Four Critical Credit Tips

Dear Buyer,

Your credit score is an important benchmark for mortgage lenders, landlords and even potential employers. Use these tips to avoid hurting your credit score:

1. Don’t max out your credit cards.
A big factor in your credit score is your debt-to-credit ratio. When you hit your spending limit, your debt-to-credit ratio rises and your credit score falls. As a rule, always have more credit available than outstanding debt. Doing so not only boosts your credit score, it keeps your payments low and leaves a buffer for emergencies.

2. Consider the pros and cons of cancelling credit cards.
While removing temptation is one way to check excessive spending, cancelling credit can actually damage your credit score. Why? Cancelling credit increases your debt-to-credit ratio just like maxing out a card, dropping your credit score. If you need to cancel a credit card, obtaining the same or higher amount of credit with a new card diminishes the effect. (But it's best not to cancel, just stop using the card.)

3. Stop applying for store credit cards in the checkout line.
It might be tempting to save 15% on a one-time purchase, but applying for unnecessary credit. It can seriously damage your credit score. Lenders make a hard inquiry whenever you apply for a new card. This type of inquiry often lowers your credit score by several points, which accumulates when applying for multiple cards. A soft inquiry occurs when you check your own credit, which is highly encouraged routinely and before a major purchase.

4. Apply with multiple lenders when shopping for a mortgage.
While I have preferred lenders I would much rather work with because ultimately, professionalism and knowledge are what gets the job done, not all lenders do all loans or work with all lender sources. Buyers should know this. When you apply for a mortgage, the lender performs a hard inquiry. This will lower your credit score by a very small amount, around 5 points. However, when multiple mortgage lenders run your credit within a 45-day period, it only generates a single credit penalty. Thus, applying at one, two or even a dozen mortgage lenders only produces one minimal deduction to your credit score. Unless you have a serious credit problem, applying with more than three is probably unnecessary, but to satisfy yourself that you are getting the best mortgage rate and terms, just like shopping around for a new car, it would be wise to take a little time in the application process and ask questions.

If you want to learn more or discuss your home buying or selling options, contact me.


Energy-Efficiency Upgrades and Residential Energy Tax Credits for 2014

If you made your home more energy efficient in 2014, you might qualify for the residential energy tax credit.

Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades. 

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

Among the upgrades that might qualify for the credit:
  • Biomass stoves
  • Heating, ventilation, and air conditioning
  • Insulation
  • Roofs (metal and asphalt)
  • Water heaters (non-solar)
  • Windows, doors, and skylights
To claim the credit, file IRS Form 5695 with your return, the 2014 version may be found at their website with the instructions.


What is the January 2015 Real Estate Profile of Long Beach, Cerritos, Lakewood and Rossmoor?

Here is a brief summary of January 2015 sales, compared to January 2014:

Long Beach - Median sales price for a single family home: $481,000 (up 5.8%), housing inventory down 22%, with only 2.2 months supply of inventory on the market.

Cerritos - Median sales price for a single family home: $602,000 (up 3%), housing inventory down 9% with only 2.1 month supply of inventory on the market.

Lakewood - Median sales price for a single family home: $443,500 (up 3%), housing inventory down 44%, with 1.4 months supply of inventory on the market.

Rossmoor - Median sales price for a single family home: $807,500 (up from $800,000), housing inventory still at 2.6 months supply of inventory on the market.

By checking points along the graph, prior months' sales prices are seen. Long Beach and Cerritos are down, Lakewood and Rossmoor are up. This is a live graph, and is updated with each month's sales.

Would you like to know what buyers' home buying motivations are? Buyers who purchased brand new homes did so because of fewer electrical and plumbing problems. Sellers who take this and other items into account when preparing their home for sale are less likely to get a laundry list of repairs desired by buyers.
NAR's 2014 Profile of Buyers and Sellers


Cash Buyers Slowing, Home Price Gains and Low Inventory In Southern California

Looking toward downtown Long Beach from Bluff Park
For quite a while the price increases have been pretty noticeable, but on closer look it's not the same for all segments of the Southern California real estate market.  According to Dataquick,
"In December, the lowest-cost third of the region's housing stock experienced a 12.9 percent year-over-year increase in the median price paid per square foot for resale single-family detached houses. The annual gain was 6.3 percent for the middle third of the market and 2.3 percent for the top, most-expensive third."

And the Southern California six-county median price for a single family home is still 17% lower than the median peak price in 2007.  While all cash transactions are decreasing in some states and regions because prices have increased enough to make returns unattractive to real estate investors, low inventory is still prominent.  Overall, the number of home sales in Southern California was more than 8% less in 2014 when compared to 2013.  This need for more homes to sell is evident in just about every local city and zip code, especially in the market below $500,000.  In Long Beach in December, 2014, there were 371 houses for sale, which put the "months supply of inventory"  at 2.1 months, a decrease of 12.5% from December 2013.   Townhouses and condos were only slightly better at 2.2 months of inventory in Long Beach.  Normal inventory levels are for a 6 months supply.  The average home sale price in Long Beach was $535,000, while the median was $464,000 for December.

At the moment, there is a demand for houses in the more affordable $400,000-$500,000 range in the Long Beach area.  For a comparable sales analysis, always a good way to get a current market education, please contact me via phone or e-mail.  Even if you don't plan on selling right now, there are good reasons why you should get a good estimate of value from an experienced professional. (Remember, sites such as Zillow offer information based on tax records, which do not tell the whole story of your home's value.) In an economy where appraisals and mortgages are still quite stringent, a professional REALTOR is the best source for finding out about market value.


New California Real Estate Laws for 2015

The following are some of the new real estate laws taking effect in the future in California.

California brokers are required to keep transaction records for at least 3 years. These records used to include text messages, instant messages and tweets, but per AB 2136, as of January 1, 2015, such electronic "ephemeral" records are not now required to be kept.  If you wish to maintain a good permanent record of communication with your agent, faxed documents and/or e-mail messages are a better way to go.

Many HOA associations use the services of a property manager who commonly carries out the forwarding of HOA documents to the buyer during escrow.  The fees charged by them for the gathering, production and delivery of such documents has been the subject of controversy and regulation in the past, all the more so since electronic documents do not incur the expense of actual copying and messengering to an escrow office that once was common.  To eliminate the practice engaged in by some companies where non-requested documents were included with requested documents--and charged for--document bundling is now prohibited. It is the now the responsibility for the seller to pay HOA document fees, and the fees must be itemized for mandated disclosures, i.e., CCRs, Minutes, By-laws, special assessments, financial/budget statements, rental reports, operating rules, etc.  The HOA must estimate the cost of such mandated documents prior to production, and if the seller possesses them electronically, they must be provided free of charge.  It is the responsibility of the seller to pay the HOA for any charges which the HOA is allowed to incur. The California purchase agreements have been revised to reflect this change in the law. So if you own a condominium and you are selling it, be aware that you are now legally required to pay for the mandated documents which are to be sent to the buyer, and that these documents can no longer be ordered by escrow using the buyer's deposit funds (a common practice until now).  These and other requirements are detailed in  AB 2430.

There are several other new HOA-related laws concerning exclusive use maintenance, use of recycled water, use of low water-using plants, judicially enforceable dispute resolutions, allowance of personal agriculture in a back yard.  For specific information on these, please contact me.
Image result for smiley faces
If you see one in your front or back yard, the California red frog is now the state amphibian.

On July 15, the California state water board adopted emergency regulations restricting water use for outdoor landscapes. The regulations prohibit using potable water outdoors, such as watering your lawn, that results in runoff water on sidewalks, driveways, roadways and your neighbor’s property; washing a car with a hose unless the hose is fitted with a shut-off nozzle; watering down your driveway and sidewalk; and using water in a decorative fountain unless it recirculates. Violation of the regulations is an infraction and may result in a fine of up to $500 for each day the violation occurs.  Various cities, such as Long Beach and Los Angeles, also have water regulations, i.e., watering on certain days and times. Try checking with their web sites.

AB 2310 allows the city attorney in certain California cities, including Long Beach, to demand that a landlord evict a tenant, after following certain procedures, for unlawful possession of weapons or ammunition or for other illegal conduct with controlled substances, or this action may be carried out by the City.

Seniors or disabled citizens may file for a postponement of their property taxes if household income does not exceed $35,500. This program does not include mobile homes, and takes effect July 1, 2016.  Claims are filed with the State Controller and any sums approved and paid by the state will become a lien on the property.

Please contact me for more detailed summary on some of these laws, I am happy to be of assistance.


The Technicalities of Reverse Mortgages: Are You a Non-Borrower Spouse?

Could the lady in this photo be someone in your family?

 Per a HUD (the overseer for reverse mortgages) statement dated September 4, 2013, reverse mortgage borrowers are advised that the both the borrower and his/her spouse should be counseled:  "One main concern for the non-borrower spouse is when the borrowing spouse passes away and the loan becomes due and payable. More often than not, the surviving nonborrower spouse, who is not on the deed, may not be able to pay the balance due or meet the criteria to qualify for a HECM of their own on the property in order to remain in the property. During counseling, all parties must be made aware that the HECM cannot be assumed by the non-borrower spouse." 

A non-borrower spouse may not have protection, and may be forced into a foreclosure situation if he or she is not able to buy out the reverse mortgage.  In a situation involving a 92-year-old widow in Arizona, this article outlines the action ultimately taken because of intervention by the Consumer Financial Protection Bureau (CFPB) when appealed to by the woman's son, where Bank of America bought the reverse mortgage after the widow claimed she was unaware that her name was not put on the loan, and the Bank stopped its foreclosure action and allowed her to continue living in her home. 

This Arizona story is not an everyday scenario, however, so the counseling described above is designed to make the parties aware of the position a non-borrower surviving spouse could be put in after a spouse's death or permanent placement in a facility, because, according to the HUD guidelines, the loan is then due and payable.  And how soon is "due and payable"?  Per All Reverse Mortgage Company's site: if a borrower passes away or
"if a borrower is forced to go to a hospital for more than 12 consecutive months and there is not still one original borrower remaining in the home (not a family member, but a borrower who is on the loan), then the loan shall become Due and Payable and must be paid in full at that time," also, a borrower is urged to contact the servicer if he/she plans to be away for an "extended vacation".  This is important because a reverse mortgage requires the borrower(s) to reside in the property as their principal residence, however, that doesn't mean people don't take trips, so communication is important. 

For borrowers interested in future application for a reverse mortgage, as of March 2, 2015, lenders will be required to review their:

• Credit reports.
• Payment histories on property taxes, homeowners association fees and hazard insurance premiums.
• Income from full-time and part-time employment, Social Security, pension funds, regular draws on IRAs and 401(k) accounts, plus any earnings on investments.
• Recurring household debt obligations.

FHA wants lenders to come up with a cash flow and residual income analysis.
 For further help on this topic, please contact me directly and I will be happy to refer you to a qualified reverse mortgage lender. 
One technicality tucked away in FHA’s regulations can snag owners whose spouse dies after taking out the reverse mortgage. If the surviving spouse’s name does not appear on the mortgage documents, the outstanding debt balance becomes due and payable. If the surviving spouse can’t afford to buy the house to make the payoff, the property may be put up for foreclosure sale. - See more at: http://therealdeal.com/blog/2013/03/01/232102/#sthash.Oty7WfpJ.dpuf



Landlords and Property Owners, Don't Risk Your Property With Illegal Activity

In spite of the laws being passed in many states allowing legal consumption of marijuana, federal law says it's illegal. So in spite of the growing public "approval" towards this drug, if you are a landlord with tenants, you may be at risk if you are allowing tenants to smoke marijuana on your property.

A landlord may be at risk, according to National Association of Realtors Senior Policy Representative Megan Booth, of having his/her property taken because the federal government, which takes precedence over state laws, may seize finances and property connected to illegal activity.  So while public opinion shifts more towards acceptance and pro-legalization, the federal government is also being pressured to act in accordance with the current federal laws. “The U.S. has signed on to global treaties classifying marijuana as one of the heaviest controlled substances,” Booth said. “So there’s some outrage that the U.S. isn’t prosecuting marijuana users here as fiercely.”

At the very least, new disclosures may be required (as if there aren't enough already) in leases and real estate sales transactions, covering marijuana policies on rented premises, and selling houses and condos where nearby marijuana use is allowed.   All is not rosy in this new "industry": there has been an increase in reports of explosions on properties where tenants have been growing pot using special equipment, mold could  be an issue because the plants require high humidity, to say nothing of smoke and odors from nearby users. Such issues could exponentially deadly if this involves apartments or attached multi-unit condominium buildings where an explosion could immediately cause damage across several units, or moisture and water leakage issues spread to a lower unit causing expensive mold removal and interior replacements, and subsequent legal issues for the owners, possibly the Board of Directors, and substantial insurance and replacement costs.  (Such a story was once told to me about non-English speaking tenants who rented a unit advertised as "garden apartment" in Orange County.  Being new to the U.S., and possessing very little English, this was interpreted to mean that a tenant could start their own garden inside the unit.  So a crop of marijuana plants was ultimately found growing over the carpeting and causing extensive water damage to the unit below.)


The New Changes in the 2014 California Residential Purchase Contract

As of November 24th, new changes and additions to our real estate contract will be taking place.  This is one of the most significant series of changes, and the largest amount, in many years.  So if you're a buyer or a seller of a condo, house, duplex, three- or four-unit residential property and you open escrow on November 24th or later, you will be using the new form associated with the California Association of REALTORS.  You don't want to be like the little koala and caught unaware of the changes.

Without going into specific detail that would be reviewed completely if you were actively engaged in an offer or a transaction, here is a general summary of some items that would be encountered:

The contract has expanded by two more pages, making a total of 10 pages.

If you're a condo owner, you will automatically be required to pay up front and deposit funds into escrow for the legally required homeowner association documents given to to the buyer.

The parties can no longer spend the entire escrow period submitting their instructions to escrow, but now must submit within 5 days of opening escrow.

The buyer deposit default language now addresses an electronic fund transfer when submitting funds to escrow.  Checks are still acceptable, but the EFTs are now much more common and direct.

Credits given back to the buyer from the seller must now be disclosed to the buyer's lender and cannot exceed the amount allowed by the buyer's lender.

Termite repairs are now considered just that -- a repair to be requested and negotiated between the buyer and seller when other buyer repairs are requested during the buyer investigation period.

The buyer loan contingency default period has been extended from 17 to 21 days.

There are additional forms added to the transaction not previously used, i.e., if the seller stays even just 3 days past the close of escrow, there is now a separate seller leaseback form used to cover that time period.

If you are contemplating buying or selling a property, you should know that the Residential Purchase Contract should be reviewed with consideration.  The ease of digital signatures and emailing of documents has allowed for less face-to-face time with an agent, while the transactional requirements have grown more explicit and careful.  So while convenience is wonderful, not being aware of what you're signing is undesirable. Unless the transaction must be conducted at a great distance between client and agent, personal contact during escrow probably ensures a clearer explanation of documents.


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