I've been hearing a lot lately about lender fraud. The industry is really scrutinizing loans to assure there is no fraud. I've been looking into what constitutes fraud and wanted to share with you what I've found.
The most common way that fraud occurs in home purchases is when monies are held back from the sale and given to the buyer or some other party.
It is not uncommon for money to be set aside from the seller's proceeds for some cost associated with the purchase. This is often referred to as a seller credit for non-recurring closing costs. In this case, it is perfectly legal for the seller to pay for some of the buyer's closing costs . These would be costs such as title insurance, appraisal fees, notary fees, etc.
The majority of problems that have been occurring have had to do with a buyer offering to purchase a property at well over the actual value of the property, then asking the seller to credit back a large chunk of money to the buyer or some other person at or after closing. This arrangement is often made through an addendum to the contract and involves more than one person actively attempting to deceive the lender.
So what should you do??? The age old advice still holds true, if you think the deal smells funny it is because there is something rotten in there. First, make sure all agreements are in writing. Next, make sure the lender receives all the addendums to the contract. The lender must be informed of all the financial agreements related to the sale of the property. Next, ask your real estate agent for advice. If the agent is unsure how to proceed, speak with the agent's broker about your concern. If you are still concerned, consult a real estate attorney.
Wednesday, January 31, 2007
Tuesday, January 23, 2007
Alameda Point Redevelopment
Alameda City invited the four developers working on a master plan for the naval base to present to the community tonight. Three plans were pretty similar, and the fourth was an intriguing Green Alameda Village concept including a UC San Francisco research center for environmental issues and Global Warming, and an ultra light rail system. In any case all four plans are proposing hundreds of residential units on the old naval base.
The plans would take years to come to fruition as the planning would take two years from the time the city chose a developer with whom to work. No one knows how long after final planning building would start.
One of the developers, SunCal, is also the developer for Oak Knoll in Oakalnd. that project , also a reclimation from the navy, is further along. They don't know yet when that project will begin construction. probably a couple of years out, but it will have the required 25% of low and moderate income housing.
The plans would take years to come to fruition as the planning would take two years from the time the city chose a developer with whom to work. No one knows how long after final planning building would start.
One of the developers, SunCal, is also the developer for Oak Knoll in Oakalnd. that project , also a reclimation from the navy, is further along. They don't know yet when that project will begin construction. probably a couple of years out, but it will have the required 25% of low and moderate income housing.
Saturday, January 20, 2007
Home Buying Resources At Your Fingertips
There are many experiences that we embark upon for the very first time. First interview. First job. First car. First baby. First home. Inevitably, we come to realize that merely putting these ‘firsts’ in the hands of fate is not how we ultimately want to operate.
Either we do our research, formulate a plan and then execute it to the best of our knowledge and ability, or we rely on the expertise of a professional.
The same can be said about purchasing our first home. There is just too much risk involved in buying a home to not uncover every stone and investigate all avenues before beginning the process.
Fortunately in the undertaking of home buying, we can have it both ways. We can do as much individual research as we like on the Internet AND we can rely on the guidance of a professional Realtor. While the Internet is a veritable smorgasbord of information on buying a home, there is nothing that will match the pool of knowledge and information that your Realtor has access to The combination of these systems will serve to empower your confidence and develop your understanding of the home buying process.
Let’s start with the basics.
Get a copy of your credit report. Go over it well and make sure there are no mistakes. And if there are, you’ll need to rectify them before applying for any type of financing. For information on how to obtain a copy of your report go to www.equifax.com.
Go over your finances and set a budget. Pay off minor debts and do not incur any new ones while going through this period. Develop a household budget and determine the maximum dollar amount that you feel you can afford, and feel comfortable, to put towards a mortgage each month.
Get familiar with types of mortgages. Investigate the different loan types that are available. You can go to most bank websites to view a checklist of the mortgages available from them. They usually outline it in simple, easy to understand terms. www.wachovia.com. Don’t know what amortization means or if you will need an adjustable rate or a balloon mortgage? For definitions of all the elusive real estate financial terms, see www.realestatewords.com.
Become familiar with your local market. It’s important to have a handle on the market because knowing its activity will better prepare you for what to expect in pricing. Your local Realtor is the best source. A good section on local market conditions can also be seen at http://realtytimes.com/.
Search for homes in your area. Again, your Realtor is your best resource. Keep in mind that a Realtor has access to an excellent database, the MLS (Multiple Listing Service), which provides very detailed information not included on the realtor.com website. Also www.realtor.com is the premier source for public access online listings.
Take a seminar on home buying. This can be a vital step. A seminar can, in one fell swoop, identify all that has been outlined above in a matter of hours. They are conducted for consumers who are serious about educating themselves to the fullest extent possible on the process and are proactive in their enterprising. The benefit of a seminar is not just the information that is presented but also the fact that the professionals conducting the class can answer your questions. An invaluable service, since your computer can’t tailor its answers to the many questions that you will invariably have while moderating the home-buying process.
Find a Realtor. However you find an agent, it is a good idea to work with one. Realtors provide beneficial services for the consumer, including providing resources on finding available homes in your price range and area while giving objective and extensive information about each property. They help you negotiate contracts and provide advice on as-is purchases, contingencies, home inspections, deposits and a myriad of other components that come up during the contract phase. Your Realtor can also help you with finance options and identifying lenders for you to speak with. Do not underestimate the necessity of a Realtor. You wouldn’t navigate several hundreds of thousands of dollars’ stock market investment without the help of a broker. Don’t unnecessarily sabotage this big financial outlay by trying to wade through the home buying process on your own. For more information on what Realtors do see “Why Use a REALTOR?” at www.realtor.com.
Secure a lender. After all of these steps have been taken, it is time to become pre-approved. This means that based on your credit and finances, you are given a commitment for a loan from a lender. Pre-approval shows sellers that you are capable of receiving financing and informs them that you are serious about purchasing a home. This process also sets a top limit on the price of the home you can afford. Ask your Realtor or a friend for a referral to one or more reputable local mortgage brokers, loan officers or banks. For more information and for help deciding which lending institution is right for you, see “Should I Use a Mortgage Broker?” at www.realtestatejournal.com
So now you have at your fingertips all of the resources available to educate yourself on the home buying process. Using these tools will give you a sense of empowerment over this seemingly slippery subject. If you become overwhelmed, just take some time to digest all of the material, then return to your task with confidence. The goal is to make the most informed decision possible. Remember, “Education is to knowledge as knowledge is to power”. Own your power in this process and you will surely be successful.
Either we do our research, formulate a plan and then execute it to the best of our knowledge and ability, or we rely on the expertise of a professional.
The same can be said about purchasing our first home. There is just too much risk involved in buying a home to not uncover every stone and investigate all avenues before beginning the process.
Fortunately in the undertaking of home buying, we can have it both ways. We can do as much individual research as we like on the Internet AND we can rely on the guidance of a professional Realtor. While the Internet is a veritable smorgasbord of information on buying a home, there is nothing that will match the pool of knowledge and information that your Realtor has access to The combination of these systems will serve to empower your confidence and develop your understanding of the home buying process.
Let’s start with the basics.
Get a copy of your credit report. Go over it well and make sure there are no mistakes. And if there are, you’ll need to rectify them before applying for any type of financing. For information on how to obtain a copy of your report go to www.equifax.com.
Go over your finances and set a budget. Pay off minor debts and do not incur any new ones while going through this period. Develop a household budget and determine the maximum dollar amount that you feel you can afford, and feel comfortable, to put towards a mortgage each month.
Get familiar with types of mortgages. Investigate the different loan types that are available. You can go to most bank websites to view a checklist of the mortgages available from them. They usually outline it in simple, easy to understand terms. www.wachovia.com. Don’t know what amortization means or if you will need an adjustable rate or a balloon mortgage? For definitions of all the elusive real estate financial terms, see www.realestatewords.com.
Become familiar with your local market. It’s important to have a handle on the market because knowing its activity will better prepare you for what to expect in pricing. Your local Realtor is the best source. A good section on local market conditions can also be seen at http://realtytimes.com/.
Search for homes in your area. Again, your Realtor is your best resource. Keep in mind that a Realtor has access to an excellent database, the MLS (Multiple Listing Service), which provides very detailed information not included on the realtor.com website. Also www.realtor.com is the premier source for public access online listings.
Take a seminar on home buying. This can be a vital step. A seminar can, in one fell swoop, identify all that has been outlined above in a matter of hours. They are conducted for consumers who are serious about educating themselves to the fullest extent possible on the process and are proactive in their enterprising. The benefit of a seminar is not just the information that is presented but also the fact that the professionals conducting the class can answer your questions. An invaluable service, since your computer can’t tailor its answers to the many questions that you will invariably have while moderating the home-buying process.
Find a Realtor. However you find an agent, it is a good idea to work with one. Realtors provide beneficial services for the consumer, including providing resources on finding available homes in your price range and area while giving objective and extensive information about each property. They help you negotiate contracts and provide advice on as-is purchases, contingencies, home inspections, deposits and a myriad of other components that come up during the contract phase. Your Realtor can also help you with finance options and identifying lenders for you to speak with. Do not underestimate the necessity of a Realtor. You wouldn’t navigate several hundreds of thousands of dollars’ stock market investment without the help of a broker. Don’t unnecessarily sabotage this big financial outlay by trying to wade through the home buying process on your own. For more information on what Realtors do see “Why Use a REALTOR?” at www.realtor.com.
Secure a lender. After all of these steps have been taken, it is time to become pre-approved. This means that based on your credit and finances, you are given a commitment for a loan from a lender. Pre-approval shows sellers that you are capable of receiving financing and informs them that you are serious about purchasing a home. This process also sets a top limit on the price of the home you can afford. Ask your Realtor or a friend for a referral to one or more reputable local mortgage brokers, loan officers or banks. For more information and for help deciding which lending institution is right for you, see “Should I Use a Mortgage Broker?” at www.realtestatejournal.com
So now you have at your fingertips all of the resources available to educate yourself on the home buying process. Using these tools will give you a sense of empowerment over this seemingly slippery subject. If you become overwhelmed, just take some time to digest all of the material, then return to your task with confidence. The goal is to make the most informed decision possible. Remember, “Education is to knowledge as knowledge is to power”. Own your power in this process and you will surely be successful.
Why Are Home Prices Declining
"Real estate normally appreciates one to two percentage points above inflation. Between 2001 and 2005, however, real estate values increased 50 percent, giving sellers an abnormally high return. That drastic increase leveled off in 2006 and prices and sales began to return to more normal rates — although still far above historical norms — resulting in the third best year for real estate sales ever.
Ironically, it was also the first year that national median home prices declined since the NATIONAL ASSOCIATION OF REALTORS® began keeping figures in 1968. "
The rest of the article is at http://realtytimes.com/rtapages/20061215_housedecline.htm
Realty Times had this article. I think its important for first time buyers to see that this is a very small window. Prices will go back to NORMAL increases which historically has been 2% above inflation. Timing the market is difficult but there are good deals out there right now.
Ironically, it was also the first year that national median home prices declined since the NATIONAL ASSOCIATION OF REALTORS® began keeping figures in 1968. "
The rest of the article is at http://realtytimes.com/rtapages/20061215_housedecline.htm
Realty Times had this article. I think its important for first time buyers to see that this is a very small window. Prices will go back to NORMAL increases which historically has been 2% above inflation. Timing the market is difficult but there are good deals out there right now.
Interest Rates Rise Again
Freddie Mac reports the following increases in rates:
15-year fixed mortgages rose to 5.98 percent from 5.96 percent during the week.
Five-year adjustable-rate mortgages nudged up to 6.04 percent from 6.03 percent.
One-year ARMs rose to 5.51 percent from 5.44 percent.
Source: Contra Costa Times (Calif.), Martin Crutsinger (01/19/07)
15-year fixed mortgages rose to 5.98 percent from 5.96 percent during the week.
Five-year adjustable-rate mortgages nudged up to 6.04 percent from 6.03 percent.
One-year ARMs rose to 5.51 percent from 5.44 percent.
Source: Contra Costa Times (Calif.), Martin Crutsinger (01/19/07)
Friday, January 19, 2007
Benefits of Home Ownership
I find that a rent-buy analysis doesn’t capture the whole picture of why homeownership is so important to building wealth and to producing satisfaction in domains other than financial. I thought I would take a moment and recount a few of the many advantages of home ownership.
Pride of Ownership. A homeowner has a personal stake in the viability, safety and aesthetic of their home, neighborhood and larger community. No one washes a rental car and no one improves a home they are renting.
Personal Autonomy. Owning your home gives you the final say in what color to paint the living room, what additions you to make to your home, and provides you with a stability that is critical to building a family and a community. No one will tell you that you need to move out; you make that decision.
Tax Benefits and Wealth. A homeowner benefits in several ways through the tax code. Mortgage interest and property taxes are deductible on your taxes. Check with your CPA to confirm this for your situation. Also, if you own your primary home for two of the past five years, unmarried persons can realize up to $250,000 on the sale of the house and pay no federal income tax on that gain. Couples can exclude up to $500,000.
Leverage. Typically, when you purchase a home, you will put a down payment and borrow the balance. This allows you to take advantage of appreciation on an asset that is many times larger than your initial investment. It is not uncommon for homeowners to see 50%-100% annual returns on their money invested.
Financial Opportunity. If your home appreciates, there could be opportunities to refinance or use a home equity line to access cash for a number of opportunities including other investments, pay for children's college or to do home improvements to further increase the value of your home. Renters will never have this opportunity.
Pride of Ownership. A homeowner has a personal stake in the viability, safety and aesthetic of their home, neighborhood and larger community. No one washes a rental car and no one improves a home they are renting.
Personal Autonomy. Owning your home gives you the final say in what color to paint the living room, what additions you to make to your home, and provides you with a stability that is critical to building a family and a community. No one will tell you that you need to move out; you make that decision.
Tax Benefits and Wealth. A homeowner benefits in several ways through the tax code. Mortgage interest and property taxes are deductible on your taxes. Check with your CPA to confirm this for your situation. Also, if you own your primary home for two of the past five years, unmarried persons can realize up to $250,000 on the sale of the house and pay no federal income tax on that gain. Couples can exclude up to $500,000.
Leverage. Typically, when you purchase a home, you will put a down payment and borrow the balance. This allows you to take advantage of appreciation on an asset that is many times larger than your initial investment. It is not uncommon for homeowners to see 50%-100% annual returns on their money invested.
Financial Opportunity. If your home appreciates, there could be opportunities to refinance or use a home equity line to access cash for a number of opportunities including other investments, pay for children's college or to do home improvements to further increase the value of your home. Renters will never have this opportunity.
Wednesday, January 17, 2007
Interest Rates Projection
While interest rates are still really low we have been seeing the rates creep up.
The rates will effect the ability of first time buyers to jump into the real estate market.
With that in mind I wanted to update the blog to reflect the following from today's Inman News headlines:
"The Mortgage Bankers Association expects the interest rate on a 30-year fixed-rate mortgage to jump from 6.2 percent to 6.5 percent by the end of the third quarter, as investors lose hope that the Federal Reserve will slash short-term rates any time soon."
All in all still a pretty wonderful climate for getting a loan to buy your first property, but that rise in interst would translate into $50 a month on a $200,000 loan, or $10,000 of house bargaining money.
The rates will effect the ability of first time buyers to jump into the real estate market.
With that in mind I wanted to update the blog to reflect the following from today's Inman News headlines:
"The Mortgage Bankers Association expects the interest rate on a 30-year fixed-rate mortgage to jump from 6.2 percent to 6.5 percent by the end of the third quarter, as investors lose hope that the Federal Reserve will slash short-term rates any time soon."
All in all still a pretty wonderful climate for getting a loan to buy your first property, but that rise in interst would translate into $50 a month on a $200,000 loan, or $10,000 of house bargaining money.
Saturday, January 13, 2007
2006 Roundup
2006 was a real turning point in our local market. I pulled together some of the forecasts for 2007 and beyond that might interest first time buyers or owners thinking of buying up to bigger properties this next year.
There are many voices chiming in on what to expect from this step forward. The National Association of Realtors has predicted that things will be looking up from now on, as we have hit the bottom.
An article on the NAR web site says, "After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer, according to the latest NAR forecast. David Lereah, NAR's chief economist, said annual totals for existing-home sales will be comparable between 2006 and 2007. 'Steady improvement in sales will support price appreciation moving forward,' he said."
Inman news reported similar projections. "We're going to hit the trough in the first half of 2007," said Frank Nothaft, chief economist for Freddie Mac and a panelist for the "Housing Outlook: 2007" session. Other panelists included representatives from the California Association of Realtors, Rutgers University and the University of Pennsylvania.
Forcasts need to be localized and for California Inman News reported, "existing-home sales fell about 23 percent to 24 percent in 2006 compared to the prior year, and that is expected to be followed by another 7 percent decline this year, said Leslie Appleton-Young, chief economist for the California Association of Realtors. Overbuilding has left a large inventory of properties on the market in some areas, she said -- there is about a 10-month supply of properties for sale in one region of the state, she said, though she expects excess inventory to be absorbed within about a year."
In the East Bay that may be most relevant in the condo market.
The Wall Street Journal's latest semiannual economic forecasting survey offered an optimistic outlook for 2007. The service sector should keep humming along as the recent weakness in housing and manufacturing abates and the Federal Reserve begins to reduce interest rates. That would allow the economy to expand at a rate fast enough to keep investors happy, but slow enough to keep inflation at bay.
THE WSJ reported that its panel of 60 economists predicted that inflation-adjusted gross domestic product, a broad measure of economic activity, will grow at an annualized rate of 2.3% in the first half of 2007 and 2.8% in the second half. That's up from a sluggish 2% in the third quarter of 2006, but still far below the robust annual growth rates of 3.2% for 2005 and 4.1% for early 2006.
The economists surveyed expect year-to-year inflation to decline to 1.7% in May from 2.0% in November. As a result, they expect the Fed to shift its focus from fighting inflation to helping the economy grow, lowering short-term interest rates to 4.75% by the end of 2007 from the current 5.25%.
That's a big change from six months ago, when forecasters saw the Fed's battle with inflation as the greatest challenge facing the economy. "The Fed was hoping to slow the economy down enough to take the wind out of inflation without triggering a recession," says Nariman Behravesh, chief economist at consulting firm Global Insight in Waltham, Mass. "So far it looks like it has succeeded."
Stay tuned for some very local numbers about house costs in 2006. I'll post them by the end of the weekend.
Sharon
There are many voices chiming in on what to expect from this step forward. The National Association of Realtors has predicted that things will be looking up from now on, as we have hit the bottom.
An article on the NAR web site says, "After bottoming in the fourth quarter of 2006, existing-home sales are forecast to gradually rise through 2007 and into 2008, while new-home sales should turnaround by summer, according to the latest NAR forecast. David Lereah, NAR's chief economist, said annual totals for existing-home sales will be comparable between 2006 and 2007. 'Steady improvement in sales will support price appreciation moving forward,' he said."
Inman news reported similar projections. "We're going to hit the trough in the first half of 2007," said Frank Nothaft, chief economist for Freddie Mac and a panelist for the "Housing Outlook: 2007" session. Other panelists included representatives from the California Association of Realtors, Rutgers University and the University of Pennsylvania.
Forcasts need to be localized and for California Inman News reported, "existing-home sales fell about 23 percent to 24 percent in 2006 compared to the prior year, and that is expected to be followed by another 7 percent decline this year, said Leslie Appleton-Young, chief economist for the California Association of Realtors. Overbuilding has left a large inventory of properties on the market in some areas, she said -- there is about a 10-month supply of properties for sale in one region of the state, she said, though she expects excess inventory to be absorbed within about a year."
In the East Bay that may be most relevant in the condo market.
The Wall Street Journal's latest semiannual economic forecasting survey offered an optimistic outlook for 2007. The service sector should keep humming along as the recent weakness in housing and manufacturing abates and the Federal Reserve begins to reduce interest rates. That would allow the economy to expand at a rate fast enough to keep investors happy, but slow enough to keep inflation at bay.
THE WSJ reported that its panel of 60 economists predicted that inflation-adjusted gross domestic product, a broad measure of economic activity, will grow at an annualized rate of 2.3% in the first half of 2007 and 2.8% in the second half. That's up from a sluggish 2% in the third quarter of 2006, but still far below the robust annual growth rates of 3.2% for 2005 and 4.1% for early 2006.
The economists surveyed expect year-to-year inflation to decline to 1.7% in May from 2.0% in November. As a result, they expect the Fed to shift its focus from fighting inflation to helping the economy grow, lowering short-term interest rates to 4.75% by the end of 2007 from the current 5.25%.
That's a big change from six months ago, when forecasters saw the Fed's battle with inflation as the greatest challenge facing the economy. "The Fed was hoping to slow the economy down enough to take the wind out of inflation without triggering a recession," says Nariman Behravesh, chief economist at consulting firm Global Insight in Waltham, Mass. "So far it looks like it has succeeded."
Stay tuned for some very local numbers about house costs in 2006. I'll post them by the end of the weekend.
Sharon
Friday, January 5, 2007
Happy New Year
Our first seminar is scheduled for Janaury 21st. We have eight people registered so far. Pretty exciting as we have barely started to advertise the event.
I've been looking for more information about special lending programs for first time buyers and will have materials at the seminar. As far as specific city programs I will bring Oakland, Berkeley, San Leandro and Alameda contacts for everyone.
Come back to the blog on Monday. I'll have a 2006 market roundup, and links to what some experts and economists are projecting for 2007.
Have a great weekend y'all.
Sharon
I've been looking for more information about special lending programs for first time buyers and will have materials at the seminar. As far as specific city programs I will bring Oakland, Berkeley, San Leandro and Alameda contacts for everyone.
Come back to the blog on Monday. I'll have a 2006 market roundup, and links to what some experts and economists are projecting for 2007.
Have a great weekend y'all.
Sharon
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