For the third consecutive month, California foreclosure sales jumped significantly as lenders come off the moratorium, according to ForeclosureRadar.com. Foreclosure sales increased by 24.7 percent following a 31.9 percent increase in May, and a 35 percent April increase. Notices of Trustee Sale dropped by an unexpected 28.7 percent, with the timing of the drop indicating that it was in response to the California Foreclosure Prevention Act.
The California Foreclosure Prevention Act adds an additional 90 days to the time before which a lender can file a Notice of Trustee Sale. This law was widely believed to have little or no impact on foreclosure filings, as it exempted the majority of large lenders that operate in the state. A number of lenders appear to have self-imposed California’s latest foreclosure moratorium on themselves, despite having received an exemption from it. Given the number of exempt lenders it was quite surprising to see Notice of Trustee Sale filings drop by nearly 50 percent the day the new law went into effect.
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Thirty-nine Dickson Realty agents have recently earned the prestigious Certified Distressed Property Expert (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. This is invaluable expertise to offer at a time when the area is ravaged by “distressed” homes in the foreclosure process.
Short sales allow the cash-strapped seller to repay the mortgage at the price that the home sells for, even though it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.
In the Northern Nevada area, currently it is estimated that close to 1,800 homes are in danger of foreclosing. It is happening in all price ranges. Local experts say that even high-priced homes are not immune.
Dickson’s new CDPE designated agents: (shown)Teri Shields, Jeff Geisler, Tammy Olivas, Claudia Byrne, Chris Barns, Victoria King, Jill Deeter, Dan Rider, Andrea Green, Helen Graham, Beth Nitz, Amy Shocket, Mary Robinson, (not shown) Bonnie Beck, Cindy Henderson, Donna Clark, Ivy Cohen, Cyndi Dawson, Gary Edwards, Pam Eikleberry, Denise Fox, Jan Houston, Jen McDonald, Mandie Jensen, Christy Klinger, Anne Lavoy, Gerry Martin, Margie McIntyre, Dee McNeely, Brenda Mee, CJ Risley, Darlene Sharp, Jan Sluchak, Alison Elder, Norm Nicholls, Lil Schaller, Kane Schaller, Emily Sterling, and Maryann Truitt.
“Our job as REALTORS® has changed over the past several years. In our area, our number one goal is to help homeowners stay in their homes. If we are unable to do that then assisting them in a short sale may be a very viable option. A short sale doesn’t impact a homeowner’s credit as disastrously as a foreclosure does. A short sale usually nets the original lender more money and it does not devastate the neighborhood pricing. However working with lenders in a short sale situation can be very frustrating for sellers, for buyers and for real estate agents. We believe successful short sale closings require specialized training and we were pleased to have had 54 agents in this two-day training.” said Nancy Fennell, president of Dickson Realty. “In addition to this two day training, our firm holds monthly “short sale conversations” at each of our branch offices. We have sent our managers to short sale training around the country and we have pooled that information into our Short Sale Toolkit. Because policies and procedures change daily in this market, we find meeting monthly is a tremendous advantage for our agents. We are proud that our agents believe as we do in training, training and more training.”
Alex Charfen, founder of the Distressed Property Institute in Boca Raton, Fla., said that REALTORS such as these Dickson agents with the CDPE designation have valuable training in short sales that can offer the homeowner much better alternatives to foreclosure, which virtually destroys the credit rating. These experts have a better understanding of market conditions and can help sellers through the emotional experience, he said.
The Distressed Property Institute opened in January 2008 and provides training on-site and online. The CDPE is the premier designation for Realtors helping homeowners in distress and handling short sales.
To find our CDPE agents, visit us online at www.dicksonrealty.com or call any of our local offices: Caughlin Ranch 775.746.7000; Damonte Ranch 775 850.7000; Sparks 775.685.8800; Montreux 775.849.9444, or Truckee 530.587.
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So I’m trying to explain our market conditions to an entry level buyer. In this case he’s considering homes in the $120,000 range. Key points for him to consider:
Overall, inventory is relatively low with less than two months supply on the market now at this price point.
In this price range, in some areas we are actually seeing appreciation. It’s not uncommon to see multiple bids and often the price is actually bid up from the list price.- We may have some challenges with the purchase appraisal.
- The well priced, active inventory is dominated by REO’s & Short Sales
Sans the distressed inventory this is exactly how we counseled buyers when the market was hot (in my market ’03 – ’06). Kind of ironic under the circumstances and one would hope that consumers and real estate professionals proceed with some caution
The five year ARM’s originated during the boom are beginning to reset now. For many if not most homeowners a lack of equity makes refinancing impossible. Meaningful loan modifications are still pretty rare and short sales still anything but “short”. With this in mind we will undoubtedly see increased foreclosure activity and that will likely create another drop in median value. So how should we proceed?
Fist of all Buyers & Agents should talk about this. Some areas and types of properties are more vulnerable than others. For example smaller, poorly funded condo associations may really struggle if a significant number of homeowners stop paying dues.
Secondly focus on the monthly payment and long term tax benefit rather than the market value of the property. We often see monthly payments equal to or less than monthly rental value. For the moment we shouldn’t consider home equity our nest egg.
Buy conservatively. I know, there are a few ½ priced mansions out there and that can be alluring. I like to recommend that the buyer at least consider the possibility of hard financial times ahead. Contemplate job status, reserves and the length of time the buyer anticipates owning the home. I have a physician client that recently told me for the first time in his career he now has big gaps in his daily appt schedule. It seems that few people are immune from this downturn.
In short I think we all must keep our wits about us and learn from the recent past. Those that ignore history are doomed to repeat it…
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It is true that both foreclosure and short sales have serious consequences for homeowners faced with the inability to pay thier mortgages. The following are some of the ways homeowners are affected showing the difference between foreclosure and short sale. (Source: Distressed Property Institute)
PURCHASING A HOME IN THE FUTURE…
- Fannie Mae Insured Loans for Primary Residences - Foreclosure requires a 5 year wait before purchasing again vs. a 2 year wait if you sold through a short sale.
- Fannie Mae Insured Loand for Non-Primary Residences – Foreclosure requires a 7 year wait and short sale again will only require a 2 year wait.
- Future Loan Applications – On any 1003 application the borrower who has a foreclosure will have to mark “YES” to the questions “Have you had a property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”, yet a borrower who has done a short sale will not have to answer yes to this question.
CREDIT HISTORY AND CREDIT SCORE
- Credit scores can be lowered anywhere from 250 to over 300 points with a foreclosure and will typically affect your credit score for over 3 years. With a short sale only late payments will show and after sale the mortage will be reported as paid or negotiated. The short sale’s affect can be as little as 50 points and can be as brief as 12 to 18 months.
- Credit history for foreclosure will remain as a public record on your credit history for 10 years or more. A short sale is not reported on a credit history, typicall it shows the mortgage was “paid in full, settled.”
EMPLOYMENT
- SECURITY CLEARANCE – If you have a security clearance, a foreclosure can result in a revokation of your clearance, where typcially a short sale on its own does not challenge a security clearance.
- Your current employment can be affected if your employer checks your credit regularly.
- Many employers are requiring credit checks when hiring for new positions. A foreclosure could challenge future employment opportunities.
DEFICIENCY JUDGEMENTS
- In 100% of foreclosures in Nevada the bank has the right to pursue a deficiency judgement. With a short sale the lender often agrees in writing to give up the right to pursue a deficiency judgement.
- With foreclosure the price the home sells for after the bank gets it back through the foreclosure process is often significantly less then the proceeds they would receive in a short sale. Thus the deficiency balance is typically much higher with a foreclosure than with a short sale.
There is a common misconception that foreclosure and shortsale are equal, but as you can see the truth is that the consequences of a short sale can be more favorable for homeowners.
If you or someone you know if facing foreclosure please contact me and I can help you understand the options available to you and give you referrals to others who can help.
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Thursday, July 30, 2009 By: The Schaller Family
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