There’s a way to make essential repairs and add other accouterments without dipping into savings or taking out a home equity loan. The Federal Housing Administration’s 203(k) rehabilitation program provides for loans covering renovation costs as well as the purchase price of a primary residence — investors excluded — and it allows for just a 3.5 percent down payment.

Although the program has been around since 1978, it is not well publicized, and many borrowers mistakenly think they have to buy a wreck in order to qualify. They don’t.

The house just has to appraise below market value and then at market value with the repairs.

While “run-down” typically means a foreclosure, the program also applies to many historic and older houses as well as short sales and bank-owned homes. HUD outlines the rules on its Web site.

Luxury improvements are ineligible, though the program has wide definitions of “repairs” and “modernization.” Covered repairs include a new roof or heating system (geothermal ones too). Decorative changes, like replacing vinyl with ceramic tile on the kitchen floor replacement, or painting the interior, are covered.

The loan rates typically run around a percentage point higher than conventional ones, and come in 15- to 30-year terms, either fixed or adjustable. Additional paperwork for inspection, appraisal, title updating and the like pushes closing costs $1,000 or more higher than average. Most borrowers, however, refinance to a conventional loan after a few years, Mr. Hood said.

Demand for 203(k) financing has been on the rise, although experts predict some contraction given the major banks’ current moratorium on foreclosures. For the first nine months, HUD insured $2.9 billion in 203(k) loans, compared with $3 billion for all of 2009 and $401 million in 2005.

Home buyers must put down at least 3.5 percent of the current value of the property and use a HUD-approved lender, appraiser and a contractor approved by the lender for the repairs. One list of approved businesses can be found at 203kcontractors.com.

Using a HUD-approved consultant like Mr. Hood, who charges a flat fee of $400 to $1,000, is not required, but the agency recommends it to expedite processing. A HUD-approved inspector will make around four trips to the home to ensure that renovations are being properly done; each trip costs the borrower around $150.

Most 203(k) lenders are smaller regional and community banks. Loan limits vary by geography, and range from $271,050 to $729,750, which covers the total mortgage. The first $5,000 must go toward the more substantial repairs like roof replacement. HUD insures the loan.

Once the borrower receives the mortgage, money owed the contractor for repairs is held in escrow by the lender until the work is completed; all work must be finished within six months.

A miniversion of the 203(k) — called a Streamline (k) — has a repair-cost limit of $35,000 and restricts upgrades to minor improvements like replacing gutters. In this case, the do-it-yourself approach is permitted.

This type of loan is for someone who’s willing to be a little involved.

From NY Times

Restored California Bungalow

Holly Drive is ready for the market.  Check out the photos and floor plan here

Some of the features…

Structural and systems

Foundation repaired and strengthened.

Large portion of house was reframed to strengthen and raise ceiling height.

New roof.

Energy efficient HVAC unit (air conditioning and heat).

New copper plumbing throughout and waste lines in structure.

New Sewer line from house.

New 200 amp electrical system with new sub-panel with extra room for additional breakers.

New tankless hot water heater.

Bat insulation installed in wall cavities of 95% of residence.

Restoration:

Main house completely remodeled (bathrooms, kitchen, etc.).

New white oak hardwood floors throughout.

Exteriors and interiors professionally repainted, restored and color-coded.

New double paned windows throughout.

New landscaping in front yard, drought resistant and low maintenance.

New retaining wall in rear of property.

New side gate large enough for car passage.

New outdoor rear deck and dining area with new front steps made from vintage bricks.

The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes.

But lenders repossessed more than 95,000 homes — a record — and that was up from 76,000 a year ago.

RealtyTrac spokesman, Rick Sharga, said the initial default rate should be higher, given the numbers of borrowers who have missed one or two payments. Normally, when a third payment is missed, lenders take immediate action.

“It appears that lenders are allowing delinquencies to go on longer before they issue notices of default,” he said.

Lenders may delay filing for a couple of reasons. In some cases, a notice of default puts lenders on the clock; regulations force them to foreclose within a certain time frame, sometimes before they want to.

Second, borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them.

However, once lenders have begun the initial foreclosure process, they are moving quickly to repossession.

That’s in part because as housing markets have improved, as it has in California, lenders are able to resell foreclosed homes more quickly and avoid further losses.

In other markets, according to Sharga, they may take homes back but not necessarily put them on the market again right away. That may represent a deliberate effort to manage the flow of foreclosures to prevent further erosion of home prices.

Not only would a flood of properties and lower prices hurt lenders’ profits, it would leave more mortgage borrowers owing more than their homes are worth. As more homeowners plunge underwater, more would default, causing a new round of home price drops and still more foreclosures.

For the 44th straight month, Nevada led all states in the rate of foreclosure filings. One in every 84 households there received some kind of filing during the month, more than four times the national average.

The other “sand states,” Florida (one in 155 households), Arizona (one in 165) and California (one in 194) followed in a familiar foreclosure pecking order.

All of the top 10 metro area hot spots recorded drops in foreclosure activity during August. In the worst hit city, Las Vegas, filings dropped 25% year-over-year but still came to one for every 73 households.

Modesto and Stockton, both medium-sized cities in California’s Central Valley, closely trailed Las Vegas in filing rate. Rounding out the first five metro areas were Cape Coral and Miami. 

MAKING SENSE OF THE STORY FOR CONSUMERS

• According to C.A.R. President Steve Goddard, home buyers who are waiting on the sidelines should consider the opportunities available in today’s market.  Favorable home prices and interest rates at or near historic lows make housing affordability the best in recent years.  Anyone who is in a position to buy a home should do so before either of these key factors rise.
• The statewide median home price posted its 10th consecutive year-over-year gain in August, according to C.A.R.’s report. The median price of an existing, single-family detached home sold in California during August 2010 was $318,660, an 8.6 percent increase from the revised $293,400 median price recorded in August 2009. The August 2010 median price was up 1.2 percent compared with July’s $314,850 median price.
• C.A.R. Chief Economist Leslie Appleton-Young says California’s housing market is transitioning from the conclusion of the federal home buyer tax credit and that home sales are strongest in the higher-price range.  The strength in the upper-end market combined with inventory levels that are higher, but still lean by average, has led to home prices holding steady.

Still, the Realtors project that nearly 4 million existing homes will sell in 2010. First-time buyers, without the burden of a home to sell, could benefit from the foul market–and the record low mortgage rates.

But woe to the overconfident buyer. Here are five common missteps that first-time home buyers make.

1. Snubbing the real estate agent

With so many websites offering a mass of data on listings, who needs an agent? Most people, actually. Finding a house and figuring out comps–the price of comparable homes on the market–is the easy part. Managing the nuances of offers, inspections, financing and all the other pivotal steps to buying a home is where many new buyers tend to get tripped up, says Shii Ann Huang, an associate broker with The Corcoran Group in New York.

When you hire an agent to act as your “buyer’s representative,” she’s obligated to put your interests first, even if her commission is paid by the seller and based on the sale price. Skeptical? That’s all the more reason to find an agent on your terms. Ask friends and acquaintances for referrals and interview two or three candidates before deciding.

But don’t let the agent find you. When Viviane Ugalde and her husband, both physicians, bought their first home in Sacramento nearly two decades ago they made this mistake. “We stumbled onto an agent when she saw us peeking in the windows of an empty house for sale,” Ms. Ugalde recalls. The agent, who happened to live on the same block, came out of her house (wearing pajamas), offered to show the couple around the neighborhood, and ultimately helped them find a house. Then the agent, who was new to real estate, neglected to show up for the closing. “It was scary and confusing signing what seemed like a thousand pages,” says Ms. Ugalde.

2. Guesstimating how much you can afford

Many buyers mistakenly take a do-it-yourself approach to financing. They use online calculators to estimate how much house they can afford, dive into the house hunt and then get a dose of cold water when lenders refuse to qualify them for that amount. “The process is so different than it was four or five years ago,” says Diann Patton, a broker with Coldwell Banker in Grass Valley, Calif. Not only are lenders reading loan applications closely, she says, they’re verifying employment and running credit checks multiple times during the process.

Make a date with a mortgage broker or banker before you get serious about your search, says Ms. Patton. Remember, too, that the costs of buying and owning a home go well beyond the sticker price. While online calculators do take into account property tax and insurance, it’s up to you to account for maintenance costs, moving fees and association dues.

3. Letting charm cloud your judgment

No one will fault you for falling hard for a charming older home. But, unless the house has been painstakingly remodeled or you’re prepared to pay for repairs and upgrades, an old house can quickly lose its allure. Last year Alison Koop, a public relations manager for the University of Washington, came dangerously close to saying “I do” to a seemingly fabulous mid-century home in northeastern Seattle. Ms. Koop was so smitten with the big windows and vaulted ceilings in the living room that she neglected to notice the exposed wires, shoddy roof and other structural problems. Any delusions Ms. Koop had were laid to rest in the guest bathroom. “When the inspector turned the faucet on,” she says, “the spigot fell off, hitting the floor of the tub with an exclamatory thunk.”

If you’re considering an old home, don’t let the inspection be your last line of defense, says Jay Papasan, vice president of publishing at Keller Williams Realty. “Negotiate a long due diligence period,” he says. That gives you time to get real estimates from contractors and back out if need be.

Of course, new homes aren’t without their drawbacks. Recently, many newly built homes experienced serious problems with Chinese-made drywall, for example. Proceed with care whatever the home’s age.

4. Focusing on the house, not the hood

In hindsight, many buyers say they wish they’d taken their due diligence a few steps further to really get to know all the perks, quirks and hassles of living in a particular place. You can always fix up the house, but there’s no easy remedy for annoying neighbors, oppressive homeowner association rules and marathon commutes. When Laurie Tarkan and her husband bought their first home in 2001 they were so infatuated with the circa-1924 three-bedroom cottage that–in addition to brushing over some of the headaches of an old house –they didn’t give a whole lot of thought to its somewhat out-of-the-way location about a mile from downtown Maplewood, N.J., a popular New York suburb. “As a first-time buyer you’re not aware of all the things you should think about that aren’t about the house,” says Ms. Tarkan, who after living in New York City for 17 years, still hasn’t gotten used to driving everywhere.

Spend as much time as you can in your future neighborhood, ideally on different days and times. Eat in the restaurants, drop in a yoga class, test drive your commute.

5. Making arbitrary offers

With housing inventory running high and sales at record lows, in most markets, there’s no shortage of houses for sale and sellers desperate to get out from under them–all the more reason to hold out for the right house and the right price. But when you find that perfect house, don’t assume you can lob a lowball offer or make unreasonable demands. Even in hard-hit markets, nice houses in desirable neighborhoods are fetching multiple bids.

If the house has been on the market for months, you probably don’t need to worry about other buyers lining up behind you. Make an offer based on recent sales for comparable homes, foreclosure activity and market trends, and don’t be afraid to start the bidding low. If the house is fresh on the market (or recently foreclosed) and other buyers are circling the block, put your best foot forward but don’t get suckered into a bidding war

On the surface, it seemed almost a quiet week in the investment markets. Beneath the surface, however, American investors were uncertain of how to respond to various economic indicators but global investors were still attracted to the safe haven of Treasury securities. In foreign exchange markets, contrary to the usual pattern, global investors elevated the euro’s value against the dollar. The Dow Jones Industrial Average (DJIA) managed a 1.79% gain on the week, a remarkable show of resilience in the face of an unfavorable employment report on Friday.

FOCUS

The July Employment Report raised a great many questions without offering answers. Why, for example, did the DJIA, after immediately reacting to the poor employment numbers with a 1% decline, regain all but 21.42 points at the end of the day? Why, on the other hand, did the 10-year Treasury security, which started the day at 2.916%, fall all day without respite, ending Friday at 2.826%? Different elements of the market were acting in diverse ways, telling us little except that investors are extremely undecided about where stocks and bonds and other investments will go in the future.

Possibly more obvious has been the significance of the euro’s movement against the dollar. The dollar began Monday at $1.3033 to the euro, and ended the week at $1.3293, suggesting that even though the DJIA may still be resilient, investors over the world are slightly wary of the American economy at this point. Major investment houses, had already begun signaling a lack of confidence in America’s economic growth late the prior week, reversing recent policy and moving funds into Treasury securities, apparently expecting interest rates to fall even further.

The one point that the week’s action in the markets makes clear is that, at this moment, intense uncertainty among investors has led to very low rates, a good deal lower than many analysts had predicted.

Mortgage rates, as a result of the uncertainty, are remarkably attractive, with the Freddie Mac average 30-year rate falling to 4.49%, its lowest level ever. Hopefully, there will be more definitive answers to the questions raised by the current market very soon.

Roof  has been installed.

Paint has begun and drywall will go up today.

If you may be interested in this property do not wait until it hits the market.
Email Imraan at contactimraan@gmail.com or call 323-547-0330

Colors have been chosen

Insulation installed including the bathroom walls.

Cracked ceiling beams in the living room.

Old roof and attic area.  Once the plaster was removed Marco found that some of the load bearing posts holding the roof up had been cut.

Ceiling raised in living room and new roof installed

Notice the addition of posts holding up the center of the roof line.  Marco knew it would make an enormous improvement to the space to raise the ceiling in the living room.

An arch brings charm to the kitchen entrance.

The entire skeleton has been almost completely leveled and reframed.

New roof and updated electric panel

As is the case with Marco, he always tries to preserved the original character of his projects whether Spanish, Craftsman or Mid-century.  Here he is working to keep as much of the original siding as possible.  Some of the siding was saved from the garage to fill in on the house.

]]> http://hollywoodhillsrealestate.wordpress.com/2010/07/16/holly-drive-remodel-update/feed/ 0 Imraan in Beachwood IMG_0663 IMG_0668 New Roof Reframing the entry to the kitchen IMG_0672 Rear http://hollywoodhillsrealestate.wordpress.com/2010/07/15/weekly-economic-summary-july-9-2010/ http://hollywoodhillsrealestate.wordpress.com/2010/07/15/weekly-economic-summary-july-9-2010/#comments Thu, 15 Jul 2010 18:22:41 +0000 Imraan Ali http://hollywoodhillsrealestate.wordpress.com/?p=329 ]]>

OVERVIEW ~ June 28 through July 2 ~ The psychology of the economic marketplace, to the extent that it can be measured, shows up in the numbers. Over the course of the week, for example, the Dow Jones Industrial Average (DJIA) fell from 10143.81 at the opening on Monday to 9640.69, presumably on growing concerns about the apparent weakness in the American economy. Until recently, it has generally been agreed that the economy would stumble forward for several months and then, at the beginning of the next year, begin to grow in a sustainable way. By Friday, however, after the release of the June employment figures, the DJIA dropped and most other data edged lower. Even the manufacturing sector, which has been one of the brightest lights in the economy in recent months, showed a weakening with the Institute of Supply Management (ISM) Index dropping from a strong 59.7 in April to 56.2 in May, and a 1.4% fall for May factory orders. In such an environment, interest rates are likely to fall, and indeed the 10-year Treasury note declined from 3.110% to 2.956%.

FOCUS ~ The employment report was treated as if it were a mid-term report card for the economy in our nation. The Thursday report of 472,000 new claims for unemployment insurance worried most investors and then the larger employment report, released Friday, caused analysts to doubt their earlier hopes for recovery and caused the markets to fall significantly.

There were 125,000 jobs lost in June. Analysts had hoped for a furthering of the positive numbers reported in the prior month. We need at least 150,000 new jobs each month to just keep up with the employment needs in our nation. In June, the economy failed even to tread water.

The unemployment rate actually declined from 9.7% to 9.5%, but this was not good news either, because the survey indicated that 652,000 capable workers had simply stopped looking for work, pulling themselves out of the so-called “labor pool.” Thus, the unemployment rate declined, not because more people found jobs, but because fewer people are looking for them.

The May employment report apparently lulled investors and analysts into a more optimistic view than it should have, largely because of the many census jobs that increased employment numbers and then swiftly fell away. A survey of American economists had resulted in a median expectation of 110,000 new jobs in June. Thus, the markets reacted strongly to the decline.

If there is any good news to be found in the week, it is the fact that overall mortgage interest rates remain even more attractive than they were before.