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A weaker-than-expected economic recovery will result in a projected decline in California home sales for 2010, although home sales are expected to edge up slightly in 2011, according to C.A.R.’s “2011 California Housing Market Forecast” released last week. 

California home sales for 2011 are projected to increase 2 percent to 502,000 units compared with 492,000 units (projected) in 2010.  After two consecutive years of record-setting price declines, the median home price in California will increase 2 percent in 2011 to $312,500, according to the forecast.

“As the U.S. economy continues its tepid recovery, we’ll see some improvement in California’s economy,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures.

“A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end,” said Appleton-Young.  “There’s some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but we do not anticipate that lenders will flood the market with distressed properties,” she said.

“The wild cards for 2011 include federal housing policies, actions of underwater homeowners, and the strength of the economic recovery,” said Appleton-Young.  “What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy,” she said.

Bank of America announced that they will no longer be working with mortgage brokers. They are leaving the wholesale part of the loan business. They will no longer be working with mortgage brokers to do loans. They say that the broker part of their business was only 4% in the first 6 months of this year. 

President of Bank of America Loans- Barbara Desoer made this comment: ” By exiting the first mortgage wholesale channel, we can redirect critical operational resources to further enhance our capabilities in direct- to -consumer channels.” 

Hmmm, let’s see. I wonder if that will be any consolation to the buyers they let hang out to dry due to their lack of customer care and service. 

We had one of our short sale listings under contract. The buyer that wanted to buy this listing was represented by another agent. This buyer walked into her Bank of America branch office because that is where she banks. They took her application and told her no problem. She got us her pre- approval letter and then she got us her approval letter. The buyer’s agent even set up the closing date based on what BofA statements about the buyer getting her loan. The buyers had all their belongings in a moving van. The day before the closing our title company began to worry. Tina felt like BofA was stringing her along. They ordered the survey, the appraisal was done and the buyer had paid these outside of closing. 

The day of closing came and an hour before closing, BofA tells the buyer they were declining her loan. 

This of course was something that should have been decided months before the closing. There was nothing that had changed in this buyers application to warrant a change of decision. 

But in our experience this had been par for the course when it comes to buyers who walk into branch offices of Bank of America. 

We always cringe when we hear that the buyers just go into a branch office of a bank to get a loan for a house. Who is that loan employee of Bank of America working for? There is only a customer relationship not a client relationship. It is just the same reason you as a buyer need a buyers’ agent to represent you when you buy a home for a builder. The sales reps in the builder’s office are not working for you. They are working for the builder. 

This is just another step towards controlling the entire real estate transaction. You think they went away quietly after being defeated with trying to get into the real estate brokerage business? Yes, NAR was able to get a nice swift kick over the line- but they are not running off with their tails between their legs. They may have lost the fight but they plan to win the war. 

Interesting article by Nestor & Katerina Gasset  Wellington, FL

This economy hasn’t taken away the desire to own a home!

People still want a place of their own to raise their families, share with friends and a place to feel safe and secure.  Over 50% of the current buyers are first-time buyers.  For people with a down payment and good credit, this may be the best time ever to buy a home.

This economy hasn’t eliminated the need or aspiration for a larger or newer or older or different home.  People’s situations change and their housing needs change also.  They may just not feel the urgency because they already own a home even if it doesn’t fit their current needs.

The role of today’s real estate professional has changed.  It isn’t enough to be an order taker.  It’s now about providing service way beyond what the buyer and seller expect.  It’s not just finding the “right” home; it’s about showing them the way to minimize the cost of housing by negotiating the price and terms.  It’s about recommending alternative financing and giving them options.  It’s all about helping them to make better decisions. It will take information and tools.  It will take knowledge and training.  But more important, it will take commitment and investment.  Today’s professional must be committed to doing more than the minimum necessary.

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

The move adds the nation’s largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Bank of America isn’t able to estimate how many homeowners’ cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday. He said the bank plans to resubmit corrected documents within several weeks.

Two other companies, Ally Financial Inc.’s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.

Full article at:   Bank of America delays foreclosures in 23 states – Yahoo! Finance

On 09/30/10, Governor Schwarzenegger vetoed SB 1178 (Corbett), a bill that would have expanded anti-deficiency protections. In his veto message, the Governor made clear his view that the bill interferes with an existing contract. Many California REALTORS(R) who had urged him to sign the bill expressed disappointed in the Governor’s misinterpretation of the bill.

The California Association of Realtors, sponsored SB 1178 to better protect homeowners going through foreclosure. SB 1178 would have ensured that homeowners keep the same “anti-deficiency” protections they have in the original loan after the loan has been refinanced.

California’s anti-deficiency protection for “purchase money” mortgages says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner’s liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers brought down by financial crisis to get back on their feet.

Unfortunately, the 1930s law hasn’t kept up with current times. Current law doesn’t apply to loans used to refinance the original purchase debt, even if the refinance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages. During those years, almost no one realized that refinancing their mortgage to obtain a lower rate, they were forfeiting their protections and were becoming personally liable on the new note.

SB 1178 would have corrected this injustice by extending anti-deficiency protections to those who have refinanced their loans.

Energy Efficiency can be Your Advantage in the Current Home Market 

The California Home Energy Rating System (HERS) Program provides a reliable way to estimate and compare the energy efficiency of California homes and identify wise energy saving improvements. Whether you are buying or selling a home, or staying in your current residence, knowing your home energy rating will help you choose smart energy upgrades and investments that will save you in energy costs, improve your home comfort, and protect the environment. As buyers become more aware of the benefits of an energy-efficient home, homes with a favorable home energy rating may be more appealing to buyers.

In California, new homes must be built to comply with the latest Building Energy Efficiency Standards (Standards). A majority of homes, however, were built before the first Standards were established in 1978 with limited energy efficiency measures. Additionally, homes built after 1978 continue to have significant opportunities for energy efficiency improvements.

For more information, contact:
Energy Standards Hotline
Phone: (800) 772-3300 or (916) 654-5106
E-mail: title24@energy.state.ca.us

The primary objective of a lender purporting to help a homeowner modify a loan is not to benefit the homeowner, but to keep the loan on their books at a loan balance that, in California, nearly always exceeds the value of the home. Lenders only reduce monthly payments below interest-only payments when they include a balloon payment in 3 to 5 years. The home is still upside down, now and then.

A simple mathematical calculation tells the lender if they will receive more money by foreclosing or through a loan modification. Their objective is to get the most net present value (NPV), or worth in “today’s” dollars, from each transaction. Homeowners are almost never aware that whether or not they qualify for a loan modification hinges on this NPV test.

A monthly payment reduction does nothing financially for homeowners who owe more than the fair market value (FMV) of their home.  Until lenders have to compete with bankruptcy judges to be the first to cram down loan balances, the only rational financial option available to negative equity homeowners is the strategic default. [For more information regarding HAMP, see the July 2010 first tuesday article, HAMP is losing participants; for more information regarding strategic default, see the April 2010 first tuesday article, The underwater homeowner, his future and his agent: a balance sheet reality check – Part II and the August 2010 first tuesday article, Fannie Mae, our government and strategic defaults.]

Real estate professionals are the gatekeepers for the multiple listing service (MLS) real estate, as well as the primary advisors to drowning homeowners. They need to inform the public, since the news media is not.

Re: “Surprise! Banks help more homeowners than Obama” from CNN Money

first tuesday take: By Kelli Galippo • Sep 8th, 2010 Copyright © 2010 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online

Is your home dressed to sell?

Staging the interior.

Clear all unnecessary objects from furniture throughout the house. Keep decorative objects on the furniture restricted to groups of 1, 3, or 5 items. In general, a sparsely decorated home helps the buyer mentally ‘move in’ with their own things.

Rearrange or remove some of the furniture in your home, if necessary. Many times home owners have too much furniture in a room. When it comes to selling your home, thin out overcrowded rooms to make the rooms appear larger.

 Clear all unnecessary objects from the kitchen countertops. If it hasn’t been used for three months…put it away! Clear refrigerator fronts of messages, magnets, pictures, etc.

 In the bathroom, remove any unnecessary items from the countertops, tub, shower stall and commode top. Keep only the most necessary cosmetics, brushes, perfumes, etc., in one small group on the counter. Coordinate towels in one or two colors only.

 Take down, reduce, or rearrange pictures and objects on walls. Patch and paint all walls, if necessary.

 Review the house interior, room by room, and:

1. Paint any room needing paint.

2. Clean carpet and draperies that need it.

3. Clean windows.

 If you need room to store extra possessions use the garage or rent a storage unit.

 Leave on certain lights during the day (your agent will show you which ones). During showings turn on ALL lights and lamps.

Staging the exterior.

Go around the perimeter of the house and move all garbage cans, discarded wood scraps, extra building materials, etc., to the garage or, if applicable, take them to the dump.

Check gutters and roof for dry rot and moss. Make sure they are swept & cleaned.

 Look at all plants. Plants are like children…they grow so fast. Prune bushes and trees. Keep plants from blocking windows: “You can’t sell a house if you can’t see it!”

 Remove any dead plants, weed all planting areas and put down fresh mulching material.

 Keep your lawn freshly cut, edged and fertilized during the growing season.

 Clear patios or decks of all small items, such as little planters, flower pots, charcoal, barbeques, toys, etc.

 Check the condition of the paint on your home, especially the trim and the front door. The first

impression, or ‘curb appeal,’ is very important.

Try to look at your house “through a buyer’s eyes,” as though you’ve never seen it before. This exercise will help you see what needs to be done. Any time and money invested on these items will usually bring you the return of more money and a quicker sale.  For additional staging ideas or if you are in the market for a professional home stager, give us a call, we would be glad  to help.

Have interest rates hit bottom? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?

The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, there are also costs.

When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures–and the same types of costs–the second time around. 

More information at: http://www.federalreserve.gov/pubs/refinancings/default.htm

A 1031 exchange is a great tool for investors who want to avoid paying tax on the gain from the sale of real estate; however, in order to completely defer the tax, an investor must 1) find one or more “like-kind” replacement properties with a total fair market value that equals or exceeds what is being sold, 2) invest all the cash from the existing property (“relinquished property”) in the new property; and 3) acquire debt on the replacement property equal to or greater than the debt on the relinquished property, unless cash is added to offset the debt.

Many experienced real estate investors who are familiar with 1031 exchanges don’t realize that a build-to-suit exchange can give them more flexibility in structuring their transactions to meet these requirements and more ability to take advantage of opportunities in today’s market.

The build-to-suit exchange allows an owner to use the proceeds from the sale of the relinquished property not only to acquire replacement property, but also to make improvements to the property. For example, in a typical forward exchange, if an investor sells relinquished property with a fair market value of $800,000, debt of $200,000 and equity of $600,000, he must acquire a property equal to at least $800,000 and must invest at least $600,000 into that property. In a build-to-suit exchange, however, the investor could acquire property worth only $200,000 and have $600,000 in improvements made to the property by using the remaining $400,000 in exchange proceeds and by borrowing $200,000. This would use up the remaining cash and increase the fair market value of the replacement property to $800,000, resulting in a fully tax deferred exchange. A build-to-suit exchange can be a great tool in this market for investors looking to buy and improve distressed assets; however, investors should consult with their legal/tax advisors to ensure that they properly structure their transaction.