Rent/Lease-To-Own Property

With borrowers having a hard time getting financing these days, and developers having a hard time getting rid of their home inventory new strategies for home ownership are emerging such as the rent/lease- to- own option.  

This option is characterized by a lease in combination with an option to buy within a specified time period (normally 3 or less years) at an agreed upon purchase price. 

The borrower (lessee) paying an option fee, usually ranging from 1-5% of the price, which is credited to the total purchase price. The borrower pays rent and an additional  rent premium usually per month which is also credited to the price and seen as equity in the property.  

 The major advantages of such an option is that  buyers  have the time to build up down payments so they will eventually be able to qualify for the mortgage they are seeking,  improve their credit history and take time to live in the home and area without a major commitment. 

There are pro's and con's of course for each party. For buyers, if you still cant get financing  at the end of the  lease period you may have to forfeit all the extra cash you've invested.  Also, determining a purchase price may be tricky at the moment, with housing rates falling and the market in flux, sellers may want to re-negotiate when the contract is up. Also, renters may not decide to go through with their options if prices continue to fall, which is less of a loss then taking on a depretiating property. This may lease sellers with a larger loss then if they would have originally sold, and were also carrying the cost of the property during and after that time period before they find new buyers. 

http://money.cnn.com/2009/06/02/real_estate/rent_to_own/index.htm?postversion=2009060416

Home Owners Associations (HOA's). What's the deal?

What are they, and why do we have them?

The fastest growing type of housing today are common-interest developments (CID's), or planned unit developments, which include condo's, TIC's and cooperative apartments. HOA’s or Home Owners Associations are corporations with formal by laws, which are created by the developer for the purpose of outlining and enforcing rules, maintaining the property, setting reserve fund amounts etc. All owners are mandatory members; however, active interest is not. A lot of CID's hire property management companies to handle the day to day matters, outsourcing of landscaping and taxes.

Being a legal entity, HOA's have the authority to enforce deed restrictions, and Covenants, Conditions & Restrictions (CC&R's) in these documents, a potential buyer will find rules and regulations that were established in order to maintain or enhance the quality and value of the properties.

Owners are charged monthly fees, called HOA dues, which are separate from their personal mortgage payment. These dues are not to generate profit, but pooled to pay building expenses and create a cash reserve to cover unforeseen costs. Dues are calculated from a projected annual budget, and divided by either square footage or percentage of ownership.

Fee's cover expenses such as, different types of insurance insurance, specific utilities, repairs, common area maintenance, and reserve funds. It's important to remember that no two properties are exactly alike, each have different needs, concerns, and histories. HOA dues vary greatly and CCR's will as well.

If you're looking to buy in a common interest property the major question is....

How much are HOA dues, when are they do, what do they cover and is it worth it?

Each property is different. A 42 unit development with a pool and gym in the financial district will have different fees and regulations than a 2 unit historic building in Pacific Heights.
The new 26 story Bridgeview in South Beach SF has an average selling price of $919, 00 with HOA dues of $535 per month.

161 Castro St, SF, an 8 units building, unit priced at $399,000 have HOA dues of $283 per month.

There is no 100% answer to that question for properties across the board.


It's all about asking the right questions!


1. What will the dues cover? What won't they cover?
2. Are there any current or upcoming assessments or liens on the building?
3. What can I realistically afford?
4. Who are the other people in the building? Do you get along? If there is a problem how will it be handled and by whom?
5. Are there any major renovations or repairs in the works?
6. What is currently in the properties reserve fund? Have the cash reserves been met in the past 3 years? If not, why?
7. What are the average HOA dues for other similar properties in the area in the past year?
8. Is there earthquake insurance? Does the building need it? (Earthquake insurance alone often raises fees by about 30 percent.)

Where do I get the answers?

Every home buyer should have a real estate agent, and a good mortgage broker. Finding someone who you like to work with, who is knowledgeable, responsive and has great referrals when they don’t have all the answers is imperative. Have your agent and mortgage broker go over the CC&R's and the disclosure package with you in detail, and dont be afraid to ask questions.

Are you wondering about your home improvement return on investment?

Investing in your home will always pay off, for you or for the future owners, but are you uncertain about doing home improvements with the market’s decline? Have you done improvements and wondering if you'll get the return you expected?
Statistics show that nationally home prices have fallen an average of 7% in this past year, but the value of home remodeling projects has only declined 3.86% according to N.A.R.
In the bay area we see the highest rate of return on our home project investments on deck and kitchen remodeling and/or upgrades.
It may be a good time to do those projects that you have been putting off. With bargains and sales across the board right now from retail stores to restaurants, you may have more room to negotiate the price of labor and materials also, more than before. Don’t forget to get at least three estimates on every project and always work with people who have a license. I can’t stress this enough, you'd be amazed by the difference in price and approach.
When remodeling a front porch I made sure to get at least 6 different bids. There was over a $20, 0000 differences for the same job! I make it a point to keep maintaining and improve my property no matter what, and it's paid off and will continue to do so for decades to come. I know that it will maintain value far longer than if I didn't. I also save more money in the long run by heading off what may be bigger future repairs not to mention, receiving the highest rental prices in that market.
Need another reason?
If you're planning on moving, no matter in 2 years or 20, buyers look for what we call "turn key" properties, properties which don't need any work-and they're willing to pay for the luxury. Maintaining your property and making improvements will pay off in the end
Buyers are not shy about making reductions, (sometimes huge ones) in their offer price because they don't want to deal with the hassle or work of doing repairs or improvements themselves. That means the possibility of less money for you and a more complicated transaction.
Think of it in line with all the other maintenance in your life that pays off, your car, your mind, your body, your relationships and career. * Chart from NAR Cost vs. Value Report 2008

March Sales Increase 63.8% from March 2008

March marks the start of the sales season and sales and prices of single family homes are up and days on market (DOM) are going down.
The California Association of Realtors® announced Monday April 27th that sales of single family homes increased by 63.8%. The median price of SFH (single family homes) also increased by 2.2% in March compared to February of 2009. The median number of days to sell a SFH has declined by 8.5 days compared to March of 2008.


Detailed information including financials on your area can be found at:

http://www.blogger.com/ww.car.org/newsstand/newsreleases/marchsalesandpricereport/

Realty Times Video: Indicators of Recovery

According to Realty Times, the bottom has dropped out and we are on the road to recovery. However, March does start off the home buying season for the year, so of course sales are going to increase compared to months like November and December.
This week focuses on mortgage applications and interest rates, and short sales just to name a few topics.

Also, they touch on my previously posted topics of government tax credits for new home buyers.



Video Link:

http://realtytimes.com/

FHA insured- Loans: Who say's you NEED 20% down? Try 3.5%.....

Potential home buyers may have more opportunity and purchase power than they knew...Why? FHA-insured loans only require a 3.5% down payment, not 20-30% like typically thought. Not only that, but funds don’t have to be your own; they can come from a family member, friend, or employer in the form of a gift. Having a hard time asking for a gift? Tell them there is a tax deductible gift allowance of $12,000 annually. ($100,000 a lifetime). Makes it a little easier. Some may get excited there until they think about their less than perfect credit and FICO score. Well, good news there as well, you don't have to have a credit score of 800, or 750 or even 650 to qualify. If even you have bad credit, it's actually easier for you to qualify for an FHA-insured loan than a conventional loan. Sweet! What's the catch? Some fees of course FHA does have some fees, they charge a onetime 1.75% premium on the total loan amount, but that can financed into the loan, it is NOT paid up front. What does that equate to? Say your loan is $200,000, (humor me) a fee of 1.75% is $3,000. You going to complain? I didn't think so. So what are the loan limits and rates? Loan limits were just raised to the current amount of $729,750 for a single family residence. $934,200 for a 2 units, and $1,403,400 for a 4 unit building. Within range of current listing prices. Today, 4/27/09 a FHA 30 year fixed: up to $1,00,000 4.375% RATE 4.878%ARM

To help you calculate your possible monthly mortgage payments clink on the link below and enter your info: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx


Looking like a really good time to buy huh? Now, stop waiting for the bottom to drop out and be proactive.


For more information Visit HUD at: http://portal.hud.gov/portal/page?_pageid=73,1827594&_dad=portal&_schema=PORTAL

Mortgage Protection Plan: Insurance for New Home Buyers against Layoffs

Yet another incentive and a little piece of mind for home buyers.
April 2nd, 2009, marked the start of the Housing Affordability Fund's new mortgage protection program that's being offered to first-time home buyers. (First time home buyers are persons who have not bought or owned a primary residence in the past three years.)
Through this new program, first time home buyers who lose their jobs (due to layoffs) may be eligible to receive up to $1,500 monthly towards mortgage payments for 6 months. Co-buyers can also benefit for a monthly amount of $750 for the same time period.
This program also includes accidental disability and a $10,000 death benefit.
To qualify escrow must close on or before December 31st 2009 and use a licensed Realtor.

For more information visit:

http://www.car.org/newsstand/newsreleases/mppstory/