Tag Archives: distressed homeowners

How Soon Can We Buy After A Short Sale

(Courtesy of REALTOR.COM Ask Michele, Buy, Finance |  By: Michele Lerner)

question-mark-house-red1

QUESTION: We had to do a short sale on our home in Nevada last year, but now we have landed on our feet again and want to buy a home in our new location in Oregon. We have enough money saved up for a 20 percent down payment for a house we can afford. Is it possible for us to qualify for a mortgage?

ANSWER: It’s great that you landed on your feet and have been able to save money for a down payment on a new house. Your bigger down payment can be a compensating factor that some lenders will use to qualify you for a loan in spite of a negative credit profile that’s a likely result of the short sale.

Conventional loan guidelines established by Fannie Mae and Freddie Mac say that you must wait two years after the closing date on your short sale to finance another home, if you have 20 percent for a down payment. You would have to wait longer if you had less cash for a down payment (four years with 10 percent and seven years with less than 10 percent). So if you want a conventional loan, you’ll need to wait another year.

FHA-insured loans are available with a down payment of as little as 3.5 percent after a three-year waiting period. Veterans Administration loans, which don’t require a down payment at all, are available after a two-year waiting period.

However, the FHA recently introduced a “Back to Work – Extenuating Circumstances” program to help the many people who lost their homes during the recent housing crisis and recession. You may qualify now for this program if you lost your home due to a job loss or a drop in income or both. This temporary loan program will be available for FHA loans issued between Aug.t 15, 2013, and Sept. 30, 2016.

To qualify, you’ll have to meet standard FHA guidelines for a loan approval and a mortgage lender’s requirements. Typically, this means that your credit score must be 620 or 640 and above and your debt-to-income ratio must be 41 percent to 43 percent or less.  You’ll be required to fully document your job history, income and assets.

In addition, the Back to Work program has other specific requirements. You must:

  • Participate in an FHA-approved housing counseling program.
  • Provide documentation for the “economic event” that caused the bankruptcy, which must have reduced your income by 20 percent or more for at least six months. In other words, you’ll need a W2 or tax returns or a termination letter.
  • Prove that you had good credit before the economic event damaged it.
  • Prove that you’ve fully recovered from the event by having a credit report without any late payments for at least 12 months on installment debt and without any major derogatory comments on revolving credit accounts. Your report cannot show any judgments or collections unless they’re related to medical bills or identity theft.

Consult a mortgage lender to see if you can qualify for this FHA program, but remember that FHA loans require mortgage insurance for at least 11 years, even if you make a down payment of 20 percent. You may want to consider asking a mortgage lender if any exceptions are possible for individuals who want to apply for a conventional loan after a short sale. If not, you should weigh the benefit of waiting one more year to buy a home rather than committing to years of mortgage insurance payments.

Home sales in a lull, median sales price stalls, inventory hovers over 3,400

OCTOBER  2014 RESIDENTIAL SALES STATISTICS

Sales volume decreased for the third straight month, closing with 1,375 single family home sales. This is down 1.5% from the 1,396 homes sold last month. Month‐to‐month since July, sales have decreased 1,548 – 1,428 – 1,396 – 1,375, respectively. Compared with last year, the current figure is down .8% (1,386 sales). Making up this month’s total are 1,208 Equity Sales (87.9%), 83 Short Sales (6%) and 84 REO sales (6.1%). For the month, REO sales remained the same, short sales increased 17.6% and conventional sales decreased 1.1%.

Of the 1,375 sales this month, 256 used cash financing, 654 used conventional (mortgage‐backed) financing, 312 used FHA (Federal Housing Administration), 89 used VA (Veteran’s Affairs) and 64 used Other* types of financing. The average DOM (days on market) for homes sold this month was 37, while the Median DOM was 23. These numbers represent the days between the initial listing of the home as “active” and the day it goes “pending.” Breaking down the Days On Market, there were 816 listings that sold between 1 – 30 days, 293 listings that sold between 31 – 60 days, 148 between 61 – 90 days, 69 between 91 – 120 days and 49 sold after being on the market for over 120 days. This breakdown, as well as types of financing, is show in the graphic below.

October 2014 Housing Stat

The month‐to‐month median sales price decreased 1.1% from $275,000 to $272,000. The current level is 7.3% above the $253,500 median sales price of October 2013. The current figure is up 70% from the January 2012 low of $160,000. When compared to the all‐time high ($392,750/Aug. ’08), the current figure is down 30.1%.

Active Listing Inventory in Sacramento County decreased 2.7% for the month to 3,434 listings, down from the 3,529 listings of September. Year‐to‐year, the current number is up (29.1%) from the 2,659 units of October 2013. The months of inventory remained the same at 2.5 months.

Drought Tolerant Landscaping

Courtesy of SacramentoAppraisalBlog.com*
Photo Courtesy of SacramentoAppraisalBlog.com*

With severe drought conditions across large swatches of the west and pockets of the rest of the United States, many homeowners are looking for ways to conserve water on landscaping. But there’s no need to rip out your whole yard and replace it with gravel—unless you want to. There are plenty of other ways to create a drought-tolerant landscape while also creating a beautiful and functional space. And drought-tolerant landscaping not only saves water immediately, but will be more resilient against future droughts. Here are some ideas:
Take on manageable pieces
Identify your biggest areas of water consumption. Besides lawns, the biggest areas of water use tend to be rose gardens, summer vegetables and cut flower gardens. If you’re not ready to eliminate these areas entirely, figure out how you might want to reduce their size. A rose garden, for example, could be made into a smaller group of favorite bushes. Vegetables and cut flowers can go in containers or raised beds where you will have more control over how much water they get. Mix compost into soil for better moisture retention.

Make your lawn more water-efficient
If you want to keep a lawn, consider downsizing to a smaller swatch, picking a spot where you’ll get the most use, like a play area for kids. Find low water grasses for your area. Raise the blades on your lawn mower—keeping grass longer will reduce evaporation and promote deeper root growth. Leave clippings on the grass after mowing to help retain moisture and return nutrients to the soil–extra clippings can also be tossed on the compost pile. Aerate soil with a soil aerator tool to reduce runoff and help water absorb into the soil.

Or go lawn-free
Consider replacing your lawn with an alternate ground cover. Try ornamental grasses for interesting textures, low-growing flowering plants for seasonal color or edibles like low-growing herbs or strawberries. Some cities offer financial incentives for switching to a drought-tolerant landscape or for using gray water (reused water from baths, sinks, washing machines, and other kitchen appliances.) Check your area for opportunities.

Add more areas of low-water use
Replace a section of lawn with an outdoor seating area, a sandbox for kids or a raised bed with herbs. Create intrigue by laying down paths of flagstone, pavers, gravel, mulch or other porous material. Add new focal points like a porch swing, fire pit, or a patio. Instead of water-thirsty blooms, think of other ways to incorporate color with colorful perennials, planters, chairs or bright native grasses.

Optimize your sprinkler system
Inspect your sprinkler system for leaks, broken heads or misdirected heads that water driveways, sidewalks, or the street. Make sure the system runs early in the morning or late in the day. Consider a “smart” system that will monitor the soil and automatically adjust watering as necessary. Try watering less frequently or for shorter periods. When reducing your irrigation, make changes gradually, so plants and trees have time to adjust.

Water smartly
If you have plants with high water needs, plant them together. Use a drip irrigation system or soaker hose to minimize run off and evaporation. Watering deeply and infrequently encourages deeper roots and more resilient plants. Take advantage of natural sources of water by putting in plants next to paths, driveways and other spots where water run off naturally occurs. Direct eave spouts into raised beds or other planted areas and consider using rainbarrels to collect rain water.

Go native
Native plants are a great choice for drought-tolerant landscaping because they won’t need much (if any) watering once established. Over time native plants have developed a natural resistance to pests and won’t require added chemicals and special care. For ideas on good native plants for your area, ask at a local nursery, look on the EPA’s listing of native and regionally appropriate plants, or contact your local extension office.

Plant smartly

Shrubs, perennials, bulbs and trees use less water than most annuals and lawns and well-established plants use less water than newly-planted ones. Evergreens and other trees are also a good choice—they’re drought-resistant and offer shade that helps retain moisture in the rest of the yard. Cover steep areas with deep-rooted native ground covers and/or shrubs to discourage water run-off and erosion. Mulching is essential—it helps soil retain moisture and keeps weeds at bay. Use organic mulch like bark, cocoa husks, or pine needles that decompose and nourish the soil. Layer mulch about three inches deep and replace as necessary.

And don’t worry too much about the pool
New research indicates that pools use only about as much water as a lawn of the same size. And covering a pool will cut water use by 50-70 percent, making a covered pool about equal in water use to drought-tolerant landscaping.

 

* Click here for more info on how to order “Brown Grass Is Sexy” signs.

Changes to the B of A Short Sale process

Considering a short sale as a Bank of America mortgage holder? Well make sure you hire an experienced, proven short-sale agent and that they are current on that lender’s process.

Below describes some new changes to B of A’s shot sale process imperative tot he successful completion of your short sale.

(Re-Printed from B of A email correspondence 07/31/2014)

Bank of America Help for Homeowners in Sacramento and Elk Groveac
Bank of America Help for Homeowners in Sacramento and Elk Groveac
The new Initiation Package assists a homeowner through the Short Sale process.  Starting mid-July, homeowners will receive a short sale Initiation Package upon initiating a short sale and not being reviewed for a home retention option. Included in the package is the Borrower Election Form that will now be required before proceeding with a short sale.The short sale transaction will no longer continue and no other homeowner documentation or offers will be reviewed until the signed Borrower Election Form is received and verified by the Short Sale Specialist. As a reminder, for your agent, a valid Third-Party Authorization Form is also required and must be verified in order to proceed with the transaction.

As a homeowner, thoroughly read this package including the Homeowner Checklist. This package contains a list of financial documents that may be required to complete a short sale. B of A’s ability to evaluate the homeowner for a short sale, as well as postpone collection and foreclosure efforts, depends on their receipt of all necessary documents. Upon initiation, a Short Sale Specialist will continue to contact your agent, to discuss the next steps in the short sale process.

Initiation Package Includes:

  1. Homeowner Checklist
  2. Information on Loan Assistance Programs
  3. Frequently Asked Questions
  4. Important Notice to Help You Avoid Foreclosure Scams
  5. Borrower Election Form – now required upon initiation
  6. Third-Party Authorization
  7. Request for Mortgage Assistance (RMA) form
  8. IRS Form 4506-T

Please note: initiating directly into a short sale, through Equator, is not an option for Federal Housing Administration (FHA) investor properties. Homeowners must always discuss their situation with their Customer Relationship Manager (CRM), who can help them identify if they qualify for an exception to proceed with a short sale without doing a full home retention review.


Short Sale Customer / Agent Care
1.866.880.1232

bankofamerica.com/shortsaleagent

If you have questions, first contact your short sale specialist (or closing officer) through Equator messaging. If there’s no response after two days, escalate to the team lead.

For urgent needs (such as a foreclosure postponement) or for escalation beyond the team lead, contact Short Sale Customer/Agent Care at 1.866.880.1232.

Visit the Agent Resource Center at bankofamerica.com/sh

The 8 Top Seller Mistakes of The Summer & How to Correct Them

"Did I Do that?"
“Did I Do that?”
(re-print, Trulia 6/24/14, Michael Corbett)

With the positive momentum in the market, more home owners are ready to put their homes on the market and make a sale. But beware—when prices are up and inventory is down, more sellers become overconfident and careless with their sale.

Here are eight of the top ways sellers sabotage their own home sale, and tips to save the day.

1. Refusing to Make Obvious Repairs Prior to Sale.
Agents tell sellers this everyday, all day: “You will lose money if you don’t take care of repairs before the house goes on the market.” Showing a house when there are leaking faucets, cracks in the walls, water stains on the ceiling, and a busted hot water heater are all ways to turn off potential buyers.

What Sellers Need to Hear: “Shelling out the money may seem like an extravagant expense—especially if you don’t think that the repair will add much to the value of your home. Trust me—time and time buyers over estimate the cost of a repair, so they are going to try to get what they think the repair will cost, and that’s going to cost you more in big credits or discounts!”

2. Ignoring the Backyard
Everybody knows that fantastic front curb appeal sells homes, but many sellers forget what’s out back. In the summer and fall months, everyone’s attention turns to the outside spaces, where they dream of warm summer nights and outdoor entertaining.

What Sellers Need to Hear: “If you don’t maximize and capitalize on your backyard, you are missing a huge component of your warm weather living spaces. That back yard patio is not just for storage of old bikes and broken patio furniture that should have been thrown out years ago. In a buyer’s eyes, it can be the most important ‘room’ in the house. You need to stage your backyard and outdoor entertaining areas as beautifully as you would the interior of your home. Green grass, flowers and trimmed trees should be the same standard as your curb-appealed front.”

3. Hiding Problem Issues From the Buyers
Far too many agents have watched too many home sellers pay out big bucks because they didn’t “reveal it all.”

What Sellers Need to Hear: “Disclose! Disclose! Disclose! Once you have an accepted offer, sellers are required to fill out disclosure statements. If you did renovations to the house without a permit over the years, disclose. If there was a roof leak that damaged the attic two years ago, disclose. If the electrical blows every time you run the dishwasher and the microwave at the same time, disclose. You know the history of the home better than anyone, and we need to work together so that we know how to address any potential issues. The buyers will find out eventually. And if you knowingly have kept things from them, it sets the tone for an ugly and difficult closing. Not to mention that you are setting yourself up for the liability.”

4. Getting Egotistical When Negotiating
Every agent has had that seller who just simply cannot fathom that a buyer would even think to make such a low offer, but the truth is that most of the time, the buyer doesn’t mean to offend the seller. Heck, the buyer may even know that the home is outside of their price range, but they may just love it so much that they couldn’t resist making an offer. Too many sellers take negotiations personally and lose out on creating a win-win deal.

What Sellers Need to Hear: “Real estate transactions are business deals. Plain and simple. There is no room for ego here. If an offer comes in low, the mistake is to be insulted and not counter back. Always counter back and keep deals in play. Keep your ego out of the equation and put your head back into it. Remember your end goal: getting your house sold and having a smooth and successful closing.”

5. Using Lousy Photos (and Not Helping their Agent Get Great Ones)
Ninety percent of all home shoppers start their home search online, and nothing can tank a home sale like terrible listing photos. But sometimes sellers don’t understand the importance of fantastic listing pictures—and that can mean that agents need to resort to grabbing a few fast photos on a cell phone or on a rainy day. After all, the only thing worst than terrible listing photos are listings with no photos at all.

What Sellers Need to Hear: “Think back to when you were originally looking for a home. Even if you were house hunting when online wasn’t a huge thing, you probably remember that seeing a home told you more about it than any text ever could. Even in a sellers market, great photos can help draw in the best buyers—the ones who will be willing to make a big offer on this property.”

6. Holding On to Clutter and Junk
For as long as buying and selling a home has been a “thing” (so a very long time) there have been sellers that say, “Oh the house looks fine. Buyer’s will see right past all my boxes and collections of plaster cookie jars and shelves overflowing with nick-knacks.” Big mistake. Huge.

What Sellers Need to Hear: “It may sound like a good idea, but it’s not a smart approach. Believe me, I have seen homes come on the market that could have sold much faster, had the home owners spent just one weekend depersonalizing and removing all the extra things inside the home. Clutter makes your home seem smaller, ultimately eating equity and killing deals. Take inventory of all your possessions and think to yourself: should I save it, store it, sell it, or chuck it? It may seem like a solid amount of work, but one weekend of work could mean thousands of dollars come closing.”

7. Selling A House Via “For Sale by Owner” (FSBO)
When the market is hot, many people think that selling their home on their own is easily doable. “Who wouldn’t want to save on commission?” think many sellers. Despite the lure of not having to pay an agent a commission, sellers need the expertise and know-how of a professional, who can help navigate the stacks of paperwork, provide priceless neighborhood knowledge—and negotiate on the seller’s behalf.

What Sellers Need to Hear: “The numbers don’t lie: the typical FSBO home sold for $174,900, compared to $215,000 for agent-assisted home sales. There may be more to a home sale than you realize. Let me walk you through what type of service I can provide you with.”

8. Overpricing the Home
For agents, this is the one major seller mistake that we see the most frequently. It is a misstep that seems to rear its head whenever the market seems like it’s heating up.

What Sellers Need to Hear: “Yes, the market is hot. But not hot enough that you can push the envelope and price it for way more that the comps will support. Overpricing your home is dangerous —and you can end up burned in this ‘hot market.’ You run the risk that your home will sit on the market for weeks and months and become the stale listing that every home seller wants to avoid. Know the competition and set the right price—never overprice too high in hopes that someone will unknowingly overpay. Let me walk you through the data.”

There they are — the biggest selling mistakes of the season.

Stay Put and Remodel — or Move?

[Article courtesy of REALTOR MAG, JANUARY 2014 | BY BARBARA BALLINGER]

Elk Grove Real Estate, Sacramento Real Estate: To Stay or Not To Stay
Elk Grove Real Estate, Sacramento Real Estate: To Stay or Not To Stay
Here are seven strategies to help you decide whether to list your home or make renovations that will help make your current house meet your needs.

A New Year ushers in new resolutions, which often includes changes on the home front, but deciding what to do with it can be tough for home owners, financially and emotionally.

As the real estate market rebounds and buyers increase in number, make a well-informed decision on the direction you should take with your home. You no longer need to be torn between selling in order to upgrade and remodeling your current space to add value and meet your needs.

Here are seven key steps to help you arrive at the best solution:

1. What bothers you most about your home, such as the traffic pattern, lack of a certain room, or absence of light?

Analyze how you use your house and determine what features are missing that you want. Changes can often be made within an existing footprint, even without adding square footage. Walls can be taken down, doors removed or changed, and windows enlarged. Home owners who have been in their house for years are often only using certain rooms because of a pattern they established early on.

“Many fail to use 30 to 40 percent of their space,” says contractor Randy Tapper of RHT Design and Construction in Deerfield, Ill. He tries to guide clients toward changing your layout, so you use all spaces, before he suggests adding. Architect Duo Dickinson, author of Staying Put: Remodel Your House to Get the Home You Want (Taunton Press, 2011) concurs, and says removing walls and adding openings rather than increasing the home’s footprint can tackle a great percentage of challenges.

2. Study how your house is sited.

Analyze the land your house sits on — both the topography and condition — as well as how it’s oriented toward views. If the site always leaks ground water, has absolutely no trees (or terrible ones), or includes hideous views, then remodeling likely won’t fix your issues, Dickinson says, and selling becomes a more viable option.

3. What are your thoughts about your neighborhood?

If you’re very attached to your neighborhood, including the area’s retail, schools, and, perhaps, proximity to major thoroughfares, it may be worthwhile for you to “build your way out of your home or site’s challenges — and stay put,” says Dickinson.

Sometimes, pleasant memories, such as where you raised your children or watched a daughter marry in the backyard, may outweigh the option of moving.

4. Factor in your time frame and family needs.

If you plan to be in your house a long time — at least five to 10 years — making significant changes, such as adding rooms, building a sunroom, or finishing a basement, may provide a worthwhile payback and incentive. If, however, you’re empty nesters and ready to downsize, then remodeling may not be the most prudent financial decision. Here’s where a good financial planner can help you assess your home’s value in relationship to the rest of your assets and needs; a mortgage lender also should be tapped to discuss the costs of a new mortgage, if you need one.

But, exceptions abound, even for empty nesters. Some may decide to stay put. If your children and grandchildren visit regularly, you may decide that remodeling, or even adding on, will be the magic bullet for them to enjoy your home for years into the future.

5. Consult contractors, designers, architects, or structural engineers, and get multiple bids, for a realistic estimate of what changes might cost.

It’s worth paying professionals for an hour of your time; some will even provide it gratis, says Dickinson. These professionals can look at a home owners’ current house, listen to what you want, appraise its condition –—including what an untrained eye may not see — and estimate costs of new work.

In addition, if the house was built more than 30 years ago and hasn’t been updated, it may require new wiring or plumbing, a new HVAC system or roof, and better insulation. A new survey may also be worthwhile depending on what changes might take place, especially if it’s dated.

6. Compare the appraisal and remodeling costs with other neighborhood homes for future resale.

Even though home owners should base decisions in large measure on enjoyment and not wholly on resale value, it’s smart to have an idea of how changes will affect the house compared with others nearby, says real estate attorney and Brooklyn Law School Professor David Reiss.

It’s never smart to overbuild for an area. The type of improvement can also affect the value. Remodeling changes may add to the house’s worth without changing real estate taxes, while an addition will probably cause an uptick in taxes.

Recent comps for homes of a similar size and quality and in a similar area will help you make that assessment, says Dickinson.

7. Seeing is believing: Besides comps, go and see what’s available in your price range in neighborhoods you like.

A new house may offer a better layout, the right number of bedrooms and bathrooms, an updated kitchen, or a nice yard. But remember that even the home you buy may need some remodeling tweaks, like new paint, carpet, or an overhaul of an outdated master bathroom. Factor in the cost and time of these changes as you weigh your final decision.

Here, too, it might prove worthwhile to bring in a contractor or architect to estimate costs of any big changes such as new insulation, removing some walls, or finishing the basement.

Dara Shlifka and her husband Aric went through these paces when they decided they needed additional space for a home office in their 1968, Colonial-style, 2,400-square-foot suburban Chicago home. Initially, they were convinced they’d move, since remodeling and bids for additions came in sky-high — $250,000 and above. They house-hunted in a broad price range, from $400,000 up to $800,000, Dara says. But before we found a house, we asked one more contractor for ideas. He suggested converting our living room to an office and building a 600-square-foot addition with a bigger kitchen and a new family room, powder room, and laundry and mud rooms, and his bid came in at only $120,000, which convinced them to stay. “We’re almost done, but already I feel I’m living in a different house,” she says.

Bottom line: Make this big decision carefully based on all of the facts. In the end, you’ll be happier.

UPDATE: Mortgage Debt Cancellation Tax Relief

National Association of REALTORs
National Association of REALTORs

NAR Issue Brief
Mortgage Debt Cancellation Tax Relief

Update on the current status of the mortgage debt cancellation tax relief provision that expired at the end of 2013. As soon as the last one-year extension was passed on New Years’ Day 2013, NAR began working on another extension of this critical tax provision. With NAR’s encouragement, champions of this provision introduced bi-partisan bills in both the House and Senate (H.R. 2994/S. 1187), to extend the provision for one or two years. Unfortunately, the current prospect of these bills being enacted in the short term is not particularly high. We are facing four big hurdles.

1. The Chairmen of both of Congress’s tax committees (Senate Finance and House Ways and Means) have committed to passing comprehensive tax reform legislation before the end of 2014. As part of reform, they have both indicated that they plan to go through the long list of expiring items, including mortgage debt cancellation, and cull those that are not worthy of permanence and make all the “worthy” ones a permanent part of the tax law. However, tax reform is unlikely to be completed in the coming months. If Congress were to extend the expiring provisions now, it might appear that they were giving up on tax reform. This is not a signal they wish to send.

2. There are over 50 such expiring tax provisions (often referred to as “extenders”). Congress rarely passes single tax provisions by themselves. The rules in both the House (and especially the Senate) could allow for added amendments that would turn a simple bill with wide support into a politically divisive bill.

3. The extension of the tax relief “costs” money to the Treasury. The Joint Committee on Taxation estimates that a one-year extension of the mortgage debt cancellation relief would cost $3.7 billion. Some Members of Congress will insist that amount be offset by raising taxes elsewhere or cuts in spending – an ongoing debate in Congress.

4. The Chairman of the Senate Finance Committee, Senator Max Baucus of Montana, has been nominated by President Obama to serve as the next United States Ambassador to China. His departure from the Senate will turn the chairmanship over to Senator Ron Wyden of Oregon. As with any change in committee leadership, there will be an adjustment period.

In sum, NAR tried to have the extension passed by year-end but it was not possible. Because of the factors listed above, NAR has so far decided not to issue Member-wide Call for Action at this time, but has instead focused on working with Congressional leadership and the bill sponsors to find additional support for moving this legislation now that Congress has returned to Washington. Our lobbyists are in daily meetings with Members of Congress, pressing for an extension and providing the most up to date data on short sales and foreclosures to continue to highlight this as a top priority.

What can you do? First, you can contact your Representative and Senators to urge them to act on these bills. If you are in distressed situation, urge them to do so as well. The more Members hear from constituents, the better.

NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law, probably late in 2014, and make it retroactive. There is precedent for Congress doing this, but no guarantee.

NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law in 2014 and make it retroactive. There is precedent for Congress doing this, but no guarantee.

3 Things You Didn’t Know About Short Sales

You'll be surprised to learn this about short sales.
You’ll be surprised to learn this about short sales. Elk Grove & Sacramento Short Sales.

Short sales have become a part of the normal fabric of real estate business. At a minimum, most people now understand the term “short sale” doesn’t mean the sale will be short, will take less time, or that the price the home will sell for will be much less than market value.

Surprisingly though, there is still a large segment of the population unaware of what may probably be three of the most important benefits to completing a short sale. With that being said, you too may be surprised to learn that, if you complete a short sale there may be:

1. No cost to you, the seller
That’s right. For the majority of sellers, to complete a short sale is totally free. The proceeds from the sale cover the costs associated with the sale, and your lender approves all fees. For example: title and escrow fees, state mandated items (NHD reports), broker fees for service (commissions), and most lenders even pay outstanding property tax liens!

You should never be asked to pay a fee to complete your short sale. If an agent asks you to pay a fee as a requirement to start or complete your short sale, find another agent.

2. Zero Tax Liability, Zero Deficiency Liability
Tax Liability – In the past, when you completed a short sale, your lender would send you a 1099 and view the forgiven difference as taxable income for the year. This gets filed with your next tax return and, unless you have an exemption, you must pay taxes on the forgiven income. This would, of course, push most people into a new tax bracket requiring you to pay taxes on that forgiven difference.

For example:
Loan Amount Owed $300,000
-Short Sale Price $160,000
Difference $140,000

However, for owner occupied residences, the Debt Forgiveness Act allows tax liability protection on the difference up to $250,000 if you are single, and $500,000 if you are married. President Obama recently extended the act until December 31, 2013. So let’s apply this law to our example above:

Loan Amount Owed $300,000
-Short Sale Price $160,000
Difference $140,000 = FORGIVEN!!
Up to $250,000 (single); $500,000 (married)

In addition, there are numerous exemptions that apply which can enable you to avoid this tax even if it is not your primary residence.

Deficiency (In the state of California) – The California Legislature passed Senate Bill 931 adding Section 580e to the California Code of Civil Procedure and stating that the senior lien holder could not pursue a deficiency judgment after a short sale which they had previously approved. The law equally applies to purchase money, hard money and refinance – as long as there was no cash out.

They later passed Senate Bill 458, amending Section 580e and extending the protection of SB 931, by making it applicable to junior liens as well. In addition to not being able to get a deficiency judgment it provides that after a short sale, no deficiency shall be owed or collected and no deficiency judgment shall be requested or rendered provided the short sale closed escrow and the lender was paid the amount they agreed to accept.

The amended law further provides that the holder of a note shall not require the seller to pay any additional compensation, aside from the proceeds of the sale, in exchange for their consent to the short sale.

How’s that for protection? So, to recap – you get to complete a short sale at no cost to you, your debt and deficiency are also forgiven, and the lender cannot ask you to come in with any additional funds above the amount they agree to accept. What more could you ask for? How about cash back?

3. Cash Back to You
Lenders learned rather quickly the magnitude of the financial responsibilities which came with foreclosed properties; tax liens, outstanding utility bills, property damage, vandalism, etc – all at a very large price tag and not including their standard attorney fees. So not only did it make sense to pay the seller an incentive to remain in the home and keep the home in good condition until close of escrow, but it also helped the seller with moving expenses as well. This turned out to be a win-win situation for everyone. Thus, relocation assistance was born and adopted.

How much assistance you will receive and specific assistance guidelines will vary. For example, if you short sale under HAFA (Home Affordable Foreclosure Alternative), you could receive $3000. However, many lenders now have their own in-house incentive programs which offer relocation assistance anywhere from $3000 to as much as $30,000 or more.

So if you are facing foreclosure, contact Mathews & Co Realty Group with Century 21 Landmark Networ at (916) 678-1803 or me, Keisha Mathews, (team short sale specialist) via direct email at SacramentoShortSaleLady@gmail.com. I would be happy to meet with you to go over your options helping you avoid foreclosure, and explain how you could reap the many benefits as well.

The information contained above is not to be construed as legal or tax advice. Each individual’s personal situation may vary. We at Mathews & Co Realty Group are not tax professionals or attorneys. Please consult a real estate attorney or tax advisor to determine whether the information above is applicable to your individual situation.

Market Update – Seriously, It’s A Sellers’ Market

new home construction n elk groveHomeowners who lost their homes at unprecedented numbers inadvertently created extraordinary opportunities of home ownership for both investors and owner occupants. Upside down home ownership blazed a grave trail with foreclosures and short sales (distressed sales) paving the way of Sacramento’s “buyers’ market”.

The recovery has been painful and volatile. At the height of the crisis, industry analysts were incredibly optimistic predicting it would last only a year or two at the most. Seven years later forecasting continues to be a challenge. Just as the mainstream media seems to sync with the analysts, Bernake speaks, interest rates bump up overnight, and you and I get to buckle up for another exciting ride in the wonderful world of real estate. However, there is actual evidence that recovery may truly be underway.

AND NOW THE LIGHT AT THE END OF THE TUNNEL

An analysis by RealtyTrac Inc. shows Sacramento as one of the hottest turn-around markets and predicts we are headed for a more normal pattern because of a rapid increase in new-housing permits at the start of this year and a significant drop in foreclosures.

To give you an idea of what that foreclosure drop looks like and some comparisons, the breakdown of sales for May was 115 REOs (6.9%), 371 short sales (22.2%) and 1,186 conventional sales (70.9%). Compared to one year ago, REO (bankowned) sales accounted for 27.8%, short sales 30.1% and conventional sales 42.2%. Since then REOs have dropped 75.1%, short sales dropped 26.2% and conventional sales have increased 68%.

However, low inventory remains a serious issue for buyers, especially would be first time buyers. Compared with May 2012, the sales volume has decreased 7.9% from the 1,816 units sold. Although active listing inventory increased for the month of May, rising 7.7% from 1,381 units to 1,488 units, the months of inventory remained at .9. This number explains the amount of time (in months) that it would take to deplete the current inventory at the current sales rate.

SAR President Chris Little adds his observations: “The number of listings continues to decline and months of inventory remain exceptionally low with supplies lasting less than 3 weeks. Both the median and mean sales prices continue to increase significantly and cash buyers, though significant, are a declining portion of the buyers.”

WHERE’S THAT LIGHT AGAIN?

So when will we begin to see some of this new inventory from the housing permit increase? According to an article in the Sacramento Business journal, “Large homebuilders are snapping up the available lots out there, with plans to build on them as soon as possible, according to Jim Radler of Land Advisors organization in Sacramento… JMC Homes bought 54 finished lots called Sienna in an unincorporated area north of Elk Grove, between Calvine and Robbins roads and east of Elk Grove/Florin Road, near a strip mall.” As soon as this time next year we can begin to see move-in ready new home construction.

SAR President Chris Little continues, “Demand is high, supply is very low and investors are moving away. If interest rates continue to rise and lender practices continue to be stringent, it may flatten the rising demand due to challenges for buyers on the financing side. Therefore, homeowners with equity and a desire to sell should act on it and consult a REALTOR®.”

All these combine to make it a STRONG sellers’ market. With inventory on the rise and interest rates still at record lows, it’s STILL a great time to buy and sell. If you or someone you know is looking to buy or sell, give us a call.

(Market Data – Sacramento Association of REALTOR’s RESIDENTIAL RESALE STATISTICS May 2013)

Check Your Mail – Payments to 4.2 Million “Distressed” Borrowers Happening Now

Actual check received in the amount of $2000 by one of my past clients in her mail today; she had completed a short sale. Envelope reads "Important Payment Agreement Informaton Enclosed" from the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System
Actual check received today by one of my past clients who completed a short sale. Envelope reads “Important Payment Agreement Informaton Enclosed” from the Office of the Compftroller of the Currency and the Board of Governors of the Federal Reserve System
If you have been foreclosed on or have completed a short sale, don’t be so quick to throw away mail from your past lender. Payments to 4.2 million borrowers will be distributed to those whose homes were in any stage of the foreclosure process in 2009 or 2010 and whose mortgages were serviced by one of the following companies, their affiliates, or subsidiaries: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.

In most cases, eligible borrowers will receive a letter with an enclosed check sent by the Paying Agent–Rust Consulting, Inc. Some borrowers may receive letters from Rust requesting additional information needed to process their payments. Rust is sending all payments and correspondence regarding the foreclosure agreement at the direction of the OCC and the Federal Reserve.

Borrowers can call Rust at 1-888-952-9105 to update their contact information or to verify that they are covered by the agreement. Information provided to Rust will only be used for purposes related to the agreement.

Watch out for scams. Beware of anyone who asks you to call a different phone number than the number above or to pay a fee to receive a payment under the agreement.

SO WHAT’S THIS ALL ABOUT
The Federal Reserve Board issued enforcement actions against four large mortgage servicers
–GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage, and EMC Mortgage Corporation–in April 2011. Under those actions, the four servicers were required to retain independent consultants to review foreclosures that were initiated, pending, or completed during 2009 or 2010. The review was intended to determine if borrowers suffered financial harm directly resulting from errors, misrepresentations, or other deficiencies that may have occurred during the foreclosure process.

A number of servicers supervised by the Office of the Comptroller of the Currency (OCC) were also required to conduct independent reviews.

The deadline to request an independent review was December 31, 2012.