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When you hire Jim and Ila to help you with your real estate needs, you want to know how they think. Here, in alphabetical order, we offer our views on topics related to real estate.
Adjustable Rate Mortgage Loans (ARMs) – When introduced in the 1980s, ARMs were touted as an affordable alternative to high fixed-rate loans. At the end of a specified term – one year, for example – the interest rate could adjust upward or downward in line with changes in a particular industry yardstick. When interest rates fell, many homeowners refinanced to fixed-rate loans and the system worked well until lenders added Option-ARMs, offering loans with low “starter” interest rates that would re-set after a few years to much higher rates. Home buyers could afford the low interest rates hoping that either their salaries would increase substantially or interest rates would go down and allow them to refinance before the interest rate re-set to payments they could no longer afford. When neither happened, homeowners lost (and are still losing) their homes because they were unable to make the new, higher payments.
The resulting foreclosures and suddenly uprooted families could be avoided if lenders agreed to apply the additional interest to a silent second or shared-equity loan while the homeowner continued to make affordable payments and had the home listed for sale.
Affordable Housing – This refers to both rentals and home ownership. What makes a home affordable is not the purchase amount, nor the interest. It is the monthly payment. A traditional rule-of-thumb is that the cost of housing should be no more than about one week’s income. As more income is devoted to housing, less is available for other necessities or extras that enhance our lives. We should work to support a lifestyle, not just a home.
Affordable Workforce Home Ownership – Home ownership is affordable when the total monthly payment of utilities, real estate taxes, homeowners insurance, HOA dues, principal and interest does not exceed 30 percent of the total monthly income of all the people living in the home. Payments can be made affordable using “silent second” or shared equity loans. We strongly believe workers ought to be able to purchase homes near their jobs. Many low- to moderate-income workers like teachers, hospitality staff, retail clerks, office employees and emergency personnel cannot purchase affordable homes for their families in the communities where they work. We commend local cities that recognize the importance of affordable housing to the economic and social well-being of the entire community.
Agent – One of the most important decisions you will make is choosing an agent you can trust to work hard on your behalf and have the experience and expertise to protect you and guide you from the day you hire him/her to close of escrow and beyond. An agent should be well-informed and easy to reach, ready to address your questions and concerns. In real estate, there are three types of agents: Seller’s Agents, Buyer’s Agents, and Agents Representing Both Seller and Buyer (Dual Agents).
Whether buying or selling real estate, being represented by an agent brings peace of mind. Legally, a real estate transaction has become much more complex. More than 50 documents are required in most transactions and your agent can provide the expertise to protect your interests. The relationship between agent and client is so important that one of the first documents you’ll sign is a Disclosure Regarding Real Estate Agency Relationship, which outlines the obligations of an agent to sellers and buyers:
An agent representing only the seller has a fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the seller. To both seller and buyer, the agent must exercise reasonable skill and care in performing his/her duties, and has a duty of honest, fair dealing, good faith, and a duty to disclose all facts known to the agent materially affecting the value or desirability of the property that might not be known to or observed by the seller or buyer. The agent is not obligated to reveal to either any confidential information that does not involve the duties listed above.
Agents can represent the seller, the buyer or both seller and buyer and have a fiduciary duty of utmost care, integrity, honesty and loyalty to their client, along with a duty to use reasonable skill and care, provide honest and fair dealing in good faith, and to disclose facts materially affecting the value or desirability of the property. Agents representing both sides are called “dual agents” and are responsible for the confidentiality of each client. Using a dual agent can be advantageous to both seller and buyer negotiating a win-win agreement.
Agents and Associates – In legal contracts, the “agent” of the seller or buyer is the Broker who employs the sales associate or broker associate who a client regards as their agent. In our case, Tarbell, Realtors, is the “Agent” listed on contracts and we sign documents as its representative.
Bail-Out Funds – Banks should never have been rewarded for bad judgment with no-strings-attached gifts. Bail-out funds should have been loans, not grants or gifts. Public policy was driven by simple greed, not the deliberation we Americans expect of our leaders.
Buying a Home – Home ownership is still the American Dream, and rightfully so. Pride of home ownership sparks a desire to maintain and improve the home, neighborhoods benefit from mutual goals of long-term residents, cities and schools reflect the pride and concerns of home owners.
We have developed a 5-Step Home Purchase Plan. The five steps are:
1) Get pre-approved by a lender for a home loan with affordable payments.
2) Select the locations and neighborhoods where you want to live.
3) Drive by the exterior of houses you are considering – and the surrounding area. If you like what you see, call or e-mail me.
4) I will make an appointment to show you the interior of the house.
5) If you like the interior of the house, I will prepare an offer.
Capitalism – The United States has always been a capitalist nation. Capitalists invest in people, products, buildings and communities with the goal of making money. Profit-driven enterprises fueled the development of our nation, strengthening our economy. Forcing lenders (cram-down loans) to receive less for underwater borrower loans is un-American and, will damage capitalism in the U.S.A.
Carbon Monoxide Detectors – These are required in homes since July 1, 2011 and are available in local stores. A carbon monoxide detector is a battery-operated or electric device that sounds an alarm when odorless, colorless carbon monoxide levels reach a dangerous level.
Code of Ethics – The National Association of Realtors has a lofty Code of Ethics which Ila and Jim believe in, subscribe to and comply with. The basis of the Code of Ethics is the Golden Rule and stresses respect for others, honest dealing, diligence, and simply doing what is right.
Conflict of Interest – In government, real estate, and in daily life, it’s important to know where one stands. Judges who have a conflict of interest are expected to recuse themselves. Legislators should disclose the conflict and abstain from voting on matters that could benefit them (or their contributors) personally.
Corporations – The U.S. Supreme Court has ruled that corporations are legal “individuals” who can give undisclosed contributions to political candidates and causes. Our government was set up of the people, by the people, and for the people. People are mortal, have hearts, can see, hear, feel, taste, and smell (the five senses). Only mortal people should be able to donate to a political campaign and it should be illegal for immortal corporations to contribute to any political campaign. Corporation funds should be used to make a profit, not bribes for public officials. We’re concerned that major corporations apply undue influence to the decisions made by elected officials through lobbying efforts and contributions to political campaigns. Putting greed or self-interest before serving the people should result in financial penalties and community service without compensation in lieu of jail time for offenders. Profitable corporations and people who pay no income tax should pay a minimum tax for the privilege of doing business and living in the U.S.
Credit – The ability to use credit is based on 3 C’s – Capacity, Collateral, and Character.
Capacity – The amount of income a person has to make payments on loans.
Collateral – The assets a person has that can be used as security for repayment of a loan.
Character – The honest, truthful, moral and ethical qualities a person has shown by past conduct.
Down Payment Assistance – Some cities will help you with the purchase of a home through “silent second” or shared equity loans. We will help you find out what programs are available and how you can qualify for assistance.
Equal Opportunity – The first five words of the Declaration of Independence – “All Men Are Created Equal” – that is clear enough for us. We do not discriminate.
Escrow – The escrow officer is charged with ensuring that the contract has been fulfilled. The seller gives escrow a signed grant deed and the buyer gives escrow the money. Escrow holds the money for the seller and records the deed for the buyer when all the conditions of sale have been completed.
FHA Loans – Many home buyers cannot qualify for conventional loans requiring down payments of 20 percent or more of the purchase price. The Federal Housing Administration (FHA) enables purchasers to buy a home with as little as 3.5 percent down. Other FHA programs provide loans to purchase homes that need repair and for seniors who want to “cash in” part of their equity with a reverse mortgage.
FICO Score – The credit score formula which determines your creditworthiness was developed by the Fair Isaacs Corporation in 1969. FICO scores are issued by national credit-reporting agencies like Equifax, TransUnion, Experian, etc. Your score will be a number between 300 and 850 and was calculated from your past credit history. In real estate financing, three scores are reported and usually the middle score is the one used. What Your FICO Score Means
Fixed-Rate Loan – A fixed-rate home loan enables borrowers to purchase a home and know exactly what the monthly payment will be until the loan is paid off. Most fixed-rate home loans are for 30 years, In the beginning, nearly all of the payment goes to pay the interest, but as time goes on, the proportion changes and towards the end, nearly all the payment goes to pay down the principal.
Flipping – Speculators purchase substandard homes, make needed repairs, and add cosmetic touches like new paint and carpeting have improved local housing stock in older, distressed neighborhoods. At the same time, their purchasing power has overwhelmed entry-level home buyers who find it impossible to compete. To discourage excessive profiteering and to encourage buyers who intend to live in the home they purchase, FHA has waived anti-flipping regulations through Dec. 31, 2011 that prohibits the use of FHA mortgage insurance for a subsequent resale within 90 days after the original purchase. Suspension of the anti-flipping regulations (some conditions apply) has been extended through 2011, allowing investors to renovate and quickly re-sell homes to buyers obtaining FHA loans.
Foreclosure – A home loan includes an acceleration clause giving the lender the right to demand payment in full if monthly payments are not made. Generally, when one payment is missed, the lender contacts the borrower with a reminder. When a second monthly payment is missed, the lender can file a legal Notice of Default giving the borrower 90 days to bring the loan current. If that doesn’t happen, the lender can record a Notice of Trustee’s Sale that is advertised in a local general circulation newspaper for three consecutive weeks. The home can be sold at auction to the highest bidder. A cash buyer can attend the auction and purchase the home. If no one buys the home, the lender beneficiary obtains title to the home from the trustee.
Glossary of Real Estate Terms – Glossary Created by the Federal Trade Commission
God – We believe in an immortal. all-loving, all-knowing supreme being.
Government – The U.S. Constitution established a government of the people, by the people, and for the people, but today it seems our nation has evolved into a government of mortal people by corporate executives for immortal corporations. Public policy often reflects what will be profitable to one industry or another rather than what is just or “right” for “The People.”
Government agencies are involved in all aspects of real estate, from qualifying real estate agents, to building standards and zoning regulations. California real estate agents must be licensed by the state Department of Real Estate, which sets legal standards and enforces regulations on behalf of consumers. On the local level, cities must be concerned about health, safety, maintenance and appearance of housing. Every city has a General Plan determining which sections are to be used for commercial areas, industrial and manufacturing facilities, and several types of residences. Proposals for new buildings must be approved by the city Planning Commission, construction permits and inspections are obtained from the Building Department, and Code Enforcement assures that construction standards are maintained. City Redevelopment Agencies can acquire and package large parcels to be sold to developers.
Guarantee - A guarantee in a real estate transaction is a promise for a particular outcome.
An Equity Guarantee is a promise for a specific amount of cash or the sale will not close escrow.
A Guarantee Sale is a promise for a specific amount on a particular date or event.
HAFA – The Home Affordable Foreclosure Alternatives program is a federal effort to streamline short sales. The seller is promised $3,000 to help with relocation expenses and 120 days to sell the home without fear of foreclosure.
To qualify, the home must be the borrower’s principal residence, the unpaid balance must be less than $729,750, the first loan must be “short”, the loan must have been originated before Jan. 1, 2009, the monthly payment must exceed 31 percent of the borrower’s gross income, the borrower must have financial hardship, and the loan must be delinquent or default is reasonably foreseeable.
HAFA short sales differ from others in that the lender agrees in advance to accept less than is owed and fully release the borrower from liability on all loans (no “contribution” or note for additional funds is permitted), and if selling the home as a short sale doesn't work, a deed-in-lieu of foreclosure may be possible.
Ila is a Certified HAFA Specialist and can assist sellers in negotiating with lenders before listing the home for sale.
Home Owners Loan Corporation – In 1933, the United States was dealing with another foreclosure crisis and the Home Owners Loan Corporation was created to provide funds to banks so they had liquidity. The Home Owners Loan Corporation purchased loans from the banks at a discount, spurring economic growth that eventually ended the Great Depression. The Federal Home Loan Bank Board took over the assets and loans of the Home Owners Loan Corporation in 1947 and liquidated them for a taxpayer profit in 1951. That strategy was far more successful than the bail-out gifts in 2008-2009.
Home Ownership – Owning a home provides poor and middle class families with a way to accumulate wealth. Building wealth and saving for retirement is difficult for most people receiving hourly wages. A home offers immediate benefits, a return on monthly payments, and the likelihood of increased value over time. The immediate benefits include freedom from unexpected rent increases and landlord edicts. Interest and property taxes are deductible on the borrower's income tax return. Historically, real estate increases in value over time, yielding tax-free equity up to $500,000 for a couple when their residence sells. A goal for many home owners is to have their home loan paid off by the time they reach retirement.
Income – Productive people earn wages, interest, rent and profit. Welfare is when others provide assistance.
Inflation - Inflation is a reduction in the purchasing power of money that resulted from a rise in the prices for goods and services. It is usually caused by an increase in the amount of money put in circulation. In areas where there is stable or increasing employment, real estate values rise with inflation.
Listing Your Home – We have developed 5 Steps to Selling Your Home Quickly. They are:
1) Our Competitive Analysis Shows Local Home Market Activity
2) Marketing Strategies to Attract Well-Qualified Buyers
3) Staging Your Home for Maximum Impact
4) Introducing Your Home to Its Next Owner
Listingbook – This home search program is updated from the Multiple Listing Service about every 30 minutes. Clients prefer the convenience of having the ability to change their criteria at will, select multiple areas for automatic updates, view pictures of the property, school and community information. Clients are able to get quick answers to questions by attaching a note that is immediately e-mailed to us.
Loan Modification – Corporate lenders have refused to temporarily modify homeowner loan payments unless it is profitable for them and instead have proceeded to foreclosure on homeowners. Contact companies that assist in loan modification, such as NACA.com, but avoid companies that require you to pay upfront for their services. We're interested in hearing your experience - call or e-mail us - with such organizations so we can help others.
Majority – “Majority rules” but isn’t always right.
Mortgage Interest Deduction (MID) – Being able to reduce your taxable income by deducting interest payments on a home loan has been benefiting working taxpayers since 1913. In the past few years, calls to eliminate the MID have grown stronger and Congress may consider it as a means of increasing tax revenues. We oppose eliminating the deduction because it will make the “American Dream” less affordable and unfairly increase taxes on working-class Americans while wealthy citizens will continue to benefit simply by putting their property into corporations and “renting” them. By doing so, they will qualify for any renter tax credits and the corporations they own can deduct mortgage interest and other costs associated with the property as a business expense.
Necessities of Life – Our basic survival depends on food, clothing and shelter.
Power – Sad, but true: Power usually corrupts.
Profit - Profit is good, but causes greed in management. Corporations must make a profit or they die (go bankrupt).
Proposition 13 – Approved by voters in 1978 and declared constitutional by the U. S. Supreme Court in 1992 (Nordinger v. Hauh 505 U S 1) , this proposition limited property tax to 1 percent of assessed value in 1975. As properties sell, the re-assessed value is about 1 percent of the sales price. The system protects long-time home owners, especially senior citizens whose fixed incomes do not keep up with rising property values. Unfortunately, Proposition 13 also protects corporations. As legal individuals, corporations can buy real estate, but a corporation itself can be bought and the transferring real estate holdings will not be re-assessed. As a result, the property tax burden weighs heavier on home owners than companies because immortal corporations never die and their properties are not re-assessed.
REALTOR® - A member of the National Association of Realtors (NAR), the California Association of Realtors, and a local association. As Realtors, we subscribe to a lofty Code of Ethics and believe it should be at the center of every real estate transaction.
Rent – Rent payments are generally less than the cost of purchasing a home. Figure on paying about a third more to purchase a home, including property insurance and property taxes. Renting makes sense for people who anticipate moving in a year or two. If you plan to stay in the community indefinitely, purchasing a home enables you to pay rent to yourself – a portion of your monthly payment will pay down the principal and build equity so that when you sell the home, you’ll get that money back. Renters do not pay interest or taxes and cannot deduct them on their income tax returns.
Reverse Mortgage – Ask a lot of questions if you are considering a reverse mortgage and talk to several lenders before making a commitment. A reverse mortgage can provide a cushion for financially stressed home owners, but there are substantial fees associated with the loan that must be paid at the time you obtain the loan. The loan must be repaid when you stop living in your home. There may be other alternatives that are less expensive in the long run. We can recommend trustworthy lenders.
Shared Equity Loan – The lender receives a percentage of increased value of a home when the home buyer later sells the home. The home buyer pays nothing on the loan while living on the property.
Short Sales – Home owners who bought or refinanced their home at the peak of the market and now need to sell that home often cannot expect to receive enough from the sale to pay back the money borrowed to purchase the home. If they cannot make up the difference, they must ask the lender to accept less than is owed. If the lender agrees to a short pay-off, the sale can be completed. If not, the owner either keeps the home or the property is foreclosed. Our job as REALTORS® is to present home owners with various options and, if they decide to sell their home, market the home to attract a well-qualified buyer and negotiate with the lender to accept a short payoff as payment in full. Before you list your home, ask Ila about the HAFA short sale program and how to prevent a deficiency judgment by your lender and IRS tax liability.
“Silent Second” Loan – This can provide down payment funds for home purchasers. A lender provides funds to buy a home with the understanding that the loan does not have to be re-paid for a period of years unless the home is sold or refinanced, or the owner moves from the home. It is “silent” because no monthly loan payments are due. Cities may use federal redevelopment grants to fund such loans.
Transparency - We are proactively transparent. Complete transparency for the people is the only way for service providers and public servants to act.
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