New Transaction Closing Rules -- Starting August 1 by CFPB

Be Careful Crossing the Road of Financial Protection

The Consumer Financial Protection  Bureau was brought into being by the Dodd-Frank legislation, and the CFPB has teeth which are being inserted into the lives of lenders, and therefore the lives of home buyers and sellers.

The "Know Before You Owe" rule, effective August 1, 2015, is bringing a new closing document (6 pages) and is doing away with our HUD-1 statement (3 pages) in the form of a non-uniform closing package which does away with the uniform coded costs which have been in existence for . . . decades.  By non-uniform is meant that lenders can call their categories what they so choose, and therefore may be different from one bank to another all across the country.  On the other hand, "the new forms resolve the problem of redundant and overlapping information presented in the standard Real Estate Settlement Procedures Act (RESPA) and Truth In Lending Act (TILA) disclosures that lenders are required to send to borrowers following submission of a mortgage application and just prior to the closing." See, for a very indepth industry discussion, this article by Patrick Barnard.

One of the net results is that there's more pages to get to a closing, and the closing will probably end up being extended well beyond the initial escrow period IF there are credits back which must be given a 3-day period to sign on and disclose to the lender.  So if, for example,  the seller agrees to credit the buyer $500 for some repairs rather than perform the repairs, that will require a written documented disclosure to the lender, the total of such amounts may not exceed the lender's cap.  Such a $500 agreement between buyer and seller will require a new good faith estimate from the lender, which in turn adds to costs by some lenders.  Another fact of life is the cost involved for escrow companies and lenders to retool their technology because they will be required to be in sync on this process.

Since this is being  implemented on a national basis, it will affect procedures and laws in all states.  The bottom line for buyers and sellers is that a 30-day escrow may turn into a 45-day escrow, which impacts people's moving plans for making the smallest of changes.

More will be said here on this issue, but the bottom line for residential buyers and sellers is to grasp the transactional costs and fees, including termite inspection (very costly sometimes) and what they agree to agree on with each other in the beginning.  I can see a world of even more advance planning on both sides.

Water Heaters Are About to Cost Much More

If you need a new water heater, consider buying one in the next three weeks.

Effective April 16, 2015, water heater replacement rules will go into effect.  A new amendment to the National Appliance Energy Conservation Act will require higher energy ratings on all new residential gas, electric, oil and tankless gas water heaters.  The changes will impact how they are designed, manufactured, tested, distributed and installed, as many will be taller, wider and heavier than your current installation.  Because of the potential increase in size, the homeowner may have an additional cost of housing the new heater in a larger cabinet.

 According to  the U.S. Department of Energy, "Standards mandatory in 2015 will save approximately 3.3 quads of energy and result in approximately $63 billion in energy bill savings for products shipped from 2015-2044. The standard will avoid about 172.5 million metric tons of carbon dioxide emissions, equivalent to the annual greenhouse gas emissions of about 33.8 million automobiles."  For water heaters under 50 gal., this greater efficiency is achieved by adding more insulation (making it bigger).  For larger water heaters, heat pumps will be required, and some larger water heater may be discontinued because they cannot meet the standard.  In the end, there will be less energy consumed, but not before the consumer pays more up front.  Also, the self-help install program will just not work, licensed plumbers will be a fact of life.  

And according to EnergyStar.gov site at least 30% of a home's energy is spent on heating and cooling:

According to the Bradford White website "It is important for contractors to understand that products manufactured before April 16, 2015, can be bought and installed after the changeover date."  However, since production of the new standard units started some time ago, some stores have been stocking up for some time, so older manufacture dates may be harder to find.

To extend the life of your current water heater, drain it yearly, and if possible, add a water softener to decrease sediments.   For more information go to http://www.energy.gov/search/site/water%20heater.

You Need to Know About Your Appraisal

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.  What does "bracket" mean?  It means that selected comparables must be, within certain percentage levels, larger and smaller in size, higher and lower in value, as well as better or worse in condition.  These may vary not only according to lender but also type of loan.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.
Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25%-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed, however, current active and pending sales will also be included in an appraiser's report.

In addition, the guidelines in the 2009 Home Valuation Code of Conduct must be applied, which among other things prohibits a lender from having any contact with or influence on how the appraiser values a home. This Code, however, does not prevent the seller or buyer REALTOR from having direct contact and asking questions concerning the appraiser's familiarity with the area.  This is very important to know about an appraiser, since it's the local marketplace that determine the adjustments in values.

Article information taken from an e-mail from South Pacific Financial Corporation

Just Listed! Alamitos Beach Condo

 One-bedroom, one-bath unit in Alamitos Beach area of Long Beach.  Very nice upper unit at a great price for a cash buyer looking for a getaway place, or a first time buyer just starting out (conventional loans only, please) in this 12-unit building.

Nice interior with soft colors and double-paned windows.  Bathroom is close to original 1950s style with newer vanity, and plenty of closet space for the bedroom.  A big plus is the garage parking for this condo, and the view down on a very nice courtyard area. Great area for walking and close to the beach.

It's a great price at $210,000, with HOA monthly dues of $183.00.
Please call for more information for 1030 E 2nd St., #8, Long Beach 90802.
(Information current as of 3/10/2015)

Julia Huntsman, Broker
Lic 01188996
562-8962609
MLS:  PW15049517
http://mrmlsmatrix.com/Matrix/Listings/ZHUNTJUL246/MyResiListings.mls

Four Critical Credit Tips

Dear Buyer,

Your credit score is an important benchmark for mortgage lenders, landlords and even potential employers. Use these tips to avoid hurting your credit score:

1. Don’t max out your credit cards.
A big factor in your credit score is your debt-to-credit ratio. When you hit your spending limit, your debt-to-credit ratio rises and your credit score falls. As a rule, always have more credit available than outstanding debt. Doing so not only boosts your credit score, it keeps your payments low and leaves a buffer for emergencies.

2. Consider the pros and cons of cancelling credit cards.
While removing temptation is one way to check excessive spending, cancelling credit can actually damage your credit score. Why? Cancelling credit increases your debt-to-credit ratio just like maxing out a card, dropping your credit score. If you need to cancel a credit card, obtaining the same or higher amount of credit with a new card diminishes the effect. (But it's best not to cancel, just stop using the card.)

3. Stop applying for store credit cards in the checkout line.
It might be tempting to save 15% on a one-time purchase, but applying for unnecessary credit. It can seriously damage your credit score. Lenders make a hard inquiry whenever you apply for a new card. This type of inquiry often lowers your credit score by several points, which accumulates when applying for multiple cards. A soft inquiry occurs when you check your own credit, which is highly encouraged routinely and before a major purchase.

4. Apply with multiple lenders when shopping for a mortgage.
While I have preferred lenders I would much rather work with because ultimately, professionalism and knowledge are what gets the job done, not all lenders do all loans or work with all lender sources. Buyers should know this. When you apply for a mortgage, the lender performs a hard inquiry. This will lower your credit score by a very small amount, around 5 points. However, when multiple mortgage lenders run your credit within a 45-day period, it only generates a single credit penalty. Thus, applying at one, two or even a dozen mortgage lenders only produces one minimal deduction to your credit score. Unless you have a serious credit problem, applying with more than three is probably unnecessary, but to satisfy yourself that you are getting the best mortgage rate and terms, just like shopping around for a new car, it would be wise to take a little time in the application process and ask questions.

If you want to learn more or discuss your home buying or selling options, contact me.

Energy-Efficiency Upgrades and Residential Energy Tax Credits for 2014

If you made your home more energy efficient in 2014, you might qualify for the residential energy tax credit.

Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar for up to 10% of the amount you spent on certain home energy-efficiency upgrades. 

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

Among the upgrades that might qualify for the credit:

• Biomass stoves

• Heating, ventilation, and air conditioning

• Insulation

• Roofs (metal and asphalt)

• Water heaters (non-solar)

• Windows, doors, and skylights

To claim the credit, file IRS Form 5695 with your return, the 2014 version may be found at their website with the instructions.

What is the January 2015 Real Estate Profile of Long Beach, Cerritos, Lakewood and Rossmoor?

Here is a brief summary of January 2015 sales, compared to January 2014:

Long Beach - Median sales price for a single family home: $481,000 (up 5.8%), housing inventory down 22%, with only 2.2 months supply of inventory on the market.

Cerritos - Median sales price for a single family home: $602,000 (up 3%), housing inventory down 9% with only 2.1 month supply of inventory on the market.

Lakewood - Median sales price for a single family home: $443,500 (up 3%), housing inventory down 44%, with 1.4 months supply of inventory on the market.

Rossmoor - Median sales price for a single family home: $807,500 (up from $800,000), housing inventory still at 2.6 months supply of inventory on the market.

By checking points along the graph, prior months' sales prices are seen. Long Beach and Cerritos are down, Lakewood and Rossmoor are up. This is a live graph, and is updated with each month's sales.

Would you like to know what buyers' home buying motivations are? Buyers who purchased brand new homes did so because of fewer electrical and plumbing problems. Sellers who take this and other items into account when preparing their home for sale are less likely to get a laundry list of repairs desired by buyers.

NAR's 2014 Profile of Buyers and Sellers

Don't Let Marketing Your Home Create an Unnecessary Gateway

Julia Huntsman
Lic 01188996

Cash Buyers Slowing, Home Price Gains and Low Inventory In Southern California

Looking toward downtown Long Beach from Bluff Park

For quite a while the price increases have been pretty noticeable, but on closer look it's not the same for all segments of the Southern California real estate market.  According to Dataquick,

"In December, the lowest-cost third of the region's housing stock experienced a 12.9 percent year-over-year increase in the median price paid per square foot for resale single-family detached houses. The annual gain was 6.3 percent for the middle third of the market and 2.3 percent for the top, most-expensive third."

And the Southern California six-county median price for a single family home is still 17% lower than the median peak price in 2007.  While all cash transactions are decreasing in some states and regions because prices have increased enough to make returns unattractive to real estate investors, low inventory is still prominent.  Overall, the number of home sales in Southern California was more than 8% less in 2014 when compared to 2013.  This need for more homes to sell is evident in just about every local city and zip code, especially in the market below $500,000.  In Long Beach in December, 2014, there were 371 houses for sale, which put the "months supply of inventory"  at 2.1 months, a decrease of 12.5% from December 2013.   Townhouses and condos were only slightly better at 2.2 months of inventory in Long Beach.  Normal inventory levels are for a 6 months supply.  The average home sale price in Long Beach was $535,000, while the median was $464,000 for December.

At the moment, there is a demand for houses in the more affordable $400,000-$500,000 range in the Long Beach area.  For a comparable sales analysis, always a good way to get a current market education, please contact me via phone or e-mail.  Even if you don't plan on selling right now, there are good reasons why you should get a good estimate of value from an experienced professional. (Remember, sites such as Zillow offer information based on tax records, which do not tell the whole story of your home's value.) In an economy where appraisals and mortgages are still quite stringent, a professional REALTOR is the best source for finding out about market value.

New California Real Estate Laws for 2015

The following are some of the new real estate laws taking effect in the future in California.

California brokers are required to keep transaction records for at least 3 years. These records used to include text messages, instant messages and tweets, but per AB 2136, as of January 1, 2015, such electronic "ephemeral" records are not now required to be kept.  If you wish to maintain a good permanent record of communication with your agent, faxed documents and/or e-mail messages are a better way to go.

Many HOA associations use the services of a property manager who commonly carries out the forwarding of HOA documents to the buyer during escrow.  The fees charged by them for the gathering, production and delivery of such documents has been the subject of controversy and regulation in the past, all the more so since electronic documents do not incur the expense of actual copying and messengering to an escrow office that once was common.  To eliminate the practice engaged in by some companies where non-requested documents were included with requested documents--and charged for--document bundling is now prohibited. It is the now the responsibility for the seller to pay HOA document fees, and the fees must be itemized for mandated disclosures, i.e., CCRs, Minutes, By-laws, special assessments, financial/budget statements, rental reports, operating rules, etc.  The HOA must estimate the cost of such mandated documents prior to production, and if the seller possesses them electronically, they must be provided free of charge.  It is the responsibility of the seller to pay the HOA for any charges which the HOA is allowed to incur. The California purchase agreements have been revised to reflect this change in the law. So if you own a condominium and you are selling it, be aware that you are now legally required to pay for the mandated documents which are to be sent to the buyer, and that these documents can no longer be ordered by escrow using the buyer's deposit funds (a common practice until now).  These and other requirements are detailed in  AB 2430.

There are several other new HOA-related laws concerning exclusive use maintenance, use of recycled water, use of low water-using plants, judicially enforceable dispute resolutions, allowance of personal agriculture in a back yard.  For specific information on these, please contact me.

If you see one in your front or back yard, the California red frog is now the state amphibian.

On July 15, the California state water board adopted emergency regulations restricting water use for outdoor landscapes. The regulations prohibit using potable water outdoors, such as watering your lawn, that results in runoff water on sidewalks, driveways, roadways and your neighbor’s property; washing a car with a hose unless the hose is fitted with a shut-off nozzle; watering down your driveway and sidewalk; and using water in a decorative fountain unless it recirculates. Violation of the regulations is an infraction and may result in a fine of up to $500 for each day the violation occurs.  Various cities, such as Long Beach and Los Angeles, also have water regulations, i.e., watering on certain days and times. Try checking with their web sites.

AB 2310 allows the city attorney in certain California cities, including Long Beach, to demand that a landlord evict a tenant, after following certain procedures, for unlawful possession of weapons or ammunition or for other illegal conduct with controlled substances, or this action may be carried out by the City.

Seniors or disabled citizens may file for a postponement of their property taxes if household income does not exceed $35,500. This program does not include mobile homes, and takes effect July 1, 2016.  Claims are filed with the State Controller and any sums approved and paid by the state will become a lien on the property.

Please contact me for more detailed summary on some of these laws, I am happy to be of assistance.
www.juliahuntsman.com