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How Did Home Sellers Handle Multiple Offers

April 17, 2014

How_Did_Home_Sellers_Handle_Multiple_Offers-300dpi
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More homeowners are becoming first-time landlords

April 11, 2014

 

Painting Angela Smith's home

Scott Riddle, left, helps his friend Angela Smith paint her El Sereno home. Smith is moving out of town but decided to rent her home out rather than sell it. (Katie Falkenberg, Los Angeles Times / April 5, 2014)

 

By Tim Logan,  latimes.com

 

Instead of selling their home when they buy a new one, many move-up buyers are keeping the old place and renting it out, real estate experts say.

The real estate market has long worked on a simple system: If you want to buy a new house, sell the old one and use the equity for a down payment.

But the last few years of low ownership costs and rising rents have some move-up buyers trying a new approach: Buy the new house. Keep the old one. And rent it out.

Real estate firm Redfin recently asked 1,900 prospective home buyers nationwide what they planned to do with their old house when they bought a new one. As you’d expect, the majority said they would sell. But 39% said they’d rent it out. In Western markets like Los Angeles that have seen big price growth lately, the percentage was even higher.

“We certainly didn’t expect that,” said Ellen Haberle, Redfin’s real estate economist and the survey’s author.

It’s the first time that Redfin has conducted this kind of study. But real estate agents and property managers say they’re seeing the same thing: a noticeable uptick in the number of home buyers who want to rent out their old place.

“We’ve had more calls in the last two months with situations like this than we’ve had in two years,” said Trevor Henson, managing partner at First Light Property Management in Manhattan Beach. “It is definitely on the upswing.”

If this trend holds, it could mean even fewer homes for sale in an already tight market. But for a certain type of homeowner, becoming a landlord could make a lot of sense.

Rents are up, having climbed in each of the last three years to now average $1,435 a month in Los Angeles County, according to USC’s Casden Multifamily Housing Forecast. They’re expected to climb nearly 4% more by 2015.

Buyers who bought at the bottom of the market in 2009 got a bargain. Then came years of opportunity to refinance into record-low interest rates. That means many owners can rent out their home for more than it costs them each month, even with taxes and other ownership costs figured in.

With the tenant covering the note, they can build equity — especially if home prices continue to rise.

“It’s a market-based decision,” Henson said. “They know they can get really high rents right now. If I’m locked in on a 30-year fixed [mortgage] at 4%, and if home values are going up, it can make a lot of sense.”

It did for Brian Darcy. The 36-year-old and his wife recently moved to North Carolina to be closer to her family. Instead of listing their three-bedroom in Manhattan Beach for sale, they signed with First Light and put it up for rent. Within a week they had a tenant and a lease that paid more than enough to cover the mortgage, Darcy said.

“The confluence of events kind of blew my mind,” he said.

Darcy and his wife bought the house in 2010 and always planned to move to something bigger. With two growing children and regular visits from relatives, it was getting to be that time. But the houses they were eyeing in Manhattan Beach were going up in price just as fast as theirs was.

They had enough savings for a down payment in North Carolina, and he could work from there as easily as in California. So off they went. They’re looking for houses now and finding that their money will go a lot farther in their new home.

The timing, Darcy said, couldn’t have been better. He estimates that his house in Manhattan Beach is worth one-third more than he paid for it four years ago, and he refinanced into lower interest rates. Now rents are rising.

“We bought at a good time,” Darcy said. “That’s what makes the mechanics work.”

Many of the new landlords are affluent and financially savvy, Haberle said. They’re not necessarily in it for the long haul, but they see a chance to profit right now.

“These amateur landlords aren’t people who are doing this for a living,” she said. “They just kind of happened into this opportunity.”

Vanessa Ginn, president of Platinum Property Management Group in Sherman Oaks, said she’s seeing a lot more people considering the idea and looking for help. But being a landlord has its challenges, including fair housing laws, tenant screening and the potential for costly repairs. It can be particularly difficult for first-timers or homeowners who move out of town.

“You don’t always know what’s going on with the property,” Ginn said. “Your tenant can tell you something that’s going on that you can’t see.”

Still, Haberle said, many new landlords that Redfin’s agents encounter are skipping the professional manager — and the fee they charge, typically 10% of the rent — and doing it on their own, perhaps with the help of a trusted neighbor. That’s what Angela Smith is planning.

The TV show that Smith works on is moving soon — either to Chicago or Atlanta — and she’s going with it. But if the show doesn’t work out in the long term, Smith wants to be able to come back to to her home in El Sereno.

“I’d like to hold it for a while and see where things go with work,” she said. “I don’t know that I’d be able to buy back in and get what I have.”

Smith owes more on her home than it’s worth, so selling her house would be tricky. But a mortgage modification lowered her monthly payment enough that she figures she can afford to rent it for $2,500, which is competitive in the neighborhood and enough to cover payments, taxes and upkeep. She’s been painting the place and fixing it up, and one Craigslist ad generated half a dozen leads.

Smith’s not yet sure if she’s going to buy a house in her new town. That depends on how the job goes — and the landlording.

“It’s nothing I would jump into,” Smith said. “I need a little time see how well I can manage this.”

The wait-and-see approach is common, Haberle said. The conditions that make renting attractive could easily change. If rents fall or home prices rise enough, selling could be the smarter play.

But some of these new landlords are playing a long game, like Darcy. He loved living in Manhattan Beach, and if he sold his house there now, he might not be able to buy another one in the future. His hope, he said, is to move back there someday — after he’s collected rent for a good long time.

“My lofty goal,” he said, “is to retire into that house.”

Copyright © 2014, Los Angeles Times

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5 Things to Know about Getting a VA Mortgage

April 4, 2014
Photo: VeteransToday.com

Photo: VeteransToday.com

By Polyana da Costa, Bankrate.com

As banks tighten lending standards, demand has increased tremendously in recent years for Veterans Affairs mortgages, known as VA loans.

The VA loan remains one of the few mortgage options for borrowers who don’t have down payments. Available to more than 22 million veterans and active military members, VA loans are somewhat easier to qualify for than conventional mortgages.

The U.S. Department of Veterans Affairs is not a direct lender. The loan is made through a private lender and partially guaranteed by the VA, as long as guidelines are met.

The VA has guaranteed nearly 500,000 loans this year, says John Bell, assistant director of loan policy at the VA. That’s 30 percent more than the number of VA loans issued last year and nearly three times the number of VA loans issued in 2008.

If you think you may be eligible for a VA loan, here are some must-knows about the program.

ELIGIBILITY: Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.

Active-duty members generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.

“Most reservists are qualifying under active duty,” says Michael Frueh, loan guaranty director for the Department of Veterans Affairs.

Reservists, members of the National Guard and active-duty members generally are eligible after 90 days of service during war periods.

“If you were on any type of foreign soil, more than likely you are eligible,” says Grant Moon, a veteran and president of VA Loan Captain Inc., a loan referral company.

Potential borrowers must obtain a certificate of eligibility before applying for a loan. The form can be submitted online.

ADVANTAGES OF A VA LOAN: The days of no-down-payment mortgages are long gone, but not for veterans. Loans guaranteed by the VA can be obtained without any down payment.

“That’s a huge plus,” Frueh says.

Another plus: A VA loan doesn’t require mortgage insurance, as do Federal Housing Administration and conventional loans with less than 20 percent down payment. The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who takes a $200,000 FHA-insured mortgage pays more than $200 a month for mortgage insurance alone.

“And with a VA loan, you don’t have to save all the money you would have to save for a conventional loan,” Moon says.

FEES: Although the costs of getting a VA loan are generally lower than other types of low down payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and the type of veteran.

A borrower in the armed forces getting a VA loan for the first time, with zero down payment, would pay a fee of 2.15 percent of the loan amount, Frueh says. The fee is reduced to 1.25 percent of the loan amount if the borrower makes a 10 percent down payment. Reservists and National Guard members normally pay about a quarter of a percentage point more in fees than active-duty members pay.

Those using the VA loan program for the second time, without a down payment, would pay 3.3 percent of the total loan amount.

“And if you receive disability compensation, the fee is waived,” Frueh says.

UNDERWRITING REQUIREMENTS: Veterans Affairs does not require a minimum credit score for a VA loan, but lenders generally have their own internal requirements. Most lenders ask for a credit score of 620 or higher, Moon says.

“There are players that would go lower, but they would probably charge a higher interest rate,” he says.

Borrowers must show sufficient income to repay the loan and shouldn’t have excessive debt, but the guidelines are usually more flexible than for conventional loans.

“We always tell underwriters to do their due diligence, but this is a benefits program, so there is some flexibility,” Frueh says.

VA guidelines allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure.

“We look at the whole credit picture, what was the reason for the credit bankruptcy, and where the borrower is now,” Bell says.

VA loans are available only to finance a primary home. A VA loan cannot be used to purchase or refinance vacation and investment homes.

The limit on VA loans vary by county, but it’s $417,000 in most parts of the country and up to $1,094,625 in high-cost areas.

WHAT IF I STOP PAYING THE MORTGAGE? Another advantage of a VA loan is the assistance offered to struggling borrowers. If the borrower of a VA loan can’t make payments on the mortgage, the VA can negotiate with the lender on behalf of the borrower.

“We have dedicated staff nationwide committed to helping veterans who are experiencing financial difficulty,” Bell says.

VA’s financial counselors can help borrowers negotiate repayment plans, loan modifications and other alternatives to foreclosure, he says.

Last year, the VA helped about 73,000 veterans avoid foreclosure, he says.

Regardless of whether they have VA loans, veterans who are struggling to make their mortgage payments can call 800-827-1000 for assistance.

©2014 Bankrate.com

Distributed by MCT Information Services

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Distressed Housing Market Shrinks Dramatically in California

March 28, 2014

distressed housing shrinksVastly improved home prices over the past five years have changed the landscape of California’s distressed housing market, which is now just a fraction of what it was during the Great Recession, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) found recently.

In January 2009, 69.5 percent of all homes sold in California were distressed, which includes short sales and real estate-owned (REOs) properties. Five years later, that figure has shrunk to 15.6 percent. More specifically, REOs comprised 60 percent of all sales in January 2009, while short sales made up 9.1 percent of all sales but rose to as high as 25.6 percent in January 2012. Short sales currently make up 9.2 percent of all sales.

During the same time period, California’s median home price has soared more than 64 percent from $249,960 in January 2009 to $410,990 in January 2014.

“The dramatic drop in the share of distressed sales throughout the state reflects a market that is fully transitioning from the housing downturn,” says C.A.R. President Kevin Brown. “Significant home price appreciation over the past five years has lifted the market value of many underwater homes, and as a result, many homeowners have gained significant equity in their homes, resulting in fewer short sales and foreclosures.”

The statewide share of equity sales hit a high of 86.4 percent in November 2013 and has been above 80 percent for the past seven months.

In some of the hardest hit California counties, the distressed market in January 2009 was 93.6 percent in Stanislaus County, 93 percent in San Joaquin County, 89.5 percent in San Benito County, 86.1 percent in Kern County, 85.6 percent in Sacramento County, 84.2 percent in Fresno County, and 83.6 percent in Monterey County. The distressed market now has shrunk to 24.8 percent in Stanislaus, 25.1 percent in San Joaquin, 17.5 percent in San Benito, 18.4 percent in Kern, 19.9 percent in Sacramento, 26.3 percent in Fresno, and 16.9 percent in Monterey counties.

Of the reporting counties, San Luis Obispo, Orange, Santa Clara, and San Mateo counties held the lowest share of distressed sales in January 2014 at 10.2 percent, 9.5 percent, 7.7 percent, and 6.8 percent, respectively.

For more information, visit www.car.org.

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Top 10 tips for mortgage borrowers in 2014

March 21, 2014
Clock is ticking on mortgagesBy Polyana da Costa • Bankrate.com

The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.

These 10 mortgage tips can help you with your mortgage decisions in 2014.

1. Document your finances.

Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations go into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.

Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can’t prove where the money came from.

2. Lock a rate as soon as you can.

Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.

3. Refinance now — if you still can.

Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5 percent interest on their home loans might still have an opportunity.

If you think you may be able to save with a refinance, but you are not sure, it doesn’t hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.

4. Buyers, use your bargaining power.

As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.

5. Learn your rights as a borrower.

Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.

6. Take good care of your credit.

It’s nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.

7. Don’t overspend.

Lenders don’t want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don’t qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43 percent of your income.

8. Consider alternative mortgage options such as ARMs.

Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.

A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as one percentage point lower than on fixed-rate loans.

If you are not sure for how long you plan to keep the house, a fixed-rate loan is probably the better choice.

9. Considering an FHA loan? Reconsider.

FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.

10. Don’t panic.

Yes, mortgage rates will likely climb in 2014. But don’t panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.

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Fannie Mae offering cash incentives to some home buyers

March 13, 2014

Fannie-Mae

By Kenneth R. Harney, LA TIMES

To reduce its inventory of foreclosed homes, Fannie offers qualified owner-occupant purchasers cash incentives toward closing costs of 3.5% of the purchase price.
If you’re planning to shop for a home in the next few weeks, here’s an early spring buying season come-on that just might save you some money if you qualify.

Fannie Mae, the largest mortgage investor in the country, has a bulging portfolio of houses acquired through foreclosures nationwide. About 31,000 of these properties are listed on its HomePath (www.homepath.com) resale marketing site. To move them quickly out of inventory, Fannie temporarily is offering qualified owner-occupant purchasers — but not investors — cash incentives toward closing costs of 3.5% of the purchase price. But you have to submit your initial offer no later than March 31 and close by May 31.

What sort of houses are we talking about? Visit the site and you’ll see. They run the gamut — from a one-bedroom condo in San Diego to a four-bedroom, four-bath single-family home in suburban Montgomery Village, Md. Some states have thousands of HomePath listings online: Florida has nearly 12,000; Illinois, 4,360; Ohio, 2,800; California, more than 2,300; Washington state, nearly 1,800; and Nevada, about 1,400. Asking prices range from $30,000 to $600,000 or more. On a $400,000 house, the 3.5% closing cost incentive would amount to $14,000.

To ensure that buyers who intend to occupy its homes get an opportunity to fully check them out and bid without competition from investment groups offering all-cash deals, Fannie has instituted what it calls a First Look program. It essentially prohibits bids from investors on properties during the first 20 days after listing (30 days in Nevada). After that, investors are free to jump in. Each First Look listing has a countdown clock attached to it that indicates the number of days remaining before bidding is opened to all comers.

The new 3.5% closing cost offer is available only during active First Look periods from mid-February through March, so there’s not a lot of time to get involved. Bidders will need to indicate upfront that they want to be considered for a closing-cost discount.

Who is eligible? First, you’ve got to be a bona fide owner-occupant purchaser and commit to live in the house as a primary residence for at least a year. You’ll need to fill out a certification to that effect that can be found on the HomePath site. Properties are not available in all states.

You don’t have to be a first-time buyer, though the Fannie program is likely to attract substantial numbers of them. The 3.5% closing cost discount helps with one of the biggest problems faced by first-timers — upfront cash.

As with most home purchases, you’ll need to be able to qualify for mortgage financing. Though Fannie may end up owning or securitizing the loan you obtain, it won’t be financing you directly. On HomePath purchases, you shop for a mortgage just as you would on any other house. Ideally, you nail down a financing source and get prequalified for mortgage money up to a specific dollar limit at current interest rates. If you’ve already located a First Look property and qualify, the lender is likely to take the 3.5% closing cost incentive into consideration in evaluating your application.

While you shop on HomePath, however, keep this important factor in mind: These are foreclosed, previously occupied homes. Though some of them are repaired, painted and spiffed up before they are listed, many could use some additional work. They are sold “as is” and that’s built into the pricing. Fannie identifies what it calls “improved” properties on the HomePath site — those that have undergone significant repairs — with either the “Home Depot” logo (when repairs have been made by contractors from that company) or a hammer and roof symbol (when repairs have been completed by independent contractors hired by Fannie).

If you can’t find the First Look house you want, don’t give up. Freddie Mac, the other giant federal mortgage investor, also has thousands of foreclosed homes that it’s trying to dispose of — and its own First Look program — at its HomeSteps (www.homesteps.com) marketing site. Though Freddie currently has no closing cost incentive offer, it does provide a $500 allowance toward the purchase of a home warranty policy, and it promotes special mortgage financing options on houses in some areas. If you qualify, that could mean a loan with no mortgage insurance, no appraisal and a 5% maximum down payment.

Definitely worth checking out.

kenharney@earthlink.net

Distributed by Washington Post Writers Group.

Copyright © 2014, Los Angeles Times

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Real Estate @ a Glance: February 2014 Edition

March 3, 2014

Here is the most recent information on the San Diego housing market. For specific information on your neighborhood or a market analysis on your home, please send me an email or call me at 619-325-4192.

FEBRUARY  2014 :: SAN DIEGO ASSOCIATION OF REALTORS®

- Comparative Sales – Existing Homes – January 2014

Attached Homes

  • Total Sales Volume: $250,876,459 = 21.72 % higher than one year ago
  • Average Sales Price: $367,315 = 19.94% higher than one year ago
  • Average days on the Market: 61 days = -22.78 % lower than one year ago

Sold Real Estate San Diego

Detached Homes

  • Total Sales Volume: $793,043,651 = 1.25% higher than one year ago
  • Average Sales Price: $644,227 = 28.23 % higher than one year ago
  • Average days on the Market: 55 days = -24,65% lower than one year ago

Median Sales San Diego Real Estate

The following graphic charts San Diego County’s market data for Active, Contingent and Pending listings over the last year.

San Diego Active Sales Real Estate

  • Existing Home Sales: $363,640 = -13.8% lower than one year ago
  • Median Home Price: $410,990  =  22.1% higher than one year ago
  • Median Days on the Market: 44.3 days = 20.7% higher than one year ago
  • California Housing Affordability Index: 32% = -16% lower than one year ago

For up-to-date information on the market, please contact me.

San Diego County market statistics provided by CAR and SDAR.  

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