The Big Orange is ripe with Real Estate investment opportunities galore. Need proof? Here are five personally hand-picked Orange County homes that have amazingly low price tags and high upside potential.

$304,000   28315 Paseo El Siena 6    Laguna Niguel     Elegant Estates   Al Johnston

Nestled in an exclusive gated community, this attractive 2 story condo is completely refreshed with new carpeting, appliances, and paint. Residents and guests can immerse themselves in the sheer comfort of a spacious living room accented by a cozy fireplace, delight in the serenity of a private patio nudging a lush greenbelt, or sooth away cares in a luxurious spa. The exhilarating Laguna Niguel luxury lifestyle for a remarkable $304,000.

$309,000   30902 Clubhouse Dr. 5f   Laguna Niguel   Re/Max Fine Homes   Lee Ann Canady

Just a short drive from Salt Creek Beach, this upgraded condo gets more than a touch of class from rich wood floors, crown molding, granite counters, stainless steel appliances, and a vaulted master bedroom ceiling. Outside, well-manicured grounds are complemented by a community pool, spa, gym, and clubhouse. A prime property on the market for only $309,000.

$349,000   30352 Via Reata   Laguna Niguel   Veranda Homes   Paul Morgan

This recently-remodeled turnkey home features gorgeous hardwood floors, a spacious master suite, an airy living room accentuated by travertine fireplace, and new kitchen enriched by stainless steel appliances and granite counters. Completely renovated bathrooms, canned lights, scraped ceilings, crown molding, and dual pane vinyl windows complete the picture of this exquisite Laguna Niguel residence. Ideal location offers quick access to miles of pristine beaches and other popular Orange County destinations. This distinctive home is available for only $349,000.

$305,000   24986 La Pantera   Laguna Niguel   Tarbell Realtors, L.H.   Marina Simmons

A recent $45,000 price reduction makes this airy, 2-story home a standout bargain.  Located in the highly desirable Mirador condominium community, the residence is a short drive away from world-class Orange County shopping, fine restaurants, movie theaters, award-winning schools, and both the Toll Road and 5 freeway. Offers lively view of the pool and spa area from the kitchen, master bedroom, open loft, and balcony. Warmly-inviting interior is highlighted by a spacious master bedroom, den, vaulted ceilings, and indoor hookups. A wealth of Laguna Niguel luxury for an amazing $305,000.

$349,000     24833  Nueva Vista Dr.  2   Laguna Niguel    Tarbell Realtors, L.H.       Jennifer Poltl

Beautiful 2 bedroom, 2.5 bath townhome is nestled amidst the serene splendor of a greenbelt. This distinctive property will impress even the most discriminating residents with an array of exquisite upgrades. Among the enhancements are new hardwood flooring, vaulted ceilings, remodeled kitchen, large master bedroom with fireplace, and a second bedroom featuring a private bath and built-in cabinets. Adding to the property’s irresistible appeal is a convenient 2-car direct access garage with windowed roll-up door. On the market for an amazing $349,000.

If you’d like to learn more about these or any other Orange County home, I’ll be delighted to help. As one of the area’s premier Coastal Property Experts, I can answer all of your questions and help you discover the numerous opportunities the Orange County Real Estate market has to offer.

Feel free to contact me at 949.922.8490 or hillary@thecoastalpropertyexperts.com.

FREE GAS — Get a gift card worth $25 at the pump for every referral you give our office.

Regards,

1) Information on 8 Home for Sale in Laguna Beach that have had significant price reductions since they were first listed. Many of these are priced under $1 Million which can be considered a fabulous deal for this coastal beach community in Orange County.

2) From our archives of information, we pulled up an article from 2008 discussing what real estate REO and Short Sale investors were looking for at that time…what they considered to be a bargain when buying a home for sale.

Price Reductions: If you would like to see details on any of these Laguna Beach Homes for Sale, click through to the website.

Discover What Some Real Estate Investors Consider to be a Bargain:

I have often mentioned that we are seeing prices in Laguna Beach that haven’t been seen since 2002 – this is good news for buyers. Add to that, historically low interest rates and you should keep your eyes open for your next home.

I ran across an interesting article that appeared in Investor’s Business Daily in July, 2008. The article was titled “Investors Hunt for Bank-Owned Property Bargains in Packs”. The article explained how investors were pooling their money to buy defaulted loans in bulk directly from the banks rather than trying to negotiate properties just one a time, a process which they felt was too pricey, and too slow.

The interesting thing was what these investors were looking for in regards to price rollbacks. It stated, “Some want only homes with prices cut to 2001 sales values…People who have cash positions now are going to do very well….”

So where are these investors looking? “Some investors say a key to this type of purchase is focusing on spots with strong rental markets. Some buy strictly in the Sun Belt – Texas, Florida, California – citing the region’s long-term desirability”

Location is always important in real estate. You may be able to get a lot of house in a place such as the Inland Empire; however, the better value may be near the coast.

In the past, the entry level cost of a home in this area has pushed people further inland for a home purchase. What was true in the past may not be true today if you are paying attention to the prices.

Keep your eyes open for your opportunity and if our team can be of assistance to you, give us a call.

If you would like a complete property profile, simple CONTACT US - be sure to reference the MLS# and we will email a complete Agent Report to you.

Duplex in Capistrano Beach

This could be an opportunity to live in one unit and rent out the other. There have been over $220K in upgrades done to the upper level.

Capo Beach Duplex for Sale on the Sand

MLS# S621982

$4,399,000

8 Beds / 6Baths / 3491 Total Sq. Ft.

Duplex on the sand

Cape Cod Style Home in Monarch Beach

Cape Cod Style Dana Point Home

MLS# S621806

$975,000 – $1,075,000

3 Beds / 4 Baths / 2302 Sq. Ft.

Just steps to the sand in Dana Point

Short Sale in Monarch Beach

Dana Point Short Sale in Monarch Bay

MLS# U10002765

4 Beds / 4 Baths / 3312 Sq. Ft.

Short Sale $1,950,000

Cape Cod Style Home and Guest Casista on 16,500 Sq. Ft. Lot

Short Sale in Laguna Beach:

Laguna Beach Commercial Zoned Home for Sale

MLS# S621296

4 Beds / 3 Baths / 2898 Sq. Ft.

Short Sale $1,900,000

Historic Storybook Castle – zoned commercial, currently used as a residence. Enjoys Mills Act property tax reductions.

Please let me know if you need additional information on any of these properties. I would be happy to send you a property profile report.

Coming out of Washington, two professors from George Washington University have identified a phenomenon called “cognitive resource depletion” as the reason why homebuyers make bad loan choices. Apparently, after the exhaustion experienced from finding a home in Laguna Beach or any other area, our brains just can’t effectively handle all the loan choices available and we choose high risk loans as a result.

Really?

As they report in the LA Times, “Shopping for a home and choosing between alternative features can deplete individuals’ cognitive resources, resulting in sub-optimal home-financing decisions….”

Wow…so we are more capable of choosing between a gas and electric stove, and less effective at monitoring the financial choices for our families or our wealth buiding.

I guess the professors over at George Washington University haven’t met any of my clients. I think that you are a bit smarter than they give you credit for. Perhaps they need to talk with the scientists that study the awesome capacity and power of the brain.

But there could be another advantage here. If you chose an option arm loan, adjustable rate loan or the like, and are now finding that you cannot refinance because the loan rules have changed in part by the greater credit crises, changing lender and government guidelines, or your home has lost value, perhaps you can blame the loan on a “disease” and a government program will surface to assist you! 

Anyhow, one thing that they do mention in this report which I do agree with is that you should obtain a pre-approval before you start your home search. This has nothing to do with the size or effectiveness of your brain; it is simply a time-saver in this new era of underwriting guidelines.

New Listings Over the Weekend:

There are no pictures available for this one yet, but may be something our investors would want to look at. It is described as two charming cottages on one lot in the heart of the village. The 2bed/1ba is rented for $1900/month; the other unit is a 2bed/2ba and us currently owner occupied. Priced at $1,298,000.

New Listing: 1175 Coast View, Laguna Beach

Priced at $2,595,000

Remodeled down to the studs

3200 sq. ft – 5 beds/4ba

New Listing: 1715 Ocean Way, Laguna Beach

Priced at $9,250,000

3000 Sq.Ft. – 3 Beds/4Baths

Steps to surf and sand

New Listing: 1100 Marine, Laguna Beach

Value Priced at $3,400,000 – $3,900,876

First time on the market in North Laguna

3291 Sq.Ft.-3Beds/3Baths

As always, give us a call, or shoot an email if you have any questions or need additional information.

Until next time…

The situation was frustrating for all parties. Including, it seems, the lender.

Tips that we took away from that experience were to avoid, if possible, removing any contingencies relating to your loan from the purchase contract. For example:

• We know that lenders have ordered second appraisals, even after the first one has been approved. Therefore, try to keep your appraisal contingency on the purchase contract until the loan has funded;
• We know that they could pull a second credit report right before the loan funds; therefore, be certain that there are no changes to your credit. If they do pull a second report, you want the credit profile to look similar. No new accounts, no major increases in your loan or credit card balances, etc. Now, you will probably not be able to avoid removing this one since you do have control over your credit history…just keep it clean!
• We know that they may re-verify your down payment and reserves. Be sure that your paper trail is accurate, and that you keep the documentation proving these assets. Again, keep it clean – you have control over this.

Now, we have some additional information from our associate over at Bank of America. This information is very helpful. It is a lender’s perspective as to why loans seem so hard to get. Read on…

A Lender’s Perspective

Compliments of Kevin Budde, Bank of America

One of the most regular comments we hear from agents and borrowers is that they believe lenders don’t want to make loans. It has become common place for many last minute underwriting conditions to be added to loans. We are even hearing about lenders who have issued written loan approvals only to have the approval pulled back days later. Sometimes, even after the buyer has removed loan contingencies, the approval is rescinded. What is going on and why is it so hard to get loans through the system?

There is a war going on between the U.S. government and the lending industry. Due to the financial collapse of FNMA and FHLMC the government was required to step in and take over these two housing giants. FNMA just required an additional $11.8 billion dollars of new capital to keep them afloat. The U.S. government is trying to stem these losses by making all of the lenders buy back loans that were sold to these two agencies. If government auditors can find any discrepancy in the file they issue a repurchase agreement to the lender who in turn needs to use their capital to buy the loan back. In response to the increased buyback requests from the government lending institutions are pressuring their underwriters to make sure not one piece of documentation is missing from a loan file prior to the closing of the loan. This often results in conditions that don’t make any sense to the borrowers and agents and can cause major upset prior to closing not to mention closing delays.

In 2009 Bank of America was requested to buy back $425 billion of home loans from FNMA and FHLMC. In 2010 the number is supposed to double. In the first quarter of 2010 Wells Fargo set aside $2.6 billion in reserves just to pay the legal bill for fighting the government and their buyback requests. The pendulum has swung from lenders making practically every loan four years ago to the extreme opposite making getting a home loan a very harrowing experience for the buyers, to say the least.

Is there anything you as agents can do to help make the borrower’s experience less daunting? Absolutely there is. Have all of your clients be thoroughly pre-approved prior to putting them in your car. Unfortunately there are many versions of what a pre-approval entails. Every day we cross pre-approve borrowers for REO and short sale properties. We see regularly the poor job and lack of documentation that made up the pre-approval. We ask for supporting documentation from the buyer only to find out they don’t qualify at all. Had we not been asked to step in and cross qualify the client that escrow would have collapsed shortly.

So what can be done to make sure the very best of efforts is being put forth? One, call the lender that issued the pre-approval letter and ask, “Did you collect income and asset documentation and review it with an underwriter to determine the accuracy of the qualification?” Two, allow time for the lender to take these steps in order to better prepare everyone. We are still asked to write pre-approval letters by talking to the client on the phone when the purchase contract is being written as everyone is in a hurry. This process doesn’t cut it in today’s difficult lending environment. Remember, if the borrower did not submit income and asset documentation to the lender for review then the pre-approval letter in your hand isn’t worth the paper it is written on.

Are you one of the many sellers whose home has not yet sold, but you are excited to close escrow on your next purchase?

Sellers in this quandry often face the decision of using their personal savings to meet the minimum required down payment in order to close the new purchase, and then refinancing after their existing home sells in order to replenish their savings and reduce their mortgage payment. The problem with this has been that the cost of refinancing could run into the thousands.

The other option is to wait on the new purchase until their home sells. In this market, that could take a few months depending on several factors. And, for those that are looking at all of the great inventory choices for Laguna Beach Homes for Sale, you may not want to risk missing out on that perfect home that has just hit the market.

Now, according to information from Kevin Budde from Bank of America, there is a third option. 

If you are able to use your savings to close your new purchase now, you could possibly recast that loan once your present home sells. Depending on the amount used, your payment could be lower.

Let’s see how this could work:

If you were purchasing a home at the price of $500,000 and had an amount in savings equal to 10%, or $50,000, you may be able to close your new purchase (depending on lender guidelines, etc.) with a loan of $450,000.

Then, when you sell your existing home, lets say that your proceeds were $100,000. You could use $50,000 of this amount to replenish the money that you used from savings, then apply the additional $50,000 to your mortgage through a recast, reducing that balance to $400,000 and thus reducing your monthly mortgage payment.

This is just another option to consider. If you believe that you could benefit from this, be sure to check with your lender to get all the details in relation to your personal financial scenario.

Here is the full information from Kevin Budde of Bank of America:

Recasting of Amortizing Loans  

A recast is a modification of a loan that can be completed when a large sum of money is applied to principal. A recast occurs when the principal balance of a loan is reduced and the subsequent payments are calculated using the lower principal balance. The recast does not shorten the term of the loan; however, it does lower the amount of the payment and the principal balance of the loan.

As an example, if a buyer who’s existing home hasn’t sold and was using the proceeds for the down payment, may choose to close escrow on his new purchase using funds from savings. Once his home for sale closes he will want to replenish his savings and use the rest of the proceeds to lower the principal balance to the originally planned loan amount. Most borrowers are under the belief they will need to refinance the existing loan and apply the additional proceeds in order to lower the monthly payment. This is where recasting becomes the solution.

If the borrower were to refinance they would incur thousands of dollars of costs. In addition, the interest rates may be higher which would also be a problem. By requesting a recast from the servicer of the loan the borrower is able to lower his monthly payment and not have to be concerned with costs or higher interest rates.

Recasts are permitted on FNMA and FHLMC loans. Recasting is not permitted on FHA or VA loans. Typically, one recast is allowed per year and no minimum principal reduction amount is required.

Are you sorry that you missed the $8000 Tax Credit?

For example, the average interest rate in the Month of April, prior to the deadline, was 5.34%. A borrower with a 30 year fixed rate on a $280,000 mortgage would pay $1561.82 per month. If that same borrower were to purchase in May with an average interest rate of 4.625%, that payment would be $1439.59 per month. This is an annual savings of $1467 which over 30 years result in savings of over $44,000. That’s quite a bundle!

“In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” said Lawrence Yun, chief economist for the National Association of Realtors.

Borrowers who wanted to take advantage of the credit have now purchased. Some describe these as “borrowed buyers” who would have normally purchased over the course of the summer months, concentrating buying activity into a set amount of time. This concentration resulted in an increase of 30% in home sales for the month of March.

For now, with the interest rates as low as they are, there is still a good incentive to purchase which will soften the landing for the tax credit expiration. And there are Laguna Beach Homes for Sale which could become great values with favorable prices and low interest rates.

However, there is still the question of that “shadow inventory”, the millions of foreclosures that need to be sold but haven’t yet been listed. That number could be as high as 4.5 million homes owned by banks and individuals that are waiting for the right time to enter the market.

When they do, the normal supply and demand factors will come into play to determine price. As prices rise, inventory will increase which could drive the prices down as supply outpaces demand. As the inventory decreases, prices will creep up again until demand is met. This cycle could result in a sawtooth recovery of home prices – moving up and down until inventory is stabilized.

For buyers looking for a bottom in the market, it may be wise to watch for several dips and be ready to take advantage of the right home at the right price. As always, get your financial ducks in a row before you find the home of your dreams. If you are going to use bank financing, get preapproved now. It is always best to be ready so when that home you want enters the market, you will be able to act.

And for Laguna Beach Homes for Sale, you just may be able to find a home priced less than $1 million that could qualify for favorable financing. Imagine, investing and living a Laguna Beach Lifestyle!

Until next time…

I just wanted to take a minute to share an article that I recently read from Rismedia. For our investors out there, these are some pretty good rules of thumb. This article references basements being “a must”; however the author is located outside of California. For our California and Laguna Beach Real Estate market, basements may be nice…but would not be considered “a must”.

Another thing to point out is that investors ARE buying homes in this market. Some are still waiting on the sidelines; however, for a well-priced investment home a good time to jump in is when YOU are ready and the RIGHT deal is found. And trust me, deals can be found every day somewhere in the country.

Know the risks….know the rewards.  Enjoy the article!

Seven Tips to Profitable Investing in Foreclosures

RISMEDIA, May 18, 2010– Have you been thinking of investing in a foreclosed home? The game plan sounds simple enough: purchase a foreclosure at pennies on the dollar, cover the mortgage by renting the property to tenants, and then sell it at a tidy profit when the economy recovers.

Unfortunately, when it comes to buying foreclosures, “things are not as simple as they appear,” says Jim McClelland of Mack Companies, a Tinley Park, Illinois firm with a portfolio of 365 previously bank-owned homes under management.

McClelland knows foreclosures: he buys two or three each week. Most of his homes are located in Chicago’s south and west suburbs, such as Dolton, Olympia Fields, Homewood and Glenwood. Mack’s in-house contractors redevelop these often badly run-down homes so that they can be rented out.

Foreclosures can be either a financial boon or a boondoggle. To help smooth out the inevitable bumps in the road to real estate riches, McClelland offers this advice:

1. You are investing in a community, not just a home. The neighborhood in which the foreclosure is located will ultimately determine its long-term appreciation. Before being lured in by a low price, do your homework. Is the town investing in new infrastructure, roads, schools, libraries and public parks? Is the downtown area thriving or declining? Bottom line: if the local government or businesses are not investing in the town for the long-term, neither should you.

2. Stick to REOs: A “Real Estate Owned” (REO) property is a safer way to purchase a foreclosure. Unlike a home sold at auction or purchased during pre-foreclosure, its title is held by a bank or lender; there are no other liens against the property. While an REO’s price discount is typically less than a foreclosure sold at auction, there is also less financial risk. Inspections are allowed. No evictions are required. Plus, the bank will see that the property is cleaned out before you take ownership, saving you potentially thousands of dollars in labor cost and dumpster rentals.

“Investors should know that homes sold at public auctions are the leftovers of an inventory picked over by professionals,” warns McClelland. “Buying one sight unseen is a gamble.”

3. The more bedrooms the better. “Three bedrooms is good, four is better,” says McClelland. Other features that will help you charge higher rents are garages, basements (a must), and at least one-and-half bathrooms. In general, steer clear of wood frame homes. Brick is a better investment.

4. Know when to walk away. There are hard fast rules as to when to pass up on a foreclosure. For example, if total repair work is more than $30,000, it is unlikely an individual investor will recoup their money. Damage to the foundation is another serious red flag, as is mold infestation or extensive plumbing repairs that will require breaking open floors and walls. It is crucial that you hire an experienced home inspector before making a bid. Otherwise, a foreclosure that seemed like a good deal could end up costing you more money than the home is worth.

5. Use the one percent rule for rents. McClelland recommends that investors charge a monthly rent of approximately one percent of the value of the home, i.e., $1,500 rent for a home valued at $150,000. While there are exceptions to this rule, collecting one percent per month should cover mortgage, insurance and taxes, plus provide a small profit that he recommends be held as a reserve for home repairs or other emergencies.

6. Skip the flip. “Real estate is slow,” advises McClelland. In other words, don’t quit your day job. Plan to hold your foreclosed properties from ten to fifteen years, just as you would a mutual fund or other retirement vehicle.

7. Consider a passive investment: Buying a foreclosure on your own is a major commitment. If you are not ready to become a landlord, McClelland offers an alternative. He has sold a limited number of his redeveloped properties to investors. For a small monthly fee his staff continues to maintain management responsibilities on the property. This way investors can take full advantage of foreclosure opportunities without wearing a landlord’s many hats.

Sounds like good news…right?

Please remember; however, what we reported in an earlier post regarding the expectation of this very news and what the implications are. Everyone is craving that assurance that we have reached the bottom of the market and things are popping back up. This number reported by the OC Register is just one statistic. Even though it may be accurate, it is simply reporting numbers.

Understanding the type of inventory that is now available would be necessary to draw a conclusion as to the real estate market condition. Many of the homes that sold in the first quarter of the year were priced under $1 million, where buyers could get government incentivized loans at less than about $750,000. Be aware that the higher average price over last year could simply mean that the lowest priced units are now gone.

Possible good news is that the inventory at those lower levels may have been reduced, possibly allowing for some price stabilization at the lower price points, since the supply/demand ratio may now be a little tighter. Additionally, some have speculated that because of a real or perceived scarcity in the inventory of those lower-priced homes (I’m talking about those priced at $500K or less), there have been reports of “bidding wars” and multiple offers that have resulted in higher sales prices.

In Laguna Beach Real Estate, there are not many homes in those lower prices points….although there are some. The next area that we are looking at for some good prices falls within the $2million to $5million range. The challenge will be to those that are seeking financing as opposed to a cash purchase.

Financing is out there, and the lending climate for high dollar loans is changing somewhat, so find a lender or broker and get your financial ducks in a row as early as possible. Correct what needs to be corrected, save what needs to be saved, and then get ready to enjoy that Coastal Lifestyle that you’ve always dreamed of…at a bargain price!

We have all heard the cautions of tightening lending standards. Most homebuyers in today’s real estate market have braced themselves for the adventure that has become the loan underwriting process. The “old rules” of “easy” lending that have plastered the news, targeted as being the culprit of our current economic situation, have been replaced by “new rules” which the big banks have promised are here to stay in the quest for more favorable lending practices. But how good can the “new rules” be when a buyer needs to scramble for $270 after putting over $200,000 in escrow to purchase their dream home in Laguna Beach? Will the “new rules” squeeze the financial middle class out of the real estate market?

For one recent Laguna Beach Home Buyer, what should have been an easy loan decision ended up resembling something akin to a 3-ring circus. As reams of documentation were sent and re-sent to satisfy a seemingly endless demand for loan conditions, and as promises of full loan approval and loan docs were issued and retracted, the buyers started to wonder why they were messing with a loan at all when they did, in fact, have access to the cash available to close the purchase without the assistance of financing.

The lender’s promise is to “be with you all the way”…it may be wise for a home buyer to find out what type of journey the lender has planned.

Tale of a Laguna Beach Home purchase

The home to be purchased was priced just over $1,000,000 and would be owner occupied. They put a 20% down payment into escrow and sought an 80% LTV loan of just over $800,000. It is important to note that the loan amount they were seeking is above the loan limits for government-incentivized programs. Their down payment funds were the result of $220,000 proceeds from the home that they just sold and closed. There was no question about where the down payment money came from.

The borrowers had good credit scores, well above 700; the primary wage earner has held the same job for over 19 years with a reputable company and it was clear that the amount of money he earned was sufficient to repay the loan. So what was the problem?

The part of the process that became most daunting for the lender, one of the five major banking institutions, was the question of reserves. Lenders want to be assured that borrowers have enough available cash in reserves to repay the loan for a period of time in the event of unforeseen circumstances. The underwriting guidelines for this loan required that the borrowers show an amount equal to 20% of the loan amount, or just over $165,000. This amount covers almost 30 months of mortgage, tax and insurance obligations.

So, to purchase a home valued at just over $1 million, this borrower needed to have close to $400,000 of cash…near 40% of the value of the home. 

Some may believe that this is fiscally responsible in light of our current financial situation. However, the scramble for “qualifying” reserve funds bordered on ridiculous.

It’s important to note that these borrowers have over $1 million in a 401K plan; however, required some paperwork and a few weeks to obtain. In this lender’s eyes, the delay in access deemed the funds not liquid and thus could not be used as proof of the required reserves. 

So what did the lender decide was acceptable proof of the $165,000 “liquid” safety net?

• A percentage of the $50,000 college fund established for their kids;
• A portion of company stock options (valued at almost $100,000) available to the borrower only during certain times of the year;
• Money from their recent tax returns of almost $15,000 (good thing they purchased during tax season!);
• Money in a liquid savings account of almost $5000;
• Money they could borrower from a Line of Credit from another of the large banks of which they would need to go through a re-approval and funding process;
• A cash advance loan from a Credit Card;
• Cash obtained from their overdraft account;
• Documentation for an insurance claim for jewelry that was stolen of which payout was expected at some point in the future;
• A refund for $270 obtained from overpayment on their auto insurance policy (yes, really – this was needed for approval!).

Mounds of paperwork and proof were collected, sent, and then re-sent to various underwriters and supervisors who reviewed the loan file for approval. Even when one underwriter accepted the documentation, another underwriter was at liberty to un-accept that same documentation and ask for even more in order to satisfy their own additional requirements.

After a while, it was as if nobody wanted the “buck” to stop on their desk. It was a hot potato scenario for a very cool loan.

What will strengthen Real Estate recovery?

As people continue to look for the bottom in housing prices and a recovery in the mortgage industry, it seems logical that we will not see it until the mortgage and lending industry finds a better way to distribute funds. Most of the lending and real estate home sales in the first quarter involved loans at government-supported levels. Government stimulation and support lessened risk and increased rewards for the banks.

Home buyers in Laguna Beach, where sales prices tend to be greater than $750,000, are often choosing non-bank financing to purchase their home. Overall, 41% of Laguna Beach homes sales since January 1, 2010 were accomplished using all-cash, private, or “other” financing. As the price tag of the home increased, so did the use of non-bank financing. When homes sold for $3 million or more, 61% of buyers avoided the banks. For Laguna Beach real estate priced over $5 Million, buyer’s took a 75% vote of no-confidence by avoiding bank financing.

Will a cycle of fear of accountability, paper-intensive qualification, avoidance or delay of lending decisions, and extreme auditing continue to muddle the lending process resulting in extreme delays to our economic recovery? Will these delays keep home prices down or even drive them down further as more buyers refuse to participate in the Loan Paper Decathlon? Will there be a chasm of home ownership where only those that can afford to pay cash, or those that can qualify for loans at government-incentivized dollar amounts, benefit from the American Dream of home ownership?