Home Buyers, Lenders Get Creative to Make Deals - November 14, 2010

BY NIRVI SHAH, INA PAIVA CORDLE AND TOLUSE OLORUNNIPA
nshah@MiamiHerald.com

When Efrain Hernandez couldn't seal a deal before the first-time home buyer tax credit expired earlier this year, he lost faith that he would ever own a house in a market where investors and all-cash buyers are snapping up bargains and mortgages seem hard to come by.

But waiting -- even though it wasn't by choice -- got him more than the $8,000 federal tax credit.

In a single day last month, Hernandez negotiated a contract on a five-bedroom, three-bath home in the Silver Palms development between Cutler Bay and Homestead. By the end of October, he closed, talking homebuilder Lennar into a $40,000 discount off the list price, getting it to pay $18,000 in closing costs and scoring a $7,500 no-interest loan from Miami-Dade County to lighten his down payment.

"I was finally able to buy the house of my dreams," Hernandez said. "Even though the tax credit was over, it ended up being a better deal."

While cash is king when it comes to buying properties in South Florida's battered housing market, new homeowners like Hernandez are finding ways to finance their homes using hard-nosed negotiation tactics and unusual financing options they never needed during the boom.

And they are scoring deals on homes -- not bedraggled or cut-rate foreclosure properties and time-consuming short sales, but well-kept homes with current mortgages.

After a long drought, more money is becoming available to buy homes. Take Wells Fargo Home Mortgage, for instance. André Brooks, vice president and regional sales manager for the bank's Florida operation, said his company has made more than $3 billion in mortgages so far this year in Florida, nearly 20 percent more than last year.

However, lending guidelines remain restrictive, said Terry H. Francisco, spokesman with Bank of America. Unlike the loose-money days of the real estate boom, people are having to painstakingly document their creditworthiness.

Making purchases happen now often requires creativity and calculation.

"Creative financing is about to become the primary means of financing." said Joe Manausa, a broker and owner of a Century 21 First Realty in Tallahassee, who has blogged about the topic.

BEST WAY?

One fruitful financing option is a loan backed by the Federal Housing Administration. FHA loans can require a down payment of just 3.5 percent compared with the much larger upfront investments many banks require. There have been three times as many FHA loans statewide this year as five years ago.

"FHA is popular again. It went away when we did that `You-don't-have-to-ask-me-for-anything' " no-income-verification kind of loan, said Patricia Perez, senior loan officer at Sunbelt Lending, which works with Coldwell Banker clients.

And in the current market, where home values continue to drop and buyers of just a year or two ago may already owe more than their properties are worth, Perez said it makes sense not to make a big down payment.

"I would rather have my $50,000 parked in my bank account for emergencies," she said.

FHA loans do have their limitations. For one, like other loans with a down payment below 20 percent, these require the buyer to get mortgage insurance.

Another limiting factor: FHA loans are for a maximum of $423,750 in Florida -- although that takes in a lot of properties, when you consider the median South Florida home price is around $200,000. They are available to people who don't already have an FHA loan and plan to make the property their primary residence.

PRIVATE LOANS

A private loan -- made by a noninstitutional investor who does not advertise himself or herself as a mortgage lender -- is another alternative, but requires some networking and using personal relationships to make a connection.

Grant S. Stern, president of Morningside Mortgage Corp. in Bay Harbor Islands, brokered a loan this summer for a buyer of a Broward condo, financing half the purchase price.

The borrower had made a preconstruction down payment of $90,000 on a two-bedroom, two-bath $300,000 condo in Sunrise. He had another $65,000 cash to close, but during the lending process, Fannie Mae's approval for the project expired.

Stern said he learned that the developer was on the verge of default, and that his client's money was in jeopardy if he didn't close the deal quickly. There wasn't enough time to get a conventional bank loan, so Stern arranged for a real estate investor to fund a five-year, fixed-rate loan in a hurry.

"They said `close in one week.' We closed in one week," he said.

The borrower, a 35-year-old wholesale electronics distributor with good credit, could conceivably arrange a more conventional refinance in the future.

"If this is the only way you are going to close, then it's a really good option," Stern said.

SELLER FINANCING

Part of real estate agent Gene Mastro's strategy for buyers is avoiding foreclosures and short sales -- especially for those buyers who intend to live in the properties they purchase.

Owners of nondistressed properties are "more ready to correct problems, any minor deficiencies," said Mastro, who works for Coldwell Banker in Miami-Dade.

Another advantage: Sellers may be willing to pay all or part of closing costs, which can range from 2 percent to 7 percent of the purchase price.

Dilihara Martin said Mastro negotiated a seller's contribution for closing costs on a home she bought near Kendall this month. The 1,700-square-foot home sits on nearly a quarter-acre.

Martin, 25, said the new place will be a nice change for her, her husband Julio and 6-month-old daughter Isabella, who have been living with her parents.

"He managed to negotiate down to $200,000 and we got a 3 percent seller's contribution on top of that," said Martin, an accountant. "He fights for you."

Another client, Daniel Diaz, closes later this month on a three-bedroom, two-bath home in Kendall. The price is $150,000. Though Diaz, 28, said he's a saver, he doesn't have enough put away for a 20 percent down payment, so he opted for an FHA-backed loan.

The sellers will contribute 4 percent of the home's purchase price toward closing costs, said Diaz, who manages a Sports Grill.

"I had no idea about this," he said. "Gene's been educating me along the way."

QUICKIE LOANS

Another way to cover closing costs is a fast, short-term loan that doesn't show up on credit reports.

Todd Hills noticed that some of the recent users of his company, Boomerang Loans, wanted fast cash to pay closing costs. His Colorado-based business works like a pawn shop for those with pricier assets, including paintings and fine jewelry. A recent borrower offered a 1955 Picasso sketch.

"It's not something we've experienced before the last six months," said Hills, CEO of the 25-year-old company, but "it makes absolutely perfect sense. This is a way this consumer can get the cash that they need."

A Texas woman who recently needed an additional $3,500 to pay closing costs sent the company several pieces of jewelry. They gave her the money and she was able to close.

"They get their house deal done, then they have six months to make the determination about whether they want to come back and retrieve their asset," Hills said.

OPTION TO BUY

Yet another possibility for buyers is a lease-to-own option, Manausa said. "It's a purchase agreement with a very delayed closing -- three months or three years."

Tom Nisbet and fiancée Greta Leber have just such a contract on a condo near Dadeland Mall. They are living in the 1,600-square-foot unit they hope to buy. It comes with two parking spaces, a pool, a gym and it's close enough to the University of Miami, where Leber is working on her Ph.D.

After watching others' experiences with short sales and foreclosures, they steered clear. "This is by far the best place we saw on the market," Nisbet said.

In their case, they have a contract that is contingent on being able to secure an FHA loan for the unit. It's in a building that is not currently approved for those kinds of mortgages. The couple -- he is 25, and she is 23 -- don't have the kind of savings needed for a down payment for a traditional mortgage.

"Our sales contract is valid until we hear we have FHA approval or not, or up to a year from now," Nisbet said. "Maybe, depending on the situation we're in, we'll keep renting this place."

THE GOVERNMENT

While the federal first-time home buyer's tax credit ended months ago, as Hernandez found, it's not too late for house hunters to get government home-buying help.

Hernandez benefited from Miami-Dade County's "surtax" program, which provides a no- or low-interest second mortgage for middle-income home buyers, who can cash in on up to $7,500 in assistance.

The program covers first-time home buyers whose household income does not exceed 140 percent of the area's median, or below $98,438 for a family of four.

The Broward County Housing Finance and Community Development Division has a similar program for first-timers, offering a loan with a 3 percent down payment and below-market fixed interest rate that doesn't require private mortgage insurance.

Additionally, many city governments offer their own home buyer subsidies, like Hollywood's no-interest second mortgage, which provides up to $40,000 or 25 percent of the purchase price to assist low-income buyers.

Government agencies with home-buying assistance programs say they are fielding lots of calls.

"People are interested in buying homes," said Mildred Reynolds, housing program manager for Broward County. She suggests people considering a purchase visit a Housing and Urban Development office to learn about their options.

Hernandez, who closed on a home after two years of searching, learned about the surtax program from Lennar.

"We're just trying to put everything together to make that sale happen," new home consultant Florinda Beguiristain said. The home she found for Hernandez was built by Lennar, went into foreclosure, then was bought back and refurbished by Lennar. "He said `Flori, you don't know what I've gone through.' "

"We enjoy being able to see that dream came true."


Read more: http://www.miamiherald.com/2010/11/14/v-fullstory/1924932/home-buyers-lenders-get-creative.html#ixzz15NI851zK

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Construction Set to Begin on Downtown Whole Foods - November 8, 2010

Downtown residents and workers will be getting a place for organic and gourmet shopping. Whole Foods is to open at Metropolitan Miami.


BY ELAINE WALKER
ewalker@MiamiHerald.com

Plans for a Whole Foods in Downtown Miami are officially back on track, offering another vote of confidence in the area's rebirth.

The upscale organic grocery chain confirmed Friday that it will open a 37,000-square-foot store at the Metropolitan Miami complex. The grocer had originally committed to open at the project back in 2004. But the deal fell apart a couple of years ago when plans for the Met 3 building got put on hold amid the real estate collapse.

Florida Whole Foods President Juan Núñez said the company never waivered in its interest, but had to wait to see the new plans.

"We always liked the downtown site," Núñez said. "These are some of the greatest densities. We really think that the customer demand is here."

The new plans call for a store about 25 percent smaller than originally envisioned. Whole Foods customers will have free, dedicated parking under the store and above will be a public parking garage with room for more than 1,200 cars.

Construction will begin sometime next year with an opening likely in late 2013.

"We're excited that Whole Foods is back," said Tim Weller, vice president of MDM Development Group. "We think it's an extremely important element of the Metropolitan Miami community. It completes the vision we had of creating a neighborhood in an urban setting."

NO CONDO UNITS

Part of the Met 3 site will also be saved for Phase 2, which would likely include a hospitality company, Weller said. Unlike the original plan that called for a 74-story building with 650 condos above Whole Foods, this time there are no condo units involved.

The Whole Foods is the beginning of the expected retail and entertainment component for the Metropolitan Miami project, which already includes condominiums, the new Wells Fargo Center office tower and the J.W. Marriott Marquis and Hotel Beaux Arts. The Whole Foods announcement came Friday, as the J.W. Marriott Marquis celebrated its grand opening with a lunch that attracted about 600 people to downtown.

Alyce Robertson, executive director of the Miami Downtown Development Authority, hopes the Whole Foods will be a sign of other major national retailers to come.

"What it says is that companies are recognizing what's happening here," she said.

Helping Whole Foods and others to make that decision is certainly evidence that the majority of new downtown condominiums are filled with either renters or buyers.

"When Whole Foods enters a market, it says that this is a real credible educated demographic," said Lyle Stern, a Miami Beach broker, who represents Whole Foods and the Met. "It's a signal to the world that all of this is real."



Read more: http://www.miamiherald.com/2010/11/06/1911156/construction-set-to-begin-on-downtown.html#ixzz14i1E14P9