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Don’t flip out! Flips are ok!

August 10, 2010 By

tempe real estateIn our current real estate market, flips have become a daily part of our business in addition to bank owned properties and short sales. It is vital for your success to partner with a lender who understands flips and can successfully navigate the process.

WHAT IS CONSIDERED A ‘FLIP’?

The primary lender definition of a ‘flip’ is when the current seller has been on title for less than 90 days. A secondary definition is when there have been ‘multiple’ title transfers of a property within the last 12 months.

WHO CARES & WHY?

Your buyer’s lender cares. In the past, fraudulent flip transactions were used amongst family members or business partners to artificially increase the value of a property and ultimately sell the home to an end user at an over-inflated price. Parties to these scams were sellers, buyers, realtors, loan officers, appraisers and title companies. To avoid this fraudulent behavior in the future, investors and regulators have put in guidelines and safeguards to verify that any ‘flip’ transaction is bona fide.

DEED TRANSFERS

Before your buyer makes an offer on a property, it is vital to check the title history of the property. When did the seller take title? Have there been multiple deed transfers in the last 12 months? Has the price increased dramatically on the title transfers? If the county records do not give you updated information, you will want to ask the listing agent. Prior to the offer on a ‘flip’, call your lender and discuss the property. Your buyer’s lender will need to follow certain ‘flip’ guidelines.

FLIP INVESTORS

If your buyer is purchasing a ‘flip’, your lender will have only certain investors who will accept the loan and each have their own underwriting criteria for flip transactions. This criterion also differs whether the loan is FHA, Conventional or VA. The guidelines are too in-depth to cover in this newsletter. It is vital that you work with a lender who understands flips, knows which investors will loan on them and how to properly document the file for an approval. Interview the lender carefully to determine their understanding of the process and never use an unqualified or inexperienced lender on a flip!

APPRAISAL REQUIREMENTS

The appraisal requirements also differ between investors and are determined on the value increase of the property from the time of the seller’s purchase compared to your buyer’s purchase price, and also on what upgrades or renovations have been done. If the seller has done renovations, it may be required or helpful for the seller to provide documentation to the buyer’s lender on the work done. Oftentimes, a desk review or second appraisal will be required on a flip transaction. An educated and experienced lender will understand how to document your buyer’s file and manage the appraisal process so that required information is included in the appraisal.

Richard M. Jefferson, Sr. Mortgage Consultant

NMLS #25381

16150 N. Arrowhead Fountain Ctr., Suite 260    Peoria, AZ  85382

Phone: 480.444.7143   Direct Fax: 480.444.7193

rich.jefferson@onqfinancial.com /    www.richjefferson.com

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August Market Update

August 6, 2010 By

tempe real estate

Area Supply Close Fails Pending Selling Days to sell Supply (weeks) Median Ask Median Pending Median Close Price
Anthem 218 46 25 70 65% 87 27 $192 $199 $200
Avondale 611 158 64 220 71% 75 23 $110 $104 $105
Chandler 1,775 359 175 417 67% 100 26 $199 $187 $185
Fountain Hills 329 37 25 47 60% 152 44 $449 $349 $376
Gilbert 2,014 428 223 514 66% 101 26 $186 $186 $185
Glendale 1,537 395 159 517 71% 81 23 $119 $111 $116
Goodyear 761 181 71 231 72% 96 24 $156 $145 $143
Mesa 2,692 560 278 708 67% 93 26 $146 $129 $130
Peoria 1,409 299 150 397 67% 102 26 $170 $159 $162
Phoenix 7,777 1,613 796 2,030 67% 86 26 $123 $100 $110
Queen Creek 717 194 73 222 73% 101 21 $140 $126 $126
Scottsdale 2,896 403 345 464 54% 143 36 $585 $400 $385
Sun City 406 80 44 72 65% 108 26 $139 $134 $124
Surprise 1,368 354 142 439 71% 91 22 $135 $129 $132
Tempe 524 112 63 112 64% 95 25 $186 $173 $169
TOTALS 25,034 5,221 2,632 6,460 66% 96 26 $155 $130 $135
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FHA Mortgage Insurance to Increase

August 6, 2010 By

Tempe Homes FHAFHA just announced that effective September 7th, 2010, monthly mortgage insurance premiums (MIP) will increase from .55% to between .85% and .90%.  To counter this change, they will reduced the upfront mortgage insurance from 2.25% of the loan to 1% of the loan.

The announcement also mentioned that these changes are required because the funds for FHA is getting depleted, and they say it makes more sense to fill it back up monthly than with up front fees.

Of course these numbers don’t mean much until we see real world examples.  So the good news is that on a $100,000 loan, your initial fee of $2,250 is now reduced to $1000.  Some will argue that since it was added to the loan anyway that it’s not as relevant, but that $2250 can cost you about $15/mo and you will have to pay it back when you sell.  Now, your mortgage insurance premium will go up $19/mo due to the monthly increase.  So you save $1250, but you pay $19 more monthly, and that is offset by $9/mo (difference from financning $1000 versus $2250).  Ultimately, your mortgage goes up $10/mo on a $100,000 loan.

For $200,000, you go from $4500 to $2000 in up front premiums.  Your MIP goes up $38/mo.  It costs you $26/mo to finance that $4500, but only $12/mo to finance $2000.  So your payments go up effectively $24/mo ($38-$26+$12) while you save $2500.

I know the news was scary when it first came out, as you can see, it’s not all that bad, right?

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Foreclosure waiting period updates

July 8, 2010 By

Fannie Mae now requires 7 years after foreclosure to obtain a new conventional loan. This new policy is to discourage Strategic Foreclosures. A shorter wait of 5 years may be possible if certain additional requirements are met. With documented “extenuating circumstances” a 3 year wait “may” be possible. FHA still allows buyers to purchase 3 years after foreclosure if the buyer meets all other FHA guidelines. At this time, there is no separate FHA policy on Strategic Foreclosures.

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Ways to ruin your own purchase

July 8, 2010 By

Due to tightening lending compliance and guidelines, buyers have more risk of blowing their own transaction by changing their situation during the process. Although it is the lenders responsibility to coach the buyers on what and what not to do, some buyers need to hear the information more than once. It is to the benefit to also coach the buyers at the onset of the transaction.

No New Debt


Buyers are required to explain all credit inquiries in the 90 days prior to loan application and whether or not a new debt was established. In addition, any new inquiries that show up during the process and before closing will need to be explained. Buyers should be coached to not apply for ANY new credit prior to, or during, the loan process. If a buyer needs to establish a new debt during the process, they should contact their mortgage consultant to review whether or not it will impact their transaction. Not disclosing current or new debt could result in a loan denial.

No (Or Limited) Use Of Current Credit


THIS IS NEW! Fannie Mae has recently issued a new policy on conventional loans that lenders must now pull a new credit report after loan documents have been issued and before funding can occur. Any change to the credit balances or credit score “could” affect the loan approval and require re-underwriting.
This may be impossible for some who have automatic payments set up on credit cards or use them for business. Buyers should have a full discussion with their mortgage consultant early on about what credit usage they cannot avoid. At this time, FHA loans are not affected by this policy, but could be in the future.
Buyers should be coached to not use their current credit accounts during the loan process.

No Job Changes


Due to the current job economy, all investors require a “pre-funding employment verification call” to be done after loan documents are sent to title and before funding and closing a loan. This is simply to verify the buyer is still employed at the time of closing. In addition, stricter verifications are done during processing regarding a buyer’s likelihood of continued employment, continued hours, expected overtime and continuation of bonus/commission income. Buyers should be coached to avoid any changes in their employment or structure of pay during the process. If a change occurs, they should contact their mortgage consultant immediately.

No Unsourced Deposits


Lenders are becoming increasingly strict on verifying that all funds used in the transaction are “sourced and seasoned” for proof that the buyer is using their own funds (or gift funds in some cases) for their purchase. The buyer must document all deposits or transfers in their accounts that are not auto deposit payroll. Buyers should be coached to avoid transferring funds between accounts and to not deposit any undocumented funds or cash into their accounts.

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Is April the Perfect Real Estate Storm?

March 31, 2010 By

For those who have been looking for the right time to purchase a home, April may present the perfect real estate storm. In fact, waiting beyond the month of April may prove to be a costly mistake for those who are interested in buying a home in the near future.

Perhaps the biggest incentive for purchasing a home during the month of April is the fact that the Home Buyer Credit is set to expire soon. While the credit has been extended to the month of June, anyone who wishes to take advantage of the credit must have the purchase contracted by the end of April. Since most buyers take a few weeks to find the best home to suit their needs, it is a good idea to get the search started well before April 30.

Of course, many savvy homebuyers have been waiting for the housing market to bottom out. Unfortunately, there is no way of determining for certain whether or not a particular market has bottomed out. Yet, according to many experts, most of the local markets have bottomed out already. In fact, some are starting to show signs of recovery. Therefore, those who are waiting for housing prices to reach rock bottom will likely find the best deals during the month of April.

The final ingredient in this perfect storm is the low mortgage loan interest rates we are currently enjoying. Over the last several weeks, the interest rates on long-term mortgage loans have been less than 5%. In fact, interest rates have been hovering around the 5% rate for several months. Unfortunately for buyers, the Fed has recently stopped the mortgage backed securities that helped keep the rates so low. As a result, many experts predict that mortgage loan interest rates will likely increase to around 6% by the end of the year.

While no one should go out and purchase a home in April simply because of the Home Buyer Credit, the great prices and the low long-term mortgage loan interest rates, those who are considering buying a home in the near future and who have the financial means to make a purchase should certainly take a serious look at buying now. Waiting just a few months longer could literally result in paying tens of thousands more dollars for the very same home that could have been purchased for less in April – the month of the perfect real estate storm.

Eric Bramlett is the broker & co-owner of One Source Realty, a boutique Austin real estate company that services downtown Austin condo buyers, and that specializes in Steiner Ranch residents. Eric enjoys working with select clients, helping his agents succeed, and hanging out on the lake with his wife & dogs.

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The recession is over

January 28, 2010 By

Is that a bold statement? Yeah, probably. But I used very careful metrics to determine this. I am going to reveal it here because I trust that my readers can keep it secret. Ready?
Last night, my wife and I went to PF Chang’s for dinner. We were going to go Friday night, but it was over an hour wait, and I had an important poker game to host. So we decided to wait. When we showed up at the restaurant at around 7:30 last night, there was a 30 minute wait. Wall to wall, the place was packed. Stressed out servers were running back and forth to stay on top of things. Can you imagine? This is the huge PF Chang’s by Chandler mall. So this was the moment I knew. The recession is over!  Gone are the days of you and one other family at a restaurant looking at each other awkwardly over your menus.  We Americans can only control our spending for so long, and now it looks like the money is flowing again.
You can’t trust silly measurements like GDP growth/decline quarter of quarter. That takes too long. You read it here, folks!

Foreclosure prices close to bottom

ASU professor Karl Guntermann publishes a monthly Repeat Sales Index.  In that, he shows that the median price of a foreclosure has declined 2% in December year-over-year.  That compares 15% in October and 8% in November.  It is for this reason that he has decided that prices have bottomed out.  This data is very different than what we have seen with our own eyes.  Generally speaking, it is much harder to buy properties below $150k today than it was a year ago.  There is a lot of upward pressure at this price point and below because investors are cashflowing at these prices.  One of my clients bought a house for $30,000.  Today, there’s no way she gets it for less than $60,000.  To read more about it, please visit http://www.azcentral.com/business/realestate/articles/2010/01/28/20100128biz-guntermann0128.html.

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Real Estate Market Analysis for October 2009

November 7, 2009 By

In the last two months, the market has remained steady.  We have had actives rise slowly from 26,000 to 28,000 homes in Phoenix metro.  Similarly, pendings are hovering around 10,600 to 10,800.  We also had 7137 homes sold in October compared to 7040 homes sold in August and 6861 in September.  Overall, in Phoenix, we have gone from 5.24 months of inventory to 5.42 months of inventory.

October 2009 Real Estate Supply

October 2009 Real Estate Supply

There were two very strong source of buyers.  First time home buyers trying to get the tax credit were still very active.  Investors trying to take advantage of the market have also bought up many homes.  We see that in October 32.66% of the homes were bought in cash.  The rumors is that on top of the Canadian money coming in, there’s a lot of Chinese and Japanese money pumping into our market.  No doubt with the winter season upon us, there will be even more Canadian buyers.

October 2009 Numbers

October 2009 Numbers

Most of the cities have remained pretty consistent during this time period.  Only Tempe and Scottsdale have seen noticeable changes.  Tempe has gone from 6.1 to 7.2 months of inventory while Scottsdale has gone from 10.3 months to 9.4.  We have noticed that there was a small drop in activity in the first week of November with the tax credit expected to expire at the end of the month.  Now that the credit has been extended again, activity has also picked up again.  Other great news for the real estate market is that the tax credit now is offered to homeowners that have been in their homes for more than 5 years.  It will be interesting to see who qualifies for this program.

Active Pending Sold Inventory
Tempe 797 179 136 7.18
Chandler 1292 570 395 4.71
Gilbert 1315 642 407 4.81
Scottsdale 4475 792 561 9.39
Mesa 2690 1050 744 5.03
Ahwatukee 536 148 115 5.95
Paradise Valley 497 29 26 20.23
Phoenix 7185 3105 2159 4.77
Maricopa County 28057 10656 7137 5.42

Real Estate Market Analysis for October 2009

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You can still buy a house with Zero down!

September 11, 2009 By

This week, we have a guest blogger. Tony is a Hawaiian Real Estate Agent, and he shares some wonderful information:

You’ve heard of the USDA and seen their stickers on the steaks you buy at the grocery store. But did you know they also insure home loans? Strange as it sounds, the USDA’s rural development program has a loan program that allows you to buy real estate with no money down in any area that they deem “rural.”

Good news for readers of this blog – many areas of Arizona are eligible for the USDA 100% home loan! While most banks and lenders have long since stopped offering zero down home loans, there are still many brokers and lenders in every state who offer 100% financing through this great program.

The USDA home loan has some great features:

  • 100% loan amount with no loan amount limit
  • 6% seller concessions allowed
  • No monthly mortgage insurance
  • You don’t have to be a first time buyer

There is an income limit for borrowers, but that limit is pretty high in some areas. For instance, in Hawaii the limit is $109,000 a year, so most people still qualify. If you want to check your eligibility and look for a neighborhood near you in your state, check out the USDA’s website.

Oddly that “rural” designation happens to apply to a lot of areas that nobody else would consider rural. Even some larger suburbs are on the list, so wherever you’re reading this, there may be a community nearby that is eligible.

Tony Kawaguchi is a Realtor with Realty Executives Oahu and sells Hawaii real estate

100% Loan Program

100% Loan Program

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Market Analysis for August 2009

September 4, 2009 By

It looks like the market is finally showing signs of slowing down.  The sky isn’t falling, we’re just going from three consecutive months of 8000+ homes sold to 7040 for the month of August.  Based off the numbers, it looks like many of the cash buyers are stepping back either because the bottom of the market has seen a sharp increase in prices or maybe they’re going back to the stock market.  Either way, it’s certainly good news for many of the first time home buyers.

August Inventory of Homes Available in Phoenix

August Inventory of Homes Available in Phoenix

Another interesting trend is that the overall number of homes available for sale have continued to go down, despite the number of homes sales has slowed just a bit.  With the number of sales going down, though, monthly inventory naturally goes up.  Overall in Phoenix metro, we have gone from 4.59 months of inventory for July to 5.24 months in August.  Across the board, most of the cities have increased by about a month.  The exceptions would be Gilbert and Chandler, which have maintained the same level.

Status of Homes sold in August in Phoenix metro

Status of Homes sold in August in Phoenix metro

Overall, we are seeing roughly 35% of homes bought in cash, 51% of are foreclosures, 18% are short sales, and 31% are traditional resales.

The next few months will be very interesting.  Just like when down payment assistance ended before, there will be a crazy rush here.  The deadline for the First Time Home Buyer Tax Credit is Dec 1.  That means that anybody participating in the program needs to be in contract by October 16th at the latest if they’re going FHA.  So imagine all the people bidding for homes in the first couple weeks of October.  They will be competing very strongly against one another.  I strongly suggest that if you are interested in this program, that you find something in the next couple of weeks.  Or else, you may find yourself outbidded during the most critical stretch.

Active Pending Sold Inventory
Tempe 722 217 155 6.06
Chandler 1150 613 394 4.47
Gilbert 1212 681 449 4.22
Scottsdale 4182 762 488 10.13
Mesa 2450 1039 665 5.25
Ahwatukee 487 171 104 6.33
Paradise Valley 500 32 27 19.70
Phoenix 6962 3154 2070 4.89
Maricopa County 26037 10853 7040 5.24
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