Wednesday, July 28, 2010

Beware For Sale By Owner

Let's pretend that you are thinking of buying a house. You have been looking quite a while and have decided to target a specific area of Santa Cruz County. Somewhere close to the beach, naturally- but not too close since you can not afford "walk to the beach" prices.

There before you sits the perfect little cottage, with a white picket fence, a lush green lawn and a hand made FOR SALE BY OWNER SIGN. You call the number and get a chance to meet the wonderful couple who are moving to be closer to their grandchildren, and also refuse to hire a professional to sell their home.

Why have they decided not to hire a REALTOR, you might ask. For one thing, no one knows this house, neighborhood, etc., better than they do. They have lived here for 30 years, they raised all 4 of their children in this house, and heck, Bob the owner even built the back yard BBQ himself, back when Bob Jr. was in junior high.

The real reason is probably because they do not want to pay a REALTOR commissions. That is fair enough, but as a home buyer are your protected from Mr. and Mrs. FSBO (For Sale By Owner) if you buy this little charmer from them directly? Probably not.

The other important question is are Mr. and Mrs. FSBO protected from you, the home buyer looking for a killer deal, and willing to forgo all the "details" of selling or buying a home to save a few bucks?

As a Licensed Realtor in the state of California we are held to a standard and required to following a specific set of standards and rules when representing a home buyer or home seller, interestingly enough your FSBO is required to provide the buyers with the exact set of Seller Disclosures that we use. But, do you or Mr. and Mrs. FBSO know what those are? Do they know how to fill them out correctly? What to look out for? Probably not.

Another important concern should be liability. All Realtors' carry insurance called Errors and Omissions Insurance. It is very expensive and allows both home buyers and sellers the knowledge that if there is a problem down the line with the transaction there is recourse they can take.

If in your travels you decide to be either a Santa Cruz Home Seller who decides to sell your home yourself, or you decided as a buyer to consider purchasing a For Sale By Owner Home in Santa Cruz, please Contact Me. I have a list of important information I would be happy to provide to you.

Friday, July 23, 2010

OPPS, don't forget those HOA fees

Many foreclosed homes or condo's are managed by homeowners associations (HOAs) and are months’ or years’ worth delinquent on their HOA dues at the time of foreclosures.

Given that foreclosure takes six months or longer in most areas, the vast majority of home owners facing foreclosure are very aware that it’s coming. The vast majority of these people stop paying their property taxes and HOA dues when they realize that they’re going to lose their homes.

The type and extent of HOA collection efforts, which are legal, depends on the terms of any agreements that were signed when the property was purchased, the laws in the area.

Virtually everywhere, HOAs are authorized under state law and the terms of the complex or subdivision’s covenants, conditions and restrictions (CC&Rs) to place a lien on the property once your dues fall delinquent by a certain amount (usually a certain time period, like 90 days behind).

However, this lien is placed against the home itself, not your personal property, salary or bank account. I have experienced delinquent HOA fees being paid by the lien holder in a short sale, but just as often I have seen a short sale stop dead in it's tracks due to delinquent HOA's because the lien holders refused to pay them, and the home seller does not have the money to do so.

The HOA may require the lien to be removed before the title to the property can be transferred to a new home buyer, which would mean either the bank or the next buyer would have to pay the lien off to close the deal (many banks do in fact pay these types of liens off when they resell a property after foreclosure).

However, you should be aware that it’s totally in the bank’s own discretion whether or when it tries to sell your former home. In some instances, the bank does not even attempt to resell the property for months or even years following a foreclosure.

And it may do nothing to pay off the delinquent dues until it absolutely has to — which is when escrow closes on its resale of the home.

Under the terms of many HOA agreements and CC&Rs, the HOA may pursue a variety of traditional collection efforts — including collection agencies or taking you to court — until the back dues are paid. The HOA doesn’t care who pays them — you, the bank or even the eventual buyer — but it does have the right to take legal means to collect the money until someone pays.

The next step would be be to closely read the lien you received — it is probably a lien against the home, not a levy against your personal property or bank accounts. Paying the lien off against the home, to clear the property is no longer your responsibility — the bank will deal with that.

However, do be aware that the HOA can and may pursue you for the delinquency personally, if it chooses to do so before someone else pays it.

Remember you need a professional to help you through the process of selling your home, or purchasing your new home once it has become an REO or Foreclosure property.
Contact Me for up to the minute information on Santa Cruz Foreclosures that are for sale.

Monday, July 19, 2010

So Your Short Sale offer was REJECTED?

Lets pretend you have made an offer over list price on a Santa Cruz County Short Sale property. You are pretty excited, since you "know" that going over the list price will assure your offer gets accepted by the lien holders..Don't be so sure, there does not appear to be a reason why some offers are rejected and some are accepted. As a Santa Cruz Home Buyer, you are about to be disappointed.

Here are a few reason your offer may have been rejected:

Another home buyer might have simply gotten into contract first. Once a home seller is in contract with a buyer, they can’t simply cancel the contract with that buyer because they get a higher offer. Some banks require that all offers are submitted by the listing agent so they can select the highest and best offer, no matter when it comes in. Others want only the actual "contract" the seller has signed.

With Short Sales, there is the additional issue, that once the bank is considering one contract, many experienced short-sale listing agents will not submit any additional offers to the bank unless and until they receive an acceptance from the bank — regardless of whether the bank has requested to see additional offers or not. Some agents believe that more than one offer confuses the process of acceptance, and sometime I think it does. There is a great deal riding on the experience of the Asset Manager of the banks concerning how the files and offers are handled.

Many fear that submitting a new offer essentially presses the restart button on an already interminable short-sale application process. And this is especially so in situations where the new, incoming offers are higher than the one being considered — here’s why.

Short sales take a long, long time. And they are very unpredictable — most of the time, there’s no telling how long it will take before the bank will issue an acceptance, or whether the bank will ever accept the short-sale application at all!

For this reason, buyer’s brokers and listing agents alike understand the reality that most buyers who make offers on short sales continue to look around for other properties, even if their offer was the one accepted by the seller. As a result, oftentimes short-sale buyers make an offer but fail to hang in the transaction for the duration. If you are considering submitting an offer on a short sale, take it one step further and be willing to submit your initial deposit (it can be a small amount) to the Title Company upon acceptance of your offer, this demonstrates to the lien holder that you are willing to hang in through the process, and wait for your approval to purchase.

So, here’s what happens in a short-sale listing agent’s head. They get an offer for $560,000 that is submitted to the bank for consideration. Then, they receive an offer from you, for $5,000 more. Some listing agents — as backwards as it sounds — would prefer to get the bank to approve the lower sale price, because the approval of your higher offer price ties their hands from ever accepting other offers at a lower sale price than yours in the (quite likely) event that you walk away before the deal can be done.

If you walk away, and the bank has already seen or approved your high price, the listing agent may never again be able to find another buyer to pay that much. And the bank may never accept less than your offer price, once they’ve seen and/or approved it.

Other things could also be at play here that would make your offer less desirable than the prevailing offer. You offered $5,000 more, and were offering cash, but the other offer might also have been all cash — especially at that price point and in that area. Did your offer include a proof of funds — a bank or other account statement documenting that you actually have the cash in hand to do the deal? If it didn’t, and the other offer did, that could cause a seller to select the other offer over yours.

Did your offer contain any contingencies, like appraisal or inspection? If it did, and the other offer didn’t, that could also push the other offer into priority over yours.

Did the listing broker or agent also represent the other buyer? Often, the total sales commissions paid out on the seller’s side go down — and the total commission earned by the listing broker goes up — when the listing agent represents both buyer and seller.

This arrangement — where a seller agrees to pay a 5 percent commission split 50/50 between two agents or 4 percent commission if the listing agent also represents the buyer (the specific numbers are hypothetical) — is called a dual/variable commission structure, and can also result in preferential treatment to a lower offer because the costs are lower to the seller on the transaction that included dual representation.

There’s no way to know for certain — other than asking the listing agent, who may or may not elaborate — exactly why the lower offer was preferred over your higher, cash offer. But I would encourage you not to shoot the messenger!

I don’t know if you’ve heard or read, but short sales are notoriously difficult to buy.Google it, and don’t fire your agent over something that’s totally out of their control. Unless, that is, you have an ongoing trust crisis — even if it’s unwarranted, that’s a good enough reason to get referrals and do whatever it takes to find an agent you do trust.

The homebuying process is difficult enough — for both you and your agent — without you constantly questioning whether your agent’s on the up and up and threatening to ditch her when things don’t go your way.

If you’re trying to buy a short sale or REO, the one thing I can guarantee you is that something — or many things — will not go your way.

If you are considering selling your home or buying a home that is going to be a Santa Cruz Short Sale Listing be sure to Contact Me, so I can help you navigate your way through the maze.

Thursday, July 8, 2010

Rough Week

This has been an very difficult and rough week so far, which seems odd since it started with a holiday..

I am not going to explain what has made this week so wacky, as most of it really makes no sense in regards to the "mood" I am in.

But there is one bright spot, my husband sent me this super fun cool link, and when I played with it just now, my partner told me I looked to be having fun- so I am sharing- in case anyone is in a funk.

Make Music

Contact Me with your fun web sites.

Tuesday, July 6, 2010

Rental or Short Sale??

Recently I received this question via email, I thought it the perfect Blogger topic:

Q: My wife and I want to sell the four-bedroom home she owns in Santa Cruz County, near Pleasure Point. She refinanced it in 2006 for $910,000, but it's only worth $480,000 now. We want to sell it to get rid of the financial burden, so my wife can quit her job and we can start a family. But we can't do it without a short sale. We have a good tenant renting the place right now who may want to purchase it. What should we do?


A: A short sale is the quickest way out of your dilemma, but it will wreck your wife's credit for years to come. Given that she will be out of the work force, limiting her ability to rebuild her credit, I'd consider this only as a last resort.

In the meantime, look into these other options:

* Consider a loan modification. Because this home is now an investment property, and not your primary home, it won't qualify for any refinancing programs sponsored by the federal government. Still, your lender might be willing to restructure your loan. An attorney can advise you on the best way to broach the issue. The attorney can review your loan's documentation to see if it fully complies with the Real Estate Settlement and Procedures Act–a federal law designed to prevent kickbacks and promote ethical lending practices. If the loan isn't in compliance, your attorney will be able to argue that the loan is void, and will be in a good position to negotiate a reduction of your principal and/or interest (you may also be due a refund of your original closing costs).

* Wait for the real estate market to recover. According to Zillow.com, home prices in Santa Cruz County have indeed taken a hit since their mid-2000 highs, and dropped almost 8% in January 2010 from a year earlier. At some point, perhaps soon, prices will recover. In fact, the most recent statistics are encouraging, research shows prices for Santa Cruz homes that are not in foreclosure actually rose 6.1% in March 2010 from the month before.Recently I had a listing receive a full price offer after only a few short weeks on the market, needless to say- the home sellers are packing.

* Talk to your tenant. Usually, I'm a big fan of rent-to-own deals, but since your property is only worth 52% of what you owe, I doubt you could negotiate a sales price and terms that would recoup all or most of your debt. But you never know. If your tenant has blemished credit, loves your house and wants to rent for four or five years before buying (when prices are sure to be higher), you might be able to come to an understanding. Such a deal would ensure that your property is kept in good condition, Make sure that if this is the route you choose,that a licensed Real Estate Agent is involved to avoid any mis-communication, while insuring that all contract documentation is correct and LEGAL.

If you have any questions that I can answer for you, please Contact Me.