Short Sales here to Stay, Title Company Official Tells REALTORS®

Katherine Handley, senior vice president of Old Republic Title Company

Short sale transactions are not just passing through the market; they are here to stay for at least three or more years, according to senior vice president of the Old Republic Title Company Katherine Handley. Handley advised REALTORS® at the Cupertino/Sunnyvale District tour meeting this week to learn as much as they can about these types of transactions, so they can render the best assistance to their clients.

Short sales used to be more prevalent in the lower-end markets impacting the huge, growing subdivisions that had overbuilt and subprime loans, but these days, they are starting to impact higher-end markets. Handley has also observed some lenders have become more pro-active.

“They will curtail REOs as much as possible and be more active in working out a short sale,” Handley said. 

She also stressed, “There is no such thing as a quick and easy short sale. They are brutal.”

With a few exceptions, the standard time for a short sale transaction from close to finish is four to five months, or longer. Handley gave her opinion on several lenders:

• Washington Mutual/Chase is on Handley’s “horrible” list because it could take four to five months or more before you can personally speak to a negotiator.

• Bank of America/Countrywide has improved its process with the introduction of equator.com, which allows licensed agents to register, upload information and communicate through this platform. This appears to be speeding up the process.

• Wachovia is on Handley’s “best” list because this institution is being very pro-active and has local people who immediately meet with the sellers to determine hardship. Transactions can take only 45 days. This lender will also offer up to 7 percent commission for agents. It is the only lender to give the seller a cash-out at closing.

• Wells Fargo is also improving slowly.

Here is Handley’s advice to REALTORS® whose clients are considering a short sale:

1. Give your client ALL options up front, so your client can decide whether a short sale or a foreclosure is the right route to take.

2. Partner with a knowledgeable, experienced attorney and CPA even before putting the property up as a short sale. These experts will be able to advise and guide your client on what to expect.

3. Make sure you know whether the seller has a recourse or nonrecourse loan. Handley said at one time second lenders were complacent and satisfied with a small amount of money; these days they have become more aggressive and even ruthless, pursuing the seller immediately after closing.

4. Prepare the seller, buyer and buyer’s agent for the time frame. “Make sure all parties are willing to go all the way. If they are willing to hang on, then you will have a greater chance of success,” Handley said.

5. Once the lender reviews the package and comes back with conditions, be proactive and creative with solutions.

6. Read the short sale approval letter carefully. The letter will contain conditions that affect the buyer and the seller. These letters are time sensitive, usually with a window of 30 days. Delays will come at a price, such as losing the deal, a reduction in commission or a per diem fine.

7. Make sure letters between the first and second lenders match.

8. Make sure it is an arms-length transaction. Parties cannot be related.

9. There are no flips on short sales; you cannot immediately transfer the deed to the property.

10. Learn everything you can about short sales.

“The best advice I can give you is learn short sales, arm yourself with someone who can give you tax and legal advice, learn what they are all about so you can be a true professional and help your client,” Handley said.

New Lending Policies Announced by FHA

	If you've been listening to the housing news, you've probably heard about some lending changes that were announced by the Federal Housing Administration (FHA). While many of the news reports were confusing, the truth is pretty clear...and isn't as bad as some people may have heard. Overall the measures announced by the FHA are intended to help the organization better manage its risks and strengthen its capital reserves, while still providing home loans to the nation. The good news, as FHA Commissioner David Stevens stated recently, is that "by continuing to provide affordable, responsible mortgage products, FHA will support the housing market's recovery" and "remain the largest source of home purchase financing for underserved communities." What's Changing? If you or someone you know is considering an FHA loan, some of these changes may affect you. Here's a clear, concise rundown of the major changes and what they mean: 1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing. This change will become effective on April 5, 2010. 2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility. 3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy. In addition to these changes, the new policies contain a series of new measures aimed at increasing lender enforcement. The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans. If you're concerned about your credit score or are worried about what these changes may mean to your specific situation, please call or email to schedule an appointment. There are many different programs available for homebuyers, so finding the right plan for you just requires a short discussion about your goals and financial picture.

Brandon Knapp's Market Update 3/1/2010

http://www.mmgweekly.com/w/index.html?SID=89e3b2c88ef35d68afff6abeb34bec4c

Brandon Knapp's Market Update 2/24/10

http://www.mmgweekly.com/w/index.html?SID=89e3b2c88ef35d68afff6abeb34bec4c

El Dorado Joins Proposition 90 Counties

PROPOSITION 90 - Inter County Base Year Transfer

On December 10th, 2009, the El Dorado County Board of Supervisors approved the introduction and 1st reading of the Proposed Prop 90 ordinance. On December 15th, 2009 the Board adopted the ordinance after its second reading. The ordinance has an effective date of February 15th 2010, which is 60 days after the adoption.

As the ordinance is currently written and based on Revenue and Taxation Code Section 69.5 (Prop 90), in order to qualify for a base year transfer:

• The replacement residence must be acquired after the effective date of the ordinance allowing base year value transfers from other counties.
• As of the date of transfer of the original property, the claimant or the claimant's spouse is at least 55 years of age or severely and permanently disabled. There is no age requirement for persons who are severely and permanently disabled.
• The claimant and/or the claimant's spouse has not previously been granted the property tax relief provided by section 69.5. The sole exception to this requirement is if relief was first granted for age, relief can be granted a second time if the claimant or claimant's spouse subsequently becomes severely and permanently disabled, and has to move because of the disability.
• The original property was eligible for the homeowner's exemption or the disabled veterans' exemption either at the time it was sold or within two years of the purchase or new construction of the replacement dwelling.
• As a result of its transfer, the original property must (1) be subject to reappraisal at its current full cash value in accordance with sections 110.1 or 5803; or (2) receive a base year value determined in accordance with section 69 (intracounty disaster relief), section 69.3 (intercounty disaster relief), or section 69.5 because the original property qualified as a replacement property under one of those sections.
• The replacement dwelling is purchased or newly constructed within two years of (before or after) the sale of the original property.
• The replacement dwelling must be eligible for the homeowner's exemption at the time the claim is filed.
• The replacement dwelling must be of equal or lesser value as compared to the original property. This means that the full cash value of the replacement dwelling on the date of purchase or completion of new construction must not exceed:

1. 100 percent of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed prior to the date of sale of the original property,
2. 105 percent of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed within the first year following the date of the sale of the original property, or
3. 110 percent of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed within the second year following the date of the sale of the original property.
   
   The "full cash value of the original property" includes any inflationary factoring that occurs between the sale of the original property and the purchase of the replacement dwelling. The "full cash value of the replacement dwelling" does not include any inflationary factoring.

• If the original property was substantially damaged or destroyed by misfortune or calamity and sold in its damaged state, the full cash value is determined immediately prior to the misfortune or calamity.
• The claimant must file a claim for property tax relief under this section within three years of the date the replacement dwelling was purchased or the new construction of the replacement dwelling was completed. 

The above requirements were taken directly from guidance issued by the State Board of Equalization in 2006. The complete document, which contains additional detailed information and is written in a Q&A format, is available by clicking on this link:http://www.boe.ca.gov/proptaxes/pdf/lta06010.pdf
In addition, the ordinance requires an application fee of $500 to the Assessor.
The Assessor is currently developing tools to help real estate professionals, homeowners and others determine if a base year value can be transferred. This will be made available as soon as completed.
If you have any questions, please call Tim Holcomb, Assessor at 530.621.5755 or Assistant Assessor Karl Weiland at 530.621.5757.
Thank you

Claiming Your Home Buyer Tax Credit for 2008 or 2009

Procedures have not remained constant when claiming a home buyer tax credit.  Here is a link to procedures as of February 26, 2010.

http://www.irs.gov/newsroom/article/0,,id=187935,00.html

Brandon Knapp's Market Update 2/15/10

Brandon Knapp of RPM Mortgage's weekly market update.
http://www.mmgweekly.com/w/index.html?SID=89e3b2c88ef35d68afff6abeb34bec4c