Getting Charged Too Much for HOA Documents?

One of the escrow expenses buyers usually pay when buying a property within a homeowner association are document fees for the CCRs, Rules and Regulations, and other documents they are entitled to. This sometimes amounts to several hundred dollars.  Even though a law prevents homeowner associations charging more than the actual cost for such documents, a loophole allowed an HOA to delegate this task to outside vendors, who could charge whatever they wanted.

Good news. Earlier this month, California Gov. Brown signed AB 771, and the loophole closed, preventing home buyers in common interest developments such as condominiums or townhomes from being charged excess document fees.


Buyers used to only have to pay $150 at the most, but that cost may now go up to $400, payable up front by the buyer. But if a charge goes much beyond that, a buyer should be aware that they perhaps are being over-charged, and ask for an accounting of that cost by the HOA or its property manager. A fee of $1000 is probably excessive, and would be considered a financial burden by most condo buyers, and could be an indication that a buyer is being charged for documents that are "bundled" in, and not required.

Where is California Real Estate Going for 2012?

Here are highlights from the September California Association of Realtors presentation on market predictions for California in 2012:

• Sales volume between Aug 2010 and Aug 2011 of detached homes was up by over 8%.
• Los Angeles County median price at $312,900 for detached homes down 7% from one year ago; Riverside County median price of $202,060 down 2.9% one year ago.
• Calfornia homes: 2 in 5 sold were distressed properties.
• California median home price of an equity sale was $431,000, for REO it was $240,000; a short sale was $287,000, for similar sized houses.
• In 2011, sellers' median net from sale was $75,000, highest amount since 2009.
• All-cash sales are over 25% of homes sold -- the highest percentage since 2000.
• The predicted 2012 California overall median house price is $296,000, an increase of 1% from 2011.
• Here is the entire California Housing Market 2012 Forecast presentation

“Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.”  “Real estate: It’s time to buy again” Fortune Magazine’s 3/28/11 article written by Shawn Tully.

Prime Opportunity for Investing/Buying in the Southern California Residential Market

In August, 2011, the California statewide median price for a single family home was approximately $297,000, an estimated 7% drop in price from 2010, BUT an 8% increase in sales volume from one year ago, per California Association of Realtors.

The lowest median single family home price in California in our current cycle was $274,000 in 2009; and $303,010 in 2010.   Los Angeles County median price for a single family home in 2009 was $333,920 and for 2010, up to $346,840.

And yet, current distressed property sales continue to make up 40%-50%, and more, of local markets, with a recent huge increase in foreclosure properties within the last month.  These trends show how opportunities will continue to bring more investors and more private money into the market. Traditional financing, i.e., FHA and FNMA, has introduced some types of requirements that discourage the present pool of buyers, that private investors with money to lend are entering the marketplace, because they believe that property values have hit the lowest point in most areas. 

There is a need for the rehab and re-sale of distressed properties in disrepair, yet traditional financing doesn't offer that vehicle for those with the goal of "buy, fix and sell." Investors who don't fit the box for traditional financing avenues do have these private money alternatives that may work for them:

• one-year loans for flip properties--no pre-payment penalties
• stated income applications for flip properties
• loan amount to be based on 60% of private lender's determined value of property
• also available are constructions loans based on "repaired" value of property
• on site appraisal and photos may not be required

Interest rates for these short term investor loans are higher than standard FNMA-type financing, however, they are also a vehicle which is more lenient on the borrower's prior financial events (i.e., short sale, foreclosure issues), and they are geared towards the eligibility of the property, and the case-by-case history of the borrower.
If you are looking for opportunity in the investor property market for 1-4 residential units, contact me for more help on finding the property and the financing!

What Will the Loan Amount Reduction to $625,500 Do to Local Markets?

Today I was contacted by a Los Angeles Times housing market reporter covering the market on new loan amounts coming into effect soon.  It's really hard to say exactly what the outcome will be, but one thing is certain: California really doesn't need any more uncertainty or instability in its housing market.  Legislators elsewhere really do not seem to be very concerned, probably because the vast majority of them do not have a home to sell in California.

Single family homes in the high end market of 90803 and 90814 may feel the cut in loan amounts to $625,000. Currently there are 145 active listings, 113 of which are over $625,500 (the new loan amount starting October 1st).  Between June 1 and August 31, 26 homes sold over $729,750 (the current limit on conforming loans), and 24 sold under $625,500, while 16 sold between the two loan amounts.  That represented 25% of the total 66 homes sold in that time period.

Currently, of the 145 active listings, 113 are listed over $625,500 (just using the loan amounts as the dividing line for the sake of discussion), 95 are listed over $729,750--meaning 18 are in the critical area in between.  Currently, 26 homes are in escrow, all over $625,500--but would the 8 in the critical area under $729,750 be buying in the future at a higher interest rate?  The homes in escrow (26) of the 145 active listings shows that the seller in this area currently has about an 18% chance of selling in the current loan market. 
Now, along with an already competitive situation in the high-end market, what will the future bring with a jump up in interest rate for the new jumbo loan amount?
See more at http://longbeachrealestate.blogspot.com/2011/07/change-may-be-coming-in-loan-amounts.html

But, there is more, not to be discussed here: the QRM, or qualified residential mortgage which basically could turn the conventional loan market at all levels into a one-size-fits-all 20% down payment.

Buyers of Long Beach Condominiums Are Using More Conventional Loans--or All Cash

In Long Beach, condominiums tend to be concentrated in several specific areas, and two of these are in the downtown and shoreline area zip codes. Condominiums are a wonderful homeowner opportunity, also attractive to many segments of the buying population for investment/rental reasons as well.

A total of 105 condominiums sold in 90802 zip code (downtown Long Beach, Alamitos Beach and Ocean Blvd.) between June 1 and August 31 in prices ranging from $60,199 to $775,000:

As reported in the MLS, all-cash buyers represented 28 (or 27%) of these sales, most for units under $200,000; 30 units were listed as REO (bank-owned) properties; 35 units were listed as subject to short pay approval; 35 units were listed as standard or equity sales (33%).  Per the MLS, 58% were financed: only 12 were reported as purchased with FHA financing, 2 with VA loans, while 47 units were purchased with conventional financing.

A total of 29 condominiums sold in 90802 zip code (Marina Pacifica, Bluff Park, Belmont Heights, Naples, Belmont Shore) in the same time period, from $134,000 to $665,000.

As reported in the MLS, all-cash represented 7 sales(or 24%); only 1 FHA financing, 19 conventional loans (69%); 16 units were standard equity sales (50%); while 8 were closed as short sale properties and 4 were listed as REO properties.

FHA financing, which used to be the great introduction to the first time buyer's purchase is increasingly a very limited vehicle for financing a condo.  Why? Because homeowner associations are not renewing their FHA project approvals, without which there is no FHA financing in that association. In a check of the HUD project approval list for Long Beach, the associations are dropping off the active list at an alarming rate. For some, it's a problem of having too many delinquent dues--but surprisingly, some HOAs may not even know they have expired as the old Board members have long since left the scene.  For others, they do not know that since 2008 FHA no longer does "spot" approvals, as they once did financing on a unit-by-unit basis, so they are not aware that they are limiting the ability to attract new homeowners. If you are a current condo owner, you should investigate what your association can do to obtain FHA approval--if only to enhance the prospect of obtaining a reverse mortgage if you are in the over-62 age bracket. Reverse mortgages are generally FHA loans, but if your project isn't approved, you will not be able to obtain one.

Both buyers and sellers need to be actively aware of these condo financing issues and investigate in advance their loan options with both FHA and conventional loans. While FHA is 3.5% down, it also has some other expenses rolled into the loan which a conventional loan does not.  There are some sources for 5% down conventional financing, which is more likely to be a better fit. If FHA is your only option because of your overall loan qualification circumstances, be prepared for a very diligent and patient search for the right homeowner association that is FHA approved before you make the offer.  And as we see above, all-cash buyers make up about one-quarter to one-third of the condo buying market in these areas.

Please contact me or visit my website for more information.