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Real Estate Radio USA Episode 143

“On todays show we talked about the federal crackdown they aptly named “Operation Malicious Mortgage“. We had two interviews today. Our first interview was with our Internet Marketing and SEO expert, Mary McKnight from RSSPieces.com and the second was with top-producer, Pete Sabine. All of this and more on this episode of Real Estate Radio USA.

We started the show with the latest in real estate news. In the last day or two the federal authorities announced a massive crackdown and arrests in what they are calling “Operation Malicious Mortgage“.

Our first interview today was with our favorite Internet Marketing and SEO expert, Mary McKnight from RSSPieces.com. Mary spoke with us today about how to improve an old blog and market drive more traffic,  ways to increase the number of leads your site generates, using competitive warfare and reputation management on social media sits, and how to be smart when getting backlinks.

Our second and final interview of the day was with Pete Sabine from Contra Costa County Market Watch.com. Pete joined us to talk about how blogs have increased his business, how he uses technology to increase his business, and how he sees the cycles in the real estate market including key indicators to look for.”

 Real Estate Radio USA Episode 143 [119:07m]: Play Now | Play in Popup | Download

 Mary McKnight from RSSPieces.com [38:17m]: Play Now | Play in Popup | Download

 Pete Sabine [33:59m]: Play Now | Play in Popup | Download

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FHA Basic Appraisal Checklist for real estate transactions in California, the San Francisco Bay Area, Contra Costa County and throughout the country…

Since its inception The Department of Housing and Urban Development (HUD) has established minimum property standards. While these standards have varied over time the recent changes have been some of the most dramatic in decades. By eliminating many of the “nuisance” repairs and mandatory inspections HUD hopes to make it easier to buy or sell a home with FHA financing. The most recent changes are highlighted bold on this checklist.

POOR CONDITION - A lack of maintenance that gives a “run down” look to a property is acceptable. Missing or damaged flooring or carpet, rotted or worn out countertops, poor workmanship, damaged plaster or drywall, bathroom tile, missing or damaged interior doors, debris, trash, or other cosmetic items that do not otherwise jeopardize the safety or structural integrity of the property are acceptable and will not require repair.

CONDOMINIUMS - Projects must be at least 51% owner occupied and may not have a “right of first refusal” clause in the association documents.

STRUCTURAL DEFECTS - Large settlement cracks, sagging floors or roofs, and significant deteriorated wood are conditions that require professional repair. Grading must be adequate to drain away from house.

TERMITES - HUD will no longer automatically require a termite inspection. Minor (non-structural) termite damage will not require repair. Wood/soil contact that is not due to a structural problem will no longer require repair. Visible evidence of active or past infestation, or evidence of dry-rot will require termite report with clearance of Section I items.

LEAD PAINT - For homes built before 1978, any peeling, chipping, or chalking paint on the house, detached garage, shed, fence, or anywhere on the property must be scraped, primed, and painted. Use tarps to collect paint chips to avoid contaminating the soil. If the home is built after 1978 HUD will no longer require painting of defective paint surfaces, in most cases.

HEATING - The property must have a permanent heat source. The heating and air conditioning system (if present) must be operating properly. Space heating systems are acceptable if installed in accordance with local building codes. Combustible (oil/gas) heat requires exhaust ventilation.

ROOFS - Leaking and worn out roofs require repair or replacement. While a remaining life of at least two years is no longer specified a roof with a life of less then two years should be considered “worn out". HUD will no longer require automatic inspection of a flat roof system.

WINDOWS/DOORS - HUD will no longer require broken glass to be repaired. Exterior doors that are in poor condition but are otherwise functional are acceptable. Windows that stick, are loose, or are otherwise in poor but serviceable condition should be acceptable with the following exception: Inadequate access/egress from vbedrooms to the exterior of the home is unacceptable. At least one window in each bedroom must open and close freely in order to allow escape in case of fire. Burglar bars on bedroom windows must have a release mechanism (at least one per bedroom).

ELECTRIC/UTILITIES/MECHANICAL SYSTEMS - Fuses are acceptable. 60amp electric service may be acceptable (a small house with oil or gas for heating, cooking, and hot water). Loose wiring, open splices, and other hazardous conditions will require repair. An exception is low voltage (telephone or cable TV) wiring that would not present a hazard. All utilities should be on in vacant homes in order to avoid re-inspection. All mechanical systems must be operating.

CRAWL SPACE & ATTIC - Access to both the attic and the crawl space is required. Both must have adequate ventilation. Crawl spaces must have sufficient clearance for inspection and maintenance.

PLUMBING - Minor plumbing leaks and defects are acceptable. Major plumbing problems will require inspection and repair. Water heaters must have a pressure relief valve.

SAFETY CONCERNS - Smoke detectors are not required but if they are present they must work properly. HUD no longer requires repair of the safety device that automatically stops an obstructed electric garage door opener. Trip hazards such as uneven walkways or sidewalks will not require repair. Missing handrails on stairways are acceptable.

HUD does not require the following:

• Appliances
• Screens
• Driveways
• Lawn sprinkler systems
• Pool repairs (unless they present a safety concern).

To learn how to interpret this information or further discuss, please feel free to contact me directly or post a comment to the blog. Contact me at (925) 385-2340 (PST) or send an email to Pete@ContraCostaLiving.com. Visit Pete’s web site www.ContraCostaLiving.com

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Real estate investors throughout the country including California, the San Francisco Bay Area and Contra Costa County now have an additional challenge when there is a need to refinance their real estate investment properties held in an LLC for liability protection…

Changes in Freddie Mac lending policy: Freddie Mac will not refinance a property that has been held in an LLC at any time in the previous 6 months. Fannie Mae is expected to follow suit. And of course, this may require your lender to do the same.

For some of you this is a ho-hum announcement - another change in policy to be dealt with. If you have never been through this sort of change before, you may be uneasy, even angry. Here is another government backed organization making a decision that will have a major impact on a large part of the investing population - people who invest in real estate in an orderly, responsible fashion and who in no way caused the current mortgage debacle. But all investors are being painted with the same brush.

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In most real estate markets in California, the San Francisco Bay Area and throughout the country, sellers are trying to cope with a slower moving market burdened with an over supply of competing homes for sale and weak buyer demand. Buyers are struggling with rising mortgage interest rates, tougher loan underwriting qualifying standards, high prices and low affordability. Real estate investors want positive monthly rental income cash flow and a hedge against a softening rental market in the future. 

Solution:

• A mortgage interest rate “buy-down” allows the seller to expand the pool of qualified buyers and real estate investors.
  

• The mortgage interest rate buy-down is a seller strategy with multiple options to maintain the sellers price position
  

• The property is offered for sale at the full asking price with a seller credit to discount the mortgage interest rate or a discounted price without a seller credit to discount the mortgage interest rate
  

•  Its a “win-win” for both the buyer and seller
  

•  The seller can deduct the buy down credit as a selling cost expense
  

• The buyer receives a 1098 form from the lender and a tax deduction for the buy down credit “points” paid for the new loan to purchase the property
  

• Higher sales price maintains neighborhood property values
  

•  The discounted mortgage interest rate helps to ensure the buyer will qualify for the loan
  

• The buy-down empowers the seller to compete with new home builders offering substantial buyer incentives
  

•  The lower monthly loan payment increases the potential for positive rental cash flow for real estate investors 

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  http://www.contracostacountymarketwatch.com/00358E
  

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Here are some tips I learned from a seasoned California mortgage banker who successfully funded over 100 loans during the tough transitional 2007 real estate market. These tales from the trenches can prevent your deal from the shrapnel of a loan decline or last minute tighter “prior to document or funding” conditions:

• Most conventional (up to $417k) and non-conforming (Jumbo) loans above $417k require Desktop Underwriting approval
• Conventional secondary financing is very difficult to obtain. A maximum of 90% loan-to-value (LTV) ratio should be relied upon from the buyer
• Jumbo interest rates are currently at least 1.375% higher than conforming loan interest rates
• Secondary “seller carry-back” financing is a great sales tool strategy. In some cases 100% total loan-to-value will be allowed with the first loan at 80% LTV or less
• Beware of “declining market” underwriting guidelines
  • A 5% reduction on the guideline is required by most lenders, so if the buyer is applying for an 80/10/10 loan, the underwriting guideline would have to meet or exceed 85/15/5 underwriting guidelines
  • Be sure to work out these important details in advance during the loan “pre-approval” stage instead of in the middle of a transaction!
  • All of California is now considered to be in a “declining market"- check with your lender to see how your local market is rated

•  Credit scores of less than 620 will not pass

• Appraisal reports are submitted to underwriting
  • Underwriting runs an Automated Value (AVM) which almost always comes in low
  • Desk/Field appraisal review is then ordered
  • Make sure the appraisal is always signed off by the underwriter within a reasonable amount of time

 One more thing…dont forget to wear your flack jacket in this ever changing lending environment.