Westcoe Realtors, Riverside California…We have touted the need for home inspections many times in the past…and almost everyone understands that a thorough home inspection can either give a buyer some serious peace of mind, or save them from a very nasty (and costly) unexpected repair bill after the close of escrow.

However, let us explain why a home inspection can also save you from a home protection insurance plan denial.

Home inspections are not to be confused with home protection insurance plans (also called home warrantys).  A home inspection is just that…an inspection by a professional to examine all that comes with your home…electrical, roof, appliances, etc.  Home inspections are done prior to the close of escrow so if their are any problems, they can either be fixed, or the buyer can bail on the transaction of the problems cannot be negotiated away. 

A home protection insurance plan is what takes place after the close of escrow.  Here, there is an insurance plan placed on the property (usually the 1st year cost is paid by the seller…renewals are paid, if desired, by the buyer), and if there is a system failure, or an appliance failure, or an air conditioner/heater failure etc., a call is placed to the insurance company.  The insurance company will send their repair person to the property, and the insurance company will then either fix the problem, or in the case of many appliances, install a new one if the problem cannot be fixed.  There is a small service charge paid by the buyer (who is now actually the homeowner), and all is well.

However, like all “simple” things, sometimes there are glitches.

While home protection insurance policies are a good thing, they do not always work the way we expect them too (what a shock, eh?).  All of the home protection policies carry the verbiage (in one form or another) that they will not be responsible for any “pre-existing” conditions in the property.  This actually makes sense, in that an unscrupulous seller could have a variety of busted appliances, place a policy on the property, and then when escrow closes, have the buyer call to make a claim, and get all new appliances for those that were not working in the first place.  This is supposed to be an insurance plan for items that work, not a repair plan for the seller’s already broken items.

However, some home protection policies use the “pre-existing condition” wording to claim they do not have to repair/replace an item when in reality they should.  A classic example is an air conditioner condenser that breaks, and when the repair person comes to deal with it, denies the repair because of the dirt and debris that was in the condenser…dirt and debris that took years to get there, so it becomes pre-existing, which allows the insurance company to deny the claim.  Maybe they are right, but who checks the condenser of their air conditioning unit…and besides, it worked on the walk-thru, so what’s the problem? However, it is the new owners word that the unit worked, so many times, the claim is denied.

Now…how can you keep this from happening (and trust us, all the home protection companies fall into this boat at some point in time)?

Easy…get a home inspection when you purchase the home.  Why?  Because when your home warranty company decides to pull that “pre-existing” garbage, you can simply pull out your home inspection company report, and show the insurance company that the item in question worked at the time of the inspection, and therefore cannot fall under the pre-existing category.  The bottom line is that the item worked before, so the insurance company needs to fix/repair it now.  Cool, eh?

This works almost 100% of the time a home warranty company tries to play the “pre-existing” card.  However, if you didn’t get a home inspection at the time of your purchase (shame on you), or your inspection was done by your contractor brother-in-law with no written report issued, then you obviously cannot go down this road.

The moral to this story?  Get your home inspection by one of the many professional reputable home inspection companies out there…it can help you in more ways than you know.  As you mother always told you…an ounce of prevention is worth a pound of cure!

Take care, and as always, thanks for reading.

Westcoe Realtors, Riverside California…Five years ago, the word “foreclosure” was on the dust heap pile of daily lingo, surrounded by the likes of “8 track and cassette tapes”, “black & white TV’s”, “Walkmans” etc.  The problem is that while the latter will not be making a comeback any time soon,  the word “foreclosure” has catapulted back into vogue and looks like it’s here to stay a while.

Any newly licensed Realtor can tell you that the law says that a foreclosure takes 111 days to complete.  A delinquent homeowner has 90 days to make up any back payments, and then an additional 21 days to pay the loan off completely if they can’t come up with the money owed (anyone ever wondered how a homeowner who can’t find 90 days worth of payments is supposed to now pay off the entire loan balance?).  However, I digress.  The salient point here is that a foreclosure, by law, takes 111 days.

Anyone want to know what is happening with foreclosure times in the real world, and not the one in the legal books?

In the State of California, as of June of this year, the average time for a foreclosure is (drumroll please)…317 days!  That’s right…just a little short of 1 year…and that is the average, which is, as we all know, is made up of some that take less time, and some that take more.  In Nevada, it is about the same…319 days. 

How about the longest?  That would be our good friends in the great State of New York.  The state that brings you massive deli sandwiches and the Empire State building also goes big with foreclosures, because in that state, the average time is…(bigger drumroll please)…960 days.  Yes, that is not a typo…it takes over 2.5 years, on average, to foreclose on a home in the land of the Big Apple.  Amazing, isn’t it?

And the shortest?  That would be the cowboy State of Texas.  I have never spent much time in Texas, but rumor has it that our Southern neighbors don’t mess around, because the average time to foreclose on a property in Texas is 92 days.  That’s right…if you can’t (or won’t) make your house payment…no problem…but the bank is not going to mess around with your plight.   You are supposed to pay, and if you don’t, then start packing.

 There is a moral to this story…and here it is.  Guess which state has had the lowest drop in residential housing prices since all this housing “mess” started in 2007?

I know, it’s too easy…but God Bless the people who shoot straight in Texas…because they have the lowest percentage of housing price loss in the country.  Some may call this a coincidence…others a cause and effect.  Hard to say.  We’ll let you decide…but come on…2.5 years to get someone out of a home that they are not paying on?  Welcome to the Bizarro World of real estate, where truth is far stranger than fiction.

So dazzle your friends at your next gathering with this new found information…and watch the ones who are making their house payments choke on their drinks.

Westcoe Realtors, Riverside California…If you look at last week’s blog regarding seller’s disclosures, we seem to have hit a nerve with many of you out there.  Our response from homeowners was fairly strong, and many of those who took the time to thank us for our disclosure list (A big thank you, by the way) asked if we could do the same thing for the costs a seller will incur to sell a home.

It appears that some of you have had situations where your close of escrow check was less than expected, and the myriad of costs were hard to comprehend…so the question posed was…”Could we at least get a list of the costs a seller could be expected to pay when selling and closing a home?”

And the answer is a hearty….YES.

First, our suggestion is that if you are ever selling your home, and your listing agent does not provide you with a detailed explanation of all your expected costs, do like Forrest Gump…and run, run, run.  Any real estate agent should be able to figure your costs, and get you very close to the exact amount…and if they can’t…or won’t…then find someone who will.  Expressions like “trust me”…or approximations that are given in percentages…or anything else that is general in nature simply are not professional.  So make sure you get exact quotes from your agent.

Ok…below is listed all of the general costs of selling a home along with a brief description of what each item is.  We need to be brief here so we don’t rewrite War and Peace, but we will give you enough to get the general idea.

Title policy…the seller must provide a clear title to the home for the new buyer…and this insurance policy guarantees that for the buyer.  The cost is based upon the sales price of the home.  For example, for a $250,000 sales price, the cost would be approximately $920.

Escrow fees…These fees are generally split between the buyer and seller, and escrow makes sure all conditions of the sales contract and new loan (if any) are fulfilled.  Once everyone has done what they are supposed to do, escrow closes, title passes to the buyer, and the seller along with everyone else gets paid.  These costs are also based upon the sales price, and vary widely…so make sure you shop around.

Documentary Transfer Tax…This is the city or county’s finger in your equity pie.  The bottom line is that they tax the sale of your home.  How much?  If you are in the County (Riverside), it will be $1.10 per thousand dollars of the sales price.  If you are in the City of Riverside, it will be double that.  Why more in the city?  Good question.  Probably because they can.  Ask your council member.

Demand Statement…your existing lender needs to send to escrow a statement showing your exact loan balance so escrow can pay off the correct amount at close.  If you own your home outright, then this will not apply.  Cost is approximately $75 per lender (ie; if you have a 2nd loan, then figure $150).

Termite inspection…In most cases, the new buyer (or their lender) will require the home to be free of termites, dry rot, fungus, etc.  The cost for an inspection is approximately $75, and if there is any work to be done, the termite company will provide you with a bid. 

Natural Hazard Disclosure Report…This is information that you are required to provide to your buyer about your home.  Are you located in a high fire area?  Are you subject to liquefaction in an earth quake?  Questions like that.  A separate company will provide all that the State demands at a cost of $100.

Real Estate Commission…This is completely negotiable between you and your listing broker.  You pay your listing broker a stated amount, and the listing broker pays the buyers broker from that.  However..beware…be sure to know what your listing broker is paying the buyers broker, and what they are keeping for themselves.  This can have a big effect on your sales activity.

Homeowners Association…If you have an HOA, there will be fees to pay for the HOA docs, and the transfer from the seller to the buyer.  On average, this is around $650, depending on your HOA.

Grant Deed, Notary Fees, Title Co. Sub-escrow fee, Reconveyance Fee, Tax Service…All “little fingers in the pie” costs from either the title company, escrow company, or new lender requirements.  Bottom line here is that all of the above will total around $400-500.

OPTIONAL COSTS

The following are costs that may be included in your sale…with your permission.

Home Warranty Policy…a separate insurance policy that allows the buyer to call a repair company instead of the seller when certain things break after the close of escrow.  This eliminates the arguments and court appearances between the buyer and seller, and let’s the repair company solve the problem.  Cost for a basic policy is around $350.

Buyers Costs…Sometimes the only way a buyer can purchase your home is if you, the seller, help them pay their closing costs.  Why would you do this?…Because if you don’t, they will find someone who will.  The good news is that the buyers know you are helping, so they usually don’t haggle on the listing price if your listing price makes sense.  These costs can be anywhere from $1,000-6,000 or more.

PRORATIONS

Interest and Tax prorations…All you need to know here is that you will be paying for your home up to the day it closes…after that, it is the buyers responsibility.  Therefore, your loan payments (really the interest) and your taxes will be prorated to your closing date.

The above list is pretty much it.  Once you have your agent fill in all these costs, then simply subtract this amount from the sales price, subtract again any loan amounts you owe, and there you have it…your net equity at the close of escrow.  As we said before, there should be no surprises, not major costs you were not told about, no “oops” on behalf of your agent…and if there is, get on the phone to the broker and raise you-know-what…because you have a right to expect your agent to get it right.

Take care, and as always, thanks for reading.  Let us know if there is anything else you would like to see us address in our blog.

Westcoe Realtors, Riverside California…Let’s face it.  We live in a world of litigation.  People sue for almost anything.  Child not playing in Little League…sue.  Teacher gives your child a “B” and ruins their Valedictorian run…sue.  Coffee too hot when you spill it in your lap….sue.  You get the point.  Such is life in the 21st century.

Naturally, the field of Real Estate is no stranger to the legal profession.  The potential for lawsuits seems to increase with the dollars involved…and in real estate, the dollars (and losses) are potentially huge.  Therefore, to help “ward off” the evil that lurks in every real estate sale, our industry has imposed numerous disclosures upon the seller whenever they sell a home (we tried garlic, but it doesn’t work as well). 

Some of these mandated disclosures are really very good and protect both sellers and buyers from each other…and from themselves.  Some are a joke…but they are required so we fill them out as well.  Below we have listed a few and will give you a brief description of why the particular disclosure exists.

Agency…This one is a little stupid to tell you the truth.  The bottom line here is that any time either the seller or buyer is represented by a real estate broker, said buyer or seller needs to understand what company is representing the seller, what company is representing the buyer, or is the same company representing both.  I mean really…can’t you just read the names of the companies?  Anyway, it’s required so we do it.

Transfer Disclosure Statement…The mother of them all, and a very essential piece of the real estate sales puzzle.  Here, the seller must disclose to the buyer anything that does not work in the home, as well as other issues that may affect the value of the home.  It is a “fill-in-the-blank” type form, and is highly necessary because since the seller is really the one who knows the most about a home, it puts the burden squarely on their shoulders to tell the buyer all that they know.  No more “buyer beware”.  As a note, the agents involved must note anything they see as well, but the agents haven’t lived in the home either, so their knowledge may not be much better than the buyers.

Smoke Detectors, Water Heater Bracing, Carbon Monoxide…Any sale of a residential home requires that the smoke detector be working at the close of escrow, that the water heater is braced/strapped for earthquake safety, and effective July 1 of this year, that the home also has a working carbon monoxide detector.  It’s the law…so head to Home Depot if necessary, but these things must be done…no exceptions.

Sellers Statutory Disclosures…This calls for additional disclosures required by law that are not included with the Transfer Disclosure Statement listed above…a supplement, if you will.  For example, here the seller must tell the buyer if there has been a death in the home in the past 3 years, any insurance claims the seller has made on the home, etc.  Random stuff, but again, legally required.

Natural Hazard Disclosure…This is actually a report that is almost always prepared by a separate company (for a cost, naturally….about $90) that includes items the seller is required to tell the buyer of which the seller has no clue.  Items like Earthquake safety issues, proximity to any military ordinance, Flood hazard potential, Fire hazard issues, Liquefaction issues (will the house sink in an earthquake?), etc.  No seller has a clue about this stuff, but since the law requires the buyer to be told these things, there are separate companies who compile the info and prepare the report…for a fee, of course.

Lead Based Paint, Earthquake disclosures…The bottom line here is that if the home was build prior to 1960, there may be lead based paint in the home, and the home may also not be built to today’s earthquake building standards.  If the home was build between 1960 and 1978, then only lead based paint potential needs to be disclosed.  Understand this does not mean an older home has these issues….only that it could.

FIRPTA…We won’t even try to give you what this acronym stands for, but the simple fact is that the seller must let the buyer know that they are either a citizen, or a citizen for tax paying purposes.  Why?  Because the government (both Federal and State) want to make sure that if there is any taxes due on the sale of the home by the seller, that they have a way to get it.  And guess what?  If you don’t have the sellers information on file with this form, and the seller skips the country and heads back to “home”, then the buyer could be on the hook for the seller’s taxes.  Yes, Toto, this is your government at work here.  Could be the most ridiculous disclosure we have, but once again, the law is the law…so you better get this one filled out.

 Believe it or not, there are more, but the ones above are probably the most common in almost any real estate transaction.  We hate them too, and those of us who are from the earlier Cro-Magnon era of real estate sales wish we could just click our heals together and go back to a simpler time…like that’s ever going to happen.  So…as the good industry soldiers that the California Real Estate Law requires, we press ahead with all of this, warm in the comfort that with each passing year of disclosure additions, we are keeping some politicians job for him or her.

Really…what could be better?  And oh, by the way…if you ever decide to sell your home yourself without the aid of a real estate professional, guess what….you will need all of the above as well.  Welcome to our world.

Westcoe Realtors, Riverside California…Ok…so we know that we are not tax professionals, and we need to tell you that.  We repeat, we are not tax professionals.  However, in a general sense, we can pass on to you information that pertains to all homeowners who either sell their home in a short sale, or lose their home through the foreclosure process.  Feel free to get the details from your tax professional, but we can use the broad brush to paint for you the big picture.

First, according to a recent article in the California Association of Realtors Magazine (May, 2011 edition), the Mortgage Forgiveness Debt Relief Act of 2007, provides that if a mortgage debt is partly or entirely forgiven during the tax years 2007-2010, those taxpayers may be able to exclude up to $2 million of debt forgiveness on their principal residence.

In the old days, if you owed $300,000 on your loan, but sold the home for, let’s say, $200,000, then the $100,000 of “debt forgiveness” was taxable to you as income in the year you sold the home!  Nice, huh?  You lose your home, and then discover you also need to pay income tax on money you never got.  Perfect.

However, with this 2007 act, this is no longer the case in many situations.

Check with your tax professional for the details, but those who qualify can claim the special exclusion by filling out Form 982 and attaching it to their federal income tax return for the tax year in which the debt was forgiven.  If you failed to do this on a past return, your tax professional can help you with an amended return.

Secondly, with regards to short sales, it used to be that in some cases, when the lender accepted a less amount than what was owing on the home to facilitate a short sale, the lender reserved the right to still come after the seller for the amount the lender “lost” on the short sale.  Again, real nice.

However, beginning in 2011, once a lender agrees to accept less than the loan amount in a short sale, they also accept “payment in full” for the loan, and cannot come back after the seller in the future.  Your tax professional or attorney should also be consulted for the details on this new development, but it looks like the lenders can no longer have their cake and eat it too!

In the end, Realtors are not qualified to give either legal or tax advice…but that doesn’t mean we don’t know some of the big issues that homeowners deal with daily in the market…and more importantly, we know enough to tell you where to go to get the details you may need.  Check all this out with your tax and legal professionals…and we  hope it saves you some money.

Westcoe Realtors, Riverside Ca…There has been a lot of conversation in the media lately about short sales ( a sale where the home is worth less than the loans, so the existing bank needs to agree to accept less than what is owed on the property….think “foreclosure in waiting”) and the headaches that accompany a real estate sale of this type.  Typically, a short sale transaction takes much longer than either a “regular” sale or the purchase of a repo, and the escrow fallout rate is much higher as well…along with the frustration and patience level of the buyers, sellers , and real estate professionals involved.

Theories abound about why short sales are a problem, but none of them hit the real issue…because the real reason short sales are such a mess is due to only one thing…the existing lender and their idiotic short sale practices.

Oh well, I guess the real estate you-know-what may hit the fan, but from the perspective of a company that is neck deep in short sales because they represent about 1/3 of homes for sale, the bottom line here is that the majority of the existing lenders are so stupid with the way they handle short sales it boggles the mind.

Allow us to explain.

In a “normal” sale with a “normal” seller, the process is fairly simple:  a price range for the home is established based upon recent sales, the seller picks the listing price, the home is marketed by the real estate agent, a buyer makes an offer, the buyer and seller ultimately work out the sales price, and the escrow proceeds and eventually closes in about 30-45 days.  The marketing period can be short or long, depending upon about a thousand things, but with effective and timely communication between all parties (seller, buyer, and agents), all will go well, and the seller will be on their way and the buyer will have a new home.

With a short sale, none of the above happens in any manner that suggests expediency or professionalism…and the common denominator with all the short sale mess resides directly with the existing lender.

Understand that it is in the lenders best interest to make the short sale happen instead of waiting for the home to be foreclosed upon.  The lender loses less money, sells the home quicker, does not have to foreclose upon the home, there is less vandalism because the seller is in the home, the yards are generally kept up so the neighborhood looks better, carrying costs for the lender are hugely reduced, and oh…did I mention that the lender loses less money?   A lot less money.

However, this money savings for the lender seems to be lost in a normal short sale.

First, while the seller and agent still establish a price range for the home using the most recent sales, the real “decider” of the short sale price will be the existing lender.  They are the ones who must say how much they will accept for the home since they control the amount they will lose.

However, the lender will not give the seller/Realtor a price until they have an offer…and there can be no offer until the home is listed for sale…but the home can’t be listed for sale until there is a listing price…etc.   This circle could go on forever.  Talk about a Catch-22 here.  This is a classic “chicken vs. egg” situation. 

So what happens?

The seller and listing agent pick a price they hope the lender will accept, and then hope they can get an offer from a buyer who understands that the listing price means nothing, and then hope again the bank is reasonable with what they will eventually take for the home.  Nice way to run a railroad, eh?

Next, understand that in a short sale, the seller has generally stopped making the payment…which means the foreclosure clock is ticking.  It would be nice if the short sale department for the bank actually talked to the foreclosure department, but that would be way to much to ask.  As a result, since the home could be foreclosed upon at any moment, the list price the seller and agent pick for the home is generally on the low side of the price range, because they need to generate an offer just to get the bank to communicate with them.

So…at this point, we have a list price that means nothing, a buyer who has made an offer based upon this “nothing” list price, and all sorts of people working like crazy to make sense of it all.  So now what?

Well…it gets even better.  Now we can contact the existing lender with the offer they demanded to begin our conversation.  We send the offer to the lender and we wait….and wait…and wait….and wait…and then we wait some more.  In a normal sale, the seller usually gives the buyer an answer within 24 hours.  With a short sale, the existing lender has taken up to 90 days to give us an answer!!!  Can you believe this?  We are attempting to save them a lot of money, and get a higher price for the home than they would ever get if the home was foreclosed upon, and they sit on an offer for up to 3 months?  We’re laughing through our tears.

So…meaningless list price leads to possible meaningless offer, which leads to months of waiting.  And what happens during this time? 

Well, the lender will tell you it takes them this time to get an independent appraisal on the home so they can decide what price they will take for their loan payoff.  We try to be cool, but we know it takes about 1 week to get an appraisal…so what are they doing with the other 11 weeks?  Beats us.

However, eventually, we will get an answer.  Sometimes the answer is Yes…they will take the offer.  Sometimes the answer is NO..they will not take the offer, and here is the price they will accept.  Sometimes the price the bank will take is actually based on reality…many times not. 

If the answer from the bank is YES, then the seller hopes the buyer still wants the home and has not found another in the time they waited (many times the buyer finds another home that actually gives them an answer in a reasonable time), or simply lost interest…and, oh-by-the-way, the bank wants this escrow closed within 2 weeks or they will not accept the price any longer.  This is almost impossible, but everyone scrambles around since at this point, it is the banks way, or the highway.

If the answer from the bank was NO, then at least now, 3-4 months later, we have a price the bank will accept…a price they could have given us in the beginning.

And let’s not forget….all this is being done while the seller is hoping the bank foreclosure department does not foreclose on the home during the short sale process!

In the end, all we can do as real estate professionals is make sure that everyone involved with a short sale understands this cumbersome process before they begin.  We explain the pitfalls, poor communication, and ridiculous time table.  The buyer and seller decide if they want to play by these insane rules.

HOWEVER…the next time the media wants to write about short sale transactions and give some other explanation as to why they take forever, and are such a problem….don’t buy it unless the blame is placed squarely where it belongs…at the feet of existing lender who refuses to act in a timely (and money saving) manner.  While the solution is simple, the banks just refuse to make it easy.

Westcoe Realtors, Riverside California…My goodness there is a lot of negative information appearing in the media the last couple of weeks regarding the current status of real estate.  Prices dropping, sales down, foreclosures, etc.  Makes Chicken Little look upbeat.  However, what does it all mean?  Anyone with a heartbeat and a slight awareness of the present understands that 2011 is not exactly 2006 when it comes to real estate….but do we all really need to head for the “real estate bomb shelters” as the media would have us do?  Well, not exactly.  It just depends on whether you want all the news, or just the stuff that sensationalizes the headlines.

Home Prices

As we have said here repeatedly over the years, all real estate is local…so anything you read that is national in content probably has no bearing on your local area.  This is especially true for our Riverside area.

Bottom line…the Riverside area has already taken the majority of price “hits” coming our way, and in most cases, our market has stabilized…and has been stable for some time.  This is especially true in the price range of approximately $350,000 and below.  Yes, the price range above that number still has some softness to it because there are fewer buyers who can swing either the financing or a large enough down payment to make the financing tolerable, but the bread and butter price range of below the $350,000 level is very stable.

So why all the fuss in the media the past few weeks? 

Because after 4 years of this economic turmoil, prices are finally starting to drop in the areas around the country that didn’t see the huge upswing of the 2000-2007 years.  The hardest areas to be hit with plummeting real estate prices the past 4 years were those areas with the largest run-up…sunbelt areas like Southern California, Arizona, Las Vegas, Florida, etc.  The rest of the country didn’t have the huge hikes in real estate pricing, so they had far less to lose.  But now, even those areas that escaped the drastic drops of the past few years are now starting to feel the sting of the real estate market. 

Why is this important?

For those of us in the Greater Riverside area, it is critical to know that the drops now being recorded in other parts of the country have already happened here.  Therefore, instead of over reacting to the negative news, we need to just “chill” and understand that we have already paid our price.  We appear to already be at our bottom, and in the majority of cases (as described above) our next move is upward.

Sales

Sales are the same way.  Our sales and closings for March, April, and May of 2011 have been very consistent.  In fact, closings for May were up almost 7% from April.  Bet you haven’t seen that number reported anywhere.

However, if you really want to scare the general public, you could also say that with regards to closings, May of 2011 was off approximately 40% from May of 2010 in the Riverside area…and while that would be true, it only tells a part of the story…because if you compare May of 2011 with June of 2010, sales would only be off by 12%…not as scary, eh?

The moral of this story is that depending on what numbers one wishes to quote, and how one wishes to slant a story, numbers can almost take you anywhere you want to go…so be careful when you read all the “stuff” now being reported in the media.  It’s probably true, but not always accurate.

So what is our local real estate market doing at the moment?

To accurately summarize, on a scale of 1-10, we seem to be running at a very consistent 5…meaning that while we will certainly acknowledge that 5 is not exactly 10 on the scale, it isn’t a 1 either.  We are solidly in the middle, with sales down a bit from previous years, but holding steady…and this is what has to happen before the market improves.

Remember, as we have stated before, our market will recover like a “U”, not a “V”…meaning that our bottom will resemble a flat line before it begins to rise (like the bottom of a “U”), instead of the sharp increase of the “V”…and that is where we are now.  We are stable, have taken the worst the market has had to give us, and while we will make no predictions as to when our rise will take place, we can say that in most cases, “down” is in the rear view mirror, and “up” lies out there somewhere on the horizon.

Take care, and as always, thanks for reading.  Let us know if you have any questions or issues you would like to see addressed here.

Westcoe Realtors, Riverside California…If you are a former home owner who has lost your home to  foreclosure, or completed a lender approved short sale, it looks like there are some definite guidelines that stipulate just how long you may have to wait to purchase a new home…and it may not be as long as you think.

Up to now, understanding how a derogatory credit event (fancy way of saying foreclosure or short sale) effected your future buying ability was a closely guarded secret akin to the Coke formula.  Everyone had a guess, but no one had any specifics.  However, in an effort to eventually bring so many displaced former home owners back into the real estate market as buyers, FHA has recently provided specific guidelines for just such circumstances as these.  Here are the basics.

FORECLOSURES…If you lost your home to a foreclosure, your wait period is 3 years from the date the home was transferred back to the bank.  With extenuating circumstances, this time period can be reduced to 2 years (or maybe even less), but never less than 12 months.  The definition of “extenuating circumstances” is open to interpretation to allow for unique circumstances, but the general rule of 3 years will apply unless you can get a waiver for your situation.

SHORT SALE…If you completed a short sale, the wait is also 3 years from the date you transferred the property to the new owner…BUT…there is no waiting period if you had no late mortgage or consumer debt within the 12 months prior to the short sale, and the reason for the short sale was hardship, and not just bailing on a property that had lost value.  **As a note here, it is very hard to get an existing lender to grant the short sale unless your are behind in your payments, so this is a bit of a Catch 22 situation.  Our thought is that the mortgage component of this stipulation will get changed at some point in the future, but for now, there is way to get right back into a home provided you qualify.

There are also stipulations if you have had either a Chapter 7 or 14 bankruptcy.  They are a bit more detailed (too lengthy to go into here), but in general, your wait is anywhere from 1-2 years, depending on your type of bankruptcy and your credit since the date of your discharge.

Please understand that these above guidelines are simply that…guidelines.  Lenders understand that every situation and every buyer is different, and they really do a good job of trying to paint an individualized picture for all potential borrowers.  That is why they can offer exceptions to their guidelines sometimes.  Each case is different.

Also, remember these guidelines are only good for FHA loans.  In time, there is no doubt that conventional loans will probably head the same way…but for now, FHA is leading the way.

In the end, it seems that the “powers-that-be” are realizing that owning a home is the American dream, even after all the “junk” that has come down the real estate road the past few years…and loan programs that offer a way for former home owners to re-purchase real estate are probably beneficial to all.  It gets more buyers back into the system, which will increase home sales…which is good for everyone.

So…if you fit into one of the categories above, take heart…you may be back in the market for a home sooner than you thought.

Westcoe Realtors, Riverside California…Since we are obviously in an age of information, it’s only logical that we are also in an era of statistics.  There are stats for everything.  It started in sports, and has spread to business faster than a Lindsay Lohan rumor.  Stats…stats…stats…we are drowning in them.  However, since we can’t slow their usage, we can make sure that our readers at least understand what is really behind the statistics being quoted repeatedly in the media.

Take today for instance.  In our local Press Enterprise paper, there is a real estate story that essentially says the real estate market is down, sales are less than usual, etc…and the source for all the stats used is Data Quick, a major supplier of real estate information.  However, while the story attempts to let the reader get a “real time” view of just what is happening in the real estate market today, there is one huge problem here…Data Quick’s statistics are 1-3 months old, and therefore outdated for the purposes of the story.

Don’t get us wrong…there is no attempt to deceive.  It’s just that most media articles are published using data on closed escrows…and closed escrows reflect the marketplace of a few months ago, not the market of today. 

Most escrows that close in April are sales that took place in January or February.  In a normal market, a standard escrow will take about 30-45 days to complete.  Some can finish sooner, and some later, but 30-45 days is the norm.  However, we are not currently in a normal market…and escrows take far longer to close.  A full 1/3 of our properties for sale are bank repossessions, another 1/3 is short sales, and the remaining 1/3 are regular, standard sales with the seller having some equity.

Given that 2/3 of our available inventory takes some sort of bank approval for the loss to be incurred, and given that getting a timely answer from these banks is nearly impossible, it is no wonder that the average escrow period is almost double.  So…where does that leave us?

 It means that stories and statistics that rely on closed escrow information are inherently 60-90 days out of date.  The April statistics quoted in today’s article referenced above reflect our SALES of January or February…which were awful.  Call it a New Year’s hangover…whatever.  The bottom line is that for the 1st two months of this year, sales were really down…but in March, April, and so far in May, sales are picking up.  In reality, our market is actually getting some steam, not lagging as is suggested by the closed statistics.

The moral of this story is that while statistics don’t lie, sometimes they can really mislead.  It’s no ones fault, just the way the statistics are presented.  What to do?  Easy…just read any information about the real estate market with an eye that the information presented may not be exactly what you expect…and call us if you really want to know what is happening now….not 3 months ago.  The media cannot access “sales”, only closings…and “sales” will give you the real picture of today….not months ago.

Take care, have a great week, and thanks for reading.  

Westcoe Realtors, Riverside California…I used to have a friend, that whenever anyone asked him, “Hey, how you doing?”, his response was always,”Compared to what?”  It came to be the running joke amongst us all, but in retrospect, he may have had a point….because these days, when someone asks us as Realtors…”Hey, how’s the market?”…it really makes sense to answer…”Compared to what?”

If you look at our local real estate market compared to the beginning of the year, then our answer would be that we are improving.  Sales are up almost 30% from January, interest rates are fairly steady and still very affordable, and inventory is also very steady with an equal choice between bank foreclosures, short sales, and regular, seller equity standard sales.  While there really is no “selling season” here in Southern California, our market usually gains it’s strength in the spring, and this strength usually holds steady until the holiday season in November.

However, if you compare our market to the same time period as last year, then things are not quite so rosy.  The total sales for Riverside were down 26% in March of this year as compared to last year, and for April, the number is even higher…a decline in unit sales of 41%.  So what gives?  Do we need to panic?

In a nutshell, no.

The bottom line here on the numbers is this…the last two months of 2010 and the first two months of 2011 were horrible.  No way around it, no way to sugar coat it.  November, December, January and February were abominable.  No real reason, but in our opinion, simply the accumulation of many issues that were seasonal in nature.  Our market normally slows over the holidays, and this year, there simply seemed to be a ”hangover” from the end of 2010 to the start of 2011.  However, 4 months ”do not a market make”, so there was no reason to panic…and we didn’t.

Sales began to rise in late February, and they continued to gain steam through March and April.  May, even this early in the month, seems to be even more active yet, so it looks like things are headed in the right direction.

As a note here, when sales “tanked” in the 4 months mentioned above, there were lots of media reports indicating doom and gloom with regards to the real estate market.  First, we hope you ignored any reports that were national, and not local, in nature (read last week’s blog), and secondly, this brings up the point that micro analyzing monthly data can be hazardous to your health…at least your real estate health.

Just like when you are driving your car “straight” down the road, in reality, you are making minor adjustments to the steering wheel, because your car is not driving totally straight.  It is really weaving, although very slightly, left and right, and you are making very, very, subtle course corrections to keep the car going “straight”.  If you were to analyze any of your car driving like the media likes to pounce upon minute real estate data, then you would totally panic in the car, because each time your car weaved microscopically left or right, you would think you were headed off the road.

The same is true for our real estate market.  Markets are made over many months, not just a few.  Any case can be made for just about anything if you analyze only a very small amount of data.  Our real estate market will weave just like the car, only our weaving will take a few months, not a few feet.  In the end, you need to give the market time to make course corrections, just like you make with the steering wheel in the car. 

So, what does all this mean?  To us, it means that our market is headed back to “straight” after weaving for a few months.  Right now, sales are headed upward, and we see no major changes from what we have dealt with in 2010.  Our market is not better, and it is not worse…it is stable…and for now, stable is not a bad thing.  So rest easy, and we’ll let you know when it is time to panic…and that time is not now.

Take care, and have a great week.