OMG what a SALE. What A Screamin Deal on this brand new 4 bedroom custom built home 7 minutes to beach.  Been on market before reduced to move!   Built in 2007 but it has never been lived in since completed

How much of a deal is it? Eppraisal & Zestimate have this valued at $739,500 and above

• 4 Bedroom
• 3 Bath
• 2200 sq ft (Seller)
• 2-Car Garage
• Tri-Level
• Vaulted Beamed ceilings
• Marble Fireplace
• Maple Cabinets
• Granite Counters
• Sorry NO Appliances
• Hardwood floors
• Italian tile in Bath
• Forced-Air Heating
• Engineered Foundation
• Advanced Septic System
• 1/2 acre

All info to be verified by buyer

A bit of Nostalgia envelops you when you see this quality 1960’s home. Beginning with the old fashioned covered front porch, to the well designed, single story floor plan, you will have plenty of room in this 1653 sq foot, 3 bedroom, 2 bath home. Enjoy the fireplace in the spacious living room featuring lovely open beamed, vaulted ceilings.

Hardwood floors throughout under the carpet, a new septic tank, a newer roof & wheelchair accessibility are a few extras you may not notice on your first visit.

You’ll be the envy of this sought after Felton Neighborhood because you’ll be the only home on the block equipped for any season with air-conditioning and an “instant on” generator. Be sure and ask us the neighborhood lore on why these items were installed. 

Tinker the day away in the big 2- car garage or indulge yourself puttering in the gardens. At the end of the day, take a leisurely evening stroll throughout this Felton country “burb", Fall Creek State park or downtown Felton for shopping at New Leaf, grab a slice at Redwood Pizzeria or listen to “live” music at Don Quixote's .

The median price for a single-family home in Santa Cruz County plunged in February to $380,000, the lowest since January 2000, prompting one agent to declare the market has bottomed out.

92 sales, with homes in Watsonville, the area hardest hit by foreclosures, accounting for a record 33 percent.

And 66 percent sold for less than $500,000, the highest percentage in years, according to Gangnes.

In Watsonville, banks sold foreclosed homes at discounts of 30 percent to 50 percent.

A few examples:

124 Grant St. sold for $166,000, down from $490,000 in 2004.

38 Lower Cutter Drive sold for $215,000, down from $420,000 in 2003.

518 E. Lake Ave. sold for $235,000, down from $395,000 in 2002.

Those are not condo prices; those are single-family homes.

"We've hit our bottom in South County in single family," said Dee Dee Vargas, president of the Watsonville Association of Realtors. "If you're waiting to see if prices might drop a bit, you might miss the boat. We're seeing multiple offers. I've got more buyers than properties right now."

With a market full of "distressed" properties, banks selling foreclosed homes and homeowners seeking bank approval for short sales, closing a sale is "almost a miracle," she added. "We get a lot of curve balls thrown at us."

It might be a lender that insists on reviewing an appraisal before authorizing a loan or one that shuts down before providing the promised funds.

Entry-level buyers are taking advantage of FHA loans, but some are discovering there's a catch. Distressed properties need repairs to meet FHA health and safety standards, but banks want to sell the home as is and the buyers are stretched to come up with the required down payment.

Some investors competing with first-time homebuyers.

That's driven by a change in Fannie Mae and Freddie Mac guidelines. The two mortgage-buying entities had restricted investors to four properties. New guidelines allow 10.

Clients qualified for an FHA loan but the bank that owned the house accepted an all-cash offer from an investor.

"With banks, cash is king,"

Tai Boutell of Santa Cruz Home Finance predicts that interest rates for mortgages, pushed artificially low -- at or below 5 percent -- could go up by mid-year to the low 6 percent range. Buyers who wait until then hoping for prices to fall will pay more, he said.

For example, payment on a $500,000 loan at 5 percent would be $2,684 a month; if the home price drops 10 percent in six months and interest rate rises to 6.5 percent, the payment would be $2,844 a month.

While the low-end market is brisk, high-end activity has nearly dried up.

Only four homes sold in February for more than $1 million.

Longtime appraiser Glenn Fuller reported 212 listings in that price range at the end of last week.

"That's a lot," he said.

He tallied only 11 pending sales, leaving about 19 months of inventory.

In 2007. buyers were snapping up $2 million homes around the county. Now they just aren't selling.

Very few people can qualify under the new standards, Fuller said, and the typical buyer of the high-end properties had money in the stock market but doesn't seem as rich since the market tanked.

A: With subprime mortgages long gone and the credit crunch keeping conventional lending guidelines quite tight, FHA and other government-insured loans have become the mortgage of first resort for many first-time homebuyers and others looking to take advantage of the current buyer's market. In many respects, FHA loans are very buyer-friendly; however, there are some insider secrets every prospective FHA loan borrower should know before they even start their house hunt.

Mindset Management

More now than ever, homebuyers must be vigilant about where they get their real estate advice and information from. Every homebuyer's situation, finances, qualifications, and the advice they receive from their real estate and mortgage professionals are unique. For example, perhaps your friends were working with a mortgage broker who charged much more for FHA loans than conventional loans. Or maybe your friends were looking at fixer-upper properties, and found it difficult to get an FHA loan approved on their ideal property.

If we've learned nothing from the recent mortgage, housing and foreclosure crisis, it is that your choice of mortgage is potentially a massively impactful decision for your long-term financial well-being and the overall wellness and prosperity of your family. Additionally, if you try to process all the voices of your friends, plus the myriad messages about real estate you see on TV and read in the paper and on the Web, you will quickly become confused and overwhelmed as you try to make these very important decisions.

As such, you owe it to yourself to get a reputable professional's personalized assessment of your various mortgage options, and their advice regarding what makes sense for you. While it is good to gain emotional support from friends who have been there and done that, stop short of allowing the input of your friends to sway your decision-making -- rather, use it to direct your research and questions, then make your decisions based on what will work for your finances in the long term.

Need-to-Knows

FHA loans are simply loans that are made by regular mortgage banks, but are insured against default by the Federal Housing Administration. As such, the FHA sets forth the qualifying criteria borrowers and properties must meet to qualify for these loans. Given that the FHA's mandate includes encouraging and facilitating homeownership, the average borrower will find FHA loans easier to qualify for than non-government-insured or conventional loans.

When you pit FHA loans head to head against conventional loans, the following advantages are clear:

• FHA loans require only 3.5 percent of the purchase price as a down payment -- conventional loans now require at least 5 or 10 percent down;

• Importantly, the FHA does not mind if your down-payment funds come from a gift, a city-funded down-payment assistance program, or even a charitable organization -- most conventional lenders require the funds to be from your own personal savings;

• FHA loans offer very low interest rates compared with lower-down-payment conventional loan programs -- the government-backed insurance minimizes the risk on the lender's part, so they charge you less;

• FHA loans have very reasonable credit qualifying guidelines -- while your specific lender might look for a higher FICO score, the FHA itself has a minimum credit score requirement of 500 if you are putting less than 10 percent down. Realistically, though, most lenders are looking for at least a 620 credit score to obtain an FHA mortgage -- and they look at the borrower with the lowest middle FICO score.

• The FHA typically implements home saving programs for homeowners with FHA mortgages much sooner and more effectively than non-FHA loans, in the event they run into financial difficulties during the life of the mortgage.

However, your friends may be referring to some of the potential pitfalls that FHA borrowers have also experienced:

• FHA loans -- like most government programs -- are quite paperwork-intensive, causing some mortgage professionals to broker FHA loans than conventional loans. However, many reputable mortgage brokers will do FHA loans for 1.5 points or even less, so if you are asked to pay much more than that, you might want to get a second opinion. FHA appraisals are also slightly more expensive, but we're talking about a $100 (or less) difference between the cost of a conventional appraisal and an FHA appraisal in most areas.

• FHA loans place more restrictions on the condition of the property than conventional loans. Time after time, I've seen transactions fall apart because a bank-owned property had no working kitchen sink or stove, or had many broken windows, which the bank refused to repair prior to closing. These items are considered health and safety requirements, and the FHA will not insure a loan placed on a property that does not allow a very basic level of healthy, safe living for its occupants.

• FHA loans have a strange little twist that allows legally married individuals to buy homes on their own, but still requires that their spouse's credit and debt be taken into consideration in the qualifying process. Don't even ask how I discovered this (!), but it comes up more frequently than you might think. Conventional lenders who allow spouses to buy separately do not consider the non-borrower spouse's financials.

Action Plan

1. Avoid letting your friends' experiences create anxiety or confusion in your mortgage decision-making process.

2. Get a reputable mortgage broker -- ideally by referral from your Realtor -- to give you a personalized assessment of your purchasing power and mortgage options.

3. Use the FHA pros and cons listed above to decide whether an FHA loan or a conventional loan will be best for your finances, target properties and lifestyle.

Q: I live in a house that had a lis pendens delivered for foreclosure with 20 days to respond. I have no interest or involvement with the owner or the house. Aside from moving out as soon as possible is there anything else I have to do? Do I have any legal issues to worry about?

A: Unfortunately the financial and mortgage crisis has been a wave that has taken many innocent people along with property owners and lenders.

You, it seems, are a renter in a property that is in the process of being foreclosed. The owner of the property you live in has either fallen behind on his payments to his lender or has simply stopped making the payments.

Now the property's lender is trying to recover what it can by foreclosing on the property to sell it off and get the loan repaid.

You on the other hand may have a lease with the owner of the property. That lease obligates you to make payments to the landlord for your rent. During normal real estate markets, a lender forecloses on a home and wants the place empty for resale purposes. The lender doesn't want to be in the business of being a landlord. So the lender moves to foreclose and notifies all occupants of the property of the foreclosure proceedings and follows through to evict all occupants.

Recently, however, more and more lenders are coming to the realization that tenants are good for properties and are a good source of income for the thousands of properties these lenders are foreclosing on.

Where does that leave you? There are several possibilities.

If you live on a month-to-month lease at the property and the property owner has effectively abandoned the building, most people in your shoes do what you are doing now and pack up their things to find another place to live. In some cases and with the new laws you can stay for 60 days but the lender will be the landlord you pay rent to. Call me to find out where you stand 831-335-2100.

But if you like where you live, you might want to see if the lender wants you to stay at the property. You should contact the lender directly to see if the lender would want the rent payments to continue or if there is some way the lender can finance your purchase of the property.

Until the lender forecloses on the property, the property is still owned by (and managed by) the current owner. But lenders have the ability to take possession of the property without becoming the owner by getting the court to allow them to operate the building until the foreclosure is final. If the lender goes this route, you may find that the lender will be eager to keep you at the property.

If you have no lease but lived in the property as a guest of the owner of the property, you shouldn't have anything to worry about with either the owner of the property or the lender when you move out. You're free to move out whenever you have to or want to.

If you are a tenant on the property, your lease continues to be valid until it is canceled through the foreclosure process. In theory, if you move out early, the current owner could sue you for defaulting under the terms of your lease. But most owners who are going through foreclosure stop being landlords and abandon their responsibilities as landlords and walk away from their properties.

If you're in a situation where your landlord no longer collects rent and is nowhere to be found, and you receive court papers that order you to vacate the property, you should be able to leave the property without worrying that someone is going to sue you down the line.

However, if your landlord continues to collect rent from you and is actively managing the property, you need to review the documentation you received from the court to determine if that documentation is sufficient to cancel your lease and allow you to move out without creating a Catch 22 situation for you in which you move out and the landlord sues you for non-payment of rent.

In some instances a lender will notify a tenant that the owner is going through foreclosure and instructs the tenant to forward all future rental payments to the lender.

As a tenant, you need to make sure that the information given to you by the lender is accurate and that you do, in fact, need to forward rent payments to the lender. The lender usually will have documentation that the building owner signed authorizing the lender to collect rents from the tenant if the building owner is in default under his loan.

It all goes back to the paperwork. To figure out whether you'll have trouble with the owner if you move out, you'll need to read through your lease and the documentation surrounding the foreclosure. In addition, you'll need to talk to your landlord and possibly the lender to get more information.

If after doing all this you are concerned about litigation, please consult with a good real estate attorney.

Instead of accepting or rejecting my offer, the bank contacted the agent saying they are waiting until Monday to make a decision. What are my options and what are they trying to do?

A: Here's what's happening: The bank is trying to make a decision in a timely manner and your attempt to force the issue isn't working. (Nice try, but no dice.) The property you are trying to buy appears to be a real estate owned (REO) property, a property that is now owned by the bank.

While you say it's a short sale -- a sale for less than what the homeowner owes on a mortgage --  it seems from your question that the bank already owns the home. It's now up to the bank to decide what price to accept for the sale of the home. If the original homeowner still owned the home, was selling the home, had an offer for the home that was less than the amount he or she owed the bank, and the bank accepted that lower amount, then the transaction would be considered a "short sale."

So, you have a choice. If your offer did not have a time limit on it, you can formally withdraw your offer or you can let it sit and see what happens.

Each lender has a process by which it has to evaluate each of the offers that has come in for an real estate owned property to see which one is the best -- best isn't always the highest offer, by the way. It could mean they're looking for the strongest buyer or one who is able to use the bank's financing (which is another way for them to recoup their investment.)

I'd have your agent stay in touch with the lender to smooth things along and make sure the lender has all the information he or she needs to make a decision. It's possible the lender will come back to you (and everyone else) on Monday to ask for another round of bidding. Or, the lender might simply come back and say, yes or no.

Unless you formally withdraw your offer, at that time you can decide whether to agree to purchase the property if you're given the opportunity.

By the way, I hope you're using a good Santa Cruz real estate agent or attorney. Foreclosures and short sales are tough purchases and I'd hate to see you get caught because you didn't have anyone representing your legal interest in the deal. Unless your agent is also a real estate attorney (and even if she is, she can't be both to you in the same transaction in some states), you should hire a santa Cruz real estate agent who has an attorney at her counsel.

Q: I'm a renter and have just learned that my home is being foreclosed. My landlord thinks the bank will evict me, because my lease began after he used the property as collateral for his mortgage (which he's defaulted on). Is there any way I can stay? I've always paid the rent and been a good tenant. --Sam S.

A: As your landlord explained, when a lease is younger than the loan that's secured by the property, and the borrower defaults, under the normal rules of the game, the lease is wiped out. Of course, the bank that now owns the property can choose to become a landlord and let tenants stay, but the majority of banks do not want anything to do with property management. They also believe that empty properties are easier to sell, despite the overwhelming evidence that a neighborhood full of empty (and possibly vandalized) foreclosed homes will mean that those homes will drop in value, thus making any sale less profitable.

There may, however, be a way for you to stay, depending on who owns the landlord's mortgage. In December 2008, Fannie Mae, the large buyer of home mortgages and loans, announced that it would allow rent-paying tenants to remain in foreclosed properties as month-to-month tenants. This is a huge development, and it remains to be seen how these bankers and number crunchers, many of whom don't know a sublet from an assignment (let alone a pipe wrench from a crescent wrench), will fare as property managers. Let's hope they do some homework and consider hiring trained property managers to handle this new division of their company.

Fannie Mae will allow qualified renters to sign month-to-month leases and stay on in homes it forecloses on -- without requiring a security deposit, credit check or payment history -- while it markets the homes for sale.

The new National REO Rental Policy is intended to limit the disruption to the lives of renters when their landlord is foreclosed on, and "bring a measure of stability to communities impacted by high foreclosure rates," said Fannie Mae Chief Operating Officer Michael Williams.

Freddie Mac is reportedly developing a similar policy. Fannie Mae's program applies only to renters -- not the owner of the property or their immediate family -- and requires that homes meet state laws and local code requirements for a rental property.

All types of single-family property are eligible for the program, including two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Properties with loans insured by FHA will require approval from the Department of Housing and Urban Development (HUD).

Rents will be set at market rate by reviewing local comparable rents, conducting a neighborhood survey, or using "other relevant indicators," Fannie Mae said. Properties will be managed through a real estate broker/property management person like me, which will be required to coordinate property repairs and respond to any property safety issues.

After a foreclosure is complete, renters will be offered a "Cash for Keys" incentive payment to vacate the property, or have the option of signing a new month-to-month lease with Fannie Mae.

It was just last November, Fannie Mae and Freddie Mac suspended the process of evicting about 16,000 troubled borrowers or selling their homes while they implemented a streamlined loan modification program intended to prevent foreclosures.

Fannie Mae said last week it was extending the suspension of foreclosure sales and evictions through Jan. 31. The company said Tuesday that the new National REO Rental Policy will be fully in place by the time the suspension is lifted.

 RENTERS KNOW YOUR RIGHTS

Lately many tenants across the United States who faithfully paid their rents on time were surprised to find eviction notices tacked on their doors because their landlords have not been paying the mortgage.  Other tenants are receiving "cash for keys" offers from the banks that reposessed the homes.  If you are a renter, here are some precautions you can take to make sure you do not face an unexpected foreclosure related eviction and also a few tips on what to do if your landlord is losing the home you live in.

If you are living in a rental home now in an area with a high rate of foreclosure, then you should definitely check the public records for any liens or judgments on the home you live in.  Fortunately, many counties now have land and tax records online.  For example, for San Mateo County you can simply search for "San Mateo Tax Assessor" and find the Tax Assessor's homepage.  From there you can search for a specific address and see if the taxes are paid ontime.  If the taxes are late or in default on the property, then that is a warning sign that the property may be in financial trouble.  You can also search the land records to find any Notice of Defaults, which is usually the first step in a foreclosure in California.  If public records are not available online where you live, then you could go to the county seat and search for the record at the county offices.  Public records are available to anyone, but some offices charge a small fee to do a search for you.  You can also find detailed information such as which bank holds the mortgage on the home, and what the mortgage amount is.

Another way to check if the home you are renting is in financial trouble is by searching the local real estate listings.  It is possible that your home is on the market as a short sale and your landlord did not inform you.  If that is the case then the home is probably about to foreclose.

If there is any sign of financial distress then it may be a good idea to speak to your landlord and ask what is going on.  If your landlord tells you everything is okay when there is a Notice of Default in the public records, then he or she may not be completely honest with you and it is probably a good idea to find a new place and get your security deposit back.

If you already received a "cash for keys" or eviction letter from the bank then you should also check the public records to see if the bank already owns the home.  If the bank is indeed the recorded owner then you should definitely stop paying your old landlord rent.  At this point you could either pack your bags or try to negotiate with the bank.  Some banks may prefer to have occupied homes because they are less likely to be vandalized so in rare instances they are willing to sign new leases, but you still have to be ready to leave when the home sells.

Eviction laws under foreclosure have changed last year but only a small amount of landlord & tenants knew the laws. always know your rights in a foreclosure related eviction. 

However, this is not true in every state so you must research if a legal battle is worthwhile for your situation.  Fighting an eviction also makes a renter undesirable to other landlords in the future even if the renter wins so you must make sure that you are willing to take that risk.  
 

The good news is that the powers that be are realizing that these unjust and surprising evictions are becoming problematic for many communities.  In July California passed a law that gives tenants a 60 day notice to leave a rental unit after the property is sold in foreclosure, and last month.    Hopefully other banks will follow suit and keep the good renters in their homes as long as they need. For now, if you are a renter, remember to protect yourself by verifying the ownership and financial status of a home through public records. Since landlords usually run credit checks on tenants, I think it is only fair for renters to find out the financial situation of their landlords.  Hopefully in the future landlords will be required to disclose their financial troubles for the benefit of renters.

If you are a homeowner or the tenant of a property owner who is facing foreclosure, or has lost the property through foreclosure, there are thousands like you through California faced with the same dilemma.  Under the law, you are entitled to no special treatment because you used to be the owner, now because you had a lease with the owner. You are basically treated the same as any apartment tenant being evicted for no reason.

The bank does not have to talk to you, work with you, consider your family or children's education, or even try to sell the property to you. Junk yard dogs seem to have more manners and common sense than the people you will probably meet to tell you to get out. You can't pay them for more time, or even expect courtesy when they want to show the property to new buyers or realtors while you're still living there. Out! Out! Out! is what you get, in most instances.

Occasionally, a bank will offer "cash for keys," where they tend you some money to move out without a fuss. Sounds good up front, but what if you move and they don't pay you? Even agreements looking like they promise payment can be invalidated by having you sign, but they don't, or by having someone sign who doesn't have authority, or can't be found later, or not giving you a copy. The real zinger for tenants of the former landlord is that you sign off your rights in exchange for the money. What rights? You have the right to get your full security deposit back from the bank, because it is the new owner and the current owner owes you your deposit, even if they never got it from the old owner. [The exception is where the former landlord pays you the full deposit beforehand.]  The "cash" that you're getting is almost always less than the full deposit, so that when you sign the agreement, you give up the bird in your hand for two in the bush. The bank has the obligation to pay you the full deposit, not just a part, so your "cash for keys" agreement has you giving up the rest of your deposit, and then you have to find your former landlord, who may very well have filed bankruptcy. All that glitters is not gold.

Another quirk in the legal system is where a desperate property owner is met by the vultures who have seen the recorded Notice of Default indicating a pending foreclosure. They prey upon the desperate and often use "we can help" devices like an "equity purchase" where they "buy" your interest in the property under the guise that they will cover your mortgage payments for a while until you can financially recover, and you pay them "rent." As you can expect, they don't pay the mortgage, but just collect your "rent," and let the property continue through foreclosure. If you are one of those, you have the right to sue them but the bank's foreclosure will probably continue.

The time line on a foreclosure is this: Usually after a few months of mortgage delinquency, the bank records. posts, and mails a Notice of Default, giving the owner 90 days to bring the account current. If that doesn't happen, the next step is the bank giving a 30-day Notice of Trustee's Sale, which is also recorded, posted, and mailed. The trustee's sale is the auction where the property is sold to the bank or a new buyer. Just before the trustee's sale is the time when many property owners file for bankruptcy, because they will be hit with a huge tax bill when their mortgage is no longer their debt - the IRS sees it as "income."  Therefore, owners file bankruptcy, which stalls the eviction for about a month or so until the bank can get the bankruptcy judge to let them proceed with the foreclosure and eviction.

The time line on the eviction is this: After the foreclosure sale, it takes a few days to record the deed, and then a Notice to Quit [or similar title] is given to the occupants of the property. The notice gives 3-days to the former owner, but often includes a separate Notice to the tenants, giving the statutory 60 days to move out. This is like any other eviction notice, in that it has to expire before they can file the eviction case.

If the local rent control applies to your dwelling, and you are a tenant, it may prohibit your eviction due solely to the foreclosure. Santa Cruz does not have has such protections for its tenants. The fact the the bank starts the eviction, and seems to have a clear-cut case is not necessarily the situation. Due to the large volume of foreclosure evictions, the eviction firms often hire temporary staff who are poorly trained and make all kinds of mistakes in the eviction paperwork and process. Therefore, if you stay and fight the eviction lawsuit, you can stay in possession for a longer period of time, often months, and even work out a settlement where, if you just go, you owe nothing for all that time.    

The average rent in Santa Cruz County was higher than in San Francisco, and Napa. San Francisco ranked fourth in the state with average rent of $1,624. The only California community surveyed last quarter with higher rents than Santa Cruz was San Jose-Sunnyvale-Santa Clara, with an average rate of $1,674.

The average occupancy rate in California dropped 0.4 percent to 94 percent. BUT In Santa Cruz County, the occupancy rate climbed 0.6 percent to 96.5 percent.  Santa Cruz-Watsonville tied with Chico for the highest occupancy rate. Napa, Hanford/Corcoran, Merced and San Francisco followed. The San Jose-Sunnyvale-Santa Clara region ranked 10th with an occupancy rate of 94.8 percent.

In Santa Cruz, average rents have increased 25.8 percent in the past four years. The highest increase -- 31.5 percent -- was for
one-bedroom apartments.
SOURCE: RealFacts

How can lender back out of deal, and where did deposit go?

Friday, January 11, 2008

Q: I put a bid on a home that was subject to a short sale early last month. I was told by my Realtor that it could take a little while before any decision would be made.

After calling my agent once a week for three weeks, he now tells me that the home went into foreclosure even though the seller wanted to sell the house, and I was told that my offer was gone.

The agent I was working with has now changed to a different real estate company. Somehow I feel that either my Realtor or the selling agent just wasn't aggressive enough in pursuing this deal. How can my offer just "be gone"? How can I still purchase the home? Do I ask for my earnest money back? Do I follow my original real estate agent to his new company? I am so very frustrated by this whole deal. I just don't think that it was handled well.

A: You certainly do have lots of issues with your attempted purchase of a home. But let's start with a little bit of understanding about the tempestuous real estate market that exists in most of the country today.

In some parts of the country, real estate values have come down significantly; homes are sitting on the market for months; mortgage lenders and home builders have gone out of business; and some homeowners are having problems keeping up with their mortgage payments.

The homeowner you were trying to buy a home from had probably not made a payment to his lender in many months. The owner was trying to get himself out of the mess and hired a real estate agent to sell the home. You found the home and you were willing to buy it. However, what you offered for the home was probably less than what the owner owed to the lender. The owner was short funds to sell the home. These circumstances gave rise to the "short sale."

But just because there is a deal on the table doesn't mean the lender is required to accept the short sale. The lender can take its chances, foreclose on the home and sue the owner for any deficiency in funds that the lender gets from the foreclosure.

There are newspaper reports of homeowners and other real estate practitioners attempting to get lenders on the phone for days at a time without success. Even if someone picks up the phone, it may take several tries to get through to the right person.

You deal may have fallen into this hole. Although we're not suggesting your agent did everything right, even the best agent might not have been able to do anything if he or she couldn't get through to the right person.

Unless you have other information about your agent and the seller's agent, you might want to cut them some slack. In this marketplace, they would have been delighted to have gotten everything together to make the sale.

Unfortunately, it didn't work out. Most likely, it wasn't that you weren't serviced properly but rather that market conditions didn't work out in your favor. Your offer wasn't really gone -- it just didn't go anywhere. The owner might have been willing to accept it but without the lender's agreement to the short sale, you would never have been able to buy the home.

The only apparent customer service flaw is that no one stayed in touch with you to let you know what was going on. That's a big problem, especially in today's market. Agents have to stay in touch with their clients during the offer and negotiation phase, so that everyone knows what's going on.  Numerous times this year, I have had to give my short sale clients an daily update report that told them I made no real progress that day.  I called for four weeks before we discussed moving on to another property or keep trying for another 4 weeks.

If you liked your agent, you can follow him to the new company he moved to. If you didn't like him or you don't feel he really gave you the proper level of customer service, you should find a new agent.

In any event, you should make a request for the return of your earnest money check. The agent you worked with should be willing to help you out with the return of the money. If he won't, then speak to the managing broker of the firm he worked for.

Property should be in same condition as day you signed contract

Wednesday, October 24, 2007

Most home buyers will have at least two opportunities to inspect their property before closing on the purchase.

First, most buyers will include a contingency in the contract that allows them to do a professional home inspection by the home inspector of their choice. This inspection typically happens right after the sales price has been agreed to, usually within a week or 10 days.

If the home inspector finds anything wrong in the property or decides further inspections (perhaps for radon, heating and air conditioning systems, or mold) are called for, the home buyer will be able to hire specialists to figure out if there is an insurmountable physical problem with the property.

Assuming those inspections go well, the second opportunity to inspect the property is just before the property closes. The preclosing inspection, or final walk-through, as it is often referred to, is a home buyer's last opportunity to walk through the property before closing.

What you're looking for here is not at the same level as the initial professional home inspection. In a preclosing inspection, you simply want to make sure that the property is in the same condition as it was on the day you agreed to buy it.

To avoid getting burned, you schedule the walk-through as close to the actual closing as possible, certainly within the 24 to 48 hours prior to closing. If possible, the sellers should have already moved out.

The whole point of the walk-through is to protect yourself and your future property from sellers who aren't as nice as they seem to be or who are actually as nasty as they appear. By inspecting the premises, you're making sure the seller has lived up to his or her agreements in the sales contract. And if he or she hasn't, you want to know about it in advance of the closing so remedies (both monetary and otherwise) can be agreed upon before money changes hands.

What should you look for in a preclosing inspection? To start with, you want to make sure that the condition of the home hasn't changed since you signed the contract several months earlier.

Believe it or not, a lot can change in the ensuing weeks. To make sure the home is in the same condition, you'll want to turn on every appliance, open every door, make sure nothing's broken (lights, fixtures, windows, etc.), be certain everything the seller agreed to leave is actually there and in good shape, and be certain that when the sellers moved out, they did no damage to the home.

Sometimes movers can accidentally scrape a wall or pull up carpet in the process of packing up the contents of a house. If you do your preclosing inspection while the movers are there, you'll have a harder time getting around them to make sure that the property is in good shape.

If you get there before the sellers have packed anything up, you might wind up with some nasty surprises on the day you move into the property.

I learned the hard way that sometimes sellers just don't want you to find out certain things until you've closed on the property.

Nearly 30 years ago, I bought our first place. It was a vintage co-op built in the 1920s. The sellers were seniors, and they were a bit quirky. The property hadn't been touched in years.

When I did our final walk-through, I noticed that the water was turned off in the kitchen sink. I wanted to run the dishwasher, which was really old, but didn't want to turn on the water if it was off.

Looking back, it's hard to imagine why this wasn't a red flag for me. But I was really happy to be buying my first place, which was taking just about all the money I had in the world. I didn't question it. I just bought it and moved in.

The first night I unpacked the dishes and decided to run a load in the dishwasher. At well past midnight, I turned on the water and I put in the dish soap and turned on the machine. I went to bed.

I was awakened early the next morning with pounding on our front door. My downstairs neighbors came into their kitchen and noticed that the liquid contents of my dishwasher had dripped down through the ceiling into their kitchen, ruining their window shade.

Iistantly knew why the water had been turned off. Too bad I didn't find that out ahead of time. Still, the damage could have been worse.

As I recall, it cost me $600 to fix the damage in our neighbor's apartment.

Is your loan going to reset?

Part 1 of 2: Preparing for an adjustable-rate reset

Monday, October 22, 2007

by Patti Lyles

(This is Part 1 of a two-part series.)

A loan modification is a change in the loan contract agreed to by the lender and the borrower. The modifications of major concern today are those designed to reduce the payment burden on borrowers faced with impending rate increases that will make the mortgage payment unaffordable to them. Many are subprime borrowers.

Homeowners faced with this prospect, whether they are already delinquent or not, should request a modification. They are very unlikely to get one if they don't ask, and they should make the investment required to make their case. The stakes are very high: They can save their house and their credit.

The Decision Process: In most cases, the decision on a modification is not made by the firm that owns the loan. It is made by a firm servicing the loan under contract to the owner. The owner could be a single lender, or it could be a group of investors who own pieces of a mortgage-backed security collateralized by a pool of loans.

Whoever the owner, the servicing firm is contractually obligated to find the solution to payment problems that will minimize loss to the owner. If the lowest-cost solution is a contract modification, great -- everyone involved prefers a modification to a foreclosure. But if a foreclosure would generate lower costs for the owner, the decision will be to foreclose. The cost of foreclosure to the borrower does not enter the decision.

Yet the decision is far from cut and dried, and it can be materially affected by whether and how the borrower presents his case. On this issue, I have benefited from an exchange with Warren Brasch, an attorney who represents borrowers seeking loan modifications.

Equity: Perhaps the most important factor affecting the modification decision is the amount of equity the borrower has in his property. If the borrower has enough equity in the property to pay any deferred interest plus foreclosure expenses, foreclosure is almost bound to be the lower-cost solution.

Equity depends on property value, which the borrower is much better positioned to know than the servicer. The borrower knows or can easily find out how many houses in the neighborhood are for sale and what the trend has been in recent sale prices. In a weakening market, it is easy for the lender to overestimate value, and the borrower must prevent that.

Moral Hazard: Servicers fear that if they are liberal in granting modifications, borrowers who don't need a modification will seek one anyway. They protect themselves against this by entertaining modification proposals on a case-by-case basis, while placing the burden of proof on the borrower.

Borrowers must accept the burden of proof. In addition to the data on property value, they need to document that they cannot afford the payment increase that is pending, and they must document exactly what they can afford.

For this purpose, borrowers should calculate their total debt ratio: the sum of mortgage payment, other debt payments, property taxes and homeowners insurance as a percent of their gross (before-tax) income. This number should be calculated now, what it will be after the rate adjustment, and what they will be able to afford. On the last, Brasch suggests that a servicer may be willing to accept 45 percent as a reasonable maximum.

Servicing Cost: Servicers have a self-interest in minimizing modifications because they add to costs. They try to minimize costs by computerizing the servicing process to the maximum degree possible, and standardizing customer support procedures so that low-paid and easily trained employees can perform them.

Modifications must be handled by a special group who are more highly trained and better-paid, and the increased costs from expanding their number cuts into the bottom line. Hence, there is a tendency to be nonresponsive in the hope that the borrower will go away.

Borrowers have to be persistent. According to Brasch: "If a servicer says they will call you back … forget about it. You need to call them and call them constantly. They will lose your paperwork, fail to return calls, put you on hold, and then hang up. It's what they do. Keep fighting, calling, faxing. This does work!"

In making their decisions about whether a modification would be less costly than a foreclosure, servicers usually ignore an asset possessed by the borrower that could tilt the balance toward modification. This is the right to future appreciation in the value of the borrower's house. In exchange for a modification that might otherwise be more costly to the owner than a foreclosure, the borrower could pledge a percent of the future appreciation, which could shift the balance to modification. This will be discussed in the second article in this series.

All too often, home buyers and sellers remove themselves as active participants in their real estate transaction when the contract is signed, confident that their agent will handle everything for them. This approach can result in an unpleasant surprise if your agent calls to tell you at the 11th hour that the sale has been delayed or won't be closing at all.

A Santa Cruz real estate agent should, of course, stay on top of the details. But an agent is not your surrogate. Ideally, you and your agent will work as a team to close the deal. However, remember that you are the decision maker, and your agent is merely the facilitator.

For example, let's say the people who have agreed to buy your home are having trouble lining up financing. They request a couple of extra days to finalize a loan commitment. The request will be made through your agent. It would be inappropriate for your agent to grant the extension. That's a decision for you, the seller to make, while relying on the good advice of your agent.

The delay in financing could be due to the fact that the lender hasn't received a forthcoming document. Or, it could be due to a bad credit report. The first is nothing to worry about; the second could mean big trouble.

Suppose your agent decides not to bother you with the request for an extension. Instead, your agent tells the buyers' agent that it's OK to take the extra time. The agent has now stepped in to the role of decision-maker.

A few days turns into a week and you still don't know that anything might be amiss with your sale. If the buyers aren't successful in obtaining the financing they need to close, you could have wasted precious marketing time by not staying involved.

Some agents think they're doing their clients a favor by insulating them from bad news. They hope to solve the problem so that the buyer or seller isn't bothered. Although the agent's intentions might be good, they are ill conceived.

HOUSE HUNTING TIP: To ensure that you have a successful home purchase or sale, resolve to stay involved in the process from beginning to end. This may seem impossible to buyers and sellers who are extremely busy. There's usually a lot at stake, so it's worthwhile to make time to stay involved in the outcome of your real estate transaction.

One reason buyers and sellers shrink into the woodwork as soon as the contract is signed is they feel they're out of their element. They have little or no real estate experience and think it's best to leave the heavy lifting to people who know what they're doing.

A good way to stay on top of your transaction -- regardless of your level of expertise -- is to ask your agent to provide you with a summary of the critical details of your purchase contract as soon as possible after the final contract is signed.

The summary should include key contract dates for such things as the date the buyer's deposit is due, contingency deadlines (for financing, inspections, the sale of another property, etc.), a final walk through of the property and the closing date.

It should also include the names and contact information of the people involved in the transactions, such as the buyers and sellers, their real estate agents, the closing agent, inspectors and the buyer's mortgage broker or loan agent. A synopsis of who pays for what (transfer taxes, mortgage fees, etc.) is also useful.

THE CLOSING: Enter the key contracts dates on your calendar and follow up with your agent on the critical deadlines as they come due.

Q: What’s the difference between a stated income loan and a fully documented loan if I want to purchase a home or refinance my home loan?

A: To put it simply, a stated income loan is where you, as the borrower, are stating your income but not providing any proof of your income. The usual result is a higher rate for the loan because of the lack of documentation of your income. Under prime and Alternative A lending guidelines, a fully documented loan typically requires either the last 2 years of tax returns or W2s. With the Subprime fallout and the resulting impact on the lending industry, programs like stated income loans have recently come under greater scrutiny. Stated income and fully documented loans are just two types of programs, there are others available but for now we will just address these two loan programs.

Is this greater scrutiny on stated income loans fair? Like a lot of things in life, stated income loans programs were created with good intentions but morphed into something abused by the less scrupulous elements in the lending industry. Stated income loans were originally designed for the self-employed but they also filled niches for other borrowers on the fringe who were unable to provide full documentation of their income. But as the subprime market began to grow, other types of borrowers started using stated income loans to qualify for purchase and refinance loans. Within the lending industry,

Well stated income loans were referred to as “liar loans,” which I believe is self-explanatory and doesn’t require further explanation on what borrowers were doing on these loan applications.

During the most recent increase in the California housing market, many borrowers purchased homes with fairly exotic loan

programs like the 80/20 Interest Only Stated Income loan. Let’s break that down, this was a loan with 100% financing with zero down creating an 80% first and a 20% second and both loans were interest only payment loans with the borrower stating income. Well, guess what? It turns out this very popular loan program (and others similar to this one) was one (of many) culprits in the resulting Subprime fall out.

Recently, regulatory agencies have started examining certain loan programs like Interest Only loans, Stated Income loans, and Adjustable Rate Mortgage loans to see if they are in the best interest of the borrower. So what should you do if you are self-employed and want to buy a home or do a refinance?

Well, a lot of it will depend on you as an individual. To get the best rate possible, do the fully documented loan and submit the last 2 years of tax returns. If you aren’t concerned with rate and more concerned with convenience, then stated income loans might be your best bet but please be truthful

about your income on your loan application. But you should know, many lenders are now requesting a 4506T which gives the lender the ability to see what you declared as income on the last two years of tax returns. If the lender submits

and they are beginning to do so more often, the numbers on your loan application and the 4506T better match up.

One last note, I believe, and please remember this is only my opinion, the stated income loans may go the way of the dinosaur and be disappearing in the near future (or at least be so rare it will be difficult to get one through the

underwriting process). What is the evidence for this statement? Well, I do not have any evidence to present, it’s a just a theory based on the rumblings coming out of Capitol Hill, changes in lender underwriting guidelines and keeping an eye on the market here in Santa Cruz and the rest of California. But rest assured, lenders will continue to tighten their guidelines to create a sellable security on the secondary market.

Can anyone explain why one's income has no bearing on a FICO score?  Seems to me that this plays a big part in creditworthiness, yet FICO doesn't use income (or net worth) as part of their formula in creating a FICO score.

Answer:

FICO doesn't care whether you're a multi-millionaire or someone who makes a dime a year.

FICO is an indicator of how capable, how likely you are of paying back money you borrow.

*A multi-millionaire asks me for $100 and I give it to him, but he doesn't pay me back.
*A hobo on the street asks me for $100 and I give it to him, but he pays me back.

I would rather lend the hobo money in future, rather than the multi-millionaire.

 On another note, sure it's more likely that the multi-millionaire is more capable of repaying the money, but the bottom line is that income does not have a correlation to whether the person will pay on time.

All people care about is whether or not they're gonna get paid back if they loan you money.

Buyer's you can't focus on falling prices, focus on long-term goals

Monday, September 10, 2007

By Dian Hymer

Last year, the home sale market began to slow, causing many buyers to postpone buying hoping that prices would drop. In fact, in some areas and in some segments of the market, prices have declined. However, in high-demand markets like San Francisco, Austin and Seattle, prices increased compared to a year ago, particularly for upper-end properties.

When interest rates fell below 6.5 percent at the beginning of 2007, San Francisco Bay Area buyers were back competing against one another in a low-inventory market. Was it wise for these buyers to postpone buying until 2007? Waiting resulted in lower interest rates, but in many cases, a higher purchase price.

Mass psychology influences home-buying patterns. For example, when buyers decide that it is not a good time to buy due to fear of falling prices or rising interest rates, this notion tends to become a self-fulfilling prophesy. When the volumes of home sales drop, buyers tend to hold back. When sales heat up, buyers perceive this as a good sign. They feel they must buy immediately before home prices rise and they are priced out of the market.

Buyers tend to follow the herd, which is counterintuitive. It would seem that the best time to buy would be when there isn't competition from other buyers -- that it, in a slow market. However, most buyers feel more comfortable buying when all their friends are buying. The comfort of the crowd validates that their decision is a good one.

Home sale markets are cyclical. There are up markets, down markets, and stable or balanced markets. In an ideal world, you would buy at the end of a down cycle, just before the housing market picks up again. But, it's impossible to time the real estate market. You know that the bottom of a cycle has passed only when the market is moving upwards again.

HOUSE HUNTING TIP: Given the cyclical nature of housing markets, home buying is risky unless you have a long-term perspective in mind. If you buy at the peak of a cycle and are forced to sell soon after in a softer market, you could end up selling for less than the price you paid. Buyers who can stay put and ride out a down cycle are in a better position to recoup their investment when they sell, and possibly make a profit.

In an uncertain market, buyers who are not sure about how long they will be living in an area may be better off renting than buying. It's often difficult to find a rental that feels like home. However, from a purely financial point of view, buying for the short term could end up costing more than you anticipated if you need to sell in a down market.

A common complaint about renting is that it's a waste of money. There are no tax benefits and you don't build equity. However, it can cost less to rent than to buy. To get the tax write-off, you often need to pay more than you'd have to pay renting. Renting usually requires no home maintenance and there's no risk of losing equity.

Good candidates for buying in a slower market are buyers who are ready to put down roots and stay put for awhile. This not only means that you aren't planning on moving out of the area soon, but it also means that you can afford to buy a home that will suit your long-term needs.

THE CLOSING: A purchase decision should involve a consideration of the dynamics at play in your local market. Prices might or might not drop in your area. In many places like Capitola & Santa Cruz, CA, sales volume is off, but not prices. When inventories are reduced and buyers are back in droves, prices could