With a peak in 2010 when nearly 1.2 million homes were foreclosed on, over 7.7 million families lost their homes throughout the entire foreclosure crisis.
Dr. Frank Nothaft, Chief Economist for CoreLogic, had this to say,
“The country experienced a wild ride in the mortgage market between 2008 and 2012, with the foreclosure peak occurring in 2010. As we look back over 10 years of the foreclosure crisis, we cannot ignore the connection between jobs and homeownership. A healthy economy is driven by jobs coupled with consumer confidence that usually leads to homeownership.”
Since the peak, foreclosures have been steadily on the decline by nearly 100,000 per year all the way through the end of 2016, as seen in the chart below.
If this trend continues, the country will be back to 2005 levels by the end of 2017.
As the economy continues to improve, and employment numbers increase, the number of completed foreclosures should continue to decrease.
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.
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.
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.
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.
Homeowners 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)
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.
For homeowners who are in danger of losing their home to foreclosure, it is common to feel like you are alone and that there is no one to help. This simply isn’t true. There are real people who have been in the same situation who have found solutions. Take, for example, Punipuao W. of Hawaii.
Punipuao found herself struggling to keep her home after her husband passed away. “With only my income, I was no longer able to make my monthly mortgage payment,” she said. Faced with the prospect of losing the home she and her husband had bought together, she began looking for alternatives to help her keep the home.
She pleaded with the bank for relief, “but their responses gave me little information and even less hope.”
The prospect of losing the home she and her husband had shared for over 20 years was difficult. “I was so distraught,” she said. “I did not know where to turn.
“Then, one day, my miracle came through a red envelope in the mail.”
In the envelope was a note from a local real estate agent with the Certified Distressed Property Expert designation (or CDPE). This designation meant that the agent was trained specifically to help people like Punipuao. She called the agent.
“About four hours after I made the call, he was at my door offering help. I told him my story.” In merely two days, she received a call from the bank saying that the president of the bank was reviewing her file. “That was a good sign,” she said.
A few days after that, Punipuao had been approved for a trial loan modification. “There were many tears of gratitude at the miracle that came to me in the form of my agent. I thank god for sending me that miracle.”
Punipuao’s story is just one of many. I have a report entitled “From Foreclosure to Freedom” which tells other stories of real homeowners who faced foreclosure and found relief. Download the report, read the stories, and then contact me for a free, confidential consultation.
In the news, there is talk of a housing recovery. Experts feel more optimistic about the state of housing industry in America. However, if you or someone you know is one of the millions of homeowners who is stuck with a home on which you owe more than the property is worth, the feeling of helplessness can be overwhelming and frustrating.
Many people don’t realize that just because they are in danger of losing their home to foreclosure doesn’t mean they have to wait around for it to happen. With help, they can take matters into their own hands.
CLAIM YOUR TICKET TO FREEDOM!
As a Certified Distressed Property Expert (CDPE), I make it my business to know all of the ins-and-outs of the options that are available for people who are in danger of losing their homes and help the challenges head-on.