The Short Sale was the Easy Part…It was the Mortgage Broker that was a Nightmare!

This listing was a short sale. This one was a wild ride till the end! The buyers competed for this home in a multiple offer situation and actually went into contract for $256k. Although, this was a market value price and buyers willing to pay this price and maybe more, since the market was in a transition mode a few months back, there were actually no recently sold comparable homes to support the value, so when it was appraised, it actually appraised quite a bit lower.

Well, that’s no good, so we went back to the bank that was making the decision on the short sale and got them down to the price of $230k, which was exciting, because we knew this home was worth well more than that price, but just didn’t have the recent comparable homes available to support the appraisal.

So, all that was great, however, the loan was another story in that the lender was just a nightmare, initially she went on vacation for about 3 weeks out of the country and didn’t even tell us, then she decided to change companies in mid transaction, acted like she took the file with her, come to find out, she did not take the file with her and while we were trying to close this transaction, she was asking for paperwork the buyers had already given her months back all over again. She was literally asking for paperwork almost every day until basically the day before closing day.

And, she was extremely cocky and always assured the buyer and myself that it would be NO problem to close by the end of August, which was the expiration date of the short sale approval, and then as that date came closer and closer, it not only did not happen, but she basically started from scratch with her new company to close this deal.

Luckily, the bank approving the short sale cooperated with us closing 11 days LATE. So, for this short sale transaction, the buyers got a killer deal, basically ALL due to the issue with the appraisal and lack of recent comparable sold homes like it! They absolutely got this home for under market value, a good $25k-$30k under market value.

Now, they are VERY happy homeowners and moving in this weekend. 🙂

Another Successful Short Sale Closing

This was another successful short sale closing. The roller coaster ride started in March! It took 5 months for the first and second lender to approve this short sale. While we were waiting for the second to approve the short sale, the deal almost went to the foreclosure department, and required one payment, which the BUYER paid to keep the deal alive. The payment was well worth it, in that we did get the approval. Once we got the approval from both lenders, the transaction was relatively smooth and closed without a hitch. It was a crazy 5 months waiting for the approval, and there are a number of stories to tell about what we went through during the wait, but in the end, the buyer got a beautiful home in a great neighborhood and the value went up between $50,000-$75,000 since March. So, he literally walked into equity since the market has been continually going up since March and he actually had locked into a good price back in March.
 
Yet another buyer…who went through a short sale transaction…with a happy ending. He moved in last weekend and is loving it!

Are you really patient enough for a short sale?

If you crave frustration then maybe you should try buying a short sale. The absolute only reason to put yourself through a short sale transaction as a buyer is for the possiblity of getting a home for a good deal and/or to avoid more competition with other buyers who do not want to buy a short sale. There is no reasoning or logic to a short sale. The banks don’t even know what they are doing. The customer reps have no clue either. It is just this random act of madness that takes place and eventually they come up with a decision. The quickest approval response I have personally witnessed is 10 days from a credit union. I am still waiting for the longest response I have personally witnessed in that I have 2 deals currently in process that have both been in process since March and we are still waiting for a final decision.

There are so many issues that can come up in a short sale that I do not even know where to start.  But, first and foremost, as a buyer, you better hope that the listing agent and the seller are on top of their game because if they drop the ball at any time, it causes a huge delay or a simple ‘no’.  They seriously may have to fax the paperwork in 20-30 times before the bank receives it. The bank is notorious for losing faxes. And, if the listing agent and/or seller does not follow up every single day for months on end, something is surely going to fall through the cracks, it is just a sure thing.  The buyer has not even one ounce of control and have to 100% depend on the listing agent, seller, and the buyer’s agent to be on top of it and follow up consistently, get papers the bank wants at a moment’s notice, and even if everyone is on the ball, the bank will still lag.

I have one case in which my buyer went into contract on an ‘approved short sale’, meaning that the bank had already approved the price. And, at the 11th hour, the bank told the seller, they would only approve the final short sale if the seller signed a $60,000 Promissory Note to Pay. Well, the seller said “hell no”, the deal fell apart, and the property foreclosed the very next day.  So, my clients waiting 30 days to find out that this deal was never even going to happen. And, if the bank would have told the seller upfront this would be a condition, he would have walked months ago. The agent worked on this particular listing for 6 months to have absolutely nothing happen in the end after all of that work.

I am working on a listing that the buyer has been waiting since March for an answer and we still have no approval, although, it appears we may have something soon at this point. There is a first loan, second loan, and deliquent HOA dues. So, we have to get 3 parties to move forward with the short sale as opposed to foreclose. If even one party will not cooperate, we have no deal, and the property will foreclose. Now, this is a balancing act for sure. I can’t even count the number of times I have faxed in paperwork that they claim they never received. I literally had to fax the same documents in every single day until I got confirmation that they actually received it. I was so frustrated that finally, a customer rep told me to email them to her and she would download them for me because I had faxed them so many times and told her I just had no idea how they will ever receive the documents they claim to never receive.  At this point, the HOA will not settle and wants to get paid the full amount that is due to them. If we can’t resolve this issue, the deal will die. So, this one is still a work in progress.

I also have a buyer that has been waiting since March for a home he really wants to buy. At this point, he will buy into equity because he has waited so long for an approval that prices have actually risen at least $50k since he went into contract. We got the approval from the first and are waiting for the approval from the second. We hope to wrap this up soon because he is very anxious to buy this home.  It appears that we will get this one through after his long wait, but we are just on pins and needles to get an approval and actually move foward with the sale.  I anticipate this transaction to be a success story I can talk about maybe the end of August, we hope.

The quickest response thus far is my buyer who is in contract on a short sale that was approved in 10 days by a credit union. That one is also a work in progress, but probably the most responsive negotiator I have ever heard of thus far. So, I really anticipate this short sale will be a success story.

There is just story after story about nightmares with short sale deals. I could go on forever. But, the point is that if you want to buy a home that is in short sale, patience is a virtue for sure. You have to anticipate waiting months for an answer and you may get the answer of ‘no’.  Sometimes the home forecloses before an approval for a short sale is generated.

I have another example of an all cash buyer who supposedly got an ‘approved short sale’. We were supposed to get an approval within 72 hours, well almost 30 days went by and the home actually foreclosed before we even got the short sale through. If the short sale would have been approved, they had an all cash buyer that could close quickly and it would have cost the bank less to go with this buyer than to go through the foreclosure process, and as usual, the banks have no sense, no logic, no real procedure in place. They just run these deals by the seat of their pants.

So, beware of short sales. I am not advising a buyer not to buy a short sale because a buyer can actually get a good deal via short sale. But, if a buyer is not patient, or depends on getting that home for sure, and can’t just go with the flow and understand that it is a long wait with a possibility of a ‘no’ at the end, then the buyer should not put themself through the frustration. But, if a buyer has a good attitude and understands the possibilities and consequences, then go for it.

Have We Hit Bottom in the Bay Area?

It sure feels as if we have hit the bottom of the market in the Bay Area, namely Santa Clara County for this particular blog. Inventory has not been this low since May of 2007, almost exactly 2 years ago! My buyers are running in to more and more multiple offer situations on a continuous basis. It seems to be true for the ‘affordable’ price ranges. And, ‘affordable’ price range varies on area, city and neighborhood. For example, in East, South, and barely ok areas of downtown San Jose, the ‘affordable’ price range of $325,000 for a single family home is very hot and tends to yield multiple offers for a home in a decent neighborhood. And, in the Cambrian, Blossom Valley, and Santa Teresa area, the ‘affordable’ price range of $425,000  for a single family home tends to yield multiple offers. In the Cupertino, Mountain View, and Sunnyvale in the good school districts, for an ‘affordable’ single family home under the $1million mark seems to be hot. In Campbell, North San Jose, Milpitas, Willow Glen, and Santa Clara, the ‘affordable’ price range of $525,000  in a good neighborhood seems hot.  And, in any semi decent area of Palo Alto, Los Gatos, Los Altos, and Saratoga, a single family home in any even semi decent location wouldn’t last a day under $1million. The luxury home pricing does not seem to be as hot of a market from what I see.

And, of course, this is just a wide example. Even within an area price ranges drastically change. For example, Willow Glen has million dollar neighborhoods as well as $500,000 dollar neighborhoods, so the information I provide are just a few examples of hot pricing in the areas, but not to say the million dolllar areas are going for $500,000.   Also, Evergreen and East San Jose, for example, have a wide variety of neighborhoods and price ranges depending on location. The East Valley Foothills is fairly expensive, but the King and Story area is quite the opposite.

My business is typically a good indication of the market trends based on how much new business and phone calls that I receive from marketing, referrals, and past clients.  Also, indicators from my own listings and the volume of calls I get from potential buyers for my own listings. And, in the last month or so, I am getting many new calls and emails for especially first time buyers and also many more calls on my own listings.

There are also government incentives to buy this year and I believe that first time buyers want to take advantage of those opportunies, as well as the VERY low interest rates, and great first time buyer programs with very little money as a down payment. Buyers seem to realize that this is the time to buy and they seem to all be realizing this at the same time. The home prices are low, the interest rates are low, there are tax incentives to buy this year, and just in general, a variety of reasons in which most people want to be homeowners as oppposed to renters, which there is no value at all to renting a home, except for a roof over your head.

Now, the interesting thing about a time when buyers all decide at once that it is a good time to buy actually drives down inventory and in the end drives up home prices. So, if you are thinking of buying a home, sooner than later may be a good time to ensure that you lock in a good price, a good interest rate, and can take advantage of some or all of the government incentives.  I really do know see prices in the ‘affordable’ ranges dropping any lower at this point. They have already dropped quite low and I see no indication that they will actually get any lower at this time.

Of course, my opinion, it subject to change, but for today, May 6, 2009, that is how I feel 🙂

Great Incentives for Buying New Construction in San Jose

There are some great programs for buying new homes in San Jose (and other areas as well) that are ending VERY soon. For many of the San Jose city programs, the buyer must have a ratified contract by 4/24/09. Yes, that is VERY soon. But, if you are interested in new construction in San Jose, it may be worth moving fast. The city incentives range from $40,000-$110,ooo from what I have personally seen with the programs. And, there is also still MCC money as well. Plus, until the funds run out, buyers who buy new construction from March 1, 2009 to March 1, 2010, can get a $10,000 tax credit. Also, for the new communities, many of them are offering lender incentives up to $20,000 that can be used towards closing costs and other incentives. Some are even offering appliance packages in which they throw a new refrigerator, washer, and dryer into the deal. And, if you qualify, you are still able to get the $8,000 tax credit to boot. Something to think about for sure.

My first time buyer young couple just went into contract on a fabulous townhome in downtown San Jose. The price is $483k and the city is giving $111k in city assistance so the buyers will only be paying on a $371k price point with a minimum down payment. They are also most likely getting MCC credit. The lender gave them $10k in closing cost credits, and the builder threw in a new washer, dryer, and refrigerator. Plus, they qualify for the $10,000 tax credit for buying a new home and the $8,000 tax credit for buying in 2009. Very exciting!

You can contact me if you have interest in getting more information. There are guidelines and such that I will explain in more detail for those interested.

What you Need to Know When Obtaining FHA Financing for a Home Loan In Santa Clara and Alameda County

FHA financing is a great option for buyers that do not have at least 10% as a down payment and/or do not have FICO scores of at least 720.  And, there are some important things to know about FHA financing so that when a FHA buyer goes through the process, the stress and frustration is at a minimum, since the buyer is already prepared for the FHA process.

First of all, the main qualifying factors for a FHA loan is that the LTV (loan to value) can not be more than 96.5% of the purchase price, meaning that the buyer needs a minimum of 3.5% as a down payment. That down payment can be the buyer’s own money or be gift funds (funds that are given by friends, family members, employers, etc that do not have to be paid back).  Under FHA guidelines, the seller can pay up to 6% of the buyers closing costs, but none of this money can go towards the buyer’s down payment.  There is also an Up-Front Mortgage Insurance Premium (UPMIP) of 1.75% of the loan amount. This fee can be added to the loan amount.  And, there is also Monthly Mortgage Insurance (MMI) of 0.55% of the loan divided by 12.  Once you obtain 20% equity in the home, you can get rid of the MMI.

So, as you will see, FHA loans are not cheap loans to obtain, but when a buyer does not have at least 10% as a down payment and/or FICO scores of less than 720, it is a great option to get a buyer’s foot in the door to home ownership and the benefits definitely outweigh the negatives on a number of levels.

What is REALLY important to know when going through the FHA process and obtaining FHA financing is that this type of loan is absolutely a full document loan, meaning, the lender wants to see anything and everything about the buyer’s financial history, credit, bank information, tax history, income, debt, and anything else they can know about the buyer.  The buyer needs to give the lender A LOT of documentation and information and this gathering of information can sometimes obtained by the lender throughout the entire transaction, depending on how complete the file was in the first place, when the package was delivered to the FHA underwriter for the initial preapproval.

The underwriters pick apart the information with a fine tooth comb and the information has to be extremely accurate and complete, or the underwriter will ask for additional supporting documentation. It can consist of explanation letters, more documented information, etc.  For example, if the buyer had a nick name that is on some information, the buyer will have to explain it. If there is a lapse in employment, alimony, child support, etc, the buyer will have to explain it. If there is a ding on the credit, the buyer will have to explain it.

As a buyer for a FHA loan, you can basically be prepared to explain every detail of your life for the last 2 years. If you want the process to go smooth and faster, the best thing you can possibly do is to get with the lender and give as complete of a package as possible upfront.  So, if you have a name change, issue with credit, etc, explain it in a letter upfront. Do not try to hide anything or leave anything out of this package, or else it WILL come back to haunt you and the underwriter WILL catch it and then the process will be delayed.

And, when you are in contract to buy a home, and the package is not fully complete, and the underwriter is asking for all kinds of information that you must gather, it can be very stressful, since now that you are in contract, there are deadlines to meet with the contractual obligations to the seller and deadlines to close the deal on time. Being thorough upfront is the key to success. And, choosing a good lender who is thorough and can help you through the process and gather all the information and screen it well BEFORE it goes to the underwriter is really key to a smooth transaction.

Also, FHA is very swamped with loans right now, so it is a good idea to ask for a 45 day closing for any transaction that is dealing with FHA. 30 days escrows are possible, but it is pushing the envelope and can be stressful to close in that amount of time. Also, asking for a long loan contingency period also takes off some pressure.  I am working with a lot of buyers that are obtaining FHA financing and these are the types of things I am running into with these transactions. And, to avoid stress and frustration once a buyer actually finds a home, having the initial preapproval package as complete as possible, will really help a lot. And, making sure to choose a thorough lender definitely helps to make the process smoother.

And, of course, to really make the process run efficiently, the buyer would call me as their Santa Clara and Alameda County realtor who will stay on top of the process throughout the whole transaction and make sure everyone is doing what they need to do to get the deal closed, as well as stay in communication with the buyer consistently so that the buyer always knows exactly what is going on throughout the transaction.

 

Interesting Statistics about San Jose, California

I found some great information on the San Jose Chamber of Commerce website that I wanted to share that has some cool statistics that I thought was really interesting. 

Did you know that the San Jose Metropolitan Area (Santa Clara County) ranks first in the nation in median household effective buying income ($62,614) among all metropolitan areas? Source: 2005 Survey of Buying Power, Sales & Marketing Management Magazine.

Did you know that the city of San Jose is the 10th largest city in the United States and the third largest in California with a population of 944,857? Source: 2005 Survey of Buying Power, Sales & Marketing Management Magazine.

Did you know that San Jose has the lowest crime rate of any major city in the U.S. (population of 500,000 or more)? Source: FBI statistics.

Did you know that the San Jose metropolitan area has over 4,505 high technology companies employing over 182,300 people?  Source: State of California , Employment Development Department – new code for North American Industry Classification System.

Did you know that San Jose  was established in 1777 and is the site of the oldest civil settlement in California?  Source: San Jose City Historian.

Did you know that San Jose ranked first among large metropolitan areas as a world class manufacturing community based on manufacturing strength and the high productivity of area workers?

Did you know that San Jose metropolitan area continues to have the highest productivity level of any region in the U.S? Source: City of San Jose, Office of Economic Development.

Did you know that San Jose is leading the nation in the number of high-tech companies? Source: City of San Jose, Office of Economic Development.

Did you know that the education level of the San Jose metropolitan area workforce is one of the highest in the U.S. with 67 percent of the workforce having some college education and 40 percent have earned a college degree?  Source: City of San Jose, Office of Economic Development.

Did you know that Fortune magazine has called San Jose “the epicenter of information technology”? Source: City of San Jose, Office of Economic Development.

See the entire article at http://www.sjchamber.com/business/info.php