At Home in Santa Cruz

I just received this update from the legal department of the California Association of Realtors. THIS IS A BIG DEAL! We may have spoken about SB 931 (CA) which prohibits a lender in FIRST POSITION from pursuing a deficiency after a short sale in California for residential properties, 1-4 units. Governor Brown just signed into law yesterday SB 458, which now expands the law to Jr. Liens as well ( second loans for example). This means that from yesterday on, once a Jr. Lien holder agrees to a short sale, they cannot come after the seller after close of escrow for the deficiency.

Of course, any homeowner considering a short sale should discuss with their Real Estate Attorney the current laws and how it applies to them as I am not qualified to give legal advice. Here is the UPDATE:
http://www.reuters.com/article/2011/07/15/idUS203138+15-Jul-2011+BW20110715

LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED
In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.
Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.
Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.
This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.

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The Watsonville Law Center has some great resources on their website regarding Foreclosure and Foreclosure prevention. They also have free workshops that may be convenient Santa Cruz County Residents can attend. We ALWAYS recommend that anyone considering a short sale or other alternatives to a foreclosure seek legal and tax advice. Please let us know if you would like a referral to a local legal or tax professional.

Watsonville Law Center Foreclosure Workshop materials

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We are just about finished with the first quarter of 2011, and it is a good time to reflect on what the market has done so far this year.  There is no doubt that we are seeing a lot of activity from buyers, which is a good sign for the local market.  The challenge for sellers and property values in general is that buyers are being very particular about what they want to buy and how much they are willing pay.   If a property is in a good area, priced well, and staged nicely, there is a good chance to see multiple offers.  At the same time if anyone of the three prime factors (Location, Price and Condition) are not attractive to buyers, the property may sit without offers or may receive “low ball” offers.  If two of the three factors are strong , then the property will get showings and may get offers.   Of course, as in any market, if the price  is low enough, there will be buyers who  will overlook location and condition.

Right now the market data shows a current trend in declining values.  It is hard to say if this is seasonal or if we are really going to see prices go down some.  Many say we have hit the bottom, but few are now predicting prices to increase this year.

Today’s Sentinel has an article regarding the drop in median price.
Median home price $450,000 in February – By Jondi Gumz
SANTA CRUZ — Is this the double dip predicted by some housing analysts last year? Or is it a seasonal dip that happens in January and February every year? View Full Story

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The number of homeowners underwater nationwide is estimated to be at least 25%.   That means that 1 in 4 homeowners owe more on their home than it is worth.  Although there have been some success stories regarding loan modifications the vast majority of the tales tend to be “nightmares”.  The numbers are no better for Santa Cruz County.  I hear time and time again that after months and months homeowners continue to get the run around with lost paperwork and transferred calls.  The frustration level builds and often ends the owner throwing in the towel.  Even if they do get an offer for a modification, it is often not affordable.  And even if it is affordable, the homeowner does the math and figures out how long it will take to pay off the loan, and how long it will take for the value of the home to come up to the value of the  loan, and often decide it just does not make financial sense.   This leaves the homeowner no option to stay in the home and their options become short sale, bankruptcy or letting the home go into foreclosure.

So what is the solution?   Many believe that the only way out of this mess is for lenders to offer “short refinance”. A short re-fi would be a loan modification where the lender agrees to reduce the amount owed to them, A.K.A principal reduction.  This means that the homeowner continues to pay the mortgage, but on a loan value that is closer to the actual value of the home.  Recently, Wells Fargo and Alloy Financial (formerly G.M.A.C) have started conducting pilot programs to test out an FHA short Refi program for loan in their portfolio. Other major lenders such as Chase, Bank of America and Citibank said they will not get involved without the participation of Freddie Mac and Fannie Mae. Fannie and Freddie own a huge percentage of the loans serviced by the major banks and will not allow their loans to qualify for Short Refi.

At least it is a step in the right direction that Wells and Alloy are trying it out, and Short Refi has become a relevant topic of discussion.   For more info here is an article from the New York Times  http://www.nytimes.com/2011/03/13/realestate/13Mortgages.html?_r=1&ref=realestate

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I recently added the word “RELENTLESS” to my business card. Here is an example of what I am referring to. I just closed this file on Monday. The photo here is the actual file. I represented the seller on a Short Sale on a single family home. Wells Fargo had the first loan and Chase had the second. The file was so thick I had to get an additional heavy duty file folder to for the “overflow” paperwork. The bulk of the paperwork is negotiations with negotiations with offer from buyers and with both the first and second lien holders. (Wells Fargo, and Chase) Typically I can close on a short sale in 3 months. This particular file took 6 months due to a variety of situations that arose beyond my control.

Was it worth it? YES, 100%. The seller is facing some serious hardships, and was pretty deep underwater on the home. In the end both lenders agreed to release the liens on the property and waive any future deficiencies, which probably total over $200,000. This means they wiped $200,000 plus of debt out without any right to try and collect in the future. The buyers were a nice family that now have an affordable home for their family with a fixed rate mortgage. The neighbors don’t have to deal with a foreclosed property , with overgrown weed and attractive to vandals that is sitting empty.

Many agents shy away from short sales due to all the extra work involved. When I first started doing them, many agents were saying that they stay away from them. Now I am seeing many of those same agents trying to do short sales as they have become a large portion of the market, and there are a lot of hungry agents. Maybe I am weird, but I actually enjoy them. Yes, they can be frustrating at times, but the reward of helping an owner out of a difficult situation, and satisfaction of overcoming a challenging deal is priceless.

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California just passed SB 931 which basically states that First Lien Holders cannot pursue a deficiency against a property owner if they have agreed to a short sale in writing. This will go into effect January 1, 2011. Currently there are no deficiencies allowed in California IF the for purchase money loans on primary residences. The new law will help to protect property owners/sellers from the lender coming after them later for deficiencies if they refinanced. This only applies to the first loan, not to a second loan. It also doesn’t state that is has to be a primary residence, so it may apply to rental properties. Please consult an attorney and CPA prior to making any decisions regarding short sales.

Here is an update I received from the California Association of Realtors:

• No Short Sale Deficiencies: Starting January 1, 2011, a seller’s first trust deed lender cannot obtain a deficiency judgment against the seller after a short sale.  Providing written consent to a short sale shall obligate the first trust deed lender to accept the sales proceeds as full payment and discharge of the remaining amount owed on the loan.  This law applies to first trust deeds secured by one-to-four residential units, but does not limit the lender from seeking damages for fraud or waste by the borrower.  Senate Bill 931.  Governor Schwarzenegger vetoed Senate Bill 1178, our sponsored bill, which would have extended California’s anti-deficiency protection to refinance loans.
  

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Just closed a 37 unit apartment building in Santa Cruz, and they had a little write up in the Sentinel:

Here is a link to the Story:  View Full Story

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As smart phones get smarter, they have become an excellent tool for property searches on the go. I am happy to announce that I have a new website created specifically designed to work on your smart phone. It works great on IPHONES, DROIDS, and other smart phones with web browsers. It is simple to use. Just open your mobile browser and enter : http://mbloch.e-agents.com/mobile

The Website is designed to either work with the search parameters you enter or the GPS built in with most cell phones. For example if you are in the Seabright Neighborhood and want to know what is for sale, all you need to do is go to http://mbloch.e-agents.com/mobile in your browser and click on “Search by Current Location”. Then you have the option to enter the radius and price range, such as $500,000- $800,000 within a 1/2 mile radius. Then it will pull up all the listings within that radius from your current location without having to enter an address. You may have to enable the GPS on your phone. You may also manually enter in search parameters and retrieve listings that way.

This website is also a great tool for finding Open Houses. Again, just go to the website, and then click on Open House Search. From there you can either search by using your Current Location, or by entering in an address or area.

Many of my clients are currently subscribed to our Listing Alert Service. Once you have a search set up, you can also use the mobile site to log in your search from there as well. To subscribe to our Listing Alert service go to www.AtHomeInSantaCruz.com or contact me to set one up for you.

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I hate to admit it, but I am often relieved to see poor economic news. I feel bad for the people that it affects negatively. However, I know that it will mean that interest rates will stay low, which is good for my clients who are locking in rates to purchase a home.  Low rates means more purchasing power for my clients.  These rates are especially helpful for first time buyers who are tring to get into their first home.

If you have been watching interest rates, you have seen them drop to record lows once again. The last time they were this low, there was a lot of talk about all of the upward pressure on rates and that they may never be low at again. After all of the recent economic problems in Europe, investors started moving into US Treasuries, which pushes rates down. Rates on 30 year fixed loans have once again fallen below 5% with zero points. Adjustable Rate Mortgages have been quoted under 4%! This is cheap money. Once again, I hearing a lot of talk, that this won’t last for long. There has recently been more evidence of the improving economy. One of the positive signs has been that more consumers are paying bills on time. We all be watching to see what Fed Chair Ben Bernanke will be doing.

Like everyone, I will be happy to see improvement in our economy, but it is hard to give up these incredible rates!

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For anyone getting ready to purchase a home, I highly recommend sitting down and making a list of wants and needs.   It is a very simple and very valuable exercise.  You start with a piece of paper, draw a line down the middle, and then put “Wants” on one side, and “Needs” on the other. 

 Needs are going to be all of the characteristics of the home and neighborhood that are neccesities and are not negotiable.  For example, a home buyer with dogs, might have a fenced yard as a need.   A family with kids may have 3 bedrooms as minimum need.

Once you have listed all the features that are absolute necessities, then it is time to make your wish  list.  This is where you  have an opportunity to list all the features that would be nice to have but could live without if the home met all your needs and some other of your wants.  For example,  a buyer may have a  two car garage on their wish list, but could live with a one car garage or sufficient storage of some kind.  Many buyers in Santa Cruz  want to be walking distance to the beach, but it is not a need.  Once the wish list is complete, then you need to go back through the list and priorotize each item in order of importance.

Once the list is done, and you are pre-approved for a loan it is time to go house hunting.  I recommend looking at as many homes as possible that are in your price range and meet all of your basic needs.  Unless you have the time and money for major remodeling or additions, there is no need to see homes that do not meet your basic needs.  After looking at properties, you should review your Wants vs. Needs list and decide if any revisions are needed. 

If you would like help putting your list together, contact me and I will be happy to sit down with you and guide you through the process.

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