Real Estate Information

REALTORS from across the country and around the world are headed to San Diego November 13-16 for this year's annual National Association of REALTORS convention.  I am excited to be attending.  This is an opportunity for REALTORS to get up-to-date information on the most pressing issues in our industry.  There will be educational opportunities so that we can expand our knowledge base as well as a huge EXPO where I can shop for the latest technology, marketing and business tools.  What's really exciting this year is the use of social media and technology for keeping up to the minute on what is happening at Convention.  There is an app for my IPhone and we can follow the convention happenings on Twitter.  But, the best part of the convention for me is always getting to meet and network with REALTORS from around the country and the world.  The fact that the convention is in beautiful San Diego is a big plus too.

On July 1, 2009 Assembly Bill 149 was passed and signed into law.  This new law requires the foreclosing trustee (company hired by the banks to foreclose) to provide mediation for any owner occupied residential property before they can foreclose.  Sorry investors you won’t get to take advantage of this program.  To get more information on this program you can visit www.nevadajudiciary.us

The purpose of the Foreclosure Mediation Program is to keep Nevada homeowners in their homes.  To qualify it must be an owner occupied, primary residence.   If you have an Notice of Default and Election To Sell filed on your home prior to July 1, 2009 you don’t qualify for this program.

Mediation is an alternative method to help parties resolve disputes by agreement with the help of trained mediators.  Mediating a foreclosure action has its advantages.  It is fast, inexpensive, and offers a flexibility that more formal processes do not.

The new law requires that a foreclosing trustee must include the following when they file the Notice of Default and Election To Sell (NOD) – (1) Contract information on how the homeowner can contact a person of authority to negotiate a loan modification, (2) Contact information for at least one local housing counseling agency approved by HUD, and (3) a form with the homeowner can indicate their election either enter into mediation or waive that option with envelopes addressed to the trustee and Mediation Administrator.

A homeowner must complete the mediation form no later than 30 days after service of the notice and return it by certified mail. 

If the homeowner selects mediation the foreclosing trustee has to notify the beneficiary (the bank) and the Mediation Administrator who then assigns a mediator and schedules the mediation.  At this point the foreclosing trustee can take no further action until the completion of the mediation. 

Proposed Supreme Court rules limit mediations to four hours and require that mediations be conducted within 90 days of a foreclosure notice being filed.   Those same rules also require that all decision makers be present for the mediations.  That means, if an agreement is reached, it can be finalized quickly.  The cost is $400 which is split between the homeowner and the lender, and it has to be paid up front. 

Within 10 days of the mediation, the mediator will prepare the necessary Statement of Agreement or Non-agreement and serve it on the parties.  The original will be filed with the Foreclosure Mediation Program Administrator and the mediation will be closed.  If there is an agreement, the parties will execute the appropriate documents.  If there is no agreement, the parties will be free to pursue other legal remedies.

This new law also gives the homeowner more time to “cure” the default by making back payments and re-instating the loan up to 5 days before the Trustee’s sale date.  This has the effect of giving homeowners and additional 3 to 5 months to reinstate.  The old law only gave 35 days from the date the Notice of Default was filed. 

You can play a major role, with the help of a trained mediator, in deciding the outcome of your individual dilemma.  Mediation is a give-and-take process in which the parties work to reach a mutually acceptable resolution to a mutual problem.  Resolutions reached through foreclosure mediations are compromises that offer advantages to lenders as well as homeowners. 

Yes, that's right we are once again seeing multple offers and bidding wars in the Reno-Sparks market.  It is key that you know some tips to getting your offer accepted prior to getting in the game. 

Those of you considering buying a home in a competitive market know or may have heard how frustrating the process can be. In certain markets a buyer can find himself competing against 3-18 other offers for almost any listing that he writes on with many of the offers being similar in terms of price. However there are steps you can take to position yourself well to win a bidding war. And the discipline and thoroughness to do so is well worth the effort given the weeks and months of extra labor involved for you and your buyer’s agent that would come if you just wrote standard offers on listings you found appealing and continually got beat out for the homes you like.

If you're wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms.  Price is probably the biggest factor in trying to compete with a multiple offer situation.  But if there are many offers within the same range, there are definitely things you can do to make your overall offer the best in the mind of the seller.

Price is Most Important - Remember, your offer price is a NET price, which means your offer price less any credits.  So many times buyers don't understand that.  As an example, if you offer $350,000 with $10,000 credit towards closing costs, your are offering $340,000 for the property, NOT $350,000.

A Complete Package - MAKE YOUR OFFER A COMPLETE PACKAGE - include your Purchase Agreement, and addendums that apply .   Also include your Loan Pre-Approval, Proof of Funds for the down payment, a copy of the deposit check, SRPD Waiver and any other documents specifically requested by the seller/listing agent.

Get the Property History - Ask your buyer's agent to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.   Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.

Determine Comparable Sales - In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.

·         Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.

·         Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.

·         Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

Analyze Listing Agent's REO Solds - Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.

·         Ask your buyer's agent to look up the listing agent in MLS.

·         Run a search using that listing agent's name to find the last three to six months of that agent's listings.

·         Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

Ask About Number of Offers - If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.   If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.

Submit Preapproval Letter - It goes without saying that you do not want a prequalification letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.   Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the preapproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.

Don't Ask for Repairs / Inspections - Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted. Shorten your inspection period to (10) days or less - really, it only takes a few days to book an inspection, and even then maybe a few days after that to assess the situation with the property.  The seller, especially if it is bank-owned, will really like a quick inspection period.  Plan on paying for all of your own inspections.

Offer to Split Fees - Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.   Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.

Large Earnest Money Deposit - Put as much of your down payment down into your earnest money deposit when you write the offer—very aggressive but it makes a REAL good impression. The earnest money is part of your down payment anyway so there is not much difference in putting it down a month early. The seller knows you’re for real and have money based on your earnest money deposit more than your stated down payment on the contract.  If you break the contract you lose your earnest money deposit so a huge earnest money deposit says to the seller you’re for real and there’s no way you are going to lose your earnest money deposit by breaking the contract.

Short Escrow Period - Write as short an escrow period as possible, with respect to the amount your lender will need to close the loan.  Consult with your lender on the type of loan you are using and get their input as to how many days he/she feels they can comfortably close the loan.

Consider the Appraisal Consequences - If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.

Escalation Clauses - Working with your buyer’s agent you can add a clause to your contract which says you are willing to pay an amount in excess of the other bidder’s highest offer.   Make a statement with your over bid increment.  Your bid increment should be in relationship to the sales price.  When you escalate  DO NOT JUST STOP AT EVEN CUT-OFF MARKS LIKE MOST AGENTS DO. Always escalate $1700-2700 above where you think the cut-off mark is going to be. You want to predict where your enemy is going to finish and position yourself ahead of them.

Agent relationships - Believe it or not it comes down to this in many instances of where things are so equal that your buyer agent’s previous experience with the listing agent comes into play.

Write your offer to win. 

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.

The good news first.  Sales of single family residences in the Sparks-Spanish Springs area were up 22% this May over May 2008.  This shows that the buyers are out there and making purchases. 

Now the not so good news.  The median sold price for May 2009 was $166,500.  This is down significantly from May 2008 when the median sold price was $245,000.  As we often hear, "real estate is regional" and the Sparks-Spanish Springs area is no exception.  So here is the figures by area.

Sparks (MLS Area 180) - Median sales price $108,000 with an average days on market of 121 days.  61.11% were bank owned, 27.77% were traditional sellers, and 11.11% were short sales.  66.66% of buyers purchased using FHA financing, 16.66% used conventional financing and 16.66% used cash.

East Sparks (MLS Area 181) - Median sales price $154,000 with an average days on market of 119 days.  69.56% were bank owned, 21.73% were traditional sellers, and 8.69% were short sales.  34.78% of buyers purchased using FHA financing, 16.66% used conventional financing,34.78% used cash and 13.04% used VA financing.

Sparks Suburban (MLS Area 182) - Median sales price $209,000 with an average days on market of 129 days.  48% were bank owned, 40% were traditional sellers, and 12% were short sales.  32% of buyers purchased using FHA financing, 56% used conventional financing, 8% used cash and 4% used VA financing.

South Spanish Springs/Wingfield(MLS Area 183) - Median sales price $210,500 with an average days on market of 158 days.  53.33% were bank owned, 20% were traditional sellers, and 23.33% were short sales.  43.33% of buyers purchased using FHA financing, 33.33% used conventional financing, 20% used cash and 3.33% used VA financing.

West Spanish Springs (MLS Area 184) - Median sales price $165,7500 with an average days on market of 97 days.  57.14% were bank owned, 28.57% were traditional sellers, and 14.28% were short sales.  71.42% of buyers purchased using FHA financing, 21.42% used conventional financing,  and 7.14% used cash.

East Spanish Springs (MLS Area 185) - Median sales price $307,500 with an average days on market of 108 days.  80% were bank owned and 20% were short sales.  20% of buyers purchased using FHA financing, 20% used conventional financing,  and 60% used cash.

Sparks Foothills (MLS Area 188) - Median sales price $215,000 with an average days on market of 130 days.  50% were bank owned, 33.33% were traditional sellers, and 16.66% were short sales.  33.33% of buyers purchased using FHA financing, 16.66% used conventional financing,  and 50% used cash.

If you would like specific valuation for your home, please contact me.

Many homeowners in the Reno-Sparks area are facing issues with mortgage delinquency and possibly foreclosure.  This can be a very stressful time and knowing the process and where to go for help can be very beneficial.  As a member of the Nevada Association of REALTORS Foreclosure Prevention Task Force, I have come across a very valuable tool for homeowners - "Nevada Foreclosure Information Workbook".  This booklet was compiled by the Nevda Statewide Foreclosure Prevention Taskforce.  You can download this booklet from Nevada Department of Business and Industry's website.  Here is a link http://foreclosurehelp.nv.gov/Brochures/ForeclosureWorkbook.pdf. 

The booklet covers topics like - Understanding Delinquency, Understanding Your Financial Situation, Know Your Mortgage, Know Your Options, Beware of Scams, Tools for the Homeowner, and Document Checklist for Dealing With Your Lender.  There are also definitions for many of the terms you may need to know.  There is also a list of resources. 

If you are facing issues with delinquency the best thing you can do is take a pro-active approach and educate yourself on the process.  This will enable you to have more successful results when dealing with your lender.

Word on the street is that home mortgages are hard to get and that banks aren’t lending.  Certainly lending criteria has gotten more strict, but banks are lending.

In Sparks/Spanish Springs since January 1, 2009 here is how buyers purchased their homes:

• Cash 17.04%
• Conventional Loans 34.92%
• FHA 41.99%
• VA 5.19%
• Miscellaneous .41%
• Owner Financing .41

As you can see the majority of buyers are using FHA financing as this type of loan only requires 3.5% down payment.  Many buyers are also still using conventional financing if they have larger amounts of down payment funds and want to avoid private mortgage insurance. 

The number of cash buyers in the market is on the rise, up from 10.3% to 17.04% over the same time last year.  This could indicate that there are investors getting back into the market because of the lower market prices.

VA financing is really the only 100% financing that is still available to eligible buyers at this time. 

And as you can see it is very rare that owners are financing the sale of a property.

If you have questions about whether or not you qualify for a mortgage you can contact me and I can refer you to several local lenders who would be happy to help.

Many borrowers are under the assumption that their responsibility for a mortgage ends with a short sale or foreclosure.  This is not always the case. 

In a short sale the mortgage holders are increasingly requiring borrowers to sign a promissory note, a written promise to pay back all or a portion of the debt, as a condition of the short sale approval.  Increasingly mortgage holders are asking sellers to sign a promissory note or retaining their right to pursue a deficiency. 

 In many states lenders have the right to come after borrowers for unpaid mortgage debt from a foreclosure or short sale, seeking a deficiency judgment.  Many times it is the second mortgage holder who will pursue the deficiency as the first may have been satisfied through the short sale.

 Whether or not a mortgage holder will pursue the borrower can depend on (1) their agreement with the investor or servicer, (2) what is allowed by State law,  or (3) if the return outweighs the potential return.  In addition, if there isn’t a true financial hardship that is when the mortgage holder might be more inclined to try to collect the unpaid balance.

In Nevada, NRS 40.455 gives creditor 6 months from the date of foreclosure or trustee’s sale to request a hearing and determine if a deficiency judgment is owed the creditor.

As a REALTOR it is outside of my area of expertise to advise a client regarding a promissory note or whether or not they could get hit with a deficiency judgment in the future.  I strongly advise anyone who is faced with a short sale or foreclosure to consult an attorney before making any decisions.

Please keep in mind that in order to complete a short sale you will need a TEAM of professionals including an experience REALTOR, a CPA and an attorney.  Each of these team members will play a critical role in assisting you.

Many borrowers are under the assumption that their responsibility for a mortgage ends with a short sale or foreclosure.  This is not always the case. 

In a short sale the mortgage holders are increasingly requiring borrowers to sign a promissory note, a written promise to pay back all or a portion of the debt, as a condition of the short sale approval.  Increasingly mortgage holders are asking sellers to sign a promissory note or retaining their right to pursue a deficiency. 

 In many states lenders have the right to come after borrowers for unpaid mortgage debt from a foreclosure or short sale, seeking a deficiency judgment.  Many times it is the second mortgage holder who will pursue the deficiency as the first may have been satisfied through the short sale.

 Whether or not a mortgage holder will pursue the borrower can depend on (1) their agreement with the investor or servicer, (2) what is allowed by State law,  or (3) if the return outweighs the potential return.  In addition, if there isn’t a true financial hardship that is when the mortgage holder might be more inclined to try to collect the unpaid balance.

In Nevada, NRS 40.455 gives creditor 6 months from the date of foreclosure or trustee’s sale to request a hearing and determine if a deficiency judgment is owed the creditor.

As a REALTOR it is outside of my area of expertise to advise a client regarding a promissory note or whether or not they could get hit with a deficiency judgment in the future.  I strongly advise anyone who is faced with a short sale or foreclosure to consult an attorney before making any decisions.

Please keep in mind that in order to complete a short sale you will need a TEAM of professionals including an experienced REALTOR, a CPA and an attorney.  Each of these team members will play a critical role in assisting you.

Beginning April 1, 2009 FHA (Federal Housing Administration) has added to its appraisal guidelines.  With 67% of homes purchased in the Reno-Sparks area in the first quarter of 2009 utilizing FHA financing, there are some key things buyers should know about these changes.

FHA appraisers are required to include a Market Conditions Addendum stating whether the market is declining or stable etc.  Appraisers must now include comps that only go back 90 days.  They used to go back 6 months.  Typically appraisals are done with sold comparables, but now FHA appraisals need to include 2 active or pending sales as well.  This is due to the fact that in some cases active listings are priced below the recently closed comparables. 

In addition, appraisers will have to adjust active listings to reflect the list-to-sales price ratios of comparable sales.  FHA is also looking for the appraiser to include the pricing history of comparables, showing price reductions.  If there are known or reported seller concession (closing costs etc.) the appraiser needs to note that.

Lastly, the appraiser will have to calculate the Absorption Rate on the subject property.  This shows the number of months of active inventory given the rate of sale in that neighborhood. 

Based on this, my recommendation to buyers would be to make sure that you buyer's agent is preparing a current market analysis on all properties you are considering writing an offer on, going back no more than 90 days.  Have your agent calculate the absorption rate as well.  Your purchase could be delayed if your offer is over the appraised value of the home.