short sales

East Bay Real Estate: Bank of American Halts Foreclosures!

In the midst of the confusing and distressing foreclosures facing homeowners today, Bank of America has now put a halt to their inventory which also includes the inventory from the Countrywide, the failed mortgage company B of A purchased that used to be the largest on in the country before the crash three years ago. With this news, the Wall Street Journal said, “…In essence, fast-paced modern finance is colliding with the much slower machinery of the U.S. legal system. While finance aims for efficiency and maximized profits, the courts demand due process. And that’s becoming a growing issue as lenders come under attack …for taking short cuts to oust homeowners who haven’t mailed in a mortgage check for months.” Short Sales are still a large part of the market and this will significantly slow down the ability for Buyers to complete their purchases of foreclosed properties. Read more

short sales

Jim Walberg’s 2008 East Bay Real Estate Update – 4th Quarter!

There is a mixed bag of critical information for Buyers and Sellers to consider for the 4th quarter.

There are MANY factors that are still mixing together that makes it critical for consumers and Realtors to understand the economics of how these factors will impact their decisions regarding Buying and Selling real estate in the San Francisco Bay Area.  And, as you read my report remember that all real estate is LOCAL!  Here are just a few of the factors that will be impacting the 2008 fourth quarter real estate sales in our Bay Area region.

• Mortgage interest rates have been adjusting downward this past week. The markets believe that inflation is not the BIG factor at this time, even though in August it was at a 27 year high. The biggest inflation factor was the price of oil. The speculation on that commodity has cooled down dramatically bringing gas prices down, therefore lower the inflation rates.
• Short Sales and REO sales are bringing down the median price for homes in the Bay Area. What this means is that appraisers are one of the BIG hurdles when purchasing a home, because in some communities there are so many distressed sales that it is the trend impacting those homes for sale that are not in a distressed condition. For example, communities such as Antioch/Brentwood/Oakley are receiving appraisals on any home sale that are based on a much lower median price trend because of the number of distressed sales.
• Positive reports on the housing markets helped regain some confidence in the past week. Preliminary Growth Domestic Product estimates showed the U.S. economy growing at a surprisingly healthy pace while the Consumer Confidence Index posted its second straight monthly gain. However, here is the catch that needs to be watched. The GDP may be a false indicator because most of this gain is generated from exports because of the world taking advantage of the weak dollar. Remember, on Friday the unemployment figures are now up to 6.1% – the highest in five years. So, the GDP is growing but that growth is not creating new jobs.
• All of the housing sales indicators are showing that we may be getting close to the bottom of housing price corrections. However, there is a wild card that may be showing up soon – pay-option adjustable-rate mortgages may show a dramatic increase in defaults in 2009 after the payment option period expires. This could be the second wave of defaults with most of these in higher priced communities.
• Remember that all real estate markets are local! The national averages do not mean anything in the Bay Area, or any other specific geographic area. The local markets are the real indicator to watch. Within a 25 mile radius in the East Bay the markets are as different as night and day. It even gets more specific by city. Some of the communities that are on fire right now are Danville, San Ramon, Dublin, and Pleasanton. The very large sales activities in Antioch/Brentwood/Oakley are still caused by the Short Sale/REO properties that continue to flood the markets. As much as 45% of the sales in these communities are distressed sales. As opposed to Danville where they are 8%. Do you see how “local” the real estate markets really are?

So, how does a consumer filter all of this information into actions?  If you are a Buyer, lock your loan and buy a house NOW.  If you are a Seller that does not need to sell right now, HOLD.  If a Seller needs to sell their home, then price it aggressively, prepare the home in turn key condition and get it SOLD.  A Seller will only hurt their chances for the best price if they do not pay attention to price and condition.  The longer a home stays on the market the likelihood of getting their expected price will decline.  One last thought for the day…there is no BAD market or GOOD real estate markets, there is just THE market we are in.  We are very effective at turning lemons into lemonade no matter what the economic conditions.  Contact me any time with questions, and I welcome your comments about my real estate market observations.  Until next time.

short sales

SHORT SALES Are Dramatically Impacting East Bay Real Estate!

The value of borrowers homes may not be enough to pay off their loans.  Short Sales are now impacting appraisals of properties and the ability of borrowers to secure their next mortgage.

Not since the early 1990s have I seen so many Short Sales being processed.  The challenge today is that most Realtors servicing a Short Sale were not in business in the early 1990s.  In fact, most of the people working for the lender’s side of the Short Sale negotiations have never participated in this type of transaction.  This may be one of the reasons why less than 30% of the Short Sales actually close escrow.  We now have the solution  for borrowers considering this method of negotiating with their lenders.  Our real estate Team is looked upon as one of the most successful in actually completing the Short Sale process because of having a dedicated department to serve these difficult situations.  Ellen Muzzio has just joined our Team as our Short Sale Specialist.  She is the most experienced professional we have found regarding the successful management of a Short Sale.

A ‘short sale’ is when a lender accepts a discount on a mortgage to avoid a possible foreclosure or bankruptcy. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $700,000.   The value of the home in today’s real estate market is only $600,000.  The borrower hires a Realtor to sell it for current market value.  A Buyer presents an offer for $600,000.  The purchase offer is submitted to the lender for consideration.  This is a ‘Short Sale’.

Deciding to participate in the Short Sale process is a BIG decision for a Buyer.  It is usually triggered when someone is at the point of not being able to afford their home due to; high interest rates, dips in property values, divorce, loss of employment, decrease of income, etc., then they are forced to make a life altering decision.  I will be the first to tell that a short sale is bad, but a foreclosure is worse.  However, the Buyer may have the ability to save their credit from reflecting a ‘foreclosure’ as to simply having a ‘settled debt’.

Why would a lender today be willing to take such a loss?  Here are just a few of the reason:  First, banks do not like excess inventory and delinquent loans on their books. An opportunity to sell the property is very attractive in today’s real estate market.  Secondly, lenders know they could lose a substantial amount more if the property goes to foreclosure – a trust deed sale. There are many fees involved: i.e., property taxes, liens, repairs, etc. The lender may be better off taking the loss beforehand and be finished with the headache and liability if in fact it goes to a ‘trust deed sale’.

The short sale negotiation with the lender is a difficult, frustrating and very time consuming.  A purchase contract from a Buyer is required to begin discussions with the lender.  This is the first step of many that will need to be successful taken in order of a lender approval to be secured.  A short sale approval is further complicated when there is a 1^st and 2^nd mortgage on the property.  Here is a list of the items a lender will require before they will even begin the negotiations. 

• A letter of hardship from the borrower.
• A copy of the purchase contract from a prospective Buyer of the property.
• Two years tax returns.  (If you have not filed, include that information in hardship letter)
• Two most recent paycheck stubs for each person on loan.
• Two most recent bank statements from the borrower(s).
• A copy of your mortgage statement(s).
• A signed borrowers authorization for our Short Sale Specialist – Ellen Muzzio, to communicate directly with the lender(s).

The outcome of a Short Sale will be up to the skill of the professionals managing the case on behalf of the borrower(s).  Again, it is not for the faint of heart, but it may be the best solution for a borrower in a very bad situation.  There are very important tax considerations for a borrower to also consider.  Before they even begin the process they will need to seek counsel from their tax and legal advisors.  Let me know  if you would like to learn more about how this may benefit your current real estate situation.  Until next time…

short sales

2008 Market Update – A July Snapshot Of East Bay Real Estate!

Jim Walberg’s perspective on the status of the East Bay real estate markets – what do the statistics really mean today?

In my lifetime, there has never been a real estate market like the one we are experiencing in the East Bay today!  The dynamics of this market are incredibly complicated with global factors impacting all aspects of our community. Some of the most critical of these factors are:

The mortgage melt down!  There have been almost 300 national lending institutions close their doors in the past year because of creating irresponsible mortgages – almost giving money away to anyone who could fog a mirror.  Greed and avarice were key factors for the mortgage industry for the past several years.  It is now payback time for the irresponsible lenders.

The world price of oil!  Who would have ever dreamed that oil prices could be manipulated by speculators and world events, such as Iran shooting off missiles this week. Because of this one event oil prices skyrocketed.  It cost Iran $5 a barrel to get their oil into storage tanks.  It is in their self interest to create instability in the world so a barrel of oil costs $150, instead of $30 on the open markets.  They are making BILLIONS of dollars a day.  Who would have ever dreamed that what is going on with oil would so dramatically impact the economic health of our national economy, and our local housing markets?

The world currency markets!  Who could have imagined that the world currencies are so much more valuable than the U.S. dollar today?  Euros – 60% higher; British pound – 100% higher: Swiss Franc – 40% higher; Canadian dollar – 4% higher.  The U.S. is the shopping center for the world because EVERYTHING is on sale for them that has a price connection to the U.S. dollar.

Lack of consumer confidence!  Consumers today are in a state of PANIC and FEAR as to what is happening with soaring expenses.  It cost the SUV owners almost $100 for a tank of gas.  The cost of fuel is causing cost of goods to rise in all sectors.  The major airlines and U.S. car manufacturers are losing billions each quarter because of their business models not taking into account the issue of oil prices on their profits.

So, how do all these factors impact the East Bay real estate markets?  What are both Sellers and Buyers facing today as they make real estate decisions?  What are the trends that should be paid attention to in our East Bay micro-markets?  Here are some of my thoughts. Sellers need to have their homes in turn key condition and priced for value or they will sit on the market for months.  Home pricing and appraisals ARE being impacted by short sales and banked owned properties.  Months of inventory used to be the statistic that told us if it is a Buyers market or a Sellers market.  Today “months of inventory” is so mingled with short sales and bank owned properties that it is now not a correct indicator as to what type of market we are in.  So, forget months of inventory,  we are in a BUYERS market today!

The current market statistics are so confusing right now because of all of the above factors.  How about three months of housing inventory in Brentwood and over 20 months of inventory in Blackhawk Country Club!  Dublin’s months of inventory is half of Danville’s.  Antioch had 254 sales in June and Pleasanton had 61.  Are you getting a better picture of the chaos in how to intepret what in the world is going on in our micro-markets.  June Pending sales in the East Bay are up 4%,  and months of inventory in the East Bay dropped 7% in June.

Here are some of my conclusions.  In some communities the majority of their sales are bank owned or short sales.  This is creating huge opportunities for first time home buyers,  move-up and move-down buyers, and investors.  Because of the current economic climate a very confusing time has been created for Buyers and Sellers.  Hire the best Realtor you can find to guide you through the current East Bay real estate “mine field”.  Until next time…

short sales

East Bay Real Estate “Short Sales”…The Rest Of Jim Walberg’s Story!

Realtors are sometimes referring to “short sales” as fake listings!

So, we have two “short sale” listings in our inventory.  The only reason why we agreed to take on these two projects is because the owners are friends of ours. And, because I had managed “short sales” as a Realtor when the worst recession in California history started in late 1989 and lasted for about four years.  Boy, has the “short sale” world changed since 1989!

The economic condition of the mortgage meltdown this time is not just in the East Bay and California, it is a national experience.  A “short sale” refers to a seller who does not have enough money to pay off their mortgage given the price of the home in today’s real estate market, and they don’t have the money to even make the monthly mortgage payments.  There are several keys for Buyers to consider if they are going to submit a purchase offer on a property listed as a “short sale”.

1. 1.  A “short sale” is only possible if the mortgage holders are willing to sell it for less than is owned to them.  The banks are the ultimate decision maker, not the current owner.
2. 2.  It is critical for a Buyer to know as much as possible about the ability of the Seller to actually have the mortgage holder agree to the “short sale”.  The current statistics show that only about one out of 20 “short sale” purchase offers ever make it to closing because the banks will not approve a “short sale” if the borrower still has money stashed in other places, such as savings.
3. It is also important for the Buyer to check out the experience the Realtor has who is representing the “short sale”.  Do the Realtors involved know what they are doing?
4. Has the process with the mortgage holder progressed to having an appraisal done on the home?  If the process hasn’t progressed to this stage it could be months for this step to be completed, if it ever is.
5. 4. The Buyer needs to understand the poor odds of closing escrow, and the amount of time it will take to work through the process – typically months.  5.  If the Buyer is able to make it through the “mine field” of the mortgage holder’s decision process they may get the deal of their life.  But remember the statistics that only 5% of them ever close.
6. A Buyer also will need to typically sign bank agreements letting the Buyer know the bank is selling the home in an “as is” condition, and the bank will not be doing any repairs that may be discovered in a home inspection.

The Buyers also need to be aware of the difference between a “short sale” and an “upside down” Seller.  The difference is BIG!  If an “upside down” Seller must sell their home, the mortgage holder will expect the Seller to take every last cent they have in their savings, 401(k), and even see if they can borrow money from their friends and family to make up the difference of the loss that the mortgage holder will be taking.  The bank won’t approve it if the Seller has cash available anywhere! ( One of the lenders on the “short sale” that we represent even asked ME to consider contributing money to them AFTER the close of escrow in order to minimize their losses!  This was a first for me – a demonstration of what type of desperate measures lenders are taking to see if it makes sense for them to take a BIG loss.)

 An added hurdle is when a property has a second deed of trust holder as part of the mortgage package.  The second deed of trust holder can nix the deal because of not agreeing to have their portion of the mortgage wiped out. ( Usually, the second deed of trust is the one that takes the biggest hit on a “short sale”.)  Also, a bank may want to take the risk of just foreclosing on the property and see if they can get some of their losses back from private mortgage insurance. 

 As you can see, it is very risky for a Buyer to enter into a “short sale” mess and come out the other end of a completed home purchase.  If you are one of these Buyers who are even considering the purchase of a “short sale”, make sure you select the most experienced Realtor you can, and then cross your fingers and pray a lot.  Until next time…your East Bay real estate detective is on duty.

short sales

Some Bank’s Short Sale Polices Seem To Be Falling Short In The East Bay!

Some homeowners who have great credit and can’t afford their home anymore are in trouble!
.
We have a customer who owns a home in the East Bay that has lost his job, he maximized a mortgage on his home purchase two years ago – which means he put as little down as possible. His lender – one of the country’s largest banks, was very cooperative in providing his current mortgage.
.
Our customer is a very hard working person, who has worked hard to meet all of his financial responsibilities. Because of his credit payment history he has great credit. We started a discussion with him several months ago regarding what alternatives he had regarding keeping his home after a sad turn of events in his life because of a downsizing company. Because of the price corrections the past two years his home will likely sell in today’s market $50,000 less than the mortgage owed.
.
During the past month of discussions with his lender we began to understand the alternatives that were available to him. What we discovered was very disturbing to us. Again, our client’s first objective is to do the right thing with the bank mortgage holder and to do all he can to protect his credit. As of today it appears the bank has no interest in doing either.
.
We have been dealing with the bank’s customer service office in the Mid-West. They do not know our customer and they don’t know the East Bay real estate market. All they know is they have a huge stack of foreclosures on each of their desks that they are dealing with more everyday. The current bank policy is to not deal with any homeowner regarding negotiating a short sale of their home until:
.

• The homeowner is at least three months behind in their mortgage payments.
• The homeowner will need to have been served the notice of foreclosure – the homeowner brings the three month’s of mortgage and interest payments current.
• The bank has delivered the eviction notice to the homeowner after the notice of foreclosure has been served.
• The homeowner has no other assets to bring their mortgage current or pay for any difference in the sale of their home.

.
Given this timetable our client’s best game plan with the bank would be to stop making all mortgage and property tax payments until the bank legal evicts him out of his current home. What a ridiculous game plan! The homeowner will ruin his credit, however he will be able to live in the home for seven or more months before he is required to vacate the home! The bank would probably get a higher price for the home today rather then what they will net months from now when they have a vacant home to sell. Plus, they will not have received any debt service on the home for months!?
.
Because of my disbelief in what I learned from this lender regarding our client’s situation, I called several of my contacts in local banks. I discovered that a consumer has a much better chance to work through mortgage problems with a local bank than a national one. The local banks understand the local needs and you are even able to meet face to face with a foreclosure counselor in many of them. We are beyond frustrated and our client is in disbelief that this is his only alternatives. We welcome any of your experiences with similar situations with foreclosures and short sales.