So What in the World is HAFA? A New Foreclosure Alternative

By now, everyone knows someone who has lost their home to a foreclosure or undergone a “Short Sale” that seem to take forever. In an effort to help homeowners avoid foreclosures and streamline the short sale process, on April 5, 2010 the Treasury Department enacted the Home Affordable Foreclosure Alternatives program, better known as HAFA. The program was developed to provide a viable alternative for struggling homeowners who are unable to keep their homes even after qualifying for the existing Home Affordable Modification Program (HAMP).

The program includes simplifying the “Short Sale” process by allowing homeowners to seek the lender’s pre-approval of the short sale price and terms prior to listing the property. The homeowner will be able to use the financial and hardship information already collected during the loan modification process to qualify for this program. It requires lenders to fully release homeowners from future liability for the first mortgage debt, and to provide homeowners with up to $3,000 in relocation money. The program also offers financial incentives for lenders to encourage their cooperation.

While it seems these guidelines may be flexible, the general qualifying criteria for the HAFA program are:

1. The property is the borrower’s principal residence;
2. The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
3. The mortgage is delinquent or default is reasonably foreseeable;
4. The current unpaid principal balance is equal to or less than
$729,7501; and
5. The borrower’s total monthly mortgage payment exceeds 31 percent of the
borrower’s gross income.

For more details, visit the Making Homes Affordable Website. The program ends on December 31, 2012.

So help is on the way for struggling homeowners and soon short sales may actually close in less than 45 days. Struggling homeowners are encouraged to contact their local Realtor® today to
discuss alternatives to foreclosure.

--Virginia Hall
ABR, CRS, e-Pro, GRI, SFR
Coldwell Banker Residential Brokerage
Direct (619)258-8585
DRE#01409760

San Diego County Median Home Prices Slowly Climb

Good news for the over-all San Diego market. The countywide medium home price increased again in May. According to the DataQuick the Median Home Price hit $295,000in May, a $15,000 rise since January and $5000 in May.

Since January, three out of five areas of San Diego County continue a modest recovery. While overall prices are still down 22.6% from a year ago, Buyer activity remains steady.

While the number of "All Homes and Condos" sold countywide decreased by 133 in May compared to April, the number of "New Homes and Condos" increased by 19. Most of May’s increases were seen in higher valued condo sales, which increased from $182,000in April to $199,000 last month.

For example, while Santee showed a 4% decrease in resale house prices from April, the New Home and Condo sale showed increases from April--resale condo prices rose 4% along with new home sales 28%.

While the number of foreclosures decreased from 43.1 percent of all resales in May compared to 51.1 percent in March, some believe the 90 day foreclosure moratorium that went into effect on 6/15/09 along with banks attempting to modify loans may be producing a temporary reduction in the number of foreclosures.

"DataQuick analysts suggested that home prices may have bottomed out, but caution that price depreciation may be hitting more affluent neighborhoods because of mortgage defaults and impatient owners of higher-end homes who need to sell in the current market," according to Ned Randolph, San Diego Business Journal.

The number of homes sold at prices greater than $500,000 has gradually increased from 18.8 percent in March to 20.5 percent in April to 23.1 percent in May.

However, with the reduction in the number of homes available down to about two months supply, demand should continue to push prices slowly upwards.

--Virginia Hall
Coldwell Banker Residential Brokerage

If Houses Could Scream!

"What happened here?" my buyer gasped.

I was in shock. What had happened since making an offer on the home?

It had been 6 weeks since he had made the offer on this home, that was being sold as a short sale. The sellers had to sell the home as the result of a divorce, and owed more on the home than it would be sold for. The home was older and needed some cleaning, a kitchen and bathroom update, but over all the 3 bedroom house had potential.

As we walked into the house, the seller passed us leaving for work muttering something about trouble with his child who had done some damage.

However, after examining the home, it was evident that the seller had done the dastardly deed. He had removed the dishwasher, the oven, the front bathroom newer bathtub doors. In addition, two bedroom doors, some kitchen cabinet doors were missing. As we walked down the hall I noticed the matching painted wood paneling on the walls was missing and now there was exposed damaged drywall with a layer of black tar down the middle. The original hardwood floors had a long scrapes and gouges where the oven had been drug through the living room to the backyard.

While we had a contract that the seller had violated, what is the point of suing someone who is in the process of losing everything. I could have renegotiated the price down for my Buyer, but where would the angry seller stop before the end of escrow. With the damage he did in 24 hours since the offer had been accepted, would the house still be standing in the next 45 days? Unfortunately, the Seller's actions, spoke loud and clear, "That if I couldn't have it, no one would.

Since we were expecting the home inspector, any minute, my buyer had to make a decision. While I hated to see him lose the house that he had hunted months for and waited patiently for the bank to approve the offer, but there was nothing else he could do. I knew he couldn't afford to rebuild the nice little home he had bought. Not to mention, would he be able to get lending on it. While we had a contract, you can't sue someone who has nothing to lose. Much to his despair, the Buyer was forced to cancel his contract.

While I have seen foreclosed homes damaged, toilets and sinks missing, entire kitchens barren, this was the first short sale where someone had sabotaged his chances of selling a home. While I knew this seller was in the middle of a divorce and angry, I tried to make sense of the destruction.

While some may see the destruction as an expression of anger towards the banks, a silent revolution, I feel we are seeing an epidemic of angry home owners, grieving over the loss of their homes--the center of their family's universe.

While buyers have an opportunity to pick up homes at a reduced price right now, there are a lot of homes out there that have been damaged by Angry Sellers or have deferred maintenance. A big problem with these homes for buyers, is lenders often won't lend on them. So right now, patience is the name of the Buyer Game and being the first to find the diamond.

Any Ghosts in the Closets? The Neighbors Will Talk

”Do you think I will get top dollar for my home,” my seller paused before adding, “ even after what happened here?”
From the tone of her voice, my instinct told me that this wasn’t good. “What happened here?”

My seller shared the story of how after they had moved into their beautiful home that the neighborhood children began to tease their children “that they lived in a haunted house”. There was much more to a last minute disclosure of a “death” in the house than had been told. Unfortunately, they had not met the neighbors before the close of escrow to share the tale of the house. While they bought the house at a reduced price, moved in and lived there happily for many years without any problems, knowing the history may have affected their decision to buy the house and should have been disclosed more thoroughly since it will live on with the house.

I have had numerous encounters with neighbors before helping buyers purchase a home and while some neighbors may have a vendetta again the seller, most often the information is helpful.

For example, while looking at a piece of land with a buyer, the neighbor stepped over to share that she wondered why anyone would buy a piece of land you couldn’t build on, because it was in a flood plain. While this wouldn’t necessarily stop me, if I loved the land, just because a neighbor says something doesn’t make it fact. However, I would definitely heed the warning and check it out with the government agency that issues building permits.

In this day of foreclosures, neighbors can be a great source of information since the banks are exempt from certain disclosures, since they have no knowledge of the house. Recently, I approached a neighbor with a potential buyer for the house next door. With a friendly introduction, we asked the neighbor about the sewer that was noted “available” in the listing information. The kind neighbor shared with us about the home being on septic, as well as, the questionable addition had been there since the house was built. While again, I would still recommend checking out the building plans at the government agency, the neighbor’s information gave my buyers the information they needed to feel comfortable enough to proceed with an offer.

So the moral of the story is, it is a good idea to meet your new neighbors before you make an offer or as soon after, while doing your inspections…to find out if there are any ghosts in the closets.

--Virginia Hall

Assume a Delinquent Home Loan--Genius or Mistake?

"I only want to look at foreclosures," buyers have requested. "I also want to take over someone else's loan." Buyers looking for the ultimate deal.

Sounds like a win win situation. Take over someone else's delinquent home loan, relieving them of their financial burden. At the same time, the buyer would put down a small amount to pick up the property at a low price with a low monthly payment

Years ago, people stayed in their homes paying down their mortgages, when suddenly tragedy would strike--a job loss, divorce or a death occurred. The bank would start the foreclose process. The banks would foreclose and the sellers would lose all the money they had invested into their home. That is when the opportunistic buyer would offer to take over the loan and keep the house from going into foreclosure. While there are laws that highly regulate this now, it was possible to assume a loan and come out ahead.

However, in today's market, most sellers have over-extended themselves by leveraging all the equity they have in their properties. For example, they may have bought the property back in 1997 for $174,000 and, for one reason or another, have borrowed up to $475,000 in 2006. With the housing market depreciation, that home may now only be worth $240,000. So if you were to take over their loan of $475,000, you would be paying more than the house was worth. Not a good deal.

Watch out for those Websites that advertise foreclosure properties for $15,000. It was brought to my attention awhile back, when several of my clients said that I was linked (without my knowledge) to such a site. Many of these websites are quoting what you need to pay in order to get the home loan back on track and out of foreclosure. Then you can assume the loan for a home that isn’t worth what is still owed on it. Not a good deal.

On the other hand, there are a lot of foreclosures and short sales still actively listed that are good deals on the market. With the help of an experienced agent, invest your money wisely. Start out the New Year right---Buy Low and Sell High!

--Virginia Hall

Take Off Those Rose Colored Glasses When Buying a Foreclosure--A Good Deal or Not?

According to the San Diego Business Journal 12/16/08, DataQuick reports that Foreclosures now make up the majority of home sales, 52.1 percent of transactions last month. A great opportunity for Buyers...or is it?

When you buy a Foreclosure or what they call a "REO", you will want to take off your rose-colored glasses and get ready to do some research. While buying a foreclosure property can be a great deal, the Buyer needs to BEWARE! The history of the house is unknown because the Bank Seller has not lived in it and thefore is not obligated, by law, to provide Buyers with any information that is normally disclosed by the usual selling homeowner. They do not know the neighborhood or the fact that the neighbor's dog may bark many nights. They do not know that there was a water leak and a recent insurance claim. They may not know that there is a crack in the foundation. This is why it is so important to have a Realtor® guide you through the process of inspections and check out any issues you have concerns on.

However, by law, the Bank Seller is required to provide you with any Material facts that they know of, including Meth labs, Lead Paint, and Megan's Law website information. However, quite often, understandablely they don't know anything about the property. They may not even be located in the state. They are also required to have smoke detectors and water heater bracing. No excuses there.

When buying a foreclosure you need vision. While you can get the home at a price below market value, you can expect that many of the homes will typically have deferred maintenence that could be very expensive. Most home owners losing their homes, are not putting money into a sinking boat. With vision, you can see the home fixed up. But remember that comes with a price.

In most transactions, the Bank Seller also expects the Buyer to pay for the termite inspections and any costs required to repair termite damaged wood and fumigation, if needed. The Bank Seller focuses on giving you a sales price that you will take the home "as is" understanding that you will have some work ahead. So you want to have a Realtor® that has a good grasp of the value of the comparable homes in the area and is able to provide them to you. Because ultimately, the Buyer makes the decision on the price.

While waiting for an accepted offer, it is not typically as long as a Short Sale (an oxymoron for a short pay sale). However, it is usually longer than the standard 72 hours Purchase Agreement period given to most sellers, but rather one to three weeks. None of the time frames for inspections or loan contingencies begin until after both Buyer and Seller have agreed upon terms and price in writing, an accepted offer.

While you are waiting for the acceptance you should begin gathering a list of referred licensed contractors (plumbing, electrical, roofer, etc.) that you may need to look at any major repairs for estimates. Down the road after you have gone through remodeling or major repairs, you don't to look back and say, "if only I had known."

Once you do finally get an answer, you may want to seek out legal advice. The Bank Seller normally has their own contracts written up by their lawyers. These contracts are definitely written with their best interest at heart. By law Realtors® , not being lawyers, are not able to interpret these contracts for you. Real Estate Agents typically use the standard Residential Purchase Agreements written by Lawyers who represent the California Association of Realtors®.

Once you feel comfortable with the contract and sign on the dotted line, then it is hurry up time. The Bank Seller will typically shorten the time periods alotted for the Buyer to do inspections, get their loans, and to close escrow. Usually the Bank Seller will stipulate a heafty fine if you close late. However, the knowledgeable Realtor® will keep the time frames on track and if at no fault to the Buyer, the agent may be able to get a time extension and delay late fines.

The one process that usually takes the longest is the loan process and can be addressed up front is the Buyer's loan. People are waiting in line to get loans, while lenders have cut back staff. You will definitely want to be preapproved and have provided your lender everything they need to get your loan approved in a timely manner.

The Foreclosure is a great opportunity for the Buyer who takes off the rose colored glasses and approaches cautiously.

--Virginia Hall

Take the Bull By the Horns: Selling Short Sale vs. Foreclosure

Many bury their heads in the ground in denial and allow their homes to go into foreclosure. This is not the way to go. While life throws you a curve ball: a death, a divorce, rising interest rates; and you may not be able to avoid foreclosure, home owners need to stand up to the hard times and need to take the bull by the horns. Even though a short sale and foreclosures impact your credit scores. In reality, the short sale shows creditors that the seller took responsibility for the problem and it will impact your credit for 2 years versus foreclosures impacting your credit for 5 years. Those facing Short Sales and Foreclosures should always consult their lawyers and accountants before listing their homes because there could be tax consequences.

While it says "Short Sale", it is the furthest thing from a short process. You need to be ready for the long haul 6 weeks to 6 months after an accepted offer. A short sale should be called a Short Pay. The seller is selling the home for less than they owe to the bank. At this time, Banks are inundated with short sales and foreclosures. In the end the banks are losing the difference. So they have appraisals to verify the value. The market has driven prices down and the bank's may have to agree to accept the loss. This is not an easy process, pulling thousands of dollars away from a bank.

The last thing people in financial crisis want to do is spend more money on a sinking ship. However, when selling a short sale you can actually get multiple offers when the home is clean and free of clutter. When there is trash thrown about and the weeds are growing out of control, buyers have a hard time seeing the potential. So take the bull by the horn. Hire a qualified agent who has handled short sales before and who you can trust to guide you through the process.

--Virginia Hall

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