Updated: Tuesday, January 23, 2018
PinRaise Agent of the Year: Dana Roberts
Earlier this year, PinRaise Inc. launched their innovative Agent with HeartTM Program, which connects real estate agents with local clients and nonprofits to help communities nationally. Despite being the inaugural year of this new program, PinRaise was able to assist hundreds of nonprofits by generating thousands of dollars in real estate donations thanks to the kindness and generosity of each and every Agent with Heart who dedicated themselves to giving a donation back to their clients nonprofit of choice after closing.
"When we began this program back in April of this year, I was immediately overwhelmed with the incredibly positive response we got from real estate agents who were ready to jump right in and start giving donations on each closing. Our Agents with Heart are each dedicated to making donations throughout the year, and thanks to them and their generosity, we have been able to assist nonprofits across the country. All of us at PinRaise are so very grateful to them for helping us realize our goal of assisting communities everywhere," said Mr. John Giaimo, President of PinRaise.
One agent in particular, Dana Roberts, is being honored as PinRaises Agent of the Year thanks to her 16 donations.
Recipients of Danas generosity include: SPEC-LA, Hope for Paws, St. Jude Childrens Research Hospital, Desert AIDS Project, American Cancer Society, Red Hill Lutheran Church School, Second Harvest Food Bank, CHOC Foundation, Make-A-Wish Foundation, Families Forward, American Red Cross Orange County to benefit Canyon 2 fire >"Dana has been an Agent with Heart with us from the very start of our program and truly epitomizes what our program is all about. We are deeply honored to be able to work with such a kind-hearted person who truly cares about paying it forward and making a difference in her community," said Mr. Giaimo.
"When it came time to choose our PinRaise Agent of the Year, it was a no-brainer that Dana would be the recipient. From the moment she joined our program we knew we had found an incredible partner in giving, and a person who would truly help us to propel the good that we envision our program doing," continues Mr. Giaimo. "All of us at PinRaise would like to congratulate Dana on her numerous donations, but I would like extend my most sincere gratitude and to personally thank her for her generosity and dedication to giving. Agents like Dana Roberts are far and few between, and we are so proud to count her among our Agents with Heart. No one deserves the Agent of the Year title more," concludes Mr. Giaimo.
To become an Agent with HeartTM and start paying it forward to your community, visit PinRaise.com.
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Does It Makes Sense To Buy A New House Before Selling The Old One?
Youre interested in moving. You need to sell your old house first before buying a new one, right? After all, you dont have enough of a down payment for the new house without selling the old one, and you are pretty certain your bank will not qualify you for two mortgages.
You are in a dilemma; houses in your area are currently receiving multiple offers. Inventory is low. Sure, you can sell your house under the same circumstances, but will you be able to identify a new house so that you can simultaneously move from the old house to the new one? Unlikely. Do you sell the current house, move to a rental [or hotel while you identify and try and close on the new house? Is the extra hassle of moving twice and the added stress of the inability to simultaneously close on the sale and purchase the new worth it? IF you could purchase a new house while still living in the old house, is it worth the added costs involved with having a second mortgage until you sell the old house? How much is "peace of mind" worth in not having the pressure of having to purchase a new house because you sold the old house too soon?
These questions are a reality in todays world in many parts of the country, specifically, the San Francisco Bay Area, because of the real estate rebound after the Great Recession. According to Jeff Stricker, a real estate professional with Alain Pinel Realtors specializing in the Silicon Valley in California, his clients are faced with these exact situations much of the time, as property is swooped up almost as soon as it hits the market, and, many times, with multiple, over asking prices. Jeff states that, although it is great for his clients as sellers, those same clients face challenging hurdles when buying a replacement property; competing against other buyers, some with cash only offers, who are willing to bid up a property far beyond the asking price in many circumstances. Some buyers are just so frustrated with the process of competing and getting outbid that they act in ways that they normally would never have thought. Overbidding. Settling for a house that they may not have originally envisioned. The list goes on.
Jeff, however, decided to think outside the box. What would happen if another house was purchased without the added pressure of "living out of a suitcase", if you will prior to the sale of the old house? Is it even possible with the banking regulations that were placed upon financial institutions as well as homeowners over the past decade due to the "mortgage meltdown" that happened in 2008 and on? Dodd Frank rules that placed inordinate restrictions on the ability of homeowners to obtain financing left many people unable to get loans in which they previously were easily able to qualify.
Jeff decided to come up with a spreadsheet wherein, if he plugged in some assumptions, he could figure out if it would make economic sense to acquire a new house before selling an old house. The other part of the equation was to find a lender who would allow for a homeowner to purchase a new home without first selling the old home; thus, carrying two mortgages at the same time. Since most conventional lenders would not touch this, Jeff had to look to alternative sources. He found a company called Pacific Private Money, in Novato, CA that specializes in such a product.
Pacific Private Money can lend enough to the borrower to purchase the new home if there is enough equity in the old home to justify a combined Loan to Value LTV of 70 or less. Sometimes, if there is not enough equity in the old home, the borrower needs to add cash to bring the LTV to 70, but, the ability to purchase a new home without having to sell the old one first can solve many issues for the homeowner. First, the new home can be identified without adding pressure since the homeowner is still living in the old house until the new house closes escrow. Second, the stress of moving twice is eliminated. Third, and probably the best and possibly most surprising is that this solution may actually cost LESS in terms of increasing net equity to the household than selling the old house and buying a new house with the proceeds from the old house and new mortgage in most circumstances wherein the new house is more expensive house than the old house.
In a rising market, the earlier the purchase of the more expensive new house and the delay of the sale of the old will increase the net equity to the homeowner more than the costs associated with carrying two mortgages.
For example, lets assume the old house is worth 1,000,000 and there is currently a 1st mortgage of 200,000. The homeowner desires to purchase a new home for 1,400,000 and has 100,000 in the bank that can be used for a down payment. We will look at two scenarios; the first is where the homeowner sells the current house, rents for a period of time, and then purchases a new home. The second scenario is where the homeowner borrows the money in order to secure the new home while owning the old home.
Obviously, there are many moving targets with both scenarios, such as how much it will cost to rent a place in the event of selling the old house first as well as how long it takes to identify and close on the new house, storage costs for belongings, the cost of obtaining a private loan, and the appreciation assumptions for both houses, just to name a few.
Here is a calculation making the following assumptions; it takes nine months to close on a new house after selling the old house; houses in the area both old and new houses are appreciating at 1 per month; interest earned on bank deposits are at 1 per annum; storage costs are 1,000 per month, a conventional bank loan is not available because the homeowner does not qualify and has to use a private loan company; the costs for the private loan are 9 plus 2 points; the interest rate on the old house is 3 per annum. Click Here to see 1 per month appreciation.
As you can see, in a rising market, where the new house is worth more than the old house, there is a significant benefit to using a private loan to purchase the new home and sell the old home at a later date. Waiting 9 months to eventually acquire the new house has tremendous opportunity costs, as compared to a net benefit of purchasing the new house right away and eventually selling the old house.
Although assuming a 1 per month appreciation of real estate may seem aggressive, the San Francisco Bay Area, and specifically the Silicon Valley, has experienced such growth. However, even if we lower the appreciation to .5 per month Click Here to see .5 per month appreciation, we still see a fairly significant benefit to purchasing the new house now rather than waiting to first sell the old house and then buy the new house.
Aside from the economic benefit, other factors need to be considered; the lack of stress of moving twice should the homeowner decide to sell the old house first and then purchase the new house; what if the homeowner finds the house of his/her dreams now and does not want to let the house slip away? In todays market, sellers are not willing to take contingent offers. Can the homeowner budget for both houses at the same time while waiting for the old house to sell? Is the market rising? Is the new house more expensive than the old house? How long will it take to sell the old house? These are just some of the issues to consider before deciding one way or the other; however, and this cant be stressed enough -- when a homeowner finds a house they like, they do not want to lose the opportunity of buying it. This means that they can start looking at new houses before putting their old house on the market. This also allows them time to make any repairs or fix up their old house so as to maximize its value prior to putting it on the market.
Once homeowners know that there is a potential to purchase a new house before selling their old house, they can be proactive in obtaining a commitment letter from the lender. Of course, homeowners should see if they qualify for a conventional loan for buying the new house owning two houses at once, but they should keep their minds open to procuring a private loan should the bank turn them down. Pacific Private Money is such a private loan company.
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There are numerous reasons banks avoid making loans that, in general, one would think have a high likelihood of paying back. According to a banker who works for a well known bank, during the mortgage crisis of almost a decade ago, one thread seem to run through all of the bad loans on the banks books; late payments on even the smallest of items, such as a department store credit card. This type of information led banks to steer away from otherwise good borrowers after the mortgage meltdown, since the banks did not want to have borrowers who tended to be late or default on mortgages. Thus, a borrower who never missed a mortgage payment but may have been late on a small credit card was seen as a bigger risk for a future default on a mortgage should there be instability in the economy.
Banks are not in the business of taking over property and do not want to be seen as predatory lenders. Even if a borrower has a "good story", banks would rather not even entertain a loan, which, on its surface, appeared to be more likely to fall into default. Banks are very cash flow oriented. They do not want to lend to borrowers where there may be a question of how a mortgage will be serviced. In commercial real estate loans, banks use a ratio called DSCR Debt Service Coverage Ratio. The DSCR is a measure of the cash flow available to pay current debt obligations principal and interest in cases of a mortgage. It shows the ability to produce enough cash to cover the mortgage payment. In previous years before 2007, most banks required a DSCR of at least 1.1.
For example, if the mortgage payment including principal and interest was 10,000 per month, the net cash flow after paying normal expenses and before the mortgage needed to be at least 11,000 per month. This was not usually an undue burden, as most real estate investors would have expected to have at least a break even cash flow after paying the mortgage. However, after 2007, almost every bank in the nation tightened up their standards to where they insisted on a DSCR of at least 1.25 and as high as 1.35. Although this may not seem excessive, the extra 15 to 25 basis point requirement seve>Another aspect that impacted banks ability to make loans to less than stellar borrowers is that they are similar to corporations in that they >Most banks work off of a fairly slim arbitrage due to competition, so it is not worth having loans in their portfolio that appear riskier. When a loan goes onto a "watch list" or goes into default, more of the banks resources are tied up and not available to be deployed into new loans. Loans that are put onto the "watch list" would be those loans in which the loan to value is not as strong as the bank had originally determined. Although the borrower may not be late on any mortgage payments, the value of the property may have declined to where bank auditors have determined that there is a more than likely potential default.
For example, if the bank made a loan on a property two years ago for 100,000 on a property that had a value of 150,000 at the time the loan was made 67, the bank would set aside a certain amount of reserves as prescribed by the FDIC. However, if the property declined in value to 117,000, the 100,000 loan presuming the loan was interest only now stood at over 85 LTV Loan to Value. Under this scenario, the bank would be required to set aside more reserves. This creates a problem for the bank in that this means less money for the bank to lend out, as the extra reserves ties up more of the banks capital and less is available to make loans. If the loan actually goes into default, substantially more reserves are needed to be set aside. After the mortgage crisis, stringent guidelines were handed down to banks, as the Federal Government did not want to bail more banks out. Thus, most banks found it was just not worth using their resources for potentially non-income earning activity.
There is a lot of activity in the lending arena as the economy has strengthened, and interest rates are still attractively low. With the numerous requests for loans, many banks are finding that they do not need to attract borrowers. They do not want to spend time having to explain to auditors or even bank board members why certain loans are being made when they have many "slam dunk" loans that are "cookie cutter". Banks are finding that they cannot charge enough to the borrower to justify the extra time, expense, and risk to make a typical "non-bank" loan.
An alternative to conventional financing can be found with private lending companies. Private lending companies do not have the same reserve requirements and will generally provide loans with much less hassle and more expediently. These private lending companies are more interested in "equity based" lending, meaning that they are more interested in how much equity is in the property at the time they make the loan as compared to the DSCR or credit issues of the borrower. This provides the private lending companies an opportunity to fill a gap where the banks have left off -- loans that are not generally considered risky but still need funding. However, the price of capital is higher because the private companies do not have the same access to capital that banks do.
They cannot provide FDIC insurance to their capital resources; thus, they have to pay a higher rate than depositors of banks. In conjunction with higher access to capital costs, these private lending companies must charge the borrowers a higher than bank rate for the money. The benefit to the borrower is the access to otherwise unavailable capital; in addition, the borrower usually does not have to jump through as many hoops as applying with a conventional bank and will almost certainly be able to borrow in a shorter time window. Many borrowers find borrowing from private lenders worth the extra cost.
Of course, if time is not of the essence, a borrower should first attempt to obtain funding from a conventional lender; however, borrowers should not be dismayed if they are turned down by banks. Alternative sources of capital are available for funding requested loans. One only need to do a little research. Many mortgage brokers, who deal with banks, also know of private lenders. If the borrower is able to go direct with a private lender, there may possibly be a cost saving to the borrower as there is one less mouth to feed; however, many times, the mortgage broker can assist the borrower with expertise as to the pricing of private loans and which companies are reputable and which are not.
In bring a deal to a private lender, the borrower should be careful not to do a shotgun approach, which is to say that it may hurt the borrower in the long run to try many brokers at the same time for the same request. One may think this is the best way to obtain financing at the best price due to attempting to force competition, but, many times, it backfires on the borrower, as some brokers broker to other brokers. What often happens in this scenario is that there may be a chain of brokers involved, all adding their fee into the loan. A two point deal may turn into a four point deal because, by the time the loan reaches the final funding so many brokers claim they had a hand in the deal and all want to get paid.
The borrower may find that a better plan of action is to find one good broker who is well connected with an array of lenders. Many times, this broker will know ahead of time what terms the borrower can expect and communicate this with the borrower, so there are no surprises. Some brokers specialize in construction loans as due some lenders; some will not touch personal residence loans due to the Dodd Frank regulations. It is best for a borrower to seek out a broker who is well versed in the type of loan that the borrower seeks.
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