Dodd-Frank effect on closings after October 3rd, 2015

There is a lot of fuss on the new home loan rules set forth by Dodd-Frank Act. Starting October 3, 2015. “Know Before You Owe” initiative aims to simplify loan disclosures and help borrowers better understand their mortgage terms. Homebuyers might see longer loan processing periods, but they’ll also be less likely to experience last-minute loan drama

However, there’s been quite a bit of ranting around it.

Some of the most fundamental changes are:

  • Four closing documents will be merged into two. Good Faith Estimate and Truth in Lending disclosures will be eliminated and combined into a Loan Estimate formTruth in Lending disclosure and HUD-1 Settlement are being replaced by Closing Disclosure form.
  • Under new rules, lenders must provide closing documents to both parties three business days before the closing date, to give buyers a chance to read them, double check information and make sure they are aligned with what they expected.
  • You’ll receive the loan estimate within three days of providing basic information to each potential lender


It is appalling that under current system, buyers often have only few hours to wade through complex legal documents that represent the largest purchase most people will ever make. With numbers making their first appearance right at the closing table, Buyers do not have enough time to think them through and compare with what they were advised at beginning of process. A 3-day window gives Buyers opportunity to think through the numbers.

About my personal experience: We decided to try a new attorney charging really low fees. Idea was to cut down recurring attorney costs on recurring purchases. At the Settlement agent’s office, we saw the HUD-1 for the first time. The title related fees seemed quite high (mind you, I didn’t say title insurance), but we did not have any previous documents to compare them with. With lots of questions in mind, we handed them the check, with an understanding that the Settlement office would only deposit it after getting a green light from us.

My immediate stop was at my office to compare the fees. A lot of current title fees were unnecessary and about $ 400 more than what I had paid my previous attorney. Ultimately, the current attorney who I thought was $ 600 cheap turned out to be only $ 150-200 cheap (including his title expenses)!

Low attorney fees was a sheer marketing gimmick (he got his money by charging us higher title fees). But we were at such a late stage of the proceedings that we just decided to move on with the purchase. Had we got a 3-day window to check, things would have been different.


In some states (closing table states), Agents or Principals have to be physically present for closing. Clients, agents and attorneys are accustomed to routinely making changes at the closing table and still closing the sale on same day. The new three-day waiting period will severely limit this practice for items covered in the TRID documents.

Breather: New Jersey is an ‘Escrow State’ where documents and signatures can be submitted few days prior to closing. We may not be heavily impacted.

When transactions don’t close on time, it’s common for one or more of the principals to be stuck with furniture on a moving van and nowhere to go. Who pays the hotel bills? What if an error retriggers the 3 day waiting period? Can you allow the Buyers to move in quickly with a rental agreement?

There are situations when a principal has to close by a certain date to take advantage of tax breaks on sale of their primary residence or where 1031 tax deferred exchange in involved! The lost tax benefit can run into thousands of dollars!

Delay could also mean losing on to a locked interest rate.

CFBP (Consumer Financial Protection Bureau) clarifications:

However, the CFBP had indicated that only three changes would require a new three-day review:

  • APR increases by more than 1/8th of a percent for a fixed rate loan or 1/4th of a percent for adjustable rate loan. A decrease will not require a new 3-day review
  • A prepayment penalty is added, making it expensive to refinance or sell
  • The basic loan product changes, such as a switch from fixed to adjustable rate or to a loan with interest-only payments.

Typos, credits that are given because of unexpected discoveries at walk-through, or changes in real estate commissions, taxes, utilities, proration and the amount paid to escrow will not require a new 3-day review.

Well, then really, are the three changes mentioned above worth the kind of hoopla?

What can you do?

The “Know Before You Owe” disclosure rule may simplify mortgage paperwork, but it doesn’t simplify the mortgage process itself. If you’re buying a house this fall, prepare for a longer closing process. You might want to adjust the term of your rate lock accordingly. And keep the lines of communication open with your lender and seller to avoid closing roadblocks.

Delays, even short ones, can put a buyer at a disadvantage to cash bidders in hot real estate markets. But understanding your loan terms can save you from headaches later.

Good luck!

Real spooky encounters @ house hunting

Who loves good ghost stories and movies and Ghost Hunter shows? Who always loves to gossip about real life paranormal incidents?

It’s all about triggering the amazing fight-or-flight response to experience the flood of adrenaline, endorphins, and dopamine, but in a completely safe space.

With my kind of profession, I have to venture into distressed, vacant properties all by myself. Most often than not, the power is also shut off. Looks like a scene right off those haunted movies! With the coming Halloween, thought I’d share some spooky experiences with You.

House #1: This is the most recent experience. I went to see a house. Another Realtor was stepping out after showing his clients. He cautioned me against opening the bathroom door as it emitted super strong smell- a smell that would hit you hard in the face!

I quickly checked the rest of the property, held my breath and briefly opened the bathroom door for a quick glimpse. Looked OK. We put an offer that got accepted!

Since then, my business partner and I went to property few times (and it smelled and smelled).

One fine day, while I was sitting outside that house waiting for the architect and partner to step out, few ladies from the community came to pay a visit. Through them, I learnt that the owner was an old man who lived alone. His house was in shambles.  About 20-30 cats called his house their home! He died in the house and no one knew. Till after 4-5 days, it smelled so bad that neighbors called the cops. Cops had to call his daughter from Texas for identification!!!

Sad story…  But the weird part was, since then, every time we left the house, we would carry the stink with us. A good shower and change of clothes wouldn’t help. The stink seemed to accompany us in our own house- as IF we had brought back something from that property! And then out of nowhere, I started hearing strange squishing sounds in my house during noons!

BOOOOOOO. We took several measures at that property like keep windows open to let fresh air in, circulate incense stick around the house, gut most walls and floors. Result: Fresh, new, crisp smelling house. And those strange sounds? It so happened, my son had started playing games on Ipad and they were getting updated every noon with a strange squish sound J

House # 2: I went to see a half done house in Rochelle Park. It was a cloudy day and no power. Touring the 1st and 2nd floor was a breeze. The basement was pitch dark. I turned on the video on my phone for the flash-light, chanted God’s name and heroically dismounted the stairs. I could only see to the extent of my weak flash-light. I noticed a finished bathroom in the far corner of the basement. Sun rays squeezed in through the translucent window. As I started walking there, a knocking sound appeared from nowhere. The closer I went to the bathroom, it got louder. A quick peek in the bathroom and I scurried out of the basement- and out of the house! I went outside to check if there was any construction work going on in the vicinity, but could see (or hear) nothing.

BOOOOOOO.  I came home and showed the video to family, who agreed to not only hearing the knocks, but they getting louder towards the bathroom. Curiosity took the better of me. I insisted that someone should accompany me to the house for another visit and see if this repeated. No one volunteered J Still wondering what it could that have been…..

House # 3: Around last Halloween, few friends met (some willingly while others obstinately following their spouses) to watch a horror movie ‘MAMA’ at night. For those who haven’t watched it, a dark ghostly image keeps appearing in the movie!

I saw a house in New Milford and thought it was a great Buy. I called my Business Partner to see it. Again, no electricity. Since I had already viewed the house earlier, I was standing at one corner, engrossed in my phone (aah, the joys of owning a smart phone). My partner stepped down in the dingy basement with his flash-light and abruptly retracted at lightening speed. He thought he saw something but wouldn’t explain! I failed to apprehend what it could be- I was there just 2 days ago!!! Maybe a small animal.. or a dog.. or even a homeless man?? What could it be!!!

BOOOOOOOO. Upon further interrogation, he mentioned he saw a black smoky shadow hanging in the basement, like a bat :-) (Does it ring a bell? MAMA?) I had a good, hysterical laugh. He probably saw a shadow of stair-railing while flickering his flash light in the basement. Till date, I enjoy teasing him about that incident- WICKED!

I intend to stay put with my work- which means more property visits and more stories! Until next Halloween……. Ciao!

Foreign Investors and EB-5 Visas (Greencard)

Couple of months ago, I gave few business presentations in India on investing in USA Real Estate! The most common question I encountered was ‘Can I get a GreenCard by investing?’

Many foreigners and non-US residents wanting a GreenCard may benefit from EB-5 information. Please feel free to share.

Few facts:

  • The total foreign sales dollar volume is estimated at $104 billion, approximately 8 percent of total Existing Home Sales dollar volume.
  • Five countries accounted for 51 percent of purchases by foreigners: Canada, China, Mexico, India, and the United Kingdom.
  • While many people have never heard of the EB-5 program, it does exist. While it is open for investors around the world, 80% of investors come from China.

What is the EB-5 Program?

Under the EB-5 program, by investing a minimum $500,000 in a project that creates at least 10 jobs, a foreigner can apply for a green card. Typically, legal residency takes up to 26 months to acquire but compared to other programs for visas that take years, this is an extremely short wait period.

The Program was first established in 1990. Since 2011, popularity of the EB-5 program has skyrocketed. In 2011, only 1,885 visas were issued but by fiscal year end in 2013, that number had jumped to 8,564, a 354 percent increase. In 2014, the 10,000 allotment annual was already claimed by mid-year. For this year, all 10,000 visas were spoken for by May 1.

According to the rules of the EB-5 program, the investor’s family, which includes dependents under the age of 21, has the opportunity to apply for a green card with each member of the family being counted toward the quota. Because the majority of investors apply as a family or couple, supply goes fast.

Real Estate investment is a very popular option for EB5.

Of course, I have just scratched the surface. There is much to add and understand. If you know of a non-US resident who can spend at least $ 500,000 and wants to become a US Greencard holder, feel free to direct them to me. I will be more than happy to assist them.

Home Buying Lessons from a Car Buying Adventure. Bizarre?? Read on…

Most of this audience would have bought a car at one point in their life. How many of us thought it was a GREAT deal at the time of buying and felt contrarily the next day? With no offence to the hard-working people at the car showrooms, how many believe the stereotypes of skeazy used car salesmen who always trick you into thinking you got a great deal?

I recently accompanied a friend who was looking to buy a new car (8 seater SUV). She wanted a standard brand- a good resale and not premium priced. She test drove the likes of Fords, Hondas and Toyotas. Few ‘clever’ salesmen couldn’t find keys of the base models and made her test drive the Tech models. No doubt, Tech models were more impressive and she got ‘sold’ to the tech safety features.

However, these advanced models were priced around 42k-47k (before negotiations). She thought ‘Why not try a premium brand if I have to shell out so much regardless?’ Acura MDX sounded right. Premium, good resale and priced right, Probably! While negotiating at final dealership, she thought she got a great deal. Until she sat to sign the papers.

It was a long day visiting few car showrooms. It was now, evening, snowing and dark. She got stumped with the extra charges like destination charges, the washing, cleaning and detailing charges, documentation charges, titling fees and taxes (taxes were accounted for, but not the rest!) Plus she was getting a rate of 3.9% APR despite her exceedingly great credit score (while Toyotas/Hondas/Nisssans had 0%-1.9% financing deals)! One Acura salesman, in absolute ‘humility’, said ‘I understand you are excited to buy. But We will not negotiate. You are not alone in the market for cars and we know, we WILL find a Buyer for our price’!  And the financing lady was equally ‘polite’ when she said ‘People tell me my friend got great APR on Acura. I tell them, why didn’t you buy with your friend?” Aaah, the joys of sarcasm. So much so for buying a brand that doesn’t need much selling!

Throughout the process, I was there, doing research on the various charges that were hurled at her. We were able to negotiate some of them. We worked out the financing numbers to see if she could afford her payments (after all, I do mortgage number crunching all the time!) Finally, she bought it and is a proud owner of her first ‘premium’ car. I am equally happy for my friend.

What did WE learn from her experience? How can we relate that in real-estate?

We all want a great deal- more house for the money. After seeing the ‘granites, stainless steels and sparkling hardwood floors’, the whites/blacks and formicas are less appealing! Premium homes are obviously, more impressive- but more expensive.

Good houses at market prices attract multiple bids within 2 days of listing. Result? Bidding wars and sometimes higher sales price than the listing. More so, houses come with approx. 3-3.5% closing costs. Sometimes, these become emotional decisions that can lure novices and veterans alike!

While I was not an experienced car sales(wo)man, I surely am an experienced Realtor. I know approximations of associated costs, current average mortgage rates, property market rates and most importantly, HOW TO GET WHAT YOU WANT IN YOUR BUDGET. For details, please get in touch. I know there are great houses on the market that fit every homebuyer’s criterias and budgets. You just need a VISION. And there’s no harm in taking some help from a professional.

Lesson: Most decisions involving spending a big chunk of your savings tend to become emotional ones. Be it a car, a house or anything else, make sure you confide in someone you feel trustworthy and can steer you back to your objective or budget. For a property, I definitely recommend using a Licensed Realtor. If you are a Buyer, you do not have to worry about paying commissions. If you are a Seller, that ‘commission’ will be a good spend for valuable insights, to get house sold in timely fashion and to avoid major blunders that might cost much more! Thankfully, Realtors do not have a quarter-end OR year end target to get that extra commission. Thankfully, we are bound by the Code of Ethics that prevents Realtors from cheap tactics (of course, there are black sheep in every profession).

Good Luck!

Are you paying ‘Just Right’ for a professional service?

We finished renovating/remodeling a property and put it on the market! Within 2 weeks, thanks to our very able Realtor, we had a reasonable offer (amidst the very cold days of winter).

Flipping is a big number crunching game. The lower your cost, higher the profit. Simple, in’it? We decided to experiment with another ‘lower’ cost attorney- just as a back-up. Sometimes, it’s better to get 2 legal advises over 1 in complex real-estate transactions. And anyways, what could go wrong with any Seller attorney?

We found a ‘real-estate only’ loooooow cost attorney who also owns a title company.  Seemed like a great future partnership. Again, what could go wrong? As Sellers, We didn’t have to worry about title, environmental or anything as such!

Now the horrors began.

We got an offer on January 19th, 2015. Under a fairy-tale sale, we should have been out of attorney review within 3 days. Then the 10 days of inspection would kick in. Then the 3 days to ask for repairs/credit and another 3 days for Seller to reply.  Please note that I have taken the full lengths of time in my calculations. People generally do not wait up until the 10th day to inspect property and so on… Buyers were already pre-qualified and could close within 30-35 days! We would have hoped to easily close before February 27, 2015!

Today is March 9th, 2015! We are nowhere close to closing. It is yet ‘anticipated’ to close by March 16th! Why? Attorney correspondence nightmares. Every stage hit a road-block and was delayed by 5-7 days!  Attorney would only reply after 3-4 emails! He reminded me of the frustration talking to Bank executives for short-sales! All the attorney did was be an intermediary- forward emails between Buyers attorney and us, the Sellers! That too, with delays!

Did we lose anything? Of course!

We are still paying the maintenance and taxes on the vacant property! PSEG bills and water bills are still in our name. That is eroding our profit margin. And, in terms of lost opportunities, We lost greatly. We had to let go off 4 properties because we yet, did not have money to buy them!

I AM a real-estate investor/professional myself! And yet, the cheap Attorney decision was so wrong. Lessons learnt! YOU GET WHAT YOU PAY FOR! Being in the real-estate field for a while, we are able to negate some effects of such unprofessional professionals. Of course, the story may not sound as horrendous. But for an investor, a lost opportunity can mean losing $ 10k+.

Whether it is a real-estate agent, attorney, contractors or any other professional in any walk of life, please do not be fooled by lowest prices! They are so low for a reason! Another investor friend found a relatively cheap plumber (relative because plumbers are never cheap :-))! He charged a low amount for diagnosing an issue and fixing it. 2 days later, tenants complained left right and center for very high heat in the house. Our dear friend had to pay another plumber for the right diagnosis and fix the problem. Ended up shelling out for 2 plumbers. Horror stories are endless.

We work 24/7 with real-estate agents. Some only list on MLS, others add value by giving inputs of getting better sales price, marketing via different channels, promptly responding to Buyers/Sellers, arranging maintenance and snow removal, suggesting right listing price (not too high and not even too low). Obviously, a very low priced property will have lots of takers. But that doesn’t do the Seller much good and  gives Agent boasting rights of selling property within 2 days!! Expect services in conjunction of your agreed commission.

Of course, under no circumstance, do I opine high-priced professionals only. Pick any. Just do your due diligence about the professional. Ask around for referrals. See if they warranty/guarantee their work. See IF you stand to lose and how much if they do not perform. Call a few and see how they diagnose an issue. Lastly, if you REALLY stand to lose, be bold and register a complaint.

I conclude and summarize with a John Ruskin quote:

“It’s unwise to pay too much, but it’s worse to pay too little. When
you pay too much, you lose a little money – that’s all. When you pay
too little, you sometimes lose everything, because the thing you
bought was incapable of doing the thing it was bought to do. The
common law of business balance prohibits paying a little and getting a
lot – it can’t be done. If you deal with the lowest bidder, it is well
to add something for the risk you run, and if you do that you will
have enough to pay for something better.”


FHA mortgage insurance rate reduction

First time home-buyer? Are you planning to get an FHA mortgage? Or are you even a current homeowner looking to refinance your FHA mortgage? There might be some good news!

Obama administration has announced reduction in the FHA annual mortgage insurance premium rate by 0.5 percentage points, to 0.85 percent by end of January. The administration estimates that the decrease will trim a borrower’s annual mortgage payment by $ 900 and enable 250,000 people to buy their first homes during the next three years. You could be one of them!

Even with the reduction, the new 0.85 percent premium is higher than historic norms. The rate was initially increased in 2011 to raise FHA capital reserves which took a hit during the housing crisis. The individual $900 annual savings estimated by the administration, which translates to $75 a month, may be the difference between buying and renting for some people.

Democrats also believe that the move will boost the volume of lending and thus, help the FHA’s bottom-line. Lending had declined when homeowners had to pay more to obtain the loans.  A December study by the Mortgage Bankers Association said the premium increases had reduced the value of the insurance fund by $ 4.4  billion as higher costs drove away creditworthy borrowers.

Republicans, on the other hand, have said premium cuts should be off the table because the agency’s insurance fund remains below legally required levels. Mark Calabria, director of financial regulation studies at the Cato Institute, which supports free markets said “FHA has a portfolio of poor quality loans. This will end up costing the taxpayer considerably.”

In addition to its annual premiums, the FHA also charges borrowers an upfront fee, which is currently set at 1.75 percent of the loan balance and is not slated to change.

Do You have an opinon on the move that you would like to share?


Q & A: Meaning of As-Is home purchase

Date: September 1, 2014


When purchasing a home ‘as-is’, is there any chance that owner or bank will fix the issues that come up during the home inspection that I ordered as the buyer?



When buying an ‘as-is’ home, there are two things to be considered. First, sellers are not willing to make any repairs to the home, hence the phrase ‘as-is’. Go into the process expecting that the seller is probably not willing to negotiate on anything other than price, and possibly the closing date. Second, get a detailed home inspection because the ‘as-is’ home most likely needs some work and you need to identify what the work is before you buy it. Though, not all ‘as-is’ sales require work. Some sellers do not want to or are unable to do any repairs. Like in a foreclosure, there is a good chance the seller has stopped taking care of the home; yet another reason for home inspection. There are certain things, eg: mold, wood destroying insects and septic failures that require repair before the transaction can close if Buyer has applied for mortgage.

Lastly, if as-is is your only home of choice, you may want to work with a Realtor to represent you in the transaction.

Tenants, Toilets and Trash! Welcome to the world of Renting!

August 31, 2014

With my very first stint as a property manager, I visited the municipal courts twice in the first 6 months (never in my life before)! One tenant cried foul over spotting a rat! Another called in emergency over overflowing kitchen sink! The heat does not work… my fridge is leaking…install child guards in windows… I am in financial/personal trouble and can’t pay rent…

The list is endless…

Becoming a landlord might sound too tempting, but trust me- it is not as glamorous as it seems. Also, it’s not nearly as ‘passive’ an income one might expect. Many landlords have spent many weekends in painting and cleaning properties in between tenants, discuss remodeling projects and repairs, stressing on late payments, feuding neighbors and secret pets. And if you get that ‘Professional Tenant from Hell’, he/she can leave you pulling your hair!

Real-estate market varies widely in different parts of the country. New Jersey’s laws are pro-tenant (favor tenant). Hence, it is important that Landlord knows what he/she is up against.

Some points to remember:

1)      Do a tenant screening of potential renters

2)      Do not slack on turnover:

Do you know the largest expense, outside mortgage, for a typical landlord is? Vacancy. A property that rents for $ 1200/month is costing you $ 40/day ++ utility charges and risk of holding on to a vacant property. When you get that ‘I am moving’ letter from your tenant, it is time to get to work and market the property.

3)      Charge fees on late payment:

‘A family member is sick’, ‘My wife filed for separation’, ‘I was laid off’… are some excuses I have heard from the very same tenant. I’ve heard all the reasons in the world for why the rent is late. However, I still charge a late fee.. NOW

Heartless, I know. I did start off forgiving penalties because I have a soft-heart J But in doing so, I was making the tenants more irresponsible in paying rents on time. Of course, not all people are the same. When I was a tenant, I took the ‘regular payments of rent’ as my sole great responsibility! At the most, give them one chance with a warning of charging fees with the 2nd late payment- AND STICK TO IT!

Ps: One tenant has paid 4 consecutive penalties. Though we are earning more, such tenants tend to stop making payments all together! Time to make some decisions..

4)      Raise rents:

You have a long term tenant. You do not want to risk losing him/her. So you maintain the same rent with which you started- 5 years ago! Unfortunately, inflation does not keep up with your rent control. If you do not raise rents in balance with inflation, you may actually be loosing money.

5)      Hire a Property Manager:

If handling the ‘landlord stress’ is getting too much, hire a property manager. For a monthly fee, they will do all the heavy lifting for you- including finding tenants, hiring out repairs, and more.

Bad things do happen. When you are a landlord, “no news” is typically good news. There is a reason why so many people are hesitant to get into the game. As my attorney told me ‘bless your stars if you get good tenants’…

Do YOU have a horror story to share? I would like to hear from you.

Q & A: Closing costs

June 2014


I’d like to buy as much home as possible, seeing now is a good time to buy. I was told, however, that the closing costs of a home may prevent me from buying as much home as I want. Is it true?


Closing costs can definitely add up. Typically, closing costs are 2-5% of purchase price of a home. Closing costs include non-recurring and recurring costs. Non-recurring closing costs include such one-time charges as title insurance coverage, escrow, survey, notary, courier, wire or other delivery fees, attorney and appraisal/inspector costs, recording and transfer taxes, buyers broker fee, if applicable and so on. Plus, you may be paying your lenders points on the loan amount. Recurring fees include home, flood, fire insurance, private mortgage insurance, property taxes, prepaid interest etc. If it’s a short-sale, you may incur additional fees like the one charged by the escrow or closing agent, or 3rd party short-sale negotiation company, if one is involved.


1) Oftentimes, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, especially things such as high administrative, mailing or courier costs charged by your lender. Shop around for your mortgage!

2) Also, you can ask for a sellers concession. The concession can be as high as 6% (for FHA). Talk to your real-estate agent for further details and possibilities.

Bought a new home? Would you Sell or Rent your current home?

June 2014

rent image

You are a homeowner. Your family is increasing in size OR your income is increasing and you decide to move to a bigger place. What would you do with your old home?


Those who want to buy a new home using proceeds of the old one will naturally, Sell. This is what most people do.

However, those that are blessed with a good income and can afford another mortgage or have paid out the previous home, may keep the old one- and rent it out.

The latter trend, though still a minority, is on the upswing. If the trend holds, it could mean even fewer homes for sale in an already uptight market. Which means an artificial price increase for the fewer homes that come on the market!

However, renting old home does make sense for some. Those who bought houses after the ‘Big Housing Bubble’ bought them cheap. In order to help with the recovery, Federal Reserve kept the mortgage rates at record lows- leading to a surge in refinance markets.

So? Those who bought cheap and/or refinanced ended up making lower monthly mortgage payments- and automatically saw their net rents increase!

Those who bought during the bubble- They may not be able to recover the purchase price of their property if it were sold in past 2-3 years. If the refinance even brings the monthly mortgage to the level of current rent- meaning, the rent pays off the mortgage, then homeowners prefer renting and holding on to their property till the price appreciates to reduce or nullify their losses.

There are even those who want to try out moving to another place/state/country; but hold and rent the old home. Just in case the new move doesn’t meet expectations, they can always come back.

Its great being a landlord. But as they say ‘Landlord should consider him/herself very lucky if they find good tenants’. Being a landlord comes with its own set of pros and cons. Landlords have to deal with the 3 T’s- Tenants, Toilets, Taxes. However, that I will discuss in another blog.

Thus, the wait-and-see approach is common. Conditions may change if rents fall or property prices rise enough making it lucrative to sell.

Did you rent your home recently? Would love to hear about your experiences!