Blog - Archive for October, 2011

New FHA certification rules hamper condo sales

October 28th, 2011

If you are in the market for a condo, buying with an FHA loan may not be the best option. Below is article written by Kenneth R Harney explaining some changes affecting common interest developments. Paul Cruz

The rule revisions, aimed at averting losses from delinquencies and foreclosures, have led to thousands of common-interest developments becoming ineligible for FHA mortgages.

October 23, 2011

Reporting from Washington—

Is a little-publicized switch in federal mortgage policy causing huge problems for condominium sellers, buyers and homeowner association boards across the country — even depressing prices and blocking refinancings?

 

Individual owners and realty agents are emphatic that the answer is yes. They say a series of rule revisions by the Federal Housing Administration has caused thousands of common-interest developments to become ineligible for FHA mortgages. This has abruptly shut off loan money for would-be buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments — sometimes 20% or higher versus the FHA’s 3.5% minimum — that they often cannot afford.For its part, FHA says the rule changes it has adopted, which focus on budgets, insurance and financial reserves, have been prudent and are designed to avert losses from delinquencies and foreclosures. But the agency confirms that thousands of developments have failed to obtain or apply for required recertifications under the new rules. Out of approximately 25,000 common-interest developments nationwide with expiration dates for FHA eligibility between last December and Sept. 30 of this year, only 2,100 — just 8.4% — have been approved or recertified by the agency, according to Lemar Wooley, an agency spokesman.

“This has been a nightmare,” said Ryan O’Quinn, a homeowner in a town house community in Calabasas. O’Quinn, a member of the board of directors of his homeowner association, has been trying to sell his condo since May. He has had multiple offers and been in escrow four times — twice with the same purchaser — but because the community’s eligibility has lapsed, buyers who need FHA financing have been rejected by lenders.

In the meantime, O’Quinn has cut his asking price several times for a total of $81,000 — a value decline that his agent, Anna Nevares of Redfin, a realty brokerage, attributes directly to FHA’s policy revisions. Not only did FHA fail to inform the association board about the changes, according to O’Quinn, but every time the board submitted applications for recertification, they were rejected on technical grounds. In one instance, he said, the agency turned down the application solely because the reserve-fund bank account for the association did not carry the words “reserve fund.”

In the Maryland suburbs outside Washington, similar scenarios have been playing out. Nancy Reynolds, executive vice president of Community Paperworks Inc., a consulting firm that assists condo associations, said, “There are entire ZIP Code areas where not one condo can meet the new requirements.” Owners in such projects find themselves unable to either sell or refinance into today’s 4% mortgage market.

Bernard Robinson, an owner of a condo in District Heights, Md., said that because of delinquencies on homeowner association payments in his development that exceed FHA’s limit, he and his wife have not been able to refinance.

“We are qualified to refinance personally,” he said, but because the development is not certified, “our unit isn’t. We’ve exhausted all our options. They’re going to force us to walk away.”

Critics say that FHA did not consult adequately with the condo industry before changing its rules — a charge FHA denies — and contend that the agency did not think through some of its policies. Andrew Fortin, government affairs director of the Community Associations Institute, said the rule that is hampering Robinson’s refinancing — that no more than 15% of the units in a development be 30 days or more delinquent on their association dues — is often impossible for volunteer boards of directors in large projects to keep track of, much less to certify to FHA.

Even worse, according to other critics, the new rules put board members into legal jeopardy by requiring them to sign certifications attesting that the governing documents comply with all local statutes and that they have no knowledge of situations that could cause any owner to become delinquent at some later date. The mandatory certification carries a maximum penalty of $1 million in fines and 30 years’ imprisonment if found to be incorrect. Large numbers of association boards have balked at this requirement, critics say, leading to the drastic drop in certification requests and eligibility.

Bottom line for owners, sellers and buyers: If an FHA loan figures in your plans, first check with the association board. If the development isn’t certified, you are cut off — at least for now — from some of the most favorable mortgage terms in the marketplace.

kenharney@earthlink.net

Distributed by Washington Post Writers Group.

Somethings to know before investing in Real Estate

October 23rd, 2011

The information below is an excerpt of an article that appeared in The Wall Street Journal online written by Karen Blumenthal. I have copied a portion of it here to share with our readers. For the full article follow the link at the end of this blog.

Traditional investments are delivering low returns, and home prices are at bargain levels. Is it time to consider buying some rental housing?

 

GETCO

Illustration by Scott Pollack

Investing in real estate right now can be surprisingly profitable, if everything goes well. Rents are climbing in many areas, and more properties may be coming on the market…

Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges, and many investors lose money. You will want to avoid falling into one of these common traps.

• Mistake 1: Confusing a cheap deal for a good deal.

It is true that you can buy some homes for ridiculously low prices—but that doesn’t mean you can rent them out. Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.

Investors from the San Francisco area often look at the Sacramento market assuming they can get Bay Area-like rents, and end up overpaying, says Robert A. Machado of HomePointe Property Management. He uses several resources, including the website FinestExpert.com, to estimate rents. Other experts suggest canvassing apartments nearby to see not just their rates, but whether they are offering special deals, like a couple of months of free rent.

• Mistake 2: Overlooking key costs.

Knowing the potential rent isn’t enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

• Mistake 3: Forgetting that time is money.

In real estate, “time is your biggest enemy,” says David Hicks, co-president of HomeVestors of America, a franchiser whose motto is “We Buy Ugly Houses.” You lose money when your property is empty, whether you are painting it or between tenants. You also lose if you buy in the fall and can’t replace the roof until spring. You may be better off accepting a lower rent than waiting for a higher-paying tenant.

• Mistake 4: Assuming you will sit back and watch the rent roll in.

“When you become a landlord, you become a rent collector,” says Mark Kreditor of Get There First Realty, which manages 1,600 rentals in the Dallas-Fort Worth area.

Just like homeowners who can’t pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property. Mr. Kreditor says that once or twice a month, a tenant removes a home’s copper tubing on the way out the door to sell the copper for its meltdown value.

You will need to screen prospective tenants carefully—or pay someone to do it for you.

• Mistake 5: Underestimating repair costs.

As with all homes, you will be making lots of repairs. You may find wood rot or mold when you remove that cracked bathtub. Carpet in rental homes typically must be replaced every five years, and you may have to repaint after every tenant. Tony A. Drost, president of the National Association of Residential Property Managers, or Narpm, suggests setting aside six months of expenses so that you will have funds if a major repair is needed.

• Mistake 6: Assuming that owning a rental is the same as owning a home.

You might put up with flaws in a home that a renter wouldn’t tolerate. In addition, many states and communities have strict (and complex) laws for landlords, even if you own only one property. A property manager can handle most of the headaches, but you should expect to pay one up to a month of rent for finding and screening tenants—and up to 10% of the monthly rent for management fees.

For complete copy of article written by Karen Blumenthal copy and paste this link – http://online.wsj.com/article/SB10001424053111904103404576558484074477822.html

Short Sale process takes a turn for the better

October 19th, 2011

Not long ago you could empty a room in one second by saying two words “Short Sale”. Today pretty much everyone is familiar with the term and Real Estate agents are knowledgeable of how the process works. Having completed many Short sale transactions with Bank of America, and with more in the works, I can personally vouch that they have become easier to work with. They use an order management system called Equator. This platform requires interaction from both the seller and the agent loading up documents and completing tasks assigned by the bank personal. There are various stages to the process and communication is clearly organized in the module as well as history of tasks and uploads. Where Equator was lacking was in the nature of the human behind the scenes and this is where I have noticed most of the change. Where as over a year ago there was apparently no human element behind the generic system of messaging and requests, there is know a friendly caller, someone who will listen, consider the individual situation and offer flexibility in working within the system toward a successful close. Across the board there has been increased motivation to get the Short Sale done and this opens up a lot of opportunity for buyers. If a property is a short sale there is no reason why you should not seriously consider offering on it. Ask your agent to find out at what stage the seller is at in the negotiation with their lender and determine whether it is the right thing for you.

In Escrow – Buyer Green Light

October 17th, 2011

Years after the Real Estate downward spiral we are all well versed in the new vocabulary, re: foreclosure, REO, short sale, sub prime and the secondary market, FHA vs. conventional loan etc. Gone are the days (we hope) when one just signs off on a contract with little knowledge of its contents. Buyers search for property prepared with area listings displayed on their i-pads, their loan pre-approvals ready to launch, and knowledge of area comparables in hand. They are carefully assessing the value of the property they are viewing, asking about any repair work required, what is the cost of the escrow, what are the maintenance costs, utility costs, property tax, also considering commuting cost, quality of schools and neighborhood.

Turning a quick profit is no longer the driving force; we have shifted from one extreme to the other. Now, a property may lumbar on the market while it is carefully assessed and the family consulted. Being cautious and completing ones due diligence is great but while crossing “t” and dotting “i” opportunities could be missed. In some areas prices are already on the rise, investors who have been purchasing dilapidated properties, refurbishing them and putting them back on the market could be one reason. These restored properties have been closing escrows and will be the comparables used to assess the value of the house you’re interested in buying. We are bombarded every day with predictions and analysis supporting a continued decline in prices. But at the end of the day the market will recover, lending will improve, inventory will go down and prices will go up.  If you’ve seen a rehabilitated property sell in your neighborhood it could mean it will already cost a buyer more to be your neighbor. This is great news for homeowners or sellers and a green light to buyers.

Historic Cultural Landmark in Echo Park, Los Angeles Ca.

October 12th, 2011

This property was published in L.A. Metro Home Hot Picks month of August. Today it is reduced to $799,500.00. Do you need buyer representation for this property? Contact L.A. Metro Home for more information.

Great opportunity to own a Los Angeles Historic Cultural Landmark in Echo Park California.

817 Glendale Boulevard, Echo Park, REDUCED TO $799,500.00

Property is a 3 bedroom 4 bathroom with approximately 2820 sq. ft of living space on a 5750 sq. ft lot. Sited high above the street, the house looks out to the Echo Park fountain. There is an office, den area and master bedroom downstairs and  2 bedrooms upstairs. Two of the 4 bathrooms are half baths. House offers a very large living room with wood beam ceiling and fireplace, a formal dining room, breakfast room, plus a family room. There are sliding doors leading out to a covered patio. Built in 1937 for a Pastor of the Angelus Temple, just down the street from the site, many of the original details such as tiles, beams and some fixtures are still in place. As with many homes of the era, time has taken its toll, the home is a fixer. Any work to be done should be comply with the L.A City Conservatory guidelines. The property is being sold in its “as is” condition, having sold only once in 1962 to its current ownership, this is a prize to own and restore to its simple grandeur.

L.A. Metro Home Hot Pick – Beverly Hills Post Office REO

October 4th, 2011

This weeks L.A. Metro Home Hot Pick takes us up Benedict Canyon to Hutton to Blantyre Dr., we drive up wide streets surrounded by well groomed homes set up against a lush mountain setting. In a short while we arrive at 9767 Blantyre Dr tucked away in the Beverly hills Post Office area of Los Angeles. This traditional style home built in 1965 has had many recent upgrades, the large back yard is the only area left for your final touches.

Enter the house through a grand foyer where attractive wrought iron railings frame the stairs leading up to the 2nd story. On the main level we have the living room with fireplace, dining area, open kitchen with sitting /TV area and a bonus space that can be used as office or maids quarters. A combination of wood and limestone floors are used throughout. There is a powder room at entry area adjacent to the step down living room with fireplace. The living room is open to the dining area set next to the kitchen.

The kitchen has a center island and opens out to a den area with large glass doors that lead out to the back yard. There is central air and heat, fresh paint, stone counter tops, recessed lighting, alarm system and a two-car garage with washer and dryer hook-up. The second level of the house has a large master bedroom with two bathrooms, a his and hers, as well as, two walk in closets. A double glass door opens in to a Juliet balcony offering views of the back yard and mountains.

There are two other bedrooms on this level each with their own bathroom and views to the backyard and mountains dotted with pine trees and other mature foliage. The flat back yard offers a multiple of possibilities; you can add a pool and create a landscape of beautiful gardens. Set on a over 20,000 sq. ft lot there is plenty of space to create your own private oasis. Contact L.A. Metro Home to schedule a private showing of this exceptional property, full of potential and  priced only at 1,199,000.0