1.) Home prices may fall even more! Yes, they may. When you make a stock purchase, you certainly buy with some understanding it may go up, down, up, and down over the course of ownership. The same with the home.  You don’t sell when its low and you hold until its high. Now that the “crash” has passed, do we really believe housing prices could fall another 10-40%? OK, maybe if the entire EURO fails. OK, maybe if the sky falls. But really, unless you plan on putting your money under a mattress (and even that has risks – rodents, fire…) every investment has risk. The real question is how do you reduce your risk? First, understand what you are buying. Much like buying a stock, review the history, check out what the professionals are saying about that market, look at competition, and with your real estate agent pull together some predictions. Know what you’re buying and set reasonable expectations on the holding of that investment. In spite of real estate history between 1992 and 2007, real estate is a “BUY AND HOLD” investment. Long term. Not forever, but not 2 years.

2.) I need a deal or my friends will think I am stupid!  Yes, they may.  There is a huge amount of pressure on any home buyer in this market because whether it is around the water cooler, over dinner, or sporting events, a buyer’s friend upon hearing you are shopping for a home will say, “What? No, don’t do that now!  What do you mean you are writing a full price offer?  You should be getting 10-20% below market!”  Really? Oh yes, I forgot, your friends spend time looking at Zillow and reading the web and believe they know everything about real estate anyone could possibly know.  I understand they mean well.  But I have to ask, do you also take their advice on buying stocks for gospel?  Do you call them before you buy a TV? Maybe you do.  Certainly buying a house in the Bay Area can not be compared to buying a TV but the point is really, know your own stuff.  Advice is nice but knowledge is power.  The best way to respond to the questions you may get from friends and family is to know why you are buying a home and then know the reasons why this is a good deal even if it isn’t 10-20% below market and you are writing a full price offer.  Make sure your real estate agent is helping you pull together this information and support. 

Why are you paying list price? Answer:  Because this is 1 of 1 houses in a good school district and this is the only one that has been updated and I am competing with 4 other buyers.  Why aren’t you buying a foreclosure? Answer: After pulling estimates together on the cost of repairs and remodeling needed, the 10% under market price was not real.  Why are you buying now?  Answer: Because I want a home not a rental.  Rents are projected to increase 4% this year alone!

3.) With all the maintenance of a home, it is better to rent!  Yes, there is maintenance.  If your landlord is completing maintenance (important point: IF), then you will also be paying for that maintenance in increasing rent over the years. You will also be helping to pay the landlord’s taxes.  You will also not be taking advantage of the current mortgage interest deduction (assumed to last for at least some period of time).  You will also not know when your landlord is taking your rent and not paying her/his mortgage and then suddenly you see a for sale sign in the yard or worse, a notice to vacate because the home has been foreclosed upon.  But more importantly, maintenance is a part of anything you own.  Your car needs oil changes but that does not prevent you from purchasing a car.  You can buy service packages that cover your oil changes.  You can also pay for gardeners and handy persons to help maintain the home.  You can also purchase a condo/town home or PUD (planned urban development) and pay a monthly HOA (home owners’ association) dues to maintain the exterior and the like so you don’t have to think about it.  Life requires maintenance. (relationships, cars, skills…)

4.) How do I know I am getting the best loan?  Great question.  Maybe even more importantly, how do you know when you aren’t getting the best loan?  First and foremost, do your home work about loans.  There is a great book called, Mortgage Confidential: What You Need to Know that Your Lender won’t tell you by David Reed.   Great book.  Easy read.  Know the different products and decision points about how to decide on a loan product.  There is not just one product.  Like finding a deal in real estate, you need, must, find a professional that you can trust.  The loan products available are available to almost anyone completing loans.  Whether you work with a broker or a direct lender (advantages and disadvantages to both – read the book), find someone that can review your specific situation, your short and long term financial goals and offer the best options for you.  ALERT:  The lowest interest rate may not be the best product to meet your financial goals.  Seriously, it is not all about rate.  Understand this and you will be 95% closer to mastering an appropriate decision on what loan to choose.

5.) All real estate agents are liars and you can’t trust them!  Yes, the industry has its issues.  There are some really bad, bad agents out there.  I feel your pain.  However, there are those of us who went into the profession to make it better, to really help home owners and home buyers, and we really, really know our stuff.  We are professional, we return calls, we do our home work, we know the neighborhoods like the back of our hands, we see anywhere from 12-50 houses a week (a staggering 3000 homes a year), we drool over MLS (multiple listing data) until wee hours in the morning, and maybe most importantly we believe in the concept of home (read land) ownership.  Tangible dirt ownership.  Tangible memory producing home ownership.  Tangible legacy and generational asset potential.  If you don’t have an agent you feel you can trust, if you don’t believe they have your back; fire them.  Find an agent that supports your goals, places your best interest first, will answer every question with a smile, and addresses every concern before, during, and after the sale.

In summary, caution in any market is prudent and necessary. If you are considering buying a home there must be a reason, an understanding of the reason and a desire to support the  goal with true professionals and knowledge.  Knowledge is simply smart living.  If you have questions or concerns about buying a home contact me.  Whether you buy a home or not, don’t go without addressing your questions and concerns.

1.) Who is the bank and/or lender?

Some banks are simply better at the short sale approval process than others.  Wells Fargo, Chase, and Bank of America have seemingly put the most effort into streamlining the process. Bank of America utilizes EQUATOR (an online transaction management system) and this has definitely helped in reducing the amount of duplicate requests for paperwork.  Wells Fargo and Chase have implemented fast track processes where they don’t require complete financial package documentation if the seller has already attempted a loan modification.

2.) Has the seller submitted all the paper work?

Some sellers are not at good at record keeping and many times, bank statements, pay stubs, and tax returns take time to locate and submit to the lender.  The lenders want all pages and sometimes sellers simply throw documents away.  Requesting back statements and copies of tax returns can take time.  Sellers may also have to provide copies of divorce decrees, alimony and child support statements and all of these documents must be updated at the time an offer is presented to the lender for approval and every 30 days after.

3.) How many loans and/or liens are there?

Every lien must be negotiated in a short sale.  This can be mortgages, HOA (Home Owner Association) dues, tax liens, personal tax liens, mechanics, and utility liens (like garbage or electric).  Liens are negotiated by position.  The senior lien holder gets to decide how much the junior lien holders will receive from the short sale.  This is where conflicts can arise.  Property tax liens take seniority over mortgages as do personal tax liens, child custody and the like.  Many lenders will not pay back HOA dues or penalties and attorney fees related to delinquent bills. The higher the number of liens, the harder and longer a short sale approval can be for all involved.

4.) Is/Are the mortgage(s) is a portfolio lien or an investor(s) held lien?

Many loans were made and then sold in bulk to 3rd party investors.  If the bank/lender actually kept the loan and did not sell it to another bank or investor, it is considered a portfolio loan.  If the loan is held by the lender you only need the lender management to agree to the short sale.  If there is an investor, state entity like Cal HFA, federal entities like Fannie Mae or Freddie Mac, or mortgage insurer involved, approvals can take longer.

5.) Has the lien been discharged?

If the lender or investor has already “written off” the loan as bad debt it is typically sold to a credit collection agency for pennies on the dollar.  Collection agencies are very common for HOA past due amounts.  Since the collection agency has paid for the debt based on a recovery amount in mind they can be challenging to negotiate with when it comes to short sales.

6.) Does the short sale seller qualify for HAFA?

HAFA is a great government program attempting to bring some standardization and incentive to the short sale process.  HAFA (Home Affordable Foreclosure Alternative) provides cash to the lender and the seller to complete a short sale but the program is voluntary.  Many of the big lenders like Bank of America have outsourced the HAFA files to third parties and unfortunately they are not always as organized and appropriately staffed to handle the volume.  Again, it is a voluntary program and investors do not have to accept the HAFA terms of a short sale.  Sometimes the question; Does it qualify as a HAFA short sale? – takes longer to obtain than the actual standard short sale approval.  However, it does provide a $3,000 relocation assistance to the seller and this can be very important to help sellers move out of the home they are losing.

7.) Are the real estate agents involved experienced, organized, diligent, communicative, and polite?

It is so very important the agents involved in a short sale are the very best professionals.  It takes solid experience to know which short sales are likely to succeed and which ones will not.  If the listing agent is not upfront about the sellers situation and poorly organized in the short sale package, the buyer can be waiting a long time simply to find out there is no deal.  Equally, if the buyer’s agent is encouraging buyers to write multiple offers with no real intent to work the deal, sellers can find themselves pulling all of it together for the lender only to find the buyer cancels before a short sale approval is issued.   The short sale process takes commitment from everyone involved to be successful.  Short sales make up nearly 30% of all homes for sale in the Bay Area and only 3 out of 10 actually close.  Ask your agent a lot of questions about their experience, their strategy, and their commitment to the short sale process before selling or buying a home.

8.) Is the buyer’s agent  setting proper expectations with AS IS, market value, and timeline?

Short sales are almost always AS IS.  Many buyers obviously do not want to invest in inspections before knowing their offer has been approved by the short sale lender.  However, an experienced real estate agent can help a buyer anticipate items like termite repairs, roof age, broken furnaces and the like before inspections are ever complete.  Do a thorough walk through of the home before writing an offer on a short sale and calculate a guesstimate on repairs.  Have a contractor walk through with you if possible.  Check light switches, flush toilets, turn on the furnace or AC, look for damaged wood and the like to get a good idea of repairs.  Make your offer based on the current market value minus repairs cost.  Take pictures, write it up and have the agent submit with your offer.  All good short sale agents should be supporting listing price/offer price with market activity, photos, and repair lists.   Nothing is more wasteful then to have a offer fall out because of repairs that could have been anticipated and written into the offer prior to submission to the lender for approval.

9.) How many humans are involved with the file?

People make mistakes, lose paperwork, make the wrong decisions and all can go to Hades in a hand basket. The volume of short sales is staggering with any of the major lenders.  Short sale agents that are good may have taken on too many short sales and can’t keep up with the volume of paper work and constant contact needed to take each sale to close. Fax machines are still in use by many of the lenders and we all know how it goes when faxing 25 pages and page 6 doesn’t make it.  Electronic faxes and files are helping but there are lost pages out there.  Departments don’t always talk to each other and I have seen homes foreclosed upon when the short sale approval was in process and even approved.  Short sale approval letters seem to come by slow boat and many times the anxiety of waiting can challenge the most zen-like person’s patience.  Some agents use 3rd party vendors to “manage” their short sales.  They charge the buyer or the buyer’s agent a fee to do this and I totally disagree with this practice.   A short sale listing agent can either pay the fee for shifting the work of phone calling everyday to someone else or handle the process themselves.  But charging the buyer or buyer’s agent is wrong in my book.  In my humble opinion, those who manage their own short sales are better and more motivated to make it happen and all incentives should be provided to keep the buyer committed to the process.

10.) How many months has the seller missed paying their mortgage?

This is a big one that is many times over looked.  Latest statistics tell us that the average home owner has lived in the home 375 days without making a payment before foreclosed upon.  The more payments missed, the less likely the short sale will be approved.  The more payments missed, the more steps are taken toward foreclosure.  Notice of Default and Notice of Trustee sales are legal actions taken against a homeowner in default.  Sometimes, the train has left the station and is there no way to stop the foreclosure.  Buyers and buyer’s agents should always find out which if any of these notices have been served and whether or not they have been placed on hold.  Some lenders will not approve a short sale within 20 days of a Trustee Sale.

There are many questions to ask when pursuing a short sale. Whether you are a buyer or seller considering a short sale, make sure your agent can give you the right information to make the right decision.  As a Certified Distressed Property Expert (CDPE), Certified Short Sale Negotiator (SSN), HAFA Certified Specialist (CHS), and an experienced, committed professional with success closing short sales transactions for sellers and buyers, I am here to answer any of your questions about the short sale process.  If you would like to talk about your options regarding the selling or purchasing of a short sale home, contact me for a no-obligation consultation.

But this is not simply an issue of value and square footage.  It can be a safety issue.  What may seem like simple updating regarding new electrical receptacles, newly re-plumbed baths with nice new tile, or more extravagant kitchen remodels can look good but have hidden issues.  I see this more and more with “flipped” foreclosures.  Investors comes in, applies granite to the kitchen, and new tile to the bath but disclosure indicate no permits and many times, no documentation the work was completed by a licensed contractor.

The debate goes on regarding the cost of permits for “simple” work but the rules are the rules and sometimes buyers are more concerned with “updated” than permitted work.  There are not enough inspectors to keep up with the number of foreclosed flips and many times non-permitted work has been a part of the house for several decades without any issues.  The obvious converted garage is not the only type of non-permitted work but commonly San Jose residents have made their homes larger without properly following easements, square footage to lot limitations, and many did not use licensed contractors.

If you are buying a house, you can find out about permits through the local municipalities building department.  Some cities in Santa Clara County have online searches and others require a written request.  Not all permits are online and sometimes you will need to go down to the building or planning office and request to see the plans or documents.  Plan to spend anywhere from 1 hour to a day depending on the nature of the building change.  Sometimes the online files are not clear on whether or not the permit was inspected and given final approval.  If it doesn’t have a final sign off, it is not a completed permit.  Ask questions and understand the impact to you as the new owner of the property.  Even if it didn’t effect value ten years ago, it may now, or may in the future.

Here is a list of links for permit searches in Santa Clara County. Also, don’t hesitate to ask your real estate agent to help you.

San Jose
Campbell
Santa Clara
Sunnyvale
Milpitas
Palo Alto
Los Gatos
Mountain View
Morgan Hill
Gilroy
Saratoga

It is now 2 ways past escrow. Since the neighbor does not want to sign the easement, the seller wants to move a portion of the driveway. This house is on a hill, with a steep driveway. We are concerned that if we move the driveway, then fire trucks or any delivery person will not be able to reach the house (the movers, with the existing curvature of the driveway could not reach the house). What are our options if we want to get out of this contract and still get our full deposit back? Thank you.

Answer:
1.) This issue is best resolved before close of escrow.  Understanding the cost, the implications, and possible solutions is critical to making a decision on whether or not to follow through with the purchase.  Since you have already move into the house and I assume some money has been exchanged it is best to resolve it instead of cancelling the deal.  Work it out with the seller to find an acceptable solution to all regarding the easement and/or the driveway.

2.) If a newly disclosed issue and its possible solutions effect the value perception of the property, this could be a solid enough reason to cancel and retain your deposit. However, the only way to be sure that you are not at risk for breach of contract is to consult with an attorney.

3.) If there may also be other methods of keeping the easement under adverse possession and certainly an attorney can help evaluation the situation to see if it applies in this case.  A true survey may be needed as well help from the chain of title via the title company used during the transaction to understand where exactly the property line resides and how it has transferred with either lot.

4.) If the previous owner wants to move drive way it would seem most appropriate to make sure it is a drive way that does not create safety hazards.

I would highly recommend you consult with a real estate attorney immediately before proceeding with close of escrow or canceling the contract.

How much are Santa Clara County transfer fees? There are fees related to the transfer the property and in Santa Clara County these are paid by the seller.  However San Jose, Mountain View, and Palo Alto also have a city transfer tax and this is typically split 50/50 by buyer and seller.  Other counties such as Santa Cruz, Contra Costa and Napa do not have city transfer fees.  Normally the transfer tax is calculated by multiplying the rate by sales price per $1000.

An example of  Transfer Tax:

A home with a $500,000 sales price in San Jose would have the seller paying $1.10 per $1000 or $550 for the county transfer tax.

The city transfer tax for this example would be split 50/50 by the buyer and seller and would be at a rate of $3.30 per $1,000 which would equal $825 each.

There are also document recording fees, courier fees, electronic copy fees and miscellaneous fees such as notary and FedEx normally adding up to less than $500.

Lender fees include the cost of completing the loan and can include points, processing, and document prep fees.  Extra fees paid can also include appraisal(s), credit reports, and certifications.   A point charged is normally considered an origination fee and represents 1% of the loan amount.  Buyers can pay points to help lower their annual percentage rate (APR).  Each lender and each type of loan can vary in cost and it is best to shop fees for different lenders.  However, the percentage rate of a loan varies mostly by point of time related to the “lock” and not the lender.  Why?  There are major players in the lending industry that set percentage rates for borrowing money.  These rates dictated by a point in time and for the most part, if there is a loan product out there offering 4.0% interest rate on any given hour of the day, almost any loan officer can obtain it.  So when trying to shop your loan product, shop the fees around that loan rate and the lenders services.  Do you want to compare loan products and fees? Here is a downloadable PDF to help you compare side by side loan products and related fees.

What is Mortgage Insurance? This is an insurance policy purchased by the lender on behalf of the borrower to protect the lender against a borrowers default.  This insurance typically has an upfront fee (which can be financed into the loan) and a monthly fee (charged as a part of the monthly house payment).  Mortgage insurance is in play for any home where the borrower is placing less than 20% down or utilizing an FHA loan.  Lenders consider any borrower placing less than 20% down a risk for default in a dynamic free market and therefore insure against default.  There are some lenders who will loan at 10% without a monthly MI but they charge an upfront MI.  Having to carry  mortgage insurance  is a common criticism of FHA loans.  All FHA loans, irregardless of the amount financed will require mortgage insurance; either upfront or monthly.  However, it makes logical sense if a borrower is only able to place 3.5% down it may very well be the only way to buy a home.  If you want to find out more about mortgage insurance check out local mortgage professional, Shashank Shekhar, blog posts on MI FAQs and FHA mortgage insurance qualifications.

Escrow fees charged by a neutral 3rd party to manage the transfer of title and money involved within the transaction.  In Santa Clara County , the seller pays for escrow fees and therefore reserves the right to choose with escrow company is used.  In contrast, Alameda County the buyer chooses and pays for escrow fees.  Most of the companies are only dollars off of each other on what they charge for services but buyer or seller can shop around if they want.   Escrow fees in general range from $800 – $1500 dollars per transaction.  It can vary depending on the sales price and type of sale involved.

Title fees charged to the buyer and seller to secure the title is free and clear of liens and is transferred with no other claims to the property.  This is an insurance policy to protect the seller in the transfer of title from seller to buyer.  A second policy is purchased by the buyer for the lender (unless the deal is all cash) to protect the lender’s collateral; the property.  Title insurance for the seller is paid by the seller and title insurance for the buyer or buyer’s lender is paid for by the buyer.  Policies are priced based on sales amount and loan amount.

HOA Fees can be charged when buying a condo, town home, or PUD (Planned Urban Development) home.  The Home Owner Association can charge for transfer fees, document preparation fees, and certifications.  A recent bill signed by Governor Jerry Brown limited the amount Home Owner Associations and related 3rd party vendors can charge buyers and sellers during the transfer of ownership.

Additional fees can come in form of repairs or inspections billed to escrow.  Some companies who complete inspections are willing to bill to escrow so that the seller pays out of proceeds or the buyer pays at closing.   For the most part the inspection companies will charge more to bill escrow and most real estate agents and loan officers prefer these fees stay out of the escrow to keep the purchase as clean as possible.  This is the same for repairs.  If the seller replaces the roof and doesn’t want to fork out cash until the deal closes, some companies will charge escrow and the seller can then pay out of the proceeds received from the sale at the time of closing.

It is important to understand your cost no matter which side of the deal you are on.  Commissions to the real estate agents are typically paid by the seller or in the case of a short sale the short sale lender(s).  Loan fees are based on your lender, if you don’t have one, find one and they can provide a good estimate on fees related to the loan you qualify for as a borrower. As a seller or buyer you can ask your real estate agent to prepare an estimated cost sheet.  Keep in mind, this is estimated.  Prorated items such as insurance, property taxes, and interest on the loan are determined by the closing date.  The buyer will initially pay a prorated property tax based on the seller’s rate and then receive a supplemental tax bill after the deal closes at the new rate.  For Santa Clara County we use 1.25% of sales price as an estimate for new property tax rates.

Buying a home can be a bit overwhelming to some and it is always best to consult with a professional in the local area to understand all your considerations.  If you have questions about closing costs or other real estate matters, contact me for a no-hassle, no-obligation consultation.

No wonder the consumer is confused about where our real estate market is heading.  One headline reads “More Foreclosure Activity”, another reads “Home sales up 19% year to year”, and don’t even bother listening to the news because everything is negative, negative, negative!
That is why you need local market information!  Thank goodness, you know me!

So here is the local scoop.

Out of 27 zip codes within San Jose:

SIX had an increase in price per square foot in July and August over 2010.

NINE had an increase in median sales price on average 15%! Highest increase by zip?  95112 – downtown with a nearly 23% increase over last year! (#2 Willow Glen, #3 Santa Teresa)

ELEVEN had an increase in volume of sales with 95130 increasing nearly 50% over last year.

Some of you have heard me say it but here it is again;  Investors are buying homes.  Willing to buy without leverage, all cash because they believe the potential upside is there.  With nearly 30% of them paying all cash, it is hard to believe this is the whim of speculators.  Consider the fact that your leveraged dollar is now at or below 4% because of interest rates, and that affordability is at a 30 year high for  San Jose. There are opportunities for those who truly want a home.  You will either be a home owner building equity or you are a renter building equity for these investors.

“Last month absentee buyers – mostly investors – purchased 21.3 percent of all Bay Area homes sold, up from 20.5 percent in July and 17.8 percent a year ago. The peak was 23.4 percent in February this year, while the monthly average since 2000 is 13.8 percent. Absentee buyers paid a median $242,818 in August, up from $240,000 in July but down from $260,000 a year ago.
Buyers who appeared to have paid all cash – meaning no corresponding purchase loan was found in the public record – accounted for 27.5 percent of sales in August, up from 26.3 percent in July and up from 25.6 percent a year ago. The record was 30.5 percent this February, while the monthly average is 11.9 percent since 1988. Cash buyers paid a median $245,000 in August, the same as in July but down from $272,727 a year earlier.  – DataQuick”
Here is the link to the August report.  Recognize, even a report on the BAY AREA is not a good local gauge.  If you have questions about specific neighborhoods, please let me know.  I am here to help!

Some more interesting charts for the San Jose area (Click on image to enlarge!)

#1 – The listing agent is working for the seller to help them avoid foreclosure not the buyer. Desperate times, desperate measures.  When an agent needs to stop a TRUSTEE SALE, they will lower the price under market, creating a bidding frenzy so they can submit an offer to the short sale negotiator as soon as possible to stop the trustee sale.   This tactic also applies when an agent has an unreasonable negotiator or a BPO (Broker Price Opinion – mini appraisal)  that is too high.  The agent will price the home slightly under the BPO and try to demonstrate to the negotiator what the buyers are willing to pay.  As a buyer, your agent should be able to demonstrate what is fair value through their assessment of the home and the comparable sales in the area.  Don’t be teased into a multiple offer crazy price war over a short sale.  Whatever home you are placing an offer on, have a good feeling for the market value before writing the offer.  Always know your highest bid before you write the offer and you will not have to worry about buyer’s remorse or second guessing yourself when you didn’t get the home because someone paid more.

#2 – Always request to see the preliminary title report  before writing an offer on a short sale. Any good short sale agent has a copy of the prelim before they place the house on the market. The prelim indicates the current liens on the property.  I can’t tell you how many times, an agent has told me there is only one loan and I find out there are three.  With that said, don’t ever believe the preliminary title report to be accurate.  The preliminary report is only good for the date it was issued and if it is over 30 days old, request an updated one.  Not that this guarantees anything either.  Why?  As you probably already know, not all notes transferred (sold) within the MERS system, are recorded at the county.   Therefore, if Bank of America sells its note to GreenPoint Financial, the original Bank of America loan  may be on the preliminary title report but not the GreenPoint.  This also means that the amount owed for Bank of America may not be the exact amount of the loan balance.  Sometimes the only way to know the liens is by the seller providing mortgage coupons and utility bills.   Home Owner Association delinquencies are another surprise that come in late in the game.  There is no standard for what an HOA will charge in late fees and penalties.

#3 – Request to see the seller’s current HUD when the short sale approval letter is received. You and your agent can double check to make sure the approved amount matches the bottom line.  With the approval letter comes a closing date.  Make sure the pro-rations for taxes and HOA fees are dated in accordance with the short sale approval letter.  This can be very tricky as the many times the escrow officer will only request a demand at the beginning, when the offer is accepted by the seller, and if the short sale approval took longer than that pay off date, there may be significantly more late fees and penalties added. This is a hard one to manage as I have found very few HOA groups that are easy to work with.  Sometimes delinquent HOA fees are passed on to collection agencies and they are even more difficult to work with when it comes to settling on a short sale.

#4 – Make sure you do everything you can not to become a landlord on the day your agent hands over the keys. It is not uncommon for short sale sellers to think  selling their home  is never going to happen and they can become complacent about the moving date.  Write into the contract that the seller vacate the property 3 days prior to close of escrow ( 5 days even better).  This way, your final walk through can confirm they have found another place to live.  My rule for my clients, if the beds are gone, get ready to close.  If the beds are still there, your only option is to hold up the funding and not close escrow.  No agent wants to get this close and not have their sellers out of the house.  I have personally hired movers to make sure sellers are out before close.  Realize many short sale sellers have bad credit and can find it hard to find another place to live.  My comments are not to be cruel but realistic as the moment the buyer takes ownership, if the sellers are not gone, they are now tenants.  Read more about the California Eviction Process here. The fact is any seller staying over close of escrow becomes a tenant.  However, in a short sale, there are no proceeds to hold until the seller vacates.  During the buyer’s walk through, it should be very clear the seller is moving.

#5 – Don’t be surprised if the buyer, is asked to pay for something that is commonly paid for by the seller. Don’t be surprised if this happens within five days or less of closing.  Taxes, garbage liens, title fees, and HOA document preparation fees have all been examples of nasty surprises in the final hour of closing on a short sale.  Generally speaking, it is less than $1000.  However, the patience of buyers, sellers, negotiators, and agents has been exhausted and the buyer should be prepared for the fact that the  seller and the short sale negotiator will not pony up.  However, the gap must be covered and it either gets paid or the deal doesn’t close.  Most agents and buyers want the deal to close and so we chip in to make it happen.

In my humble opinion, the only reason anyone should buy a short sale is if it is the home they really, really want.  Don’t write an offer just because you think it is a deal (the feeling you got a deal can slip away quickly with unknown repairs and surprise closing costs).  Make the offer because you think it is the best home for you.  Only then will it be worth “hanging in there”  and only then will you be willing to do what it takes to make the deal happen.  Buying a home in a short sale takes patience, more patience, and a little bit more patience to make it happen.  If it is not your personality type (or your agent’s) to keep working the deal and not let the speed bumps derail your desire for the home, then don’t write an offer on a short sale.  It is not my intent to make you an anti-short-sale buyer but to give you just a wee bit more insight on what to prepare for when buying  a short sale home.  As someone once told me, “Prepare for everything and nothing will happen.”.

If you have specific questions about short sales  email me or call me at 408-406-6035.

Answer:

There is no way of predicting short sale timing.
1.) Is it HAFA pre-approved? With an agreed upon list price? Or was this the list price the agent/seller chose?
2.) Is it one lender or more? Are there other liens? (HOA, garbage, mechanics?)
3.) Is the loan(s) being short sold portfolio loans (owned by initiating bank) or by investors? Was it previously a CountryWide loan?
4.) Is there mortgage insurance attached to the loan?
5.) How does the offer price compare to other neighborhood sales? Will the bank believe the offer price is a fair price based on recent sales or will they counter at a higher price?
6.) How on top-of-it is the agent? Do they call weekly (sometimes more)? Is the file complete? Does the agent provide a weekly update to buyer’s agent?
7.) Did the seller provide all the appropriate paperwork? Are they working well with bank and agent to answer any request in a timely manner?

I have had Bank of America short sales with two loans approved in less than 45 days – non HAFA.  With HAFA 60-90 days. (Strange as HAFA was suppose to shorten timelines.).

I would suggest you try to get some word on whether or not  the NOD (Notice of Default) has been issued, whether or not the short sale negotiator has actually been assigned, and whether or not the foreclosure process is on hold. The next notice to the seller will be a Notice of Trustee Sale (the actual foreclosure sale at the court house steps). Sometimes banks will not allow this to be postponed until 2 or 3 days before the sale. No rhyme or reason to all that they do but with short sales, anything can happen and the more you prepare yourself for the “speed bumps” that are possible the better you will be able deal with the short sale transaction.

Here is a step-by-step guide to how to replace a wax ring on a toilet.  Below you will also find a video from Joe Schmidt at the Home Remodel Workshop You Tube Channel  to help you walk through this simple home maintenance item.  There are great videos on this channel for home maintenance do-it-yourself tasks.

In the beginning
When short sales first returned to our housing market in 2008, the lenders were reluctant to approve and many times proceeded to foreclosure.  Over the last three years we have seen a change in the approval process and more short sales are being approved every day.  The second challenge to selling a short sale was the amount of time it took to process the short sale.  The banks were overwhelmed and simply did not have  the staff to keep up with volume of short sale requests.  Third, the banks did not really have a process in place for how to approve a short sale in this current market and arbitrary decisions were being made in regards to which seller/borrowers qualified.

The initial short sale packets required by the short sale lender included pretty much every piece of documentation they possibly think of from the seller/owner and all via fax. Pages were missed, packages were deemed incomplete, and the clock kept ticking along for months.  Now, the packages have been reduced and many banks allow for electronic uploads through systems like EQUATOR.  This has allowed the process of qualifying the seller quicker and the process of obtaining approval has been improving.   Further improvements come in the government program HAFA.  This program sets timelines for approval and provided incentives to the short sale lender and to the seller via $3000.00 for relocation.

Complicating the short sale process
The complications of short sales normally come in the manner of additional liens on the property.   If there is one loan and one bank to deal with, many times the approval process is fairly straightforward and reasonably quick.  The challenges to short sales come when there is more than one loan on the property, further exaggerated when it is a different lender than the first or senior lien holder, un-paid property taxes, and unpaid HOA (Home Owner Association) dues.  In this situation, instead of asking one lien holder to take less than what is owed, you are asking multiple lien holders to approve the short sale.  Multiple lien holders equals complexity around the approval and time.

Who gets paid?
Lien holders are ranked in order of pay off position.  Taxes are always first.  Therefore, back taxes must be paid prior to any other lien being satisfied.  The “first position” loan lien is normally called the senior lien holder and after taxes, they are paid first.  Lien holders after these two, are considered subordinate lien holders.  In a foreclosure, these subordinate liens will most likely receive nothing.  But their approval in a short sale is required.  The senior lien holder (1st position lien) will typically offer the subordinate lien holders a small pay off to obtain short sale approval.  The thinking is with a short sale they will receive something in comparison to a foreclosure subordinate liens will receive nothing.   It is fairly common to offer $3,000 to remaining lenders but more recently, subordinate lenders are requiring 10% of unpaid balance to approve a short sale.

Lenders are very reluctant to pay delinquent HOA dues in conjunction with a short sale.  From the lender’s perspective the  borrower may not have been able to pay the mortgage but surely they could pay the HOA fees as they are normally less than $500 per month.  Only in extreme circumstances do you see a lender include delinquent HOA dues in a short sale payoff.  The hardship must be clear and convincing.  Therefore it very important that as a seller, HOA dues are paid if a short sale approval is the goal.  From a buyer’s perspective, always know how delinquent the HOA dues are and who intends to pay for them.  It is not uncommon for the seller or short sale lender to come back and ask for someone else to pay the delinquent dues in order to approve the short sale.  Also included in the pay off are the seller’s closing costs.  This includes escrow fees, title fees, transfer taxes, and commissions.  The short sale lender must approved these charges as well.

How do know what liens are on the property?
Your agent should be able to obtain a preliminary title report which outlines all liens and balances as of the date the report is issued.  Make sure it is the most recent preliminary report.  Your agent can also request to see a HUD-1.  This is an estimate cost and proceeds sheet used by the short sale lender to approve the deal.  The agent can write this into the contract under “additional disclosures” .  This allows the buyer to understand during the contingency period whether or not all liens are included and can help prevent surprise seller or buyer contribution request late in the game.  It is great if your agent can get these items prior to writing an offer but sometimes it is difficult to do so.  Always worth asking.

Overcoming challenges to purchasing short sales:

1.) Know the lien holders involved.  How many? Same bank? Back taxes? Delinquent HOAs?   The fewer lien holders, the better chance of a straight forward approval.

2.) Patience is key but the file should be progressing or someone is not on top of it.  It takes constant communication with the lender to keep a file moving.  The listing agent should be providing your agent weekly updates. Your agent should be providing you weekly updates.

3.) Property is sold AS IS. Very, very rarely will banks consent to any repairs.  Only in extreme conditions will they allow a credit for repair.  Do not assume, as a buyer, anything will be fixed or credited.  If you find something you are not happy with during inspection you can ask for a repair/credit but don’t be surprised at all if the lender says no.   Sellers typically have no money or motivation to make repairs.

4.) Don’t become a landlord.  Your agent can write into the contract the property must be vacated 5 days prior to close of escrow with a 40 day close of escrow.  Sometimes short sale sellers have not been making payments for over a year.  With bad credit and no rent, they sometimes have a hard time find motivation to move out.  If they are there after close of escrow, you are now a landlord.  Eviction laws prevail and it can cost money to hire lawyers to facilitate the vacancy.

5.) Just because it is a short sale does not mean it is a deal.  The banks are becoming more and more savvy about market conditions and market value.  They are attempting to obtain as much of a repayment as possible.  The short sale lender will complete a BPO (Broker’s Price Opinion) or an appraisal to know whether or not the offer price is competitive for the market place.

More and more, we are seeing listing agents for short sales require a deposit from the buyer and they want the buyer to complete physical investigation prior to short sale approval.   In certain situations, this may be appropriate.  However, if the buyer signs a short sale addendum stating they will wait for 45 days for short sale approval and deposit money into escrow, it sets up for a challenge if you cancel early.  If money is spent on inspections prior to short sale approval and for some reason it is not approved, the buyer is out that money.  There are contractual ways to protect the buyer and the buyer’s agent should share these options with you.

In the San Jose market, nearly 35% of all sales are short sales.  With 1/3 of the market being short sales, your agent can not avoid showing you these homes.  Short sale knowledge helps the transaction go smoother and can help keep the stress down for all involved.  Understand with short sales, there are speed bumps.   Ask your agent about their experience and how they work to avoid the pitfalls of short sale purchases.  Experience, investigation of title, tenacity, patience, and contract management are keys to a successful short sale transaction.

For reference here is a short sale process flow chart.  If you have questions about short sales, contact me.

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The program provides up to $25,000 in a 20 year note that can be utilized to make improvements of their choice, based on a list of DOE (Department of Energy) and FHA approved projects.  Energy efficient heating and air conditioners, water heaters, duct sealing, and solar panels are just a few of the approved items on the list.  It is recommended that the homeowner complete an energy audit that will allow them to choose the most appropriate items to include in the energy remodel/upgrade.

The interest rates are competitive but only certain lenders are approved to make these loans.  For a list of approved lender click here.  This loan will be a subordinate lien and can be just the right answer to homeowners looking to lower their energy bills.  These loans are backed by the government up to 90% and FHA has promised a stream-lined approval process for loan applications for this program.  The borrower must have a credit score of at least 660 and their total debt-to-income ratio can not exceed 45%.  The loan to value total can not exceed 100%.

First up, the Housing Trust of Silicon Valley.  A non-profit which has been around 10 years and was formatted by leaders of the community.  The objective was to assist families and individuals to purchase homes.  In January 2011, the organization received $4 million dollars to assist over the next two years.  There are several programs offered from this group.  The Purchase Assistance Loan (PAL Program) related to Neighborhood Stabilization Program consensus neighborhoods.  This program allows buyers to purchase foreclosed homes in San Jose.  Maximum gross income of every individual in the household (over 18 years of age) begins at $86,950 for a single person up to a $163,950 for 8 individuals.  Home buyer do not have to be a 1st time home buyer but must intend to occupy the home. Borrower must also complete 8 hours of HUD related education.  If the home owner moves out and rents the property loan must be repaid.  This is a deferred loan of 20% of the purchase price up to $50,000 at 0% interest rate.  For more information about this program go to the web site or contact me.

Other programs from this organization include the Closing Cost Assistance Program (CCAP) and Mortgage Assistance Program (MAP). The CCAP program provides a deferred loan up to 3% of purchase price up to $15,000 for down payment and/or closing costs for first time homebuyers.  The loan is repaid at time of sale or 30 years (whichever comes first) at a simple interest rate of 3%.   The MAP program provides 17% of purchase price up to $85,000 in a simple loan that is at a rate of 1.5% over the first loan rate. This program is designated for first time home buyers and requires a minimum of 3% down.

City of Santa Clara also has the First Time Home Buyers Program (FTHB) and the Below Market Program (BMP). Currently, these redevelopment funds are at risk through Governor Brown’s policy but for the county these assets have already been moved into the Santa Clara County Housing Authority and the program is fully funded for 5 years.

The First Time Buyers program are for homes located in the city of Santa Clara and available through CHASE and METLIFE home loan lenders.  The program provides $75,000 down payment assistance.  This is a deferred second loan with no interest or payments within first 5 years.  The home buyer is required 3% down.

The Below Market Program allows 10% of units in new for-sale housing development with 10 or more units to be affordable.  Home owners are allowed to sell their home after 5% to the open market with an equity share program.  After 20 years they are completed vested and can sell without equity share.

CalHFA has provided long standing assistance for many home buyers over the years.  This program was established nearly 30 years ago to help first time home buyers with buying their first homes.  This is a 30 year fixed loans that can go up to 102% of home value which allows home buyers to use money for closing cost as well.  The CalHFA FHA loan program limit is $417,000.

This must be a single family home with no “income potential” add ons to the home (extra kitchens,studios etc).  The home buyer will not be allowed to utilize CalHFA for properties that have been flipped.  No matter how long ago the property was transferred to the investor.  The rate is  3.25% simple interest (does not compound) and is deferred for 30 years.  Which means there are no payments but there is no penalty for pre payment or early pay off.    Borrower must contribute 1% of their own funds.  This is a great program for first time buyers that are struggling with down payment.  For more information about eligibility see the CalHFA or CalHFA down payment assistance visit the web site.

MCC Program provides tax credit for borrowers with home buyers that utilize the home is a primary residence.   The program allows tax credits for the home borrower’s federal income taxes currently up to 15%.   There is a potential for a recapture tax if the home buyer sells the home within 9 years.  Even then the recapture tax is based on borrowers financial situation at the time of sale.  The homes must be in designated target areas within San Jose.  If you want to see if you are eligible, which areas homes are located, and which lenders and brokers can help see the following website.

There is also a Santa Clara County Down Payment Assistance Program for low income borrowers.  It allows up to $40,000 down payment assistance for borrowers looking into Alum Rock neighborhood and Burbank areas of San Jose.  It is a deferred loan on properties up to $570,000 value with 3% simple interest per year for the first four years and drops to 0% interest starting the first year to maturity.  Maximum annual income per household ranges from $56,500 and $93,650.  This is a HUD based program and applicants can learn more at web site.

Santa Clara County also offers a Home Rehabilitation Program for primary residences up to $100,000 for 3% simple interest to repair the home.  Items that can be repaired incude roofs, fumigation, furnace, plumbing, and electrical work.  The loan must be repaid by 30th year or when the home is sold.  To see how to qualify for this program visit the county web site.

The City of Sunnyvale Homebuyer Programs consist of a Below Market Program and the First Time Homebuyer program. You must live or work in the City of Sunnyvale and the home must be located in Sunnyvale.  This is a loan program that allows the borrower to borrow up to There are income limits and the first time home buyer must not have owned a home in the last 3 years.

The Below Market Program has homes available in DR Horton Lotus Community available.  These are 3 bedrooms for $250,000 and are anticipated to be available by October 2011.  O’Brien Homes on 920 Duane will be condominiums for 2 and 3 bedrooms for $344,000-$430,000 which are anticipated to be available October 2011.  The Town Center homes will be 1,2,and 3 bedrooms between $290,000 and $390,000 and are anticipated October 2011.  For more information on these new developments see information on the web site.

City of San Jose Home Ownership Program.  Project Specific Loans for Neighborhood Stabilization Program (NSP) and Building Equity & Growth in Neighborhoods (BEGIN).  They also have City-wide Loans through the Welcome Home Program and the Teacher/Public Service Assistance Program.

The Neighborhood Stabilization Program allow private developers to purchase foreclosed homes in targeted neighborhoods.  Homes are renovated to meet health and safety codes which include green upgrades as well.  These homes are then sold at fair market value.   These homes are available to those who work in San Jose,  currently live in San Jose, must attend an 8-hour education class, previously submitted and offer on NSP home, first time buyer, and in order which offers is received.

The BEGIN Program has certain homes available for first time buyer and provides up to 20% of sales price down payment assistance to new home owners.  Some of the developments include THE 88, AXIS, VILLA FONTANAS, MODERN ICE, and THE WORKS.

Welcome Home Program up to $25,000 loan amount, no monthly payments, 3% simple interest, deferred for 30 years or until home is sold.  Home must be located in within City of San Jose.  Maximum purchase price is $481,650 and is limited to low-income households and require a city inspection.  The city inspection is looking for illegal conversion and other safety issues.

Teacher Homebuyer Program (THP) provides up to $50,000 toward the purchase of a home.  Buyer must be full time income in K-12 San Jose public school teacher or credentialed staff.  This is a deferred payment at 3% simple interest for 40 years or until home is sold.

Home buyer programs and home owner assistance through the http://nhssv.org/

CalSTRS – California State Teachers’ Retirement System Home Loan Program.  A great program for teachers, community college instructors and anyone who had a retirement account through CalSTRS.  The new home owner must live in the property after purchase and the property must be located in California.  The borrower can not own another property.  Allows eligible borrowers to borrow with 3% down and no mortgage insurance. The max loan limit is $417,000 and for the first 5 years the payments are based on the 80% loan.  After 5 years, the payment increases to cover the full loan amount payment.  This is a 80% fixed rate loan for 30 years and a 17% fixed rate loan for 30 years.  The borrower must place 1% of their own money but can have 2% gifted of the total 3% down payment required.

The HomePath program provides foreclosed homes to the buying public through a system that allows as little as $500 down.  Financing is 97% but the the borrower can use other programs mentioned above to qualify.  The advantage of this program is there is no appraisal and there is no mortgage insurance.  There is also a first look period of 14 days that allow buyers who intend to occupy the home a chance to purchase first.  After 14 days the bidding is opened up to investors and non-occupant buyers.   First time investors can use 75% of rental income to qualify.  We are starting to see more of these homes come available in San Jose and greater Silicon Valley.

Disclaimer: Details of each program are not included in this post and the only way to be sure of the whether you as the buyer/borrower qualify is to talk with the entity offering the program.

Of  course almost every city has a Below Market Program and first time buyer down payment assistance available for buyers.  It is always good to check with the local municipality to see if you qualify for any of these programs.  For a complete list of city programs follow this link and click on the neighborhood city links.

• One company stole a family’s money and all their possessions.
• Another scam artist bid the job over the phone for a low hourly rate and then held the family’s belongings hostage until they paid a sum three times the original amount.
• One company just didn’t show up.

These stories are enough to make your hair turn gray. But you don’t need to be a victim.

Follow these tips to save yourself the high cost and heartache of dealing with a dishonest mover:

1. Deal only with a mover who has a local office. No local office, no deal.
2. Deal only with the actual van line or its authorized agent who can give a binding estimate on behalf of the national line. Never use brokers.
3. Get on-site estimates from at least three movers before deciding on a mover.
4. Check out the license and insurance status of all interstate carriers with the Federal Carrier Safety Administration Protect Your Move.
5. Ask for a binding estimate or a “not to exceed” estimate. A nonbinding estimate is never allowed to exceed the quoted price by more than 10 percent.
6. READ THE AGREEMENT the mover hands you. Make sure the mover will not be able to add on “incidental” or “additional services” without your permission.
7. Pay with a credit card. Never deal with a mover who expects to be paid in cash. Paying by credit card gives you the added protection of the card issuer’s dispute resolution if needed.
8. Make sure your estimate includes your initial deposit, not the balance due.
9. Make sure the mover actually has enough equipment to move your belongings. Otherwise, they may broker your move to someone else you know nothing about, putting your possessions at risk.
10. Never sign an “addendum” to your moving agreement after your move. This is most likely an attempt to get you to waive your rights to file a claim later if you discover you’ve been ripped off.

Don’t be the victim of an unscrupulous mover. Follow the tips above and protect yourself from the financial loss and hassle that come when you deal with a scam artist.

Brian Long is President and Founder of First Movers Advantage, LLC and Eureka! Quotes the international online directory of licensed, local movers. If you are looking for a mover, visit Eureka! Quotes to connect with professional movers in your area who are eager to provide moving services.

1.) Offer the highest price and have all cash. Yes, “cash is king” works many times. However, recognize cash from an investor or non-occupant is considered weaker than all cash from a buyer who will actually occupy the home. All cash investors don’t hesitate to cancel a purchase contract on a home if they see something shiny on the next street over or find out something through investigations that keep the numbers from making sense on the investment.

2.) Offer the highest price with no loan or appraisal contingency. Scary to most buyers as they are not sure of what current appraisals will value the home and yet depend on appraisers to confirm their loan. If you set up the purchase based on the value you believe is accurate, then the appraisal shouldn’t be far off. Leaving out this variable can make a huge difference in the perception of your offer. If you have over shot the value, you will make up the difference in cash to secure your loan. If you can’t get the loan because  you can’t support the difference, you risk losing your deposit. Your lender will still require an appraisal.

3.) Offer the highest price with no physical contingency. Unless you are a building contractor, this too can be pretty scary. Not knowing whether or not their are costly foundation issues or major termite damage can have a significant impact on value. But if the home is newer, under transferable warranty, or you happen to know the person that owns the home and you know the home has been well maintained, it may be worth beating out the other 5 offers.

4.) Offer the highest price with the shortest contingency periods and the fastest close of escrow. The sooner you can be definite about your purchase and close the deal, the better your purchase offer looks to the seller. Don’t just say you can do it. Show documented proof and phone calls from your loan officer.

5.) Offer the highest price with 20% or more down. Anything less than 20% down implies a FHA loan and mortgage insurance, which basically implies you are not the best qualified to a purchase a home and you are a higher risk buyer. If you are using FHA and are placing 3.5% down make sure you show strong proof of funds to close the deal. This means you should have 5-10% in the funds somewhere in your name.

6.) Offer the highest price and impress the seller. If you are looking at a home that is owner or tenant occupied, be nice. You are making an impression on the occupants/owners of the home and you can best believe they will take that in consideration when reviewing your offer. Mind your manners, this is the time to compliment the home and not tear it down. Ask them sincere questions about what they like about living there and let them know when their responses match what you are looking for in a home. If you like the open floor plan, comment on how it will work for your lifestyle. Do not ask if the refrigerator or play set is included in the sale. That will come later. Your agent should also mind their manners and represent you best when making appointments, previewing, or showing the home.

7.) Offer the highest price and do your homework. Look for permits and ask for inspections and disclosures up front. If the home is unoccupied, investor owned, or bank owned, bring a contractor with you to the home before writing an offer. Understand as much about the home and potential value before writing the offer. Read any reports carefully. Look for “further investigation” items that will indicate what can’t be seen or assessed by the common inspection.

8.) Offer the highest price and make sure your agent presents a clean, organized, per listing agent instructions offer. Offers should have a cover letter highlighting key components of the offer. A pre-approval letter is necessary. A personal letter explaining to the seller why you believe this home is best for you works in certain situations. Proof of funds to close, copy of earnest money check, and a clear, legible, contract with appropriate boxes checked. A sloppy agent can lose your deal. Ask your agent how they will present your deal. Very rarely is a buyer’s agent able to present to the seller in person but presenting a clean and organized offer to the listing agent can certainly help your offer make it to the top of the pile.

9.) Offer the highest price and be the only offer. Timing can make a difference. Once you have been house hunting and lost out on a couple of homes by a day or an hour, suddenly you are now obsessed with the MLS (Multiple Listing Service) and learn to pounce. This is why looking at a variety of homes and not being afraid to make an offer helps. There is no perfect house, but the sooner you can spot a solid deal, the better chance you have of beating out the buying competition. You can request a quick response. Standard is 3 days. Don’t assume a bank owned seller will respond to this tactic but private sellers may. This can also help when you have your eye on different homes at the same time. Make sure you and your agent know the deadline (if any) to accept offers.

10.) If you can’t offer the highest price offer, do as many of the items above as possible. The highest price does not always win. A strong offer, presented by a professional REALTOR®, from a committed buyer can win the deal many times. It can be hard to lose an offer on a home you wanted, but I am a firm believer in the fact that there will be another home that is a better fit in one way or another for each buyer. Be diligent. Be honest. The real estate world will move your way. Eventually.

There is no doubt there are a lot of home owners in trouble.  There is no doubt the banks have inventory that they have not sent back to the public consumer.  There is no doubt you can complete a web search on  shadow inventory and find a ton of articles about the reality of its existence and whether or not these homes will come to market.  More importantly, when will they come to market?  Who knows?  Maybe some high paid executive of the in the asset manager kingdom knows.  They aren’t telling.  But in San Jose, foreclosures are the smaller part of the market.   I am more interested in the 1/3 of the market called short sales.  These are the challenges of real life sellers, buyers, and agents.

As of today, February 15, 2011,  there are 777 active short sales in San Jose.

Of that 777 homes, 81 have been on and off the market for over 1 year (10%) and 17 have been on and off the market for over 2 years (2%).  Of the total listings pending sale, 1635 are short sales.  Of that 1635,  123 have been pending for over a year and 19 have been pending for over 2 years! 104 of these homes are vacant. Anyone think we have a problem moving short sales out of the hands of struggling borrowers and into the hands of new eager buyers?  Why is this so difficult to do?  Let me count the ways:

1.) Bank short sale process is non-standardized and the banks are overwhelmed by the process. This is improving and I applaud the efforts that I have witnessed with Bank of America – Equator system, and Wachovia/Wells Fargo Short Sale Fast Track.  There is still a great deal of improvement needed.  Automated systems are nice but standardization of short sale packets, approval process, assigned negotiators up front, contact information, and communication is critical.

2.) Many sellers are desperate, scared, and some are unwilling or unsure of what to do next. Most can’t afford their house because of hardship. Their credit is taking a monthly hit and in many cases they can not even find an apartment because of damaged credit. They try loan modifications and are stuck in a quagmire worse than the short sale approval process and are simply tired of the entire experience.  Can you imagine having your house on the market with people coming in and out every day, 7 days a week for over a year? Ask any seller after the experience of selling a home and they will tell you how quickly they tired of keeping everything picked up and how stressful it is to constantly manipulate their home life around showings.  No surprise that some short sales do not have access  and even more make it nearly impossible to make an appointment.

3.) Short sale agents have less than 3 years experience. Even if an agent has been doing short sales full time, each one is different.  Different circumstances, different lenders, different negotiators, and different levels of cooperation from all involved.   Some agents hire “professional” negotiators to handle their files because they are tired of the daily phone calls and pleading  with negotiators to make it happen.  On top of the cost of the negotiator, the bank reduces commission on average by 1%.  Can you imagine the motivation you would have to do your job for a year before you got paid and then your paycheck was cut 30-40%?  Many short sale listing agents would be happy with a nickel for every time they answered an email or phone call that ask the questions: How many lenders? Any offers? Who are the lenders? Yet I believe if you are going to take a short sale listing, it is critical to provide the absolute best service possible.  If the agent can’t, doesn’t want to, or gets tired of it, they should give the listing to another agent.

4.) Short sale buyers believe all short sales are going to be deals. But in fact, banks know the value of the home and expect a near market if not at market offer.  Of the 87 short sale homes that sold the first 15 days of February, the average sales price to list ratio was 99.7%.  More specifically, 16 sold for the same as list, 31 sold for higher than list, and 40 sold below list.  If the home (mostly condos) were priced lower than $200,000 it was more likely to go under list price.  I assume that is because they are more likely to be all cash deals.

The final information I want to share with you are the number of short sales for different  price points.  If you are a first time home buyer, excited that you can now afford a home in California, you will be competing with other buyers for homes that are mostly short sales.  Make sure you understand the process of offering on a short sale and don’t assume because the days on the market are long, that they will take a discounted sales price or will not be snatched out from under you while you are trying to decide.  It is a very competitive market. If you want to talk about your strategy to buy a home or in particular to buy a short sale or foreclosure, contact me.

San Jose Stats for Single Family Detached Homes

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All data is collected from the multiple listings service on February 15th, 2011 and presented graphically by CJ Brasiel.  The information is deemed reliable but not guaranteed.  The graphs and content of the blog are property of the author CJ Brasiel and should not be used, duplicated, or distributed without express permission by CJ Brasiel.