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When it comes to extravagant housing, traditional mortgage rules don’t apply

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By Tiffany Hsu for Los Angeles Times | Read the original article here

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Paying for an average home is a rough process — a hefty down payment can wipe out savings, the paperwork feels endless and the mortgage often lasts decades.

In the upper echelons of the Southland residential real estate market, financing isn’t much easier — it just involves more eager-to-please private bankers, vast reserves of cash and massive, multimillion-dollar loans.

Los Angeles is the fifth most important center of wealth in the world, based on the current and projected population of well-heeled residents, the value of property investments and connectivity to other global hubs, according to the most recent wealth report from British consultancy Knight Frank. Only London, New York, Hong Kong and Shanghai rank higher.

Prices in the city’s luxury residential market ballooned 5.3% from 2015 to 2016 — the largest increase in the U.S. behind Seattle’s 9.7% upswing, according to the report.

Nationwide, the median price for a luxury home at the end of July was $1.6 million, according to the Institute for Luxury Home Marketing. In Los Angeles, it’s nearly $4.1 million.

Most high-end buyers in Southern California are locally based, although many hail from abroad.

“The buyer of the $10-million-plus property comes from everywhere,” said Stan Smith, managing director of Teles Properties, a Beverly Hills-based luxury real estate brokerage. “Aside from the occasional headline-grabbing uber-celebrity, most purchasers are people you’ve never heard of.”

In this market, cash is king. So far this year in Los Angeles County, excluding Beverly Hills and West Los Angeles, 35% of homes priced $2 million or higher were purchased using all cash, according to Multiple Listing Service data provided by the California Assn. of Realtors. 

But when rich home buyers don’t have the liquidity to purchase their homes outright, many turn to massive mortgages known as jumbo loans.

The average borrower commonly uses a so-called conforming loan, which is backed and capped by the government. For most of the country, the limit is $424,100, but in pricey Los Angeles County, the maximum is $636,150, according to the Federal Housing Finance Agency.

Jumbo loans exceed the mortgage amount that Fannie Mae and Freddie Mac will purchase from lenders. Many experts blame the financing tactic for helping to enable the housing bubble by encouraging extravagant property purchases.

But in recent years, interest rates for jumbo mortgages have bucked expectations, said Lynn Fisher, vice president of research and economics for the Mortgage Bankers Assn.

“Historically, conforming loans are more liquid and are backed by government agencies, so from a supply-side point of view, they’re easier loans to make,” she said. “But since the crisis, we’ve seen a phenomenon where jumbo rates are as low and sometimes lower than conforming.”

Lenders have loosened the spigot for jumbo borrowers. Credit supply for jumbo loans surged 2.7% in July from the previous month, compared with 0.3% for conforming loans, according to a credit availability index from Fisher’s group.

High-net-worth home buyers are attractive to lenders because their substantial income and assets make them appear to be less of a default risk. And many banks offer the loans to entice premium clients.

“There’s a lot of advertising, a lot of competition to provide these loans right now,” Fisher said.

Still, from origination to payout, the jumbo-loan process can be vexing, especially for borrowers whose wealth is spread across different types of income, investments, inheritance and assets. Documentation is often extremely complicated.

“A lot of these borrowers can’t walk into a traditional bank and get a $5-million loan,” said Brandon Boyd, an executive mortgage consultant with Encinitas lender Drop Mortgage. “It’s hard for a bank lender to pull back and understand that income.”

Boyd said his company uses a more specialized approach, considering financial factors that might elude a bank relying on an automated screening system. In addition to common mortgage products, Drop also offers customized jumbo loans of up to $15 million.

Many clients — including entrepreneurs, film producers and athletes — aren’t focused on their day-to-day financials, resulting in less-than-stellar credit scores, Boyd said. Or they’re willing to pay a premium to protect their privacy by closing a sale through a limited liability company, which is prohibited for Freddie Mac and Fannie Mae mortgages.

Drop’s loans — most of which fall between $800,000 and $2.5 million — comply with government regulations and have yet to result in a default, Boyd said.

“It’s not irresponsible lending at all — it’s an alternative space, but it’s not the subprime of the past, not by a long shot,” he said.

The Hollywood Reporter: Kofi is one of Hollywood’s top 30 real estate agents

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By Peter Kiefer | Read the original Hollywood Reporter article here

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Ten years ago, Nartey asked his former college teammate, star NFL tight end Tony Gonzalez, to do him a solid. “He was one of the first people I reached out to, and he gave me a shot at selling his house in Manhattan Beach,” says Nartey, himself a ex-standout wide receiver at Cal who has emerged as the “go-to” broker for a growing pool of pro athletes seeking to buy or sell in L.A. Last year, the 3-year-old Compass poached Nartey from The Agency and tasked the Pepperdine MBA with launching a sports and entertainment division, which now has more than $100 million in active pocket listings. Having worked as an actor for nearly a decade after college (he’s appeared on True Blood and Modern Family), the father of two brings an understanding of both Hollywood and sports.

In August, he sold NBA player Nick Young’s six-bedroom Tarzana home for $3.2 million, and he’s in escrow on former Laker Derek Fisher’s Hidden Hills six-bedroom for $6.2 million. He also holds the listing for comedian Steve Oedekerk’s $10 million home in San Juan Capistrano. “The thing you want when dealing with a broker is inside information, and Kofi’s knowledge of pocket listings and off-the-market properties is second to none,” says Black-ish showrunner Kenya Barris, who hired Nartey to help him lease a home previously owned by Golden State Warriors star Andre Iguodala. “He’s also a cool-ass dude.”

With the arrival of two NFL franchises, a stadium rising in Inglewood and the recent deal for L.A. to host the 2028 Summer Olympics, more sports figures are looking to buy here. But in addition to “baller pads,” athletes need proximity to training facilities, which has Nartey and his team studying markets that range from Calabasas to the South Bay. “We now have a collective of 40-plus agents who are sharing ideas and best practices on how we can service clients and work better with business managers,” says Nartey. “We just get it better than everyone else because we’ve built a specialization around it.”

LA Times: Former Laker Derek Fisher scores a $6-million home sale in Hidden Hills

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By Neal J. Leitereg | Read the original article here

Derek Fisher, the former Lakers point guard and five-time NBA champion, has sold his home in gated Hidden Hills for $5.95 million.

The Traditional-style estate, built in 2007 and customized during Fisher’s ownership, features such personal touches as Venetian plaster walls and hickory wood floors. Modern chandeliers create visual interest in the two-story foyer and living and dining rooms.

A wood-paneled den, executive office, screening room, six bedrooms and eight bathrooms also lie within more than 9,400 square feet of living space. An over-the-top kitchen large enough for a pickup game is equipped with two islands, marble countertops and warming and cooling drawers. An elevator services both floors.

French doors open to a flagstone patio that surrounds the swimming pool and spa. A guesthouse, outdoor fireplace, lawns and formal landscaping fill out the backyard. Elsewhere on the acre-plus property is a two-stall barn.

Kofi Nartey of Compass and Jordan Cohen of RE/MAX Olson & Assoc. were the listing agents. Nartey represented the buyer in the sale.

Fisher, 43, paired with Kobe Bryant in the Lakers backcourt on multiple championship teams coached by Phil Jackson. After retiring in 2014, the former point guard reunited with Jackson, then the president of the Knicks, when he was named head coach of the New York franchise. He was let go from his position last year.

He bought the house in 2009 for $5.5 million, The Times previously reported.

TRD forum: The state of LA’s luxury market, according to top brokers who live and breathe it

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Written by Natalie Hoberman | Read the original article here

Angelenos are no stranger to high price tags, but with the Chartwell home listing for a record $350 million, has the bar been raised cartoonishly high?

Talk of Mr. Gucci, clients demanding bulletproof windows and the record-breaking Playboy mansion sale were among the topics that bounced around the Bank of America Plaza auditorium at The Real Deal’s first Los Angeles forum, where residential industry leaders came together to discuss the state of the market.

With a massive influx of global capital flowing into L.A., the city has become a luxury destination to rival the likes of New York and London, brokers said. But how much is too much, and how can brokers and developers stay realistic?

“The agents are telling developers what they want to hear and not what the reality is,” said Mauricio Umansky, co-founder of the Agency. Umansky said that when there was such a disconnect between asking prices and what buyers will pay, even a massive sale will end up looking like a defeat.

“When you hear that a $300 million house ends up selling for $100 million, the news is that you sold it for $200 million less,” he said.

“The luxury market is very fickle,” said Ben Bacal of Rodeo Realty, who said buyers want an increasingly demanding list of home features that includes bulletproof windows. “Los Angeles is coming up, but it’s slow.”

Rather than selling the “tangible value” of a property, listings are “selling the sizzle of L.A.,” said Kofi Nartey, who heads Compass’ sports and entertainment division. “We’re seeing a lot of these properties being priced [high] as a marketing strategy.”

Read the full article here

Kofi quoted in Private Wealth Magazine

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A Penthouse Too Far?
Written by Leila Bouton | Read original article here

Manhattan’s iconic “Billionaires’ Row” is known for establishing new benchmarks in both the luxury and price of real estate. Now, the toniest residential area in New York City—with its ultra-exclusive condominium towers offering breathtaking views of Central Park—is experiencing its first-ever foreclosures.

Two recent lender suits against defaulting owners at luxury high-rise One57 (157 West 57th Street) have stirred concerns about the outlook for the Big Apple’s luxury residential real estate market. Are these foreclosures early warning signs of a bubble, perhaps global in scope, that could soon burst?

Donna Olshan, president of high-end Manhattan brokerage Olshan Realty, doesn’t think so. She says the recent foreclosures at One57 are isolated incidents involving borrowers who got into trouble, not indications of a coming market meltdown.

Instead, Olshan says current soft prices are partly the result of excess inventory caused by the overbuilding of expensive condos. “At $10 million and above, inventory is growing. We had too much building on the uber-luxury end of the market. Things under $1 million fly and things over $10 million are sitting,” she says.

Overpricing by sellers of luxury properties is largely responsible for stalling transactions at the top of the market, says Olshan, a 37-year veteran of the New York real estate market. “Real estate is an efficient market. If it’s not priced correctly, it won’t sell. People either remove their property from the market or they lower the price and sell it.”

Click to read entire article at fa-mag.com

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