How Many Loans are Too Many in a Short Sale?

Often in a real estate short sale there is more than one bank that has to be negotiated with. As a buyer and a seller you want to be aware of how many lenders have to be negotiated with in order to make the short sale process work as efficiently as possible.

So let's cover a couple reasons why you want to limit the number of lenders or even creditors that have to be paid in a real estate short sale.

1. Too Many Lenders lengthens negotiations - when you have lenders who have liens on a property they usually must be negotiated with separately and each can take 4-6 weeks to negotiate with. The lender in first position will not, in general, sign off on any short sale until the lenders behind them have agreed to get a very small amount, customary is $1,000.
2. Process are different - each bank can have a different process and as a result complicate the process for the buyer and a seller. You may have a cooperative first but if the second doesn't want to talk to you it may make it difficult to close the transaction.

Remember that tax liens also count and the government, in general, does not negotiate the amount they are owed so they must be paid and that must be factored into what the lenders are going to receive.

In our experience having any more than 2 lenders is too many lenders and it is highly preferred to have only one lender because you can work with them as efficiently as possible.

If the value of your home is such that the first lender will be paid in full but the second will be sold short it is still a short sale and make sure to keep the first lender informed of what you are doing.

Banks Not Giving Houses Away

Contrary to the media's belief that inventory levels of bank owned properties are so high that the banks will take anything we have found a bit that banks are holding their ground on many of their properties.

Bank owned properties (also known as REO's and Foreclosures) are currently being priced about 10% below the rest of the traditional resale inventory. This price point has enabled them to get showings, but many consumers feel that since it is bank owned they can offer whatever they want. Although we do empower our customers to write competitive offers for discounts there does appear to be a threshold that the banks will take.

On properties offers from Long Beach to Riverside we have found that the banks:

1. Will still discount off of their current list price (sometimes another 3-5%)
2. If it is a new listing the bank is usually less likely to give up big ground on price
3. Banks will counter offer! They aren't desperate enough to take anything
4. They have been willing to provide termite clearances in some situations
5. They like thorough offers with pre-approvals, FICO scores, and proof of funds like a traditional seller

Keep your eye out for the foreclosure, but act quickly. The well priced foreclosures in prime areas are often receiving multiple offers.

It would be great to hear what situations others have come across in their experience. We look forward to the comments!

Temple Lofts Blow Out for the final 9!

The Masonic Temple in Long Beach has been selling Lofts for 3 years. 3 years to sell 84 units. Now, in their defense, they only recently participated with the real estate community and since then sales have been brisk.

The Temple Lofts is a truly striking adaptive re-use project. Their attention to detail to keep the history of the Temple and compliment that with two new towers to the North and South is truly an achievement. Now, there are Just 9 Lofts left. So what is special about these remaining Lofts? Here are some highlights:

• 2 Penthouse units that used to be priced over $900,000 are now both below $600,000


• $50,000 incentive on many of the remaining units can be used anyway you would like from reduction in price to rate buy down


• Only 3 units left total between the towers. One in the North Tower has a great city view

If you were waiting for the right price, now is your time. The builder is happily working away to be done with their project so these prices are close to phase 1 pricing!

Los Angeles County Condo Sales for November 2007

Before we get into what's going on with the condo market in Los Angeles county California we hope that everyone is having a happy Dr. Martin Luther King Day and remembers the great work he did for everyone.

So what has happened in the condo market in Los Angeles county which of course affects long beach condos.

Well let's look at the graph of what happened in 2007 and in 2006 for condos sales and see how that will translate into where we are going in 2008.

• November condo sales in 2007 were up from October sales. This is actually great news when you look at last year sales were down in the same month. In fact sales were up almost 10% from the previous month.
• Overall condo sales are down 32% from the same point in time last year. While this is a large number there are several factors to consider: 2006 was still a record year and home sales were down an even greater number. Check out the post on home sales for more information and detail.

Overall when you look at how home sales are down and the fact that condo sales are down less it is a good sign for sellers who are looking to sell their condos. I am not saying that the condo market is going crazy but it does show there are available condo buyers and people have not abandoned the long beach condo or the Los Angeles condo so happy buying and selling!

Truth Behind Foreclosures in Long Beach

Although the amount of Foreclosures in Long Beach is much smaller than the media would have you believe, they are still available. People think of traditional foreclosures as "great deals" and of purchasing them at the court house for just pennies on the dollar.

Now as a matter of practicality you can purchase them at the foreclosure sales, but you better bring your cashiers check! For those who don't have a few hundred thousand in the bank ready to spend on a property you can still get a deal using a traditional search in the Long Beach MLS.

Here are some items to watch for to understand your purchase of a foreclosure in Long Beach.

• Each bank can have a different purchase contract. This can be an addendum to the traditional purchase contract or replace it entirely. Read the contract so you know what they require as many put in penalties for closing late.
• They are usually priced below "retail" inventory. They can be priced 10% below most inventory, but don't expect to get it at 50 cents on the dollar
• They are sold "as-is". The bank has already lost quite a bit of money on the deal so don't expect them to fix anything
• Make sure your offer is complete with FICO scores, proof of down payment, and a pre-approval letter. They want to see that an escrow will succeed like any seller.

Looking through the Long Beach MLS you can find a few foreclosures. Knowing the prices in an area will help you to spot the deals. Remember there are other people looking too so act quickly when you find that deal.

3 Options Besides a Short Sale

Often times borrowers who are behind on their payments don't realize there are other options besides a short sale that they can explore. While these options are offered less commonly by banks than a short sale you should always ask your bank or your real estate professional about these options.

1. Deed in Lieu of Foreclosure - this is where the bank agrees to take the title of your home back in exchange for not foreclosing on the property. Banks
2. Loan Modification - This is where the bank modifies your loan without creating a new one or having you re qualify. They may lower your interest rate, fix the interest rate so it doesn't adjust, or waive part of your balance.
3. Repayment Plans - The bank may take the amount that you are behind and spread the payments over a longer period of time so you can catch up on your behind payments. They may stretch the payments over 5,10, or more years depending on the bank.

Make sure you investigate all your options prior to proceeding with a short sale and understand what each can do for you.

Los Angeles County Home Sales for November 2007

The stats are in for November home sales for Los Angeles County. The graph to the left does not include condo sales. We will make a separate post on that so everyone can see what is happening in the condo market separately. So what happened in November of 2007? Well it appears that many were more focused on Thanksgiving than they were on buying a home.

So what does it mean looking at the sales as far as home values are concerned? Let's take a look.

• Sales of homes in Los Angeles County were down just slightly over 47% in comparison to 2006 which was near a record year of real estate in Los Angeles County.
• Values did not drop 47% in the same period. If they did this would be a much more different environment then it currently is.
• We conducted a small survey of a few hundred buyers that are looking and they felt that it was still a great time to buy and felt that they were just waiting for the right kind of property to become available.

What it looks like to me is that with rates continuing to drop and sales being down sellers are going to be happy to work with buyers. I don't think sellers are going to give their homes way for 50% of their value but it does look like they should be willing to help buyers purchase the home they desire.

Mortgage Relief Act Becomes Law

How scary is it to owe taxes on the sale of your home after you have already fallen behind on your payments? I would say pretty scary and thankfully the federal government agreed late last year to pass H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007 which changes the IRS tax code on debt relief for primary residences.

So what does this all mean? Well prior to the change in law, which became effective when President Bush signed it into law effective December 20th 2007 home owners who sold their homes on a short sale would receive a 1099 from the bank for the loss and it would be treated as income. This obviously created a problem because taxes would be owed on the debt relief but borrowers didn't have funds to make their mortgage payments and didn't have money for the taxes.

So now borrowers can work with a bank on a short sale without the fear of being hit with a 1099 and owing taxes for their principle residence. The tax code now excludes debt relief from a primary residence from being calculated as gross income. This law is in effect until 2010 and was created to address the current need of homeowners to sell their home without having equity.

More information on this law can be found at: http://www.govtrack.us/congress/bill.xpd?tab=summary&bill=h110-3648 which has a complete description of the bill and when it was signed into law.

What is a Real Estate Hardship Letter?

This is a question that is coming up more and more these days. I thought I would let everyone know what a real estate hardship letter is. A real estate hardship letter or a short sale hardship letter is written by a borrower or borrowers who have fallen behind on payments or are negotiating a short sale with a bank. This letter is written to explain why the home owner fell behind and why they need assistance from the bank with a short sale.

So what should a home owner include in a hardship letter?

• The loan number - funny as it might sound including the loan number is valuable as paperwork often gets lost.
• The reason one fell behind - whether that be the loan adjusted, loss of income, loss of employment, or a combination of factors.
• What the home owner did to try and stay current - if you borrowed or accrued other debt to keep current on your mortgage this is important for the bank to know.
• The truth - funny as it sounds make sure you tell the truth when writing the letter as the bank may choose to look into any and all claims that are made.

A hardship letter is required for most real estate short sales to get approved. We have yet to work with any lender who did not require a short sale hardship letter. Make sure the letter is written promptly and faxed in by your real estate professional or you to the appropriate department.

Related Posts

• 5 Ways to Protect Yourself in a real estate short sale
• 3 Options Besides a short sale

5 Questions to Ask your Long Beach Real Estate Agent

Finding a Long Beach real estate agent by doing online research is a great way to find someone who can help you with your goals. People who sell their homes usually interview 2-3 listing agents, however most people looking to purchase a property interview just 1. Interviewing 1 may be ok, if you find the right one, but we thought we would share some questions you might want to ask to ensure you have the right Long Beach Realtor working hard for you.

1. How many people do you help each year to purchase property? - This is better than asking how long someone has been in the business because many agents are in the business a long time but don't have the experience of helping that many people. The average agent helps 6 people a year.
2. Do you specialize in buyers? - Most agents help both buyers and sellers. Some agents specialize in just helping buyers and that can mean they are more up to date on their inventory and they can be more aggressive on offers because they aren't looking for sellers.
3. How long have you operated in the area that we are looking? - Closely related to question 1, but a bit different. Many agents help people across many different cities. If you want an expert in Long Beach, make sure the majority of their business is in Long Beach so you can get specialized attention.
4. Do you do a buyer's consultation? - This is a great question if you are on the phone. If an agent just asks you the number of bedrooms, number of bathrooms, and price then you might want to move-on. Experienced agents will take the time to meet with you and understand as much as they can about your goals before taking you to see a single property.
5. How will I be updated on properties that meet my needs? - Here you want to look for a process that the agent has defined. Do they call you weekly? Do they customize a website for you that is updated constantly?

We hope these help you to choose the right Long Beach real estate agent for you. Besides the questions here, find someone that you like to work with, it should be a fun process!

2007 Long Beach Real Estate Market...what did happen?

2007 was an event filled year with the Long Beach real estate market changing dramatically from previous years (as well as real estate markets throughout the country). Realistically it turned to a more "normal" real estate market but due to the difference from the previous strong years it was a shock to many. Here are some of the realities that occured in the past 12 months:

• Homes, condos, multi-units, and land still DID sell! - Sounds crazy but if you listened to the media you would think that inventory just sat around. Buyer and sellers were still active throughout many different cities.
• Home Loans are still available - Although the sub-prime market withered away a great deal, there are still loans that can help individuals and families purchase. Long standing programs like FHA and CalHFA have continued to support 100% loan programs and down payment assistance programs.
• No Crystal Ball - No matter what month we are in, or what year we are in, not the media or your local real estate broker can tell you exactly what will happen. Take the time to be informed and if you purchase get a loan that has a payment that is fixed for 5, 10 years, or more so you can be protected no matter what the changes occur.
• Foreclosures exist...but.. - Foreclosures are available, but not in the record numbers the media portrays. I have yet to see panoramic ocean view properties for 50 cents on the dollar.
• Limited Properties - Yes I did say limited properties available. What I mean is that there are limited properties that have appeal to buyers. Although we have a little over 2,000 available properties listed throughout the city, many are over priced, in poor condition, or not in the areas that many able buyers today desire. Finding just that 1 property (as most people are purchasing just 1 at a time) is a fun process but means focusing on requirements to find it.

2008 looks to be a year that buyers will continue to be able to have choices and sellers will need to have patience. We look forward to keeping you up to date on the latest Long Beach real estate information throughout the coming year!

Long Beach Real Estate Forecast....Fact or Opinion?

In my mind 2008 is officially here. A few minutes ago I was laying in bed going over all the things I had to do and wondering how in the world I was going to get them all done in time. Then I asked myself...In time for what? Will our industry survive the doom and gloom that everyone is preaching out there? After eleven years of working in this wonderful industry and area, will I be one of the ones still standing in 2009? Of course!

It's so easy to get caught up in all the negative clatter around us. We enjoy a wonderful and beautiful area here in Long Beach and for that reason (as well as location) we should bounce quickly from the short pause we experienced in the last quarter of 2007. When will the bottom arrive you ask? I ask you in return...why do you care? You can take a look at any ten year span here in the Long Beach and see that every single time property values increase. That's any ten year span. So, for example, if you looked at 1990 to 2000 or 1956 to 1966, your property value would have increased.

The days of turning and burning are going to be gone for a bit, however for future homeowners, move up buyers and the like it's a great time to buy or sell. Why? Interest rates are still at historical lows and we've shifted into a buyers market. I believe Long Beach will enjoy a great real estate market this year. Not only for the reasons listed above, but also because of location. People are always moving west and unless you have gills, we live as far west as you can go. That's a huge factor in this type of market when you're looking at it from a 10,000 foot perspective nationally.

So, whether you're a real estate professional like myself or a consumer looking to buy or sell. Get ready for 2008 and brush off all the negative chatter around you. As my father always told me growing up..."Don't worry about what others are saying or doing, just pull your little red wagon down the road and do your own thing!" Cheers to you and yours and whatever side of the fence you're on...Happy Hunting out there!