If you are counting on real estate values rebounding soon, think again.

Here are some numbers that will be major factors in the real estate market recovery:

$14 Trillion Dollar U.S. Deficit.  The 2-year extension of the Bush era tax cuts will continue to drive up these numbers.

$9 Trillion loss in real estate value since prices peaked in 2005.

9.4% U.S Unemployment & 12.5% CA Unemployment. Last month we gained 103,000 jobs nationwide while the workforce grows by $150,000 every month.  Even if we gained 200,000 new jobs a month, it would take until 2022 to get back to 2005 employment levels.

$28 Billion California Deficit.  Expect cuts, cuts and more cuts in public services.

$36M Sonoma County Deficit.  Same situation in our beloved Wine Country.

There are 54M mortgages in the US.  27M have had at least one late payment over the last 6 months.

1 in 7 homeowners nationwide are at least 3 months late.

4 Million more foreclosures are expected in 2011.

World-Renowned economist Nouriel Roubini (aka Dr. Doom) was one of only a handful of experts who predicted the collapse of real estate prices well before they happened.  He's predicting another trillion $'s in real estate value losses. 

http://dealbook.nytimes.com/2010/12/06/dr-doom-predicts-another-1-trillion-in-housing-losses/

I believe the douple-dip in prices will be felt more on the mid to upper end market here in Sonoma County (>$500,000).  While we may see a reduction of 3-10% on the low end, we could see up to a 20-25% further price erosion on the mid to high end properties.

If I was a homeowners whose mortgage payment is above 25% of fair market rental even if the home was not underwater, I would seriously consider renting.  

For homeowners whose house value has dropped to below the loan(s) levels, the best option is a HAMP Loan Modification and/or a HAFA Short Sale.

There are many experts predicting values may not rebound for 5-7 or more years.  This projection has to be a major factor when making that crucial decision.

Happy & Prosperous 2011!

 

I just signed up with PartnerFirst, a nationwide Real Estate Network designed to serve homeowners & agents/brokers with Short Sales.  I took their intensive online course on Short Sales and acquired their PSC (Pre-Foreclosure Specialist Certification). Whether you are agent or financially-stressed homeowner, I recommend you visit their website.  PartnerFirst link: http://members.partnerfirst.org/

I also have been certified by Equator with their Platiinum Short Sale & REO Certification.  I also have been certified by NABPOP ) National Association of Broker Price Opinion Professionals), Titanium Solutions, Distressed Sales University and Harris Real Estate University.

Why would I focus so much time and effort on this, you may ask?

Please consider these facts which essentially guarantee a steady flow of Short Sales & REOs for several years to come:

• Half of the 55 million mortgages nationwide are in some form of distress.
• There are roughly 11 Trillion in total loans.
• Three Trillion are in pools of investors.
• Three Trillion are in whole loans (1 owner owns entire loan & 1/2 -1.5 Trillion- are in distress).
• Whole Loans are the easiest ones to get Short Sales approved.
• Ben Bernanke, Chairman of the US Federal Reserve Board, recently stated in CBS's 60 Minutes that he expects unemployment rate to remain high for 4-5 years.
• Economists predict another drop in real estate prices in 2011.  Forbes predicts a 20% loss in values while Moody's predicts 8%.  Like politics, real estate prices are LOCAL.  Different area will be hit differently.
• As underwater homeowners realize the economic advantage of renting vs having an unreonably high mortgage payment, more and more Short Sales will hit the market.

Happy Holidays!!!

ADVANTAGES OF SHORT SALES

  

If your home is under water (you owe more than what it's currently worth), and/or you are having problems making your mortgage payments, it's important you carefully consider all options available to you:

Loan Modification-  Banks are more flexible than ever to reduce mortgage payments by reducing the interest rate and at least some banks will reduce your principal in some cases.  In order to qualify, you must prove you have income above and beyond your monthly expenses.  Even in situations where the bank offers a Loan Modification and/or principal reduction, if the new payments are still well above the current fair market rents, a Short Sale could be the best solution.

While nobody can predict exactly what will happen, most experts believe real estate prices will stay stagnant for 5-7 years and consistent year-to-year appreciation may not resume for another 10-15 years.

  Foreclosure- This is likely the worst option because of the long term effects it can have on your credit, your employment opportunities, income taxes etc.

  Short Sale- This option is worth considering for the following reasons:

  GROW YOUR SAVINGS

In most cases, once a homeowner decides a Short Sale in the best option, the sellers stop making mortgage payments.  In most cases the decision is made AFTER the seller is already behind not before.  The Short Sale process could take anywhere between 3-12 months or even longer in some isolated cases.  I had two that lasted more than a year because the lenders took that long to approve them.

 SAVE YOUR CREDIT (FICO) SCORE

With a Short Sale only late payments show up on the credit report.

Once Short Sale is closed, it is reported as "settled for less than full amount due".  As long as your credit is kept clean in the rest of the accounts, the impact to the FICO Credit score could be as little as 50 points.  A foreclosure could impact FICO scores by up to 200 points and stay on record for 7-10 years.

  PURCHASING A NEW HOME

A person selling their home as a Short Sale can be eligible for a FNMA (Fannie Mae) loan after only 2 years.  I have heard of cases where Short Sales sellers can purchase another home immediately as long as they stay current on the mortgage payments on the house they sold as a Short Sale.  A foreclosure, on the other hand, can prevent the previous owner from getting a FNMA-backed loan for 7 years.

  OBTAINING FINANCING

At this time, there are no questions related to Short Sales on the financing application.    On a foreclosure, there is a question related to foreclosure in Section V111 of the Standard 1003 Application.

  

LOAN DEFICIENCY CONSEQUENCES

In a Short Sale, it is possible to negotiate that the seller be released of the deficiency in writing by one or more lenders.  In many states, including California, lenders have the right to pursue a deficiency against the homeowner.  It is more likely that lenders will seek a deficiency from the sellers on a foreclosure than on a Short Sale.

  SALES PRICE VS DEFICIENCY JUDGMENT

It is likely that a Short Sale be closer to market value than a foreclosure (REO or Bank-Owned).  Therefore, the amount lost by the lenders will be less on a Short Sale than on a foreclosure.  In the rare event the lenders seek a deficiency judgment, the amount owed will be less on a Short Sale.

INCOME TAX IMPLICATIONS

On a Short Sale, the lender sends the IRS a 1099-C for the amount "written off". As long as the home was the seller's primary residence and was not refinanced, the Mortgage Debt Relief Act of 2007 protects homeowners from owing additional income taxes.  In cases where the seller did not occupy the home and/or the home was refinanced and money was taken out, insolvency (Chapter 7, 11 or 13) could be considered.

EMPLOYMENT

A Short Sale is not a public record and is reported separately on a credit report.  Prospective employers will only be able to see the late payments and the account has been settled.  A foreclosure could pose a bigger obstacle to employment.

  SECURITY CLEARANCE

A Short Sale does not pose any problems for Security Clearances.  A foreclosure could be a problem when applying for police officer, military, CIA, FBI etc.

  

Disclaimer-  In matters with potential tax and legal implications, it is always recommended that professionals be consulted (CPAs, Tax Advisors, Attorneys).

  

Rudy Romo

REO PRO REALTY

T: (707) 235-4773

F: (707) 526-5790

www.RudyRomo.com

rsraaron@comcast.net

Titanium Holdings, Inc. has announced the launching of Excellen, which will offer a full suite of asset management services.  Excellen will be led by president, Cary Sternberg.  Cary has many years experience in this field.

Thousands of agents/brokers (like myself), who already belong to Titanium have been eagerly waiting for this announcement.

On January 15th, 2010, Cary was interviewed by Tim & Julie Harris from H.R.E.U. (Harris Real Estate University).  I thought the interview was highly informative and quite fascinating.

I took notes and I highlight what I thought were the most important points below.

EXCELLEN JAN 15^th HREU INTERVIEW

======================================================

 

Shadow Inventory-

As far as already-foreclosed homes, there is NO "shadow inventory".

We do expect somewhere between 3-7 million homes to be in default and therefore end up as Short Sales & REOs.  These are expected to "start flowing" at the end of Q1, 2010.

 

Property Values-

We are now in the middle of the 2^nd wave of distressed homes.  As we enter the third wave, it is conceivable to see another 10-30% drop in property values depending on the area and the number of distressed homes hitting the market.  In hard-hit states like Arizona, California, Nevada & Florida, expect to see an increase of distressed "executive level homes" that will hit the market as Short Sales or REOs.

 It could take 5-7 years to go back to a "normal market" and 10 years for values to rise back to their peak values.

 

Qualifications For Hiring & Retaining Excellen Agents-

Good communicators.  Quick, responsive, personal & professional.

Market knowledge.  Experts in their specific areas with limited number of Zip Codes.  Innovative, quick & solution-oriented quick thinkers.  Related certifications and affiliations will be important considerations.

NOTE:  Within the next 2 weeks, Titanium HRC's will be receiving an e-mail with a questionnaire asking for their interest and qualifications in REOs.  It is advised HRC's do not call their managers since they are not responsible for assigning REOs.

  

Excellen Policies-

Out of 9,000-10,000 HRC's, 1,500 will be included on the first wave of REOs. 

There will be a limit 20 listings per agent/broker.

Most, if not all listings will be prepared by Property Preservation Companies and agents will have minimal or no out-of-pocket expenses.

Listings will be for 90 days.

Unsold listings may be reduced to a 30-Day Quick Sale level.  If that price is 20% less than the current price, a new BPO will be necessary.  Listings will then be given another 30 days to sell.  If they still do not sell, the plan is for them to be assigned to an Auction Company.

 

I often get asked what it takes to succesfully close a Short Sale in a "relatively short" time period.

Here are just a few factors that must be considered:

 1. List home 5-10% BELOW market.
2. Submit only the BEST OFFER to the lender(s).
3. Make sure the Short Sale Packet is COMPLETE.
4. Write the Loan No,(s) on ALL Pages before submitting
5. Make sure a HUD is included with at least $3-5K going to the 2nd lien holder
6. Make sure you fax the Third Party Authorization to the right fax no.. (Most banks have a DEDICATED fax for this purpose
6. Follow up with a call to the lender(s) at least once a week to make sure the file stays ALIVE. Keep in mind BAC's process requires three (yes, three) different Negotiators.  Level 1, Level 2 and Closer.  In the event a new buyer comes along, the process resumes with a Level 1 Negotiator. 

7. In cases where an HOA is involved, advise the seller(s) to continue making payments because if they don't, the HOA will assign the account to a Collections Agency adding thosudands of dollars to the cost of sale.

 

Hope that helps!!!

Word from Washinghton is that the Senate will extend The First Time Home Buyer Credit of $8,000 from Nov. 30, 2009 to April 30 of 2010.  Under this legislation, all sales must close by June 30, 2010 in order to be eligible for the $8,000 Credit.

In addition, the Senate is looking at giving homeowners who have owned their home for at least 5 years eligibility for a $6,500 credit in the purchase of a second home.

This should continue to give home purchases a spark, at least in the low end of the market where Short Sales and REO's continue to be prevalent.

While the legislation is not official look for teh final details soon!

 

 

Senate Bill 306 was just signed into law by Governor Schwarzenegger whereby lenders will have to streamline their Short Sale process.

The bill requiresllenders & Service Companies operating in California to:

1.  Either Deny or Accept within 4 days (YES, 4 Days!) a Short Sale offer which includes a HUD or it is assumed to be accepted.

2.  When a HUD is not included, they must respond to all Short Sales offers within 21 days.

This is a welcome change by buyers (and their agents) whose frustration is at an all-time high and patience is at an all-time low.

In my personal experience, I have lost countless buyers on my Short Sale listings due to the ultra-ssssslow  response from lenders.  Not only do they take an unreasonable amount of time but quite often, documentation is lost or misplaced.

In the case of BofA where three levels of Negotiators are required, anytime a Short Sale falls out of escrow the process resumes back to a Level 1 Negotiator basically guaranteeing that the next escrow process will take just as long, if not longer than the previous escrow process.

I have no doubt millions of dollars are being lost by servicers by having such an inefficient, disorganized and ultra-slow Short Sale Process.  Eventually, these losses will impact all of us as Taxpayers.

To their credit of Wachovia/Wells Fargo, they have initiated their own 45-day Short Sale Process.

It is my sincere hope that more lenders join Wachovia/Wells Fargo!!!

 

A global credit squeeze has most economists convinced the Federal Reserve will come to the rescue and cut interest rates next month, a Reuters poll showed on Wednesday.

The survey of more than 100 economists across the U.S. and Europe taken Aug 20-22 represents a 180-degree turn on risks to the economy and is as sudden as the violent moves in credit, currency and stock markets that triggered such a souring.

Median forecasts show they now expect the Fed to cut rates by 25 basis points by its September 18 meeting to 5.0 percent and to follow with another, bringing them to 4.75 percent by year-end.

Forty-five of 63 say the Fed will trim the funds rate by Sept 18, with 6 of those saying they will cut before and 18 saying they will stay on hold.

Thirty-four economists see a quarter percentage point of easing by then, 9 say 50 basis points and 2 thought the funds rate will be 75 basis points lower by Sept 18.

Economists saw the European Central Bank holding rates at 4.0 percent on Sept 6 -- 34 of 65 were making that call compared with only 2 of 65 just a few weeks ago, with medians showing 4.25 percent as the peak in rates.

However, the poll was taken before the ECB said on Wednesday that its rate policy stance was given by President Jean-Claude Trichet on August 2. Then, he used the words "strong vigilance" -- well-known codewords for a rate rise the following month.

As for the Bank of England, hawkish bets rates would climb to 6.0 percent, which had already dwindled to only a small majority before the recent market turmoil began, are now off the table and rates are seen on hold at 5.75 percent. Fifty of 53 see no move in UK rates in September