Lodi experts offer tips for home buyers

By Jessica A. Hardy
News-Sentinel Staff Writer

For a first time home buyer in Lodi, the words “affordable” and “housing” may not seem to go together.

Yet Lodi’s future is dependent upon first time homebuyers and their ability to jump into the market.

“It is a wheel,” said Randy Heinitz, the chair of the Lodi Planning Commission.

“You need first time buyers to buy that entry level house, which will gather equity so that they can buy the next slightly higher priced house; the wheel must keep turning,” he said.

But what do first time buyers need to look for beside a house that fits into the budget?

What about Realtors, real estate agents, lenders, interest rates, points, mortgage options, loans, equity — the vocabulary of the business is overwhelming by itself.

Fortunately, the business is not totally impenetrable.

The Realtor’s role

One thing a first time homebuyer must know, is the difference between a Realtor (not real-a-tor) and real estate agent.

According to Vicki Jenkins, the president of the Lodi Association of Realtors, both categories have a license from the state Department of Real Estate, but a Realtor is also a member of the National Association of Realtors and has a stricter code of ethics than a real estate agent.

Larry Underhill of Statesman Realty says it is imperative that a first time buyer finds a reputable and trusted Realtor.

“Because first time home buyers require more effort, attention, and explanation, they are more of a challenge for less patient Realtors,” Underhill said.

“I would instruct first timers to get references for an agent by talking to friends, family, and people they respect,” he said, adding that once they get that referral, they should stick with their Realtor unless they feel belittled, rushed or manipulated.

Jenkins also agreed with the idea that a home buyer should have only one Realtor working for them, because this allows that Realtor to do their job for their client more efficiently.

Rose Lazzaro, a Realtor for Schaffer Suess and Boyd, mentioned that most people don’t realize how much paperwork is involved in buying a house.

“There is the buyer, seller, lenders, inspectors, and if there is a disagreement or discrepancy between any of the parties, we negotiate. A Realtor will save you a lot of headaches,” Lazzaro said.

Rick Woodward agrees. He said that when he and his wife bought their house in Lodi in 1996, it took about an hour and a half just to sign all the paperwork.

According to Underhill, a Realtor’s primary job is to listen to the buyer, connect the buyer to a reputable lender, and advise the buyer concerning their practical options.

“A good Realtor will not be a sales man or woman. Instead he or she should arm the buyer with options, so that they can make a reasonable and informed decision,” said Underhill.

Who pays a Realtor? Jenkins said that both the buyer and seller potentially pay commision and the commission amount is negotiable, as well as how the commission is split up. For the most part, ultimatly commission will be split in four ways between the broker of the Real Estate company and the seller’s agent, and the buyer’s agents and the broker of his or her company. Commission also goes to pay office expencese, which change from company to company.

A loan and the lender

There are almost as many different loans as there are people.

The specific interest rates and initial points (the one-time payment that can be used to lower interest rates on a mortgage) of the loan, all depend upon the credit score of the individual, length of residency and employment, the average income in the county, and the neighborhood of the house.

According to Dan Freeman, a client manager for the Bank of America, to get a decent loan, one must have a credit score of at least 660-665. A score above 720 is very good.

Jenkins said that is it very important a buyer gets a pre-approved loan as opposed to a pre-qualified loan. Being pre-qualified usually only requires a small amount of paperwork and running a credit check. To be pre-approved requires a more strenuous pile of verification, from specific job salary information to tax data.

Freeman said it is normal for a client to have to pay 20 percent of the cost of the house as a down payment to avoid an additional charge. He also mentioned that a down payment should be money that has been saved and that it is common for many first time homebuyers to get help from their parents.

Local Realtors and loan officers agreed that the buyer must not only find out the cost of the down payment and monthly payment that the new purchase will incur, but additionally the added costs of taxes and insurance.

Scott Wilson, a loan officer for the Bank of America, said there are some loans that allow zero money down. However, even these loans require a payment for closing costs. For instance, a $200,000 house with a zero down loan, will still incur a cost of about $4,000 dollars to close the deal.

When a buyer qualifies for a loan, they must also decide the time frame in which they will pay it off. Freeman recommended that first-time home buyers should give themselves a 30-year time period, as this will be the lowest monthly payment and probably closer to what the buyer is used to paying in rent.

Special loans for first-timers

In addition to regular loan assistance, there are several other options in Lodi for low-income individuals and families who want to buy a house for the first time.

The GAP Loan program provides down payment assistance through money from a grant issued by the county. The “GAP” refers to the financial distance between the cost of a home and the payment that a low-income family can afford. It provides a low interest loan, with about a 2 percent interest rate, of either 20 percent of the sales price of the house, or $20,000.

The GAP loan does not limit participants to a particular area in Lodi, but it does require that the house decided upon be inspected by the city of Lodi and San Joaquin County.

Even though the inspections are strenuous, they are a safeguard for the buyer and the investment of the city. According to Joseph Wood, the community improvement manager for Lodi, the inspections might unduly cause some Realtors to shy away from representing GAP loan recipients.

“Just because a buyer uses a GAP loan, doesn’t mean the city will harness the seller with tons of extra expense. Remedies cam be reached, especially when the buyer qualifies to receive additional federal assistance to help with upgrades,” Wood said.

According to Wood the city has provided over $500,000 to 33 first time home buyers since GAP’s beginning in 1997.

Another option for low income citizens is the Individual Development Empowerment Account (IDEA) Grant, sponsored by Farmers & Merchants Bank.

The program is different from the GAP grant because it matches three dollars to every one dollar saved by the household in need. This means that if the household has saved $3000 for a down payment, with IDEA they would have $9000 toward their goal.

To qualify, the household must meet certain income requirements, open a savings account dedicated toward their goal, and successfully complete a Family Self-sufficiency Program which provides counseling, career guidance, and financial management training.

According to Keith Land, vice president and community development officer at F&M, the Lodi F&M branch sets itself apart from other banks participating in the IDEA program by not requiring that the recipients get a loan through their bank if they find a better rate elsewhere.

To date, about $124,000 has been distributed to 13 families in the Lodi area.

Affordable housing: Myth or fact?

Realtors, developers, city officials and others all agree that there is a high need for affordable housing in the city of Lodi.

This is made more evident by the fact that only 54.4 percent of the citizens of Lodi own a house — the second lowest percent out of the 17 cities in the county.

Land, who recently attended a meeting for the San Joaquin Council Government, was shocked at these and other statistic he heard concerning the city of Lodi’s profile, including the fact that according to the 2000 census, Lodi had a poverty rate of 16.7 percent, only slightly lower than Stockton’s poverty level.

Affordable housing is needed, but what is being done?

Tim and Vicki Dougherty have been looking to buy a house in Lodi for the last couple of years.

“Even though I have perfect credit, I’m a professional, a college grad, and I make a decent salary, I still don’t feel like I make enough for a house payment,” Tim Dougherty said.

Vicki Dougherty, who works part-time and takes care of their two children under the age of six, said she is also frustrated about their situation.

“We started looking for houses in 1996. The house that was $117,000 in ‘96, is now $230,000. We feel priced out of the market,” she said.

There is hope, but it may require patience.

Lazzaro is on a committee through the Lodi Board of Realtors to get affordable housing for first time buyers and Lodi seniors.

Heinitz says that one of the reasons Lodi’s housing market is so hot, is because of the price of the soil and a 2 percent growth cap embraced by voters a number of years ago.

He recommends that new time buyers get an older house, fix it up, and develop sweat equity, which is the increase in the value of a house due to improvements by owners.

Dennis Bennett, a developer in Lodi and the surrounding areas, said that the price of land and the impact fees make it almost impossible to build affordable housing to meet the needs of Lodi.

“I believe it will take a public/private partnership to create new and affordable housing,” he said.

Bennett said that even in areas where affordable housing is proposed in Lodi, especially in the older parts of town, costs go up because of shortfalls in the infrastructure, meaning basic water and power lines need to be repaired or replaced before building takes place.

Old or new?

In Lodi, first time buyers might only be able to afford used homes that require many repairs.

Ann Hughes bought her house on Central Avenue 14 years ago, and she is still working on it. However, she appreciated the fact that, even though her house was a fixer-uper, the foundations were very solid and she could be creative in her renovations.

“I am an artist and a teacher, and as such I appreciate the creativity I can have with my home,” she said.

Jana and Darin Schoch bought their 1965 vintage house in March of 2002. It took Darin Schoch seven months to find a house because as soon as he found a house he wanted to make an offer on, there would be bidding wars between 5-6 people who offered to pay $50,000 above asking price, sight unseen.

Finally when they found a house, they discovered dry rot in the bathroom.

As a result Darin Schoch recommended that first-time home buyers of old houses pay top dollar for inspections, in order to save money in the long run.

“Also, I’d recommend that a 1st time buyer made sure their house had dual pane windows for a more energy efficient house,” he said.

Buyers who don’t want to worry about all the fixing up might consider a new house as all the components in a new house are unused, warranted and more energy efficient.

Bennett says that upgrades, options, and the latest electronic equipment are the things that drive prices to considerably high levels for a new house.

“A home can have from $10,000 to $ 55,000 worth of upgrades depending on the size and initial price, and needs and desires of the potential homeowners,” he said.

Regardless, there is hope for the first time homebuyer.

Jenkins encourages buyers to ask questions and more questions, and be willing to wait for the right house.

“Currently there are 125 active listings in Lodi. While less than 20 of those are in the $200,000 and under price range, they are still there. Patience is a virtue,” she said adding that anyone looking for a house for the first time must do their homework, go to open houses, and watch for the right opportunity to come along.