Conventional vs. Conforming vs. Gov’t vs. Jumbo Loans; Bias For Action

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CINNABON STORY – BIAS FOR ACTION I heard this story on a podcast a few months back and just had to share it. When Cinnabon first started, they could only afford to lease very small spaces that required them to place their ovens in front; as a result, passersby could easily smell the aroma when […]Read More

Real Estate Commissions; Antitrust; Follow The Money; OPEC; Why It’s A Moot Point

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OPEC BRINGS AMERICA TO ITS KNEES! OPEC is probably the most famous “cartel” of all time b/c it effectively brought America to its knees in the 1970s with its oil embargo and price floors. OPEC or the Organization of Petroleum Exporting Countries was founded in 1960 and by the 1970s it had so much power, […]Read More

Housing Inventory Shortages – Is Help On The Way?

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INVENTORY SHORTAGE – WILL THERE BE RELIEF? Homebuyers nationwide are facing severe housing inventory shortages while median home prices continue to rise. Pundits are weighing in on whether relief is on the way or not. Ken McElroy says relief is on the way. In this four-minute video, real estate guru, Ken McElroy points out why […]Read More

Listing Agents Speak! (About Representing BOTH Buyers & Sellers/Dual Agency)

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On Friday, I blogged about Buyers Working Directly with Listing Agents Instead of Using a Buyers Agent, and I received a surprising amount of feedback. What was even more surprising though was that most of the feedback was from listing agents as opposed to buyers agents – and all of them were opposed to dual […]Read More

Divorces Continue To Surge! How They Impact Mortgages And Real Estate

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COVID changed everything – including marriage, as many couples realized they didn’t like each other when they had to actually spend time together. 😊 Even Bill Gates is getting a divorce, as we learned recently. I am sure being cooped up in a 66,000 square foot house with another person is enough to drive any […]Read More

The Other Reason Housing Inventory Is So Low (Not What You Think)

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In the 1970s, when inflation was out of control, the press was always looking for scapegoats to blame like “middlemen” and “greedy businessmen” when the cause was really at the feet of Fed and Government policy. That is largely the situation today with respect to housing, as Fed and Government Policy – intended to help […]Read More

Owner Occupancy Requirements In A Post-COVID World; Second Home Rates Higher Now

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“Owner-Occupied” is a big deal in the mortgage world for several reasons: Interest rates are more than a 1/2 percent lower than they are for investment properties b/c there is less risk lending to an owner-occupant who will take better care of the property and be much less likely to let it go into foreclosure. […]Read More

DANGER! Don’t Waive Contingencies For Condo Purchases! 12 Condo Considerations

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We sometimes have very strong buyers waive contingencies when they make offers on condos. But, no matter how strong a buyer might be from a credit, asset, and income perspective, deals can still readily die if the condo or the Homeowners’ Associations don’t pass muster. For example, litigation, too much commercial use, ownership concentrations, and […]Read More

Low Rates Make Real Estate Investing And Airbnb More Viable

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My wife Heejin is looking at an investment property in Plano, Texas that will sell for about $510,000. It also has a tenant in it who is paying $3,700 per month. With 25% down, the PITI is around $2,600 – assuming a no-points loan in the 3.25% range. Note that investors can put 20% down […]Read More

Getting The “Best Deal” Cost Client $300,000; It’s %’s; Putting Money Where Your Mouth Is

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In 2010, we had a client shopping for homes in what was and still is one of the hottest markets in the entire country – “the Rockridge” neighborhood in Oakland, CA. He was well-qualified with ample cash and low debt ratios, but he was determined to get the best deal possible; he was convinced that […]Read More

“America’s Largest Landlord Adds $1 Billion For Its House Hunt” Why It Matters, And It Does!

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The title of today’s blog was lifted directly from this WSJ article. I blogged last week about why inventory levels are so low. One of the reasons was investors buying up properties en masse, and today’s WSJ article is case and point. Per the WSJ: “Real-estate investors have a mountain of money looking for a […]Read More

Condos Not Always “Cheaper” Than Single-Family Residences; Condo Questions To Ask

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I read recently that the median single-family home price in Marin County, California is almost $500,000 more than the median condo price. So, condos are way cheaper, right? Not always, and here’s why. HOA DUES HOA dues are significantly higher nowadays for a variety of reasons (more liabilities; more maintenance needs for older buildings; more […]Read More

Why Home Prices Did Not Crash With 15% Unemployment? Planet Money Explains

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After the COVID-19 crisis was in full force, I wrote several blogs in March and April pointing out why I thought housing prices would not crash as a result of the crisis. In response, numerous agents emailed or called me to suggest that I was being too optimistic and potentially misleading people. So, was I […]Read More

Capital Gains Taxes On Real Estate

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CAPITAL GAINS 101 The IRS and many states collect capital gains taxes on the difference between what someone pays for an asset (their “basis”) vs what they sell it for. This tax applies to most assets such as stocks, cars, boats and of course real estate. EXCLUSION AMOUNTS The IRS allows property-sellers to ignore capital […]Read More

What’s Up With Compass Real Estate? Hype vs. Reality?

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NYU Professor, Scott Galloway, recently released a fascinating six-minute video about Compass Real Estate. Galloway was the one who recently illuminated WeWork’s glaring weaknesses, so he looked into other SoftBank investments to see if they had similar issues and he focused on Compass. B/c I have been utterly fascinated by Compass’ fast expansion and b/c […]Read More

Condo Spot Approvals (again), Reserves, Time-Frames; Rate Volatility

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RATE VOLATILITY On Monday, a top producing loan officer/friend told me over dinner how much he loves the lack of volatility in the current rate environment. He explained that it allows him to float (not lock in rates) for many of his borrowers until he has the time and capacity to process their loans. But […]Read More

Will a Recession Tank Housing Prices? Probably Not…

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I know numerous people who are anxiously waiting for the next recession b/c they expect housing prices to tank. They can’t wait to swoop in and find bargains like the many that were available after the 2008 meltdown. BUT, according to Appraisal-Blogger-Extraordinaire, Ryan Lundquist, housing prices don’t always “correct” or decrease during recessions. Prices often […]Read More

Tenacity & Focus vs. Training, Seminars, Self-Help, Organizing, Inputting, & Fixing Your Business

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Of all the agents we work with (over 800 and counting), one of the most successful, by far, is a buyer’s agent on a very successful team. She is successful via every major metric – units, total volume, and income. What makes her so successful though is simply her tenacity and focus. She does not […]Read More

Leverage Your Database Before Amazon Does; Amazon Teams Up With Realogy

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Most readers have probably heard this already but Amazon is teaming up with Realogy to match homebuyers with real estate agents through a program called TurnKey. This is a huge deal b/c of the size of the partners. Amazon is the world’s largest retailer and Realogy, which owns NRT, Better Homes, Century 21, Coldwell Banker, […]Read More

New Condo Complexes/Phases Do NOT Have to Be Complete

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Many loan officers and real estate agents mistakenly believe that condo projects and/or phases within a project must be complete before units within them are eligible for mortgage financing. We, however, have an investor that offers new construction condo financing as long as only the building containing the unit is complete. Again – neither the […]Read More

How Much Do HOA Dues Zap Purchasing Power?

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We recently had a buyer who desperately wanted to qualify for a condo purchase but could not b/c the HOA dues were $800 per month! This prompted me to remind agents and buyers alike of just how much purchasing power HOA dues extract from buyers. In the above situation, $800 of HOA dues equates to […]Read More

House Flipping Back to 2006 Levels; Worried?

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I get several calls or texts every week by someone offering to buy a condo we own in Scottsdale. What is particularly interesting to me is that the offers come from dialers at large call centers that house-flipping firms have set up to make nonstop calls. In other words, house flipping is a big business […]Read More

Don’t Deposit Gift Funds, Please! (Straight to Escrow)

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It is well-known that buyers can use “gift funds” from a relative to help with the purchase of a home. But, we want to again remind buyers to not deposit gift funds into their personal accounts. Buyers should instead tell their “donors” (aka “gifters”) to hold on to their funds and to instead deposit all […]Read More

Too Busy for Big Houses! Too Old & Too Dated Too

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I hike for five or six miles every weekend in the hills around one of the Bay Area’s most high-end housing developments. The homes are huge, stunning and fun to see, but the best part is the extremely elaborate backyards with vineyards, gazebos, massive pools, outdoor kitchens, terraces, fruit trees, playsets, sport courts, and immaculate […]Read More

Important Condo Considerations

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Below are twelve things buyers and agents should consider if they plan to finance the purchase of a condo. I repeat these items from time to time b/c they are so important and b/c we continue to add so many people to our blog distribution list. Concentration Rule. No single entity/person can own over 20% […]Read More

Marketing & Lead Gen – “There Is No One Thing”

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We work with a Keller Williams agent who closed 140 transactions last year (over $100 million in sales). When people ask her what she does to generate so much business, she always says: “There’s No One Thing.” Her comment always amuses me too b/c the namesake of her brokerage (Gary Keller) wrote a famous book […]Read More

Avoid Waiting To Buy A Home in California

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The right time to buy a house is now! With rates continuing to rise and the California housing inventory that shrinks each day, the time to get into the market is now. Here are some reasons why buyers should consider buying now to avoid the cost of waiting. Rates have officially hit a 7-year high. […]Read More

The Only Time Condo Owner Occupancy Ratios Matter – Investors!

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Owner-Occupancy Ratios For Condos This is another reminder to agents with clients looking for investment properties. Investment (non-owner-occupied) condos must be in a complex with an owner-occupancy ratio above 50%. Owner-occupied buyers, however, can obtain financing for condos no matter how low the owner-occupancy ratio is. Again – the only time owner-occupancy ratios matter is […]Read More

Condos Must Be FHA & VA Approved; Townhomes & PUDs Don’t Need FHA/VA Approval

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We are asked this so often that we thought it warranted a reminder. An entire condominium (condo) complex needs to be FHA or VA approved before a unit within the complex is eligible for FHA or VA financing. Townhomes and PUDs (Planned Unit Developments) do not need to be FHA or VA approved, even if […]Read More

Is Inflation Back? Houses Are An Inflation Hedge!

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INFLATION RAVAGED THE 1970s The only thing that ravaged the 1970s more than the bad music, hair and clothes was the high rate of inflation. High inflation rates hurt economies b/c they create uncertainty, increase interest rates and decrease purchasing power and economic investment, among other things. Inflation is primarily a result of the Fed […]Read More

Are 2 Kitchens Allowed? Garage Conversions? Friendly CPAs

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2 KITCHENS USUALLY NOT ALLOWED This question comes up often, so we thought we’d revisit it. Lenders will usually lend against a property with two kitchens IF both kitchens have permits. If one of the kitchens is not permitted (also known as unwarranted), lenders will usually not lend against the property, primarily b/c the extra […]Read More

Lenders & Vendors = Reflection On You More Than You Realize

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I was chatting with some very successful Redfin agents recently and I learned just how important strong vendor and lender relationships are. As most people know, Redfin agents do not work for commission, but instead get paid a salary and bonuses based primarily on “customer satisfaction.” Customer satisfaction is measured by the results of an […]Read More

Clean Purchase Contracts; No Reports/Inspections; All Addenda

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We received a purchase contract last week, and immediately emailed our confirmation of terms request to the Realtor and then ordered our rush appraisal, as per usual. Four days later, we received the appraisal at the contract price of $830,000. Yaaaayyy, right? Wrong. The Realtor forgot to send us the addendum indicating the price was […]Read More

Condos – Three Numbers To Know

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If you’re looking at a Condo, there are three numbers to know: 1) % of owners delinquent with HOA Dues: Less than 15% of owners must be less than 60 days late. This number is often an issue after market corrections b/c people are more likely to walk away from condos (and stop paying HOA […]Read More

Reasons Why Inventory Is So Low

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When my boys and I go back to South Dakota to hunt pheasants, one of the most interesting things to observe (besides the massive cultural chasm between the Bay Area and rural America) is the real estate market. In some parts of South Dakota, the inventory and the “days on market” are almost infinite b/c […]Read More

Recipe for New Real Estate Agents to Follow?

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Heejin sat on a panel last night at a Realtor event, giving advice to Realtors. This is humorous in light of the fact that she is and always will be a lender. It makes sense, however, when you consider that she has worked closely with hundreds (if not thousands) of Realtors over the years and […]Read More

Motorcycle Falls Off Wall; Fixing Houses; Appraisal Fails

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When I was in college my roommate and I hung a motorcycle on a wall b/c we loved motorcycles and b/c we thought it was “artful” and amusing. My two roommates who didn’t love motorcycles found it neither artful nor amusing, particularly when the wall started to sag. And sure enough, after a month or […]Read More

Have Housing Prices Peaked? Probably Not, After Inflation

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Many people mistakenly believe housing prices have surged out of control in recent years and may have peaked. The reality is that in most areas they are only back to the levels they hit previously in 2006. More importantly, if we adjust for inflation since 2006, housing prices are actually 16% below their 2006 peaks […]Read More

Appraisals with “Adverse External” Influences; Big Deal Lately

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We are having more issues lately with properties that have “adverse external influences.” Adverse external influences are structures or entities near a property that negatively affect its value. Adverse influences include freeways, busy arterial through-streets, railroads, BART or mass transit trains, cemeteries, schools, and commercial buildings or establishments. Realtors involved in transactions with external influences often under-estimate […]Read More

Beware of Homeowner’s Association (HOA) Dues; Lower Qualifications

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As the prices of single family residences (SFRs) continue to climb, we have more and more borrowers shifting their home searches to condos and townhouses. The problem is that they (and their Realtors) often do not account for the impact of HOA dues on their maximum qualification amounts. HOA dues range from $200 to well […]Read More

“Negative Interest Rates;” How Do They Affect Real Estate?

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The German 10-Year Government Bond Yield hit negative territory yesterday. This means that investors actually pay Germany to borrow their money; Germany doesn’t pay interest, but it actually gets paid to borrow money. The same thing is happening in Japan. Why would investors take a negative yield, or pay somebody to borrow their money? B/c […]Read More

Importance of Local Lender In Hot/Unique Markets; Quotes Of The Day

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Employing a local lender is now more important than ever in the Bay Area’s super hot markets. Listing agents simply do not want to risk a transaction on untested lenders or appraisers (they go hand in hand) when so much can go wrong in today’s lending environment. We take enormous pride in the reputation we […]Read More

Condo Issues: Concentration? Delinquent HOAs? Oakland Tribune Bldg :)

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First, unrelated to anything, if any of you appreciate the Oakland Tribune Building as much as I do, here is a great podcast discussing it: http://99percentinvisible.org/episode/tube-benders/ Secondly, we have had condo deals below up recently b/c of HOA issues – one involving “concentration” (one entity owns more than 10% of units, and another involving delinquent […]Read More

Inflation Concerns Explained – How They Affect Real Estate

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The Fed is expected to raise short term rates this month b/c employment numbers are adequately strong. But, one area that remains a concern is inflation, or the lack thereof. The Fed actually desires a little inflation, and they do not understand why there is so little. The WSJ had an article this morning on […]Read More

How To Buy A Flip – Property Bought & Re-Sold Within 90 Days

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We have been seeing “Flips” surface again lately. Flips are properties that are purchased and re-sold within 90 days. Lenders go by “contract date” and not close of escrow. Hence, if you buy a property on October 1st, your contract to re-sell it must be dated after January 1st, to avoid “flip” status. Anytime a […]Read More

Condo Concerns? What To Look For

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Things to consider when looking at Condos: 1. Rates are usually higher for condos if the down payment is less than 25%. 2. Concentration Rule. Does one owner own more than 10% of the units? If so, most lenders won’t finance the units. 3. Litigation. If the HOA is involved in litigation, most lenders will […]Read More

“Site Condos” For Multiple Units When Lot Splits Are Not Allowed

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We are seeing “Site Condos” more often than ever lately. This is b/c many cities, like Berkeley, will not allow small lots to be split into multiple parcels, but they will allow multiple units on a single lot. B/c of this many developers opt to convert small lots into “site condos” or condo units that […]Read More

Why Young People Need To Buy Real Estate

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We have many clients who come to us concerned about timing the market. While it is of course very advantageous to buy at the bottom, the reality is that nobody can truly know what the market will do over the next few years. The more important thing for young homebuyers to remember is that property […]Read More

“Flip” Rules Again – Selling 90 Days After Purchase

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We still see the occasional “Flip” surface, although not nearly as often as we saw them in 2010-2012. A “Flip” once again is a property that is purchased (usually by investors) and re-sold within 90 days. FHA will not finance Flips at all. Conventional and Jumbo lenders will finance Flips, but they require two appraisals. […]Read More

Un-permitted Space OK If No “Health & Safety” Issues; No Value

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Unwarranted or un-permitted space is always OK, from a lending perspective as long as: (1) it is just an additional room, with no plumbing or stove; (2) it was built in a workmanlike manner with no health and safety issues; and (3) no significant value is attributed to it. Hence, un-permitted sun rooms, breakfast nooks, […]Read More