Short Sales in Long Beach are 26.6% of the market

How many short sales are there in Long Beach, CA? According to the MLS that serves the area 26.6% of properties are either attempting a short sale or are about to be one. By the way that is for those who are accurately reporting the situation (this is solely my opinion and more on that later in the post).

How Much Inventory is Available in Long Beach?

The answer may surprise some. There is actually less inventory today then there was just a few months back. The inventory level in Long Beach, for residential properties, is actually decreasing.

• Total Available Properties: 1,683
• Total Properties Facing Short Sale: 448

I define properties facing a short sale as defined as any property that has been identified by the listing agent in the MLS as:

• Short Sale Subject to Lender Approval - The definition of a short sale.
• Notice of Default - This means that the lender has issued a notice that the owner is behind on their mortgage and in danger of losing their home. I am making an educated guess that most people in this situation owe more than the property is worth or they would sell it and get out.
• In Foreclosure Process - another phrase that means the property is still owned by the seller but they are having some financial hardship.

Is everything being reported?

I would say that not everything is being reported. Some homes start off as regular sales and as the market has adjusted they have turned into short sales and not all listings may have been updated. Some agents have said they don't report that their property is a short sale so that they get more showings. This is a violation of MLS rules but they are doing what they think is right for their client.

What does this all mean

It may mean that far more than 26.6% of properties in Long Beach are short sales or may eventually be owned by a bank. Does this mean the market is failing apart? I would say no. Properties are still being sold every day. It does mean that you need to price your property aggressively if you are a seller.

Properties that are in top condition still get multiple offers when priced aggressively.

Related Posts

• Where have all the short sales gone
• Mortgage Relief Act Becomes Law
• 5 Ways to Protect Yourself in a Short Sale

Where have all the short sales gone?

Short sales were the only thing that people could talk about in 2007 and it seemed like that was going to continue in 2008. But truly what has happened to all of the short sales? First there are plenty of short sales available on the market in Long Beach. Some areas of the city have more to choose from than others. It is quite easy to find a short sale in north long beach or in the westside of long beach. If you were looking for an amazing short sale deal in belmont shore you will be pretty much out of luck. So what has changed this year compared to last? Well let's take a look at a few items that have changed.

• Passing of the Mortgage relief act - this allowed consumers to complete a short sale without the tax ramifications that used to exist.


• More short sales - there are more short sales on the market this year compared to last year. While the statistics are difficult to come by a sampling of different areas has shown an increase on a percentage of available properties.


• Some banks have stopped doing short sales - countrywide has recently stopped approving short sales for investment properties. Some banks are deciding that foreclosure for them is a better option.


• Consumers have become frustrated with the process of short sales - consumers and real estate professionals have found it difficult to work with banks on short sales and found it easier on REO (real estate owned) or bank owned properties.

What does this all mean? It means that one needs to know all of the facts prior to going after a short sale. You need to know the experience of the agent helping you, the agent on the other side, how many banks, and to have a high level of patience. Know the facts about the short sale process.

Related Posts:

• Mortgage Forgiveness Debt Relief Act


• 5 Ways to Protect Yourself in a Short Sale

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.

5 Ways to Protect yourself in a Short Sale

Did you ever think that you needed to protect yourself in a short sale? If you didn't we hope you will after this post. A short sale is really just like any other transaction except that you have a bank that needs to approve the price you offered on the home. So in order to make sure things go smoothly you need to make sure a few things happen.

1. Make sure you are THE offer that is submitted to the bank - some agents, incorrectly, submit multiple offers to the bank and let the bank decide. Let's be very clear about this. The bank doesn't own the property in a short sale. They may decide the terms and they will certainly determine what price they are willing to take but it is not their decision to decide which buyer to work with. The seller still owns the home. If the listing agent says they are going to submit multiple offers, not open escrow, or submit offers as they come in find a new home to submit an offer on.
2. Use the C.A.R form SSA (Short Sale Addendum) - this is for California short sales. This form provides the buyer protection in that the buying contingencies do not start until after the buyer receives written approval from the bank. It doesn't make sense for a buyer to spend time and money on a property that the bank may not approve the price so wait (patiently) for the bank to perform their process so you can do yours.
3. Make sure the listing agent has done this before - We are all for people getting experience but it is critical to make sure the listing agent has experience in this process as it is a complicated one for the listing agent as there is far more to do than a standard sale for them.
4. Have preliminary title pulled for the property - your buying agent or the listing agent can supply this for you from their title representative. This will show you liens on the property and give you a clear picture of what has occurred (in a title sense) with the property.
5. Make sure the escrow company is familiar with short sales - It is important to have an experienced escrow company that embraces the short sale process and doesn't charge the buyer cancellation fees. Make sure you read all of their documents and interview the escrow officer before you open escrow.

We hope that these 5 Tips make sure that you have a successful short sale and help you protect your time and your money.

What is a Real Estate Short Sale?

In today's changing real estate market we hear the word short sale used many times. In fact the word is used by both real estate professionals and home owners. Often times the definition of what a short sale is is not clear. It is critical that all parties understand what a short sale in real estate is.

We thought we would define a short sale and give an example so that everyone knows what it is.

A short sale is where a property is being sold for less than the total amount that is owed to all lien holders on the property.

So in other words if the property cannot be sold without the seller, the bank, or someone on the selling side having to take a loss or bring money into escrow to close the transaction it will be a short sale. Short sales are most often done with a bank and that is what we will cover here.

An example of a short sale:

• Loan 1: $300,000
• Loan 2: $50,000
• Total Value of Property: $315,000

So in the above example the property is at least $35,000 short of what is needed and that does not take into account real estate commissions and other fees necessary to sell a property. This is what is considered a short sale where the home owner will go to the bank to ask for assistance.

H.R. 3648 ~ What it means to you

H.R. 3648 would amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income.

View H.R.3648

Read more about H.R. 3648 at Washington Watch.

Short Sale vs Foreclosure - Which is best

In this market with the change in interest rates, jobs, and opinions from everyone it is often asked why would I do a short sale or why not just walk away from the home and let the bank take it into foreclosure? Both are very valid questions and while we can't get all the reasons out there we thought it might be good if we go over a few reasons for each and why you may or may not do each one.

Short Sale

1. This is the process where you actively work with the bank and a loss mitigation specialist to sell your home even though you owe more than the home is worth.


2. This is a valid solution if you want to prevent a foreclosure from showing up on your credit report.


3. You want to limit the number of late hits to your credit report as it can often be accomplished much faster than a foreclosure.


4. You want to face the issue at hand and have a bank that understands that these things do happen.

Foreclosure

1. You bank has indicated to you and your real estate professional that they have no intention of working with you on a short sale. Make sure this is in writing before proceeding.


2. You may or may not have multiple properties that you cannot get short sales negotiated on.


3. You are OK with significant damage to your credit and having to report that you had a foreclosure on future lending applications.

In all both are solutions that will help a homeowner when they are faced with mounting or increasing mortgage payments that cannot be met. Be very wary of individuals who guarantee they can make a short sale work or guarantee that they can prevent foreclosure unless they are personally going to buy your home and can show you proof of that in writing that they don't mind getting notarized. In the end not one single solution is best. What is best is the one that works for you and your family. Make sure that you receive appropriate advice from your real estate professional as well as your tax advisor prior to pursuing any course of action.

5 Tips to Working with Banks on a Short Sale

Now often times real estate professionals and buyers are scared of submitting offers on short sales because of the fact that banks are involved and the time frame that they take. These situations can often be beneficial for the buyer, seller, and the bank. Banks do not want to go to foreclosure. I know we have stated that in previous posts but they do not. It costs them more money, time, and effort to go to foreclosure. As banks work on their process of short sales there are things you can do as a buyer, a seller, and have your real estate professional do that will help improve the process for everyone.

5 Tips to Working with Banks on Short Sales

1. Have a well documented offer - An offer from a buyer must be so complete that there are no questions that can be asked that an answer is not readily available. Make sure that the buyer has taken time to get pre-approved. Ensure that they submit credit scores (with sensitive data deleted), bank statements, and any other information that a lender would want to do. They want to make sure that things go through successfully.
2. Communicate with the bank regularly and kindly - Banks have people who work for them who are people and not robots. Be kind and call at least once a week to see if anything is needed or missing. This is generally done by the seller or the listing agent as they are the ones who generally have signed authorization to speak to the bank.
3. Make sure the sellers packet is complete!!! - Nothing is worse than having the seller forget to give ALL their information to the bank. Ask the selling agent if the sellers packet is complete and ready to submit.
4. Be patient - The banks are assisting many home owners and are working hard at things. Understand that these things take weeks and sometimes longer than promised. If you are the agents regularly communicate
5. Be Understanding - This is for all parties involved. More than likely commissions will be reduced, repairs may not be authorized or approved, and time frames will extend. It is still a situation that helps out all parties and prevents foreclosure.

These tips will help make the short sale experience as pleasant as it can be for all parties involved.

3 Times to Consider a Short Sale

Often times I am asked the question by clients, friends, colleagues "When should someone consider a short sale?" It is important question today and it is important to know that a short sale is an option that may not work for all but should at least be considered. So today we wanted to address situations and time frames on when you should consider a short sale.

• You are currently 30 days or more behind on your mortgage and you can't catch up - Now this is important. There are times when people get behind on their mortgage because they are working on a business, tending to family, or waiting for a disability payment that they are guaranteed will come in. If you are behind in your mortgage and know you will be able to make it up call your lender and explain your situation to see if they can work with you to adjust your payments temporarily. If you can't catch up and know you will not be able to make up the payments calling your lender immediately and asking for short sale information is important.
• You are about to miss your first payment and you know you will not be able to make future payments - If you can see that you won't be able to make future payments because your loan is adjusting upwards then contacting a real estate professional is critical. Often times people have enough equity to sell but not to refinance. It is important to get this information from a specialist. I always recommend speaking to a real estate professional and a lending professional. I do not recommend speaking to 1 person who does both lending and real estate. Have the real estate professional or the lending professional refer you to someone that they have used on their own home. If you don't know anyone or didn't like the last service you received try the bank or credit union you bank at or ask a friend whom you trust.
• You have received a Notice of Default (NOD) from the lender - This means they have filed the legal paperwork recording that you are in default of your mortgage. This notice must be on record for at least 90 days. They cannot set a sale date of your property earlier than 21 days after this 90 days has been completed. If an NOD has been filed and you cannot make up the payments I recommend contacting your bank and a real estate professional trained as a loss mitigation specialist immediately to help you.

If you are just having problems making payments or you are out of work temporarily these may not be strong enough reasons to consider a short sale. Short sales are great at helping you avoid foreclosure but they will cause you to have to sell your home. Always seek qualified advice from real estate professionals, tax professionals, and legal guidance as you deem appropriate.

Tax Consequences of a Short Sale

The most common question that arises when seller's are considering a short sale is what are the tax consequences when I sell this home.

Well first the disclaimer: Please see a CPA, your tax professional, or a lawyer prior to making any decision that you feel may or may not have tax consequences associated with it. I am not a tax professional and recommend that all clients and individuals seek the advice of a tax professional in regards to short sales.

So with that out of the way let's go over a few situations that have happened to clients in the past. In addition for more short sale articles on our blog go to Short Sale Information.

Short Sale Issues

1. Will I get a 1099? - The answer to this is more than likely. In order for banks to get the loss off of their books they will issue you a 1099 which may be considered debt relief.
2. Will I owe taxes on this? - First, if you owe taxes it may be at your standard income tax rate.

• You may not owe taxes if it is your primary residence. You may be able to take your home owners exclusion for owning the property for 2 years as your primary residence.
• If it is not your primary residence and you have not refinanced your property your accountant or tax professional may be able to show this as a loss and that you did not make money on this property.

Foreclosure Issues

1. Will there be tax consequences on a foreclosure - More than likely yes. A foreclosure and a short sale are both considered debt relief. It is out belief that a foreclosure provides a far greater possibility of a great amount owed for debt relief.

Prior to making any decision ask your real estate professional to refer a tax advisor to you or seek out your own tax advisor. The only thing you should not do is wait.

Related Posts

• What is a hardship letter
• What is a short sale
• Life of a short sale

4 Ways to Prevent Foreclosure Now

Right now foreclosure, the thought of foreclosure, or information pertaining to how to buy foreclosure properties is everywhere. We thought we would tell you a great way to avoid foreclosure starting with things you can do today if you feel you might be near that point where you might start missing mortgage payments.

1. Know what kind of home loan you have - I don't like saying that you shouldn't trust what people say but you definitely should know exactly what your mortgage is on your home or condo. Do not take for face value what the person who did your loan said make sure you have read all the paperwork and understand it. Even if it was a really good friend it may be an unintentional mistake that was made so understand what kind of loan you have. If you are missing copies of your loan paperwork then call your lender and get copies of it.
2. Create a budget & stick to it! - many times foreclosure happens because people do not understand where all of their money is going. Know where you spend all of your money and stick to a savings plan.
3. Save every month - We all know it is hard to do in this day and age but we also all enjoy Starbucks and itunes so save a little every month in case you loose overtime or a job so you can cover your mortgage payment while you are looking for new work.
4. Refinance your loan if you don't have a fixed rate - The federal reserve dropped the rate at which banks borrow money last week. They are now lending money cheaper than they were even 3 weeks ago. If you have a loan that is adjusting right now or is about to adjust and you want to stay in your home this is a great time to refinance. Make sure you know all the fees and know what is going to happen with your loan. Even if you don't plan on staying in your home for more than the next couple of years you may want to keep your property and rent it plus getting a long term loan right now is cheaper than a short term one.

We hope these 4 Ways to Prevent Foreclosure help people keep their home. Make sure to pass on this list and help those who are having trouble.

What is a Pre Foreclosure?

These days there are many different words being used to describe properties that are in distress. You hear everything from short sale, to pre forelcosure, to quick sale, to well you name it. Today I thought I would cover what is a short sale and what is happening so everyone has a better idea. This will not be the last post on pre floclosure properties. We have really just begun to see what is going to happen.

Let's start at the beginning.

1. Defaulting on your mortgage - now to be clear almost all home loans state that you are in default if you are 1 day past when the payment is due. So are all of us in default when we pay late? Well the bank doesn't want to go through the kind of paperwork to say you are in default. In general most banks penalize you if you are past 15 days late on your payment with a late fee.
2. 30,60,90 day notices - this is when you haven't paid your mortgage for 30 days after it has been due. For example if your mortgage was due on August 1st of 2007 and you hadn't paid it by September 1st you will more than likely receive a 30 day notice on your credit and from your bank in the mail. Trust me they will be calling you and sending you letters as well.
3. It is homes that are past the 30 days that have a potential to be pre foreclosure homes. Now let's get this straight everyone has problems now and then so some people can bring their homes current (pay all past due fees) and some have experienced problems that they cannot and will not be able to bring them current.

So pre-foreclosure means a home owner is at least past the 30 day mark and maybe even after the 90 day late notice point. They have received notices but their home has not been sold to the bank, taken to sale, or sold to an investor. Home owners who are in this situation can consider a short sale. Check out the post earlier in the month on "Avoid Foreclosure - Ask for a Short Sale" for more information on that process.

So we hope that this clears up what a pre-foreclosure is. Feel free to share with your friends. This is a changing market and many home owners need help right now so make sure they know all of their options.

Don't sign over your Deed to your home!

During the changing times of real estate at the moment there are a variety of people who come out of the wood work in order not help but take advantage of home owners when they are behind on their payments. I thought it would be good to go over a few tricks that these people use and some of their pitches so home owners that are considering a short sale or are facing foreclosure can be aware of.

Now these individuals or companies come with a variety of pitches to make it sound like you are a winner on the deal and that you will avoid foreclosure or not have to go through a short sale if you just sign the deed over to them. Below are some of the best pitches that I have heard and please we caution people not to listen to these people and contact a real estate professional or a lawyer prior to signing anything that releases your rights to your property.

1. "Sign your deed over to me so I can negotiate with the bank and you won't have to worry about anything" - once you sign over the deed you no longer control what happens with your property. You are still on the hook for the loan you just can't do anything with your home.
2. "The deed won't be worth anything if you go to foreclosure it is just a piece of paper." - It is a piece of paper that says you own the home and the bank has lent you money based on that home. Once you sign it over the person can even evict you from your own home.
3. "Sign it over to me and I will let you pay half the amount you are paying now so you can stay in your home." - You have literally no guarantee that they will do this. They have no obligation and can say whatever they want. If someone states this ask them to put the funds for the next 6 months in an escrow account with an escrow company you choose and have a contract written up to state where the money will be sent. If the don't like this they probably aren't telling the truth.

Please remember that if someone makes you an offer that sounds to good to be true it probably is. The best thing you can do if you are facing foreclosure or want to consider a short sale is contact a real estate professional or a lawyer in regards to these issues.

Avoid Foreclosure - Ask for a Short Sale

There are many home owners at the moment that are facing foreclosure of their homes. The entire process of foreclosure and missing payments on it can be terrifying, embarrassing, and stressful. In order to make prevent a foreclosure the best possible thing that a home owner can do is ask the bank to work with them on a short sale. A short sale occurs when you owe more than the market value of the property and the property cannot be sold with the bank being paid off in full.

Banks such as Bank of America, Countrywide, and Washington Mutual have Loss Mitigation departments set-up in order to help home owners in this market. They are people too and they want to help their borrowers in their situation. The first step is to speak with the bank and ask for Loss Mitigation department. You want to see if they can help you lower the payments first if you want to keep your home. Banks can lower the interest rate if you are behind in payments and your credit and job worthiness indicate that this is only temporary. The only way to get this is to make sure you speak with the bank.

The vast majority of banks these days have short sale packets that you can ask for. These packets will ask you to outline in detail what you owe not only on your home but also all your assets.

4 Tips on How to Purchase a Short Sale

Short Sales or Quick Sales are a part of the Long Beach, Ca Real Estate market. A short sale occurs when the property is trying to be sold for less than the trust deed that the bank has on the property.

Purchasing a short sale is different than purchasing an REO (Foreclosure). Here are 4 tips on how to have a successful purchase of a short sale:

1. Be Patient! - The bank has to approve the short sale. Unlike an REO where the bank already owns the property, in a short sale the bank has to decide if they are comfortable losing a certain sum of money. The bank must determine if it would be cheaper to go to foreclosure than accept the offer. For this reason, it can take many weeks (sometimes 6 weeks or more) just to get an approval of the short sale. The total process of purchase can take 3 months.
2. Deposit Amount - You will need to have a deposit that is at least 1% of the purchase price of the property. The bank wants to see that you can complete the purchase.
3. Complete Package - Have as much documentation as possible. In other words, include FICO scores, bank statements, and a pre-approval letter to show you are prepared.
4. Closing Costs - You can still get closing costs from the bank, but you will be limited at 3%. Be prepared that the bank may come back and knock that amount down as they are reviewing your offer.

As you are working with your Long Beach realtor, realize that they may be hesitant to submit an offer on a short sale because often the realtor commission gets cut. Be persistent and be open that you may need to look for other properties in case your short sale does not get approved.

Don't Fear Your Lender - Government Urges Them to Help

Times are changing and the federal government has given some guidance to lenders to urge them to help borrowers out. So how does this affect all of us in the Long Beach Real Estate Market? Well it will help our home owners who are in trouble and nearing real estate foreclosure. When the federal government talks banks, lenders, brokers, and everyone tends to listen.

Detailed information can be found at Fed Urges Companies to help borrowers. So why would lenders voluntarily comply with recommendations from the government? Well because it is better to comply when you are asked nicely to then when you are told to with a mandate. Again how does this help home owners who are trying to avoid foreclosure in Long Beach? The guidance given to lenders covers options that will help owners in Long Beach and all over the country. Those options are as follows:

1. Loan Modification - This is where the lender modifies your existing loan to help you afford it. This may include fixing your adjustable rate rate mortgage to a fixed rate.
2. Deferring Payments - Allowing you to defer payments on your loan for a short amount of time to help you get back on your feet.
3. Extending the loan - stretching out the term of the loan so that it lowers your monthly payment.

Rest assured when the government makes recommendations to lenders they will listen. So if you are having problems right now with making your loan payments call your lender and ask to speak to the loss mitigation department or someone who can help you. Sometimes it just takes getting to the right people.

Top 4 Reasons to Ask for A Short Sale

When things get tough, as they are now, in the long beach real estate market some home owners find themselves getting behind in payments. Often through no fault of their own home owners have lost jobs, health reasons, helping family, and rising rates make it difficult to pay the mortgage on their piece of long beach real estate. So what is a short sale and why should you ask your bank for one if you get behind? Well let's get into this.

1. The bank doesn't want to foreclose - Truly banks like to lend money. They have no desire to actually be property owners.
2. It is bad for business - It costs the bank a tremendous amount of time and effort to foreclose on a piece of property and long beach real estate is no different. The average cost of a foreclosure is over $42,356!
3. The number one reason for foreclosure is the bank can't speak with the home owner - That's right lack of communication is the reason behind the majority of foreclosures. So speaking with the bank and asking them to work with you is highly in your benefit.
4. It is better for your credit - Getting a short sale where the bank works with you to sell a property is better for your credit than a foreclosure. The bank has more options on how to report it to the credit agencies.

Remember a short sale is when you are selling a property for less than it is owed. In future posts we will talk about how this can affect you. For now if you are behind on payments, can't refinance, and just need out consider a short sale instead of letting the property foreclosure.

How many California Foreclosures will there be?

The news has spread there will be foreclosures in the state of California. First of all foreclosures happen in any market. There have been many news reports that California foreclosures are up 200%. Well what they fail to mention in that amazing headline is the fact that they have been extremely low in the last several years as a result of the market that existed here. So just how many California foreclosures will there be? Well that is the millionaire dollar question. We will try to answer it as best we can.

First what we believe won't happen:

• Foreclosures will not be 50% of the overall market - Unemployment is still very low and the government seems to be doing an adequate job to assist the lending institutions.
• Homes will not sell for 50 cents on the dollar - Let's be clear about this. If you were thinking that you were going to pick up the million dollar ocean front home for 50 cents on the dollar please know that just isn't going to happen. The economy is still going forward and certain areas are still selling within days and that includes the ocean front properties.

What probably will happen

• Foreclosures and/or short sales will make up at least 5% of the market - now that is still a large number of homes.
• 10% off of what the bank owns will be common - let's be clear we don't mean that the market will fall 10%. What we do mean is some people were able to finance their homes above the actual value of the property and the banks will be taking less than they financed for. In some cases the value will be far greater than 10%.

So just how many California foreclosures will there be? Well there will be a few. If you are serious about buying you can find a deal besides a foreclosure. If you still would like to sell you can still do that as well it just means you have to make sure to understand what is happening in your neighborhood.