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Loft Rent to Own

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Approaching lenders for financing can be stressful. Here are five useful tips that may help make it a little easier.

1. Do some research ahead of time. Try your best to find a local banker or lender who makes construction loans and understands the business of residential home construction. At the very least, you should look for one that is flexible and open to learning about the industry.

2. Establish credibility early on. There is great value in establishing confidence and trust. Provide the bank/lender with your resume and company history, and make sure to demonstrate past successes. Provide references from satisfied customers and subcontractors with whom you have positive relationships.

3. Come prepared. Before negotiating with a bank or lender, put together a thorough and complete packet of information about your business, including: up-to-date and easy-to-understand financials, a marketing plan for each project that requires financing, marketing collateral material and an accurate estimate of the project cost(s).

4. Negotiate from a position of strength. Knowledge is power, so it’s beneficial to learn about local terms and conditions in the banking community. Know the loan-to-value ratios of your request, as well as the ranges acceptable to your bank. As a helpful guide on financing home construction projects, read Survive and Thrive in Building.

5. Understand your banker’s needs. Know what regulations, requirements and internal management issues affect your banker. How much power or authority does the loan officer maintain? Is there a loan committee that makes decisions or a series of management signoffs? By understanding these needs, you will have a far better chance of success.

Negotiating with a bank or lender can be intimidating. Keep in mind that your banker has a job to do as well. Careful and diligent preparation can help ease the process, and foster positive outcomes.

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Affordability Backslides
Housing's critical path issue may be attainability in builders' minds; however, it's considered an effective anti-development tactic among many localities.

It's already the issue that keeps builders, developers, architects, and their supplier partners up at night. And, it's getting worse. And, you know what? It's going to get worse still.

It's housing affordability.

Here's new data from the ATTOM Data Solutions (RealtyTrac) Home Affordability Index for third quarter 2016, which indicates one in four U.S. county housing markets were less affordable than their historic affordability averages, up from 22% the prior quarter, and up from 19% a year earlier.

Prices-for sale and for rent-keep rising, widening gaps between income gains and monthly home payments because the demand for housing exceeds supply, especially for middle and lower-tier price bands of new, used, for-sale, and for-rent housing.

The mismatch between supply and demandone that is likely to continue for the near future- is exacerbated by cost creep that labor capacity constraints and over-regulated lots have fueled.

Marketwatch plots the drop in household wealth due to stock market losses since the first quarter of 2015.
Gyrations on Wall Street remind us of why we picked the reporting business, not the predictions business.

Overnight, global market investors built a solid base of stabilization, and this morning's futures markets surged with news that China's central bank shifted into an aggressive accommodative mode, and our own Fed officials were tamping back talk of raising U.S. interest rates as soon as September.

Since consumer confidence and household spending work as such powerful forces in both the demand side and supply of homes for sale, it's not for nothing that attention and a wave of apprehensiveness should intensify as the markets decide whether they're in correction or bear mode. Will the U.S. recovery stall?

What happens to the dollar vs. other currencies, and other economies' ability to consume U.S.-produced goods and services does tie in this small, flat world to our housing, new home, and development market. But, as mentioned above, we're reporters not prophets.

New Home Sales from the Census Bureau at 10 a.m. eastern is about as far ahead as our brains will allow themselves to go.

We know that the tumble in the stock market--which since the first quarter of 2015 has taken a dive of $1.8 trillion in value, much of that in the past few weeks--materially affects household wealth, and directly affects at least a significant share of the higher-end segment of new-home demand represented by financial services industry pros and other industry execs whose wealth has taken a beating in the stock market rout.

We also know that a "stealth force" in the early recovery, particularly in West Coast markets, has been buyers from China. John Burns notes the extensiveness of the impact those buyers have had and will continue to exert, that is, if their wealth is not wiped out in the financial dislocation occurring in their homeland right now.

That dislocation is either bad news or good news, Burns concludes, with one caveat being policies on the overseas investment cap currently sitting at $50,000.

What we're thinking, though, is that a "correction" in the financial markets, and a limbo period among non-U.S.-based home and property buyers could fix a redoubled focus where it needs to be in the United States housing market, on the "slab on grade" of our housing economy, the entry-level buyer.

If Wall Street volatility and global uncertainty and doubt put the higher-end housing market on pause, then perhaps developers, builders, policy makers, employers, and young prospective buyers will gain clarity and mission around the need to activate that lower-price-tier in the housing market.

We'll stay tuned to New Home Sales at 10 this morning, and let you know whether we're seeing anything in the just-past weeks that can tell us about what may be ahead.

Stay cool headed as the markets find their way.

Rent to Own Nightmares (and How You Can Avoid Them)
With the downturn of the economy and the fact that the banks are more hesitant to lending to many people, homebuyers and sellers have resorted to another strategy than the traditional approach.  It’s called “Rent to Own”, also known as “Lease Purchase” or “Lease Option”, and it is basically an arrangement between a buyer without stellar credit and a seller that the buyer may rent the home from the seller until the buyer can qualify to buy the home.  While this sounds great for both parties, there are a wide variety of Rent to Own agreements that can end up putting one of the parties in quite a messy situation.
It is not always the buyer, often called a “tenant buyer,” with the credit problems that is at fault, but the seller can also put the buyer and their living situation in peril.
Here are some of the most outrageous Rent to Own stories that I have heard of:
The home is foreclosed upon and the tenant buyer does not even know. 
The tenant buyer has made all of the payments on time, has taken care of the property and is well on their way to reaching a qualifying credit score but the seller hasn’t been making the mortgage payments but pocketing the money.  Usually, the tenant buyer is paying above the actual mortgage amount, so when the home is foreclosed upon, they have not only lost their home, the ability to buy the home, but also the additional money paid every month.
The tenant buyer slips up just once on the lease agreement and the seller claims the tenant buyer cannot buy the home and has to forfeit the down payment and rent payments.
The tenant buyer makes one payment late or violates a clause on the lease agreement and the seller refuses to honor the purchase agreement on those grounds, thus leaving the tenant buyer with no way to buy the home and no way to get a refund on the down payment or rent credits for the period leased.
The tenant buyer brings a down payment to the table with the understanding they will rent to own the home but the seller backs out and keeps the money.
The seller, or the person facilitating the agreement between the buyer and the seller, takes the down payment from the seller but either backs out or does not complete the agreement to properly put the tenant buyer in the home.  This leaves the potential buyer without a down payment to put on another property, at a minimum, but could have also been their life savings.  In this case, the seller or the person facilitating the agreement may be sued, and at the very least have their reputation destroyed.
The seller does not actually own the property and the tenant buyer has been making payments on a fraudulent lease and agreement.
In areas of high vacancies, such as Las Vegas, Nevada, scammers have been known to rent out homes that are in foreclosure and usually do a rent to own deal to get the additional down payment and avoid speculation from professionals. The tenant buyer is then unwittingly in a home the “seller” has no legal right to sell or occupy, so when the foreclosure goes through and the tenant buyers are served eviction papers, they have no ability to fight the eviction or get any money back.
The tenant buyer falls on financial trouble again and can’t buy the home or make the payments.
If a tenant buyer has financial trouble, the chances are that they could fall on it again.  This leaves the seller with a renter with no ability to cash out on their property and they are still on the hook for the mortgage.  Then they usually have to evict the renter and put it back on the market for sale, lease or rent to own.  However, in this situation, because the tenant buyer has put more money into renting the property and the seller wants to evict them, the property is usually trashed in the process.  So the seller is left to make repairs as well.
The tenant buyer decides they don’t like the home, neighborhood or schools and leaves the home without notifying the seller with sufficient time or leave it trashed.
Sometimes people pick a house too quickly and aren’t completely committed to a home, area or become displeased with the schools.  They chose to vacate the house without properly notifying the owner, which may also result in the property being left in subpar conditions.
So how do you, whether you’re a seller or a buyer, protect yourself in a Rent to Own agreement?  Take these precautionary steps to make sure you do not become a casualty of a Rent to Own nightmare.
Set up an escrow account with an escrow company and ensure that the company is making the owner’s mortgage payments and there is a record of every payment.
This will also require the buyer to make payments to the escrow account, which avoids the whole “Check got lost in the mail” excuse.  A third party handling the payments also allows the seller to be hands off the collection of lease payments and the buyer to not feel like they still have a landlord.
Make sure that there is a safety net clause in the lease agreement.
For instance, if a payment is late, the buyer has 30 days to make the payment or notify the seller they are forfeiting the purchase option.  Also double check the lease for any frivolous excuses for release of contract if violated.
Ensure that the agreements are all executed with witnesses and at the escrow company when money exchanges hands.
When making a down payment, make sure it goes directly into an escrow account on record so that the buyer gets credit for it towards the purchase price.  Also, understand that if you are using a facilitator, such as Loft Rent to Own, that the fees are agreed upon prior to payment.  It is also helpful to make sure there haven’t been any claims filed against the seller or the facilitator.
Verify that the seller is the owner on the deed of the property.
This can be done online at any county’s assessor office by looking up the property address and checking the owner’s name against the seller.  If you’re using a company, such as Loft Rent to Own, to help facilitate the agreement, simply verify with the seller that the company has the rights to Lease Option the property. 
Use a third party to help credit check and verify the tenant buyer to ensure that they are not a repeat offender for things like collections.
This one is a difficult one to avoid if you are doing a Rent to Own on your own.  At Loft Rent to Own, we have a program set up for all of the tenant buyers to ensure they are on the right track and there are fail safes in place if in case they run into financial issues again.
Properly vet a potential tenant buyer.
This means having them bring a substantial enough down payment, making sure they understand if they leave they forfeit the down payment, and not rush people into making a decision.  Giving buyers a few days to look over their finances with a professional, walk the property and look over all the documents (lease, purchase option, various disclosures etc.) to make sure they understand them.
And last but certainly not least, ALWAYS use an attorney if you have your own documents or go through a reputable company that has Attorney approved documents.

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Top 10 Rent Growth Markets of May 2015
Dallas-based research firm Axiometrics notes May's 95.3% occupancy rate is the highest it has been since August 2014 when the number was recorded at 95.2%.

Atlanta is the No. 9 rent growth market of May 2015.
May apartment occupancy hit 95.3% this year, according to a new Axiometrics report.
The Dallas-based research firm notes this increase is 12 basis points above April’s occupancy and a 28 basis point increase compared to last May. It’s also the highest occupancy has been since August 2014, when the number was recorded at 95.2%.
However, national annual effective rent growth was down month-over-month at 5%, compared to April’s 5.1%. Still, the metric is a big improvement on the 3.6% rent growth recorded in May 2014, and marks the fourth straight month where the figure is above 5%.
Oakland, Calif. topped the list of markets with the largest annual rent growth in May for the top 50 apartment markets, with a whopping 14.3% rent growth. In fact, the West once again dominated the rankings, with Atlanta as the only Eastern market cracking the Top 10, clocking in ninth with 7% annual rent growth. 
Here are the Top 10 metros for rent growth in May:
1.       Oakland, Calif., 14.3%
2.       Portland, Ore., 12.2%
3.       Denver, Colo., 11%
4.       Sacramento, Calif., 10.7%
5.       San Jose, Calif., 9.9%
6.       San Francisco, Calif., 9.1%
7.       Riverside, Calif., 8.2%
8.       Seattle, Wash., 7.3%
9.       Atlanta, Ga., 7%
10.   Las Vegas, Nev., 6.6%
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