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Below is an article furnished by the California Association of Realtors (CAR) which provides information regarding short sales.

As we head into 2010, we will start to see many more short sales hit the California real estate market. Next year, short sale listings should increase while we should see a decrease REO listings as lenders try to recoup as much of their investment as possible.

In general, lenders recover approximately 70-percent of their investment by working with homeowners to short sale their homes. On the other hand, lenders recover only about 50-percent of their investment by letting homes go into foreclosure. More and more lenders are realizing the benefits of working with homeowners - and not against them - and are therefore working to streamline the short sale process. At the time of this blog, many lenders are working toward creating a streamlined short sale process in preparation to efficiently handle the tremendous amount of short sales that will be coming down the pipe in 2010.

Short Sale FAQ's 

TABLE OF CONTENTS

	Introduction
I.	Lender's Options Upon Borrower's Loan Default (Questions 1 - 6)
II.	Effect On Borrowers of Short Sales (Questions 7 - 11)
III.	Licensing Requirements for Short Sales (Questions 12 - 15)
IV.	Disclosure Requirements in Short Sales (Questions 16 - 19)
V.	Short Sale Application Process and other Issues (Questions 20 - 23)

Introduction

Increasingly, lenders are making loans in amounts that become too difficult for borrowers to repay.  Some of these borrowers may not be able to fulfill their mortgage obligations.  When a borrower is no longer in a position to make the mortgage payments, is facing foreclosure and the current market value of the property--including escrow costs--is less than the loan on the property, the borrower may consider a short sale.  This could save the lender the expenses of foreclosure proceedings and from having another REO property on its books.  From the borrower's perspective, the short sale prevents having the foreclosure on the borrower's credit history, and releases the borrower from an obligation that he or she can no longer afford.

In essence, a short sale is a sale transaction subject to a lender's approval in which the lender consents to a sale of the security interest for less than what is owed on the note and accepts the proceeds in full satisfaction of the loan amount.  A short sale requires much paperwork and preparation on behalf of the borrower.  Typically, before applying for a short sale, the seller must have a ready buyer and all the paper work prepared to present to the lender.  The buyer of the property must also be prepared for a protracted time period to conclude the purchase of the property.

I.  Lender's Options Upon Borrower's Loan Default

Q  1.  What options does a lender have on a debt secured by California real property if the borrower does not make the payments on the loan?

A  A lender may foreclose on the defaulting borrower's real property which secures the loan.  There are two types of "foreclosures" available to a lender:  a trustee's sale and a judicial foreclosure.  (Bank of Italy National Trust & Savings Assoc. v. Bentley, 217 Cal. 644 (1933).) Technically, a trustee's sale is not a "foreclosure" but the term has been used for both a trustee's sale as well as a judicial foreclosure.

For certain loans, a lender has no choice and must conduct a trustee's sale.  With a trustee's sale, a lender cannot go after a deficiency judgment.  A deficiency occurs when the current market value of the property is less than the loan on the property.  See Questions 3 and 4 for more details.

The lender may also be able to pursue "guarantors" of the debt who have signed written guarantee agreements (not including the borrowers).

Q  2.  What other options may the lender consider instead of foreclosure when the borrower is delinquent?

A  Depending on the situation, a lender may consider one of the following:

Loan Workout:  Basically, a loan workout is any resolution of a problem loan between the lender and borrower that modifies the original loan agreement.  Some of these options include forbearance (e.g. forgiving a portion of the debt or late charges); deferment; renegotiating interest rate, monthly payment amount, principal amount, maturity date; or the enforcement an acceleration clause in the loan. 

Deed in Lieu of Foreclosure:  After the borrower is in default, the borrower voluntarily delivers title to the lender for consideration and the lender accepts the conveyance of the property in full satisfaction of the mortgage debt.  Using this method, the lender saves the costs of foreclosure and the borrower avoids having a notice of default on his/her records.  (Hamud v. Hawthorne, 52 Cal.2d 78 (1959).)
 
Short Sale*:  A short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage amount due and accepts the proceeds as full payment of the loan.  A lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender's damages.  Like a deed in lieu of foreclosure, this saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on his or her credit report. 

Short Payoff*:  With a short payoff, the lender accepts less than the remaining mortgage amount as full payment of the loan.  The property need not be sold. 

*Note:  Some lenders do not differentiate between a short sale and a short payoff.

Q  3.  What is a deficiency judgment?

A   A deficiency judgment is a judgment obtained by the lender in court against the borrower for the difference between the unpaid balance of the secured debt and the amount produced by sale or the fair market value of the security, whichever is greater, in a judicial foreclosure. (Cal. Code Civ. Proc. § 726 (b).)  A lender may obtain a deficiency judgment only with a judicial foreclosure.  With a trustee's sale foreclosure, the lender cannot go after a deficiency judgment.  See Question 4 for more details. 
 
Q  4.  Can a real estate lender obtain a deficiency judgment against a defaulting borrower following foreclosure?

A  It depends.  California has "anti-deficiency statutes" that protect certain borrowers from deficiency judgments.  Under those circumstances, a lender would opt for a trustee's sale foreclosure which is quicker and less expensive than a judicial foreclosure.  A trustee's sale foreclosure does not involve the courts. Generally, there are five situations in which a deficiency judgment is prohibited:

1)  Purchase Money.  If the loan is obtained to purchase a residential 1-4 unit dwelling all or part of which is owner occupied and the loan is secured by that property, the lender may not obtain a deficiency judgment against the defaulting borrower. This loan is entitled to "purchase money" protection. Note, however, that should the buyer refinance the home, the new loan is no longer "purchase money."  Thus, the buyer would lose the protection against a deficiency judgment in the event of a default.

2)  Seller Carryback.   If the purchase money loan for any type of real property is financed by the seller and secured by that same property, the lender/seller may not obtain a deficiency judgment against the defaulting borrower/buyer. 

3)  Trustee's Sale.   A lender may not pursue a deficiency judgment against the borrower should the lender opt to foreclose by a trustee's sale foreclosure (a non-judicial action).  

4)  3 Month Time Limit.   An action for a deficiency judgment must be brought within 3 months from the time of judicially-ordered sale.  

5)  Fair Value Limitations.   A deficiency judgment is limited by the difference between the amount of the indebtedness and the fair market value of the property, unless the actual sale price exceeds that value.  

When a deficiency judgment is permitted, the lender may obtain one only following a judicial foreclosure, or when the security has become valueless (such as when security for a second trust deed loan is wiped out when the first trust deed lender completes its foreclosure).  Holders of a junior deed of trust (second, third, etc.) should note that if the "wiped-out" junior lien is not purchase money or seller carryback, then the junior lien holder may sue on the note and the borrower on the junior loan may be personally liable.  (Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35 (1963).)

Q  5.  Can a lender avoid the foreclosure process and just sue the borrower on the note (i.e., treat it as an unsecured note)?

A  No.  A lender cannot sue on a debt secured by a mortgage or trust deed except for a judicial foreclosure.  This is called the "one action rule" or "one form of action rule." One exception to this rule is if the security for the loan has become "valueless" after the lender's security interest was recorded (e.g., a "wiped out" junior lien holder).  In this case, the lender can sue directly on the debt (note) unless the borrower's loan falls into category 1) or 2) in Question 4.

Q  6.  Why would a lender agree to accept a short sale?

A  Lenders may have ample incentive to negotiate a short sale with a distressed borrower. For example, should the lender take back a property pursuant to a foreclosure sale, the lender would become responsible for a variety of costs, including property maintenance, utilities, HOA fees, and might risk destruction of the property by vandalism. Furthermore, lender-owned properties (REO) may take a long time to sell, in part because so many REO properties are now for sale.
 
A lender will typically evaluate the financial situation of the borrower as well as current market conditions to determine whether or not to agree to a short sale. It is really a business decision for the lender to determine whether it would receive more money by accepting the short sale, or completing a foreclosure, reselling the property, and pursuing personal liability (i.e., deficiency judgment against the borrower and/or claims against guarantors, for loans on which those remedies are available.)

II.  Effect On Borrowers of Short Sales

Q  7.  Does a short sale adversely affect a defaulting borrower's credit rating?

A  Yes.  Lenders will report the short sale as being settled for less than the full balance.  This would show up on the borrower's credit report as a negative mark for seven years.  

Q  8.  Suppose the borrower is late with his/her mortgage payments, causing the lender to begin the foreclosure process by filing a notice of default. Before the foreclosure sale occurs, the borrower pays the lender what is owed on the note. Could these activities appear on the borrower's credit report?

A  Yes. The lender can report to a credit bureau receipt of any payments made 30, 60, 90 or more days after their due date. This may appear on a borrower's credit report as a "foreclosure in process," "foreclosure proceedings," "current was 30," or in some other way. Any such terms, or other similar reporting comments, harm that individual's overall credit rating.

Q   9.  Is the method by which lenders report a short sale a negotiable item?

A  Typically, no.  The short sale is usually reported to credit reporting agencies as settled for less than the full balance. However, a borrower may try to negotiate this at the time the short sale is being arranged.

Q   10.  Are there any special risks to borrowers when negotiating a short sale with their lender?

A  Yes.  In particular, REALTORS® who assist borrowers should be aware and warn their clients of one particular risk.  If the borrower was less than completely honest when using the stated income method in applying for the loan, this information may become apparent to the lender when the documentation listed in Question 17 (such as tax returns and paycheck stubs) are submitted to the lender in the application for short sale approval.  This may put the borrower at great risk of potential liability for their dishonesty. 

Q  11.  Are there any tax effects of a short sale?

A  Yes. The tax implications for the borrower could be so significant that a short sale would not be in the borrower's best interest.  Before a short sale is contemplated, it is strongly recommended that the borrower seek the advice of a professional tax advisor.
 
Generally speaking, any relief of indebtedness from a short sale, regardless of whether the loan is a recourse or nonrecourse loan, is taxed as ordinary income. There are, however, some exceptions to this rule that may benefit a taxpayer involved in a short sale.  For more information on the tax implications of short sales, consult your CPA and/or seek legal council.

III.  Licensing Requirements for Short Sales

Q 12.  What is a short sale consultant?

A  A short sale consultant is someone who advises on short sales.  Depending on the agreement between the parties involved, the typical short sale consultant assists a homeowner or listing agent to prepare a short sale application package, submit it to the homeowner’s lender, and negotiate with the lender on the homeowner’s behalf to approve the short sale.

Q 13.  Does a short sale consultant have to be a real estate licensee?

A  Yes.  Generally, if a short sale consultant negotiates real estate loans or performs services for borrowers or lenders, both the short sale consultant and the short sale consulting company must be properly licensed with the California Department of Real Estate (DRE).  More specifically, unless an exemption applies, a real estate license is required for someone who, for compensation or in expectation of compensation, does or negotiates to do any of the following acts on behalf of another:

•  Solicits borrowers or lenders for loans secured by real property;

•  Negotiates loans secured by real property;

•  Performs services for borrowers, lenders or note holders for loans secured by real property; or

•  Collects payments for loans secured by real property.

Certain exemptions to the licensing laws may apply.  For example, a real estate license is not required if someone merely performs clerical or administrative services, such as assembling a short sale package as long as final determination as to its completeness is made by the broker. 

Q 14.  Can a licensed short sale consultant collect an advance fee?

A  No, unless certain requirements are met.  An advance fee is a fee charged upfront for services not yet performed.  An advance fee is broadly defined to include a fee claimed, demanded, charged, received, collected or contracted from a principal for negotiating real estate loans .  Among other things, no less than ten calendar days before collecting an advance fee, a real estate broker must submit to the DRE the advance fee agreement and all other materials to be used for advertising, promoting, soliciting, or negotiating the advance fee.  Furthermore, if a Notice of Default has been recorded against a property involving one-to-four owner occupied residential units, an advance fee is prohibited for foreclosure-related consulting services under the foreclosure consultant law. 

Q 15.  If a real estate broker collects an advance fee, does it have to be handled in a special way?

A  Yes.  A real estate broker who collects an advance fee must deposit it in a trust account with a bank or other recognized depository.  Amounts may not be withdrawn for the agent’s behalf until actually expended for the benefit of the principal or five days after a verified accounting as specified is mailed to the principal in compliance with Section 2972 of Title 10 of the California Code of Regulations. 

 
IV.  Disclosure Requirements in Short Sales

Q  16.  Must a real estate transfer disclosure statement be given to a buyer in a short sale transaction?

A   Yes, if the property being sold is a residential 1-4 unit dwelling and the transaction doesn't fall into one of the regular TDS exemption categories. No exemption exists for a short sale transaction in which the borrower sells the property to an outside buyer, using the sale proceeds to pay off the lender. 

Q   17.  Must other disclosures be given to a buyer (or seller) pursuant to a short sale?

A  Yes.  Short sales are treated just like any other sales transaction. 

Q  18.  Suppose a distressed seller enters into a contract to sell his/her home to a buyer pursuant to a short sale. Should the listing agent inform the lender if and when other offers are made on the property?

A   Probably.  Although the lender is technically not a party to the real estate contract, lender approval is nearly always a contingency of the agreement. Therefore, REALTORS® should obtain the client's permission to keep the lender apprised of any relevant developments, including the presentation of other offers.

Q   19.  Should a listing agent working with a distressed seller attempt to negotiate a future listing agreement with the lender?

A  No. Listing agents working with distressed sellers owe them a fiduciary duty. Since in a short sale situation a lender could choose to foreclose on the seller, the lender's interests are potentially adverse to the seller's interests. Attempting to negotiate a future listing agreement with the lender raises the issues of "to whom is the agent's loyalty devoted" and "has the agent violated the fiduciary duty he/she owes the seller." The safer practice is to avoid putting oneself in such a position.

V.  Short Sale Application Process and Other Issues

Q  20.  What is the process for applying for a short sale?

A  It is always in the best interest of the borrower to keep the lender informed.  If the borrower is in default of the loan and is contemplating a short sale, it would be best for the borrower to let the lender know before the foreclosure proceedings are well under way.  The lender may or may not grant more time to the borrower to find a buyer.  In general, the process goes as follows:

·  First, the borrower must find a buyer for the property.

·  Second, the borrower must prepare all the necessary documents (See Question 17).

·  Third, the borrower must submit all documents to the lender.

·  Fourth, the lender will send out their own appraiser to make sure that the buyer's offer is at fair market value.

·  Fifth, the lender will make a determination on whether or not to agree to the short sale.

Q  21.  What documentation will a lender typically require?

A  Lenders will typically require a distressed borrower to furnish a variety of documents, which could include the following:

·  Written explanation (and proof) of the hardship the borrower is experiencing;

·  Copy of the purchase contract signed by both the buyer and seller (borrower);

·  Copy of the TDS;

·  Proof of the buyer's ability to purchase the property, i.e., a completed loan application, pre-approval by another lender, or evidence of cash on hand (bank statement);

·  Copy of the certified escrow instructions; 

·  Preliminary title report;

·  Estimated net/closing statement certified by an escrow officer acceptable to the lender;

·  Completed and signed IRS Form 4506, "Request for Copy of Tax Form;"

·  Completed and signed personal financial worksheet;

·  Previous two years tax returns;

·  Employment paycheck stubs for the past two months;

·  Profit and loss statement (if the borrower is self-employed);

·  Past three months bank statements.

Article courtesy of the Californiak Association of Realtors®

For more information contact Randy Fox at randy.fox@coldwellbanker.com

Randy Fox is a Realtor with Coldwell Banker Kivett Teeters in Yucaipa, California. Randy can be reached by phone at (909) 797-1151 ext. 145 and by email at randy.fox@coldwellbanker.com. Randy also has a website; Www.YucaipaProperties.Net

The information contained herein is believed accurate as of December 29, 2009. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.

December 12, 2009

Has the Real Estate Market in Yucaipa and the Surrounding Inland Empire Shifted from a Buyer's Market to a Seller's Market?

Just what kind of a crazy, mixed up market is this?? If you've been following the real estate market in Yucaipa and the surrounding Inland Empire region of Southern California for any length of time, you may be under the assumption that the current real estate market is a Buyer's Market.

After all, with the extension of the $8,000 First Time Home Buyer Tax Credit and the addition of the $6,500 tax credit for Move Up Buyers as incentives for would-be home buyers, one would think this is Buyer's Market and is a great time to buy a home.

While it's always a great time to buy a home - live the American Dream, invest in one of the best investment vehicles around, take advantage of tax benefits and provide security for your family - recent changes in the local real estate market seem to indicate the market is indeed shifting from a Buyer's Market to - believe it or not - a Seller's Market.

Why, you ask? After all, Notice of Defaults are being filed in record numbers, lenders own tens-of-thousands of bank owned homes (REOs) in the Inland Empire and short sales have hit the market in unprecedented numbers. All of this adds up to the Buyer's Market of all Buyer's Markets, right? Read on my friends, read on...

Loan Modifications

While it's true Notice of Defaults (NODs) in the Inland Empire are being filed in record numbers, most lenders are using whatever means necessary to try to keep home owners in their homes and prevent the foreclosure process.

President Obama has given lenders monetary incentives to work with home owners to try to work out loan modifications, so there are more and more home owners getting loan modifications; resulting in reductions in interest rates, reductions in principle, and in some cases, both. As more loans get modified, less homes go on the market as either a short sale or a REO. 

Disappearance of Home Auctions

Have you noticed that the once-thriving home auctions have all but dried up? This is because the sale dates of over 90-percent of homes that are scheduled to be auctioned off at the steps of the local courthouses at Trustee Sales have been postponed and have had their auction dates extended; again because of government incentives to lenders to try to work out loan modifications or short sales with home owners.

Where, Oh Where Have the R-E-Os Gone, Oh Where, Oh Where Have They Gone...?

Remember a couple of years ago when there were so many bank owned homes on the market that a buyer had virtually hundreds of homes to pick and choose from? Where'd they all go? They're still there, but the banks aren't releasing them for sale in the same droves of numbers as they were before.

At last count, there were over 14,000 homes in lenders' inventory in Riverside and San Bernardino counties alone. Could you imagine what would happen to home prices if the banks released all of these homes at once? When all was said and done, you would probably be able to buy a pack of gum for more than what you could buy a home for. It's called preserving home values. This is why banks are releasing - trickling, really - REOs onto the market. One here, a couple there...

1+1+1=Lack of Inventory on the Market

Add the three together - an increase in loan modifications, the disappearance of home auctions and the reduced inventory of bank owned/REO properties on the market - and you have what amounts to a reduction in the amount of homes available for sale. In other words, a lack of inventory.

As mentioned in previous blogs, supply and demand is what drives the real estate market and is what dictates whether the market is a Buyer's Market (over-supply of inventory of homes on the market and/or decreased demand) or a Seller's Market (under-supply, or shortage, of homes on the market and increased demand).

We Rest Our Case: Three Reasons why the Market has Shifted from a Buyer's Market to a Seller's Market

Reason #1: Lack of Available Inventory

We are currently seeing existing inventory levels of homes for sale in the Yucaipa and Inland Empire real estate market of six weeks; in other words, it takes on average 6 weeks for homes currently on the market to sell. In a balanced market, most real estate practitioners consider a typical market to be one in which homes take an average of six months to sell. This 6-week inventory level indicates there is a shortage of available inventory of homes for sale.

Reason #2: Multiple Offers on Available Homes

Due to this lack of available inventory and having more buyers than there are homes for sale, we are starting to see multiple offers on homes available for sale on the market. In fact, Days on Market (the number of days a home is on the market before having an offer accepted and going into escrow) for REO and short sale homes in the price range of $300,000 and under, are averaging 7-14 days. Standard sale homes (homes for sale by an owner with equity) can realize this same time frame for Days on Market as long as their home is priced competitively in the market.

Reason #3: Increased Home Prices/Property Values

This combination of a shortage of available properties for sale plus the existance of multiple offers (a.k.a. bidding wars) is actually driving home prices and property values upward (bet you didn't think you'd hear that for a while). Again, another indication the market is shifting to a Seller's Market.

The Proof is in the Puddin'

So, while it's still somewhat of a Buyer's Market, mainly due to government tax incentives, the real estate market has definetly shifted and is now leaning toward being a Seller's Market.

If you've been thinking about selling your home, whether you have equity in it or you have to sell it short, recent changes in the market indicate this is a great time to sell.

Your questions, comments and suggestions are always welcome; feel free to drop us a line at randy.fox@coldwellbanker.com with yours.

Randy Fox is a Realtor® with Coldwell Banker Kivett Teeters in Yucaipa, California. Randy specializes in helping home buyers and home sellers reach their real estate goals; Randy also specializes in helping home owners with loan modifications and short sales. Randy can be reached by email at randy.fox@coldwellbanker.com or by phone at (909) 965-2937. Randy can also be reached through his website; Www.YucaipaProperties.Net

Is the Inland Empire Real Estate Market Starting to Rebound? Preliminary Indications Say "Yes"

In the most recent figures released by the East Valley Association of Realtors, data gathered through the month of July 2009 indicate that real estate market in the Yucaipa, Calimesa and Redlands areas have begun the journey on the Road to Recovery.

Keep in mind that these indicators are preliminary and are by no means the final say in the matter, but looking at the charts below do indicate that the number of properties in inventory (supply) are shrinking, months of supply of inventory is shrinking and the number of sales and properties "in contract" are rising (demand) as well. As in any real estate cycle, once the supply of available homes decreases and demand increases, the median sales price follows the demand and increases as well.

We are again starting to see multiple offers for properties, another indication that things are starting to heat up in the market. Should this trend continue, it won't be long before we start to see a snowball effect that should not only start to drive home prices back up, but also help the United States economy to the Road to Recovery as well.

Has the real estate market bottomed out? Is the real estate market on the Road to Recovery? Take a look at the charts below and come to your own conclusions. If you are in the market to either buy or sell a home, you may want to keep an eye on these figures. I will post these charts monthly so you can keep your pulse on the market. And as always, feel free to drop me a line with any questions or comments.

The charts below are based on comparing the latest sales figures between July 2008 and July 2009. If you look closely at the latter part of 2009, you can see the most recent trends, indicating a preliminary rebound.

Latest Sales Figures for Yucaipa & Calimesa Through July 2009

Latest Sales Figures for Redlands Through July 2009

Randy Fox is a Realtor® with Coldwell Banker Kivett-Teeters in Yucaipa California, serving clients throughout the Inland Empire Region of Southern California, including Riverside and San Bernardino counties. Randy can be reached at randy.fox@coldwellbanker.com or through his website, www.yucaipaproperties.net.

Update: August 7th, 2009

As those of you who have visited the site before (and I thank my returning visitors who frequent the site) may have noticed -  and for those visiting the site for the first time should be aware of - there have been some changes made to to the site over the past week. 

I recently made what I feel is a very positive career move and have joined Coldwell Banker/Kivett-Teeters Associates Realty in Yucaipa.

Although I have only known him for a short time, I have been so impressed by Garey Teeters, my new broker. Mr. Teeters is without a doubt the most knowledgable broker I have ever been associated with. It is no wonder that Coldwell Banker Kivett-Teeters is the top-selling real estate brokerage in Yucaipa and is in the top 50 nationally. I will forever be indebted to Mr. Teeters and Pat Wirth, my office manager, for allowing this budding real estate agent the opportunity of a lifetime.

Secondly, I've recently added a new residential search function. This search pulls information directly from the MLS and gives you the tools you need to search for properties not only in Yucaipa and the Inland Empire (Riverside and San Bernardino counties), but also throughout Southern California and even parts of Arizona. Be sure to give the new search function a try, I think you'll like it.

About the Market

I will be posting the most recent real estate market trends in an upcoming blog; preliminary indications point to the market actually hitting the bottom in April. Stay tuned; I should have the information posted in a day or two.

And remember...if you or someone you know needs assistance buying or selling residential or commercial real estate, please don't hesitate to contact me.

Until next time,

Randy

Randy Fox, Realtor

Coldwell Banker/Kivett-Teeters Associates

(909) 965-2937

Email: Randy.Fox@ColdwellBanker.com  

Website: Http://Www.YucaipaProperties.Net

As some of you may have noticed, it's bee a couple of weeks since my last post on www.yucaipaproperties.net. I'm working on a new blog platform on an outside website that will be directly linked to this website that should be up and running soon. I'm in the process of re-posting my blogs from this website into the new blog platform. I thank you for your patience as I work on the transition.

In the meantime, here's a new blog regarding how to get your property reassessed to lower your property taxes.

Most of us have experienced a sharp decline in our property values over the last couple of years thanks to the so-called "bust" of the real estate market.

One thing that does not normally happen automatically is the reassessment of your property value by the San Bernardino and Riverside County tax assessors other than when you are buying a property.

While property re-assessment is a given when properties are bought and sold, you have to submit a request to have your property reassessed if you feel your property value has declined. 

I submitted such a request to the San Bernardino County Tax Assessor last week through their website. Surprisingly, I received an email from the tax assessor's liason today:

"Hello Mr. Fox,

Your attached Prop 8 - Decline in Market Value Review request has been received. However, your property has been alredy been reassessed. 

The Assessor's Office reviewed approximately 235,000 single-family residences and condominiums for the 2009 assessment roll under the Decline in Market Value provisions.

Any home or condominium acquired or newly constructed after January 1, 2001 was automatically reviewed in addition to any property whose owner or authorized agent requested a review regardless of property type, date of acquisition, or when the new construction was completed. All property that was reduced under this provision for the 2008 assessment roll will be reviewed for possible further adjustment for 2009.

Notices of value changes were mailed out starting May 4, 2009. You should receive your notice within the next week.

The notice will have the appraiser's phone number should you have any
questions or further information for them to consider."

Sheila D. Raines
Special Assistant to
Dennis Draeger, Assistant Assessor

After sending Ms. Raines an email thanking her for the information, she then responded with an email back:

"Many homeowners have e-mailed me to let me know they received their notice already.  Most are happy with their new assessment.  Check your mailbox."

Oh, you can bet on it Sheila.

So you may be receiving a letter from the San Bernardino County Tax Assessor with a new assessed value of your property. If you don't, be sure to contact them for a reassessment.

I would encourage those of you living in Riverside county to contact your tax assessor and see if they are automatically reassessing property values as well. If they aren't, submit a request for them to do so.

One other note: I also received a letter in the mail from a company telling me they can help me ask the county for a reassessment; all for the low, low price of $179.00. Beware, this is a ploy to get your money for something you can do for free through your county's tax assessor office. As stated on the San Bernardino County Tax Assessor's website:

"Various private companies are mailing solicitations to property owners offering their services to file a Decline in Value review request forms with the Assessor’s Office for fees ranging from $95 to thousands of dollars. These applications may be filed free of charge directly with the Assessor’s Office by the property owner. Property owners may call the San Bernardino County Assessor’s Office toll free at (877) 885-7654 or visit our website for more information regarding an online or mail-in Decline in Value application at:

http://www.sbcounty.gov/assessor/Decline.asp "

For more information on free services provided by the San Bernardino County Tax Assessor's Office, click on the link below:

http://www.sbcounty.gov/assessor/FreeServices.asp

You can reach me with any questions at randy.fox@realestate.com or through my website www.yucaipaproperties.net.

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Could it be? Could home sales in California actually be rising from the grave? Recent reports indicate there is a lot of activity going on that may indicate a reawakening of the California housing market.

As many of you know, no state has been harder hit by the housing bust than California. Foreclosures in California have piled up since the beginning of the real estate downturn and California has endured some of the worst declines in property value and prices in the nation. According to a report by the California Association of Realtors (CAR), the median price of a single-family home sold in February 2009 was $247,590, down a whopping 41% from February 2008.

But the median price of a single family home isn’t the only thing that’s dropped; new home construction in California has nearly disappeared. According to the National Association of Homebuilders (NAH), housing permits in December 2008 shrank to about a quarter of what they were during the boom years.

Aside from all of the gloom and doom, there actually may be light at the end of the tunnel. There are signs that the California housing market may be coming out of this tailspin. Sales volume is increasing, investors are returning to investing in real estate, and home inventories are shrinking.

Buyers are Buying

Low prices have brought out buyers by the droves. In February, according to CAR, buyers purchased more than 600,000 homes, more than 80% more than they bought in February 2007. Most of this buying activity is where home prices are off anywhere from 40-60% from peak prices.

In fact, according to CAR, existing home sales have been rising strongly year on year for the past eleven months. Unsold inventory of existing homes, in months of supply, has fallen to just 6.5 months for detached home listings, down from an astronomical 15 months just one year ago. In metro areas like Sacramento and San Diego, unsold home inventories have dropped to 4.0 months at current sales rates!

The biggest gains in sales and largest decrease in inventory appear to be occurring in the lower-priced listings, listings $300,000 and less, which are more attractive and affordable for potential home buyers.

Two major factors for this is foreclosures and distressed sales. In fact, months of inventory for property prices at or below $750,000 have been cut in half from a year ago!

As an example, in the Sun City area of Riverside County, home prices have fallen more than 35% over the past 12 months. Nearly two-thirds of home sales in the Sun City area in February were foreclosed properties owned by banks. According to CAR, the sales rebound is largely centered around areas that have experienced the biggest impact from the subprime crisis.

In more stable communities where fewer homes were saddled with toxic mortgages, prices have not crashed as badly and sales are rebounding more slowly. But foreclosures still play a major part of sales in these areas.

Most analysts foresee continued price declines in California, according to Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "But [there'll be] a slowing of that decline, which portends the end of price drops."

There might be signs that this is already happening. In Long Beach, price per square foot increased 5%, to $360, in February.

Investors are Returning

Another positive sign that real estate markets in California don’t have much further to fall is that investors are returning to some markets. Some investors are even putting groups of investors together who are planning on buying single family homes in bulk.

As an example, John Dugan, a real estate investor in based in San Francisco, has purchased 3-840 square foot, 2 bedroom/1 bath duplexes in Sacramento for between $35,000 to $80,000 each, down from the $180,000 to $200,000 selling prices these townhomes sold for just a few years ago.

Using a portion of cash from his IRA, John paid cash for the first townhouse. He rents it out for $750 a month, realizing a profit of $550 after dues and common charges. That’s an extremely nice $19% ROI (return on investment), without figuring on appreciation.

"This kind of pricing is something you only think of as Midwestern, not Californian," he said.

Supply is Dropping

In a typical, “normal” real estate market, supply should be in the six to seven month range of supply. According to CAR, unsold home inventory in California now compares favorably with the rest of the nation, where there is a 9.7 month supply of homes on the market (source: NAR).

One wildcard, however, is that banks have kept many repossessed homes off the market. Banks are “spoon feeding” foreclosed homes out very slowly so they don't overload the market. If they release a lot of properties during the heavy spring buying season, they "will be eaten right up by buyers."

Could the end be near?

All of these factors add up to a more optimistic forecast for California, which is seen as a harbinger of things to come for the rest of the country.

If home prices should happen to continue to decline for the rest of 2009, the pace of that decline will slow, but we could see home price stabilization by early next year.

To Buy or Not to Buy

Is it a Buyer’s Market? Is now the time to buy your home? You be the judge...

As most of us have witnessed to one extent or another, 2007 and 2008 were two of the worst years for the real estate market that we’ve seen in our lifetime. Some have compared the current real estate market slump to the real estate market crash of the 1980s, when the affordability of home ownership dropped drastically due to record-high mortgage interest rates, which peaked at a whopping 18.45 percent in October of 1982.

As seen in the April 24^th, 2008 edition of the Yucaipa News Mirror

Buying Your First Home Can Be More Affordable Than You Think

Special to the News Mirror by Randy Fox

Unless you’ve been on an extended vacation on some remote tropical island (lucky you), you’ve heard all the gloom & doom stories about the current real estate market: the prices of homes dropping, people losing their homes due to foreclosure, the mortgage industry crisis and the subsequent tightening-up of lending guidelines…the list goes on…and on…and on.

If you’re inclined to listen to Chicken Little (“The sky is falling…”) and all the Nay-Sayers, you’re missing out on a tremendous opportunity in the real estate market – especially if you’re thinking about buying your first home.

Buyer’s and Seller’s Markets Explained

You’ve probably heard the terms “Buyer’s Market” and “Seller’s Market” before; while there is never a “bad” time to buy or sell a home, these terms are used as a generic way of summing up the state of the real estate market at any given time. Looking back to a few years ago when the market was “hot”; it was both a Buyer’s Market and a Seller’s Market. Home buyers purchased a home, sat on it for a year or two, sold it for a handsome profit, and on it went – for a while, anyway.

It all stems down to supply and demand; just like the stock market, the real estate market is an ever-changing entity and is tied in with economic factors. Key factors that affect home prices include existing inventories of both new construction and resale homes, interest rates, unemployment rates, the penetration of non-traditional home financing options, debt-to-income ratios, mortgage servicing costs, the Consumer Confidence Index (CCI) and more play major parts.

With the current inventory of homes being high and demand not keeping pace, the current real estate market is what most would call a Buyer’s Market; what this means to you is that this an excellent time purchase a home.

Should you be thinking about buying your first home, it can be easier and more affordable than you may think. Many programs available for first-time home buyers, including programs requiring little or no down payment.

Benefits of Home Ownership

Purchasing your own home can provide you with many benefits, including:

• Building Equity
• Investing in Your Future
• Receiving Tax Benefits
• Maintaining a Stable Monthly Payment
• Loving Where You Live

If you are willing to put a little elbow grease or “sweat equity” into a home, bank-owned (also known as REO or Real Estate Owned) homes can provide you with the best value for your money. There are examples of currently-listed REO homes on the market listed for hundreds (yes I said hundreds) of thousands of dollars less than what they previously sold for just few years ago. Why? Because banks are in the money business, not the real estate business. Their share holders do not like to see a large amount of homes in the banks’ inventories, so the banks offer homes they have obtained through foreclosure/trustee sales at discounted prices in order to get them off their books. It is not uncommon to see banks offering REO properties fro thousands of dollars less than the price they purchased them back for.

As with any home purchase, be sure to have the home thoroughly inspected by a professional home inspection service. The home inspection will uncover needed repairs and will give you an idea as to which repairs you can tackle on your own, and which repairs need to be performed by a professional.

First Time Home Buyer Programs

Here are some of the programs available to first-time home buyers:

NHF Loan:

This loan for first-time home buyers only can provide you with up to 104% financing, with as much as 4% in the form of a non-repayable grant. There are income and sales price limits. If the loan is underwritten by Fanny Mae (FNMA), the seller of the home can contribute up to 3% of the sales price toward closing costs; if the loan is underwritten by the Federal Housing Authority (F.H.A.), the seller can contribute to up to 6% of the sales price of the home toward the closing costs.

CalHFA Loan

The most popular first-time home buyer program, the CalHFA loan provides 100% financing with one loan.

F.H.A. Loan

While the F.H.A. loan is not a "first-time buyer" loan, it is very first-time buyer-friendly. A 3% down payment is mandatory; however, down payment and closing cost assistance programs are available that can be used in conjunction with the F.H.A. loan. With an F.H.A. loan, the seller of the home can contribute up to 6% of the sales price of the home toward closing costs.

CHDAP Down Payment Assistance Program

This is a down payment assistance program that can be used for 3% financing when combined with the F.H.A. loan, and again, there are income and sales price limits.

CHAP Closing Cost Assistance Program

This is a closing cost assistance program that can be used for 3% financing and can be combined with both the F.H.A. loan and the CHDAP Down Payment Assistance Program. Income and sales price limits apply.

With the CHDAP and CHAP programs, the seller can't contribute any money toward the down payment; however, the seller may contribute to a non-profit organization such as AmeriDream and the Heart Foundation, who in turn pays the 3% down payment.

Riverside County Down Payment Assistance Program

With this program, up to 20% of the sales price of the home is available in the form of a grant. There are income and sales price limits and not all cities in the county have this program available (email me for a list of approved cities). One stipulation with this program is that the buyer is supposed to stay in the property for at least nine years (in most cases) and sometimes even much longer (depending on the particular program guidelines).

City Down Payment Assistance Programs

There are also down payment assistance programs for the cities of Banning, Beaumont, Highland, San Bernardino and Rancho Cucamonga, subject to a first-come, first-served basis.

Keep in mind that a Home Buyer Education course is mandatory for all first-time home buyer and grant programs; this is usually one eight-hour course conducted on a Saturday.

If you’ve been thinking about buying your first home, do yourself a favor and look into it further; you never know, you could find yourself in your own American Dream.

Randy Fox is a real estate consultant with Century 21 Best Properties in Yucaipa. He can be reached by email at randy.fox@century21.com or by phone at (909) 965-2937. He also has a website, www.yucaipaproperties.net.