SHORT SALES Category
Efforts To Streamline Short Sale Process Underway
HOME LOANS, INDUSTRY NEWS, REAL ESTATE LEGISLATION, SHORT SALES, TIPS FOR SELLERS
Lenders, loan servicing companies and homeowners have been fighting over how to deal with mortgages that are underwater. According to a recent article in the New York Times “more than 5 million households are behind in their mortgages and risk foreclosure”. The Obama administration has targeted billions for loan modification programs that have helped very few.
A new program to be launched April 5 will attempt to help homeowners unload their homes using the short sale process. The program aims to streamline and standardize the process by establishing some ground rules for determining who gets how much. The benefits this program is intended to create include:
- More net proceeds to the investor doing a short sale than a foreclosure
- Set amount of cash for the loan servicer ($1,000)
- A predetermined amount for second lienholders, if any ($1,000)
- Less damage to the home owner’s credit rating
- Relocation money for the homeowner ($1,500)
- Assurance from lender the homeowner will not be sued for any dollar deficiency
- Fewer empty homes waiting to be foreclosed upon
Real estate agents would be used to establish the home’s current fair market value. This value estimate would not be shared with the homeowner but if an offer meets or exceeds the indicated value, the lender must accept the offer. Lenders want proof the homeowner has done everything possible to keep the home including trying to sell the home or utilized available savings to make payments.
Those of us that have handled short sales know how frustrating the process can be for homeowners, title companies, lenders and loan servicing companies. Some are easy to work with while others have made the process very difficult and time consuming. It’s not unusal to have the first couple of buyers fall by the wayside before the investor wakes up and agrees to a short sale. Any help by the federal government to regulate the process is welcomed by real estate professionals.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL REAL ESTATE SALES EXPERIENCE
Redding/Shasta County Real Estate Market Update
INDUSTRY NEWS, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
Distress sales continue to represent a significant number of homes selling in today’s market. The second week of March was marked with 465 homes pending. Of these, 133 are bank-owned homes and 157 are short sales or 41% of all homes under contract. These same two segments of the market only account for 31% of the 1379 active listings.
February saw 131 homes sold. 85% were listed for $300,000 or less. More than a third of the homes sold were priced under $150,000. Ten more homes sold this February than a year ago. The number of bank-owned properties listed for sale has doubled from a year ago.
Home prices continue to slide downward as noted by a local real estate appraiser. The last quarter of 2009 saw the average cost per square foot of homes in all areas served by the Shasta MLS drop from $122.75 to $114.86. On the positive side, prices for new homes actually increased to $158.29/square foot from $147.72. However, there have been far fewer new homes sold year-to-date than the last quarter of 2009. Homes more than 5 years old in Redding sold on average for $125 the end of 2009 and for $120 thus far this year.
The area price declines can be pegged to continuing high numbers of homes in various stages of foreclosure due to high unemployment and sharp price declines after the housing market bubble burst. Banks seem to be in no hurry to clear their books of overvalued assets which prevents steeper declines in prices in the near term but prolongs the overall recovery of the housing sector.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL SALES EXPERIENCE
Redding Real Estate:Newer The Home, Higher The Value!
INDUSTRY NEWS, REDDING LIFESTYLES, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
A local appraiser points out that homes 5 years of age or newer have the highest average value on a cost per square foot basis. The average price of a newer home is $286,172 or $155.9 per square foot. The average of homes 6 years or older drops precipitously to $116.7/square foot. All homes sold in the area served by the Shasta MLS average $121.6/square foot. To get a rough idea of what your home is worth, multiply your square footage by the average cost per square foot based on your home’s age.
My own numbers indicate homes for sale on the Shasta MLS inched up to 1329. Pending home sales have risen to 429 Monday compared to 382 one month earlier. The number of bank foreclosures listed for sale continues to rise with 176 available active home listings.. That number was less than 120 for most of 2009. 111 of the total pending home sales are bank repo’s. 138 homes have closed escrow thus far this year.
Short sales continue to be a significant part of the market. 233 sellers are trying to sell their homes for less than what is owed. Together with foreclosures, distressed sales are predicted to represent half of all transactions in 2010.
Those that lose their homes to foreclosure can expect to wait 3-4 years before being qualified to buy a home again. Members of credit unions may be able to purchase again in as little as a year. Credit unions typically hold their loans instead of selling them to Fannie or Freddie GSE’s allowing them to set their own rules for reconsideration. Divorce, medical bills or job loss may be legitimate reasons for allowing someone to re-enter the housing market on a case-by-case basis. Chapter 7 bankruptcy is likely to prevent one from buying for 5 years or more.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL SALES EXPERIENCE
Is Your Taxable Property Value Too High?
LOCAL GOVERNMENT, SHASTA COUNTY, SHORT SALES, TIPS FOR SELLERS
Proposition 8 requires county assessors review property values used to calculate property tax bills when the current value drops below the base year valuation. Some California assessors have waited for property owners to request a new appraisal while others, including our elected assessor Leslie Morgan, have taken the initiative to examine thousands of properties purchased after 2002. Leslie Morgan and members of her staff updated Realtors on actions taken by their department to bring area property values in line with the current market at our weekly MLS meeting.
More than 32,000 of Shasta County’s 95,000 properties were reviewed and approximately 16,400 saw a drop in their taxable value. In fact, Shasta County property owners collectively paid $12.5 million less in property taxes as a result of Leslie’s actions. This translates to billions of dollars of lost property values across the county. Sacramento feels the hurt because they keep the lion’s share of property tax dollars that are collected by the county and forwarded to the state’s general fund. Only 13 cents of each tax dollar is returned to the county.
The challenge for county appraisers is selecting from two distinct pools of sales data-arms length transactions involving owner occupied, well-maintained properties or distress sales which include neglected bank-owned properties and short sales. Referred to as two-tiered market comparables, the appraisers must decide which pool to draw sales data from when conducting a reappraisal.
The county also received more than 500 appeals from property owners contesting the value of their property as reflected on the tax roll. This usually happens when the tax bills are mailed out each fall. Less than half of these properties were adjusted downward according to Leslie. Appeals are accepted after the tax year begins July 1 but the appraisal must reflect the value as of January 1 of the current year.
Another challenge is the lack of closed sales to choose from. The slow real estate market means there are fewer properties in a given location to use for an appraisal. This is an even greater challenge in rural areas of Shasta County. In some cases, the appraisers are so buried with a backlog of properties to evaluate they encourage property owners to file a formal appeal to protect their rights to have their property reassessed. This way they can have the value adjusted at a later date and receive a refund if there was an overpayment of property taxes.
One positive note is the inflation rate was negative for 2009 so the county will not be adjusting property tax bills upward this tax year. Prop 13 allows up to 2%/year increase if the CPI has increased by at least that amount.
Legislators are discussing possible revisions to Prop 13 in light of the spending problem in Sacramento. There is a push to split the tax roll-assessing commercial properties differently than residential properties. If this happens, it would be one more reason for businesses to move out of California.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL SALES EXPERIENCE
Redding Home Prices Slip Further in 4th Quarter 2009
INDUSTRY NEWS, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
Despite news that prices have bottomed elsewhere in California, Redding home values dived nearly $4 in the average cost per square foot in the last quarter of 2009 from $133.35/foot to $129.7/foot. The average cost per square foot year-to-year dropped from $148.16/square foot in the final quarter of 2008 representing a 12% drop in value for homes in Redding for the year.
A local appraiser tracks these statistics and reports them monthly to others in the local housing industry. These numbers are for Redding only and could be higher or lower depending on each property’s amenities. Newer homes will generally sell at a higher cost per foot while older homes will sell for less. The average home size is about 1750 square feet in Redding.
The avearge home price followed suit dropping from $260,102 in 2008 to $226,466 in 2009. According to the local paper, the median price for Shasta County finished the year at $185,000. This reflects lower values in neighboring communities of Anderson, Cottonwood and Shasta Lake City. In general, smaller homes around 1000-1200 square feet will sell at a higher cost per square foot and homes over 2000 square feet will sell for less than the average. This is due to the fixed costs associated with building a home-land and permit fees, that are about the same for any sized home.
As of Monday, January 11, 2010 there are 1313 active residential listings, 377 homes pending, 165 bank owned homes listed for sale and 215 property owners attempting a short sale. The big change here is the number of bank repo’s for sale. Last year the number hovered between 100-120 from June through October. Since October, that number has crept up steadily to today’s level. Based on the number of NOD’s (Notices of Default) being filed in Shasta County, this trend is not likely to change anytime soon. Our higher-than-average unemployment rate may be to blame.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Shasta County Housing Market-A Year In Review
INDUSTRY NEWS, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
Thankfully, 2009 is in the history books! It was a trying year for many in the housing industry. Real estate offices closed, escrow companies pared their staffs to the bones, lenders struggled with ever-tightening underwriting rules and appraisers are valuing properties conservatively after being blamed for overvaluing properties during the bubble. What follows are my tabulations of yearly totals for 2009:
Homes sold-2045 ….up slightly from 1942 units in 2008
Distress sales-926 or 45% of all home sales, up from 33% in 2008
Inventory level-Started with 1495 active listings Jan. 5, 2009 compared with 1301 on Jan. 4, 2010
Pending home sales -Started with 257 in escrow the beginning of January and compared with 382 in escrow 1/4/2010
I started tracking REO’s (bank repo’s) listings in June because I believe these are an indicator of our local market’s health. The number was amazingly stable most of the year with 100-120 available on any given day. However, that changed in November when the number of active REO listings on the Shasta MLS started inching upward to today’s level of 160.
Before anyone can say the local real estate market is on the path to recovery, the level of distressed properties available in our marketplace must recede to less than 100 in my opinion. David Benda reports a monthly tally of the homes entering foreclosure which foretells what the market can expect 3-6 months later. Peak foreclosure activity may be behind us but these properties must be listed and sold before our market will return to something resembling normalcy.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
MORE THAN QUARTER CENTURY LOCAL SALES EXPERIENCE
Redding Real Estate Market Update
INDUSTRY NEWS, SHASTA COUNTY, SHORT SALES, TIPS FOR BUYERS, TIPS FOR SELLERS
Last year about 1/3 of all homes sold fell in the distress sale category. This year that number has increased to 44%-no big surprise. Next year expect half of all sales to be distressed sales-either bank foreclosures (REO’s) or short sales. So far, 1792 homes have closed escrow on the Shasta MLS for 2009 of which 622 were REO’s and 172 were short sales.
Currently, just over 1400 homes are for sale. 133 of these active listings are REO’s. 231 are short sale listings-where the total loans and closing costs exceed the home’s value. 464 homes are pending sales. That works out to 3 homes available for every home pending. This is much better than 2007 when there were seven homes for sale for each home pending.
The average cost for a 1750 square foot home in Redding hovers just below $130/square foot. That number was $139 at the beginning of the year. 211 homes closed escrow in October-up from 178 a year earlier. 77% were priced at or below $250,000. No homes sold over $700,000.
The foreclosures taking place today are primarily on homes owned by creditworthy borrowers in financial distress due to job loss or a cut in hours. The economy is to blame, not sub-prime loans. Banks have the unenviable task of foreclosing then selling these properties. Placing too many of these homes for sale in the same area at the same time could drive down values which would undermine other loans on neighboring properties held by these banks. Taking too long to get these REO’s off the books could prolong the housing crisis by several years. The inventory of REO’s in Shasta County is on the rise despite a nearly insatiable appetite for these homes by first-time buyers and investors. 2010 may be the year the real estate market turns the corner heading for better times.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
E.A. Discusses Tax Implications of Short Sales
Enrolled Agent, Earl M. Salter, addressed members of the Shasta Association of Realtors regarding what sellers of over-encumbered homes should expect from the IRS. Homeowners in this predicament should consult with an accountant or enrolled agent prior to pursuing a short sale. It is a viable option for those that took out a purchase money loan to buy the home originally. However, if the property was refinanced or is not the primary residence of the homeowner, selling short could create unwanted income tax liability.
Earl said 95% of the time a property owner has no tax liability if the property was their personal residence and the loan was taken out to purchase the property. These loans are referred to as “non-recourse loans”. A homeowner should make sure their lender will issue a 1099C after the transaction closes. If the lender will not provide this debt forgiveness form, the lender could pursue the loss for up to 10 years. Some lenders are selling these debts to collection agencies which will pursue the homeowner for the amount forgiven. Earl said a good indicator a 1099C will not be issued is when the loan has been sold to investors.
In the event a homeowner is not provided a 1099C, bankruptcy may be the only option to get out from under the debt. To add insult to injury, the IRS may consider any debt forgivness income and tax the “gift” accordingly. The same will happen if a borrower successfully negotiates a loan modification with a principal reduction.
Anyone considering a short sale should consult with a tax professional before determining a course of action. Failure to do so could result in unexpected tax consequences. Contact me if I can be of help.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
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
CAR Releases 2009 Housing Survey
The California Association of Realtors released their annual survey of home buyers. Factors motivating buyers to buy now center on favorable home prices, record-low mortgage interest rates and concern that interest rates may climb in the near future. More specifically, 68% cited price declines as the main reason they decided to buy now while 39% were motivated by low interest rates and 23% feared future interest rate spikes.
Nearly half the buyers purchased a home through a traditional market sale. 38% purchased a foreclosed property and only 13% bought a short sale. Just over half the sales are distress sales-REO or short payoff properties. Buyers of distressed sale properties reported more difficulty obtaining financing. Buyers rated their level of difficulty on a scale of 1 to 10. Distress sales were rated at a level of difficulty as 8.9 compared to 7.7 for traditional properties.
A local mortgage broker offered a theory as to why banks are making short sales difficult. Banks can write off the losses when they take a property back in foreclosure. Banks can also package and sell the properties they acquire to other banks recovering some of their capital. They can then ask for TARP funds to offset a portion of their losses.
Low mortgage rates and more affordable home priceshave contributed to a housing market rebound in 2008 and 2009 after two years of sharp declines according to CAR President, Jim Liptak. State and federal tax credits are cited as additional factors helping the market recovery. However, money set aside for the state tax credit, allocated to buyers of new homes, has been largely exhausted.
Looking ahead, the concern I hear over and over again from financial analysts is that mortgage rates could increase significantly due to the increasing national debt. The more money the feds print, the sooner this day of reckoning may come!
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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