I am often asked what the benefits of a short sale over a foreclosure are.  Most real estate agents would agree that the borrower's credit score is affected less with a short sale, but there are not any real facts to back that up.

When was the last time you filled out a Uniform Residential Loan Application also known as Form 1003?  On page 3 under section VIII Declarations question C asks, "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?

It would seem to me that 7 years is an awfully long time that you would have to declare that you were involved in a foreclosure which will certainly have an adverse effect on the lender's decision to give you a loan.  It is a Federal offense to lie on a credit application, so not declaring the truth is not an option. 

There is nothing on the application that states that you have to admit to a short sale. 

With the current tax benefits and the future benefits of being much more attractive to a lender it just does not make any sense not to at least attempt to do a short sale.

____________________________________________________________________________________________________

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Here is the scenario that led me to this revelation...

I have been working on a short sale for 14 months and have finally received an approval from the lender and the property is now in escrow.  The buyers want to do an inspection, but there is no power and the seller has no money to pay to get it turned on.  I proceeded to call the Los Angeles Department of Water and Power in order to get the service turned on.  After following the maze of prompts I finally made it through the 45 minute hold period to talk to a human.

These 45 minutes did not go to waste.  I was thinking wouldn't it be great to put together an information website that had all of the prompts figured out so you could get directly to a human to answer your questions.  Then I realized that I have a hard enough time updating my blog once a week how would I ever be able to complete the task of going through thousands of merchants' telephone systems to figure out their prompts.

Google to the rescue.  I found a site appropriately called www.GetHuman.com.  Every merchant I could think of is there with all of the telephone push button prompt to get you to a live person quickly. 

I love the Internet!

...and yes I did get the power turned on!

 _____________________________________________________________________________________________________

Picture provided by Harry Cobra

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

The economic downturn and the current real estate market have made HOA's (Homeowner Associations) very hard pressed to collect their monthly payments from homeowners.   I am often asked by seller's facing foreclosure or trying to negotiate a short sale if the HOA back dues that they owe will be wiped clean.  

The simple answer is no, but there are some variables that can apply.

In a short sale situation I am often able to negotiate with the lender to pay the HOA.  Sometimes negotiations have to be done with the HOA themselves in order to arrive at a palatable figure for the lender, but most HOA's are willing to negotiate as they know the possibilities of collecting from the current owner are slim and they are looking forward to a new financially secure owner who will be paying the dues.

In a foreclosure where the property has no equity (if it did it probably wouldn't have to be a foreclosure!) the situation is a little different.  Although the HOA has a recorded position on the title report it does NOT have a priority lien position over the mortgage encumbrances.  A HOA would have to file a lien and the lien position would be dictated by the recording date.  In most cases since there is no equity in the property the HOA's only recourse is to go after the former owner personally. 

So the answer to the question, "Are HOA dues a personal liability?" the answer is YES! 

HOA have the right to go to court and get a judgment against the former property owner.  Depending on the amount they can go to Small Claims Court or to a Civil Court.  Whether they can collect is an entirely different subject! 

An important point to mention is that the new owner of the property is NOT responsible for any past arrears.  I have often heard of an HOA trying to collect past arrears from new owners.  These past due arrears are not the responsibility of the new owner unless the new owner assumed the debt as part of the purchase.

If you are part of an HOA with a large foreclosure problem then get ready for an increase in your dues.  The HOA needs the funds from the monthly collections to pay for the maintenance of the building.  If there is a shortage an assessment will be levied upon all of the owners. 

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

The economic snowball effect is reaching the pace of an avalanche.  First it was bad loans putting pressure on home prices and now unemployment is adding to the downturn.  The circle is vicious as unemployment fuels the borrowers to miss their payments and the bad loans have spooked banks from lending to business so they cannot hire new employees.

Negative equity is when your loan balance is higher than the current value of your home.  Generally speaking if a borrower put down 20% to purchase their home and they are in a negative equity position they still will make their mortgage payment as they feel that they have something to lose...even though currently it has already been lost.  On the other hand borrowers who put little to nothing down are not financially attached to their property and can walk-away knowing that it was not their money that was lost.

With unemployment at over 10% in California and rising it looks like this avalanche is going to continue for sometime.  These indicators would lead one to believe that prices will continue to fall.

I am taking a more positive approach.  My feelings are that investors who have been on the sidelines for years are about to come out and purchase.  Investors will purchase when they can buy with 20% down and have the rent cover the expenses.  We are at that point on many properties listed today.

I also believe that a person who is looking to buy a primary residence should not be overly worried about what is going to happen over the next 12-months.  If a home buyer has a horizon of 7 plus years then they can easily ride out any short term drop in prices and will reap the benefits of appreciation.  Nobody knows when the bottom of the market is until it has passed.  Hind site will always be 20/20.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Fannie Mae Eases Credit To Aid Mortgage Lending.  This was an article headline from the NY times on September 30^th, 1999.   Fannie Mae was under "increasing pressure" from President Clinton's administration to expand mortgages to moderate income people.  The problem was that moderate income people in general did not have a traditional 20% down payment and often their credit was below a level that would lead to a loan being approved.

Fannie Mae succumbed to the pressure and eased their credit requirements.  Franklin D. Raines, Fannie Mae's then chairman and CEO was quoted as saying, "Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements" and "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."

So to get more people into homes sub-prime became Main Street and 100% financing was born. 

There were some that questioned the lending changes and were concerned with the risks involved, but the "everyone should be a homeowner" policy leaders pushed ahead and made loans affordable for everyone.

The rest is history!

It would be great if everyone could own their own home, but the truth is we need renters, too.  Lending guidelines were in place to prevent the current catastrophe from happening.  When we make changes to these guidelines we put ourselves in a position to have great success, but also dramatic failures.

The current changes to lending requirements are really not changes at all.  They are simply reverting back to before and only lending to qualified individuals who have good credit and a down payment.  That actually sounds like a good plan.

President Clinton recently said that he was not to blame for the economic mess we are currently in.  I would not argue that he is totally to blame, but he has to admit some responsibility.  Not to be political, but the liberal approach of everyone should own a home just does not work. 

Here is a link to the NY Times article: http://tinyurl.com/4ulb87

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission. 

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

The Los Angeles Dodgers and Manny Ramirez have agreed to terms on a 2-year 45 Million Dollar contract which basically locks up the World Series for the Dodgers.  OK, I admit I am a diehard fan and I am hoping my headline turns out to be true!  Here is a picture of the real Manny fan in the family...my 9-year old son loves wearing his Manny wig!

I actually think this contract is a sign of the times.  Yes, 45 Million Dollars is a lot of money to spend, but this is essentially the same contract that Manny's agent Scott Boras turned down 4 months ago.  At that time he said that he would start negotiations when a "real" offer was put on the table.  It looks like the economy has hit major league baseball as there was not one single team that was realistically interested in spending that type of money.  It's funny how 4-months later that offer all of a sudden was "real" enough.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

On the eve of potentially sweeping reform to the foreclosure rules I have had some time to think about the $8,000 first time homebuyer tax credit that is part of the new economic stimulus package.

First of all you have to give credit to President Obama who in a very short period of time actually got something passed.  It might not be all of what he wanted, but it is something and in this financial crisis something is better than nothing. 

I have had numerous conversations over the past few weeks about the proposed credits to first time homebuyers and I was not a big fan as I did not think it would do anything to get them into the market to buy a home.  I have had an opportunity to rethink that position and I have come to the conclusion that the $8,000 tax credit that NEVER has to be repaid is a good proposal.  True there are some strings attached, but did you expect there would not be? 

The definition of a first time homebuyer is one that has not owned a home in the last three years.  To qualify for the "NEVER have to pay it back" part you need to hold on to the home for three years.  The good news is as long as the purchase price of your owner occupied home is $80,000 or more and you do not go over the qualifying income threshold you get the full $8,000 tax credit right away.  Although I think the holding period is overboard and restrictive I can live with it since a first time homebuyer gets a free $8,000 gift from the government.

I have had conversations with first time homebuyers and they seem energetic about purchasing a home prior to the December 1^st deadline.  What we need now is a lending system that is willing to lend money!

The banking system and their lending qualification requirements are the key to getting us back on track.  I have blogged in the past about their more restrictive qualifications and I do not have any issue with them.  However, lenders simply must be willing to lend to someone who has good credit, a 20% down payment and verifiable income.  If they are unwilling then there is no amount of economic stimulus that will work.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Here is a great picture taken by Jason Erdkamp of Lake Forest and posted on the web by The Orange County Register. 

I don't think I've ever really seen the end of the rainbow before.  Have you?

Enjoy!

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

We can easily argue who is to blame for the current banking meltdown as there is plenty to go around.   Here are some of my favorite finger pointing bullet points...

• It was the politicians who wanted everyone to be a homeowner and loosened the regulations to make it happen
• It was the creative marketing departments who created programs intended for investors and then pushed them on first time home buyers 
• It was lenders who gave 100% financing to people who "said" they had a substantial income without any verification
• It was the mortgage brokers who convinced borrowers that a negative amortization loan was good in an appreciating market place while never mentioning what would happen in a declining marketplace 
• It was the borrower who saw that for the same price they were paying for rent they could own a home that far exceeded their expectations and means 
• It was the appraisers who asked how much the home was selling for and then found comparables to support the price as opposed to giving an unbiased opinion
• It was the refinancer that actually thought pulling out 100% of the equity in their home was a sound business decision and then proceed to take the family on vacation

The list could go on and on, but at this point does it really matter?  What we need is change and what we are going to get is just that.

It was not long ago that when buying a house you needed to put down 20% for a down payment as one of the requirements for getting a loan.  This 20% was a cushion for the lender which was one of the factors that enabled the lender to sell the loan to investors as a secure investment.  In addition to the down payment you needed good credit and verifiable income.  Imagine that you needed to show you pay your bills on time, have a job and were able to save.  What happened to those basic principles?

To get our banking system back on track we need to have confidence in the marketplace.  The best way to instill confidence is by giving loans to qualified people for secure investments.  Real estate has always been the backbone of the American economy and it will continue to be that.  If we embrace the more stringent requirements and come to the realization that not everyone should be a homeowner we can get back to basic fundamentals and turn this ship around.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of our commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Have you ever typed in your home address into the Google search bar?  Not surprising that you are directed to Google Maps with a "push-pin" locator for where your home is located.  The surprising or even shocking item is the picture that is now associated with it.  It is an actual picture of your home taken from the street.  I know anyone can find my address and drive by my property to see what it looks like, but that takes time and effort.  Don't you think this is too easy?  I agree that it is pretty cool that once the picture is expanded you can click on the directional arrows and go up and down the street looking at the neighborhood.  I would even argue that for a homebuyer especially a relocation buyer that this is an extremely valuable tool, but everything has a trade off.  Do we really want everyone knowing what our house looks like?

Google has now taken Maps to a whole new level.  Their newest application dubbed "Latitude" aims to be able to track a person via their mobile phone.  The software pinpoints a user's location by using information from cell phone towers, global positioning systems and Wi-Fi connections.  As a parent of soon to be teenagers I can think of lots of good reasons to have this application, but in the hands of someone with bad intentions it becomes very scary.  Google has tried to put safety devices into this application as you have the ability to turn it off or on, but even with the safety measures the technology is frightening.

George Orwell's 1949 classic "1984" which led to the phrase Big Brother was a look into the future and offered an insightful prediction on how we were going to be watched by the government.  I'm not sure Orwellians could have even predicted this new level of surveillance, not by the government, but by ourselves.  From digital cameras to cell phones with video cameras and now tracking devices what is going to be next.  Will the word privacy be removed from a future edition of the dictionary?

I'd love to hear your opinion.  Feel free to comment below or send an email to BlogResponse@MillsRealty.com.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow.  Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home.   Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of our commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California.  He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.