D.S.News.com reports that Capital Economics experts predict that the housing crisis will end this year.  The primary reason is that banks are loosening credit standards. You no longer have to be Donald Trump to buy a basic home!

Five years ago buyers could qualify for a loan when their FICO credit score was in the mid to low 500s. (Fair Isacc Corporation developed a formula to apply to an individuals credit history which predicts the likelihood of a that borrower being 90 days late on their mortgage payment. The scores range from 300 to 850) The factors considered are: 1) payment history, 2) credit history length, 3) Recent searches of their credit record, 4) Other factors, such as types of credit used, recent improvements or declines, court or tax liens…)  It now takes a FICO score of 700 to qualify for a mortgage loan.

During the housing spike, one could obtain a loan for 100% of the purchase price.  In the past year, few borrowers could get a loan for more than 75% of that purchase price.  Lenders have recently loosened that requirement and most are back to a loan of 80% of the purchase price if other factors pass muster.

Lenders are also now lending amounts of up to 3.5 times a borrower’s annual income, up from 3.2 times in recent years.

The days of 100% financing and “liars loans” are long gone.  Borrowers still have to meet stringent standards to qualify for financing.  The good news is that lenders are loosening up on most of those standards a little bit at a time.

The lenders are being very cautious, however, they have new loans to stay in business, so the market is slowly righting itself.

Select this link for the full DS News story:

http://www.linkedin.com/news?actionBar=&articleID=5567733516482908167&ids=dj8QdP4Ud3gQdzsRe34OejoRdiMRcPkVdjgUdzgUczkRdPsUdzkRb3sOdj8RdjAPcz0UcPcVdPASdjkIczsQejcRcj4Oej8TdPwQdPoRdiMTdz4Uc3AOe3gScjkPcPsTdzkR&aag=true&freq=weekly&trk=eml-tod2-b-ttl-0&ut=1jY48NKE9SMB41

If you have questions about obtaining a loan, feel free to call or text (916) 337-0658 or e-mail Mike@BuyYourVilla.com .

This is one in a series of brief videos designed to provide buyers and sellers information about the sale and purchase of real estate.  The data provided helps people better understand the market place and the process of buying or selling.  The tips are offered so that you can leverage your position in that purchase process.  Knowledge is power, or at least a tool with which to increase your chances of success.

If you are thinking of buying or selling in our area, we will be happy to assist.  Just call (916) 337-0658, text or e-mail us at Mike@BuyYourVilla.com.

El Dorado Hills is a beautiful area, an ideal location to raise a family and meet life’s challenges.  Since El Dorado Hills is a bedroom community, there are many fine homes from which to choose at any given time.

A prudent buyer will investigate an area before they decide if it is right for them.  They will also learn as much as they can about the local real estate market.  The purpose of this post is to provide home sales data for single-family homes in El Dorado Hills.

Contrary to all of the media hype about the “national” real estate market, real estate markets are local and one can be very different from another.

For those of you who remember your Economics 101 class, the laws of supply and demand still apply, especially in the real estate market.  One of the statistics Realtors® monitor carefully is supply, or the inventory of homes available on the market.  

Pundits consider a six-month supply to be a neutral market.  An inventory of less than six-months is a seller’s market and an inventory of more than six-months is a buyer’s market.

The graph below provides the inventory data for El Dorado Hills for the past 15-months. You can see that there were two months in which the inventory level exceeded a six-month supply, both at the beginning of last year.  Homeowners are reluctant to put their homes on the market when sales prices are low.

The second graph lists the actual price per square foot that single-family homes sold for in each of the past 15-months. This is an important statistic to Realtors®, one used to determine to value of any specific property.

Naturally, there are fluctuations but there is no measurable trend.  We submit that the price point is bumping along at the bottom of the market. 

We can provide this data for any town in our seven county areas.  If you have an interest in a specific home, we will be happy to help you determine a value and assist you in getting the best possible deal.  Call (916) 337-0658 or e-mail Mike@BuyYourVilla.com

This posting is the forth in a series designed to help take the mystery out of the home buying and selling process.  That process can be confusing and, since it pertains to the single most expensive asset most of us have, our home; we feel that our clients are better prepared for the experience if they have some understanding of each step in the process in advance. 

If you have reached this point in the purchase of any real estate, congratulations, you are in the home stretch.  The seller has met all of your requirements and, with the exception of the loan, you have met theirs. You will have received final approval of your loan, completed all inspections, and reviewed and approved all inspection reports.

The deed of trust and the promissory note are two of the many documents that you will sign. The escrow officer will return all loan related documents to the lender, where they will be carefully reviewed.  The lender will fund the loan on the date of closing, sometimes the day before. 

The document signing usually takes place a few days before the recording of the transfer of title, and escrow is closed.  The escrow officer will have informed you about the exact amount of the funds you have to bring to close the transaction.

The signing usually takes between an hour and an hour and one half to complete, so make sure you set aside enough time.

Funds must be in the form of a certified check, or you can wire transfer them directly into escrow.  Sorry, no personal checks, cash or credit cards may be used. 

Don’t forget to bring identification.  Most people use a driver’s license or passport.  The person who conducts the signing is a notary and must notarize many of the documents.   

 First American produced a straightforward video that is easy to understand.  If, after you view the video, you have questions, please feel free to call, text (916) 337-0658, or e-mail Mike@BuyYourVilla.com for clarification. 

This posting is the first in a series designed to help take the mystery out of the home buying and selling process.  That process can be confusing and, since it pertains to the single most expensive asset most of us own, our home; we feel it best to provide our clients with an understanding of the process before it starts. 

The second posting and video in the series covers title insurance.  Title insurance is one of many types of insurance with which a homebuyer must deal.

Just as you have insurance on your automobile protecting you against a loss in an accident and hazard insurance for your home in case of fire or disaster, title insurance protects a homeowner against obscure or unforeseen issues from the past that could endanger your title (ownership of the property).

Title insurance only exists in the United States and a few other first world countries. In most of the world when you purchase real property, there is a danger that you could lose that property because of the actions of the past owners.

In the United States when you purchase property, you also purchase a title insurance policy. If, at some later date, issues arise, such as unpaid taxes, forged documents during a past transfer of the property or mechanics liens because a former owner failed to pay a contractor, title insurance protects you, the owner, and ensures that you do not lose your property as a result.

First American produced this straightforward video that is easy to understand.  If, after you view the video, you have questions, please feel free to call, text (916) 337-0658, or e-mail Mike@BuyYourVilla.com for clarification.

This posting is the first in a series designed to help take the mystery out of the home buying and selling process. That process can be confusing and, since it pertains to the single most expensive asset most of us have, our home; we feel that our clients are better prepared for the experience if they have some understanding of each step in the process in advance.

The first posting and video in the series covers escrow. A licensed, neutral third party that handles the many documents and all of the money involved in the purchase, sale or refinancing of real property. The escrow officer must follow all of the written instructions provided by the parties to the transaction. Once a buyer’s deposit earnest money or other funds into the escrow account, both the buyer and seller must agree to any action that the escrow officer can take with respect to those funds.

In essence, escrow protects all parties to the transaction.

First American produced this straightforward video that is easy to understand. If, after you view the video, you have questions, please feel free to call, text (916) 337-0658, or e-mail Mike@BuyYourVilla.com for clarification.

What is the MLS?  The MLS (Multiple Listing Service) is an organization that collects the data for all residential properties listed by real estate brokerages in a specific geographical area. There are many different MLS’s, one for each area of the country.  Although they all perform the same function, there are differences between them that are more apparent to the Realtors® who are members than to the public.

When a Realtor® lists a property for sale, they enter the listing (all the pertinent data about that property) into their local MLS, which notifies all of the other Realtor® members of that MLS that the property is available for sale. That listing Realtor® is required to keep all pertinent data about that property current in their MLS. In essence, the MLS data is the most accurate database available for properties that are for sale in that area.

Other Realtor® members of that MLS use the data on available properties to help buyers review and select properties they may wish to buy.

There is considerable data on each property and Realtors® have many ways to search and sort the available listings in order to zero in on the specifics that a buyer is looking for.

MLS organizations are particular about how their data is used and who they allow to use that data.  They have strict guidelines, which they enforce.  Their efforts result in high quality data that is not available on many property search web sites.  Realtor® members of an MLS may provide the data to their client base, or the public, if they meet the requirements of their MLS.

The property search data available on www.BuyYourVilla.com is an example of that high quality data.  The system automatically updates the data daily so that users do not spend their time looking at SOLD properties or those that are no longer available for sale.

Many large property search web sites do not have these high quality MLS feeds. Their data comes from different sources.  Some charge Realtors® for the privilege of entering listings.  Realtors® do so in an attempt to maximize exposure for their listings.  There seldom is a requirement to keep the data current. Properties that have been on off the market for months or years may still show up on those sites.

Anyone seriously considering a purchase should be selective when choosing a property search web site.  Sorting through useless data can be frustrating.

If you find a property that you feel may be worth a look, feel free to contact us at (916) 337-0658 (or text us) and we will be happy to review the property for you and, if necessary, arrange for a visit.  Happy Searching!

Short Sales 101, Part 2

A short sale property is one that is on the market with an asking price that is less than the seller owes on the property.

Not many banks are known for their philanthropic pursuits, they are in business to make money.  Debt forgiveness is not high on their priority list. So getting them to accept a short pay on a mortgage loan is not an easy task.

However, the housing market has changed over the past year.  Remarkably, distressed homeowners with a legitimate hardship are finding it slightly easier to obtain a short sale approval.  As with most things, if the distressed homeowner prepares properly they increase their chances of success.

For the purposes of simplifying this discussion, we will use the term bank when we refer to the lender and/or servicer.  In fact, most loans are sold on the secondary market and the organization that actually owns the note (title to the property) may be your insurance company, union retirement fund or any number of investment entities commonly known as the investor.

Usually, the organization to which you make your loan payment is a loan servicer that works for the investor.  That loan servicer may or may not have the decision-making power to accept or reject a short sale request.  However, distressed homeowners must present their short sale requests to the servicer in the form that servicer requires.

One of the first things that the bank will look at is the seller’s financial hardship.  That hardship must be one that meets the banks guidelines.  The distressed homeowner must include a hardship letter, explaining why they can no longer make their monthly payments, accompanied by supporting documentation. The bank will verify every detail. Some homeowners try to beat the system by omitting income streams and assets from their financial picture in the short sale request package.  That is fraud and can result in severe penalties.  

A partial list of hardships that are usually accepted include:

Business Failure                                Job Loss

Damage to the property                     Mandatory Job Relocation

Death in the Family                           Medical Bills

Divorce                                           Military Service

Insurance or Tax Increase                  Military Service

Incarceration                                   Severe Illness

Increase in Mortgage Payment            Too Much Debt

The second thing the bank will consider is if there is insolvency.  If the distressed homeowner has liquid assets that can be used to pay down or pay off the debt, that homeowner does not meet the insolvency test. (Federal Law excludes 401K retirement account balances from this calculation).

The third requirement that distressed homeowners must demonstrate in order to obtain short sale approval is a monthly income shortfall.  A simple list of monthly income less a list of monthly expenses will provide the proof needed for this test.  Remember to list only minimum monthly payments when making this calculation.

Once again, the bank will review every document provided and check each for authenticity. Borrowers with a verified, acceptable hardship will receive serious consideration for their short sale request.

For those seriously considering a short sale, we recommend that you enlist the professional services of a qualified Realtor®, certified to handle short sales.  The process is time consuming and requires a highly detailed approach if one is to achieve shot sale approval.  Not all licensed real estate agents have the skills, interest or patience to meet your goal.

Call us at (916) 337-0658 if you have any questions or wish to consider short selling your house.

Stay tuned for more on short sales. 

 What is a short sale?   A short sale is transaction in which the seller is attempting to sell their property for less than they owe the lien holder or lien holders.  In almost all cases something has happened that prevents the homeowner from being able to continue to make their mortgage payments.  

The difficult part of this process is getting the lien holder or lien holders to accept the short pay.  Short sale properties are available everywhere and offer the potential of being a GREAT BUY.  However, they usually take a long time to complete and, because many lien holders can not or will not accept a short pay, many attempts at a short sales fail.  Also, many buyers give up in frustration and move on to another property because they get tired of waiting for lien holder’s approval.

Do I qualify for a Short Sale?  Qualifications for a short sale include any or all of the following:

• Financial Hardship – an acceptable reason (as determined by the lien holder) causing the homeowner to have trouble affording their mortgage payment.  Some acceptable reasons include; death in the family, serious injury impacting a wage earner’s income, loss of job, major reduction in income… to name just a few.
• Monthly Income Shortfall – You have more month than money.
• Insolvency

In all cased the homeowner must document the reason they can not make their payments.  Tax returns, pay checks, bank statements, investment account statements, documentation from employers are part of the paperwork required.

The fact that the value of your home has declined and your mortgage payment is too high given the current market value is not an acceptable reason.

More on Short sales will be posted soon.

Call (916) 337-0658 if you want to discuss your particular situation.  Each one is different.

A step by step process for distressed homeowners.

This is the third in a series of posts designed to be a step-by-step directory for distressed homeowners to use to try an avoid foreclosure.

We continue the discussion of various options that a distressed homeowner may have.  Some of these options only apply to homeowners in very specific situations and will not apply to most; however, if you meet the criteria you should take advantage of any opportunity that presents itself.

Forbearance or Repayment Plan

This option is likely to work for a larger number of distressed homeowners.  The hardship causing the borrower to miss one or more payments must be resolved.  The borrower must be able to prove that they have the income to continue to make the required payments.   

The borrower must make up all of their missed payments, pay late fees and any other fees the lien holder charges.  However, in this option, rather than making a lump sum payment they ask the lien holder to allow monthly payments of the total reinstatement balance, usually three to twelve.

Naturally, the lien holder must approve this option.  Bear in mind that these payments will be in addition to the regular monthly payments.

So, for the time it takes to repay the reinstatement balance the total monthly payments will be very large.

The danger here is that if only one of the payments is missed, or not paid completely, the borrower goes right back to the same stage of the foreclosure process where they were when they started to make the forbearance payments.

 This is difficult for most borrowers, but some use this option successfully to avoid foreclosure.

Sell The Property

This option was probably in the back of many borrower’s minds as an exit strategy if they got into trouble, when they really did the financial stretch to buy their dream home.  It can still work IF conditions are right.

In order to sell the property the current market value of the property has to me high enough for the seller to satisfy all liens against the property, plus commissions and all closing costs.  Today few will qualify.

Here are links to a few web sites with helpful information for less specific situations:

                               http://portal.hud.gov/portal/page/portal/hud/topics/avoiding_foreclosure

http://www.ForeclosureStopper.org

http://www.CDPE.com

In future posts we will discuss other options people may use to avoid foreclosure.  Those posts will be coming soon.

Feel free to contact Mike West, Realtor, CDPE if you have any questions or need help.

(916) 337-0658              e-mail:   Mike@BMikeWest.com