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Homeownership

Zuckerberg’s initiative helps teachers to buy homes

(HOMEOWNERSHIP) If any of your clients are teachers, you should know about the Landed program that pays it forward.

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CZI investments

The Chan Zuckerberg Initiative (CZI), the $45 billion philanthropy vehicle created by Mark Zuckerberg and his wife, Priscilla Chan, has recently pledged $5 million to Landed, a Y Combinator startup dedicated to helping educators buy homes.

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The most recent in a number of programs seeking to assist educators with the ever-increasing housing prices in the San Francisco Bay Area, Landed seeks to connect investors with educators that would otherwise be unable to afford a house on their own.

First things, first

The startup offers to pay up to half of the standard 20% down payment required to purchase a house featuring zero interest or monthly payments for the buyer aside from the mortgage.


graphic courtesy of TechCrunch

Instead, Landed makes a return on its investment whenever the homeowner decides to sell or refinance the house, taking a cut of up to 25% of the appreciation or depreciation of the home’s value.

It also makes money in the meantime by taking a cut of the standard realtor referral fee, who in turn pay nothing extra for using Landed’s services.

Being a lifelong Bay Area resident and the son of an educator, I can assure you that it’s a pretty sweet deal. Not that it’s much easier around the rest of the country, but finding housing in the Bay Area on a teacher’s salary is no joke.

How it works

After applying online, educators are paired with a lender who then determines whether or not they qualify for a mortgage. If approved, they are then linked up with a real estate agent that helps them find a home.

Once they have found a home, Landed pays up to 50% of the down payment in return for its equity stake in the house.

Viewing Landed as a “stair-step to ownership,” CEO Jonathan Asmis hopes that educators helped by the startup will earn enough from the home’s appreciation to purchase their next home without assistance.


graphic courtesy of TechCrunch

Paying it forward

CZI’s $5 million pledge to Landed will help roughly 60 educators working at schools near Facebook’s headquarters in Menlo Park afford down payments on homes.

Any money earned if the homes appreciate in value will be put back into CZI’s fund for Landed to help future educators.

According to a post on CZI’s Facebook page, their “hope is that [their] partnership with Landed will help create a sustainable model to help make home ownership a reality for more educators and others at risk of getting priced out of the communities they serve.”

Diversifying the portfolio

Thus far, CZI has primarily focused on donating and investing in health science and education, such as their $3 billion BioHub initiative focused on ending disease. However, this is not the first time the initiative has diversified, as it has also began funding programs for the underprivileged.

A prime example of this is the $3.1 million it gave in February of this year to Community Legal Services in East Palo Alto, which offers legal services pertaining to immigration, housing and economic advancement.

It seems that CZI is aware of the economic disparities in the Bay Area that are largely due to the region’s “tech bubble,” and are in turn taking action to aid increasing number of families that are getting priced out of their homes.

Educators interested in purchasing a home with Landed’s help can apply on their website.

Andrew Clausen is a Staff Writer at The American Genius and when he’s not deep diving into technology and business news for you, he is a poet, enjoys rock climbing, monster movies, and spending time with his notoriously naughty cat.

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Homeownership

Loftium trades a fat down payment for a spare bedroom made available for Airbnb

(REAL ESTATE NEWS) Loftium will help you out with a down payment on your first home if you turn your spare bedroom into an AirBnB and millennials seem open minded about this option.

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Homeownership may not be such a distant dream for renters hoping to buy one day. Seattle-based startup Loftium has devised an alternative approach to obtaining a down payment on a house: Airbnb a bedroom in the house for up to three years.

For buyers who have been pre-approved by a lender, Loftium will pay up to $50,000 on a down payment on a house.

The home must be the primary residence of the homeowner, so Loftium is not available for purchase as an investment property, per their eligibility FAQ.

In exchange for the dough, Loftium requires home buyers to sign a service contract agreeing to list a spare room on airbnb.com for 12-36 months, depending on the loan amount and rental price, and split the profits 70/30 with Loftium. The idea is to generate a passive income stream for the homeowner to help with monthly payments on the home.

While Loftium does take a cut of the Airbnb profits, they are in no way a co-owner of the home. If you purchased a home through them, it’s yours and yours alone – “like it should be,” the website declares.

There are a couple of caveats, and I mean, if someone is handing you $50,000 to help you buy a house, it would make sense to look into the conditions of ownership.

For instance, the Loftium home owner must be a good Airbnb host. So no sabotaging the listing by making the space sound like Shawshank, no making guests feel awkward or unwelcome, and listed rooms must be furnished with at minimum: a queen-sized bed (or larger) with mattress and frame, a chair, a desk or bedside table, and a lamp.

All other stipulations would be the same for any other Airbnb host.

This may sound a little insane, maybe even a little desperate to anyone who has successfully managed a down payment on a house to share the space with strangers for an agreed upon time, but this is exactly the boost many renters need to overcome the down payment hurdle. And Millennials are already primed for this sharing economy and are open minded to the arrangement.

Loftium co-founder Yifan Zhang believes that within the next five to ten years, prospective home buyers will have three standard options for coming up with a down payment: save, ask the parents to help out, or sign up for Loftium. Based on early interest, likely from those signing up for quotes and votes for their city (more on that), Zhang expects business to scale quickly.

So far, Loftium is only available in Seattle as a beta test for the service. There have already been successful homeowners in this brand new program, one of which had the clever idea of finding a place with a mother-in-law quarters to rent out as her listed space/bedroom, and Loftium is currently offering 50 down payments initially this fall in the Seattle area.

The plan is to eventually expand into Chicago and Washington D.C., but interested renters have the option of submitting votes for their city. As of publication, Austin is currently sitting around 4,000+ votes.

There will be some obstacles for particular cities that will prevent Loftium from setting up shop, such as city legislation that prevents people from renting out rooms in their homes, but I suspect that with the rise in popularity of alternative approaches to homeownership coupled with the demand of travelers seeking to rent out a shared space, this could absolutely change over time.

The service sounds almost too good to be true, and it will be very interesting to hear the success, or even horror stories, of how these contracts will play out, but I believe others will jump on board to offer something similar.

Take heed millennials, homeownership is within reach!

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Homeownership

How many homeowners are impacted by proposed MID cap?

(REAL ESTATE NEWS) The mortgage interest deduction (MID) cap inserted in the proposed tax bill could impact more homeowners than originally thought.

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As a part of the recent tax reform legislation release, the House proposed reducing the mortgage cap at which one can no longer deduct their interest payments from their taxable income by a factor of 50 percent. But how many people would this proposal actually affect? As it turns out, quite a few.

The current mortgage interest deduction (MID) sits at a cool million dollars, meaning that anyone who currently has a mortgage of up to $1,000,000 can deduct the amount of paid interest from their taxable income. These proposed changes would lower that number to $500,000 — still a respectable figure, some would argue.

That said, researchers at the National Association of Realtors (NAR) crunched the numbers, and the results are surprising: somewhere around 15 percent of Americans own homes with mortgages totaling at least $500,000 — and those numbers are “conservative” by NAR’s estimates.

Additionally, projections show fairly aggressive growth in the number of homeowners with $500,000-plus mortgages in as few as 10 years.

Once one adjusts for future inflation, the number of people who might be affected by this bill within the next ten years certainly isn’t negligible, with some states seeing almost twice the number of $500,000 and up mortgages within that time frame.

The bill wouldn’t affect people who now own houses with mortgages that are in excess of the proposed MID cap, but the current rate at which houses are rising in value means that the percentage of people affected could still be quite high, and anyone hoping to remodel or sell during this time will most likely have to contend with the revised MID cap if the legislature does pass.

Ultimately, NAR says a bill lowering the amount of deductions from taxable income will lead to a few things. First and foremost, homeowners whose mortgages meet or exceed the proposed MID cap may be reluctant to sell, resulting in scarcity and tampering with the market.

Equity value could potentially drop, and home values in general may be susceptible to dropping values as a result of the tax reform as it is currently proposed.

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Homeownership

Feds say Northwest Trustee knew they illegally foreclosed on active military, veterans

(REAL ESTATE NEWS) The Justice Department alleges that for the past six years, Northwest Trustee opted to knowingly foreclose illegally on active and former military servicemembers.

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northwest trustee military veterans servicemembers civil relief act SCRA

Obviously foreclosures are heartbreaking and tragic, but what if you had your home taken away from you while you were overseas serving your country? Should be impossible, right?

In exchange for their service, the U.S. federal government protects active duty military from foreclosure under the Servicemembers Civil Relief Act (SCRA). The Act ensures that servicemembers can’t have their houses repossessed while they are actively serving in the military.

According to the U.S. Justice Department, the largest foreclosure trustee in the Pacific Northwest has knowingly violated this law on many occasions over the past six years.

Recently, the Justice Department filed suit in the U.S. District court in Seattle. The case will potentially provide financial compensation for 28 military servicemembers or veterans whose houses were repossessed while they were serving.

The case centers on Jacob McGreevey, a Marine who has served four tours of duty in the Middle East. His Vancouver home was repossessed between his third and fourth tour by Northwest Trustee Services of Bellevue, Washington. It was only several years later that McGreevey found out that he should have been protected by the SCRA.

The Justice Department says that Northwest Trustees did reference a database to see if McGreevey was protected by the Act, and then chose to foreclose on him regardless.

Originally the court had sided with the lender, saying that McGreevey had waited too long to file suit. After McGreevey and his lawyer wrote a complaint, the U.S. Justice Department took up the case. They argue that there is no statute of limitations on the Servicemembers Civil Relief Act. This contradicts state laws.

Legislation may be necessary to reconcile the federal and state laws.

Annette Hayes, U.S. Attorney in the western district of Washington says that their “investigation revealed that Northwest Trustee Services repeatedly failed to comply with laws that are meant to ensure our servicemembers do not have to fight a two-front war – one on behalf of all of us, and the other against illegal foreclosures.”

Sean Riddell, McGreevey’s lawyer and former commanding officer, condemned Northwest Trustee in even harsher terms.

“I want Northwest Trustee and PHH put out of business, their buildings burned down and the ground salted so that nothing ever grows for what they did to veterans,” said Riddell.

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