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Real Estate Column: Financing to Win

By Danita Kulp

How, in today’s market, can eager buyers actually acquire desired properties? Buyers are certainly plentiful, so why aren’t they buying; especially with such low interest rates and great deals on properties? Is something truly wrong with our market, or is it possible that lenders, single-handedly, have a stranglehold on our economy due to fear-based thinking and their understandable reluctance to lend? Presently, their lending criterion is virtually impossible to meet. And, with some regularity, lenders withhold funds at the eleventh hour, refusing to honor loan commitments. Yet, there are solutions.

We have a large number of buyers wanting to buy now, but they can’t meet the present and extreme lending restrictions. The media’s fear-based spin on this fools us into thinking the real estate market is horrible and few are buying. Au contraire! They just can’t get a loan.

Presently, the down payment requirement is 20-plus percent, which is excessively high for many buyers. And to actually fund and close the sale on time requires skillful real estate agents, loan officers and title officers.

Buyers are also being pre-qualified for loans WAY below their means, and property values are being appraised WAY below their current market value. Recent clients of mine got pre-qualified for $500,000 below their means by three lenders! And another client’s home was valued for refinancing by appraisers for $400,000 below current market value twice! Talk about lender paranoia.

The real estate industry is hostage to the large financial institutions. They’ve forgotten that in order to make money, you need to spend it too. Right now, the single most important action needed throughout the U.S. is for lenders to loosen their excessive qualifying criteria so money can begin to flow again throughout our economy.

The main issue here is how to solve the problem of so few lenders willingly funding reasonable loans, or even lending at all. Many more homes would sell if money was made more easily available, and the lending criterion relaxed a bit. In fact, we’d rapidly be short of inventory.
Alternative direct lenders who are financially sound and will lend realistic first deeds of trust are: Chase, small local banks and various credit unions. FHA loans are presently available in San Francisco for entry-level housing, requiring only three percent down. And, of course, mortgage brokers and mortgage bankers, as third party sources of both public and privately-pooled funds, can help. Many of the above choices offer you more realistic purchasing power (and higher refinancing values, as well) than larger institutions, and, oftentimes can close in two weeks.

A more uncommon, yet excellent funding source, is the property owner; depending on their mortgage, and if they are willing to play bank. This lowers your closing costs too. And, based on your financial strength, a seller may possibly accept zero-to-ten percent down, with acceptable terms.

Another option is seller-carried second deeds of trust. Just carrying 10 percent of your purchase price can effectively increase your purchasing power by as much as $100,000, depending on the range you qualify for, since this reduces the first lender’s risk.

The MLS is replete with examples of properties in contract with delayed closings, or not closing at all due to failed lending. The lack of available loans is literally deflating our property values and altering people’s perceptions of our national economic standing.

The winners in this particular market are those people who can end-run the present lending system, want to bet on San Francisco real estate as the excellent investment that it is, and close soon (before everyone else wakes up and becomes your competition effectively increasing prices).
It’s a great time to buy property or refinance. Carpe diem!

Danita Kulp is a broker associate with Paragon Real Estate Group. She has sold property since 1981 and has written monthly real estate articles, geared towards consumer education, since 1994 for various SF neighborhoods newspapers. She can be reached at (415) 738-7081. Or visit