Drought In California Is Changing The Real Estate Landscape


California is in the midst of historic drought conditions and those of us working on California real estate deals need to start thinking about what this means and how these two relate. To set the scene, California’s governor has mandated a 25 percent reduction in urban water usage and the Sustainable Groundwater Management Act is being implemented.

As every developer, investor, buyer and seller knows, every real estate transaction involves performing due diligence. As the drought conditions continue, traditional due diligence should expand to focus on water supply, water costs, development costs and other water related issues during the due diligence phase of a project, as water, more and more so, will have a profound effect on property valuation here in California.

The well-being of the built environment is heavily dependent on water from the natural environment. As the built environment in California continues to grow along with the state’s population, the real estate industry must adapt to the changing (and reduced) supply of water in order to continue to thrive. The effect of the drought conditions in California will ripple through the real estate industry impacting it in a number of ways, including water rationing, cost of living, development costs, urban migration, increased utility costs, property values and lending restrictions. With each of these challenges there are also opportunities for creative solutions.

Efficiency Standards
The State Water Resources Control Board translated this into a number of water targets for individual water suppliers ranging from an 8 percent conservation standard to a 36 percent conservation standard. The individual water suppliers have the discretion to determine how to best meet these conservation standards. It is important that building owners and operators proactively help policy makers to develop conservation and efficiency measures that are feasible, and potentially even beneficial to their businesses, in order to work with the water suppliers to achieve their mandatory reductions and escape the very real potential of quickly escalating water costs and penalties.

Dense Transit Oriented Development 
There are opportunities for developers to build dense transit oriented projects as the demand for these types of developments will increase. The drought will continue to impact agriculture production in the state, and lower production yields will likely mean higher food prices. As the cost of living increases due to the drought, Californians will look to offset these increases elsewhere, such as by cutting back on commuting expenses by living near work or near transit that connects to work. Thus, as the cost of living increases, there will likely be an increased demand for transit oriented developments near jobs and amenities, creating an opportunity for residential developers who are at the forefront of this trend.

Water Recapture and Reuse Systems
There are enormous opportunities for implementing water efficiency measures in both new developments and building retrofits. Owners can design into their buildings creative ways to capture and reuse water such as green roofs and on-site water retention systems. There are also opportunities for building owners to collaborate and utilize shared infrastructure for water reuse and storm water capture and treatment. Working out solutions on a neighborhood-wide or district-wide scale could lower the cost of water reuse systems for individual building owners by utilizing shared infrastructure. Careful planning, negotiation and drafting of multi-party agreements will be essential to implementing shared water reuse infrastructure.

Urban Development
There are opportunities for developers in urban areas to proactively work with municipalities to plan for and develop sustainable water and wastewater infrastructure in order to support California’s growing urban population. As the drought puts pressure on the agricultural industry, there may be a further migration westward toward California’s coastal urban centers. The trend toward urbanization is already happening in part due to the job growth in the tech industry and the desire of many to live near work and transit. One challenge for these urban areas will be upgrading and maintaining their water and wastewater infrastructure in order to accommodate the population growth. There is an opportunity for urban building owners to proactively engage in a dialog about sustainable water infrastructure and to help shape city policies.

Those that proactively implement conservation measures, while being mindful of the ripple effect potentially caused in the wastewater stream, will be rewarded with lower ongoing expenses while maintaining stability as the cost of water continues to rise. With less water to go around, the rates for water and treating wastewater will increase. Further, with increased water conservation, the concentration of toxins in wastewater may increase, creating a greater toll on wastewater districts. Additional taxes and fees associated with water use and wastewater treatment will increase utility expenses. Thus, utilizing smarter, more efficient systems will allow businesses to stay competitive and thrive as the drought continues.

Property Values
Water is critical to the agriculture industry. Depending on the severity and length of the drought conditions, certain agricultural land may lose value due to the lack of reliable water. On the other hand, land such as urban infill sites near transit could greatly benefit from an increased demand for urban property as office and residential uses move into urban areas where there is an economy of scale for water infrastructure.

Financing Strategies
Borrowers should take the opportunity now to plan ahead and develop water reduction and conservation strategies and create plans for implementing them in order to best situate themselves to get financing for future projects. As the drought continues, banks may start looking more closely at a property’s access to water when making lending decisions. This would likely have the biggest impact on agricultural land, but could also impact lending for property containing water-intensive industries as well as property for residential development.
The drought will certainly impact the real estate industry in California as the built environment is inextricably linked to the natural environment. The extent of the impact may depend on how quickly real estate owners, operators and developers react. The good news is implementing water reduction and water efficiency strategies can be done; it is within the control of property owners and operators to implement these plans. The current drought conditions are an opportunity for real estate owners, operators and developers and their legal counsel to think strategically about water usage and develop creative cross-disciplinary conservation and efficiency measures to stay ahead of the challenges that the real estate industry will face in the future.

Source: law360.com

From Rent to Own, It’s a Perilous Path for the Buyer


We’ve all seen those oh-so-tempting “rent-to-own” signs that try to convince would-be homeowners that dreams really can come true. And sure, at first blush, a rent-to-own deal might seem like an easier path to homeownership, especially for first-time buyers who are struggling to overcome credit issues or build up a down payment.

But like with most money matters, the road is fraught with peril. And buyers have to tread that road very, very carefully to keep from getting bamboozled. Here are a few things to keep in mind before you sign a lease that ultimately becomes a mortgage.

So, what is rent-to-own anyway?

A rent-to-own home deal is pretty much what it sounds like: a hybrid of renting and homeownership.

Initially, when you sign the deal, you’re a renter. You’ll move in immediately and pay the seller rent each month, often at a higher rate than for other traditional rentals. But a portion of that rent is typically put toward the purchase price of the home, and at the end of the lease contract term, you have the option to buy the home outright.

Expect to shell out cash upfront

Once you get past the basics and into the nitty-gritty, things get more complicated. While a normal rental lease has just a few upfront fees—such as a security deposit, first and last month’s rent, and pet fees—rent-to-own homes require significant amounts of money upfront.

This fee often isn’t refundable. Instead, it may be considered simply a fee for setting up the deal. After all that, buyers will also need to build up a down payment and, when the time comes, pay closing costs. Some sellers may also require security and pet deposits upfront.

When all is said and done, the total cash amount you’re out could be hefty—and buyers should be leery.

The devil is in the details of the contract

Unlike a standard lease with the usual rules and one-year term, rent-to-own homes will come with lengthy contracts, and you’ll want to pay attention to all the details.

First, the length of the rental period is set by the seller and can vary widely—typically anywhere from six months to three years, according to Brandt. While a longer contract buys time for the buyer to build up credit and a down payment, it also leaves more time for something to go wrong.

Since the seller is writing the contract, it could wind up heavily in his or her favor. These contracts can “contain subtle clauses that might hurt the buyer down the road,” Brandt says. There are state laws that protect buyers in many cases, but sellers can dream up any number of legal loopholes, and buyers have to tread carefully to avoid problems in the months to come.

The seller is also your landlord

Typical rent-to-own deals have one potentially terrifying aspect in common: The seller is your landlord. That means that while you may be planning to buy the home in the future, you still have to follow all the typical landlord and tenant laws. If you don’t, you’ll risk an eviction, and that is a very bad thing.

“If the renter fails to pay rent, they may be evicted, losing their option fee and money they’ve put toward the purchase price,” Brandt says.

Check—and double-check—your agreement

Even if the rental side goes smoothly, buyers might set themselves up for a shock when it comes time to actually buy the home.

For example, mortgage underwriting guidelines are very specific and an underwriter may not agree with the terms on your original rent-to-own terms.

To avoid the potential pitfalls, hire a real estate attorney to go over the contract with a fine-toothed comb before you sign on the dotted line.

Source: realtor.com

An Introduction to Commercial Real Estate Financing


Discover the benefits of owning commercial real estate, basic information about purchasing commercial property, and how you can put your property to work for you and your business.

At Wells Fargo, you’ll find a wide range of credit possibilities for your business, from cards and lines of credit to long-term financing, secured or unsecured. Every business owner relies on key assets to help them succeed. They’re part of your competitive edge, which helps you stay on target with your business goals.

What’s your most important business asset? You might say your strong customer relationships, or your dedicated employees, or the unique products or services you bring to market, or even your drive and determination.

All this is true, and important, but when you own commercial property for your business, that kind of asset is in a different category. We’ll explore some of the benefits of owning, basic information about purchasing commercial property, and how you can put your property to work for you and your business.

Owning your own space and being part of a community is a great feeling. Go ahead and repaint the building, add a solar energy system, or update the equipment. Just knowing that it’s yours gives you peace of mind, so you’re free to focus on running your business.

And there are financial advantages, too. No one will ever raise your rent, so your operating costs are easier to predict and budget for. And you can see some tax benefits, depending on your situation. So in the long run, you may even save money compared to leasing.

Some property owners use their investment as a place of business, though for many entrepreneurs, investing in commercial property is a business in itself. If you’re primarily a real estate investor, you expect your property to produce income in the short term, and grow in value over time. Or if you’re like some business owners, you may do a little of both, using part of the space for your own operations, and leasing out the rest to someone else. However, if your business is growing and you don’t want a long-term commitment to one space, leasing may be the way to go. Or you may choose to lease because you need the flexibility to use your funds for other business needs.

Once you own commercial real estate, Business Real Estate Financing can provide the funding to help your business thrive at every stage of ownership. Consider refinancing your current property to take advantage of today’s low interest rates, refinance the balloon payment that’s due soon, or maybe take advantage of the cash-out opportunity to refinance business debt, or for other business needs. You might also use your equity for working capital, either in the form of a loan or line of credit, to pay for renovations to your property, or to purchase large equipment, or use it to take advantage of other business opportunities that can help your business grow.

Whether you’re looking to purchase, refinance, or tap into equity in commercial property, the details of the financing you secure can have a big impact on your bottom line and your future. Seek out a lender with the flexibility to choose terms that work best for you. For example, when you work with Wells Fargo Business Real Estate Financing, you’ll find a range of options that can help keep your costs low, including fixed or prime-based adjustable loans, terms fully amortized from five to 15 years, and five- or 10-year balloon payments, or an equity line of credit.

Whether you’re a business owner making the leap into ownership or leveraging your equity, or a seasoned real estate investor planning your next deal, at Wells Fargo, you’ll find the guidance and resources you need to make the most of your commercial property, and you’ll enjoy all the advantages of our local experience, broad and deep capabilities, and a commitment to helping businesses like yours succeed financially.

Source: wellsfargoworks.com

Tips for buying a business

Business_AdviceDetermine what kind of business you’d like to buy, consider how you will pay for it, and investigate the seller before entering a business sale. Buying a business has real advantages over starting a new one. An existing business already has infrastructure, employees, and most importantly, customers. It’s also possible to generate cash flow and profits from day one, provided you make a smart purchase.

Narrow the type of business you want to buy

You are more likely to be successful in a business or industry in which you have experience. Consider your interests, too. What do you want to spend your days doing? Think this through because once you buy a business, you may not be able to change it easily.

Determine how much you can afford when buying a business

Start by setting aside living expenses for six months. Then, investigate your options for paying for a business. Add up your available liquid assets. Do you have enough to cover the purchase price, or will you need a loan?

Even if you borrow, you will have to put some of your own money down. Speak with your bank about its application process and requirements for commercial loans.

Sometimes, sellers will finance all or part of the price. Seller financing helps ensure the seller will assist with the hand-over, but it may increase the price.

Find a specific business to buy

Today, it’s easier to find businesses for sale because of the emergence of business-for-sale online marketplaces. Search for businesses by purchase price, revenues, location, industry, and other criteria.

Business brokers are another option to find businesses for sale. But brokers typically work for sellers rather than buyers, and usually show only their listings.

Ask around your community about local businesses for sale. Sometimes, retiring business owners are looking to sell.

Determine the value of the business for sale

When you find an interesting business, determine its value. Valuations are based on the expectation of future profits and usually calculated from a business’s earnings before interest, taxes, depreciation and amortization (EBITDA).

Understanding the cash-free/debt-free value of the operating company can only be done if any real estate is valued separately (at a fair market value). Further, any cash in the company should increase the value of the business dollar for dollar, while any interest-bearing debt that you might take on should decrease the value of the business. All the balance sheet items necessary to generate the income statement should be considered included in the sale. In other words, you should be handed over all inventory, receivables, equipment, and all other business assets. You should also expect to assume all non-interest bearing liabilities of the company including trade payables and reasonable accrued expenses (if they exist).

These are all areas that an attorney with experience in mergers and acquisitions or a professional valuation service can help you review and understand. SCORE also offers a spreadsheet tool to help you determine a business’s fair market value.

Investigate the seller and the business

When buying a business, independently investigate the seller and the business to determine exactly what you are getting.

As part of your due diligence, look into these aspects of a business sale:

  • Reason for selling: Does it raise red flags?
  • Property included: What real estate, equipment, inventory, intellectual property, bank account balances, customer contacts, and accounts receivable are included?
  • Liabilities: Are there lawsuits, claims, debts, accounts payable, or unpaid taxes?
  • Material contracts: What leases, mortgages, and supplier contracts exist?
  • Customers: Are customers under contract? How many are likely to stay?
  • Market position: Have sales increased or decreased in recent years? How does competition impact the business?
  • Audited financials: What did your CPA find when reviewing the seller’s last three years of financials?
  • Employees: Are they aware of the sale? How many will stay? Will any need to be let go? Who will do that — the seller or buyer?
  • Suppliers: Will they continue? Do you want them to?
  • Seller involvement: Is there an advantage to having the seller assist during a transition, or will the seller leave immediately on closing?
  • Contingencies: How much of the purchase price should be held back to cover contingencies or future events that could occur?

Consult your attorney, preferably an attorney specializing in mergers and acquisitions, as well as a CPA (certified public accountant) before you sign anything, including a letter of intent — even one you think is “non-binding” might have financial consequences. A lot of money is at stake when you purchase a business, and it pays to protect yourself.

Source: Wellsfargoworks.com

How to Sell Your House When You’re Surrounded by Zombies (Foreclosures, That Is)

z hSo you want to put your house up for sale. But you’re surrounded by empty, lifeless creatures—those owner-abandoned but not-yet-repossessed-by-the-bank homes known as zombie foreclosures.

While foreclosures (and their zombie cousins) are on the decline since the housing crash, they’re increasing in some large metro areas such as New York, Los Angeles, Boston, and Houston. Of the more than 500,000 foreclosures across the nation, 1 in 5 is a vacant home.

And beware: Those zombies sure can take a bite out of your property value (almost 2% for each nearby zombie).

So how do you defend your listing price from the reach of the unwalking undead? Well, when it comes to selling your house in a neighborhood full of zombie foreclosures, it takes some brains. Mmm, brains!

Here are some expert tips to make sure your home looks lively and vibrant to potential buyers—even if the nail’s in the coffin for others on the block.

Put some makeup on your home

One of the problems with zombie foreclosures is their appearance. The grass gets too long, the home goes uncared for, and the whole place can look like it belongs in a cemetery. An unattractive cemetery. While you can file a complaint with the local housing enforcement agency, it might not do any good. Even if the fine reaches the owners, they might just ignore it. And the bank won’t perform maintenance until it has possession.

Short of creating a nonprofit zombie lawn care company, you’ll just have to step up your own curb appeal.

That means taking a step back to view your property from the road. The more you can do to make your property look fresh, the better. A new coat of paint will set your property apart, as will a lush and manicured lawn. If your front door is looking worse for wear, replace it—it’s one of the most cost-efficient home improvements you can do.

Clean up those little signs of decay

Now that you’re confident the outside of your home will attract the living, start looking closer at the details.

Sellers in an area with many foreclosures are already likely to take a price hit, so they’re probably not keen on spending tons of cash on upgrades. It helps to think cheap.

Replace an old doorknob and put a brass kick plate on the door, she says. Check the light fixtures and make sure they’re clean. A fresh coat of paint on the front door can also work wonders.

A combination of all the little touches can help.

Bring some life to the inside

In an ideal world, you’d have the house professionally staged. But you might not have the budget for that. That’s OK—just make sure to keep the house uncluttered and clean. As with the outside, pick up some paint. Using the right color for the right room—like yellow for the kitchen—can warm up a buyer for a sale.

Hide the family photos, too—buyers want to envision their family there, not yours. Get the carpets professionally cleaned. Use tall objects to accentuate the height of high ceilings. Think like a home stager to get your interior looking inviting and lively.

Offer up a sacrifice

Even if those zombies haven’t yet turned into foreclosures, you should still consider them competition. They won’t be zombies forever—and when they do get resuscitated by the bank, they can look tempting to potential buyers.

“The banks are offering (to pay) closing costs and advertising it as well, “Trust me—buyers are taking notice.”

“Offering to assist with closing costs will put your home at the top of their list and make you more competitive with competing foreclosures.”

So if your home is a diamond in a graveyard, give it some life—and a good polish.

Source: Realtor.com


Moving Tips-Preparing for a Move Part I



As you search for the perfect home, it’s a good idea to start thinking about packing and moving. It may not be walk in the park , but the more you plan, the smoother it will go.

Before the move (approximately two months before):

  • Sort and purge. Go through every room of your house and choose what you’d like to keep, store, donate or throw away.
  • Make a list of moving options. Are you renting a truck? Are you using a moving company? Or a moving pod? Make sure you get an on-site estimate in order to get a better idea of how much it’ll cost. Investigate potential movers, using the Better Business Bureau and the U.S. Department of Transportation, to make sure they’re a Legitimate company.
  • Store important move-related documents. Use a binder or folder to keep keep track of receipts, estimates and checklists.
  • Research schools and day care options, if needed. Taking time to research schools and involving your kids in the move will make them feel like they’re part of the whole process, and may even help them get excited about it. Try to visit schools before you move and bring your children so they’re as involved as possible.
  • Get moving supplies. Stock up on the boxes, bubble wrap, tape, markers, plastic storage bags, etc.

Packing for the move:

  • Separate valuable items. Keep valuable items separate from the rest so that you can determine whether you feel comfortable packing them in boxes or taking them with you.
  • Pack your suitcase first. This will ensure that you have what you need in your suitcase, readily available and not packed in a box.
  • Label one box per room to be opened first. For instance, if you have kids, you can pack things that would make them feel at home at their new place, such as their favorite bedding or toys.


  • Set unpacking goals. Set a goal of unpacking a certain number of boxes per day and stick to it!
  • Prioritize rooms. Unpack the rooms that you’ll use the most, such as your kitchen and bathrooms.

Hiring The Wrong Real Estate Agent

first-time-home-buyer-loansStudies show that only majorly depressing life events — think death of a family member, losing a job or getting a divorce — outweigh the stressful demands of moving. Since an estimated 43 million Americans relocate each year, we’ve partnered with Quicken Loans to help make your search for your first home a little bit easier. We give you the 10 mistakes people commonly make when starting their home search…and most importantly, how to avoid them.


You’re actually nowhere near prepared

Sure, you may love the idea of being a homeowner. But are you ready for all that responsibility? Larry Nelson, president and co-owner, says rookie home buyers often fail to identify and qualify for a source of down payment, start searching before they’re completely pre-approved for financing, and may have unrealistic expectations. Nelson suggests identifying clear housing goals at the beginning of your search, and researching desired neighborhoods to start off on the right foot. Nelson asks: “If you need a three-bedroom ranch and can qualify for $200,000, are there homes in areas you would live in for that price?”

You’re skipping steps

One of the most common errors Bay Area realtor Ed Milestone often sees is that potential buyers get so excited, they overlook important details — even though it’s likely to be one of the biggest purchases they’ll ever make.

“When I first meet first-time home buyers, they’re usually so excited to get started that they’ll skip steps,” Milestone says. He advises home buyers to talk to a lender before starting the process or contacting a realtor: “In order to submit for a property, you need a pre-approval letter,” he says. “Some people make assumptions about what they can afford, which can get them into trouble later on.”

You underestimate the cost

Another huge mistake Milestone witnesses among first-time buyers is underestimating just much how they’ll have to pay. “Don’t assume you can afford what you think you can afford,” he warns. “You can play with mortgage calculators online, but they don’t know your credit or how much debt you’re in.”

Erin Lantz has seen many first-timers overlook budgeting in closing costs, which can run anywhere from 2-4 percent of the purchase price. “If a buyer has saved up enough for a 3.5 percent down Federal Housing Administration (FHA) loan, they’ll need to essentially double the amount they’ve saved to cover the closing cost,” she explains.

You’re too quick to say, ‘Yes’

If you’re not settling down for good, don’t be so quick to agree to a fixed-rate loan. “First-time home buyers are often buying starter homes and plan to be in them for just a few years, so getting a 30-year fixed loan may not be the best choice,” says Lantz. He recommends looking for a lower monthly payment with an adjustable rate mortgage that is still locked at a fixed rate for five, seven or 10 years. That will carry new homeowners through until they’re likely to move. “If buyers think there is a chance they’ll stay longer than 10 years, they’ll likely be better off with a fixed-rate loan.”

You don’t ask for help

One of the biggest mistakes new buyers make is believing they don’t need a real estate agent, says Real Estate Expert and author of “Next Generation Real Estate,” Brendon DeSimone. “Some people, especially millennials, think they can go at it alone — just like people have eliminated the travel agent. But a good agent who knows their market well and has seen the homes can really make a difference. They know what you don’t know. You can only go at it so far by doing it yourself.”

You lack a total financial plan

Failing to have a complete financial plan is a major homebuyer faux-pas, Nelson warns: “Buying a first home involves more than substituting a mortgage payment for rent. All financial resources should be inventoried and compared to the demands that will be placed on those resources.” While lenders may approve an income debt ratio of 40 percent, it’s important to make sure you can actually afford that percentage of your income being used for the mortgage payment — while saving for your future.

You rely too much on the Internet

Think you can buy a new home with a few Google searches and clicks? Think again. According to real estate SEO expert Dave Keys, 90 percent of all home searches begin online — and “online” usually means Google. “Google is going to give them a syndicate website, like Zillow or Trulia,” Keys explains. “The mistake that’s inherent in using those sites is that they give you the idea that you can simply go on the Internet and buy a house.” DeSimone cautions against this frequent mistake, too: “Don’t take what you see online for face value. Go and see it in person.”

You hire the wrong Real Estate Agent

Buying a home is a big decision, so make sure you trust who’s leading the process. “Talk to coworkers, friends and family to get [realtor] recommendations,” Nelson advises. When talking to prospective agents, it’s important to ask the right questions. Everything from, “Do you specialize in the areas that I am interested in?” to, “Do you really want to work with me?” are fair game. Need more advice or finding the right agent just contact Waldo. YES the guy on the right side of the page site.

You don’t educate yourself

Above all, it’s important to educate yourself. “It’s a huge purchase,” DeSimone says. “Do your research, check that research, then double-check and triple-check it. If your agent tells you one thing, ask for a second opinion.”

As for a loan? “Always ask questions and make sure the numbers add up,” he says. “Be a smart shopper.”

You underestimate the value of the appraisal

How much a lender can lend depends on several guidelines, many of which depend on the value of the home, according to Ralph Linsangan, Director of Solution Consulting. If the home appraises for lower than the original purchase price, the amount a lender can provide may decrease based on that value. What to do in this situation?

“There are options to renegotiate with the seller, bring extra funds to close, change the loan structure, or find a different property if the other options did not work,” Linsangan advises.

Source: Huffingtonpost.com

My Dream Home Is Pending Sale—Am I Too Late?

imagesSo you’re perusing listings and finally you find it: Staring back at you from your laptop screen is the perfect place you’ve been dreaming about. It’s in the right location, has all the amenities you’re looking for, and still, somehow, fits in your budget. There’s just one problem: It’s pending sale. Does that mean you’re too late? Is it entirely hands off? Or do you still have a shot?

The short answer: If a home you love is pending sale, don’t give up hope.

“‘Pending’ does not mean ‘sold,’” says Joy Triglia, broker and CEO of Century 21 Universal Luxury in Fort Lauderdale, FL.

“Pending” means the seller has an offer but hasn’t closed yet. (This is different from a contingent sale.) A property is placed in pending status the minute a contract is executed. But there’s still a chance the home can be up for grabs again—say, if the inspection doesn’t check out or the buyer can’t pull together the financing.

Until the sale is a done deal, there’s still an opportunity to land that magical, marvelous dream home. In fact, there’s more wiggle room than you might expect, particularly if you’re looking in a market that’s competitive. Many sellers will want to hold out for the best bid—and that bid could be yours.

Here are five ways you can improve your odds, swoop in, and steal that home out from under someone else.

Make your interest known

Think you’re wasting your real estate agent’s time when asking about a pending home? Think again.

“Many seller’s agents will continue to show the property to potential buyers up until the very last minute, in hopes of obtaining an even more compelling offer,” says Gary Malin, president of Citi Habitats in New York City.

Make sure your agent knows how in love you are with the home. You’ll want to be first in line in case any issues crop up with the pending sale.

“Remember: Until the ink dries on the contract, no transaction is legally binding,” Malin says.

Get the dirt

While you’re at it, call the listing agent. The agent might have some insight on parts of the deal that aren’t firm. Try to suss out how many other offers there are and whether there are any potential concerns about the initial bid. You can use those to your advantage in your own bid.

“You need to get on the listing agent’s radar screen—and stay there,” Malin says. “If the agreed-upon deadline to close the sale passes, it’s time to take action—and fast.”

Try driving through the neighborhood to learn as much about the home and the community as possible. Do your homework. Google the address, check out property tax records, or go on PropertyShark and see what comes up. You may never need the intel, but who knows when details might help sway the odds in your favor. You could think of it as getting a head start on your research in case the initial deal does fall through.

Negotiate to beat the other buyer’s deal

This doesn’t necessarily mean putting in a higher bid—although that can certainly help.

If—and only if—you’re financially comfortable, you could consider offering more than the asking price. But you can also try presenting convenient terms to the seller. Maybe you want to agree to waive a mortgage contingency, pay closing costs, or offer flexible moving dates. Being open to negotiation is one of the best things you can do to improve your odds, Malin notes.

“It helps make the case that you are serious about the property,” Malin says. “Your goal is to convey a sense of urgency to the current owner and make your offer, quite simply, hard to refuse.”

Use a personal touch

If you’re certain that this place is your dream home, tell the seller. Send a handwritten letter explaining why you want the property, and your hopes for it. That human connection could be a significant factor in the seller’s decision.

Be aggressive with a capital A

Err on the side of being pushy and tenacious, even if that isn’t your normal style. That way if the initial sale does fall through, you’ll be the obvious next bid. Be available for phone calls, check your email, and follow up with your agent often.

“If the seller has a sense the competing would-be buyer is dragging their feet—or has any other seeds of doubt about their offer—this aggressive approach may end up tipping the scale in your favor,” Malin advises.

So the next time you see that pending sale icon, don’t despair. Just be prepared to work a little bit harder for your fantasy home.

Buy or lease: What’s right for your business?


Location is a vital component of any business. However, once you have determined the area where you want to set up shop, one of the key decisions you will face next is whether to buy or lease the property. Here are some key factors to consider when deciding which option is right for you.

Buying vs. leasing

The main advantages of buying a property are the ability to control the costs as well as the financial benefits that may possibly accrue including the potential appreciation of the asset and the depreciation for tax purposes.

Furthermore, in some circumstances, you could even end up paying out less to buy the property than you would pay to lease a similar property.

“Over the long-term, owning may be cheaper than leasing because you’re cutting out the rental property investor’s profit margin,” says Gadi Meir, Vice President of Business Real Estate Financing for Wells Fargo.

You should also consider if you’ve been in business for a number of years, and your location is especially valuable to you because you’ve established a presence in the neighborhood and have regular customers, then owning a property for the long term may be beneficial.

“However, if you need flexibility in your business and you don’t want to use your credit or available cash for real estate, then leasing may be preferable,” Meir added.

This is especially true if your business is still growing. That is because leases typically only lock you into a location for two to five years, making it easier to pick up and move if, for example, your business is expanding rapidly and has outgrown your current space. Or you may negotiate a long-term lease with favorable rates that could allow you to use the capital for another business opportunity.

The bottom line is: If you qualify for a loan, your cash flow is stable, you can afford the upfront downpayment, you want to secure your current location, and are willing to take the real estate risk, then you may decide that owning a business property makes the most sense.

How much money do you need for upfront costs?

When buying commercial real estate, you’ll need to come up with a down payment. That’s a large upfront cost that doesn’t apply if you lease, Meir says. For standard commercial real estate purchases — office or retail space — you can expect to pay upfront a minimum down payment of 20% – 25% of the purchase price. For “special purpose” properties — restaurants, auto repair shops, etc. — it can be as high as 40%.

Also, keep in mind that if you do decide to buy commercial real estate, your credit profile will need to be analyzed. And if you’re opening a brand new business, a solid business credit history can be difficult to prove. “When we look at an applicant, we’re looking to see that they have two years of positive business cash flow — sometimes even three years,” Meir says. Documents such as tax returns will be requested. “Lenders want to see that a business has sufficient cash flow to manage the new commercial real estate mortgage payments, plus a buffer.”

Since leasing requires less cash upfront — usually just first and last month’s rent and a security deposit — this could leave you with more cash for other business needs.

What are your credit needs?

If you’re planning on using credit to grow your business through equipment purchases or other investments, leasing may be a good choice because a large mortgage will tie up your available credit and possibly prevent you from borrowing for other purposes. However, if you have enough borrowing power to take on the mortgage as well as other investments, buying might be the right move for you.

Clearly, it is a complex decision whether to buy or lease, and so it makes great sense to consult with a team including a real estate expert, lawyer, accountant, and banker as you investigate your options.

Business Real Estate Financing offers loans up to $750,000 for small business owners and real estate investors. Click here to learn more.

Source: Wellsfargoworks.com

Should You Refinance Even If You Plan to Sell Your Home?

denver_refinance_xxl   Should You Refinance Even If You Plan to Sell Your Home?

Are you interested in refinancing your mortgage, but hesitant to do so because you’re thinking of selling your home at some point? Believe it or not, refinancing could still make sense. Here are several reasons why you might want to consider refinancing anyway.

Your financial circumstances could change

Let’s say you plan to sell your house in five to seven years. No matter how well you plan for the future financially, things happen. Job loss, illness, death—life inevitably gets in the way of your financial plans. Focus on the here and now, as long as you can financially justify refinancing your mortgage. The longer the horizon of selling the home, the more chances life has of getting in the way. If refinancing can save you money in the meantime, it may just make sense.

Because financial circumstances can change over time, for better or worse, it can be a good idea to calculate how affordable your house really is for you. This free calculator can tell you how much house you can afford.

You could take advantage of lower interest rates

At publishing time, 30-year mortgage rates have edged their way up and are hovering just over 4%. The new outlook for mortgage rates points to continual increases, bringing the cost of debt up. Picture this, if you don’t sell the property or if there is a market correction—and you do not refinance for whatever reason—is your current loan rate and payment something that you can afford to carry for the long haul? If you could save money or better your financial position, it is probably worth investigating. Rates are even better on jumbo mortgage loans, as more investors are pouring into this particular market niche. So if you have a big mortgage on your home, you may want to consider refinancing.

You’re facing a higher rate on your ARM or HELOC

With the increased likelihood of interest rates going up in fall 2015, the subsequent recasting of adjustable-rate mortgages and home equity lines of credit will affect millions of homeowners. Most adjustable mortgage loans were tied to the London Interbank Offered Rate, which closely trails the Fed Funds Rate, the rate at which the Federal Reserve uses to control the U.S. economy. If the Federal Reserve hikes interest rates, LIBOR will soon follow suit, and any homeowners within their adjustment period will experience a higher payment or a future higher payment when their adjustable-rate loans reset.

A HELOC works in a similar fashion to an ARM with a fixed period for the interest rate, followed by a rate reset. For a HELOC, payments are interest-only for the first 10 years of the 30-year term. After 10 years, the loan resets, and for the remaining 20 years the loan payment is principal and interest, so at the end of 30 years, the loan is paid off in full. The payment shock will happen after the first 10 years.

If you have a first mortgage on your home with a HELOC, it very well might make sense even if you plan to sell the home down the road, to roll the first mortgage and HELOC into one, saving money and continuing to make a manageable mortgage payment until you sell.

Mortgage tip: If you have not taken any draws on the HELOC in the past 12 months, you may be eligible for more mortgage programs as the HELOC may be considered a “rate and term,” which allows you to refinance up to 80% of the value of the home.

You want to rid yourself of this dreaded mortgage cost

The one mortgage cost consumers love to hate is private mortgage insurance. PMI is an extra portion of the mortgage payment that not only drives the housing expense higher, but it also doesn’t do anything beneficial for the consumer. PMI benefits the bank to protect against payment default. If you can rid yourself of PMI because you have 20% or more equity in your home, or can qualify for a special mortgage loan program such as lender-paid mortgage insurance, you’ll save money. PMI can average up to several hundred dollars per month in most instances. If you have the 20% equity needed to refinance a new non-PMI loan and are creditworthy, but simply choose to not refinance because the paperwork is too daunting, you’re throwing money away.

If you’re not sure where your credit stands, but you want to refinance, it’s a good idea to check your credit sooner than later. You can get two of your credit scores for free on Credit.com, and they’re updated monthly so you can watch for changes.

How quickly will you begin saving money?

No one should refinance unless the time frame it takes to recoup the closing costs on a refinance is sooner than the time in which they plan to sell the home. The most common form of determining how quickly you can recoup your money when refinancing is performing a “cash-on-cash” calculation. For example, if your closing costs are $2,800, and you’re saving a proposed $300 per month on a refinance, that’s a nine-month recapture. Fees divided by benefit equals recapture.

If you can benefit by refinancing by payment reduction, by cashing in on equity, or by interest savings or any combination of these benefits, remortgaging your home very well could make sense. Consider the following scenario: If you can recoup the refinance costs in under two years, and you don’t plan to sell for five years, you’re three years ahead, and the rewards are yours, no matter the future. Ultimately, weighing the pros and cons of a possible refinance in conjunction with selling the home is your decision. A good mortgage professional should be able to suggest mortgage options in alignment with your financial goals and objectives.

Source: Realtor.com