It's official now, Mr. President has signed it.   So how is the newer version compared to the older version?  Here is a chart comparing the two.

http://www.msnbc.msn.com/id/33522046/ns/business-real_estate/

AP announced that the Senate agreed to extend the tax credit. 

Yes, it looks like first time buyers and even repeat buyers get upto $6500 and can can continue to purchase throught the spring.

I was reading over CAR’s 2010 Housing Market Forecast Presentation today and came across some interesting data I wanted to share.

When did the housing market peak?   In the San Francisco Bay area, it peaked in the summer of 2007, specifically, May 2007, when the median home price reached $853,910!  As of August 2009, it decreased to $531,580 or a reduction of 37.7%.

Fig. A

Anecdotally, many of us who list homes see a lot of cash offers being made recently, especially towards the lower end of the price spectrum.   What percentage of buyers are actually making all cash offers?  In California, in 2009. 19.6% of buyers are coming in with all cash. 

Figure B

 Why are buyers purchasing now rather than at other times?  67% of buyers said it was due to lower prices while 39% attributed lower interest rates.

Figure C

Directly related to the notion of “lower prices” is the Housing Affordability Index which measures the percentage of buyers who can afford to purchase an average home in California.     It just fell shy 70%  in August of 2009.  This means for the first time in this decade, approximately 70% of Californians can afford to purchase an average home.  This figure corresponds almost exactly with the 67% of those who purchased homes this year believing low prices prompted them to bite the bullet. 

Fig. D

A good friend of mine and I like to meet up occasionally and go to a little hole in the wall restaurant which serves a wide array of Chinese food.  The menu has literally a hundred items but we both eat the same thing and have for a few years now.  We get together to have some good food and chat and catch up on things.

The other day, we were doing our usual routine of chatting and eating our same ole food.   Suddenly, a foul, putrid smell overwhelmed and enveloped me.  It literally stopped me in my tracks.  I cautiously looked around to  see what could be the problem,  I was puzzled because I had never smelled such  powerful stench in a  restaurant and could only  reach the conclusion  that my friend had  an episode of bad gas......  I tried not to  make  eye contact for fear that it would make him feel uncomfortable; after all, he did it, so  he must be feeling really bad at that point anyway.....   

I can't remember the exact details, but there was what seemed to be a long pause with no one saying anything and me not trying to make eye contact.  The problem was the stench lingered; it would not go away.  I quickly decided it was not him; it wasn't me, so it was ok to gather intelligence and talk.

So in my delicate manner, I ask: "Leland, what is that smell?"  His reply was rather quick: "stinky tofu, I think."  My mind instantly filled with images of Andrew Zimmern of Bizarre Food  and other Travel Channel celebrities discussing the stench of this peculiarly but accurately named food product.   

For those who have not smelled it before, you cannot imagine such an odor emanating from something sold at a restaurant is all I can say.  I’ve been to my fair share of Chinese restaurants, but I’ve never seen or certainly smelled this delicacy before that day.    

The table to my left had ordered a small plate of this harmless looking, but nose hair burning soy product.  And rather than quickly eating them and relieving the rest of the restaurant from the agony, they left it there and ate other food while they were talking.  I guess one gets immune from the smell, but obviously neither of us was accustomed to it. Rather than continuing to chat and catch up, we got our checks and left in a hurry.  That was my first encounter with stinky tofu and I feel bad for thinking my buddy Leland's accidental gaseous tendenacies were the source of that smell.

And you are wondering how this is related to Real Estate?  My buddy Leland is a Realtor too……..

I had some things to say about a recent encounter with an appraiser who was sent out to my listing to place a value on it.  The  problem I had was that the appraiser was not local but from a suburb of Modesto, about two hours  away.  I was hot an bothered not only because he was non-local, but he also sent a trainee without accompanying him.  Everyone hears about these non-local appraisers swooping in and killing the deal because they don't know the market.  I was facing  that scenario as well.

I promised to report back because some people wanted to see what would happen and follow the results.   

The good thing is that the appraiser was smart enough to use the comps I handed him, so the appraisal value was exactly what I thought he should come out with; no drama there.  Almost anti-climactic, because I  almost wanted him to not use my comps, so I could challenge him and make a big deal of it.  But that was it, no drama.     

An advantages of being a Certified Distressed Property Expert (CDPE) is the connections and networking opportunity this certification and my successful experience  affords me.   One of those opportunities was the preferred partner opportunity with Wachovia Mortgages.  I now have direct access to a local Short Sale Manager who can expedite the process for me.

Wachovia is one of the smarter lenders which understands that, generally, a short sale is a money saving opportunity for them  when compared to when the homeowner is forced into foreclosure or bankruptcy.  They also understand that one of the biggest reasons why typical short sales only close at 23% rate (Campbell Communications Survey, February 2009) is that the process takes too long and even if there is a good offer in hand, the long delay often causes the buyers to back out or simply lose interest and move on to another property.

Wachovia has committed to reaching out to successful short sale agents in a given area and working with them to expedite the process so good buyers don’t walk away from a deal because of the long delay associated with short sales.   Remember, Wachovia isn’t necessarily doing this completely out of sense of compassion, they are doing this because their acturaries have detertmined  expedited short sales will net them more money.

They are setting the new standard in efficiency: 45 days or less is their goal to close escrow from receiving the offer.  

If you have attempted a loan modification but were not successful, or have received a Notice of Default or simply do not have other options or solutions, please feel free to contact me.  I can give you a no-obligation consultation as to whether a Wachovia Expedited Short Sale may be an option available to you and your family.

Article Here

The above article mentions an interesting phenomenon that occurred last month in Santa Clara County’s foreclosure market. Between August and September of 2009, the actual number of homes being foreclosed (either sold at auction or returned to the bank as REO properties) decreased, while filings of Notices of Default and Notices of Trustee Sale remained consistent.

“Lenders foreclosed on 415 homes last month, down about 5 percent from August.….. Of these, 109 homes were sold at auction to third parties and the remaining 306 were taken back by the lender. …… At the same time, lenders filed 1,257 notices of default, the first step in the foreclosure process, and 1,027 notices of trustee sale, the final step before actual sale of a foreclosed home. The numbers for August were almost the same.”

The author doesn’t really reach a conclusion but leaves us wondering as to why this may be happening.

Well, I will pull data from the MLS in an attempt to interpret what may be happening in our back yard.

But first, it is important to understand the process of foreclosure.  Simply put, when a person receives a Notice of Default from the lender, they have 90 days to cure the default, or a Notice of Trustee Sale will follow, scheduling a date and time by when the property will be sold at the County Courthouse.  By the Notice of Trustee Sale date, if the delinquent amount, plus penalty and interest  is not cured, then it is sold.    But there is a wonderful vehicle which by now everyone has heard, which can stop that foreclosure if executed properly: the Short Sale.

If, from the time that the lender issues the Notice of Default and before the auction date, an experienced  San Jose Short Sale Agent can bring in a qualified buyer who is willing to take the property off the sellers’ hands and if the lender agrees to the terms of the sale, then that foreclosure process is stopped with the closing of escrow on the property in question.

What the article did not factor into the equation were approved short sales that closed escrow. I pulled data about Short Sales that actually closed during the months of August and September.

For the Month of August 2009, in Santa Clara County 187 properties identified as being short sales (both single family and condo/townhomes) successfully closed escrow (Fig A).  But in September 2009, 251 properties identified as short sales closed escrow (Fig B).  I’m not a mathematician, but by my estimate, that is an increase of 25% from August to September of short sales approved by lenders. And more than sufficient to explain the disparity as to why the notices are increasing but why the final result is  decreasing.

So let’s look at the complete picture in September 2009 in Santa Clara County.  Over 2000 notices starting the foreclosure process goes out to homeowners.  Of those, approximately 1000 attempt a short sale and 251 of them are successful in preventing a short sale (Campbell Communication conducted a survey  in February 2009 of Realtors and concluded only 23% of short sale are successfully completed). Of the 750 who were unsuccessful in their short sales, 415 of them actually get foreclosed (109 of them lose their homes to auction and another 306 of them are evicted and the lender takes  over their homes).  That leaves 1335  people still stuck in foreclosure limbo — the original 1000 who chose not to do a short sale and the remaining 335 who were unsuccessful with their short sales but have not gotten around to being foreclosed yet — wondering when they will be evicted.  And these homes that have not been foreclosed or sold through short sales are often referred to as the shadow inventory of bank properties.  Depending on how this inventory will be released, it could have a tremendous impact of flooding the market with cheap, bargain priced bank owned (REO) properties.   Let’s hope the lenders will release them gradually, rather than all at once or, even bettter,  allow more of them to be sold as short sales so they can stop the influx of undervalued properties from hitting the market place and bringing down home values.

Fig. A.  August 2009

Fig. B. September 2009

I had a listing where a friend referred a friend whose family was going through financial difficulty and could not pay their mortgage.   As a San Jose Short Sale agent, I agreed to work on their short sale in an effort at least to prevent the non-payment and the probable foreclosure from greatly affecting their family business.  I explained exactly what I would do and how we would go about getting a good offer so as to slow down the foreclosure process and negotiate with the lenders for a mutually beneficial sale.  They were genuinely thankful and wanted to do everything they could to help me achieve our mutual goal.

Two weeks later, I get a call from the father saying they wanted to cancel the listing because they wanted to try a loan modification.  I had seen all of their financial statements, no lending institution was going to cut their interest rate or forgive portions of their principal – which was what he says he was trying to get.  I didn’t want to be the one to splash cold water in his face; so I said I would withdraw the listing while he tried to get a loan modification. 

Three weeks later, I get another call from the father.  He wanted me to cancel the listing rather than withdraw the property from the market.  Why I asked?  He said that the loan modification person told him that in order for them to take on the loan modification project, they needed to sign a listing agreement.  I was supposedly preventing him from getting a loan modification……   What could I say to that?   He sounded so convinced that he would get a loan modification, I didn’t have the heart to tell him with their decrease in income, they were not going to get anything meaningful modified.    

I knew a legitimate loan modification organization had no reason to sign a listing agreement.  Why would they?  All they were trying to do was get the loan re-worked; they had no need to list the house for sale for that purpose.  I knew something was not right; but this was a friend of a friend, I didn’t want to appear to be standing in his way of getting at that loan modification in the sky.

Two weeks later, I check and the house is listed as a short sale with a Realtor and not some loan modification company.  I sensed something was not right, but I wasn’t going to go back and demand an explanation.  I just wrote it off as someone who must have found someone they felt would do a better job at saving them from foreclosure and moved on.

A few days ago, six months after I canceled their listing, I got a frantic call from the father again.  He wanted to know if I could help him.  According to the MLS, the house was supposed to close escrow in early October, but he was advised by the agent that the buyer had backed out and the Realtor wanted him to write a check for one month of mortgage payment after six months of non-payment to stop the foreclosure (What?!).  Apparently he was told three buyers had backed out over the months.  He graciously offered to give me the listing if I wanted it……..

I thanked him but declined.  I advised him that the listing agreement was active for two more weeks and I could not take the listing even if I wanted it.  So I started asking questions to see why the nice house in a good neighborhood had fallen out of contract on three separate occasions. 

It turned out that the only reason why the father had me cancel my listing and went with another Realtor was because the other Realtor had offered to kick him back $5,000 after close of escrow!    I do a lot of short sales, I understand the need for money and how enticing that could be for a family in financial distress.  So right off the bat, I don’t blame him for being enticed and going against the recommendation of the friend who introduced me and my explanation of why I was best equipped to help with their short sale; he saw an opportunity to make free money. 

What I was able to find out was: he knew absolutely nothing of what was going on with his short sale which progressed for the past six months and went through three offers.  He never saw any paperwork, not even a copy of his own listing agreement, so he didn’t know when his listing agreement expired.  He never saw any communication with the lending institutions, never saw the notice of default, the notice of trustee’s sale…..nothing.  He was lulled into oblivion with the promise of free money.   Yet, the Realtor had persuaded him to move out to an apartment because the buyer was going to close escrow. 

I specifically asked him to go and get copies of the listing agreement, notice of default, notice of trust deed sale, and any other written communication from the lending institution explaining the status of his short sale, as he knew nothing except an offer had backed out and he was not going to get his $5,000.  

We spoke again today.  The realtor did not give him any of the documentation and had told him that the house went through an auction and is now an REO property.  So why ask for one month’s worth of mortgage payment to stop the foreclosure on an REO property?  They now have a foreclosure on their record, so my initial effort in trying to minimize the effect on their family business by avoiding a foreclosure on their record was thrown to the wind for the promise of free money which never materialized.  He now wants to sue the Realtor……

So what did this family gain by going with a Realtor they did not really know but who promised them free money?  They lost their family home; have a foreclosure on their record; live in an apartment and paid rent when they did not have to; all the family members probably went through an emotional roller coaster ride which could have been avoided; and now needs to spend money they do not have to sue this Realtor.  Did this family’s fate have to end this way?  Was one bad decision the result of these compounding negative effects?   

What is the moral of this story?  I believe it is that short sighted greed should not be the driving force behind your long-term decisions.

What do you think is the moral to this story?          

"Beginning Oct. 1, new rules adopted by the Federal Reserve will go into effect, requiring greater diligence on the part of mortgage lenders and brokers who issue high-cost loans for borrowers with less than favorable credit.  The interest rates on these loans are at least 1.5 percentage points greater than the average prime mortgage rate."  Read the full Article. 

It's about time they outlawed "liar's loans" those Stated Income Stated Assets and No Income No Assets loan products which generated so much fees for mortgage brokers but left the gate with "foreclosure" written all over them.   But as the article mentioned, it is a few years too late.....  Once the lenders realized there were high default rates with these so called Alt-A loan products, they stopped offering them as well as the even more ridiculous option ARM loans.  The damage is already done with these loans.   But it is nice for the Federal Government to announce they are against these types of loans and require that people actually demonstrate that they have the financial wherewithal to make payments on these loans........