How will a Stockton short sale or loan mod affect your FICO score?
January 17, 2010
I receive many questions from potential Stockton short sale sellers regarding the impact of short sales, loan modifications and late pays on their FICO scores. The San Francisco Examiner published an article regarding the subject. Worth checking out.
View article…
CNBC.com Article: Big Banks Accused of Short Sale Fraud
January 16, 2010
Big Banks Accused of Short Sale Fraud - Just as regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud and another mortgage meltdown, there appears to be yet a new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks. For additional information on the short sale process visit http://www.homes-in-stockton.com/blog/.
The Second Mortgage Challenge
January 12, 2010
In order to do a short sale the second lien holder must also agree to the terms of the sale. This is even more challenging than with the first lien holder, since there usually isn’t much left to gain for the second in line. Obama’s administration has tried to encourage second lien holders into the incentive program, but at this point it doesn’t look good. I previously mentioned this topic on December 17, 2009 when I wrote “Homeowners with subordinate liens are still likely to face some challenges to reach approvals. It is common for subordinate liens to seek 10% of the balance owed to release the lien. Which may become more difficult than the current market since the participating primary lien holders will now be capped in what they can contribute to the subordinate lien holder. This will be the fly in the ointment and sellers should expect high demands from subordinate liens.” You can read even more about this ongoing problem in the Atlantic’s January 8th 2010 article entitled The Difficulty of Modifying Second Mortgages.
Four Common Mistakes Made by Short Sale Buyers
January 8, 2010
So often buyers say they don’t want to get involved in a short sale because they believe short sales always fall apart. However when one explores why short sales so often fall apart they are likely to find the buyer frequently plays a significant role. Sure, one can argue that there are difficult lenders who refuse to negotiate or make financial demands that the seller couldn’t possibly meet or that occasionally the seller isn’t cooperative. But the more common scenario is that the short sale seller is very motivated and sees the short sale as their last hope. Most short sale sellers feel very vulnerable and that they have no other choice but to trust a complete stranger, the buyer, to make a sensible offer and have the patience to wait for the outcome. Sadly more often than not, this doesn’t happen. Most short sales will go through multiple buyers before final approval and the actions of each buyer can greatly affect the short sale’s success.
The first error a buyer can make to negatively impact a short sale transaction is working with an agent who is not experienced in the short sales. Although the seller’s agent is the one working with the seller and lender to get a short sale approval, the buyer’s agent can complicate this simply by not understanding the process and expectations. The buyer relies on their agent to advise them and an inexperienced short sale agent will not be able to adequately keep their buyers informed.
A frequent error a buyer makes is to submit an offer on a property which is way higher than the list price to ensure that the bank will choose their offer. Then when the bank takes the usual multiple month process to approve the offer, the buyer then decides the offer was too high because the market has depreciated. The buyer then walks away from their offer leaving the seller holding the bag and the bank demanding the higher purchase price which no longer entices buyers since the offer was too high to begin with. In this situation, the seller and their agent must try to convince the lender that the property is actually valued too high creating a time consuming uphill battle. Meanwhile the lender will deactivate the file because there is no current offer. This leaves the seller with no ability to postpone their pending foreclosure.
Another common buyer mistake is to treat the short sale as a normal transaction. When making an offer on a short sale the buyer must remember that the seller is merely a conduit in this situation and they are actually dealing with the lender. Dealing with the lender means that all seller paid expenses are actually being paid by the lender and therefore the buyer can’t keep asking for things to be paid by the seller. Many buyers make an offer asking for a credit back at closing. Lenders won’t even consider a credit over 3% and frequently reject any credit whatsoever. Short sales are “as is” sales which means the buyer accepts the property in its current condition and the lender doesn’t have to pay for repairs. In addition, the buyer doesn’t control the escrow timeline, the lender does. Once an approval is reached, the lender will state the closing date. Extensions are not guaranteed and when granted may cause lender imposed per diem fees that the buyer will be required to pay.
Finally, the buyer must have patience; there is nothing short about a short sale. Even a “pre-approved” short sale can take some time to get “re-approved”. More often than not when buyers walk away from a short sale it is in the final weeks just prior to the approval. Unfortunately for the seller, even if there is another offer waiting to be submitted, the lender doesn’t exactly pick up where they left off which equates to a one step forward two steps back type scenario. In most cases it doesn’t help the buyer either. When they walk away and start over by making a new offer on a property, whether the new property is a short sale or not, they have wasted time. Whatever their reason, the buyer should take the decision to walk away from a short sale they have invested time in very seriously. If they change their mind and decide to resubmit an offer, it is not likely the seller or the lender will reconsider their offer the second time around.
Homes-in-Stockton has a buyer database of over 20,000 names and a proven short sale success record. Both sellers and buyers considering entering the short sale market can have the confidence that Homes-in-Stockton is the San Joaquin Central Valley’s short sale specialist! Call me at (209) 471-6516 or email me at info@homes-in-stockton.com regarding any questions you may have regarding Stockton real estate, Lathrop real estate, Lodi real estate, Manteca real estate or Tracy real estate.
Build Your Ark, the Short Sale Flood is Coming
January 6, 2010
The Home Affordable Foreclosure Alternatives Program or HAFA will not only effect how lenders manage short sales as I have previously mentioned in the December 17, 2009 post, it will demand that all lenders who operate under HAMP offer short sales to any failed loan modification attempts who are eligible.
With the current numbers at approximately 750,000 homes under loan modification trials and a success rate predicted at about 30,000 under HAFA the remaining 720,000 will all be offered short sale opportunity. This means a flood of short sale listings will be arriving on the market starting around May of 2010.
If you have questions about how this will impact your real estate listing or purchase plans, please feel free call me at (209) 471-6516 or email me at info@homes-in-stockton.com regarding any questions you may have regarding Stockton real estate, Lathrop real estate, Lodi real estate, Manteca real estate or Tracy real estate.
The Next Wave - Luxury Short Sales
December 29, 2009
A recent Bloomberg News article reports first time home buyers were aided this past year by an $8,000 tax credit that raised resales to a 6.1 million annual pace in October, the highest since February 2007 according to the NAR. Last month President Obama extended the program for another year for first time buyers and broadened the program to include some move-up buyers. However, it can’t be used for homes priced above $800,000. As a result, the high end has continued to decrease in value and is predicted to continue to do so over the next year. High end homeowners are no different from other housing markets in that they have also suffered in this down economy and many struggle to make their mortgage payments. Only there is no bailout plan in place to help the million dollar market. Currently houses valued at over a million dollars are defaulting at twice the rate of other markets. Read the full article here
Call me at (209) 471-6516 or email me at info@homes-in-stockton.com regarding any questions you may have regarding Stockton real estate, Lathrop real estate, Lodi real estate, Manteca real estate or Tracy real estate. Click on the links below to see all the Valley’s listings or only those in the neighborhood you desire.
Foreclosure and Short Sale Tax Implications
December 22, 2009
The Mortgage Debt Forgiveness Act of 2007 and the Emergency Economic Stabilization Act of 2009 provide tax relief for debt forgiven through a short sale or foreclosure. In the Internal Revenue Code Section 108, discharge of qualified debt from the purchase of a principal residence can be excluded from income if the discharge occurs in calendar years 2007 through 2012. In order to understand how these laws apply to your specific mortgage, you must determine the following:
1) Is it a recourse or non-recourse mortgage?
a. Recourse -the borrower is personally liable for the debt and the lender can pursue collections
b. Nonrecourse - the lender is limited to the property and the borrower is not personally liable for any deficiency
i. California – is a nonrecourse state so most loans to purchase a home are nonrecourse
ii. California - most loans from refinancing or a home equity line of credit are recourse
2) Will there be cancellation of debt?
a. When nonrecourse mortgages are foreclosed or sold as a short sale, the mortgage is thereby satisfied
b. For recourse mortgages, the remaining debt is the difference between the principal balance of the debt and the fair market value of the property and collections can be and often are pursued
In California SB 1055 was the state tax law intended to follow the federal legislation and was only effective for 2007 and 2008. Currently, the state is considering new legislation that would adopt the federal law through 2010 but it has yet to be approved.
For more information regarding the current federal tax laws go to the Internal Revenue Service website for further information.
It is important to understand how the federal and state imposed tax laws will apply to your specific situation be sure to consult an attorney and CPA prior to making any decisions pertaining to foreclosures and short sales. As Stockton’s number 1 listing agent, I would be happy to answer your questions regarding a Stockton short sale, Lathrop short sale, Lodi short sale, Tracy short sale or Manteca short sale.
Streamlined Shortsales? Really? Hey, I Have This Bridge For Sale…
December 17, 2009
Buyers and sellers unfamiliar with the short sale process always ask if there is anything that can be done to speed up the short sale process. As I have mentioned before, there are new and improved rules that have just been formed to streamline the short sale process that will go into effect April 5, 2010. First off, the streamlining rules are guidelines, not laws and lender participation in the incentive program is not mandatory but optional. There is no guarantee that lenders will even choose to participate.
Under the new guidelines, the seller will receive the pre-approved short sales terms before listing the property, including the minimum acceptable net proceeds. However, what isn’t clear is how long the minimum net set by the broker price opinion or appraisal will be valid. Currently, many banks won’t order a new appraisal for four to six months. Hopefully, the home isn’t in a declining market. In addition, mortgage servicers will have 10 days to approve or disapprove the request for the short sale. Please remember, this is the REQUEST for a short sale NOT short sale approval.
Lenders will provide a financial incentive of $1,500 to help home sellers move out of their home. There will also be a requirement that borrowers must be fully released from future liability for the first mortgage debt. This means no cash contribution, promissory note, or deficiency judgment will be allowed. This is great news to sellers if lenders actually choose to go along with it. Since the lender’s participation incentive is only $1,000, it is questionable that they would play along with these conditions if they stand to lose too much. They would be more likely to disapprove the request for a short sale or build it into the initial minimum acceptable net proceeds thus driving up the purchase price and making it more difficult to entice buyers.
The investors will be paid a maximum of $1,000 for allowing up to $3,000 in short-sale proceeds to be paid out to subordinate lien holders. Which means subordinate lien holders will be paid up to $3,000 of the short sale proceeds. The Treasury said second lien holders who want more than this will have to pursue a short sale outside of the federal program. Travis Hamel Olsen, COO of Loan Resolution Corporation said “While we are excited about the new measures that the Treasury announced, we believe that subordinate lien holders will have a limited adoption rate of the program. It is a step in the right direction, but there needs to be more incentive to subordinate lien holders.”
‘Streamlining’ may be an exaggerated term. Although these changes will help speed up the process for a select few, it will not be the solution to the majority of ongoing short sale dilemmas. It is still yet to be seen how the loan servicers will choose to embrace the new program. Homeowners with subordinate liens are still likely to face some challenges to reach approvals. It is common for subordinate liens to seek 10% of the balance owed to release the lien. Which may become more difficult than the current market since the participating primary lien holders will now be capped in what they can contribute to the subordinate lien holder. This will be the fly in the ointment and sellers should expect high demands from subordinate liens.
It is still unclear how the new guidelines will affect the Stockton short sales, Lodi short sales, Tracy short-sales, Manteca short sales and Lathrop short sales, but for those considering a short sale hope for the best a prepare for the worst. Work with an agent who is experienced in short sales and stay involved and informed. The transactions with proactive sellers tend to resolve themselves quicker. Consult with your attorney and or CPA before pursuing a short sale and be prepared for any subordinate lien holders to request additional funds or a promissory note in order to close escrow. So buckle up, the ride could be short or it could be long but it will definitely be bumpy!
They Should be Called Long Sales
December 15, 2009
Time and time again sellers, buyers and agents involved in short sale transactions complain that the process takes too long. In fact, buyers often get frustrated and leave prior to receiving approval. It isn’t uncommon to go through two or three buyers in any given short sale. This is unfortunate since it can prolong the final approval for the seller. In the following New York Times article, Short Sales a Long Process the newspaper explains why they are not likley to speed up anytime soon. For more information on the short sale process call 209-471-6516. We are your short sale experts in Stockton!
Short Sales Gain and REOs Slip
December 10, 2009
Although the number of foreclosures has been reported as going down 8% since last month, it is still up 18% over this time last year. Don’t be mislead by the numbers, foreclosures are still ocurring in large numbers and the government is actively trying to create incentives to help prevent them. The good news is incentives for banks means more foreclosure alternatives for borrowers. Banks are shifting more and more of their resources, once reserved for foreclosures, to short sales and loan modifications in an attempt to limit runaway foreclosure figures. As illutrated in the Deutsche Bank loan performance figures shown below:
