The little-known way to buy a home with almost no cash down

We had a trusted local lender come and do a presentation at our most recent sales and marketing strategy meeting. “It’s amazing how much grant money is out there right now to help people with closing costs and down payment assistance” is what she told us. And it’s true – here where I practice as a Real Estate Broker in SLO County on the Central Coast of California we have not only USDA loans and FHA loans available with as little as 0% – 3% down payments – but first time buyer down payment assistance programs throughout the county. Plus, there are now grants that can be applied to closing costs like escrow fees, taxes and insurance.

When you consider all of these incentives and interest rates below 4% it may be one of the best opportunities in a lifetime to buy a home on the Central Coast. If you are ready to get pre-qualified and set a budget, you can learn more about selecting a lender and loan programs here.

Here is a recently published article by MarketWatch that discusses this very real and now opportunity for home buyers. Check it out…and then call me to get you started on the path to home ownership.

The little-known way to buy a home with almost no cash down – MarketWatch.

 

Everything You Need to Know About Down Payments – Yahoo Finance

Fantasy league play is a big deal right now. I know in the NFL the coverage for fantasy league statistics are as important as the coverage of the actual game. I haven’t gone there yet, participating in fantasy leagues, as most of my weekends are spent showing SLO County homes and writing offers for clients. I can hardly keep up with my favorite teams–much less favorite players. But the concept of selecting, building and managing a team that can help you accomplish your real estate goals is no different than building your fantasy sports team. Except this is not a game, this is about your financial independence.

The time spent on the selection process of finding a great real estate broker, great lender, home inspectors, insurance, title and escrow services can make all the difference in you reaching your goals. This is the real deal and you need to assemble your A-Team to make it happen.

I recently posted an article on Selecting a Lender and how important selecting the right lender is in building your team of experts that can help you accomplish your financial goals. Here is some more information to add in regards to down payments and what you need to know.

When you are ready to assemble your A-Team, schedule an appointment with me and I can help you with the draft selections.

10 things real estate appraisers won’t tell you – MarketWatch

Appraisers have a challenging job; their primary responsibility is to determine, the best they can, what an appropriate value for a property is, at a given time, considering all the external circumstances that are, or were in play at that moment in time. In communities like Atascadero, Templeton and Paso Robles that can be a tough order to fill. However, there are standard methods and practices that all professional, licensed appraisers should abide by in order to accomplish the goal. The onslaught of rules, requirements and regulations have made it a tough gig in recent years, and the original scope of work is just as challenging as ever.

I think that the title of this article is a bit misleading as most appraisers are working assignments for banks and that is who they are primarily coordinating specific information for. Rarely do I see consumers deal directly with an appraiser, even though it is considered part of the buyers closing costs expense. It is also usually part of the re-finance process.

I recently posted some information on appraisals and some local providers I work with. Here is another article I found that can help shed some more light on the appraisal process so you know what to look for and what to expect when it comes time for you to require an appraisal.

Still time to identify for a 1031 Exchange this year

I’ve been helping a number of clients recently regarding 1031 exchanges. I have sellers who are weighing the options of doing an exchange on a SLO County property as well as buyers who are actively doing an exchange and are in the market for a Central Coast vacation home or a VRBO (vacation rental by owner) home. If you are considering a 1031 exchange before the end of the year, it’s not too late. You have 45 days to identify the property that you want to do the exchange on.

A 1031 exchange, as defined in the tax code, is the exchange of certain types of property that may defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.

In a 1031 exchange the first deadline to be met is the the 45-day Identification period.  The identification of replacement property document  must be postmarked or received by a qualified party on or before midnight of the 45th day after the close of escrow on the property you are ‘exchanging’.

The key words in this are qualified party. In order to do a 1031 exchange properly you need some help, as a seller you are going to need an intermediary to. An Intermediary or Accommodator is used to sell the property that is being exchanged through a specially determined escrow and then they buy the new property that is replacing the exchange property. The agreement is written as such so that the taxpayer never touches the funds and therefore defers the tax owed on the sale and transfer.

There are Intermediary and Accommodation services through some of the title and escrow service companies I work with as well as some independent providers that practice in our area and throughout California. As always I recommend that you consult with your tax adviser, C.P.A., or attorney regarding any financial or tax decisions you are considering. Its important to have someone you trust and who understands your entire financial portfolio and can advise you to make the best decisions for you and your family. My area of expertise is real estate, you call me to help you find the right property and to tap into my pool of connections and resources that can help you make better decisions.

 

Choosing a Lender

Here’s the deal on bankers and lenders: regardless of whether you are buying or selling a property in SLO County, there are some important things you need to know about choosing and working with a lender.

First of all, it’s important to understand that the business of lending money is just that, it’s a business. And like most businesses, lenders can offer different products and services in order to entice customers to work with them and buy their services and products. In this case, the product happens to be money. There are several different sources of lenders who you can investigate in order to borrow money for the purchase of real property.

•  Mortgage Brokers: Local loan brokers are usually who we work with the most as real estate agents and brokers. The local mortgage brokers I work with are licensed and knowledgeable about a variety of loan products and are an important part of the transaction process. Having a working relationship with local Mortgage Brokers also allows me access to them at a moment’s notice for pre-qualification letters and other client services.
•  Banks: Most banks that you do business with offer home loan programs and refinance programs. There could be a benefit to working with a local banker and having a working relationship with a local lending institution. There are also a number of online banking institutions that offer loan products and they can be very competitive.
• Credit Unions: Many Credit Unions offer competitive rates and financing options for real estate.
• Private Lenders: Most private lenders are found through mortgage brokers as mentioned above. There are groups of investors who pool money and lend it out just like banks, credit unions or other lending institutions.

As a buyer of real property, the agent or lender you choose to work with can make or break the deal. I always recommend to my clients that they consider all their options, make comparisons, and always do the math. What’s important is that you feel comfortable with who you are working with and know that your agent is looking out for your best interest.

For sellers, who is the lender that your buyer is working with? Are they reputable and communicating with your Broker in a responsible manner? It’s important that the person you have an agreement with is able to execute the contract and have the ability to pay for the property.

Secondly, you have choices in loan products. One size does not fit all; it’s important to do some research and determine what you qualify for and your lending choices. Here in California, we work with several different types of loans, some are even part of the contract language. You should also know that the type of loan you are working with can make a difference in the strength of your offer. The most widely used loans in our area are:

• Conventional: 30 year or 15 year mortgages with down payments of 5% – 20%
• FHA: mortgages with 3.5% down payment
• USDA: mortgages with 0% down payment options
• FHA 203K: Rehab loans with 3.5% down payment
• Seller Financing: options and proposals, usually require 20% – 30% down payment

Lastly, you should know that in order to make your real estate dreams come true you are going to need money. There is good debt and there is bad debt. The point is to establish a relationship with a lender you trust and who you can work with. They want your business and they want to help you. A great lender and a great Real Estate Broker can guide you and assist you and help you accomplish your real estate goals. It’s up to you to decide how big you want to dream, hire the best people you can find to work with and let them do what they do to get you there.

Remodeling 101: Tankless Water Heaters

It’s my job to look at property. I do it all day, most every day and I see a lot of homes throughout SLO County. One of the first things I look at in a home is the plumbing and hot water heater. Now, as I meet with buyers and sellers throughout SLO County I see more and more Tankless Water Heaters that are not only being installed in many new homes, but they are a popular choice for remodels. If you are near the end of the life of your water heater, you should consider installing a tankless water heater because it can add value to your home when you are ready to sell.

A tankless water heater is just that – it heats water directly without the use of a storage tank. It’s energy efficient because it heats the water only as you need it – it’s not keeping the water hot and stored that way until you need it, like a traditional water heater.

There are several makes and models out there, but since I get asked about tankless water heaters a lot, I thought I would pass this article along. Most everyone I have spoken to enjoys the benefits and energy savings of this type of on-demand water heating system. Here is what you need to know about instantaneous water heaters:

Remodeling 101: Tankless Water Heaters – Yahoo Homes.

How To: Find a Roof Leak

Now that we have officially had our first good rain of the SLO County rainy season, some of you may have discovered a leak in your roof. You know that we are all hoping for lots of rain this season, so if you think you have a leaky roof you may want to check it out now. Having a leaky roof can lead to a whole list of problems and if you can avoid them now they won’t be an issue when you are ready to sell your home and have a home inspection performed. Water can create conditions for mold spores and other wood destroying pests to thrive. Find out where the leak is coming from, fix it and disclose it.

Here’s a piece from Bob Villa and Yahoo Homes on how to find a roof leak:  How To: Find a Roof Leak – Yahoo Homes.

Land Surveys

The old adage in Real Estate has always been to “buy dirt; they’re not making any more of it.” And while for the most part it’s true, the real issue that comes up from time to time is “which piece of dirt is mine?” That’s where they survey comes into play. If during the course of your due diligence and inspection process you find that there are questions about the physical location of the property and who has rights to what, a survey may be your best course of action to sort things out.

A survey is the technique, art and science of accurately determining the terrestrial position of points and the distances of angles between them. They are commonly used for things such as:

• Maps
• Legal Descriptions
• Boundaries of ownership
• Title insurance
• Building setback and height verification certifications
• Easements
• Land Subdivision
• Lot line adjustment
• Parcel and tract maps
• Public lands, ranches and farms

In most cases, a detailed survey must be performed to strict standards set by The American Land Title Association (ALTA), The American Congress on Surveying and Mapping (ASCM) and the National Society of Professional Surveyors (NSPS). This certified survey is presented by the Professional Licensed Land Surveyor to the client for the intended purposes of the survey. The preliminary title report usually contains a legal description of the property which is based on a survey done at some point in time, most likely when the land was last divided.

The cost of a survey can vary greatly depending on the size and scope of the job.  I have seen surveyors spend days hiking in hills to determine property corners and of course, the more complicated the survey job, the more the cost.

Like any other part of the due diligence process, it pays to ask the right questions upfront. If you think a survey is an important part of your due diligence process then your Broker should guide you to the appropriate resources and providers. When it comes to building structures or establishing agricultural concerns, putting it in the wrong place can be a very expensive mistake to correct. Get it right the first time, every time.

Here is a list of local Land Survey Service Providers that can help.

Title Search and Escrow Services

When you enter into a purchase agreement to buy real property, as part of the buyer’s inspection and due diligence process, you will need a title search and title and escrow services.  A title company checks the history of the property ownership and makes sure that the title is legitimate so that a buyer can be confident that they are dealing with the true owners of the property that they are buying.  The title search also contains a legal description of the property and a chain of title, which is the chain of ownership or claims to any property rights. The title search will also reveal other important aspects of the property such as:

• Taxes owed on the property
• Outstanding mortgages
• Liens on the property
• Judgments against the property
• Easements
• Leases
• Restrictions
• Ownership of mineral rights

Once the title company checks the title and determines that it is legitimate, they can issue title insurance on the property which provides the buyer with assurances against most any claims of ownership or title rights once the property is transferred.  There are two main types of title insurance: owner’s title insurance and lenders title insurance. The buyer is usually responsible for providing lender’s title insurance and the seller the owner’s title insurance.

Many title companies also provide escrow services in addition to the title functions they perform. They collect all the monies from interested parties, follow the escrow instructions according to the buyer and seller contract and handle the payoff of loans, taxes and sales costs at the close of escrow.

The cost of title and escrow services is relative to the sales price and/or loan amount on the property. The fees they charge for their services are part of the buyers and sellers closing costs and can be negotiated in the contract. Your Broker should be able to recommend a title company that they work with on a regular basis who can provide timely and accurate services.

Here is a list of the Title and Escrow Services I work with on The Central Coast.

Real Estate Appraisals

Appraisals are not only an important part of the home buying process, but part of your inspection and due diligence process. Most Residential Purchase Agreements (RPA) contain one contingency clause for inspection and another contingency clause for appraisal and loan. A professional real estate appraiser provides an opinion of value of real property, which can be land, buildings or any combination, at a given point in time.

The appraisal is also an important part of the home buying process because it is used by lenders to determine the amount of money they will eventually loan on the home and any conditions or repairs that need to be made prior to funding the loan. In California, appraisers are licensed by the Bureau of Real Estate Appraisers and every holder of a license must conform to and observe The Uniform Standards of Appraisal Practice (USPAP).  There are three standard approaches that an appraiser uses to determine the value of real property.

• The Cost Approach – what it would cost to replace or reproduce
• The Comparison Approach – what properties of similar size, quality, age, etc. are valued at
• The Income Approach – what amount of income the property produces (generally used for commercial properties)

An appraisal usually costs around $400 and would be considered part of the buyers ‘Non Recurring Closing Costs’.  It is ordered by the lender, usually through an independent third party that specializes in performing appraisals. As a borrower you should receive a copy of the appraisal once it has been completed. If you do not agree with the final appraisal process you can contest it through an appraisal review process if you can present the appropriate documentation to support your values. It may be necessary to renegotiate some of the terms of the agreement based on the appraised value.

Once the appraisal process is completed and agreements are in place the buyer usually removes the ‘Appraisal Contingency’ per the terms of the agreement and moves to requesting the final loan conditions and documents and then arranging the signing with the Escrow Company. This means you are on your way to closing escrow!

As a seller of real property, your Broker can guide you in studying market comparables and setting pricing, but you are certainly entitled to hire your own appraiser to determine the appropriate market value.  In fact, if there is a large enough discrepancy between what your Broker thinks is the appropriate price range and your price range, an appraiser could give a home seller another level of professional, unbiased valuation.

When the deal is done the property will be worth what a buyer is willing to pay and a seller willing to sell for, until then use your smarts and obtain as much professional information as possible to price it right. Here are some of the Central Coast Appraisal Services that I frequently work with in the area.