And the Beat Goes on…

Yes… We are still here! The market turmoil has created some casualties in big lending institutions – we have lost a few on our list!!! Our business remains in good health as the market changes. Buyers and sellers have changed considerably in the last year. Sellers are becoming frustrated and a little fearful ( Thankyou media!!!) and sometimes are in denial. Since we had such a run-up in prices over the last few years, the resulting correction was inevitable. The correction in the market as well the re-assessment of risk in the mortgage market, will actually help the market in the long run. Unfortunately, there are many who have got caught in the middle who will suffer greatly in the short run!!! Buyers are having a harder time financing homes with some of the more aggressive programs, such as high-leverage loans, option ARMS, etc. Programs are still out there but take a little longer to find, and guidelines have tightened considerably. Spec builders have been hard hit in particular and profits have dried up or even disappeared. The good news is that there are still loans available if they are willing to move into their spec homes for awhile. One option is to refinance into an option ARM. Option ARMS allow a minimum payment option every month that is usually around half of a regular 30 year amortizing loan payment, thus allowing a builder  to have less cash going out each month. This way they are able to ‘weather’ the storm and not lose property and or their credit!!! The flip side of this is that these loans can negatively amortize (if you make minimum payments), so the loan balance can grow substantially.  These loans usually offer up to 4 different payment options on every mortgage statement: A) Minimum payment , B) Interest only payment, C) Fully amortizing 30 year (principle & interest), and D) a 15 year amortizing payment. There also is another choice of making one of these payments plus an additional amount that you choose in order to have complete control of your equity. They are adjustable loans and can adjust monthly or have different periods of time that are fixed such as 3yr, 5yr, 7yr, etc. They are generally not well understood, and require a more financial savvy borrower (or loan officer who will explain fully how they work).

The flip side of the pain that some sellers are going through is the buying opportunities that abound now. There are so many great deals out there for a buyer who understands the market. Many buyers have been sitting on the fence for awhile, wary of falling prices and everything else the media shoves in our face! For the savvy buyer this is a fantastic time for deals, because they understand the real estate market has cycles, and buying after the market corrections leads to great profits. Real estate is and always has been a long-term investment. It may be a few years before we have another surge in prices but it’s coming, and there are some gems to be had right now.

Low Rates & Lower Prices

                    Since the real estate frenzy has settled down and prices are at more normal levels, it’s a great time to pick up bargains! Rates are still at historic lows, despite what the media would have you believe. There has been a lot of noise about adjustable rate mortgages, and how people are getting caught in these mortgages that all of a sudden have a substantial monthly payment increase. The hit to the sub-prime market was a direct result of lax lending guidelines for people with challenged credit, and allowed un-qualified people to get loans for which they were not capable of repayment. These loans were typically programs such as a 3/1, 5/1, etc. which are fixed for the first number of years and then adjust after that, enabling people to get into a home with a lower monthly payment at first, the idea being that they are expecting to increase their income or pay it off before it adjusts. Other programs with an even lower payment start are called Option ARMS and can adjust monthly or have a certain period at a fixed minimum payment (less than an interest-only payment) and/or accrual rate (fixed interest rate). All of these programs have distinct advantages and disadvantages and are not for everyone. One must have a plan! As there are many homes on the market these days, there is a lot of competition for able buyers, and smart sellers are offering incentives such as buying down the interest rate, paying closing costs, or of course lowering their asking price. Buyers are getting more for their money than a year ago, and with interest rates at about the same level more buying power also. 100% financing is still available, as are many, many other programs for people with good credit. For lower credit scores however there has been a significant tightening of guidelines, and some people will have to wait to buy. 

Financing Incentives

One often overlooked method of attracting buyers is to have the seller pay points-buy down the buyers rate. For the seller it is usually cheaper than lowering their asking price, and obviously lowering the price is not popular with sellers. For the buyer this is a huge incentive as getting a lower rate affects their payment for as long as they hold the loan. Buyers are also very rate conscious, and consider purchases relative to monthly payments (can I afford this payment). By buying down the rate, a seller can make the difference in affordability. Over the long term this can actually be more valuable than getting the property for a little less money. Also, in a psychological way, it is better for a seller to offer value to the buyer than to cut percieved property value. It is a gift to the potential buyer and sets the seller’s property apart from the competition, and as we all know there is alot of that! It’s a win win situation!!! Sellers can also offer incentives such as  free cars, or anything else of value to attract attention to their property. In this market it’s important  to cover all the bases and be creative.

The Advantages of a Real Estate Team

Most everyone would agree that teamwork leads to a better result, no matter what the objective is. Many real estate professionals promote their teams as they should.  Each member  brings their own expertise and personality into the mix, and as time goes by develop a rapport and knowledge on how best to serve their client. A Realtor/Lender partnership results in a smoother transaction, and a better understanding of their client’s and wants. The truth is that homes and loans go together like peanut butter and jelly, unless your fortunate enough to be able to write a check for your new home! Other members of a great team include loan processors, appraisers, title & escrow officers, home inspectors, and pest control companies. Great teams also consist of referral partners such as tax accountants, 1031 exchange companies, insurance agents, architects, contractors and other tradesmen. Everyone loves a referral instead of calling out of the yellow pages! Teams are especially great for out of town buyers who are unfamiliar with their new surroundings. A good knowledge of specific areas and neighborhoods (i.e. which side of the tracks do you want to be on) help with ensuring that clients are investing in value (location, location, location) and getting referred to ethical expert professionals. Even knowing great restaurants, clubs, events, etc. are invaluable to your clients. It all adds up to make the difference that counts!

Great time to buy real estate!!!

As we hear the media speak about the growing foreclosures and falling prices, we might be led to think that real estate investing is a risky proposition!  In fact the opposite is true! As prices ‘correct’ to more realistic values and mortgage rates remain at historic lows, the longterm potential of real estate appreciation becomes more sustainable. One cannot expect the enormous rates of appreciation of a few years ago to continue without these corrections.  There are many bargains around us now, and many sellers are all too anxious to negotiate! Also, the recent fallout of the subprime lending market was a ‘correction’ of another sort. The lax lending guidelines for credit-challenged people in the middle of the real estate appreciation frenzy and froth resulted in lenders tightening their guidelines, and resulting in more common sense lending. It is true that some people may not be able to purchase homes right now because of credit issues, but with credit counseling and financial education  and a little time, they will! The subprime correction has really not affected people with good credit and financial stability, and by tightening guidelines for lending less people will be likely to go through foreclosure.  These corrections are healthy for the market and the industry.

Car collectors dream home!

Nancy & I had the unique pleasure of touring this beautiful home in Newcastle. From the Honduran mahogany kitchen cabinets and granite countertops to the 8 car garage to the tennis court (with spectator area) to the gorgeous pool, this unique home sings out perfection on every level.  This home, priced at $1,495,000 is situated on 5 beautiful acres offering complete privacy, views of the Sutter Buttes and valley views from most rooms. There is also an adjoining 5 acre parcel for sale for $400,000. The majestic gates and long driveway welcome you to this private estate. Rolling lawns & granite outcroppings are the backdrop to this 5626 square foot 4bed/4bath luxurious home. The builder spared no expense, as evidenced by the slate roof, cast cement cornices  and trim work on the exterior to the majestic custom wrought iron banister railings, and limestone floors inside. The custom Natural Design pool & spa (with sand bottom) can be seen from most rooms, even the theater room. With parking for 40 cars (per seller) 2 kitchen sinks and dishwashers, this house is perfect for entertaining! Relax in the pool while watching the sunsets! Featured property may not be listed by the office/agent presenting this brochure. All measurements and calculations of area are approximate. Information provided by Seller/Other sources, not verified by Broker. All interested persons should independantly verify accuracy of above information. For more property information please call Nancy at 530-305-8976.  Own this home with 20% down and mortgage payment as low as $3025/month!! Call Paul at 530-218-5765 for details.

How to Retire Rich & Young!

Many people have the appearance of being rich or wealthy! Many of them also are renters living on the edge! And some of them are past and present renters of mine!! Being wealthy and looking wealthy are often on opposite sides. As a lender I see what the true financial picture is-no fuzzy logic here. It prompts me to mention a couple of things to inspire people who would like to retire!! Looking wealthy is an expensive and self-defeating proposition. Being wealthy requires determination and some sacrifice, but the alternative-work your whole life then try to survive- doesn’t seem to be a great option either! Giving your money to someone else to invest usually insures a meager return on your investment. Now for the silver lining! Investing in real estate is and always has been a powerful method of acquiring wealth (just look at the truly wealthy people and you’ll notice most either hold their wealth in real estate or made it that way).  One can start with literally no money and good credit, and create a fortune. If you don’t believe it talk to me. Most of the power of real estate has to do with leverage and appreciation (here in California). With 20% invested of your money, you can make 5 times the appreciation rate which has been 8.7% average over the last 40 years which is an average of 43.5% return on your money! Where else can the ordinary person achieve this rate of return??!!! Personally I have achieved a rate of 185% ROI during the last 7 years! This has been due to A) personally rehabbing properties B) renting them out, C) selling a few, but keeping most, D) above average appreciation the past few years, E) determination, F) a lot of education from personal experience, experiences of others, seminars, mentoring, etc, and last but not least G) the use of ordinary practises that most people can understand anyway such as buying and selling real estate, using mortgage brokers and real estate agents.  There are no big secrets to this, and usually the simplest of plans will get you further than trying to buy discount properties  through foreclosure or other creative means. If you are more sophisticated, these may work well for you, but definitely are not necessary. I find many people who come to me and want to invest in real estate have the nice house and cars, and have pulled out equity from their home to afford it, leaving little room for investment. I only wish they had come to me sooner! If there is equity in your home, and want to invest, you may want to refinance and pull cash out to invest & start your journey to a great retirement!!! It’s all about the numbers, and everyone’s situation is different. As I said before you don’t have to start out with money but it is important to have good credit or at least know what your score is and start working on it sooner than later!  The techniques I use for investing are simple, and require 3rd grade math and some common sense!! No excuses ! This is not rocket science! Many refinance and pull cash out for vacations, cars, etc. If you aren’t already set with your retirement plan, this a great way to never retire!!! It’s ironic that most of the mortgage companies advertise refinances as a way to get the toys everyone wants instead of using the cash to buy investments that will provide cashflow to buy the same toys and become wealthy! This is marketing at its best-they know everyone wants the toys, and people want instant gratification! Who doesn’t?  Investing in real estate is not sexy or gratifying, etc to the general public, but I have to say, I love my real estate!!!!! It is so powerful and empowering!! Working for a living is not!

Cashflow Property Already Rented! $289,900!!!

This home features 2192 square feet of living with 2-3 bedrooms & 3 full bathrooms. Master bedroom plus large second bedroom with private entrance on main floor. Family room features natural rock fireplace with insert, open beam vaulted ceilings and stained glass windows, with view of water feature outside the slider. Loft bedroom with full bathroom upstairs. Spacious country kitchen with lots of cabinets and separate dining room. Expansive lawn with auto-sprinklers in front, natural landscaping with rock out-croppings elsewhere. 2 1yr old HVAC systems. Five minutes from downtown Oroville, a hike to river-fishing, and another 10 minutes to beautiful Lake Oroville for water sports. This is a big house! It is already rented out for $1250/month, so would be perfect rental property. It cashflows with 20% down-call 530-218-5765 for financing and other info. As low as $1016/month expenses (mortgage,taxes & insurance). 1250-1016=$234 cashflow/month!

Buying Property in Auburn

What? Buying real estate in this market?>#@! Of course!! Just made an offer today. Why? Prices have come down from their previous high for sure, so we are in a more realistic market with more supportable values. Many buyers are sitting on the fence waiting for prices to come down. As they are doing this, the reasonably priced homes are getting snapped up within days by other more savvy buyers. Too much attention to the media and too many ‘friend of a friend of a friend supposedly in the real estate business’ giving their expert opinions, has completely confused a major portion of the consumers who would otherwise buy property. People also forget that many of the high prices that were ‘posted’ at the height of the frenzy last year were merely some sellers fishing for a buyer who might pay an exorbitant price for their home, and not based on any market comparables. A good buy is a good buy in any market, or in other words if the value is there, it’s a good investment. Another factor in this market is the fact that many sellers actually over extended themselves either in buying too much home or racking up too much consumer debt, or both, so some sellers are actually desperate and will sell under the market price. Bargain properties are available, even though the general public may not believe it.

As a long time resident of Auburn also, I believe it is a great place to invest for a variety of reasons. One reason is the location-2 hours from San Francisco, 1 hour from Lake Tahoe and on route 80 which is a major freeway. There also are many outdoor recreational activities in Auburn, such as beautiful & extensive hiking trails, river rafting, etc. There are major employers nearby such as HP, Intel, Oracle, Coherent, Hospitals such as Kaiser and Sutter, and major shopping areas also. Auburn still retains it’s small town atmosphere, so it’s the best of both worlds. The rental market is good also since prices tend to be more here, than in the surrounding areas because of the desirability of Auburn. Land is less available also which keeps values up. People who can’t afford to buy here will rent instead. The movie ‘Phenomenom’ with John Travolta was filmed in old town Auburn, at the Shanghai Bar (the name of the bar was changed in the movie). Another movie was filmed at the Foresthill Bridge, over 700 feet high over the American River.

Loan Consultant versus Loan Salesman-what’s the difference?

When you hear the mortgage company ads on radio or TV, most people would say mortgage companies consist of loan salesmen/women. It’s pretty obvious from the language used that they would be correct in this opinion, and they are most of the time. This creates confusion for the consumer and in effect trains the consumer to shop for the lowest rate, which is what everyone wants, correct?! Yes and No!! I guarantee that if you shop around you will always find a lower rate, by simply asking! What invariably happens is that you get what you ask for on the surface, but you will be penalized somewhere else, usually before you realize it, and end up with a loan that could be completely wrong for you. This situation usually results from obtaining a loan from a loan salesman not a consultant. A consultant asks alot of questions, (other than the obvious-what do you make?, what is your credit score?) such as what your short and long term goals are, how long are you going to be in the house, are you trying to make money on this? (a flip,etc), how close to retirement (are you satisfied with your retirement plan & amount), do you want a pre-pay penalty (which will usually lower your interest rate), do you want to pay points (with an explanation why you might or might not want to), etc, etc. Anyone can quote rates without these questions (which is what a salesman wants because it’s an easy sale!),but this is like going in for surgery before the doctor has met with you, done tests and consulted with you! Who would do that!!?? In the loan business, many people get a loan in just this manner!!! This is great for the loan salesman and terrible for the consumer, and creates a bad environment for the true loan consultants. There is so much B.S. flying around that it’s hard to see. It’s like a snowjob!

My background as a General Contractor, Real Estate Investor, and Mortgage Professional, brings a more comprehensive knowledge to my clients. My own experiences and successes in all these professions is what motivates me to help others, since I know what I’ve been able to accomplish myself utilizing what I’ve learned. My mission is to show others how to use mortgage financing in particular to create extraordinary wealth. This entales a thorough understanding of each client’s unique circumstances and their goals, in order to lay out options to attain these goals. I need to know exactly where they are now and where they want to go, to be able to offer any value. As advertising essentially trains the consumer that a mortgage professional is not the person to seek financial advice from, most people are surprised that I ask the questions I do ask. They end up being pleasantly surprised that I care enough to really help them!! What a concept!!!