At Home in Santa Cruz

Nobody is more deserving to be a home owner in Santa Cruz County than our teachers. As a former teacher, I great pleasure from helping teachers purchase their first home. Heidi works as special education teacher in Watsonville and her husband works for Good Will Industries in Santa Cruz. They were able to qualify for a fantastic program called an 80/17 through CALSTRS (California State Teachers Retirement System) The 80 means an 80% of the purchase price is a first loan. This is a fixed rate, 30 year mortgage at a competitive rate. The 17% is also a fixed rate mortgage at the same rate. The kicker is that that the home buyer doesn’t make payments on the second loan for the first 5 years of the loan. This gives the buyers 5 years to get used to their current payment and prepare for an increased payment. There are no surprises or variable rates.

The remaining 3 % (80+17+3=100) is the down payment. This means that 3% of the purchase price must come from the buyers for the down payment. In addition to the down payment there were about $10,000 in closing costs for title, escrow, and lender fees plus prepaid taxes, hazard insurance and mortgage interest. We were all thrilled when the seller agreed to pay the closing costs so really the only out of pocket expense was the 3% down payment. This one happened to be a short sale, so it was the seller’s lender, Chase, who actually approved the $10,000 credit for the buyer’s closing costs.They will also be getting $8500 back from the IRS for the first time credit, so really their true cost was about $2000!

This was not a subprime loan. This was not a variable rate mortgage. This is a fixed rate mortgage on very nice, ten year old, 3 bedroom 2.5 bath home with a nice yard and a 2 car garage for $2000! (out of pocket)

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Michael Bloch Earns NAR Short Sales and Foreclosure Certification

Buyers and Sellers Benefit from REALTOR^® Expertise in Distressed Sales

Michael Bloch has earned the nationally recognized Short Sales and Foreclosure Resource certification. The National Association of REALTORS^® offers the SFR certification to REALTORS^® who want to help both buyers and sellers navigate these complicated transactions, as demand for professional expertise with distressed sales grows.

According to a recent NAR survey, nearly one-third of all existing homes sold recently were either short sales or foreclosures. For many real estate professionals, short sales and foreclosures are the new “traditional” transaction. REALTORS^® who have earned the SFR certification know how to help sellers maneuver the complexities of short sales as well as help buyers pursue short sale and foreclosure opportunities.

 ”As leading advocates for home ownership, REALTORS^® believe that any family that loses its home to foreclosure is one family too many, but unfortunately, there are situations in which people just cannot afford to keep their homes, and a foreclosure or a short sale results,” said 2009 NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth. “Foreclosures and short sales can offer opportunities for home buyers and benefit the larger community, as well, but it’s extremely important to have the help of a real estate professional like a REALTOR^® who has earned the SFR certification for these kinds of purchases.”

 As you may be aware, Michael is also  a Certified Distressed Property Expert. (CDPE).

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Have you ever been in a relationship that you knew had no real future and yet it was so hard to break it off? You start out by having occasional doubts. Little by little those doubts become all consuming thoughts. You have trouble concentrating at work and may even lose some sleep thinking about. You know this absolutely will not work out long term, and yet can’t imagine giving it up. Finally, you make the decision to break it off and tell the other person the truth. What once seemed impossible, now feels like a huge sigh of relief. It won’t be easy, but your mind already starts wandering about what your new future holds. This is what many troubled homeowners feel when they finally make the decision to do a short sale; a huge weight has been lifted off their back. Although there are challenges and uncertainty that lie ahead, the homeowner can now stop stressing about what has passed and start making plans for a brighter future.

I have witnessed it several times when helping sellers with a short sale on their home. They usually start out overwhelmed. We start by putting all the cards on the table and looking at the reality of their particular situation. We then lay out all of the different options they can take. For many, attempting a short sale ends up being the best option they have. Then at some point, something clicks. You can hear it in their voice and see it their face. They have made the decision to move forward with the short sale. Immediately, the conversation turns from the “would haves” and “could haves” to planning for what will happen next. Doom and gloom seem to be replaced by hope with even a little bit of excitement. There is the obvious relief from taking a big step toward getting the proverbial “monkey off their back”. There are also a variety of other qualify of life improvements to follow.

One example is a single mom who was paying over $3000 a month to pay for the mortgage on her 2 bedroom, Captiola  condo. When her regular teacher pay was not enough, she worked the after school program as well as summer school. This left her all too little time to spend with her son and do many of the things they enjoy to do together. She loves to travel, and that was out of the question. She scratched and clawed to stay current on her mortgage and even applied for a loan modification (which was denied). Finally, when she started using her credit card to pay property taxes she knew that something had to change. This was not sustainable. We went over all of her options and then one day it all clicked. She made the decision to do a short sale and never looked back. She starting saving for a deposit on a rental and even planned a well deserved vacation. When it was all said and done, she moved from her two bedroom condo to a two bedroom apartment. My guess is that her housing cost dropped about $2000 per month. She is still in the same neighborhood, and even a little closer to the beach. Her son was able to stay in the same school and best of all they now have the time and resources to do a lot more fun stuff together. I would say her quality of life has improved. Yes, she did lose the down payment she had put on her condo. Yes, she will probably have a couple of missed payments in her credit report. In my opinion, these loses were greatly outweighed by the quality of life gained.

Michael Bloch, Realtor, GRI, CDPE

Lifestyles Real Estate

Office 831.420.2100

Cell 831.588.1588

E-Fax 831.854.0600

www.AtHomeInSantaCruz.com

www.ShortSalesInSantaCruz.com

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Wachovia (aka World Savings and Golden West) currently has the most aggressive program to help homeowners avoid foreclosure. Today I attended training at the Santa Cruz Board of Realtors put on by a Wachovia Short Sale Manger from Santa Clara In the current world of processing nightmares for short sales and loan modifications, there is finally one lender is “getting it”. It’s not rocket science. When lenders have to foreclose on a home they lose a tremendous amount of money. However, if they work with the homeowner to keep them in the home with a loan modification or allow them to sell short, they are saving huge amounts of money from the bottom line. Wachovia has streamlined their loan modification process and short sale process, making it a quicker and smoother process. They are calling this the FAST TRACK. This means that if you know anyone with a World Savings, Golden West or Wachovia loan that is underwater or having some kind of hardship, we can help them get answers relatively quickly. This also means that if you are buying a short sale, and the seller’s lender is Wachovia, you will most likely have an answer sooner than later. Wachovia says they will have it approved in 45 days or less.

What is also very exciting to actually have a direct contact with a Short Sale Manager at Wachovia. (Wachovia took over World Savings and Golden West so this applies to those loans as well) We have all been transferred through the never ending maze of a customer service phone tree, only to become increasingly disgruntled. Multiply that frustration tenfold when dealing with a large bank like B of A on a short sale. I know have the name, phone number, email, and physical address of an actual person that can make actual decisions on short sales!

Unlike most lenders, Wachovia is not requiring extensive documentation from the property owner to do a short sale. They only require a hard ship letter from the seller and a phone interview. If it is for a loan modification they will also want to see proof that the owner has the ability to pay. This is smart as many other modifications end up in back in default because they can’t afford their modified terms.

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I have just finished setting up a new website at www.ShortSalesInSantaCruz.com .  It is also listed as a link on the bottom, right-hand-side of this webiste. The purpose of this website is to give home owners who are dealing with some kind of hardship or distress information on all of their options in lieu of Foreclosure.

Some of the possible options may include:

• Loan Modification
• Refinancing Home Loan
• Deed in Lieu of Foreclosure
• Short Sale

The stats show that 7 out of 10 homeowners, who go through foreclosure, never contacted their lender. There is help out there. If you know anyone who is experiencing difficulties in making their mortgage payments please refer them to my website for information and let me know so I can contact them, and offer my assistance.

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As a former second grade teacher in Watsonville, one of my goals in Real Estate has always been to help teachers buy homes. One of the upsides of the drop in home prices has been that I have been able to help more teachers and other local buyers purchase their first home. Along with the reduction in prices there has also been an extreme tightening of lending guidelines, which has made it difficult to qualify for a loan. To get conventional financing buyers now need 20% down. However, there are several programs that can help teachers and other first time buyers. Here are some examples with brief descriptions. If you would like more information or have specific questions about any of these programs, please let me know.

1. CALSTRS- This is a program which works with the California State Teacher Retirement System (CALSTRS) to provide fixed rate loans with 3% down. The buyer gets two loans. One for 80% of the value of the home, and another for 17% of the value of the home. Both of the loans are fixed rates for the life of the loan. In addition, the second loan of 17% has no payments due for the first 5 years of the loan. Many refer to this as a “silent second”. This gives buyers 5 years to get used making mortgage payments while getting ready for a higher payment in five years. The increased payment is defined from day one, so there are no surprises. The interest rate is fixed at today’s competitive and historically low rates.

    

2. FHA- These are government insured loans through the Federal Housing Administration. You do not need to be a teacher or first time buyer to qualify. The main advantages are the low down payment (3.5%) and looser credit restrictions. However, they do collect quite a bit of prepaid interest, insurance, taxes and there is often a high onetime fee, which all makes closing costs high relative to the size of the loan. There is also mortgage insurance required for these loans, which adds to the monthly expense. I will often negotiate the deal so that the seller is paying the majority of the closings costs since many buyers need their savings for the down payment as well as reserves funds and extra money for any repairs or improvements that the property needs.

    

3. CALHFA- The California Housing Finance Agency is also offering the CAL-30 loan. This loan only requires 5% down, and is also a 30 year amortized, fixed loan. I recently received a bulletin saying that through monies from the Federal Government and approval from Governor Schwarzenegger there should be funds available for first time buyers. I had stopped recommending this program awhile ago because they had run out of funds to loan money. It appears that they will be funded again, and I am having a local lender look into the pros and cons of the loan with today’s underwriting standards.

   If you have any questions or know anyone interested in more information on fixed rate loans with low down payments, please let me know.

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Santa Cruz County Real Estate Sales Statistics for September 2009

Is it too early to say that the local real estate market has started to recover? There are a lot of indicators pointing in that direction.   What else can you call it when you see a decrease in supply alongside an increase in demand? I am no economist, but then again,  it does not take an expert to understand the basic principles of supply vs. demand.

Here is a comparison between September sales for single family homes in 2009 and 2008:

                                                     2009                                                   2008

# Of homes for sale                        947                                                     1251

Days on market                                86                                                     100

# of sales                                         151                                                    143

Months of Inventory                       6.6                                                      9

% of list price received                   98.01%                                               95.66%

Median sales price                          $535,000                                           $475,000

Prime interest rate                          3.25%                                                 5.0%

Again, the data shows a decrease in homes available and an increase in numbers of sales.  This is a trend that we have been seeing for most of 2009.   Currently we have a supply of 6.6 months of inventory vs. 9 months a year ago.  This is considered by most to signal “normal” market conditions, with little pressure on prices to go up or down.  If the trend continues we will see the current supply decrease, which will put upward pressure on prices.   There is still an increasingly smaller segment of the population that believes prices will have another significant drop. At this point in time, for that to happen we would need to see a significant number of buyers leave the market and/or a sharp increase in inventory.   

Much depends on what potential buyers can qualify for based on interest rates and underwriting guidelines.  Rates have continued to stay near historic lows, helping to keep payments affordable.  The challenge for buyers is to qualify for the loan with today’s very strict guidelines.    If guidelines loosen up then more buyers will be able to purchase, which would increase demand.  On the flip side, if guidelines continue to tighten up, or interest rates spike upward, this could decrease demand by limiting the number of qualified buyers in the market place.

Another factor has been the tax credit for first time buyers of up to $8,000.  This has just about run out (end of November) and congress is debating whether they will extend the tax credit.  There is even talk of extending the credit for all home buyers, not just first time buyers. The question is whether it is really enough to stimulate the market.  I have observed from my own clientele this past year, that the credit was one of the motivating factors to get them off the fence and buy if they were first time buyers.  There will also be the delayed stimulus to the local economy when they file their taxes in 2010 and either owe $8,000 less or get a refund.  This may make the difference in purchasing new furniture, or doing minor remodeling.

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“Should I make my mortgage payment?”  This is question that I have been asked many times by property owners considering doing a short sale.   My first answer is always the same.  I let them know that I am not qualified to give  that kind of advise and that they should consult their financial planner, tax advisor and/or attorney for this kind of advice.  

The type of home owner asking this question is often the honest, hard working, responsible citizen type of person that really just wants to do what is right.  They are not trying to rip-off the the lender, or re-nig on their financial obligations. Usually, they are experiencing some kind of hardship, and go no longer afford their mortgage payment.   They may be making the payment on time, but struggle each month to do so. I have seen owners start using credit cards to make the payment.   They may also be pulling from retirement accounts. 

I do let the struggling home owner know, that from my experience,  most lenders will not even review your file, let alone approve a short sale, unless the home owner is delinquent on payments.  I do also let them know, that most likely those missed payments will be reported to the credit bureaus and show up on the credit report.  Whatever a struggling homeowner decides to do, they should consider all options before missing payments deciding to miss a payment.  If after reviewing all options, the owner decides that attempting a short sale will be their best option, then they should check with the lender to see if they will consider a short sale if they payment is current. 

Intentionally missing a payment is a hard thing to do for a person who is trying to do the “right thing” and trying to do what is best for their own financial future.

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The tax credit for up to $8000 for fisrt time buyers is set to run out by the end of November. There has been a lot of talk about having it extended. I have have also heard and read talk of the credit being extended to all buyers.  From my experience with my own clients, I have know that many first time buyers where partiallly motivated to buy because of the credit.  According the the National Association of Realtors, there have been over 1.2 million first time buyers who came into the market with 350,000 sayting they would not have purchased without the credit. Here is an article from the National Association of Realtors:

Congress Urged to Extend Tax Credit
The National Association of REALTORS® is calling upon its 1.2 million members to urge Congress to extend the successful homebuyer tax credit into next year.

Since its inception earlier this year, the $8,000 first-time homebuyer tax credit has brought 1.2 million new buyers into the market—350,000 of whom would not have purchased a home without the credit, according to NAR. The credit is due to expire November 30.

“Now is the time for Congress to keep this recovery going by extending the tax credit through 2010 and making it available to more homebuyers. We have all seen how the credit has been a spur to bring homebuyers into the market, and have seen the beginnings of a real recovery in the housing market. Housing has always led this nation out of economic downturns, and can do so again,” said NAR President Charles McMillan.

Write Congress Now

REALTORS®, the leading advocates for homeownership and housing issues, will be writing to their Senators and Representatives to tell them of the successes with the tax credit thus far, and press them to extend and expand it now.

McMillan added that the market has improved, but it has not yet fully corrected itself. “The credit needs to be available for an additional period of time in order to sustain the progress that’s been made so we can continue to see our markets fully recover. Uncertainty about the future of the credit will dampen consumer demand. The only way we can assure that the progress we’ve made can continue is to extend the credit and to do that now,” he said.

As the current deadline for the credit looms, potential homebuyers need to complete a contract, satisfy any contingencies, secure financing, and go to closing by November 30. In today’s market, NAR estimates that it generally is taking between 45 and 60 days from contract to closing.

“That means potential homebuyers who qualify must act now, and so must Congress,” McMillan said.

Source: NAR

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As a former educator, I place a high value on continuing education and have made it my goal to continue seeking advanced training and education in my field. I have just enrolled in the CDPE training in October in San Jose, CA.  This course has been highly rec commended to me by a my Real Estate Business Coach.  CPDE stands for Certified Distressed Property Expert.

I already have quite a bit of experience with working with buyers and sellers on short sales and foreclosures in Santa Cruz County. I am looking forward to this training as I am sure it will deepen my understanding as to the ins and outs of dealing with the banks  and breaking a complicated process down to smaller, simpler steps.  My understanding is that we will also walk away with practical tools that we can apply right away.

To my knowledge, there are only two other CPDE certified agents in Santa Cruz County.  This is a pretty small number considering that there are about 1100 Realtors with the Santa Cruz Board, and the high amount of distressed sales in the area. 

In the end, it will be my clients that benefit most from this training, as I will be that much more prepared to advise them should they find themselves in a “distressed” position with their property.

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