Under the Obama Administration’s Making Home Affordable plan, which offers alternatives to foreclosure for homeowners struggling or unable to make their payment but unable to complete a loan modification, the short sale process is expected to be streamlined with incentives for all parties by the Treasury.  As reported in Short Sale Stories:

Sellers who complete a short sale can receive up to $1,500 when the sale closes. They can use this money to pay some of their moving expenses when they finish the short sale. This helps the recurring problem that sellers need funds to be able to relocate when the home sells. This same $1,500 incentive payment applies to borrowers who give their lender a deed in lieu of foreclosure.

In addition to these incentives, this expansion of the Making Home Affordable program creates a standard process to follow in a short sale. It creates timelines for the performance of the short sale, which is a welcome addition as they frequently drag on and on. The program also creates standard documents for use in short sales and deeds in lieu of foreclosure. This standardization will make short sales easier to do, and the performance timelines should speed up the process. Clear time limits for a response from the lender to a proposed short sale contract… could greatly encourage buyers to purchase short sale properties.

The lender has to allow the sellers/borrowers a minimum of 90 days and a maximum of a year to sell their property. The time will vary depending on local market conditions. The property to be sold must be listed with a real estate agent that has experience in selling properties in the neighborhood.

The lender will establish both the property value and the minimum amount that the lender will accept. So, the lender will order an appraisal or a Broker Price Opinion (BPO) and use that to establish a reasonable sales price for the property. The appraisal or BPO will have to be current, as the program requires that they be done within 120 days of the Short Sale Agreement. This appraised value will be the basis for the lender’s decision of how much they will accept as the short payment of the balance due on the loan. Many lenders will accept 80% to 90% of the value established by the appraisal or BPO, which allows buyers to purchase the property at a favorable price.

This procedure of establishing the acceptable value of an offer will be a wonderful improvement to a short sale. This should eliminate the “guess again” feature found in some current short sales, where the lender will occasionally turn down an offer without giving a counter offer or any guidance to the seller. The opposite should happen under the current program, i.e. the lender will instruct the seller concerning the price at which the property should be listed and also provide guidance on price reductions.

One of the biggest problems in short sales comes when the property has a first loan and additional junior liens. For example, many homes have a first loan and a home equity line of credit that is a second loan. There is some assistance from this program because the Treasury will contribute money to help pay off second loans and other junior liens.

If the borrower is unable to sell the home within the time specified in the Short Sale Agreement, the lender may consider a deed in lieu of foreclosure, in which the borrower voluntarily transfers ownership of the property to the lender. However a deed in lieu of foreclosure only works if there is only one loan on the property because the lender will not want to accept the property burdened by the obligation to pay off the junior loans.

This program will be available until 2012.

To read all the details, go to: http://www.treas.gov/press/releases/docs/05142009FactSheet-MakingHomesAffordable.pdf

If you are interested in finding out more about Making Home Affordable, the short sale process, or want to know whether a short sale may be the best move for you or someone you know; or if you have other questions – feel free to comment (by clicking on the title to this blog), email: schristie@cghomes.com, or call: 805.582.9500.

We have had great success in making short sales a viable option for both buyers and sellers alike in this market, and can help you to determine if the short sale scenario is right for you to be included in this successful group.

I had the pleasure of speaking to Gerry Dougherty, the principal and founder of the Dougherty Law Firm, APC, and an expert in residential property disclosure by sellers.  We were discussing the situation that many sellers find themselves caught up in regarding failure to disclose information about a home, and what they could have done differently to avoid the difficulties that are inevitable in such a situation.  Here’s what Gerry shared with me:

“Realtors are all taught "Disclose, Disclose, Disclose!" when advising their clients on how to properly fill out a Transfer Disclosure Statement. So why is it that homeowner’s continue to get sued for non-disclosure of defects by their disgruntled buyers? The lack of an adequate disclosure in many instances causes the disgruntled buyer to file an action seeking damages for breach of contract, fraud and misrepresentation against the seller and the realtors involved in the transaction. With rare exception, the seller must then defend the lawsuit with his or her own funds and is likely to file a counter suit against the realtor for failing to properly advise the seller on what should have been disclosed.  

The key to minimizing and perhaps avoiding such lawsuits is to put yourself in the position of the buyer and ask, "Would I want to know this information about the house?” It's a simple question and if sellers answered the question fully and fairly on their disclosure documents they could save themselves tens and even hundreds of thousands of dollars in litigation costs.”

[Gerard M. Dougherty, Esq. is the founder and principal of the Dougherty Law Firm, APC in Westlake Village, and has been successfully prosecuting and defending cases based on the failure to disclose material information affecting the value and desirability of residential properties for the past 20 years. For more information contact Gerard M. Dougherty at: (805) 494-9038 ext 244, or via email: gmd@dllawyers.com.] 

In addition to the Transfer Disclosure Statement, California state law requires that seller’s complete a Seller Property Questionnaire, which is intended to give the buyer more information “about known material or significant items affecting the value or desirability of the Property and help to eliminate misunderstandings about the condition of the Property.” 

Upon review of completed disclosures offered by the seller it is also recommended that buyer’s be sure to put their concerns and questions in writing, as well as complete all necessary investigations of the property, including but not limited to property, termite, mold, geological and septic system inspections, all by a licensed individual or company.

I always advise my clients to seek the professional opinion of a knowledgeable and reputable source. Should you or someone you know would like more information about this or a related topic, feel free to contact myself and/or Gerry. Also, if you have something to say – feel free to COMMENT (by clicking on the title to this blog), email: schristie@cghomes.com, or call: 805.582.9500.

I was talking today with ALEX “TREY” ROBERTSON, IV, Esq., who is a Senior Partner at ROBERTSON & VICK, LLP. He practices construction defect litigation and so we were discussing the potential pitfalls of homeownership, even with new homes, and what the law allows for these newly built properties. Here's some great information he offered:

WHAT EVERY HOMEOWNER NEEDS TO KNOW ABOUT CALIFORNIA’S “RIGHT TO REPAIR” LAW

"Sometimes, a dream home can turn into your worst nightmare!  Leaking windows, roofs plumbing, or worse, often are the result of the builder’s defective construction.  Fortunately, homeowners have a strong remedy provided by California’s construction defect laws.  Senate Bill 800, commonly referred to as the builder’s “Right to Repair” law, applies to new residences where the purchase agreement with the buyer was signed by the seller on or after January 1, 2003.   This law establishes a mandatory procedure for homeowners to make a claim against the builder prior to the filing of a lawsuit for defective construction.

Most importantly, the law extends the typical one (1) year warranty obligations of builders, subcontractors, product manufacturers and designers to as much as ten (10) years following close of escrow.  This warranty is available to both the original owner and to all subsequent purchasers as well.

This law provides that the builder, subcontractors, product manufacturers and design professionals are all liable for violation of construction standards specified in the statute.  The statute sets forth certain “performance” criteria and the applicable length of time the warranty applies.  For instance, the following construction components have these warranty periods:

10 years:          plumbing, sewer and utility systems shall not leak; retaining walls, site walls and drainage systems shall not cause water or soil erosion to enter into contact with a structure; shower and bath enclosures shall not leak water into the interior of walls or floors; stucco, exterior siding and other exterior finishes shall not contain significant cracks or separations; and soils shall not cause damage to any structure or cause the structure to become unstable.

5 years:            paint and stain applications

4 years;            electrical, plumbing and sewer systems must operate properly

2 years:            Landscape systems, dryer ducts and untreated wood posts in contact with soil

1 year:             noise transmission from adjacent units in attached dwellings (i.e. condos).

Once a homeowner makes a claim to the builder, the builder has the option to offer to perform a repair.  While the homeowner cannot object to builder’s offer to perform the repair, the builder cannot require the homeowner to sign a release, waiving the homeowner’s right to sue if the repair fails.  If the builder fails to respond to the homeowner’s claim, or refuses to offer a repair, the homeowner may then file suit against the builder to recover the reasonable cost to repair the defect, together with any relocation and storage expenses, lost business income if the home was used as a principal place of business, reasonable investigative costs and attorney’s fees, if provided in the purchase agreement.

The “Right to Repar” statutes are complicated and different deadlines to make a claim apply to each type of defect.  Thus, homeowners are encouraged to consult an experienced construction defect attorney for advice as soon as a defect is discovered."

[Robertson & Vick, LLP concentrates in the representation of homeowners and homeowner associations in construction defect litigation.  The firm is based in Westlake Village,  and also has offices in Las Vegas and Albuquerque.  For more information, visit www.rvcdlaw.com or call Alex Robertson, IV at (805) 418-9900.]

I always advise my clients to seek the professional opinion of a knowledgeable and reputable source. Should you or someone you know would like more information about this or a related topic, feel free to contact myself and/or Alex. Also, if you have something to say – feel free to COMMENT (by clicking on the title to this blog), email: schristie@cghomes.com, or call: 805.582.9500.

Here we are again…

Where were you in 1971 when 30-Year Mortgage Rates hit a record low and we never thought we’d be there again?

I read an article this morning, and thought to myself about how incredible it is to be a buyer right now.  I have seen many different market cycles, and in the last down market of 1990 we were experiencing interest rates above 9.0%.  Buyers were still purchasing, and qualifying for a loan on what was a great real estate deal for that time.   Today, when I read an article stating the information shown below, I think, “Wow what a great market to be in as a buyer; where we have record breaking low interest rates AND incredible values in the market!”  I also can’t help but to wonder which buyers will be the ones thinking “Glad I Did” instead of “Wish I Did” in 5 more years – which is exactly what I saw and heard 15 years ago!

“The average interest rate for the 30-year mortgage has fallen to the lowest level since Freddie Mac began compiling its weekly survey in 1971, declining to 4.71 percent this week from 4.78 percent a week ago.

Rates also were more attractive for 15-year fixed loans, which fell from 4.29 percent to 4.27 percent, but many consumers may not have qualified for them because they now face higher credit standards from lenders.” 

 -REALTOR.com

What’s most important to take away is that since rates are at a “record low,” that it is certainly not a ‘typical’ circumstance and should be taken advantage of, as they inevitably won’t last. If you are looking to buy, get in to escrow as soon as possible in order to lock in an incredible rate. And if you are a seller get your home sold so that you will be able to take advantage of these rates in your next purchase.

Mortgage interest rates are a huge part of the real estate transaction equation. The slight variation in price of the home does not have the same impact in the long run of how much you pay for it as the interest rate does. With the combination of an extension for the buyer tax credit and the interest rate dip, this is the perfect time to purchase a new home!

If you want to know more about rates and qualification for purchasing please call me at (805) 582-9500 or email me at Stephen@cghomes.com.

To stay educated in the market and view homes as if you were an agent, visit our site www.cghomes.com.

As reported on CNNMoney.com, “Snag a great deal on a short sale…”:

Not long ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth. If you're in the market for a home today, you're almost guaranteed to be looking at some short sales… The good news is that short sellers are likely not the run-down, distressed properties that you often find among foreclosures. However, there can also be many hassles in getting involved in a short sale... If you're willing to brave the intricacies of the process, you'll be far more likely to land the home you always wanted. The key to snagging a good deal is knowing how to avoid the land mines.

Know what you're getting into. In a short sale, you are dealing with several parties: the sellers, their agent and the sellers' lender. That's why a short sale can take anywhere between two and six months to execute, compared with about 30 days for a typical sale. Though many banks are willing to take a loss on a mortgage in a short sale if it means avoiding an even bigger loss in a foreclosure, with so many owners trying to unload properties, the lender's negotiators are flooded with short-sale offers. So if you're moving or selling another property, keep in mind that you'll likely need to budget for a few months' worth of rental payments so you have somewhere to live in the interim.

Find the right pro. Lenders often make realtors who work on short sales take a hit on their commission, so some brokers may be loath to show you the listings. But don't even think about going solo. These deals take a lot of work and persistence, says Loni Parmelly, author of Success in Short Sales. Before you sign up with an agent, ask him how many short sales he's closed. If he hasn't done at least two, find someone more experienced.

Set the right price. The first step is to have your agent submit your offer to the seller. Don't just rely on the current list price to come up with your initial bid, says Bill Richardson, a district sales manager for the Keyes Co. Realtors in Boca Raton, Fla. The seller's agent may have far underpriced it in hopes of attracting buyers, but the bank likely won't accept a lowball offer. Ask your agent to determine the home's fair market value by searching comparable sales in the area, with an emphasis on other short sales and foreclosures…You'll also want to have a pre-approval for a mortgage, as your offer won't even be considered if you don't have one.

If you are interested in finding out more about the short sale process, and want to know whether buying a short sale may be the right move for you or someone  you know, or have other questions – feel free to comment (by clicking on the title to this blog), email: schristie@cghomes.com, or call: 805.582.9500.

We have had great success in making short sales a viable option for both buyers and sellers alike in this market, and can help you to determine if the short sale scenario is right for you to be included in this successful group.

Did you Read this Article in the Wall Street Journal?

 According to The Wall Street Journal, November 24, 2009:

“The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply. 

Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.

Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau.

But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default.”

This is news to so many people. We definitely have A LOT of cleaning-up to do in order to boost our real estate economy!

In light of what’s been said, I ask you…  What are your thoughts?  How are you set up in this scenario and who is your professional advisor?  There are many families in need of assistance, and many others wondering if they should be investing at this time.  Tell us your thoughts and opinion on the matter – I am very interested to hear WHAT YOU HAVE TO SAY! 

(Comment by clicking on the title above, and thanks for taking the time to contribute your input!) 

What You Need to Know Before You Buy

Before you buy a home have a plan!  Make sure it is your plan...  one that you are comfortable with and fits your strategy and goals for home ownership.

1. Start with the right mortgage that you can afford.  A mortgage payment is one thing, but the reason a 30 year fixed rate became so popular after the last great depression is that it is a budgeted mortgage.  It provides a fixed rate payment for the term of the loan.  Principal, Interest, Taxes and Insurance are all provided for.  If you know what your payments are for the next 30 years you can plan around it.  The secret is that you pay it down, and NEVER borrow against the equity!  The goal is to pay off the loan, not add to it and find yourself financially strapped when it comes time for retirement.
2. Assess Your Finances.  Once you know what your monthly payment is then you can look at the list of other items to budget in your life, such as income, taxes and expenses.  Some expenses may be fixed, and others will fluctuate.  It is the monthly expenses that are most important.  Sometimes they are not constant, such as gas and electricity, for example, which depend on the time of year and the weather conditions.  The important part is to understand the lifestyle you currently live in and to make sure that when you do your budget you’re enhancing that lifestyle, otherwise you will just be building up debt to keep up with the Jones’s.
3. Know Your Financial Obligations: Home insurance, electricity, gas, sanitation, water and sewer will fall into this category.  Cable TV is optional.  Then there are expenses like home maintenance, hospitalization, auto payment(s), car insurance, registration, fuel, car maintenance, parking tolls, food, medical, personal care, taxes and more.  On top of this you should have a solid emergency fund.  I would suggest at least 6 months in the bank! 
4. Don't Have a Budget?  Time to take a look at your income and expenses for the last 2-3 years and build your budget around the averages.  Look at each area of your obligations, and remember to consider future savings and your children’s educational expenses.

Now let’s see… We covered the right mortgage, your finances, your financial obligations and finally the budget.  What you need now is to choose the best advisor to assist you in your home purchase.  While there are so many to choose from, you should find one with experience, knowledge, tools and resources, and current market skills to handle your home purchase.  When purchasing a home you can hire the best and not pay a dime!  

To know more please watch our video or visit our website at www.cghomes.com. 

What Is This Market About & How Do You Survive And Thrive In It?

I sit here today thinking about the current market and the many elements that are working within it.  I was talking with my sales partners this morning about all the great aspects of our business today in real estate, and here is what we know… Sellers are waiting to put their home on the market because it is perceived that the market will get better in the next year. Buyers are waiting to buy because it is perceived that the bank owned properties which are not yet on the market will be coming soon. Agents are lost and searching for the best tool to survive in these times, rather than investing the necessary time and money to increase their skill level and learn how to advise their clients in today’s marketplace. People are hearing promises by the government that they will receive the assistance on their short sale and loan modification which is needed, but are having no success. 

So what does that tell us?... Well, things are looking great. I love the idea that there is so much commotion in the market, and people are looking for a knowledgeable professional to advise them on their questions. I feel excited about what that means because when the market shifted two years ago we all woke up, tightened our belts and rolled up our sleeves. It was time to learn how foolish we had been in the ‘up’ market as well as what the value of a good advisor really meant. We took the inordinately bountiful market for granted and were making so much money that we forgot how we got there. All the hard work to achieve success until that point was completely ignored, and instead we saw that the consumer did not need a great agent, they just needed anyone with a license who could fog a mirror. We saw lenders giving loans to just about anyone, and just about anyone in turn did buy a home.

Now here we are today, faced with the true reality of the economy and what we need to do in order to get ourselves realigned and refocused in our lives. The word “budget” is being used more than “spending”. The words “interviewing for the best advisor” are being heard instead of “discounted agent”. I recognize people turning to the experts to clean up after the past five years of bad habits, and getting wiser advice.

I met with a client the other day and the first thing they said to me was, “Sorry we didn’t hire you in the first place a year ago,” to which I looked at them and replied, “The world forgot how important it was to hire someone they know and can trust. Too many people got in to the business eight years ago and really damaged the reputation of the professionals in my field.” Having been in real estate for 20 years I have seen the market’s ups and downs, but never have I seen so many people hurt as I did this last cycle.  I acknowledge one thing for sure… We have to help people get out of the negative places they have been facing, advise and direct them on how to clean up and move forward. There is way too much stress on these good families, and with times so tough it just moves around like a virus.

So when I ended the conversation with my team today I told them, “Do your best to contribute positive feedback and be the source people turn toward to assist them in getting to that better place.”

How we can do this is by educating people on the market…

1.     For sellers… We can explain what the advantages of this market are so they can be completely understanding in setting their goals and expectations.

2.    For investors… We’ll discuss the many opportunities that are out there and assist in forecasting their goals and expectations.

3.    For homeowners who are behind on payments and do not know where to turn… We can assist them with good advice and direct them to a solution. 

We are going to be proactive and set up consultations, along with offering education about the market via videos and blogs on our website, as well as emails, all on a daily and weekly basis.

So what’s next? Stay tuned with us and we will provide you with the information you require to make your next move to a positive result.  You can do the following: 

1.    Call us for a consultation (805) 582-9500

2.    Email us your questions at info@cghomes.com

3.    Visit our website at www.cghomes.com for up-to-date information and news, and remember to keep a watch on our BLOG postings.

We look forward to making a difference for you, and being a part of your plan to succeed in this market!

Fannie Mae is offering to let troubled borrowers who don't qualify for a loan modification stay in their homes as renters if they volunteer to relinquish ownership through a deed in lieu of foreclosure. The move is the latest in a series of steps by lenders trying to manage inventories of foreclosed homes. By reducing the supply of cheap foreclosures on the market, Fannie Mae's Deed for Lease Program would add to other efforts by the federal government to aid the housing market, analysts said.

Jay Ryan, Fannie Mae's vice president of equity investments, said the program would help to stabilize neighborhoods. The firm said Thursday that the program would qualify only those borrowers who had exhausted other options, such as a loan modification. The program also would allow Fannie to produce some income from the properties -- many worth less than their mortgages, or "underwater" in industry terms -- as it waits for home prices to recover.

Fannie Mae didn’t say how many homeowners it expected would qualify for the program. To participate, a borrower must agree to convey all interest in a property to the lender. The company recorded 1,996 people agreeing to such a transaction in the first nine months of the year, according to a filing Thursday with the Securities and Exchange Commission. In California, Fannie held $475 billion in loans at the end of the third quarter, of which 5% were "seriously" delinquent.

The home must be a borrower's primary place of residence. A borrower-turned-tenant would have to document that the new market rental rate is no more than 31% of his or her gross income and be released from any subordinate liens on the property. Tenants must agree to allow the home to be shown to potential buyers and allow the company to market it for sale.

Fannie's program isn't for everyone. Some borrowers would be better off pursuing loan modifications or other solutions.

Keeping you updated:  Tax Credit for First Time Buyers…

On Thursday the 5th of November, Congress and the Senate passed the extension of the Tax Credit First-time Home Buyers. The U.S. House of Representatives voted 403 to 12 and now will be sent to President Obama today for signing.

“More than 1.4 million first-time home buyers nationwide were eligible for the initial credit. We expect that number to increase dramatically in the months ahead once this new legislation is in place.”-Liptake

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

We will be keeping you updated on any changes… Just come on back and check our blogs.  If you have anything to say or thoughts on this topic, please feel free to blog and give us your thoughts and opinions.