Over the past month, I’ve been combing through my database of my closed clients who have either adjustable rate or balloon mortgages.   I’m sending each and every one of them a letter reminding them of the terms of their mortgage.   Regardless of how much time I spend explaining how their mortgage program functions, as soon as someone has moved into their new home and they’re unpacking boxes—they’ve forgotten the fine details to the financing that made buying a home possible! 

The letters restate what is disclosed on the Federal Truth in Lending and their Note, including what their margin and caps are.    It also addresses when their first adjustment will take place and what the worse case rate and payment may be.   Worse case payments are currently not disclosed on the Truth in Lending.   

I began my mortgage career on April 1, 2000.   So far, 20% of my closed transactions have been adjustable or balloon mortgages and 3% of my total closed business would be classified as “subprime”.   As part of my practice, I extract what my client’s financial goals are to make sure they fit with the mortgage they are selecting and to show them other possible mortgages that may be worth their consideration.   Sometimes, borrowers arrive to you with their minds pretty well made up regardless of if it makes sense to you or not.    ARMs have made perfect sense for many families if they were not planning on retaining the mortgage beyond the fixed period (in most cases, there are exceptions where keeping the mortgage while it’s adjusting is perfectly fine, too).  

The most popular ARM I’ve “dispensed” is a five year fixed with and without the interest only payment option.   5 year fixed period ARMs (all together) accounted for 66% of the ARMs I closed.   Just over half of those were interest only (some i/o for 60 months, other for 120 months giving 60 additional months of interest only payments beyond the first adjustment date).   I’ve provided everything from a 2 year to a 10 year adjustable rate mortgage…never an Option ARM.    With seven years in this industry, most of my clients will begin to see their first adjustment starting 2008 with a chunk adjusting in 2010 (most of my ARMS were originated in 2005).  

What I found by reviewing the information from sending the ARM letters to my clients is that the average “worse case” adjustment to a mortgage payment is 37%.   This is assuming that when the mortgage is due to reset for the first time, it reaches the maximum allowable cap.  You might think this figure applies to subprime; however a majority (88%) of the ARMs are prime. 

This is why the worse thing someone with an ARM can do is to wait until their mortgage adjusts before contacting a Mortgage Professional.   If you’re not going to dig out your Note to see what your caps are…then just increase your mortgage payment (excluding taxes and insurance) by 37%.  Try that payment on for size.   It’s not pretty or comfortable.    The earlier you contact your Mortgage Professional to review your ARM, the more time  you’ll have to decide what you need to do (if anything at all).

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Filed under: Estates, Green

There's no denying the green trend but it's fascinating to see how it plays out in the luxury real estate market. This new build is a ,800 square foot, five bedroom, mountain home in Bear Dance just outside of Larkspur,Colorado. The house was designed to have a utility bill costing no more than $350 a month. It may not sound like a big reduction but heating and electricity for a home this size in the winter can run into the thousands. The home's energy-efficient features include wrap-around wall insulation, solar thermal panels on the roof that pre-heat all the domestic water and four additional solar electric panels that produce enough electricity to run the homes six refrigerators.

The home was also built green, using recycled, reclaimed and organic materials whenever possible, including the Cultured Logs(TM), log-finish exterior, made from composite material and non-toxic blown-in insulation. The hardwood floors are reclaimed antique hickory, taken from a barn built in Virginia in the late 1800's. All the paints and stains are VOC free and even the vegetation cleared at the homesite was mulched and returned to the land. The home has a media room, wine cellar, game room and exercise area as well as a wet bar and family room. The home is listed at $4.5 million.

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Continue reading Longbow Drive, Estate of the Day

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Getting people to visit your website and read your blog post is interesting, but the most successful bloggers I see seem to get a kick out of having an impact on the industry. With that in mind, I came up with seven ways to make an impact by blogging:

1. Be more consumer-focused: No one loves an argument about buyer agency more than Ardell DellaLoggia (Here’s her first post on RCG a year-and-half ago to give you some perspective). While she may appear to loose an argument with real estate insiders from time-to-time, she always comes out ahead with consumer by arguing for what she consistently believes is their best interest.

2. Be more principled: Whether it be refusing to accept Brad Inman’s gifts or going out of his way to disclose meager earnings from his site, Greg Swann insists on taking the high ground. Add a prolific personality and the ability to say the right words at the right time, and Greg has clearly earned his reputation as a leader in the RE.net.

3. Be more consistent: Whether your interest is real estate blogs or the architecture of doors; Whether you are Beattles’ person or a Dylan person; Whether you like Odd & Crazy or Odd & Ends, Hanan Levin has been searching out the edges of the internet to return with blogging gold. Despite threats to quit and/or move to New Zealand, he continues to delight with multiple updates every day.

4. Be more fun: Is there a business plan behind traveling the country and playing with photoshop? Who cares. The Sellsius boys have shown us all how to make a huge impact by simply having more fun that the rest of us!

5. Be more credible: Whether taking on short sales, professional status, or subprime lending, Jillayne Schlicke always finds a way to offer the voice of reason by providing an interesting perspective filled with interesting solutions…

6. Be more unexpected: With stories ranging from the real estate happenings of Sanjaya, little towns in Austria with unusual names, and hard-hitting coverage of Redfin, one can never know what you’ll get when you land on a post by Marlow Harris… except that it will be interesting and probably provocative.

7. Be more up-to-date: No one else follows the online real estate industry better than Joel Burslem of the Future of Real Estate Marketing. Whether he is analyzing the new guys like Terabitz or the old guys like Zillow, he never misses and interesting story and consistently does a top-notch job putting developments in perspective.

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If you’ve made it this far, then I might as well tell you the genesis of this article…

After my presentation a few weeks ago in Austin, TX, the folks at KW asked if I’d like to submit an article on blogging for the next issue of the KW newsletter. Rather than succumb to the usual “5 reasons you should blog” type article, I thought I’d try to be a bit more interesting and profile some of the bloggers that have made the largest impact on me.

I still haven’t figured out how I’m going to deal with the links (which obviously don’t translate well to a written article). I think I’ll just add one link for each individual back to their blog, and include some text that says the article is best viewed “blog” format on Rain City Guide with a link back to this article. If someone has a better solution on how to deal with lots of links within a printed article, I’m definitely open to suggestions…

As always, I’d love to get your feedback. Should I re-phrase things? Should I include another blogger who has made a strong impact on you?

And, no surprise, I put off writing this article until almost the last minute (the article is due by the end of the month!), so if you have some suggestions, you’ll need to make them soon in order to get into print!

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I think this comes under the category of “Out of the mouths of babes”.

I happened upon this description of a real estate agent apparently written by the young man pictured here as a school project for “career day”.  Recently I have been evaluating a large number of agents who are currently with the Company, as well as several asking to join us.  I’ve always been told that my standards are too high.  That my bar is not realistic. 

As I read the young man’s description of what a real estate agent is, or should be, I was stunned by some of the key realities this young man depicted.

“Real estate agents help people buy and sell houses.  They must be able to say approximately how much money a house is worth…Real estate agents work for real estate brokers. Real estate brokers manage real estate offices…They help the seller set the price for the house. To do this, they must know what the house is like. They must also figure out what people would be willing to pay for the house so that it will sell quickly…Good real estate agents also spend time away from the office finding out more about the houses in their town that might one day be up for sale…They should deal honestly with people and have good manners.”

This is just a small excerpt.  I’m thinking of making this young man’s depiction of who we are and what we do required reading for all agents.  More and more I find my standard to be “worthy of the public trust”.  Someone you might hire to help your elderly mother buy a home.  Someone you might seek out if you don’t speak English very well, and need someone who you can trust to have your back. 

More and more I see people using “assistance to savvy buyers” as the benchmark for all that an agent needs to be.  I just don’t see it that way.  A savvy buyer can’t be the benchmark, though options should clearly exist for the savvy buyer.  Lower cost options.  But I think the standard of hiring and retaining agents has to be someone who is worthy of the public trust, because you really can’t forget the people who need an agent most, when setting your standards.

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Filed under: Estates

There's no denying it, winter is on the way. But it that isn't necessarily a bad thing. This house on the California side of Lake Tahoe would make a lovely place to spend a snowy day. The home has over 100 feet of lakefront and a slip at the marina and includes both a four-bedroom main home and a two-bedroom guest house on over an acre of land. The great room with its stone fireplace and large windows is the perfect place for hanging out. The home has four bedroom suites each with a whirlpool tub, fireplace, custom-fitted walk-in closet and deck. The master suite has a Turkish steam bath, double-sided fireplace and two decks. Other deluxe features include an eight-person spa room, home theater, wine room and a heated garage. This home is listed at $11.95 million.

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Continue reading Cedar Shores, Estate of the Day

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