Short Sale--An Oxymoron--A Word for Wait

People hear "short sale" and think "Great! It won't take too long". Unfortunately, the term short sale refers to the home selling for less than the sellers owe on it. So they will come up "Short" of what they owe.

Because the banks aren't anxious to take the loss, they mull over the sellers' financial records and the process takes anywhere from 3 months to 6 months on average to get an acceptance, if the bank approves it. There are circumstances where the bank won't approve the short sale, and the home moves into foreclosure.

What happens while you wait and wait for an answer to your offer? Once your offer emerges from the bottom of the piles, the bank starts by reviewing the seller's financial records. In variably, they are missing or need updated records. Next they order their own appraisal or a Broker Price Opinion (BPO) to insure the offer price is reasonable. Then they ask for the breakdown of the closing costs to see what they can cut there.

So you wait and wait, and then finally the day comes when they send an approval letter. Now the race is on. The banks will typically give you no more than 30 days to get it closed and will coerce you with late fines.

So is all the waiting worth it. If it is the home you have been searching for, it is usually worth it in the long run. You can usually get a home at a good price, and if nothing more you learn a valuable lesson in patience.

“Patience and fortitude conquer all things” Ralph Waldo Emerson

Virginia Hall
ABR®, CRS®, e-Pro®, GRI®
Coldwell Banker Residential Brokerage
Direct (619)258-8585

They're Back....Multiple Offers in the San Diego Housing Market

While the medium home prices in San Diego County may be climbing slower than in 2003 in, due to the uncertainty of the economy, the bidding atmosphere with Multiple Offers is back.

As the inventory of homes decreases below the normal 6 months of inventory in most areas of San Diego County to 2-to-3 months and the number of buyers increased 10%, compared to a year ago, the competition for good homes is driving buyers into a competetive bidding frenzy. Buyers are making offers on multiple properties, and sellers in the lower end of the housing market are getting multiple competing offers.

"My goal is to get a house this year," said one of my serious first time home buyers. Many are racing towards that goal before the $8,000 Tax Credit expires, before the giant carrot disappears from underneathe their noses April 30th. To add to the mix, the government added in a $6500 tax credit for repeat buyers. And then there are the investors buying while prices are low.

Sellers and banks are looking for the cash to back up those rising offers, should the appraisal not come in and the buyer may have to pay more cash to make up the difference.

So what are buyers to do?

1. Lite Fixer. Look for a home that may not be perfect. Look for the potential in a home. Cosmetic repairs can always be done one at a time. Look beyond the stained carpet and scuffs on the walls. Ask the seller to help with your closing costs so that you can use that money to replace the carpet and paint. Also, the tax credit can be used in the near future for needed repairs or updating. But beware, avoid homes that require too many "honey do's" unless you have lots of money to sink into the home. Watch "The Money Pit" with Tom Hanks and Shelley Long before jumping into a home with lots of issues.

2. Buy Low. Buy a home below your means, below your maximum preapproved price, so that you have room to bid up. While you think you are doing good by giving the seller his asking price, multiple offers pushes the price upward and you may need room to meet that higher price.

3. Be Realistic. Most importantly, listen to your Realtor's advice and be realistic. Listing agents toss the low ball offers aside, unless you have "all cash" for a quicker sale. Know what the comparable homes are running in the area and plan to make a fair market value offer.

For more tips on being a successful buyer in this challenging market, read 5 Tips How FHA and VA Buyers Can Succeed

--Virginia Hall
ABR®, CRS®, e-Pro®, GRI®
"2009 & 2010 FIVE STAR Real Estate Agent(SM)”.
Coldwell Banker Residential Brokerage
Direct (619)258-8585

5 Tips How FHA and VA Buyers Can Succeed

First time home buyers grow frusted! Good homes at good prices are being snatched up by All Cash and Conventional buyers. Homes that are priced well below the market value, a technique called Power Pricing, are meant to get multiple offers in record time. The frenzy created by a low priced home creates an atmosphere of desperation amongst buyers. Each buyer outbidding one another in an effort to secure the great deal.

Unfortuately, there is a heirarchy of loans: "All Cash" is the best, then Conventional, FHA and lastly VA loans. How is an FHA or VA buyer to compete?

1. Representation. Serious buyers must employ the help of a qualified Realtor who can help them catch the brass ring. However, they need the experienced agent to help them understand that everyone is looking for the elusive great deal! They need a representative that can help find a home with their needs in mind, at the same time being realistic.

When buyers are first exploring the market, there are many websites (i.e. Realtor.com, Trulia.com, Redfin.com, etc.) for them to investigate on. However most of these websites have a 48hr filter delay. In this market, those great deals may have multiple offers and not even available in 48hrs.

A Realtor can set up an automated search that is directly connected to the MLS, such as Gateway, notifying buyers immediately of new listings or changes.

2. Ready to Jump. Buyers need to check their personalized online searches daily. They have to be ready to go, to make a quick decision. While a buyer is thinking it over, another one has put an offer in on it. What buyers need to remember is that they can change their mind within a certain period of time defined in the purchase agreement without risk of losing any money.

3. Closing Costs.For sellers, FHA & VA buyers are less desirable when compared to "All Cash" and Conventional loan buyers. The FHA and VA buyers have less down and are less financially stable, often needing assistance from the seller with closing costs, and may not qualify for a loan at the end of the road. Where the all cash and conventional loan buyer may have more money and if the appraisal comes in low, they are more apt to pay the difference. So what is an FHA and VA buyer to do? The price and conditions are the only way to stand out.

The all cash and conventional buyers know they have an advantage and may make lower offers. However the FHA and VA buyer has to come up to the plate with a reasonable or higher offer. With a Realtor's assistance, carefully analyse the comparable home prices and consider the condition of the property and make a reasonable offer. The offer may be higher than the asking price.

If you have the money for closing costs, pay your own closing costs. While you are searching for a home, continue to save your money for the down payment. This will help give you an advantage. If you need the closing costs paid for by the seller, you will need to add those costs into the offer.

4. Ask for Less. When buying a Bank owned property or a short sale, the less a buyer asks for the better. In a normal market, the buyer may ask for appliances or additional items such as a home warranty that the seller would typically pay for. However, the banks don't want to give any frills.

While normally in Southern California, the termite inspection is paid for by the seller, in Northern California the buyer pays for it. In the case of Short Sales and Bank Owned properties, the tide seems to be turning. While VA buyers have to have a termite inspection and clearance, the buyer should put a maximum price tag on the repairs. Banks don't deal well with unknowns.

FHA buyers may want to avoid asking for a termite inspection with repairs altogether, if the appraiser will allow it. Especially, on condominiums where the HOA usually pays for the exterior termite inspections once a year. Buyers should let the home inspector know this so that they can look for any issues of wood rot under sinks.

In regards to houses, if the seller of the short sale home purchased it in the past few years it more than likely had a termite clearance at that time and less likely to have costly damage and repairs needed. However, if the house shows lots of signs of deferred maintence, this may not be the house for a first time home buyer. The bank wants to give you a great price for the house "as is".

5. Stand Out. Buying a home is an emotional purchase. By appealing to the emotional side of a seller, buyers may beat out the competition. In a letter, buyers should give the seller a little history of themselves and reasons for them to like them. Especially Veterans, they need to use their service to our country to their advantage to tug on those heart strings. Even add a nice photo.

These tips will hopefully help a FHA and VA buyer succeed. But the biggest tip is to patient and persistent.

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

Cautious, but Good News for the San Diego Housing Market in 2010

With prices up 6.6% in San Diego County, the medium priced home now $325,000, and the number of homes sold up 18% compared to one year ago, it is fair to say that San Diego County is in a stabilizing market. Just last week appraiser, Leon Crowell, confirmed, "We can no longer say we are in a declining market. "

While some are cautiously optomistic about the unemployment rate improving from 10.7% in October, the highest rate since the Great Depression, to 10.3% in November. According to Chrisopher Thornberg, who was one of the first economists to forecast a major recession, said the recession has hit it peak. "All the data shows that the U.S. economy has more or less bottomed out. We should only be surprised if unemployment wasn't peaking. The bigger issue is how fast of a recovery we're going to see," said Thornberg, who works for Beacon Economics in Los Angeles.

Coupled with the news that foreclosures rates are dropping. According to the MDA DataQuick, San Diego County Foreclosures by all lenders totaled 11,393 from January to October was down from 15,414 for the same period last year. The reduction continues, the number of foreclosures in October 2009 numbered 1,346 dropping 4.7% to 1,283 in November. Some believe under government pressure and incentives, banks are delaying or canceling foreclosures while working with home owners to modify their loans or arrange for short sales.

In the short term, the reduction in foreclosures and the reduction in unemployment could help stabilize the economy and housing market, prompting homeowners with equity, not in distress, to sell and buy another home. Some believe that many owners will still hold back because of loss in value compared to a few years ago. Since 2006, prices tumbled as a result of many homes being lost to foreclosures. But as one of my wise sellers recently said, this is the time to sell and move up because "while my home value has fallen, I will get a better deal on my new home and 10 years from now, the home I am buying will be worth much more in proportion."

So while I agree with Thornberg, the question is how quickly the recovery will occur, it does seem there is hope on the horizon.

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

Uncle Sam's Christmas Gift

While everyone is bustling around buying gifts and attending parties, there are still serious buyers out there making multiple offers on well maintained homes.

If you atticipate the need to sell your home, now is a great time to market it. The number of homes for sale are typically lower at this time of year due the holidays. With fewer serious buyers trampling through your home and the Christmas decorations adding a romantic ambience, make it the perfect time to sell.

If you need to sell, it definitely won't get sold unless you have it on the market. Worried about theft? Hiring a Realtor who uses computerized Sentri lockboxes, provides the ability to track agents and their clients entering the home.

Many sellers think waiting until spring is the best time to sell. However this year, with the Tax credit extension, buyers must have an accepted offer by April 30, 2010 and close by June 30,2010 leaving only a few more months. So if you are facing a possible foreclosure and want to sell your home before that, you need to consider that banks typically take several months to approve short pay sales.

If you are moving up, you may qualify for the $6500 tax credit. The tax credit does have income limits and the home-price cannot be above $800,000. Read more about it in Homebuyer Tax Credit Extension & Expansion . However, if you can afford to move up, this is the perfect time to sell and buy a bigger or better home.

Many move-up home buyers say they are waiting for home prices to go back up to regain the equity that they have lost in the last couple of years. For those who have lost all of their equity, there is no choice. They must wait for the equity to return. However, for those who have some equity and plan to wait until they regain what they have lost, may find themselves behind the curve.

Several years from now when home prices begin to rise again, as they historically do in San Diego County, the home equity growth will all be in proportion to the price of the home. For example, if you purchase a home of $350,000 versus a home of $700,000, in 10 years from now if the home value rises 10% then you will have gained $70,000 in the $700,000 versus $35,000 in the $350,000 home. During the downturn, if you have lost about 30% of your home equity, on your $350,000 house, then you will be down about $150,000 in equity. In comparison, the $700,000 house has lost about $300,000 in equity, twice as much. So in the long run when home prices go back up as they historically do, by moving up now, then you will be up $150,000 in equity.

Don't delay take advantage of Uncle Sam's Christmas Gift.

Homebuyer Tax Credit Extension & Expansion

If you haven't heard the news already, the First Time Home Buyer Tax Credit has been extended, as well as the new bill includes a tax incentive for existing homeowners as well. Homeowners who have owned their current homes at least five years, are now eligible for tax credits of up to $6,500 when they purchase a new home. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010 and close by June 30.

The credit is available for the purchase of principal homes costing $800,000 or less, excluding vacation homes. Single individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000 would not be eligible.

Other provisions in the bill, include taxpayers will be eligible to claim the credit on purchases made in 2010 on their 2009 income tax returns. The bill also established that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

While some may feel the tax credit may be adding to the National debt, according to the National Association of Realtors, economists estimate that the current tax credit has already contributed approximately $22 billion to the general economy, and approximately 2 million people will take advantage of the tax credit this year.

Some think that they didn't need to give such large tax credits. Or was it large enough? What do you think?

If you would like more information, please contact me.

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

Buyers, Don’t Forget Your Pre-Approval Letter!

Many buyers consider shopping for a home, like a buying a car. When is the last time you checked with your lender before buying a car? However, it is a much bigger investment and by getting a preapproval letter, you can step smoothly into home ownership.

But you looked on-line at a mortgage calculator. These wonderful tools are helpful to get a rough idea of what your monthly payment might be, but a lender will use many factors to decide what type of loan you qualify for and for how much.

If you are serious about buying a home, check with your Realtor® on who they might refer. Realtors® know which lenders will deal with their clients in a professional, timely manner and will find any obstacles upfront, rather than half way through the purchase that might cause a problem.

A preapproval letter from a lender, before you begin seriously shopping for a home, will save you hours of wasted time and frustration for the following reasons:

1) A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a “pre-qual” from a Web site is just as easy. Enter some information, click “submit” and in no time you have a letter. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.

2) You’ll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors — down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on — are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history.

3) You’ll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you’ll be able to obtain a mortgage.

4) Your Realtor® will work harder on your behalf. A pre-approval letter signals to your real estate agent that you’re a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale — and a commission — will naturally motivate your agent to devote more time and energy to you. In fact, some agents won’t even show property to buyers who don’t have a pre-approval letter.

5) A few caveats: Pre-approval letters are not binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, apply for credit or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.

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