WHY WE NEED MORE INVESTORS IN THE MARKET & WHY FLIPPING IS GOOD

We need to have more investors in the market and we need them flipping properties. There, I said it. I know it won't be long until the riotous crowds start descending on me. But before they do, let me explain. Investors aren't the scourge of the earth. Well, at least not most of them. They are looking to buy an under-valued asset. No different than a stock or a bond fund. And here's why investors are helpful in this market:
1. There are hundreds of thousands of REO and short sale properties on the market. Values will not be going up until demand at least equals supply. In the ever tightening lending markets, investors fill a void by paying cash. It's very true that they may take a potential buyer out of a transaction, but that buyer should be putting offers in on multiple homes, thereby taking two properties off the market.
2. Investors buy up a lot of the very distressed (read: completely trashed) properties. These are units that, due to health and safety issues, can not be financed anyway. Investors buy these up cheap, and fix the inherent problems. At this point,the unit is now gone from total disrepair to some form of turn key for a buyer. That subsequent buyer will get into a home and not have to spend thousands doing repair work they would other wise need to. And I'm pretty sure the neighbor living next door doesn't mind a lawn that actually has grass and windows not made of plywood.
3. Investors buy/sell or buy/rent repeatedly. One by one, that gets more properties out of the hands of the REO listing agents and non-responsive banks we've all grown so fond of dealing with.
When you put all of that together,investors help stabilize the market. Since I see the agitated crowd starting to mill outside now, I will make one more point before the horse mounted,riot police descend. In an effort to quell investor purchases/flips ,FHA, Fannie Mae & Freddie Mac(the latter two having made repeated, brilliant decisions to the point of government receivership) have mandated that no property can get a loan on it if title has changed within the previous 90 days. In fact, an offer can not even be written prior to the 90th day. Hmmmmmm. That law might have worked really well 3-6 years ago, BEFORE the appreciation horse left the barn.THAT'S the time investors needed to be reigned in. THAT was the time when demand far outstripped supply. THAT'S when everyone was on Easy Street. It would have made great sense to calm the market by making "flippers" hold their investments for 90 days. But in the market today, it makes no sense. If your house is worth less that it was 3 years ago, raise your hand. 1...2...1,453,312. I count fast. The point is, why take away a tool that can actually help stabilizeand start to appreciate an asset that you are either living in, or hope to buy? I think it's time to conclude this post. It's some what unnerving to see yourself burned in effigy.

HERA RAISING

If you applied for a loan after 7/30/2009, there is a new, and as of yet, little known law in effect that has the potential to cost you a lot of money. Hopefully, that opening line grabbed your attention. The new law is called the Housing and Economic Recovery Act, or H.E.R.A. Sure, it sounds wonderful. Who would argue with Housing and Economic Recovery? If fairness, there are lots of parts of this law that are beneficial. And while the law was designed to protect the public from predatory lending, it instead, serves to delay loan closings.

Here is my opinion on some of the flaws:

1. The federal government wants you to be aware of what your A.P.R. is, and if it's gone up since your loan application was taken. Sounds good. But here's a couple of questions. Do you know what your A.P.R. is? Have you ever known? Did you know it is different than your interest rate? If you are like 99.9% of all Americans, the answers are "no". The link that follows, is a pretty good definition... have a look . OK, are you still awake? That probably still didn't make a lot of sense. FLAW #1: The government wants to protect you from an increase in your A.P.R., yet they have never come up with a good definition for it. The federal government came up with this rather useless number in...get this..1968. Yes, an A.P.R. has been on mortgage loans for 41 years, and most people wouldn't know it if it was written in flashing neon red lights.


2. If your final A.P.R. increases by more than .125(1/8)% from your initial loan disclosures to your final ones, you must be given an additional six business daysto decide if you still want your loan. That actually sounds kind of good. But wait. How does that figure get increased? Well, the most simple ways are if interest rates went up from the time you started until the time you were ready to lock your loan. Or how about if the sales price changed, maybe you decided to change loan programs all together.Any of those very simple, normal things could very easily trigger that extra waiting period. So how does this effect you? FLAW#2: In order to avoid this extended wait period, your bank, mortgage broker will likely show a marginally higher interest rate and/or loan costs in your initial disclosures. Keep in mind, the waiting period is only triggered if your final A.P.R. is higher. FLAW 2A: The odds of your initial disclosures being higher actually will increase with the new law.


3. Once the lender has or package to start with, you must be sent(read: you must wait) and additional 4 business daysbefore your appraisal can be ordered. The premise is so that you will have three business days to receive the previously mentioned flawed disclosures in your mail...not your email,mind you. You're mail..as in post office. FLAW#3: Does the government not know about this new thing called the Internet?

Now here's where the numbers meet the road.You potentially have just enountered an additional 10 business days of waiting. Business days don't count Sundays,folks.And in buying a home, you have two VERY important dates to be aware of. The first is your inspection contingency period. Basically that is the number of days you have to inspect a property once you are in escrow. During that time, you can potentially cancel the transaction if you need. In a normal market here in California, that time period is 17 days. In this fun filled, wacky foreclosure market, it's quite common for the seller to lower that to 10 days. OOOPPSSSSSS. See the problem with the math? Your contingency period could effectively be up while you are waiting for "T's" to be crossed and "I's" to be dotted. Don't think for a minute the large bank that you are negotiating with as the seller gives one rip that you can't meet their time frame. At that point, there is a risk of forfeiture of your initial deposit.

The second date in all of this is the time frame you need when locking in your interest rate. Once in escrow,a typical loan could actually close in thirty days. Most lenders would lock your loan for no additional charge for 30 days. THESE are calander days.And trust me, Sundays count. With all the extra time afforded you for your own "protection", you will no longer be able to close in 30 days. Some lenders I use won't even offer a 30 day lock unless your final loan papers are drawn. Here's the gem in this one. A 45 day lock could cost you an additional .5% in your loan fees(On a $200,000 loan, that's an additional $1,000). $1,000 sure seems like a lot to protect you from an A.P.R. that most people don't know about to begin with.

In closing, there is a lot wrong with the real estate and mortgage industry. Some very much the fault of business. Some also the fault of buyers and sellers. The government did need to step up its oversight. However, it's a slippery slope when it also starts mandating how a free enterprise industry and their clients must go about day to day functions. If you are interested in buying or refinancing, please take time to familiarize yourself with the H.E.R.A law. There are some wonderful things in it. But the parts I've outlined are some potentially detrimental aspects.

HVCC-HOW TO DELAY YOUR LOAN IN 1 EASY LESSON

What does HVCC stand for, and what it is? Well, it stands for Home Valuation Code of Conduct. And it's Fannie Mae & Freddie Mac's (this does not appy to FHA) attempt at sending appraisers to their rooms for being bad. The assumption is that because lenders/brokers and appraisers had an actual working relationship, that appraisers would risk their licenses and give that lender the value needed to do a loan for a client. Did that happen? Of course it did. There's bad appraisers, just like there's bad lenders,bad post men and so on. But appraisals are an opinion of a range of value, most generally given by a licensed,qualified appraiser. The guy walking around your house with a little wheel on a stick isn't Bernie Madoff. And he probably didn't cause the real estate bubble to burst. But he is a convenient scape goat. Until HVCC became a reality, you most often had an appraisal ordered by either your lender or mortgage broker. And yes, there was this terrible thing called a rapport established. How dare two professionals try to work together to get your appraisal done. In my years, that rapport didn't lead to the 3 walled hovel down the street getting appraised at $400,000. It led to things like an appraiser meeting a client after normal hours,looking at comparable sales to establish a general value before the appraiser took your check for $350, and things of that nature.
But now in the infinite wisdom of those with the least amount of it, when you order an appraisal, it is given to an appraisal management company. The theory is that by using an intermediary, those bad ole' appraisers won't be able to get away with their shenanigans anymore. 'See the management company will then contact an appraisers on their "list". The appraiser may be from the local area...maybe not. And almost assuredly, the management company's knowledge of that appraiser is the resume he turned in, and a license search. The management company will then charge you between $400-$500 in ADVANCE...on your credit card. Because obviously, an appraiser couldn't be trusted with collecting a check at the door. Now here's where it gets very interesting.
Remember in the good old days an appraisal cost around $350? Well now, for the right to baby sit appraisers, the management companies charge you more. And the appraiser(who, by the way, is generally self-employed) may get $200-$250 of that fee, for doing exactly what he used to get $350 to do. Hmmmmm. Guess what quality of work and responsiveness you may see? And it gets better. Because lenders don't all use the same management companies....here it comes......they probably won't accept the same appraisal. Which means, if you decide you want to go to a different lender, you have to pay all over again. In the words of Homer Simpson....DOHHHHH!!!
The one silver lining in all of this. A bill, H.R. 3044, granting an 18 month moratorium on the wonderful world of HVCC has just been introduced... Click Here to read an article on it. Hopefully it will get appraisers out of their Time Out Chairs and back to doing appraisals like they should.

WANT TO TEST DRIVE YOUR HOME? GET A HOME INSPECTION

There's one part of a real estate transaction that often gets overlooked. Or worse yet, in the interest of saving $300-$400, isn't done at all. That is a home inspection. Sometimes, it's confused with an appraisal. An appraisal is a valuation of a property done by an appraiser, and generally done in conjunction with a purchase money loan or a refinance. Its purpose is to give an accurate value range to the lender and client. In California, appraisers are governed by the OREA .

A home inspection is a valuation of property condition. It is generally done as part of a buyer's contingency period for investigating a property being purchased. Basically, it gives a buyer the opportunity to test drive the home they are about to buy. A lender does not require a home inspection. A very important note here. In California,as in most states, there is no formal licensing requirement for home inspectors. Kinda' scary,huh? However, there is a recognized association that oversees those inspectors with a greater level of education and commitment. It is the NAHI.





So what do you get for your $300-$400? Well, you get a general overview of a property's condition from crawl space to rafters. Keep in mind that an inspector may not be a contractor, and isn't being paid for those services. Instead, consider him a trained eye looking for hidden problems. Those problems can range from electrical, water leakage, pressure, health and safety to grading, plumbing and a host of other potential issues.
Even in a normal real estate market, almost any(including new) properties have some issues. And if your current market is like ours in The Inland Empire area of Southern California, most of the properties you are seeing are "distressed". That's a polite word for beat up.
So why would it be the best $300-$400 you loose? Well, if your home inspection reveals major problems you don't want to inherit, or the seller won't agree to fix, you have a right to cancel your contract. And keep in mind, no seller is bound to fix anything you discover.
If you do happen to live in this general area, I do recommend an inspector for you to consider.
His name is Jim Turner, and you can visit his website by clicking here. And to see what a home inspection looks like, click here .

HIGHLAND POOL HOME-REGULAR SALE

***JUST LISTED***

1565 Central Avenue,Highland

4 Bed/2 Bath/1330 Sq.Ft.

$165,000

Click here for more information

SHOPPING FOR A LOAN LIMIT

In today's market, it's not so much a Tale of Two Cities, as it is a Tale of Two Loan Limits... or if you count FHA loans, make it Three. There are basically three loan sizes out there. Instead of Small, Medium and Xtra Large, we have FHA, Conventional, and Jumbo.
FHA loans are those that are direct government loans. They tend to be more forgiving of past credit problems, allow a higher debt ratio and a lower down payment. The loan amount FHA allows varies county to county,and state to state. To find out what your FHA loan limit is,
click here .
That would be the "Small". Relative to everything else, this is the single most popular, and easiest home loan to get.
Next is the Conventional, or "Medium" loan. The term "Conventional" is kind of a catch phrase for those loans backed by FannieMae & FreddieMac . Both of them have a maximum loan limit of $417,000. While more restrictive than what it used to be, this money is still flowing into the home loan market. Both FHA and Conventional loans are most often 30 or 15 year, fixed rate loans that offer interest rates in the 5%-5.5% range.
Now the hardest type of loan (some might say almost impossible) to get right now is a Jumbo ,or "Xtra Large", loan. These are for home loans above $417,000. They come at a much higher interest rate and a much larger down payment. I saw a very interesting article in today's L.A. Times that hi- lites this point. See the article here.
So what does this all mean to you ( he asked rhetorically)? Well, if you are selling your home in a short sale or non-distressed sale, keep in mind someone has to buy your home. And unless they have cash, they have to get a loan. It may be wise to set your price close to that $417,000 range so that the buyers have a much better shot at getting financed to buy your home.
Now, if you're a buyer, guess what? You have to shop at the same loan store as everyone else. Do you want to try to find a loan that very few are getting, or would you rather get your financing in order and take advantage of an incredible opportunity to buy a home at the lowest price in years?