Friday, October 23, 2015

Portland's upcoming rental rules and real estate transactions

I think most of you know by now, that the City of Portland declared a housing state of emergency, allowing for temporary rules with regard to no cause evictions and rent increases.  Portland has been focusing, for awhile, on homeless issues.  Instituting rules with regard to landlord/tenant issues is a new direction.

Portland's rental market is so tight, that renters, given only thirty days notice to vacate, are challenged to find a new rental.  And some landlords have been using aggressive rent increases as a way to "encourage" tenants to move.

In short, the City Council's new rules require landlords to give tenants 90 days notice when raising their rents 5% or more, and in the case of "no cause" evictions.  Landlords will still have the ability to evict tenants for "cause, if the terms of the lease or rental agreement have been violated, and may raise rents once annually with a less than 5% increase.  These rules take effect November 14th, 2015.  I believe they will be in place for one year, unless extended by the City Council.
In general, I'm quite supportive of these rules.  There are few instances in which a landlord NEEDS to raise rents more than 5% on short notice, or to move a tenant, in good standing, out.  But...these rules may put us in some sticky spots with regard to real estate transactions.  First though, I'll agree, this won't be the first time rules to curb egregious actions will end up compromising those behaving more reasonably. 
The particular sticky spot will be when a tenant occupied property is being purchased by buyers who will be owner occupying.  Keep in mind, often the buyers of tenant occupied property are first time or low income buyers.  Properties financed with owner occupied loans must be owner occupied within 60 days of closing, and our normal closing/escrow time is 30 - 45 days.   We'll most likely be asking a landlord/owner to give tenants the 90 day notice when an offer is accepted, and before a buyer is through inspection or finance contingencies.  This instance will only work if the buyer is willing to have a tenant in their new home for up to 60 days, and is confident and comfortable that the tenant will vacate on time, and leaving the property in reasonable condition.  I'm not sure that scenario is really the best for first time buyers who might be inexperienced with landlord/tenant dynamics.
 As a broker representing first time buyers, I'm most comfortable showing them properties that are vacant, or owner occupied.   Real estate transactions have enough foibles and pitfalls, I'm hesitant to build in any further hurdles.  Admittedly, even before the 90 day rule, I have advised my landlords who are selling, it may be best to move tenants out.  With the 90 day rule, I'll probably put a bit more emphasis on the benefits of moving tenants out prior to marketing a property.  

Tenant occupied rentals being sold to owner occupants are but a small slice of tenant occupied properties in Portland.  With careful and informed navigation, the real estate community should be able to avoid the above referenced pitfalls, while closing transactions.  An extremely volatile rental or real estate market does not benefit the overall stability or livability of our city.

If you have questions about these rules, from the tenant, landlord or real estate point of view, please do get in touch.  503-312-8038.

Friday, October 16, 2015

Why I care which lender you use...

There are all sorts of folks and businesses who say they can handle your home purchase loan; your credit union, a huge mega bank, a mortgage broker and so on.  Gone are the days when most anyone could get a home loan.  The underwriting guidelines and meticulous paper trail needed for a loan are incredible.    Yes, your lender does need to know what that $150 deposit was into your account last month - even if it was birthday money from your parents.  No, don't get pissy about it, these are the lenders who overlooked all that stuff in the past and got stung by it.

There are a huge variety of loan programs, for different down payments amounts, credit scores, interest rates and so on. And all  have slightly different underwriting requirements.  A good loan officer knows these specifics and stays on top of changes to programs.  A not so good loan officer looses track.

So why does that matter?  It can be the difference between you getting your loan or not, or missing the close date or not and being at the grace of the seller to extend the close date.  It can cost your more money in fees and points.  It can be the difference in you being able to buy your house, or not.

Here are a few examples of the kinds of issues we see come up in the lending on real estate purchases.

 I had a buyer client withdrawing money from an IRA and receiving gift funds for her down payment and closing costs.  She and I both asked the loan officer ahead of time if there was any special way the money needed to be handled.  No, no special anything.  This was communicated in writing an d by phone.  So imagine our dismay when THE DAY BEFORE SHE WAS TO HAVE CLOSED ON HER NEW HOME, we were told underwriting didn't like how the funds had been co-mingled.  She needed to withdraw even more money from the IRA and handle it a certain way.  Thankfully she had the additional money, and thankfully the seller was willing to delay closing by the two necessary weeks, at no charge to the buyer.  It could easily have happened that a seller would demand an increase in the sale price to extend closing, or the buyer could have lost  the lock on an interest rate, forcing a higher interest rate, or the seller could have refuse to grant the extension; losing the buyer the house and the money she had spent on inspections and appraisal.   The loan officer, in this case, either should have known there was a special way the funds needed to be handled, or should have known to ask.  I knew to ask, and even my asking should have prompted her to check with the underwriters before answering our query back at the beginning of the transaction.

A few years ago, my husband, yes, my husband, refinanced our house through Wells Fargo.  Their refinance office was in Florida, and the whole thing was done primarily by email.  The folks in Florida, a state littered with subdivisions, kept asking for the C, C & R's for the subdivision in which we live.  There's no such thing at SE 26th and Clinton.  In the absence of C, C & R's, they then required a survey of the property, because, if we didn't live in a subdivision, then clearly we must be out in the country.  Round and round we went, convincing them neither case applied.  This, in the day and age of google earth and all.

The whole loan process is a series of data requests and performance requirements.  This we know.  And if those requirements and requests are timely, that is, well in advance of closing, they are reasonable and a part of the process.  Arriving in the eleventh hour, and delaying closing can be what makes them seem unreasonable.  Many lenders collect all the data, and only submit the file to underwriting at the end of the transaction, in advance of preparing the loan documents for closing.  The files of a loan officer inexperienced and unknowledgeable about  the idiosyncrasies of particular loan products are often kicked out of underwriting, right before closing, with a myriad of requests that can take days, or even weeks to fulfill.

A "good" lender is one who is familiar with our local properties and customs (see above about subdivisions), who knows the different loan programs and stays on top of changes, and who communicates well, and promptly.  While I prefer loan officers who don't work for the large banks as they tend to be a bit more nimble and less encumbered by a behemoth process, I have seen a few very good lenders from large, national banks.  But 1-800- get-loan, or some such, scares me.  All parties in the transaction need to be able to talk to a specific person, who's job it is to work on your loan.  A loan number, and a phone or email answered by a general staff person at the institution doesn't bode well for getting your loan done on time, and to the terms to which you think you have agreed.

I'm glad to give suggestions for lenders, whether you are purchasing or even just re-financing.  Get in touch: or 503-312-8038