The Truth About Danville’s Affordable Housing Plan

Now the downtown Danville’s redevelopment is officially underway, let’s revisit Danville’s controversial affordable housing plan. Rumors are spreading that affordable housing will open the floodgates to drugs, crime, and an unsafe downtown. However, if we look at what “affordable” actually means, you can see that these rumors are completely unfounded.

First, remember that the State of California requires that a portion of new development in all towns be “affordable,” and they will withhold critical funding if towns like Danville don’t comply. The Department of Housing and Community Development sets the necessary income targets based on the median income for the county.

For both Alameda and Contra Costa Counties, the median income (for a 4-person household) in 2012 was $93,500. Here is a link to their official PDF that explains their methodology and gives data for all counties.

alccmedian

The best way to understand the income requirements for affordable housing in Danville is to look at  what’s already happening in Dublin. They have the same median income, so Danville’s requirements will likely be very similar.

Affordable Housing In Dublin

The City of Dublin has a page on their website that explains their affordable housing program:

In general, the City of Dublin’s Inclusionary Zoning Ordinance requires that 12.5% of the units constructed in a residential development project of 20 residential units or more be restricted in occupancy and in sale price or rent charged. Such restricted units are referred to as Below Market Rate (BMR) units.

For units being sold, 60% must be affordable to moderate-income households and 40% to low-income households.

For rental units, 50% must be affordable to moderate-income households, 20% to low-income households, and 30% to very-low-income households. (Section 8.68.030.B)

That page also details affordable housing programs for seniors, including senior citizens on fixed incomes.

In Dublin, 12.5% of all new units must be affordable. Given Danville’s 9.6 acres in question, that might end up being around 30 actual affordable units downtown.

The income requirements for affordable housing in Dublin are higher than most people are assuming. One of the developments on the city website is Chateau at Fallon Crossings, described as:

Standard Pacific Homes is currently offering two 3-bedroom Below Market Rate (BMR) Units and two 4-bedroom BMR units for sale to qualified households of 3 – 8 persons.

Standard Pacific Homes is accepting applications for one Low-income and three Moderate-income* households.

Here are the actual income and credit requirements from the PDF:

income

Here, “Low-Income” means a family of four with an income not to exceed $65,350 and the affordable “Moderate” income would not exceed $112,200.

Got that? Most of the “affordable” housing will still go to families earning six figures.

Let’s look at affordable housing in Toll Brother’s high-end Terraces development:

Toll Brothers is currently offering 2-bedroom Below Market Rate (BMR) Units for sale to qualified households of 2-4 persons.

Toll Brothers is accepting applications for Moderate-income* households.

terraces

That’s right, a family of three could qualify with an income up to $101,000.

It’s also worth noting that the applications are tedious and thorough… most who apply won’t be accepted.

Affordable Housing Income Requirements For Danville

Using Dublin to approximate, the proposed affordable housing in Danville will generally be sold to families with incomes between $60,000 and $120,000 per year in today’s dollars. Some, no-doubt, will be sold to retirees (and, yes, I’ll be putting my mother on that list as soon as it happens).

These are not Section 8 renters. Or crack dealers. Or criminals. An additional 30 or so families in this income bracket isn’t going to destroy our schools or property values.

People around town are up-in-arms about the idea of low-income housing in Danville, but I doubt that many of them actually understand what that means. It still takes a huge salary to be able to afford “affordable” housing around here.

If you are opposed to Danville’s 2030 General Plan for other reasons, fine. Or if you are unhappy with the fact that ABAG and the State of California can influence Danville’s growth, this is a reasonable debate to have.

But, if you are one of the many who are freaking out about all of the poor people who may move here, then the numbers above should calm your nerves. Or, to think about it differently, lots of households in town already make below these limits. The poor people are already here.

If you know of anyone in Danville who is concerned about how affordable housing might impact our downtown, please share this post with them.

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6 Reasons Why Your Offers Keep Getting Rejected

Let’s take a look at the 6 reasons why your offer isn’t getting accepted in this booming, multiple-offer market.

1. Ignoring the Market

First off, you need to have a reasonable idea of what to expect before you even consider writing your offer. Take a look at the last few sales in the neighborhood… did they all sell right away? Did they sell for more than the list price? Were there multiple offers? Are there several homes for sale, or just the one you want to bid on?

A few minutes of research can give you a reasonable idea of just how competitive the bidding will probably be for the house.

Too many Buyers are bidding as if they are the only Buyer. You’ve got to respect your competition to have a chance to beat them.

2. Ignoring Their Own Weaknesses

Every Buyer has weaknesses. In a competitive market, you’ve got to set aside your ego and honestly assess yours.

For example: Are you getting a mortgage? If so, you’ll be less-desirable than an all-cash buyer. Meaning, you’ll probably have to bid a little higher than the cash offer to get your’s accepted.

Are you an FHA or VA buyer with a small down-payment? You’ll probably have to pay even more of a premium to be worth the risk.

Are you a contingent buyer? Or needing a long escrow? If the appraisal comes in low, do you have the extra cash to make up the difference?

Take a few minutes to think about why a Seller would not want to accept you. You and your agent have to either solve those problems before you write the offer, or you have to write an offer that specifically compensates for your weaknesses.

3. No Rapport With the Listing Agent

If there will be multiple offers, you need the listing agent to be your advocate. It is critical that your agent be professional, respectable, and present both themselves and you as competent and serious.

The Sellers are the ones who make the final decision, but they are usually looking to their Listing Agent to give them guidance and recommendations.

If, for example, there are ten offers on a property, the Listing Agent is probably uncomfortable with five of them just because of things the Buyers’ agents did or didn’t do. Everything else being roughly equal, these Buyers have no chance of getting the Listing Agent’s recommendation.

The Sellers are looking for the highest price from a Buyer who will actually perform and close the deal. It’s your agent’s job to make sure the Listing Agent believes you will absolutely close and without hiccups or drama.

4. Focusing Too Much on the List Price

Remember, the list price of a home is an arbitrary number they may not accurately reflect the market value of the home. It’s not the price the Sellers want, it’s the value they listed their property for to hopefully get them the highest price.

Buyers commonly assume that the best strategy is to offer the Seller full price and then wait for a counter. I have two clients who did this within the last week and they didn’t even get a counter back.

Consider that every other bidder knows that there are multiple bids. Some will bid full price and hope. Others will bid higher right out of the gate, which sends a clear message that they are more serious and more in love with the house than the full-price bidders.

If a Seller is getting 5-10 offers and 2-3 of those offers stand out from the rest, they will be the ones to continue negotiation and the others will be rejected. To get your offer accepted, it is critical that you make it to “round two” of negotiation, and simply offering full price may not be enough to get you there.

5. Poorly-Written Offers

There are a lot of important parts of your offer besides the price. Too many Buyers write the terms that they would like, or simply leave in the default terms. Other Buyers correctly use offer terms as a way to make their offer stand out from the pack.

Try and write all of those terms as the Seller would want to see them. In other words, don’t give the Seller anything they’d need to counter except for maybe price. This makes you look reasonable and accommodating.

For example:

  • Close in 30 days (only longer if it’s what the Sellers wants)
  • Offer extra time after close for the Sellers to move out. Or even an inexpensive rent-back for longer time-periods.
  • Put down a large deposit (closer to 3% in CA)
  • Shorten your Inspection Contingency from 17 to 10 or even 7 days
  • Equally shorten (or even remove) your Loan and Appraisal Contingencies
  • Do not ask for the Sellers to pay for inspections
  • Consider and increased deposit
  • Include or exclude items from the sale (refrigerator, washer/dryer, etc.) as the Seller would like
  • Make sure that all of the costs are split as would be customary for the area
  • Anything else that the Listing Agent indicates would be appreciated

Also, be sure that your pre-approval letter is rock solid. Many basically indicate that the lender has pulled a credit report and looked at the application, but these are weak letters. Yours should say that you lender has also verified employment, verified funds to close, reviewed bank statements, etc. The stronger the better.

6. Bungling the Negotiation

Let’s assume you are savvy enough to have made it to “round two” of the negotiations – meaning you are actually getting a counter offer and not getting rejected right away. If you’ve made it this far, you’ve got a chance… and this is where a lot of Buyers screw things up.

First off, did the Sellers counter just you? Or did they counter several Buyers? Your agent should try and figure out how many Buyers received counter offers and sometimes the Listing Agent will even tell you if all of the counter offers were for the same price and terms.

Most of the time, there will be multiple Buyers receiving counter offers at roughly similar price and terms. This is where the winning Buyer typically steps up and not only accepts the counter offer, but offers back to the Seller at an even higher price. Depending on the situation, this may not be necessary. But the more bidders there are, the more likely someone is to step up and up their bid.

Losing Buyers commonly:

  • Drag their feet with their reply (the longer you wait to answer, the less-enthusiastic you look)
  • Counter back at price below the Sellers’ counter.
  • Accept the Seller’s counter when other Buyers are probably re-offering more.

But Doesn’t This Mean You Are Overpaying?

A property is worth what someone else is willing to pay for it. If there are multiple offers on a home, clearly there is a strong market for it and you could probably sell it immediately for the price you paid.

That being said, could the appraisal come in low? Yes. Which, is why many Buyers are removing their appraisal contingencies from their offers.

To be clear, I’m not saying that I’m a fan of all of this. This market is as frustrating to the agents as it is for our Buyers. But this is the market we are in and if you want to buy a home in a competitive neighborhood today, these are all factors you should consider.

If you are looking to buy a home in Danville or the surrounding areas, please call me at 925-212-2908 and I’d be happy to help. If you are elsewhere in the Bay Area, please find the agent on this blog from your area.

And, if you know a frustrated Buyer who has been making any of these mistakes, please forward this article to them and hopefully it will help.

When To Lock-In Your Interest Rate

Here is exactly what you need to know about when and how to lock-in your mortgage interest rate.

A mortgage interest rate-lock is when your lender commits (in writing) to give you your mortgage at a given rate, even if market rates rise before the loan is funded. They are taking a risk, so they charge a fee of anywhere from 1/8-1/2 of a point for the security. A “point” is a one percentage of the amount of the mortgage. Shorter locks (15-30 days) are more expensive than longer locks.

You don’t have to lock-in your rate. Many buyers don’t and that’s perfectly fine. However, if you really need to ensure a cap to afford the home, or you are worried that even a slight rise in rates would make you unhappy, then you should strongly consider paying a little extra to lock-in your interest rate.

Step 1: Get a House Under Contract (this is getting harder and harder recently).

Don’t even worry about locking in your interest rate until you’ve secured a property.

Step 2: Price it Out.

Ask your lender for a quote to lock-in your interest rate through the close of your transaction, adding a little extra time for possible delays. 30-45 day locks are the most common.

Remember, they are “selling” you an extra feature. It’s not as bad as undercoating on a car, but it is an optional add-on. Be sure all of your questions are answered.

Step 3: Inspections and Disclosures.

Your rate-lock will expire in 30-60 days, so essentially it only applies to this property. Don’t stress too much about locking-in rates until you are very sure that there aren’t any “deal-breaker” problems with the house. You should know this within a week or 10 days from getting into contract.

Step 4: Lock-In Your Interest Rate.

Once you are sure this is the house and you are happy with your quoted rate and costs, go ahead and lock in it. Your window to lock in your rate starts when you are sure this is the house, and ends about a week before close (to give your lender time to process). For most buyers, this is roughly a 10-day window.

Your lender will provide you, in writing, with a document detailing your lock, the cost, and the expiration. If it’s verbal, it doesn’t count.

Common Confusion

You don’t need to lock a rate before securing a property.

If a rate lock expires, you can’t get it back.

If interest rates go up, you win. But if they go down, you have to pay more for the right to drop your rate. This is a “float-down” clause that adds to the cost of your initial lock. Be sure to ask about this when you get your initial quote.

Finally, you aren’t required to lock-in your rate. Explore it, and weight the pros and cons, but know you don’t have to lock in your mortgage rate.

In Your Neighborhood. In Your Corner.