The Encinitas Short Sale from Hell: Closed
April 27th, 2008 Categories: Encinitas, Mortgage News, Real Estate News
It was group hug time Friday afternoon when we received confirmation that our 10-month short sale ordeal in Encinitas Ranch had successfully recorded and closed.
Kudos to the patient buyers of this Encinitas home, because they truly got a terrific deal ($890,000).
Welcome relief is also due the out of area young seller, who had been unwittingly pulled into a raunchy real estate transaction by a couple of sleazy mortgage brokers (one of whom was the seller) , a credit “packager” –and escrow, title and appraisal personnel who surely knew better than to facilitate such a sham.
Our first time home buyer-turned-seller from Los Angeles, with excellent FICO score (and no savings), was lured by the promise of buying an “undervalued” $1.2 million home (100 percent financing) in San Diego that he could profitably sell 6 months later–while someone else made the payments. It was to be his stepping stone to riches. Or so he thought.
Instead, it turned into 16-month nightmare:
. The “credit “packager” forged our client’s name and leased the property at under-market rent. He collected rents and deposits for about four months, until we listed the Encinitas home for sale. At that time, the tenants began paying rent to their attorney and barred us from showing the home. Now, we were dealing not only with a short sale, but a listing that could not be shown.
. Because we had priced the property aggressively, because Encinitas Ranch is a very desirable community, and because we marketed the home everywhere possible, we were able to secure 8 offers–ranging from ridiculous to credible. This in spite of the fact that the
tenants and their attorney would not allow anyone in to see the home.
. Foreclosure sale for this Encinitas home had to be stopped three times because the loss mitigation department of this major lender has a major interdepartmental communication problem.
Real estate commissions were slashed by the short sale lender, but that is nothing new. They also refused to pay HOA fees that were in serious arrears, the home warranty for the buyer, utilities in our name, and a list of other necessities required for closing. But sometimes achieving the impossible is almost worth more than monetary compensation.
Monday morning, I will order the sign removed from this Encinitas property, where it has probably set a record for the longest-standing Realtor’s sign in Encinitas Ranch.
The neighbors will breathe a sigh of relief–and so will we.
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Are Lenders Redlining Entire Cities?
April 19th, 2008 Categories: Mortgage News, Real Estate News, San Marcos
Redlining is a term that describes the unethical if not illegal practice where lenders red line a neighborhood or community, making it very difficult for buyers to purchase in these afflicted areas.
I have recently heard from a couple of direct lenders, Countrywide Home Loans and Bank of America, that most if not all of San Diego County real estate is in the red zone.
Qualifying for current red zone status simply means that the subject property is located in a declining market area. The impact of this colorization is significant to both the San Diego real estate market as a whole and to first time home buyers in particular.
How this version of redlining works creates a no-win situation for buyers putting down less than 5 percent.
Even if a buyer has negotiated a bargain purchase price, say 10 percent under market value, the appraiser will automatically deduct another 5 percent from the contract price to determine a value. In other words, a borrower cannot get away with putting less than 5 percent down.
I spoke with Brian Brady a couple of weeks ago about this matter. I had been told by a representative from a large direct lender that San Marcos, CA was in a red zone, and would be subject to different lending standards. Brian bristled at the thought of redlining, declaring it an illegal practice unless an entire region were painted red.
Well, it seems that most, if not all of San Diego County real estate, is swimming in blood.
One of our agents is struggling with a couple seeking to buy their first home in the Shadowridge area of Vista, CA. The buyer is an automobile service manager in nearby Carlsbad and his wife is an attorney. They are conservative in lifestyle, and can afford payments on a $417,000 home. However, they are short on down payment. And with current lending guidelines and the unavoidable prospect of buying in a red zone, they can no longer qualify for the 100 percent loan Countrywide Home Loans had promised.
And what makes this particular case so interesting is that the home is a foreclosure held by Countrywide as an REO (real estate owned). Any reasonable person would think that Countrywide Home Loans would jump through hoops to get this liability off their books especially with buyers like these.
Wouldnt reasonable minds agree?
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A San Diego Short Sale Solution
April 11th, 2008 Categories: Market Trends, Mortgage News, San Diego Real Estate
More and more, San Diego real estate bargain hunters are making specific requests:
Show me foreclosures, show me great deals, but forget short sales.
Why?
They have learned that about the cost of lost opportunity while they wait an interminably long time for banks to respond. Banks and loan servicers are absolutely overwhelmed with paperwork and pleading phone calls and it can literally take months for a short sale to close.
During that time, vacant homes may be subjected to vandalism, neglect and the elements. Increasingly, real estate agents also avoid showing short sales because of uncertain pricing, uncertain compensation, and the increasing reality that they will be left holding the bag for costs lenders refuse to cover.
Many San Diego Realtors have been burned by lenders and refuse to go down that road again.
The solution?
Prenegotiate all short sales.
Once borrowers indicate they want to sell their over-mortgaged property, lenders should take the initiative to get that liability sold as soon as possible. Order appraisals or BPOs (broker price opinion) immediately, and encourage these borrowers to maintain the property while it is on the market. Perhaps there is an incentive that might be offered to encourage this kind of care? Turn the property over to a competent Realtor, who knows the local market, knows how to market these properties aggressively, and make sure all costs and allocation of fees are clearly defined.
This, as much as anything, might help to restore some order to the markets at the local level and with the international investing community who ultimately provide mortgage funding. Investors in the secondary market know they are going to take a hit. Let them know how much so they can plan and react accordingly. Its the uncertainty thats killing the mortgage market.
Real estate investors, home buyers, and real estate professionals also want to know what price the lender/investor will accept so they can smartly shop and compare properties. Short sales are the chaotic element in the San Diego real estate market because they have uncertain pricing, uncertain timing for closing, and offer uncertain compensation for those who procure the offers.
Once order is restored with that element of the market, I believe we will be on the road to recovery. The failure of mortgage lenders and investors to pre-negotiate short sales will only prolong the agony for all.
Pointing fingers and assigning blame for the mortgage mess wont contribute to a solution. Mistakes and miscalculations were made by all, but its time to get on with resolutions and remember you cant justify a mistake by perpetuating it.
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Two Income Tax Tips for San Diego Filers
April 10th, 2008 Categories: Carlsbad Real Estate, Mortgage News, Oceanside, Real Estate News, San Diego Communities, San Diego Real Estate
Income tax filing is just around the corner, but here are a couple of tax tips owners may want to keep on hand:
1. Congress, reacting to the subprime mortgage mess (in San Diego and elsewhere), has provided welcome tax relief to San Diego homeowners facing foreclosure. In the past, if a mortgage lender foreclosed on a property and it sold for less than what was owed, income taxes were due on that so-called forgiven debt.
In other words, a homeowner in San Diego who sold for less than what was owed on the home would still owe income taxes on the loss suffered by the mortgage lender. Now, for 2007-2009 tax years, this so-called forgiven debt will no longer be taxed up to a $2 million cap. This provision may also be applied to amounts forgiven when qualifying loans are restructured in order to reduce the principal amount owed to the lender.
2. New to 2008 is an IRS provision that allows a surviving spouse who sells a primary residence no later than two years after the spouses death to exclude as much as $500,000 in capital gains on the sale from taxable income.
In years past, if a home was sold in a year after the death of a spouse, when a joint return could no longer be filed, the maximum gain exclusion was $250,000. To qualify for this benefit, the exclusion requirement must have been met immediately before the spouses death and the surviving spouse must not have remarried as of the date of sale.
Of course, I am no tax expert (just a San Diego Realtor) and am just passing along a couple of tips from our accountant. Please consult your own!
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New FHA Loan Limits for San Diego County
March 6th, 2008 Categories: Mortgage News, Real Estate Juice, Real Estate News, San Diego Market Trends, San Diego Real Estate
California is privileged to have HUD release their new FHA loan limits just ahead of the rest of the country, who will get their own announcements tomorrow.
These new temporary limits were government-derived by calculating 125 percent of each California countys median home price.
In San Diego, for example, the median home price at time of calculation
(from the San Diego MLS) was $558,000. Hence, the new FHA loan limit in San Diego County will now be $697,500.
Many distressed San Diego homeowners and potential home buyers will rejoice at the new loan limits that may provide financing or refinancing for their homes. And these long-awaited increases may help to contribute to the recovery of the San Diego real estate market.
San Diego real estate, though, is apparently still more affordable than that in 14 other California Counties, where FHA, Fannie Mae and Freddie Mac loan limits were hiked to $729,750. Many of those counties are located in the San Francisco and Bay area, along with Los Angeles, Orange, Ventura, and Santa Barbara Counties. San Bernardino and Riverside Counties cap out at $500,000.
We havent done an FHA loan in our real estate practice in years, but I think its time we quickly went back to school!
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