Archive for September, 2009
State Bar Publishes List Of Attorneys Under Investigation
INDUSTRY NEWS, TIPS FOR SELLERS
SBC-Logo
In a rare move by the State Bar Association of California, a list of attorneys under investigation for misconduct relating to loan modification programs has been released. Typically, the association that is responsible for policing its own ranks refrains from publishing attorneys names in trouble until they have had due process and been disbarred.
According to an article released by the California Association of Realtors (CAR), the State Bar elected to “waive investigation confidentiality in favor of public protection”. The sixteen attorneys named allegedly took money from clients for promised services then failed to perform the services and even avoided communication with their clients faced with eminent foreclosure. Additionally, staff persons at some of these law firms are under investigation for unlawfully practicing law.
The article emphasizes that not all attorneys offering loan modification services are “unscrupulos”. However, some scam artists go out of their way to associate or affiliate themselves with an attorney to lend credibility to their fraudulent schemes. A list of the attorneys can be viewed by clicking here: http://calbar.ca.gov/state/calbar/calbar_generic.jsp?cid=10144&n=96395
Most of the lawyers are under investigation practice in the Southern California area.
As always, before paying anyone for loan modification services, research the company and individuals before signing on the dotted line. Instead, consider free credit counseling or working with a company that requires payment only after services have been rendered. The news alert from the state bar provides contact information for agencies offering free or minimal cost loan modification services.
530-941-7492 or 530-224-6767
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Pension Forum Enlightening
LOCAL GOVERNMENT, SHASTA COUNTY
Redding City Hall
I was invited to listen to a distinguished panel examining many facets of public employee pension plans in California. The panel included representation from Shasta County, City of Redding, CalPers, labor negotiators and a taxpayer advocacy group. The panel was provided 10 questions in advance regarding pension issues and were all given an opportunity to respond. The discussion lasted nearly 2 hours.
The first factoid that caught my attention was California is the only state that allows individual jurisdictions to negotiate retirement benefits for public employees. In all 49 other states public pensions rules are set by their legislatures. Over 2400 different entities from cities, counties, special districts, firefighters and police have negotiated individual pension packages for their public employees. This has created fierce competition among these entities that essentially bid up pension benefits to attract and retain qualified employees. CalPERS has devised many different pension plans to suit these various contracts negotiated between management and employees. Numerous different unions represent these various employee groups. That’s why police, firefighters and other public employees are well paid compared to their counterparts in other states.
Pension spiking was discussed and CalPERS typically audits an employees work history to make sure the final years pay was not spiked in order to maximize retirement benefits. Mike Warren’s pension was discussed and because the final year salary spike included a performance bonus, no violation of the law occurred. In the past, deferred vacation pay, sick pay, uniform allowances, educational funds, comp time and even marksmanship perks were added to final year salary so the employee could have their predetermined percentage of base pay spiked to increase their monthly pension benefit. These tricks are not available to rank and file employees but typically used by those in management positions.
The best solution to reign in retirement costs is delaying the age for retirement 5-7 years. As it stands, pension benefits encourage early retirement. This causes problems for actuaries that try to project future pension costs and also extends the time period health benefits must be paid by the employee or employer until the retiree qualifies for MediCare. Extending the retirement age would lower CalPers pension obligations by 50% according to the speaker representing California Foundation for Fiscal Responsibility.
Most agree a change in state law is needed so all pensions are changed at once eliminating the game of one-upmanship that got us to the current pension benefit levels. Changes would apply to new hires only. This will likely happen at the ballot box using the initiative process.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Trading Down May Hurt
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR SELLERS
The new reality that currently exists in the marketplace favor move-up buyers more than trade-down buyers. The reason is demand is stronger at the low end of the market. Homeowners wishing to sell their larger, more expensive home so they can purchase a smaller, cheaper home will likely encounter two distinctly different markets.
In Redding, 92% of August sales activity was focused on homes priced under $350,000. Investors and first-time buyers are competing to buy affordable homes and in some cases are experiencing bidding wars for the most desireable properties. Meanwhile, sellers of homes above $350,000 are seeing little activity and will have to be very flexible negotiating a sale with skittish buyers hesitant of future price erosion.
Move-up buyers should be better off as they sell their smaller, more affordable homes and bargain hard for the larger more expensive homes. Among buyers clamoring to buy their first home are teachers, police officers and firefighters who were locked out of home ownership when home prices soared out of alignment with area wages.
Another advantage to the current market prices are property tax savings. Shasta County real estate prices have declined roughly 40% from the peak, meaning the property tax bill for homebuyers today will have dropped by an equal measure. The average home price in Redding/Shasta County peaked at $300,000. Today, its closer to $200,000. That $100,000 difference results in more than $1,000 per year in property tax savings! Prop 13 will lock in that assessment even if prices rise in the years ahead. The tax savings are even greater for the higher end of the market.
If you need help analyzing a trade, up or down, contact me:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
Home Price Declines Linked to Foreclosure Sales
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR SELLERS
What seems obvious has been confirmed with market statistics published in an article in The Wall Street Journal. Those areas with the highest level of sales of REO’s also had the sharpest decline in home prices. Michigan, a state hard hit by the market downturn and the slumping auto industry, reported 64% of their home sales being foreclosures since the beginning of the year and saw home prices drop 47% in the same time period.
Massachusetts on the other hand, where only 14% of their home sales were REO’s saw only a 19% decline in home prices for the first half of 2009. Looking ahead, the fear is loan modification efforts are nearing an end and ”traditional” sellers are holding off putting their homes for sale in the current down market leading to the possibility the market will be dominated by distress sales this winter.
One reader commented they just returned from Florida and wondered if there was anything in Florida not for sale. Another commented on the fact “short sales” were not factored into the discussion. This agent from Florida claims the majority of home sold there are short sales.
Locally, foreclosures represent about 1/3 of sales activity. Prices appear to have bottomed out for properties priced at the lower end of the market with the average cost per square foot settling at about $130 in Redding. Available home inventory continues to decline and pending sales today are at their highest level for the year.
Interest rates are hovering around 5% for a 30-year mortgage and lenders are willing to make loans to qualified buyers. Investors and first-time buyers continue to dominate the marketplace. 174 homes sold in August and 1331 have closed escrow since January as reported by the Shasta MLS. 160 homes, or 92%, sold for $350,000 or less!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
Firms Prey On Credit Wary Consumers
Consumer concerns surrounding tightening credit and identity theft has created a new industry targeting those worried about their credit ratings. These companies are selling credit tracking services for a monthly fee that really may be of little value. An article in The Wall Street Journal by personal finance columnist Karen Blumenthal points out that your credit score is only important if you are planning to borrow money now. Since getting credit to buy a home or car is a rare occurrence, it helps to monitor your credit once a year but paying for monthly tracking is likely a waste of money.
The article goes on to discuss why credit scores vary and debunks some myths including:
- My credit score is a good reflection of my financial smarts and good behavior-FALSE- Your credit score does not take into account your income, job history or assets which are very important in determining ability to repay a loan. Think of your credit score less like a report card and more like an SAT score that pegs the likelihood of “future credit success or failure” she explains.
- I pay my credit card off every month, so I must be a low credit risk-True, your credit habits are excellent but that does not translate to a better credit score. Credit bureaus have no idea if you pay off your bill monthly, only the balance owed on your most recent statement. Of greater importance is the amount of credit you have utilized relative to your total available credit. The article discussed advice from Steve Ely, president of personal information solutions for Equifax, which suggests you utilize no more than half your available credit- otherwise your credit score may be adversely impacted.
- Taking advantage of reward cards shouldn’t affect my creditworthiness-False-roughly 30% of your credit score is based on something referred to as “credit utilization”. This tracks how close you have come to your credit limit, how big your remaining balances are and the percentage of your total credit limit you have utilized. Using your card for everything that you would normally use a debit card, write a check or pay cash for can push your credit utilization higher resulting in a lower credit score. The advice provided recommends cutting back credit usage to get points several months before you plan a major purchase. This will improve your credit utilization numbers and your credit score.
- I was late on a payment but the debt is now paid off. So I’m good, right? False-Paying bills on time is the single most important factor that determines your credit score. One late payment will impact your credit for a year; even longer lates will hurt for 2-3 years; collections and bankruptcies will follow you for up to 7 years. In theory you are late if your payment is one day late. However, credit card companies know people move, take extended vacations or lose the bill. They don’t get upset if you’re less than 30 days late, usually. What should you do-grovel! Plead for leniency and if you’re a good customer, don’t be surprised if they waive the late fees and agree not to report the mistake to the credit bureaus. The silver lining is good credit history can follow you for decades. Even if you close the accounts, that credit will show for 10 years according to Barry Paperno, a FICO consumer-operations manager cited in the article.
- I haven’t gotten a loan in awhile, which should boost the “new credit” part of my score. Maybe-many businesses check your credit without your knowledge. Banks may pull your credit when you open a checking account and car dealers sometimes check your credit even if you haven’t applied for a loan. These “credit inquiries” can and do lower credit scores. The solution is to ask up front if a bank or business plans to check your credit score. Keep your shopping and associated inquiries confined to a few week period as these multiple inquires will not lower your score any more than a single inquiry. If businesses are looking at your credit over a period of months, expect your credit score to go lower for a year after inquiries stop. This does not apply to “soft inquiries” -defined as you checking your own score, a credit card company you have a card with checking on you or when credit card companies check your credit before offering you a “pre-approved card”.
- The score I pay for or get for free is my real score. Maybe not-This score may not be the same as the one a lender requests. Two of the three credit bureaus will sell you a score for about $16. You can get a free report once a year from all three bureaus which shows all the credit files they have for you. However, you won’t get your credit score unless you pay a fee. Go to www.annualcreditreprot.com to order your free report. My experience with lenders is they obtain credit scores/reports from all three credit bureaus.
- I should aspire to a score above 800. Bragging rights are about all you get with a credit score above 750 or so. Interest rates won’t get any cheaper for a car loan or mortgage according to the author. Those with credit scores in the 600’s or low 700’s should work to raise their score. Reaching the high 700’s will allow you some cushion, above that is meaningless!
For tips on raising your credit score, click here:http://movetoredding.com/2008/11/23/tips-to-pump-up-your-credit-score/
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Home Again-A Place To Hang Your Hat
REAL ESTATE PRACTICE, SHASTA COUNTY, TIPS FOR BUYERS
California property owners became accustomed to viewing their homes primarily as an investment and secondly, less importantly, a shelter to keep the elements at bay. Today, nearly 1 of 4 mortgages are “underwater”, meaning more is owed than the market will bear, causing many to re-evaluate home ownership.
Over the years I have tried to emphasize to my clients that buying a home should be viewed as gaining control of your future by allowing you to call the shots. Renters are always at the mercy of their landlords. Rent can be increased, you can be asked to move with little notice and making improvements to your abode benefits the landlord.
California’s climate and natural beauty has attracted residents from other states and all over the world wishing to live here in the land of endless summers. The side effect has been ever-increasing real estate values that, until recently, we took for granted. I try to explain that this is not the case in many other states.
My brother moved to Dallas Texas in the late 1970’s. He rented out his condo in Novato, knowing he would return to California some day. He bought a home in the Dallas suburbs for $85,000, lived there for nearly 20 years before selling it for slightly less than he paid for it and moved back to California. His condo in Marin County, which he bought for about $70,000 new, sold for more than $500,000 after minimal updating. The more than 6-fold appreciation windfall was not all that uncommon here in the Golden State.
Times have changed. Reality is setting in for many that saw their homes as cash cows to be milked whenever extra funds were needed. College tuition, a new car, boat or RV were purchased or paid for using equity extracted from homes that appreciated substantially despite the owner not lifting a finger. Home equity lines of credit (HELOC’s) have been frozen or canceled, credit tightening has made cash-out refinancing difficult and equity evaporation has made it impossible for many to lay their hands on needed cash.
Californians must change their attitude toward home ownership. Priority needs to return to it being a shelter and a tax writeoff. Even if market prices stabilize, I would be surprised to see double-digit appreciation return anytime soon. Banks will be stingy with loans, builders will be cautious building new homes hoping someone will buy them and the business climate has become so toxic in California that new jobs and industry will move elsewhere. Demand will be held in check and supply will be ample for those that desire home ownership.
I believe this is all for the best because it has made people look at home ownership differently. Buy because you want a place of your own, not because it is going to make you rich!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Credit Damage From Housing Bubble Burst Detailed
HOME LOANS, INDUSTRY NEWS, SHORT SALES, TIPS FOR SELLERS
A recent story in 
THE LOS ANGELES TIMES reported the impact of tough economic times on Americans’ credit ratings. Those that had trouble making their mortgage payments and sought a loan modification actually saw a modest improvement in their credit scores. Others that elected to unload their property by negotiating a short sale were not as lucky. On average, as measured by the risk-prediction index provided by VantageScore Solutions, those that successfully complete a short sale saw a 120-130 point drop in their credit score.
Those that walk away from their homes by defaulting on their mortgageresulting in foreclosure can expect a 140-150 point drop in their credit score, according to columnist Kenneth Harney. The worst thing one can do to damage their credit score is seeking protection by declaring bankruptcy. This method of avoiding debt obligations caused a 355 to 365 point drop on average. Why? Bankruptcy addresses all debt of the consumer including credit cards and car loans, not just the mortgage debt. To add insult to injury, the reporter points out that bankruptcies impact your credit for a decade.
It helps to understand the VantageScore Solutions index, whose scoring system is now being used by some of the nation’s largest lenders, differs from the three major credit bureaus that generate credit scores. Their scale ranges from 501 (subprime, high-risk) to 990 (super prime, low-risk). FICO scores can vary 50 to 100 points depending on the credit bureau generating the number while Vantage scores are more consistent for all 213 million American consumers with credit profiles.
It took little more than a year for consumers with super prime ratings-scores above 900, to fall from that tier in staggering numbers. More than 3 million Americans fell from the elite status in this time period. Additionally, almost 5.5 million dropped to the lowest credit category joining 34.4 million other Americans already there. These drops were attributed to late payments on mortgages, other serious credit delinquincies, short sales and foreclosures.
The lesson to be learned here is those in trouble with their mortgage should contact their lender immediatelyand seek a loan modification because falling a few payments behind will cause a drop of ”240 points on your score” according to Barrett Burns, chief executive of VantageScore. He goes on to explain this credit drop will impact your ability to borrow for years.
Good advice from someone on the inside!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Coastal Commission Bills Squashed
The California Coastal Commission had two bills pending that would have greatly expanded their powers over development including projects far from the coastal environment. The California Association of Realtors (CAR) have fought these bills and won, for now.
AB 226 proposed to expand the Coastal Commission’s authority to levy its own civil penalties instead of pursuing fines and penalties through courts. This bill, according to our lobbyists, “would give the Commission the power to be judge, jury and executioner” avoiding the due process allowed by existing laws. The bill failed passage in this first year of a two-year legislative session.
AB 291 would have allowed the Coastal Commission to halt permit application processing for “violations that have no relationship between the application and the existing violation on the parcel in question”. Both bills have been placed by their authors in the “inactive file” but can be revived next year.
Other bills which CAR opposed include:
- AB 827-a bill that would have allowed county recorders to charge a $3 per property-related document to fund archival services. What this bill really does is open the door for bill sponsors to circumvent local voters by calling this a fee instead of what it really is-a new tax. Without opposition, this could develop into a trend to tax property-related services to secure funding for a wide range of local government expenditures.
- SB 407-a point-of-sale mandate that would have required sellers retrofit their property with low-flush toilets, shower heads and faucets. The bill was amended dropping the point-of-sale mandate. CAR removed its opposition and the bill passed and now sits on the governor’s desk awaiting signature. The bill now would apply to all properties in California-requiring water saving retrofits by 2017.
- AB 758-another point-of-sale mandate requiring energy audits of all property being sold. The bill was amended “ensuring home energy audits or improvements will not adversely affect real property transactions and offers programs for cost-effective energy efficiency improvements for existing buildings”.
- SB 183-Yet another point-of-sale retrofit bill requiring installation of carbon monoxide detectors. The bill has been amended eliminating the point-of-sale requirement, delaying the deadline for implementation and adding language to the Transfer Disclosure statement regarding these safety devices. A final vote on this bill will take place when legislators reconvene in January.
Nearly a decade ago the Coastal Commission pushed a ballot initiative that in part required the state to adopt statewide septic regulations. Those regulations met stiff opposition during public forums held across the state in recent months. The regulations are under review and time will tell what the final regulations will require.
Realtors are now focused on lobbying for the continuation and expansionof the federal Homebuyer Tax Credit which is scheduled to expire at the end of November.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Fix It, Then Disclose It
REAL ESTATE PRACTICE, TIPS FOR SELLERS
Many home sellers get their home ready for sale by fixing, painting and replacing worn out items to get the best possible price. After all, many real estate professionals encourage their clients to do just that prior to placing a home on the market for sale. However, some sellers believe they do not need to disclose what repairs or alterations were made.
In reality, failure to disclose material facts about the property known to the seller is the basis for most lawsuits brought by homebuyers. The confusion arises in some cases because the seller corrected a problem and feels there is no need to disclose it to the buyer. However, a buyer should be made aware in writing all repairs and remodeling completed by seller and previous owners if known, so the buyer can ask questions or have their inspectors examine these areas more closely.
A case in point related by Dian Hymer, a San Fransisco real estate broker, is a seller that converted a basement to a den just prior to placing the home for sale. The home sold and low and behold the first time it rained, the basement flooded and all the improvements had to be demolished and removed. Yes, the seller was sued and the buyer won. The critical line crossed here was concealment after fixing up. The seller knew the basement flooded and not only withheld that fact, but added significant improvements to garner a better price which came back to bite him or her.
One form in the Realtor’s tool box to help avoid such disclosure issues is the Seller Property Questionnaire. This form goes above and beyond the state required Transfer Disclosure Statement by asking more in-depth questions of the seller. It asks 44 questions including if:
- Any part of the property was painted in the past year (covering stains from roof leaks?)
- Any water intrusion problems (mold?)
- Any pets inside (soiling the carpets?)
- Any repeated maintenance calls (clearing the sewer line of roots?)
- Any lawsuits (past or present-what was the dispute over?)
This form jogs the seller’s memory so they can disclose any past problems that a buyer may want to examine more closely. My experience has been that sellers forget about a problem because they have become accustomed to living with it, or have fixed it and forgot it even existed. This form reminds the seller of all aspects of the property which may be of interest to a prospective buyer. If a seller has to ponder if something should be disclosed, disclose it! Better safe than sorry.
Other things sellers can do to avoid disclosure problems:
- Take before and after pictures of any remodeling projects
- Have professional inspections done prior to placing the home for sale
- Keep records and/or receipts of repairs or replacements and provide to buyer if requested
- Attach extra sheets of paper if the forms don’t have adequate space to explain your answers
- Consult with your real estate agent or attorney for guidance on filling out disclosure forms
Some sellers are concerned disclosing material facts will scare buyers away. In reality, buyers would prefer knowing as much as possible about a property they are considering even if the seller thinks it’s problematic. Error on the side of over-disclosing, even if it scares a buyer away. Sitting across the table from a plaintiff’s lawyer is not where you want to be after selling a home!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Study Concludes Walkability Adds Value To Homes
LOCAL GOVERNMENT, REDDING LIFESTYLES, SHASTA COUNTY
A recent report by Joe Cortright of Impresa, Inc concluded homes located in areas with above-average levels of walkability garner about $4,000-$34,000 more than houses with average levels of walkability. Walkablity is defined as those areas with a mix of common daily shopping and social destinations within a short distance.
Unfortunately, few, if any, Redding neighborhoods can claim above-average walkability. Retail/commercial areas were intentionally located away from residential housing due to planning decisions made decades ago. Thus, Redding has grown outward requiring more roads, infrastructure, fire stations and police officers to adequately serve our ever-expanding city limits . This growth pattern is known as urban sprawl.
Redding planners unquestionably laid out the city to be auto-centric. One must hop in the car to grocery shop, find a hardware store or visit a restaurant. Only in recent years has the planning department seen the value of allowing residential uses above commercial space. Past planning has resulted in the city core becoming a ghost town after business hours. Workers must leave downtown for one of many subdivisions that sprawl outward from the city’s core in all directions. Patronizing a business requires staying in town after work or making another vehicle trip back into town after going home. More recently, planners are open to mixing residential and commercial uses. Where feasible, living units can be added over street level commercial space. I heard, but have not confirmed, new buildings under construction downtown have residential units on the upper floor.
The study also found that a value premium for walkability was higher in areas with extensive transit systems. If you can live somewhere where having a car is optional, the walkability premium is higher. Even if you still have to use a car to get where you want to go, commute times are shorter if you live close to areas with mixed uses instead of homogeneous subdivisions with mazes of streets that discourage walking. I live in one of those neighborhoods and doubt I would visit the park I can see from my home if I had to walk the labyrinth of streets to get there. Fortunately, I have a gate in my back fence that opens across the street from the park.
The health benefits of walkingare not the main motivation of households that buy homes in areas with high walkability scores according to the study. City planners have given walking little respect when considering transportation methods. That certainly seems to be the case here in Redding. Change will be slow as long as gas prices are painless and public transportation is inconvenient. Connecting and expanding walking trails around Redding may encourage walkers and bicyclists to leave their cars in the garage. Summer and winter weather will likely be a deterrent for all but the most dedicated anti-auto crowd.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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