Reuben Alexander’s Blog

On May 03, 2009 at 13:00 PM, you are invited to an Open House at 5409 Castle Knoll Rd in La Canada Flintridge. If you are looking for a Resale - single family property in this area, don’t miss this rare opportunity to visit this magnificent property. For a preview of this Resale - single family property, check out my site at realtor4good.com. Please do not hesitate to Contact Me if you have any questions or wish to schedule a private showing.

On April 19, 2009 at 14:00 PM, you are invited to an Open House at 1627 Oakengate Dr in Glendale. If you are looking for a Resale - single family property in this area, don’t miss this rare opportunity to visit this magnificent property. For a preview of this Resale - single family property, check out my site at realtor4good.com. Please do not hesitate to Contact Me if you have any questions or wish to schedule a private showing.

I’ve just sold a Resale - single family property at 11558 Gilmore St in North Hollywood. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 11558 Gilmore St in North Hollywood. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I’ve just sold a Resale - single family property at 1526 Winchester Ave in Glendale. Come and visit my site to see other properties in that area. If you are interested in looking for or selling your home, please Contact Me.

I think we forget sometimes that not everyone is in the real estate business. We have seen terms pop up over the last couple of years that we think we know, and some we might have never heard of. I thought I would take a second and make sure we are all on the same page regarding the definitions of these terms. Our good friends over at Wikipedia provided the definitions.

FORECLOSURE

Foreclosure is the legal and professional proceeding in which a  mortgagee, or other  lienholder, usually a lender, obtains a court ordered termination of a  mortgagor’s  equitable right of  redemption. Usually a lender obtains a  security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower  defaults and the lender tries to repossess the property,  courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, the lender cannot be sure that it can successfully repossess the property, thus the lender seeks to foreclose the equitable right of redemption. Other lienholders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue  HOA dues or assessments.

The foreclosure process as applied to residential mortgage loans is a  bank or other  secured  creditor selling or repossessing a parcel of  real property ( immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a “ mortgage” or “ deed of trust“. Commonly, the violation of the mortgage is a  default in payment of a  promissory note, secured by a  lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its  mortgage or  lien“. If the promissory note was made with a recourse clause then if the sale does not bring enough to pay the existing balance of principal and fees the mortgagee can file a claim for a deficiency judgment.

SHORT SALE

In real estate, a short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the  bank or  mortgage lender agrees to discount a  loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s  loss mitigation or workout department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the  debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Many Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain as a potential liability for the Mortgagor / Borrower. The bank’s opportunity of pursuit of a deficiency judgment will vary from state to state.

REO (REAL ESTATE OWNED)

Real estate owned or REO is a class of  property owned by a  lender, typically a  bank, after an unsuccessful sale at a  foreclosure auction. A bank will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount. If there are no bidders that are interested, then the bank will legally repossess the property. As soon as the bank repossesses the property, it is listed on their books as REO - Real Estate Owned - and is categorized as an asset (non-performing).

As soon as a property goes into a distressed status (the borrower/home owner misses mortgage payments) the bank will want to determine the amount of equity that the property has. A popular method to determine the equity is to obtain a  Broker Price Opinion  BPO or order an  appraisal. Based on the amount of equity that is determined from the  BPO, the bank will decide to try for a  short sale or to allow it to go through the foreclosure process. If the bank is able to sell the property through a short sale or at a foreclosure auction, then the property will not become a REO property.

After repossession and the property becomes classified as REO, the bank will go through the process of trying to sell the property on its own. It will remove some of the liens and other expenses on the home and try to resell it to the public, either through future auctions or direct marketing through a real estate broker (REALTOR). Generally speaking, bank REO properties are in poor shape in terms of repairs and maintenance; however,  real estate  investors will often go after these properties as banks are not in the business of owning homes and so, in some cases, the low price can more than compensate for the condition of the property.

Once a property is REO, the bank or lender will try to get rid of the property by either selling it directly themselves or through an established  broker. Many larger banks such as Bank of America and Wells Fargo have REO/ asset management departments that will field bids and offers, oversee upkeep and handle sales. The majority of REO properties that are on the open market are listed in  MLS by the broker/REALTOR that performed the  BPO.

You can find foreclosures on Reuben’s website by going to http://www.realtor4good.com, clicking ot the “Property Search” button, typing in a city.

Please call Reuben Alexander at: 818-497-3879 or simply dial (800) 595-0754 code 050 for recorded 24 hr. message for homeowner’s options in default. Please listen to this cost free, no obligation report. You won’t have to talk to anyone when calling. Just sit back, relax and listen to the recorded information and take some notes if you wish.

 In any give real estate market there is always a certain percentage of homeowners who suffer financial difficulties, start missing mortage payments and head towards foreclosure. The reasons for this are many, but most recently, the majority of these are due to variable rate creative mortgage payments that are turning into higher payments. Most of the time these resets yield monthly payments that are so high that they are unsustainalbe by the homeowner, resulting in default in a very short period of time. Default is defined as missing just one payment. Properties in default are referred to as distressed properties.

Here’s some disturbing statistics:

1. One in five properties are currently in distress (in some areas in the country it approaches 80%)

2. One out of two mortgages that reset are going into default

3. The potential payment increase on an ‘Option ARM’ mortgage is 63%

4. 7 out of 10 homeowners go into foreclosure without seeking professional help.

Homeowners in this situation should understand that they are not alone. Stories about this mortgage crisis dominate the news media. Default is a serious problem that should not be ignored. These problems can be mitigated and the resultant damage to your credit rating minimized, but it does take immediate professional assistance by an expert trained to negotiate for you with your lender.

Default can lead to foreclosure which is the worst case scenario. If the situation cannot be remedied by a refinance or recast of the payments, the best approach is to structure a plan of action to negotiate a short sale before it goes into foreclosure. Short sale is the best thing possible; foreclosure is the worst thing possible. Here’s the differences:

1. A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 7 years. A homeowner who successfully negotiates and closes a short sale will be eligible after only 2 years.

2. On any future loan (1003) application, a prospective borrower will have to answer YES to the question that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” This will affect future rates. There is no similar declaration or question regarding a short sale.

3. A foreclosure will lower a credit score anywhere from 250 to over 300 points, typically affecting the credit rating for over 3 years. For a short sale, only late payments on the mortgage will show and, after the sale, the mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months.

4. Foreclosure will remain as a public record on a person’s credit history for 10 years or more. Short sale is not reported on a credit history. There is no specific reporting item for ’short sale’. The loan is typically reported ‘paid in full, settled’.

5. Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. Security clearances for police officers, military, or any other position that requires a security clearance, in almost all cases, will be revoked and the position terminated. A short sale, on its own, does not challenge most security clearances.

6. Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure, in many cases, is grounds for reassignment or termination. A short sale is not reported on a credit report and is, therefore, not a challenge to employment. Also, many employers are requiring credit checks on all job applicants.

7. In 100% of foreclosures (except in a few states) the bank has the right to pursue a deficiency judgment. In some successful short sales, it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner.

Having to sell a home due to a personal financial situation can be stressful, but it doesn’t have to be financially devastating. The consequences can be greatly minimized, but it does take professional help by a specialist in this area. Just listing the home for sale with an agent and hoping to negotiate with the lender if you get an offer, in most cases, will not work. It’s not that easy.

Lenders require that the listing, marketing, communication, paperwork and follow up be handled in a specific manner. They are buried in short sale proposals that never even get proper review, because they were not processed properly. The clock is always running in a short sale situation. Foreclosure must be avoided. Time is the enemy. A successful short sale requires quick, decisive action by a professional working in concert with the homeowner.

Times are tough right now, but people who find themselves in difficult times can take the steps to lighten their load. Ignoring a problem like this will not make it go away. It can only get worse. Contact me immediately so that I can help you plan for a better future. All communication will be held in the strictest confidence. Please call Reuben Alexander at: 818-497-3879 or simply dial (800) 595-0754 code 050 for recorded 24 hr. message for homeowner’s options in default. Please listen to this cost free, no obligation report. You won’t have to talk to any realtors. Just sit back, relax and  listen to the recorded information and take some notes if you wish.

It’s important to understand that banks much prefer a ’short sale’ than taking the home back through foreclosure. Lenders don’t like empty homes that they have to maintain and try to resell. They’ve got more than they can handle right now. They will, however, go to foreclosure if the homeowner doesn’t get realtor’s help, get the home listed and establish good communication with the lender.

During the professional consultations with people in mortgage default, I outline a plan to get the home listed and provide the bank with the documentation required for an acceptable short sale. Just listing the home with any Realtor and hoping to get an offer that can be submitted to a lender for short sale approval does not work. These must be handled in a specific fashion with a Short sale specialist, like myself, so that they are acceptable to the lender. Incomplete or inappropriate paperwork will be ignored or rejected by the lender. Time is the enemy here. We can’t afford delays.

My game plan is to have all of the required paperwork completed before we get an “Offer to Purchase” on the home. This process takes professional expertise.

Also, this is very important, in a ’short sale’, the homeowner does not pay any costs or fees, including the real estate fee. All costs associated with the sale are absorbed by the lender.

For more information on the process, call Reuben Alexander with RE/MAX Elite at (818) 497-3879, or call for 24 hr. recorded message for free, no obligation, report on short sale at (800) 595-0754 code 050. You won’t have to talk to any agent, just make yourself confortable and take some notes.

NAR President Charles McMillan says it’s ironic with the weak housing market that affordability conditions have improved dramatically.

“Housing affordability is at a record high – the buying power of a typical family has risen significantly,” McMillan says. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices to stabilize in many areas by the end of this year.” 

A median-income family, earning $59,800, could afford a home costing $283,400 in January with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest; affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. A year ago, the typical family could afford a home costing $263,300.

Hopeful for Spring Turnaround

Conditions have been aligning very favorably for home buyers with the exception of consumer confidence. However, I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.

My strong recommendation is to consider investing in a duplex, triplex or small apartment building.

Well known fact is that smaller units are typically older, and during a downturn people prefer lower-quality properties with fewer amenities.

Also, young people are the most likely tenants in these older units and that segment of the population is growing. The baby boom peaked in the 1950s and those boomers’ children, born in the 1980s, are just going out on their own. While they have one of the highest unemployment rates now – 12 percent – they will likely be the first hired when the economy improves.

I urge investors to buy now while prices are down. There is a good chance that if an investor waits for a recovery to materialize, they’ll see prices go up again.