Our own Rafael Perez has an article in the San Diego Union Tribune where he discusses possible opportunities amid all the doom and gloom of the Charges leaving the city. I can’t describe it any better than Rafael already has, so please click the link below to read this article.
This week’s vlog is aimed at real estate agents rather than clients. Why do some agents fail while others succeed? Watch and find out!
In this week’s vlog we look at pitfalls of pocket listings and why sellers should be wary of them. Don’t let a smooth talking realtor take advantage of your lack of knowledge – educate yourself!
Ever wonder why there are not any home mortgage options for the self-employed? One of the many ironies of working in real estate is that real estate agents themselves often have a harder time being approved for a mortgage than the clients they represent! Self-employed individuals (such as real-estate agents) are generally not seen as the ideal borrower. They typically pay higher interest rates than someone who collects a regular paycheck from their employer. If an advertised mortgage rate seems too good to be true, it usually is. The best rates are applicable only for prime borrowers. Individuals with excellent credit scores and steady verifiable income source. Something many of the self-employed lack. But of course they never mention that in the ads.
As a self-employed individual you will often have to go the extra mile to find lenders willing to work with you. Reporting requirements are more stringent and lenders will look at your financial background with more scrutiny than they would a regular 9-to-5 employee with a steady income.
Mortgages Options for Self-Employed Individuals
Traditional FHA Loans – Most lenders these days will only offer traditional FHA loans to the self-employed on the basis of their tax returns for the last two years. Borrowers will have to fill out IRS Form 4506-T, authorizing lenders to request tax transcripts. Tax returns can only be received directly from the IRS and not the borrower and lenders will have to wait until the IRS has processed and recorded them.
A lender will look at the average of the borrower’s adjusted gross income for the last two years, unless the most recent year shows falling income, in which case the lower number will be used. The actual requirements (such as the debt-to-income ratio) to qualify for an FHA loan varies greatly depending on each borrower’s unique financial situation – this is something you really should discuss with a qualified mortgage broker or financial adviser.
Stated Income Loans – Before the housing market crash of the mid to late 2000’s, most banks would approve what was known as ‘stated income’ loans from most self-employed individuals. A stated income loan, as the name suggests, was where the mortgage lender would approve the loan on the basis of the borrower’s stated income, without verifying it against pay stubs, tax returns or other documents. Needless to say such loans were abused (by both borrowers and lenders) to such an extent during the housing boom, they came to be known as liar’s loans.
While stated income loans have been all but outlawed by federal legislation, some smaller lenders at the State level are offering their versions of stated income loans, albeit with more stringent requirements. For example, a lender might provide a stated income loan to a borrower who has a credit score of 720 or higher, can put a down payment of at least 30 percent or more and has at least six months of cash reserves at hand to cover all their monthly obligations beyond just the mortgage. Also it should be noted that the mortgage rates of stated income loans on the secondary market are not as competitive as those offered by traditional FHA loans.
No Documentation Loans / Alt-A Loans – Similar to stated income loans, these are loans given out in the secondary market where the lender will not seek to verify borrower income information. Since these are riskier loans than full documentation loans, the interest rates will be considerably higher. As with stated income loans, Alt-A loans have come under increased scrutiny in the wake of the housing market crash of the mid to late 2000’s.
As our regular readers might have noticed, the Team Aguilar website has undergone a total redesign. The old site, while perfectly functional, was getting a little long in the tooth. What was cutting edge design in 2008 was starting to show its age in 2014.
Our overall goal with the redesign was to streamline the site while retaining much of the old content. A typical real estate website belonging to a small to medium sized brokerage limits itself to a few sections containing a weekly blog, a contact page and MLS listings. What sets TeamAguilar.com apart is that it is crammed with information covering all aspects of residential and commercial real estate in San Diego you won’t find anywhere else (and yes, we have a weekly blog and MLS listings as well.)
The menu bar linking all the information pages is persistent throughout the site, meaning users are only a mouse-click away from a treasure-trove of information on San Diego real estate. Our ambition was to allow the user reach his or her desired page with the fewest number of clicks – we hope we have succeeded in that aspect!
The other major goal was to make searching for properties easier. To achieve this, we placed the MLS search bar front and center in the home page. Users can now search for San Diego homes based on a number of criteria including neighborhood, number of bedrooms, price and type of property.
You may have noticed the new “search by map” feature, where users can zoom in via Google Maps and see what properties are available on the map itself along with their listing price. Links to this are available in the home page as well as the property search page.
We have also included a persistent “search by MLS#” box and “Search for San Diego Properties” link in right sidebar of every page.
Note: MLS stands for Multiple Listing Service, a centralized online resource where real estate brokers (such as Team Aguilar) access and share information with buyers, sellers and fellow brokers. MLS contains a comprehensive up-to-date list of all the available real estate inventory throughout California. If there’s a property on the market in San Diego County, it will show up in the MLS search.
Have questions, comments, or suggestions on how to make the site even better? Contact us!
The practice of Dual Agency brings so many conflicts to the table; I wanted to share some of them. Over the last 5 years we have sold hundreds of REO’s (foreclosures) and now with the market improving we are seeing fewer and fewer REO’s come up for sale, which is fantastic because it means we are dealing with regular sellers and the market is starting to improve. Take a look at this email I received about a new foreclosure listing we have. We have received similar e-mails inquiring about dual agency at least once a week for the last 5 years.
Please read the bottom first, as this will show you the original email sent to Carlos, along with Carlos’ response at the top. This is just one example of why I hate real estate dual agency. In addition, I created a video where I talk about Why I Hate Real Estate Dual Agency. Please also take a couple minutes to view.
My question is similar to what Carlos stated in his reply above: Why would we enter into a dual agency relationship for just one extra real-estate commission and jeopardize our relationships with various banks and put our careers and reputations at risk? In fairness to the email above and many other emails we have received, the investor is not flat-out asking us to do anything illicit like look the other way when higher offers come in – but it is pretty obvious when you read between the lines.
You walk a very fine line with dual agency, and that’s a line that I’m not comfortable walking. What happens if another offer comes in at a higher price? In this scenario we had 28 offers on this REO listing. Our investor buyer will certainly want to know that number and expect that we will tell him the number that he will need to be at to make the deal work. How is that fair to the other party who submitted the offer? How can I negotiate on behalf of each party and represent their best interest? Should I walk in and out of a room during negotiations or have a 3 way conference call? It just doesn’t make sense and someone always ends up losing out (in our little example above it would be the seller).
I really wish dual agency would go away!!!
We’ve all heard news of the San Diego housing market recovery by now – I’ve already blogged about it before (mini housing bubble, Prices Up, Foreclosures Down ). Latest data from real estate tracking company DataQuick, however, provides an interesting quirk on the recovery story. It turns out that the recovery is not uniform across all neighborhoods in San Diego County but, in fact, certain neighborhoods are recovering faster than others.
Unsurprisingly, high-density subdivisions close to major employers as well as beach-front neighborhoods in northwest San Diego recovered fastest, gaining back much of their pre-housing-crash value, while neighborhoods in south and east San Diego County have been much slower to recover.
What’s driving the recovery?
First of all, it is important to pinpoint the reasons behind the recovery in the first place. A gradually strengthening national economy, combined with steady increases in employment and historically low interest rates mandated by FHA have played a role in creating a mini-frenzy in the real estate market last year. Many would-be home buyers sitting on the fence decided to jump into the market to take advantage of low rates and depressed prices, driving up property values in certain desirable neighborhoods. The limited inventory of detached single-family homes combined with increased demand from local, out-of-state and international buyers resulted in a significant rise in home prices.
Which areas experienced the strongest recovery?
Carmel Valley, thanks to its proximity to large employers such as Qualcomm and good schools experienced the strongest recovery – the average home value are a mere 3.2% below their pre-crash peak in 2005.
The coastal communities of Mission Beach and Pacific Beach have also seen strong recoveries in home values thanks to limited supply of prime beach front property. Premium beach-front areas in a city like San Diego will always be in demand, regardless of the overall state of the housing market. The average home in Mission Beach and Pacific Beach sells for around 9.3% less than their peak pre-crash price.
Which areas are going through slow recoveries?
Neighborhoods mainly in the southern and eastern parts of San Diego County such as Logan Heights, Paradise Hills and Chula Vista are not faring as well as their northern counterparts. Average home prices in these areas are still nearly 50% lower than their pre-housing-crash peak.
These areas were hardest hit by the mortgage crisis, experiencing a high level of mortgage defaults resulting in foreclosures. To reduce their inventory of foreclosed homes banks were compelled to resell these properties at highly discounted prices, which had a knock-on effect of lowering property values throughout the neighborhood. While values have risen, they have not kept pace with other parts of San Diego County.
The silver lining (Here’s how you benefit!)
Economists and analysts all agree that the recovery is well underway, and has been for some time now. It’s not a matter of if, but when, prices will return to their pre-crash peaks. Even neighborhoods like Logan Heights and Paradise Hills are expected to recover fully as homeowners in those neighborhoods fix up their properties and put them on the market. As non-distressed home sales increase in such neighborhoods it will have the effect of raising median home prices across the board.
Investors are already being priced out the more expensive areas on San Diego and are turning to the South and East areas of the County to find great deals on single family homes. Southern and Eastern San Diego County are prime areas for anyone looking for a bargain right now.
The historically low interest rates for single family detached homes won’t last forever. FHA has artificially held rates down to speed up recovery in the national housing market, but once the government intervention ends mortgage rates will start to rise, pushing many would-be buyers out of the market.
San Diego’s Uneven Housing Recovery and How You Can Benefit From It!
The signs are clear; prices have no way to go but up and rates are still historically low (for the time being). Now is a great time to invest.
Mini-Housing Bubble, Foreclosure Recovery and the Most Morally Pure San Diego Neighborhoods – San Diego Real Estate Highlights for the Week of June 17, 2013
CNNMoney recently featured San Diego as one of their Top Ten Fastest Growing Cities for Real Estate. San Diego’s prominent Navy presence and the defence contractors that come with it, as well as being the conduit for $26.3 billion worth of Californian exports to Mexico are cited as the primary reasons for the city’s economic growth. San Diego’s sunny climate and ocean front location are also listed as major draws for new residents. The article mentions that property developers in San Diego have switched to condos and rental apartments as affordable alternatives to single family homes.
UT San Diego kicked off June with a number of dire predictions about the local real estate market. This story warns about rising home prices in San Diego Real Estate. Home prices in March of 2013 were 12% higher from what they were a year ago – the highest they have been since 2008. What is the reason behind this precipitous rise? Inventory shortage as a result of high buyer demand thanks to historically low rates combined with a large number of homeowners unable to sell because they’re stuck in underwater mortgages.
A follow up piece three days later cites the aforementioned factors as a potential catalyst for a mini-housing bubble in San Diego. The author states that San Diego is more vulnerable to abrupt changes in house prices than other markets because of its strict zoning laws. Such laws, though popular with residents, make it difficult for property developers to quickly respond to surging demand with new construction. Experts estimate that new construction in San Diego is down 89 percent from its peak in 2006, leading to a dearth of new inventory in the face of increasing buyer enthusiasm.
A June 20 article laments the bleak prospects for affordable housing in California in the wake of reduced federal funding. The article discusses several new proposals to keep affordable housing alive in the Golden State, including a bill that would mandate an additional $75 fee for filing paperwork relating to refinancing, liens and quit-claim deeds – a move predictably opposed by the California Association of Realtors.
We end our UT San Diego round-up with this positive piece proudly proclaiming that San Diego foreclosures are at a 7 year low. The $25 billion national mortgage settlement and California’s Homeowner’s Bill of Rights are said to be the primary driving forces behind the reduction in foreclosures (both are discussed in more detail in this earlier blog post). Another factor behind the recovery is increasing home values, which brought many homeowners struggling with underwater mortgages out of negative equity. Federal and State incentives to protect homeowners also meant that banks were more receptive to conducting short sales in San Diego instead of foreclosing. Now would be a good time to remind readers that real estate industry groups like the California Mortgage Association, California Bankers Association and California Mortgage Bankers Association lobbied hard against the Homeowner’s Bill of Rights, warning of dire consequences if it passed.
This 13 page feature in the May/June 2013 issue of Our City San Diego gives us an extensive look into the many diverse and colorful neighborhoods that make up San Diego. The editors broke down San Diego County into 85 neighborhoods and ranked them in 16 categories, including crime, schools, youth facilities, health and “moral cleanliness.” The article contains the details behind ranking methodology and data sources used. Spoiler: Coronado consistently ranks as the best place to raise a family, and Downtown San Diego the worst. As far as moral cleanliness (i.e. sex, drugs and rock ‘n roll) is concerned, Hillcrest and Downtown San Diego are ranked as the worst (or best, if you happen to enjoy sex, drugs and rock ‘n roll!)
The prices of homes in San Diego County are the highest they have been in the last 6 years. It’s due to a combination of distressed sales continuing to fall, and mortgage rates reaching record lows.
According to DataQuick, a San Diego-based real estate monitoring site, the median price of houses sold in April rose to $400,000. This is a 21% increase from what it was exactly one year ago. Meanwhile, the rate of sales increased by 7% compared to what it was a year ago.
The numbers from the site also indicated that properties lost to foreclosure in the past year were at the lowest they have been in the last 6 years. Less than 10% of home sales were distressed homes such as foreclosures or short sales. January of 2009 was the peak of foreclosure sales where 55% of all homes sold that month were foreclosures. The median price was also $280,000.
Some analysts are worried these figures may trigger another housing bubble, but San Diego State University real estate economist Michael Lea says such fears are overblown.
The primary reason for continued hikes in the prices of homes is caused by a shift from a distressed market. This resulted to heavily discounted deals for buyers, and a decline in short sales. Short sales means that borrowers are selling their homes for less than what they owe.
All in all, the market is finally moving in the right direction. It’s nice to get back to a more normal market where we are helping buyers realize their dream of purchasing a home and dealing with regular sellers that are not facing foreclosure or having to consider a real estate short sale.
San Diego Real Estate Market Update – May 2013