My New Blog

In these turbulent economic times many people are struggling with their mortgage payments. On the upside, I feel that things are starting to stabilize and we may be seeing the end of the tunnel soon. For buyers this is an historic opportunity, the likes of which we may never see again.

But many people ask me questions about their options if they are under water on their mortgage; some people will benefit from mortgage modifications but it is unclear how many will benefit at this point. In previous email I have sent you information about the recently passed legislation to assist people in saving their homes. Here is a NYTimes summary of that bill: http://www.nytimes.com/imagepages/2009/03/05/business/05housing.graf01.ready.html

ALWAYS TALK TO YOUR BANK IF YOU ARE IN TROUBLE, DON’T AVOID THEM. THEY MAY BE ABLE TO HELP YOU. If you have a record of being proactive with your lender, they will be more inclined to work with you.

When people reach a point that it looks as though keeping an investment does not make sense, they ask me questions about selling their home “short” or foreclosure.

THIS IS NOT LEGAL OR FINANCIAL ADVICE AS TO WHAT YOU CHOOSE TO DO. YOU SHOULD ALWAYS CONSULT YOUR TAX ADVISOR/ATTORNEY. REALTORS ARE NOT TAX OR FINANCIAL ADVISORS. Here is some descriptive information regarding various alternatives when you need to leave a home and you cannot sell it for what you owe:

1) A SHORT SALE: this means that you owe more than your home is worth and you don’t want to try to keep it. You list the home for less than is owed and when offers come in, your agent negotiates with the bank or banks to whom you owe your loans to try to get them to accept less than full payoff.

- There are several steps to prepare for a short sale and you should consult with an experienced realtor to see if you can qualify

The first step is filling out a “Hardship Letter” to the bank to show that you can no longer pay your payments

- You should also consult your financial advisor before beginning this process (NOT just your realtor)

- This is a long process; it can take months from the point of receipt of an offer until the banks accept or reject an offer, but it can work.

- The credit implications of a short sale are not as extreme as a foreclosure. If you continue paying your payments until the sale is

concluded, the credit hit will stay on your report for about 2 years and then the effect starts to diminish

- It will lower your FICO score in the range of 75-100 points (+ or -) depending on whether and when you stop paying your payments.  Again, consult your financial advisor.

2) FORECLOSURE – in this case you stop paying payments on your home altogether. This is called defaulting on your loan.

- Your lenders are now supposed to contact you within 30 days of default to offer you a face to face meeting.

- After that 30 day notice if you continue in default the bank will mail you a Notice of Default (NOD).

- 90 Days after the NOD you will be given a Notice of Sale (NOS) to occur within 30 days at the court house.

- So, altogether there is a period of around six months from quitting payments to the foreclosure sale of your home in California.

- The effect of a foreclosure stays on your credit report for 7 years

- Foreclosure will lower your FICO score approximately 200 points + or -again, consult your financial advisor before choosing this option

- There are many other aspects to foreclosure depending on the state you live in and the kind of loans you have

3) "JINGLE LETTER" – otherwise known as simply mailing in your keys to the bank and saying, “here, take this property back.”

- This sounds simple but apparently it is not recommended. Consult an attorney.

In all cases, it is important for you to consult a tax advisor for any tax implications of the short sale or foreclosure. Do this prior to making any decisions as to what to do.

Now, on a lighter note, let’s hope that the recent stabilization of the stock market is an indicator that we are heading toward better times ahead. No matter what, your health and happiness and the love of family and friends are more fundamental than any investments. Stay positive and this too shall pass.

As always, I am here to help. Feel free to call or refer me to your friends who need assistance.

During the recent lending crisis, brought on by the unregulated lending of the boom period, lenders have become phobic of taking any risks.  Thus, most lenders are requiring larger down payments, often 20% or more.

If you do not have much cash to put down, consider FHA financing.   FHA has raised their conventional loan cap (temporarily) to $729000 and FHA can require as little as 3 1/2% down if you qualify.   Check it out as an option.  FHA is making loans possible for many people who could not have found a loan six months ago.

We hear bad news every day regarding the real estate market and the economy, and yes, there are challenges.     But here is the good news:

In the lower end markets in Marin and Sonoma County, prices have been hit so hard that finally many first time buyers who were priced out of the market are now finding that they could afford their first home.   Those who do not have big down payments are being helped by FHA financing.   FHA raised its lending cap (see previous blog) and now we are seeing many more loans being processed by FHA.   What are some of the benefits to first time buyers:  low down payments:  FHA requires as little as 3 1/2% down, and lower credit score requirements:  FHA looks at ability to pay more than absolute credit scores.  So, first time buyers and those who are not flush with big down payments are coming back into the market.

Investors are also seeing a big boon to this market.  Marin's market had become too pricey to translate into good rental investments.   Now, we are seeing strong investor values. 

Call me if you want more detail on either of these topics.

The Marin County Market as a whole is in better shape than most of the Bay Area, and most of California.   Sonoma County is a bit harder hit.  The middle upper ends of the market are fairly stable, ($1mil - $2mil and above) although the low ends represented in Novato and parts of San Rafael are still hitting bottom, due to adjustible rate loans continuing to hit people on tighter budgets and forcing sales.

We are starting to see a lot of all cash buyers coming into these markets and quietly scooping up properties.  That is an indicator that the experienced investor sees excellent investment value - In my view an indication of the bottom of the market cycle.

Will there still be more hardship in that low end - yes.  I believe we will see it all throughout the summer and perhaps through fall.

Is it time to buy?  All throughout the price ranges I believe it is an excellent value opportunity.  This is not a "flip" market.  It is a time to buy the home you want to live in for the next five years or so.

Many clients ask me whether it matters if they put laminate floors in the house instead of hardwood.  Although laminate is a lower cost alternative, I usually recommend hardwood if you can afford it.   Price them both out - installed - and you may be surprised that the price is not as hugely different as you thought.

Genuine hardwood floors are a valuable upgrade.  Pergo-like laminates can have a nice look, but won't add as much value to your home.

When you are looking for distressed sales, in my opinion the REO market is a good place to look.  REO's are real estate properties owned by the bank, after foreclosure proceedings.

Prior to foreclosure sellers often try to sell their homes as a "short sale" meaning they attempt to sell it for less than the total loan amount owed to the bank.  Sometimes that fails prior to foreclosure starting.    Also, when a buyer attempts to offer on a short sale they need to be ready to be patient, because banks sometimes won't respond for 30, 60, or even 90 days to their offer.

Once foreclosure occurs, you can bid on the home at the court house, but the lenders will usually make a minimum bid for what is owed, so again, you may not want to bid that high.

But once the property becomes owned by the bank, the bank is motivated to get that liability off their books and they proceed to a publicly listed REO sale.  This process is more straightforward than a short sale and you are likely to see good values.  

The short answer is "probably not" in this market.  Due to the credit crisis we are currently experiencing, in which lenders were too free with their money during the recent real estate boom, lenders have now swung back the conservative side and mostly are looking for very solid loans, with good credit, 10% to 20% down, and full documentation on your income.

There are a very few 95% loans out there, but very hard to get.   If you need a repututable lender or mortgage broker, talk to your agent.  I always make sure that I have 2 or 3 strong lenders that I can provide to my clients so they don't get burned by someone who promises things that they can't deliver.

Why not let the buyer do all the home inspections for themselves?

I always advise my sellers that it is wise to pay for a pest inspection when they list their home, because then you know prior to getting into contract what issues - if any - you may have that would affect negotiation.  It makes for a smoother sale and fewer surprises.   It is not manditory, and some sellers decline, but it is a good idea and allows you to find and repair items you might not otherwise be aware of.  That report becomes part of your seller disclosures and if you decide not to fix problems that you find, you can prepare for a buyer credit or attempt an "as is" sale.

Today the FHA released their new conforming loan limits by area, nationwide.  For Marin County, the new limit will be $729,750, for Sonoma county it will be $662,500, Napa County $729,750 and Solano County $557,500.

HUD Link to New Conforming Loan Limits - Marin

HUD Link to New Conforming Loan Limits - Sonoma Cty

HUD Link to New Conforming Loan Limits - Napa Cty

HUD Link to New Conforming Loan Limits - Solano Cty

HUD Link for Any County in US - New FHA Conforming Loan Limits

Call me for more information on how this might affect you.

Many of my clients are asking when we will see the benefit in new conforming loan levels from the recent Economic Stimulous Package.

HUD and Fannie Mae and Freddie Mac are currently evaluating the new lending limits and it will probably be six weeks or more before we see the impact on new lending packages for higher conforming loans.  

If you have questions, I am getting regular updates from my lenders and would be happy to share the scoop on what we think will happen.  Call or email me for more info.