However, we are hearing stories now about many lenders who are not participating in the program, or are only doing refi’s for those loans in which they did the original loan….not for any new borrowers. 

So what gives?  Well…it is possible that there is a huge battle brewing under the radar between Fannie and Freddie and all those lenders who sell their loans to these institutions…and here is our take on what is really happening.

First, you will need to understand the following with regards to loans sold to Fannie/Freddie by your local lender.

1.  When a local lender sells a loan they originate to Fannie/Freddie, if the loan goes into default (ie: the borrower misses a payment) within the first 12 months, the local lender must buy the loan back from Fannie/Freddie.  That means if a borrower got a loan for $250,000, the local bank recouped their $250,000 when they sold it to Fannie/Freddie…and must repay said $250,000 to Fannie/Freddie if the loan defaults within 12 months.

2.  If a default occurs after the 12 month origination date, then Fannie/Freddie has to deal with the problem…unless Fannie/Freddie can claim/prove loan fraud by the local originating lender.  In that case, there is no time limit…the local lender must buy the loan back.

3.  Fannie/Freddie currently have a HUGE percentage of their loans where they dealing with loan defaults…many past the 12 month origination deadline…and rumor has it they are scouring these loans for evidence of loan fraud.  Depending upon which side of the coin you are on, either Fannie/Freddie are pursuing their legal right to send loans back to the originating lender for repayment, or Fannie/Freddie are using every little “ticky-tack” excuse to get the originating lenders to cough-up some money…money the local lenders feel they do not owe.  Time will tell on this one, but the bottom line is that many lenders are concerned about sending new loans to Fannie/Freddie for fear that they will have to repurchase them later on some ridiculous technicality.

4.  History has shown that a large percentage of previously modified loans have resulted in defaults.  Perhaps this is because the home is still too far “underwater” to make the seller continue the new payments, or the economy, or who knows what…but the bottom line here is that modifications have a very high rate of default.

5.  And lastly, AND MOST IMPORTANTLY, when a local lender does a Harp II loan modification, if it is a loan that was originated by them in the beginning, the 12 month clock starts from the date of the first origination.  If the local lender did not originate the loan, then the 12 month clock starts from the date of the Harp II loan date.

Now…let’s put this all together.

The bottom line here, in our trench level opinion, is that local lenders are afraid of making Harp II loans to new customers because they know the default rate is high for loan modifications (especially when there are no appraisal or qualification standards for such loans), and they do not want to have to repurchase these loan mods within a new 12 month period.  Therefore, some lenders are refusing to get involved in this program at all, and those who are participating, are only doing so with loans they originated in the beginning, thereby reducing (or even eliminating) the 12 month buy-back date in case the loan modification goes into default.

Since many local lenders think that Fannie/Freddie are looking for ways to send defaults back to the local lenders, and loan modifications have a high default rate, the local lenders are very, very reluctant to make a new loan with a new 12 month clock.  If they are going to make any new loans under this Harp II loan program, it will be to customers with an “old” 12 month clock, not a “new” one. 

It appears that Harp II has the possibility of being another case where the government, in trying to solve one problem, simply creates others to take it’s place.  Also, as we have stated in this blog space before, it is one thing for the administration to mandate loan programs for the banks to follow, and it is quite another for the banks to listen to the government.  As we have all seen, banks continue to march to their own drummer.

In the end, we hope our assumptions outlined above are incorrect, but we fear they are more right than wrong.  Therefore, our best advice for those of you who really need a modification is to try very hard to go back through your originating lender.  If that is not possible, then discuss this with the new lender who is doing Harp II Loans, and perhaps they can put you at ease with their success rate.

Oh..and don’t forget…no matter who you use for your new Harp II loan, make sure you bring along a huge dose of patience.  Our experience is that you will need it.

Take care, and thanks for reading our blog.

So…ask and you shall receive.  Here is an update to last weeks data as of today, May 1, 2012…and it’s not pretty.

As you know, we reported that available housing inventory in Riverside had dropped from 1,104 properties for sale as of January 1, 2012 to 795 properties as of April 1…and unfortunately, as of today, May 1, that number has dropped again to 670…a drop of almost 40% since the beginning of the year.

This means that while it is a wonderful time to buy a home, and buyers have finally figured that out, the process will still require massive amounts of both patience and expedience.  Expedience will be required by every buyer who is looking for a home, because if you snooze, you will lose (so jump too when your agent calls you about a new home for sale), and patience will be mandated in large doses because you may have to miss a few before you get your offer accepted.

The good news is that in a market like this, those sellers with equity, who have been languishing on the sidelines for the past few years, will get the message and we should begin to see more “regular/standard” listings available for sale.

The bad news is that until the banks get rid of all the homes they have either as foreclosures or in the short sale pipeline, this market is here to stay…and so once again, the rest of the world is at the mercy of what the big banks are doing.  A scary thought, but such is our life at the moment.

Our advice?  As a buyer, stay patient and keep your eye on the end result, which is a home purchased at a very reasonable price with a super-low interest rate.  As a seller, if you have equity, and you are considering a move, now is the time.  A standard sale (as opposed to a short sale or a bank repo) can command a higher price-no bank “garbage” to deal with…so jump in.

Remember, it has always been about supply and demand in the real estate world…and right now, in our Riverside area, demand is far out pacing supply…good news finally for home owners.

Take care, and as always, thanks for reading our blog.

Allow us to explain.

In January 1 of this year, there were exactly 1,104 properties for sale in the Riverside area.  This number included all types…bank repos, standard sellers, and short sale sellers etc.  This also included all price ranges, from the very highest property for sale, to the lowliest of prices.  It included the well priced homes, and the ones that are so overpriced for today’s market, they will never sell.  In short, this 1,104 number included it all.

Now, let’s fast forward to April 1…just 90 days later…where that 1,104 number had dropped to exactly 795.  That is a reduction in the existing inventory of 28%…309 fewer properties for buyers to choose from for their housing needs.  Let us put that in perspective.

Imagine that on your way home tonight, you stop at the store…and over 1/4 of the store is gone!  Hope it’s not the department you needed.  You want some meat and milk, but sorry…they didn’t make the cut.  Lots of produce, lots of bread, but no meat and milk.  Totally bummed out, you realize you need gas for the car, and swing by your favorite station, only to discover that they are totally out of your grade of gas.  Oh, they’ve got diesel, and regular, but you need premium, and it is all gone.  Oops…our bad.  Frustrated, you simply head home and will figure something out…but the freeway you need to take has been reduced from 4 lanes to 3…AT RUSH HOUR…really?  Really?  Not a great way to end your day.

Now try the above with something as long lasting as buying a home.

The media hypes the foreclosures, and sellers that are “upside down” in equity, and all the other negative stuff that they unfortunately have to choose from these days, but rarely do you hear about the effect on those families who simply want to purchase a home.

In our area, we have an abundance of buyers who feel, rightfully so, that the existing housing market is a very good time for them to purchase a home…they just are so frustrated with how little they have to choose from.  We in the real estate business preach patience (and preach, and preach ,and preach), and those buyers who can handle their frustrations ultimately win in the end, but life would be far simpler if we simply had a few more homes for sale.

The solution?  The answers lie with the banks.  They need to put the foreclosures they have on the market for sale, and make the short sale process less like a torture, and more like a professional business.  The rest will take care of itself when we move all the bank inventory and get these homes into the hands of the buyers who so desperately want them.  We know that our “problem” is far better than those perhaps faced in other states, but think how much better things would be if we could simply put every buyer who wants a home into the hands of a bank who needs to sell one?

Crazy talk, I know…but the mind boggles at the possibilities.  Until then…we’ll just keep trying to hold a party with the small number of people who want to attend..and good luck with your meat and your milk. 

Our answer…who knows?

In this blog space, we try really hard to be the voice from the trenches…from the real world of real estate, not the theoretical world that exists in sound bites from your favorite politicians.  While we laud the intentions of the Washington D.C. politicos who have once again ventured into our world with what we assume are the best of intentions, we can only hope that the lending community embraces these HARP II guidelines with less disdain than their predecessor.

You see, the problem with many government mandated lending programs is that the politicians can shout all they want about what lenders “have” to do, but in the real world, these same lenders have shown a consistent propensity to do whatever they want.  It’s sort of like telling your teenager to take out the trash…and then they smile, nod, and then do what they want…and you can’t even ground them!

HARP I was mostly viewed as a rousing failure, because when it comes to government edicts, the devil is truly in the details…and the details were not exactly embraced by the very lenders who were “invited” by the government to make the new loan adjustments.

HARP II promises to cure these previous ills, and streamline the process for the underwater home owner, but again, the proof will be in the pudding…a pudding that tasted pretty bitter the first time around.  It is far too early to tell yet whether HARP II has simply traded one set of problems for another, but if past history is any indication, we in the real estate community are not exactly holding our breath.  Don’t get us wrong…we would like nothing better than to see a well intentioned refinancing program work.  It’s simply that we have learned to take a “wait and see” approach with government lending programs.

So…what do we suggest you do if you think HARP II is for you?  Simple…contact either your existing lender or a local lender you trust (call us if you want a referral…Westcoe doesn’t do loans, but we use reputable lenders every day), and let them guide you through the process.  There are a lot of restrictions and conditions you will need to know, and a good lender can get you pointed in the right direction.  Hopefully, things will go smoothly for you and you will get the refinanced loan you desire.

We also suggest that you maintain a ton of patience and don’t get too set on the success of your HARP II loan refinance, as while our hearts are with you, our heads are filled with the past attempts that have gone wayward due to the government’s inability to make the banks get on board. 

In other words, the politicians can shout “all aboard” all they want…our experience is that engines will run when the engineers (the banks) want them to, not when the conductor stands there shouting.

Take care, and have a great week. 

This one affects both buyers and sellers, and has to do with credit reports.

We all know that almost every day, anyone with a computer and an internet address is bombarded with a ton of “useless” offers from a variety of sources.  From Russian brides to the “male enhancement drugs” necessary to keep said brides happy, there is more garbage coming our way than mosquitoes in a swamp.

In our case today, we have another “watch-out” category…and that is the offers of free credit reports that are touted for us all.

According to msnbc, it now appears that some (many?) of these “free credit reports” are nothing more than scammers trying to get your personal information so that they can “sell” your stats to the bad guys…who will in turn ruin your credit before you know what hit you.  It seems that the going rate for this information is $40 if you have marginal credit scores, and up to $80 for high credit scores!

Amazing…such little money for such a huge hassle to repair.

At this point, since we in the real estate industry deal with credit scoring all the time, our best advice is that if you want your credit score, get it from your local lender…who will use the proper methods to make sure that your are not getting scammed.  We suppose that you could also go directly to the major credit bureaus as well, but since we always work with a lender, we cannot vouch for the direct approach.  If you do use a lender, they will charge you what the reporting agency charges them ($25-$35), but that is far better than the alternative.

In any event, whatever you do, we strongly suggest that you stay away from all the “free” credit report offers you are getting on your email account.  We can’t speak for the Russian brides or male drugs, but the credit reports look like a “no-no”!

Just thought you might like to know.

We have picked the Riverside area as our target for today, and will breakdown listings, pendings, and closings with respect to the 3 major categories of properties…Standard Sales (sellers with equity), Bank Owned Properties, and Short Sales (foreclosures in waiting, but still owned by the seller).

Listings, Pendings, and Closings

As it stands today, we have a large spread between the major types of sellers.  Standard Sales account for 45% of the market, Foreclosures are at 15%, and Short sales round out at 40%.  It is no surprise that Foreclosures are the lowest, since they tend to sell the fastest.  A bank repo is generally priced right, and the bank is ready to rock-and-roll once they put the property on the market, so they tend to get offers fairly quickly.  That’s why there generally aren’t too many for sale at any one time.  What is good news is that Standard Sellers represent 45% of the listing inventory, since for the past few years, they have been somewhat of an endangered species.  It’s nice to see regular sellers getting back into the market.

As for Pendings (properties currently in escrow, but not yet closed), we are as follows:  Standard Sellers check in with 31% of the pendings, Bank Foreclosures are at 27%, and short sales again round out the stats with 42%.  Again, nothing surprising here.  The repos will be lower for the same reasons outlined in the listings…they take the shortest amount of time to close.  Therefore, there won’t be too many in escrow at any one time.  Many of the bank properties are “all cash” transactions (sometimes the poor quality of the home makes getting a new loan impossible…so they must sell for cash), so this too speeds up the time spent in escrow. 

That would also explain the large jump in pendings for the short sales, as in many cases, they can take FOREVER to close.  Some banks are trying to streamline their short sale process, but it can be tough sledding out there when it comes to short sale time frames.  Yes, they are better, but not good enough to yet to be called “good”.

Lastly, Standard Sales pendings are down a bit as well since the listing percentages of these sales include some really overpriced homes where the seller still thinks it is 2007.  Most sellers “get it”, but some still do not, so those properties will show up in the listing category, but will never see the light of day in the pendings.

Lastly, for all closings from January 1, 2012 through today, March 21, 2012, we have the following:  Standard Sellers at 38%, Bank Properties at 32%, and Short Sales at 30%…which is far more balanced than we would expect.  Why?  Unclear at this point, but since “water seeks it’s own level”, perhaps our real estate market does as well.  Too early in the year to know for sure, and we will need to keep an eye on this as the year progresses.

So…there you have it.  Everything you never wanted to know about our local market.  You are now armed to the teeth for your next cocktail conversation, where you can amaze and dazzle all your friends with your new-found real estate info…or bore them to death.  Be careful!

As always, thanks for reading.

Let’s talk inventory first.  In a nutshell, it is down.  The numbers of homes available for sale in Riverside on March 1, 2012 as compared to March 1, 2011 is down 37%.  That is a huge change in the amount of homes a potential buyer has to look at.  If you compare March 1, 2012 with just a couple of months ago (January 1, 2012), our inventory is down almost 15%.  It’s still way to early in the year to make any predictions from this data, so we will just have to wait and see what the spring brings.

The banks say they have more inventory on the way (code for all their potential foreclosures), but we stopped believing anything the banks say a long time ago.  Short sales are on the rise, and regular “standard” sellers (those sellers with equity) are increasing some as well.  We will need a few more months to see where all this settles out, but for now, the homes for sale are definitely fewer than at any time last year.

As for pending sales (those homes in escrow, but not yet closed), for the first two months, they are up 8% as compared to the same two months of 2011.  This is not unexpected by those of us who live this real estate market every day, as we have definitely seen an uptick in the number of buyers in the market.  We think this is a result of both the much more affordable home prices, and the super-low interest rates available for these buyers.  Don’t forget…FHA financing is open to almost everyone, and only requires a 3.5% down payment.  Not bad…especially when you get a 30 year, fixed rate at around 4%.  No more rent increases!

Lastly, the closings for January and February are also up compared to last year…by 17%.  This too is expected with the increase in buyer demand.  Closings are usually about 60 days behind the pendings, but they don’t necessarily go hand in hand, due to the longer time it can take to close a short sale.  It is almost impossible to predict closing sales from the pending sales statistics, but it’s just nice to see that whatever the ratio, it is up for 2011.

So…the bottom line?  Simple…we expect 2012 to be a better year than 2011 (better rates, prices, economy, etc.), and so far, so good.  Remember, we have said many times that this recovery will not be a huge “V”, but more like a “U”, in that sales and prices will creep up very slowly.  However, while we cannot get too carried away with a couple of better months, it’s sure nice to see us headed in the right direction.

Take care, thanks for reading, and stay tuned…hopefully there is more to come.

So…this past week, two of our clients received in the mail a very official looking document.  This document had as a title at the top “Public Property Information Retrieval”…and the bottom line here is that if you acted within approximately 20 days, for the mere sum of $85, they could get for you copies of your Grant Deed, a Property Profile package, the property history of your property, and if you were willing to spend an additional $15, you could also get a copy of the parcel map of your home.

While all of the above can be interesting reading when you are having trouble getting to sleep, the problem here is that we (any Realtor really) can get you all of the above for FREE. 

Yes Toto, you are only a phone call away to your favorite Realtor, and all of the above can be yours for the lowly sum of nothing.  It is all public information easily accessed with a computer.  More importantly, it’s not particularly imporatnt that you have any of the above data in your possession, since it is all online and available when you should ever need it.

However, because this document is very official looking, complete with your name, address, parcel number, and the purchase price of your home (all which can be obtained from your Grant Deed), we have no doubt that some people out there will feel the need to have this information for your file…and needlessly spend the $85-100 they ask.  

Again, one call to your Realtor gets you all of this for free.

Unfortunately, many people fall prey to companies like this that feed on everyone’s desire to have important information regarding their home.  More unfortunately in this case, what they are doing is not illegal, since the title of the document says it is public information that they are retrieving for a cost…thereby making it unethical, but not illegal.

What can we say?  Hard times bring out the worst in some people.

So…in the end, what is the moral of today’s blog?   Twofold:  First, like your momma said…don’t pay for something you can get for free, and Two…call your Realtor for any real estate information or to verify anything you get in the mail…especially if someone wants money for anything.

For now, we are just glad that perhaps we have saved you $100 today.  Go have an ice cream…it costs less and feels better.

OK…you are a potential buyer, and you even have a pretty good idea where you want to live…so like most inquisitive potential home owners, you head out on the web and start looking at possible homes.  The good news is there are plenty of sites to give you information.  The bad news is that much of this info is not up to date or accurate…but that is a subject for another day.

In searching for your potential home, you notice that most of the homes in the area you desire are  listed between…(as an example) $250,000-$300,000, depending on size, bedrooms, amenities, etc.  However, while searching, you come across one property in the neighborhood that is listed for sale at $199,000…and it even looks like a normal home…not something beat to death or trashed, or destroyed, etc.  Wow! The information on the home says it is a short sale, but so is much of everything else, so that is OK.   You’ve just hit the jackpot.  Your palms get sweaty, your heart races, and you begin to count all the money you will save by purchasing a home is good shape for at least $50,000 (or more) under market.

All we can say at this point is what we opened today’s blog with…If it’s too good to be true, it probably is.

In this case, what you have just encountered is “phony” listing price on a short sale property that has no chance of ever closing at this below market price.  Sorry, but it is a “come-on” price that will not happen.  Allow us to explain.

The bottom line here is that in a short sale, the bank with the existing loan on the property has the final say on what price the property will sell…not the seller, not the buyer, and not the agents, but the bank.  However, the bank will not give the Realtors the price they will take for the home until they get an offer.  Ass backwards…yes, but that is the way of the short sale world.

So what is the seller and Realtor supposed to do about a listing price?

A professional Realtor will run the comparable sales on the property, get a good idea on the actual market price range of the home, and then most likely, since time is generally short, price the home at the low side of the range.  In our example above, if the value of the home was somewhere between $275,000-285,000, then you might expect to see the home listed for around $270,000 or so.  This price will be low enough to attract a buyer in a fairly short time span, yet realistic enough so that the bank will hopefully accept it as a final sales price.

A “non-professional” Realtor will put the $199,000 price on it (as mentioned above), trying to attract potential buyers, yet knowing full well that the bank will never accept this ridiculously low price for the home.  Banks may be a lot of things, but stupid is not one of them…and once the bank does their own appraisal, they will simply counter the $199,000 offered price to a number far more realistic.

So…why does the “non-professional” Realtor start with the “going nowhere” price of $199,000??

Who knows?  Maybe they are an idiot…or new to the business with no experience and no idea what they are doing.  Maybe they simply want to find potential buyers to sell something else too.  There are lots options, but the most important thing here for a buyer to realize is that a bank will never lose more than they have too, so a low priced short sale will never close…it will only get you excited about a home you will never get.  What’s more, the bank may not even give a counter offer, but simply reject the price and foreclose on the home, because they assume that you, the buyer, are not really serious about purchasing the home.  We’ve seen it happen, trust us.  The bank will simply make a decision that they can get more for the home when they resell it after the foreclosure, and reject the short sale completely.

So…whether you are working with a Realtor or not, beware of the property that makes no sense.  Most Realtors will explain all this to their buyers and then avoid these properties all together because they never work…but sometimes buyers simply cannot resist the siren call of the “huge discount”…and all we can say is that there have been many before you who have ”crashed on the rocks” of a never consummated short sale because after 3 months of waiting, the bank countered with a more realistic sales price, or simple rejected the offer as noted above.

Remember…banks are not stupid.  They may be greedy, frustrating, slow, and operate in a manner that we mere mortals cannot fathom…but they are not stupid.  Remember this when you encounter a short sale home that is screaming “what a deal” to you…and save yourself some heartache.    

While no one is asking for anyone’s sympathy here, as a company that represents all types of buyers and sellers, it’s important that we dispel some of the myths regarding those investors that purchase single family homes…because contrary to the opinions offered by the media (who are not, by the way, involved in the daily trenches of real estate sales like we are), investors not only serve a vital role in the real estate food chain, but are doing a great job of helping with our market recovery.

Myth #1…Investors are “stealing” properties from first time buyers.  In actuality, in many cases, they are doing just the opposite.  Since most banks are unwilling to put any additional money into a foreclosed property, these homes by and large sell “as-is”…which is code for many of them look like a bomb has gone off in the home.  You name it, and we have seen it…no drywall, no appliances, no flooring, broken windows, stripped of all hardware, half completed home improvement projects, etc.  Trust us, the list could go on for miles.  In homes like this, they can only sell for cash, since a new lender will not lend on a property that needs any of the work described above.  Therefore, since new buyers almost 100% of the time need a loan to purchase a home, they could not buy these houses even if they wanted too.  In fact, the only segment of the purchasing market who both has the cash to purchase and the cash to repair the home are the investors.  Hence, investors purchase the homes that regular buyers cannot.

Sure, investors also buy homes that do not need this much work, but not that often because they are unwilling to pay the “near market price” a regular home can command.  Investors want bargains, and these bargains usually come in the homes that cannot sustain a new loan…the “beaters” that are described above.

So…in these cases, the investor is purchasing a property no one else can.

Myth #2…The investor purchase price kills the sales values in the neighborhood.  First of all, the home is worth what it is worth, regardless of who buys it…and since we have already established that it must be sold for “cash”, what other option is there?  The home was a wreck before it went up for sale, so the “low sales price dye” was cast once the bank foreclosed on the home.

Secondly, if the investor “flips” the property (fixes it up and sells it right away), you now have a much nicer home, in good condition, usually with at least a new front lawn…a home that looks far, far better than the eyesore that existed before the bank sold it to the investor.  Trust us on this…the neighbors love it.  Wouldn’t you?  You got rid of the empty home that was a gathering place for all the kids (or worse) in your area, and replaced it with a home that now looks a lot like yours…well kept and well groomed.  Where is the down side in that?

Lastly, NOW your first time home buyer (the one the media said was “screwed” above) can purchase the home because a new lender will be happy to lend on it…and the ultimate result is that the neighborhood went from continually looking at a vacant, garbage home to one occupied by a new family who will be much better than the bank repo….all made possible by an investor.

Myth # 3…When an investor keeps the home as a rental, it is bad for the neighborhood…slumlords, etc.

While we suppose this can happen, it is rare in the world of the professional investor, for one large reason….they just paid a lot of money to purchase and fix-up the home…do you really think they will let a tenant beat it up? 

The majority of the investors that we know, who choose to keep the home as a rental, are very concerned about the condition of their asset.  They usually hire gardeners to keep the lawns up, and since the home is now looking much better than the repo it was before (see Myth #2 above), again, the net result is a far better looking home than a repo.

Also, we need homes for tenants…especially now.  Where do you think all those former home owners are going once they either lose their homes to the banks, or participate in a short sale?  They all need a place to live too, and since they are not able to purchase a home for a few years, they need to rent.  Again, most of the displaced former home owners are delighted to have a home to move into, and most investors are delighted to have them.  Looks like another win-win to us.

In the end, we all know there are exceptions to every generality noted here.  Everyone has a story about a dirt-bag tenant near them who takes lousy care of a home while the landlord does nothing.  However, in our experience, that is indeed the exception to today’s investor, not the rule.  Today’s investor is a savvy person or company who understands the asset they have needs care and attention and they proceed accordingly…at least accordingly enough for the media to cut them some slack, because these investors are doing far more good than harm.