer to FHA" program, please contact me at 562-572-9870.
Thursday, April 15, 2010
California's new tax credit starts May 1, depleted May 10?
This just in from the California Association of Realtors:
The $100 million allocated for California's first-time home buyer tax credits may be depleted in about 10 to 20 days or sooner, according to CAR's Economics Team. California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time buyers and for homes that have never been previously occupied ($100 million allocated for each category - on a first-come, first-served basis).
This is CAR's forecast based on projection of May sales and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a large shift occurs, the California tax credit allocations may be depleted more quickly than indicated.
Remember, the Federal first-time (up to $8000) and move-up (up to $6500) buyer tax credits are still in affect, the qualification being that one must be under contract by April 30th and close escrow by June 30th. With a "perfect storm", it is possible for one to qualify for the Federal and State tax credits, though it sounds as if the California credit may be difficult to acquire. Contact your accountant or appropriate professional for further details. For more details, visit http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
The $100 million allocated for California's first-time home buyer tax credits may be depleted in about 10 to 20 days or sooner, according to CAR's Economics Team. California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time buyers and for homes that have never been previously occupied ($100 million allocated for each category - on a first-come, first-served basis).
This is CAR's forecast based on projection of May sales and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a large shift occurs, the California tax credit allocations may be depleted more quickly than indicated.
Remember, the Federal first-time (up to $8000) and move-up (up to $6500) buyer tax credits are still in affect, the qualification being that one must be under contract by April 30th and close escrow by June 30th. With a "perfect storm", it is possible for one to qualify for the Federal and State tax credits, though it sounds as if the California credit may be difficult to acquire. Contact your accountant or appropriate professional for further details. For more details, visit http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
Wednesday, April 14, 2010
Tuesday, February 16, 2010
Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales
Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales
Ever wonder why it's hard to get a loan modification? Banks stand to gain more through short sales...
Ever wonder why it's hard to get a loan modification? Banks stand to gain more through short sales...
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