Mike Knight

2011 Tustin Western Little League Season Ends

June 13, 2011 by Mike Knight Leave a Comment

Looking back, the 2011 Tustin Western Little League season seemed to just fly by this year. And yet as a parent when you’re in the heat of battle it actually takes a lot of time and dedication to keep your boys on track. It seems as if there is always another practice at the field, the batting cages or another game. When you have two sons in the game as I do, it gets even more hectic. I thought about signing up my third and youngest son as well, but I just couldn’t bring myself to the point of earning 4 more points working another field day. So he will have to wait until next year. I will somehow have to figure out a way to store up enough energy to get him into the game. I can only imagine how consuming it must be for the coaches who have multiple sons playing the game.

But all the effort is worth it. The boys are learning lessons they will carry around with them for a lifetime. They may be lessons that they in fact they pass on to their sons. The skills they learn, the disappointments they encounter and the victories they obtain will all contribute to developing their character. The trophies they win may land up on their desk someday as a tribute to their childhood and the journey of becoming men. The friendships they make with other boys in the hunt for victory may also endure for a lifetime.

But as parents, we also learn something about life. We remember they are only boys. We sometimes want or expect them to act like men. But they are still boys. They play the game with all their sensitivities in tact. They still cry at times and wear their hurt on their sleeves. But what they really want is to play and have fun. Somehow we need to allow them that privilege as well. And when we do, it allow us as parents with all the responsibilities we endure to feel those care free days of days of summer again.

The Smart Money Is Buying Real Estate

June 9, 2011 by Mike Knight Leave a Comment

If you haven’t heard, the smart money is buying real estate right now. Approximately one third of the sales nationally as well as in Orange County are investors purchasing either investment property with the long term in mind, that equates to consistent cash flow, or investors purchasing properties to flip for short term gains. Long term investors will benefit from a nice cash flow right now in addition to rising rents in the future plus appreciation at some future date due to a fixed supply of housing in Orange County with very little new building occurring. Flippers however are only benefiting from the immediate purchase, rehab and turning of properties. Real Estate Investment Trusts (REIT) which fell out of favor for a while back are starting to look attractive again as rents begin to rise. Rents will rise due to several factors including individuals that have lost their homes to foreclosure or short sale will become tenants for possibly a long time due to the fact that they cannot qualify for a new loan and maybe do not want to be responsible for a mortgage after having gone through the process of losing a home. Others will remain tenants due to the strict lender underwriting standards these days and inability to qualify for a new loan. And even though we have some of the most favorable affordability ratios in this generations history, some buyers will not purchase because they are unable to get off the fence and make a decision. They are like a deer frozen in the headlights allowing the opportunity of a lifetime to pass them right by.

Many in the investment community are starting to get concerned about their stock portfolios and commodity investments making a revisit to recent downturns and are expressing an interest in moving at least some of their eggs into real estate basket. After all, real estate has taken such a big hit in the past three years that the chance of it going significantly lower is very remote at this time. At some point real estate has a certain utility value, rental value for instance and replacement value, where the price will not go any lower. We are near that point right now based on cash flow and return on investment. So I will reiterate, THE SMART MONEY IS BUYING REAL ESTATE right now!

Filed Under: Investing, Real Estate Tagged With: investor, Investors

December 31, 2010 by Mike Knight Leave a Comment

Happy New Year Orange County and the World!

And what a crazy world it has been this 2010. I am glad this year is coming to a close! I’m sure I’m not the only one that says it feels like another year of just holding on! However, I already know that 2011 is going to be a better year. There are signs of it everywhere. The stock market is doing better. Retail sales might have had their best Christmas sales season ever. And real estate sales began to pick up steam toward the end of the year after having slowed down for the second half of 2010. There was such a big deal made about the $8,000 tax credit for purchasing a home before the spring deadline ended and it did get buyers to respond. However, the credit was 10% of the purchase price. To get $8,000 you had to buy a $800,000 home. If you bought a $400,000 home your credit was only $4000. If you skipped the tax credit in the spring and bought a home in the fall season and obtained a loan in October, you are going to potentially save thousands of dollars more than the tax credit due to hitting the lowest interest rates in 60 years. Rates have gone up a little since October but have nudged down again just a little bit lately. We still have historically low interest rates due to government intervention but they will not last forever. Inflation will begin to take root in the system and rates will have to rise! The window to catch the best affordability period in our lifetimes will be coming to a close. This is the case for first time buyers as well as move up buyers trying to find a better school for their kids or individuals dreaming about their buying their Dream Home. The biggest fly in the ointment is are you able to qualify for a loan? I have talked to numerous people that would like to refinance and get a lower interest loan, but are not able to, due to their financial situation or due to the fact that they have no equity or negative equity in their current home. Some individuals have enough assets to lease out their current home and take advantage of this unique market. If you have any of these concerns please call me and I can make some recommendations for various lenders and options that you may have. Well, that’s it for now. I think I will go grab my kids and get outside to enjoy some of this brisk California winter weather we are having. HAPPY NEW YEAR!

Filed Under: Economy Tagged With: 2011, Dream Home, Happy New Year, Mortgage Rates, opportunity

Bank of America Stops Foreclosures in All 50 States

October 15, 2010 by Mike Knight Leave a Comment

In the case of president Obama they are stopping foreclosure in all 57 states.

How would you like to get up tomorrow and not have a mortgage payment? I’m sure many people would. How would you like the security of a home that is free and clear? About one third of the population of the United States owns their homes free and clear and that means no mortgage payment. There are many other Americans that will get up tomorrow and not make a mortgage payment. These people are in a totally different camp all together. They do not have a mortgage payment right now, however, these people do not have the security of staying in their homes long term either. It’s a terrible position to be in. I personally know some people that have been in their homes not making a payment for almost 2 years now! With this freeze on foreclosures by several large institutions who knows how much longer this will go on. Many believe, we need to foreclose on these non performing loans in a timely manner and get the properties on the market, and sold to new buyers that will make the payments, before the market can begin to recover. This current roadblock will only prolong the inevitable.

Just recently Fannie Mae and Freddie Mac have instructed the banks to start speeding up the foreclosure process and get rid of the shadow inventory on their books. Truth is, once the banks start certain foreclosure processes they are required to have greater and greater reserves on hand to meet those loan losses. If the banks put too many properties into foreclosure all at once they quiet simply would not have enough reserves and the Feds would have to drive up in their large black American SUV’s and cart away all their records. The free market as far as banks are concerned would be over. The banking system would have to be nationalized. There is a very fine line for the banks to keep profits positive and stock prices up so that they are stable enough put away x amount of reserves to handle x amount of foreclosed loan losses. This is why we have shadow inventory and why we are unable to get an accurate number on it. Matter of fact, do we really want to know?

This procedure error of not reading the foreclosure documents properly and signing in front of a notary will get resolved. Whether by the banks or the administration it will get resolved. The country must move forward and housing is a big key in doing that. Many people have their wealth tied up in or to their homes and values must begin to stabilize and even begin to appreciate. In the lower price ranges we have already hit the bottom and prices are moving higher. As the correction takes place, people will feel better about their nest eggs and consumer confidence will begin take off. Now is the window period to become a home owner for the first time or to move up!

Filed Under: Economy, Foreclosure, Loans, Shadow Inventory Tagged With: Foreclosure all 50 states, mortgagepayment, obama

Why Aren’t Higher Priced Homes Selling?

October 7, 2010 by Mike Knight Leave a Comment

The New Frugality, Less Equity and Tighter Loan Qualifications.

There are several reasons why higher price homes are not selling as they have in past markets. First of all, you need to keep in mind that higher priced homes are for the most part discretionary purchases. Generally but not always, they are a type of luxury purchase and in our current frugal environment, luxury is not a necessity.

In addition, according to the California Association of Realtors latest survey, the current median cash proceeds received by the seller at the close of escrow in California is at an all time low of just $35,000 compared with $220,000 in 2005. This is a real game changer due to the fact that the real estate market operates on a pyramid type structure. At the bottom of pyramid are the lower priced properties (condos and small starter homes) and then moving up the pyramid are the mid priced (move up homes) and finally up the pyramid even further are the more expensive (luxury homes). For this system to function properly, the smaller homes sell giving those sellers equity to move up the pyramid and so forth and so on. Because the equity position coming out of these sales is so small today, the typical move up pyramid paradigm is unable to function in it’s normal fashion.

Another factor for the slower pace of sales in the upper end are the tighter loan qualification parameters. Because lenders are so conservative and have such an aversion to risk, full documentation loans to the nth degree are the order of the day and there is virtually no loan product above $729,750. Therefor, the gradual move up market in luxury homes is stalled. Liquidity has been sucked right out of the market place due to the investment communities loss of interest in purchasing newly originated loans.great schools,

Having looked at the reasons as to why this market segment is stalled, an astute buyer still has to ask the question, is it the right time for me to purchase a luxury home? If you’re financially secure and your prospects of employment are stable, this may be literally be a once in a lifetime opportunity to take advantage of the luxury home market. Home prices are down, property taxes are down, interest rates are at historically low rates and the selection in this price range is as good as it gets. But most importantly, if you have a traditional family, blended family, extended family or are thinking of having a family, a luxury property is not so much a luxury but a necessity. Along with a luxury property comes great memories at home , a safe neighborhood, community and the simple fact that your children are able to attend the best public schools.

Filed Under: Economy, Real Estate, Schools Tagged With: great schools, less equity, luxury homes, new frugality, opportunity, upper end homes

Is IT Always Best To Refinance To A Lower Interest Rate Loan?

October 6, 2010 by Mike Knight Leave a Comment

No, it isn’t always best to refinance to a lower interest rate! It really depends on your situation. For one thing, if you’ve made payments on a loan for several years you might be better off to keep paying on that marginally higher interest rate loan due to the fact that as a loan ages your are paying more toward principle and less toward interest. If you refinance, almost all of the initial payments will go toward interest and hardly anything toward the principle. That’s just the way amortization works. Therefor it might make more sense to keep the mature loan since you are paying down the loan balance to a much greater degree.

Another point to consider is, if the loan you are refinancing is the original loan you obtained when you purchased your property and you now refinance into a newer lower rate loan, that newly refinanced loan becomes a recourse loan. That means that if you default on this newly refinanced loan at any time, the lender can obtain a deficiency judgment against you for any unpaid balance. On the original purchase money loan there is no possibility of a deficiency judgment and the property is the only recourse that the lender has.

The other consideration is do you have a fixed rate loan or a traditional ARM-Adjustable Rate Loan? Many conservative consumers like myself feel more secure with a fixed rate loan. But a fixed rate loan doesn’t always mean that your mortgage rates will be lower than an ARM loan over the length of ownership of any given property. Historically, ARM’s have resulted in lower overall interest costs compared to fixed rate loans particularly in a low interest rate environment as we are currently experiencing.

Option ARM’s on the hand most likely should be refinanced due to the fact, that many of these loans usually provide lower than market interest rates for the first few years and then adjust upward in increments larger than most consumers feel comfortable with. Also, many consumers choose or OPTION to make payments on these loans that are actually lower than the interest rate necessary to carry the loan and accrue or increase their loan balances commonly know as negative amortization.

There is no one size fits all when it comes to refinancing. Each refinance should be determined on a case by case basis.

Filed Under: Loans, Real Estate Tagged With: option ARM, purchase money loan, recourse loan/dediciency judgment, refinance

Jumbo Loans to $729,750 Extended

October 4, 2010 by Mike Knight Leave a Comment

Conforming Jumbo Loans to a Maximum of $729,750 have been Extended until September 30th 2011.

This is a really big deal for the housing market. Without the extension of these conforming jumbo loans limits, properties with a sales price of about $520,000 would come to a screeching halt. When a buyer purchases a property for $520,000 with a $104,000 (20%) down payment they obtain a $416,000 loan which is less than the $417,000 conforming loan limit. To purchase a property above the $417,000 conforming loan limits, we need these higher jumbo loan limits. Conforming jumbo loan limits allow a buyer to purchase a home up to $912,000 with a $182,400 (20%) down payment. And even though $182,400 is a healthy down payment for just about any one these days, imagine what would happen to the market above $417,000 if the buyer could not get jumbo financing. In the case of a $912,000 sales price, a buyer would need a down payment of $495,000 and what do you think that would do to our housing market in so called high-cost areas such as southern California?

Even better yet, these higher loan limits extend to loans insured by the Federal Housing Administration otherwise known as FHA loans. The benefit of this extension is that a buyer can purchase a property with a 3% down payment up to a loan amount of $729,750. This means a buyer could purchase a property with a sales price of $752,000 and a down payment of only $22,560 (3%) and finance the balance of $729,440 . As you see , there obviously are many more buyers that meet the parameters of a $22,560 (3%) down payment versus a $150,600 (20%) down payment on a $752,000 sales price. In addition, a buyer could purchase a home with a sales price above $752,000 and still obtain an FHA loan as long as any additional increase in price above $752,000 was in a cash and where the FHA loan did not exceed $729,750. Of course with all these loan types a buyer must have a fully documented loan.

Luckily, buyers have an opportunity t purchase their dream home at reduced prices and lock in these jumbo loans at historically low rates.

Filed Under: Loans Tagged With: $729, 750, conforming loan, FHA, Jumbo loans

How Much Shadow Inventory Is There Anyway?

October 1, 2010 by Mike Knight Leave a Comment

Do we really want to know just how many properties are considered “shadow inventory” ?

I’ve seen the shadow inventory figures quoted all over the place. What is the real number? I don’t think we will get an accurate figure by just looking at the distressed property sites a person can subscribe to for a fee. And I don’t think you’ll here an accurate number quoted by the banks. It’s not in the governments best interests to let the cat out of the bag. The highest number of Option ARM’s are coming due for their first adjustments in 2010 thru 2011 time period. Many of these loans will be unaffordable by the current owners after these first adjustments if they aren’t already unaffordable before the adjustments. Particularly in the higher price ranges, you have a tremendous number of individuals that had great incomes in the go go years but have been living on their credit lines for a while now and well, it’s just a matter of time before they run out of equity line. I personally know of homeowners that have been living in million dollar homes and that have not made a payment in 20 months now yet, the banks have not set an auction date for the property. The banks do not want to foreclose on these large properties because they know that the loses on these properties requires a huge write off and larger reserve requirements by the regulators on these banks. In addition, large properties come with high costs just to maintain them let alone getting them back in shape enabling the banks to liquidate them in a timely fashion. On the positive side, there doesn’t seem to be enough of these higher priced bank owned properties (REO’s) coming to market for the current demand that is out there . Because they are price aggressively, there is an appetite for them and they generally sell quickly and quiet often involve multiple offers.

Filed Under: Bank Owned, Foreclosure, Real Estate, Shadow Inventory Tagged With: Bank Owned, buying a foreclosure, Foreclosure, Real Estate, shadow inventory

North Tustin Office Space Close To Home

September 30, 2010 by Mike Knight Leave a Comment

An Office Closer To Home?

If you live in the hills of North Tustin and you want to make life a little easier and who doesn’t these days, maybe you should consider getting an office closer to home. Keep in mind that there are very few office building in North Tustin 92705 and therefore only a few chances to find office space. However, do to market conditions there is currently a window of opportunity to find quality space close to home so that you can shorten your commute time, run home for lunch or help pick up the kids when necessary. Maybe it’s time for a pleasant change of pace for you, your business and your family.

Filed Under: North Tustin, Real Estate Tagged With: 92705, North Tustin, office space

Buying A Foreclosure At The Courthouse Steps Is Not For Novices

September 29, 2010 by Mike Knight Leave a Comment

Many buyers ask me “what about buying a foreclosure at the courtyard steps?”

Even though a significant number of properties are being bought at the court yard steps, this is not the average consumer who is doing this. The buyers who are buying on the courthouse steps are battle hardened investors with the skills and tools necessary to do this. They are after all buying all cash. To limit the risk of purchasing a property with numerous encumbrances whether known or unknown and buying more than they ask for, these sophisticated buyers often have an account with a title company and are on their laptop with an aircard checking the condition of title right at and up to the auction time to limit their exposure. Buyer beware is critical in this situatiuon.

Filed Under: Foreclosure, Investing, Real Estate, Technology Tagged With: buying a foreclosure, investor, risk