Note: Connie Chronis, a Sr. Mortgage Advisor at Diversified Capital Funding in Los Altos, CA, told me that Department of Real Estate (DRE) licensed mortgage brokers are highly motivated to establish and maintain reputation and expertise as independent business owners, whereas Department of Corporations brokers typically work within a corporation such as a bank, and may be quite inexperienced. Although DRE mortgage brokers have a real estate license, they do not generally act as a realtor in a real estate transaction–DRE mortgage brokers focus on lending. Connie noted that First Home, Inc. may not have had access to top tier lenders. She recommends working with an independent broker with an excellent reputation who can provide access to the best products.
Heather is delighted to be the proud new owner of a charming Victorian home in San Jose.
As Four Pillars notes in 5 Ways To Make (Or Lose) Money With Investment Properties – Part 5 – Buying at a Discount, you can sometimes get a killer deal if the home is in awful shape.
Located on a quiet, tree-lined street near the Guadalupe River, Heather’s new home has been damaged by multiple floods since 1902, when the 888 sqft 2-bedroom 1-bath home was built. The lot size is 3120 sqft, small but just big enough for a back garden.
The seller, an elderly woman without adequate funds to repair or renovate the home, was experiencing some health problems and needed to sell the home as soon as possible to be able to move to Sacramento and live near her son Peter.
Peter, who read For Sale by Owner in California, helped his Mom advertise the home on HomesByOwner.com for sale at $200,000. The house has a musty smell, and Heather’s new boyfriend Frank, a teacher who enjoys doing carpentry as a hobby, thinks there might be some considerable dry rot in the framing, but Heather fell in love with the house immediately. She initially offered a low ball price of $100,000; after multiple counter offers she and the seller settled on a price of $145,000.
Heather makes a modest salary as an administrative assistant in the Admissions office at Santa Clara University and was worried about qualifying for home financing. Frank told her about a Peninsula home-buyer seminar he attended in 2004 with a teacher friend of his. Mr. Walter Zhovreboff, President of First Home, Inc., explained his company’s program for helping Bay Area first-time home buyers with limited means obtain home loans. Frank was able to buy a Condo in 2004 with help from First Home, Inc. Then, facing some unexpected financial challenges, he sold the Condo in 2006 for a profit, most of which was wiped out by Realtor commissions, loan prepayment penalty and other payoff and settlement charges. And, to top it off, because he didn’t hold the property for 2 full years, he had to pay tax on his capital gain. Not the happiest outcome for Frank, but he still thinks Heather might benefit from contacting First Home, Inc.
Heather did some Googling, and sure enough, Mr. Zhovreboff appears in lots of Bay Area newpaper articles, just recently gave a Seminar to help first time home buyers learn about assistance in the City of Alameda, and has a public-service web site.
Then something funny happened. She clicked on the link for the partners page and tried to click through to the link for First Home, Inc, but a Firefox Alert dialog popped up with the message The URL is not valid and cannot be loaded. A little more Googling on the agency name Bay Area HomeBuyer Agency produced a link to a recent report of the City of Pinole Redevelopment Agency in which, Bay Area HomeBuyer Agency is listed as a DBA of East Bay Delta Housing Finance Agency, and noted in the Background section as administrator of the Pinole Redevelopment Agency’s First-Time Home Buyer Program. Hmm. Heather searched for the Bay Area HomeBuyer Agency using the California Secretary of State Business Search portal and discovered that the East Bay Delta Housing Finance Agency Corporation has been suspended.
Super curious, Heather tried the Multiple Department License Lookup for the Department of Corporations, Department of Financial Institutions, Department of Real Estate and the Office of Real Estate Appraisers and found the Department of Real Estate license for First Home Inc and a link to the Real Estate Broker license for officer Walter Zhovreboff.
In California, you can be a real estate broker who is also a mortgage broker, but the rules are different depending on which CA agency issues your license. As a Department of Corporations licensed mortgage broker you’re restricted to working with lenders who hold a California Finance Lenders license, but as a Department of Real Estate licensed mortgage broker, you don’t have this restriction.
Heather wondered what lender provided Frank’s loan and what were its terms, so Frank pulled the lender disclosure papers on file at his apartment: the lender was First Franklin Financial Corporation in Campbell, CA. She dialed the phone number listed and got a message that it has been disconnected. Googling produced the link First Franklin Financial Corporation Headquarters, that makes another Firefox Alert dialog appear with a message about an invalid URL.
First Home, Inc. probably isn’t working with First Franklin Financial Corporation anymore, which is a good thing, since the loan terms weren’t particularly friendly. For example, even though Frank provided a 20% for a down payment, had a great credit score and makes a decent salary as a high school math teacher, his loan was an interest-only (IO), adjustable rate mortgage (ARM) with a prepayment penalty and rate increases tied to the London InterBank Offered Rate (LIBOR). For this deal, he paid a 1% origination point and $350 processing fee to First Home, Inc.
If this is an example of helping a first-time home buyer, no thanks. Heather did some shopping using mortgagequotes.com and with her 20% down payment ($25,000 from Jack and $4,000 from Kate and Ben), reliable employment and clean credit history for two years, was able to qualify for a 30-year fixed rate loan at a competitive rate with no points and low fees.
She plans to devote all of her free time to restoring the home as an owner-builder, with the ultimate goal of either renting or selling it for a profit, but meanwhile living in it as her own home so that she can experience and appreciate its charm.
Holly is finding it hard to picture Heather in her new leather tool belt and dust mask tearing plaster off walls and working with Frank to re-frame sections of framing with dry rot, but they seem pretty excited about it and can’t wait for her to come visit. Meanwhile, she’s on her way to San Francisco to visit Jack’s sister Sarah and talk about the pros and cons of converting her traditional IRA to a Roth.
Stay tuned for upcoming Financial Organizing Soap Opera Episode #5: Paris-Shoot.
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Good point about which broker and real estate agent to hire. As I get ready to purchase a house next year, I’m hoping I can qualify for a loan through my teacher pension with CalStrs. I was told by other teachers that they have a first time home buyer program and really low interest rates, it’s also easy to qualify through them. Though, I won’t really know until I go through the process.
thanks for the post!