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Short Sales An Alternative to Foreclosure

Steven Keefe, Broker/Owner 
Coldwell Banker Sky Ridge Realty 
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@mountainupdate.com
909.336.2131

Lenders in the current evironment in most instances are approving "Short Sales."  A "Short Sale" is when the lender allows a homeowner to sell a property for less than the existing values of the loans against it, forgiving the difference.

As the number of homeowners in default on their mortgages began to rise over the last few years, troubled homeowners are now resorting to negotiating with lenders to take less than full payoff on their mortgage at closing.... and are getting the banks to go along with them.

The problem with "Short Sales" is that often they take significantly longer than a standard transaction an there is no assurance or guarantee that after the wait, the lender will approve the reduction in the payoff.  This can leave buyers out in the cold after a long wait and potential expenditure of costs.  

If done correctly, some of the concerns can be mitigated.  There is a process that must be followed to effectively close a short sale transaction.  Unfortunately, most real estat agents are not equipped with an understanding of the process which puts both buyers and sellers in jeopardy.  My advice to anyone on either end of a short sale transaction is to ask the question of the broker involved... have you sucessfully closed a short sale and what is the process you follow.  In a separate blog posting later today or tomorrow, I will provide a suggested process that will work.  If your agent isn't following something similar, beware.

Under the short sale process lenders that have borrowers that are in default are ahead of the game because they do not have to take possession of the property and in turn go out and find a buyer.  Industry averages show that lenders that accept a short sale are taking losses in the 19 to 20% range where homes that go through the foreclosure process yield 40% or more losses.

Mortgage companies are attempting to retool their loss mitigation departments to increase the efficiency of the process due to the anticipated numbers of short sale transactions.  In many markets, homeowners owe more on their mortgages than the homes are worth.  When this happens, often the only alternative available to sell the property is the short sale.  

For additional information on the short sale process, or if you have questions, email me at steve@cbskyridge.com or contact me at my office.

Broker/Owner Steve Keefe Conducts "Short Sale" Training

Steven Keefe, Broker/Owner 
Coldwell Banker Sky Ridge Realty 
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@mountainupdate.com
909.336.2131

Each Friday, I conduct a training session to bring to our team the latest trends in real estate.  This morning 42 of our agents met for a round table discussion on the short sale process.

Many homeowners are faced with tough decisons in this market.  Exotic loan products as well as declining values in many areas are contributing to mortgage defaults.  I am asked frequently, why a homeowner should go through the short sale process rather than allow the bank to take the property in a foreclosure sale.

Either option has negative ramifications, but in my opinion, I would rather have a settled mortgage on my credit report than a foreclosure.  The settled mortgage (short sale) says to me that the homeowner cooperated with the bank in trying to cover as much of the mortgage as possible.  A foreclosure says the borrower walked away.

My training this morning was geared to raising an awareness on the process.  There is right way and a wrong way to go about negotiating this type of sale.  It has been my experience that most agents don't have a clue how to do it.  This can be a dangerous proposition for the parties involved.  If the sale is mishandled many difficulties can arise and it can cost everybody time and money.  

I have been through a certification program for dealing specifically with the short sale process.  I have devised a systematic approach that Coldwell Banker Sky Ridge Realty uses to insure that the transaction goes as smooth as possible and the sale is completed.  Real estate can be complicated... the short sale compounds the complexity of the transaction.  If a homeowner is in need of this specialized type of service, I would urge them to make sure that they are working with an agent that understands the process and will effectively manage the sale.

If you know someone who is in need of assistance with a short sale transaction, please don't hesitate to contact me at my office.  I will put you in touch with one of my specialists.

If you are a buyer making an offer on a potential short sale... "Buyer beware".  If you agent is not familiar with the process, you could be opening yourself up to a lot of problems.  Make sure the agent you are working with knows the process and how to get it done.

Latest UCLA Report on the Economy

Steven Keefe, Broker/Owner
Coldwell Banker Sky Ridge Realty 
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@mountainupdate.com
909.336.2131

A recent report released by UCLA says that A recession in 2008 is not likely and that the economy has taken the hardest hits and is likely to have bottomed out.

The report goes on to say that the necessary elements that would contribute to a recession are not only unlikely, they are not possible.  The Federal Reserve will meet Tuesday and is widely expected to cut its benchmark interest rate for the 3rd consecutive time to assist in boosting the economy.  The credit markets are predicted to calm significantly freeing up available capital.

Overall the report provides a much needed positive reporting on the future of the economy near term.

House Passes "Phantom Income" Bill, Senate Still Pending

Steven Keefe, Broker/Owner
Coldwell Banker Sky Ridge Realty
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@cbskyridge.com
(909)  336-2131

Financially distressed homeowners got some good news from Congress last Thursday. The House overwhelmingly approved legislation that would end the controversial practice of imposing federal income taxes on borrowers whose mortgage lenders forgive a portion of their debt as part of a "workout" or pre-foreclosure short sale arrangement.

Under current law, the federal tax code essentially punishes homeowners in deep financial distress. When a lender "discharges" -- writes off -- a portion of their principal debt, the IRS demands income taxes on the full amount of debt relief.

For example, if a short sale designed to avoid foreclosure produces $100,000 less than the balance owed to the lender, some lenders choose to forgo that remainder rather than fight the borrower. But the IRS requires the lender to report the $100,000 debt forgiveness on a Form 1099-C. The IRS then treats the $100,000 as ordinary, taxable income.

Not only does that tend to worsen families' financial distress when they are down -- they've lost their home and equity, their credit is shot -- but it complicates some borrowers' willingness to engage in loss-mitigation programs offered by lenders.

The House-passed bill (HR 3648) would prohibit income tax levies on home mortgage debt discharges. Similar legislation is pending in the Senate (S 1394). The House bill is retroactive to Jan. 1, 2007, thereby assisting borrowers who received debt relief any time this year, and in future years. It would not apply, however, to transactions closing in 2006 or earlier.

The senate bill excludes several provisions that passed the house which may be a point of contention in this provision becoming law.

A Great Cartoon

CAR Forecasts 14% Sales Decline, Modest Increase in Median Home Price For State

Steven R. Keefe, Broker/Owner
Coldwell Banker Sky Ridge Realty
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@cbskyridge.com
(909) 336-2131

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) projected a 14% decline in single-family home sales this year, and forecast a 1.8% increase in the median price of a home. C.A.R. Executive Vice President Joel Singer delivered the Association's 2007 Midyear Housing Market Forecast as part of the California Realtor Showcase and C.A.R.'s Legislative Day activities last week in Sacramento..

Sales are expected to fall to 410,500 units in 2007, a 14% decline from the 477,460 pace recorded in 2006, according to the forecast. The median price of a home will reach $566,500 this year, a 1.8% increase from the $556,640 median for 2006.

"Sales have declined in all areas of the state, but higher-end markets have experienced somewhat smaller declines," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "Sales are weakest in areas that had a lot of new home building in recent years or those areas that had been popular for second home purchases
.

"Prices tend to be softer in those areas as well," she said. "This pattern is likely to continue throughout the rest of the year, particularly in areas that were popular among first-time home buyers, which experienced the greatest run-up in prices. Similarly, higher-end markets have seen greater price stability, with the median price of a home declining slightly, if at all. The sales mix, with slower sales in the entry and lower-end of the market and relatively stronger sales in the high end, has helped stabilize the median price."

According to the C.A.R. forecast, the Central Valley region has experienced a greater decline in sales compared with the state as a whole, and a succession of year-to-year declines in the median price. This trend is likely to continue, due in part to excess inventory of new homes for sale.

The San Francisco Bay Area and moderately priced to higher-priced areas of Southern California have seen a somewhat better sales picture, with small or nonexistent median price declines. These areas should continue to fare better than lower-priced inland markets in the San Bernardino and Riverside areas, according to Appleton-Young. Sales in those areas remain significantly below the record levels of the peak years, she said.

Get a Free Lake Arrowhead Magazine

Hot off the press is the latest Lake Arrowhead Magazine.  64 Pages of happenings, events and local information.  If you would like to receive a copy via email, send me an email at steve@cbskyridge.com and in the subject line, put "email magazine" in the subject line.  If you would like to receive a hard copy in the mail, include your mailing address in an email to me at steve@cbskyridge.com and we will gladly send you a copy.

Special Events in Lake Arrowhead

Our community celebrates year round.  The following list is a sample of the family oriented activities available through the balance of this year.  We will update the list as additional information comes available.  For additional information on any of these special events, please contact me at steve@cbskyridge.com

Now -Sept 3	Summer Concert Series
June 2-3	Wooden Boat Show
June 9th	Forest Festival
June 23-24	Home Improvement Expo
June 23-24	Art and Wine Festival
June 29-July 7	Fourth of July Celebration
July 4th	Fireworks on the Lake
July 5-Aug 2	Music Festival
July 15th	Le Grand Picnic
July 28th	Arrowhead Goes Wild
August 18th	Lake Arrowhead Triatholon
August 18th	Summit Club Dinner
August 25th	Chili Cook-off
Aug 31-Sept 3	Labor Day Celebration
Sept 8-Oct 28	Oktoberfest
Sept 14th	A Night at the Castle
Sept 15th	Home Tour
Sep 22nd	Family Adventure Day
Sept 29th	Porsche Exhibition
Oct 7th	Classical Music Fest
Oct 27th	Halloween Party
Oct 31st	Trick O' Treat
Nov 23rd	Tree Lighting Ceremony
Nov 23- Dec 24	Holiday Time with Santa

60 Minutes Last Sunday Night

Steven R. Keefe, Broker/Owner
Coldwell Banker Sky Ridge Realty
Arrowhead Home Loans, Inc.
www.mountainmoves.com
steve@cbskyridge.com
(909)  336-2131

On Sunday 60 Minutes, one of the most respected names in television journalism history produced one of the most one sided, news segments I have ever seen.  As a long time viewer and admirer of the show, I was shocked at what they did.  I have listed the information I and others - including the National Association of Realtors (NAR) - feel they have done wrong...

60 Minutes presentation was one sided and inaccurate on many points.

Here are some examples of the misinformation:

Error: The six percent commission is "sacrosanct."
Fact: All commissions are negotiable. In most markets, there is a range of commissions generally between 5% and 7% depending upon many factors.

Error: NAR is the industry's "governing body."
Fact: NAR is a trade association. It does not govern the industry.

Error: In 2003, NAR issued new rules of its own that threatened to block Internet discounters' access to the MLS.
Fact: The Virtual Office Website policy did not block access to MLSs for discounters or any other brokers who are members of the MLS. Discounters listings ARE shown in the Rim MLS.

Error: The MLS is the database that lists virtually every home for sale in the country.
Fact: There is no single national MLS. Rather, there are more than 900 local and regional multiple listing services. These are not simply "databases" but private exchange of offers of cooperation and compensation between real estate brokers.

Error: Eight states have "minimum service laws" that require REALTORS® to provide a level of service many Internet discounters can't afford.
Fact: "REALTOR®" is a trademarked term and should never be used synonymously with "real estate agent." The intent of minimum service laws is to ensure consumers receive a minimal level of service from licensees.

Error: The brokerage industry has a powerful lobby. Eleven states flatly prohibit rebates.
Fact: The intent of anti-rebate laws is to prevent kickbacks in real estate transactions, not to limit brokers' incentives to attract customers. The brokerage industry does not lobby for anti-rebate laws.

Other key points 60 Minutes misrepresented or overlooked:

• NAR supports all business models and favors none. Our 1.3 million members include REALTORS® who work on a full-service basis, as well as those who consider themselves to be limited service, fee-for-service, minimum service, and discounters.
• The real estate industry has harnessed technology for the benefit of consumers and will continue to do so. Real estate is both high-tech and high-touch, so can be enhanced by both electronic and personal interaction.  
• There is no such thing as a "standard commission." Commissions are negotiable and prices vary.
• The real estate business is unique in that competitors must also cooperate with each other to ensure a successful transaction, and MLS systems facilitate that cooperation. The first MLS was created more than 100 years ago as way for brokers to share their listing agreements with each another in hopes of procuring buyers for their properties more quickly and efficiently than they could on their own.
• The MLS is a tool to help listing brokers find cooperative buyer brokers to help sell their clients' homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems, fragmenting rather than consolidating property information.