Aug 27, 2009

California Association of Realtors Offers Job Loss Insurance

Hello Neighbors,

This is very cool.

At a time when employment is challenging - yet buying a home is absolutely the right thing to do (and timing couldn't be better), CAR is offering "First Time Buyer Insurance". I love it.

Take a look:

C.A.R.'s Housing Affordability Fund (C.A.R.H.A.F) has committed $1 million to support the Mortgage Protection Program - and the National Association of REALTOR another $420,000 - an insurance product that kicks in when the unexpected happens: job loss.

Your first-time buyers who enroll in the program can draw upon their mortgage protection policy in the event they lose their job after purchasing their home. Under the program, first-time buyers will be eligible to receive $1,500 per month for six months in the event of a job loss; co-buyers are eligible to receive $750 per month.

To be eligible for coverage, the home must be a principle resident in California and a first-time buyer is defined as someone who has not purchased a home in the past three years. While there are no caps on the applicant's income or the purchase prices of the home, the applicants are required to use a California REALTOR in their transaction; they cannot be self-employed or older than the age of 70. Consumers can apply for the program via their REALTOR.

It's new - so we haven't tried executing on the program yet... but if you want it, call me! We'll figure it out together!

Putting 2009 in the rear view mirror... Neighborly!

- Jim

Aug 26, 2009

Short Sale Process Help for Realtors

Hello Neighbors,

More evidence that sanity is returning to Real Estate!

Freddie Mac has thrown its weight behind helping us in the industry.

Thank you NAR (National Association of Realtors) for posting this update.

Short Sale transactions are the hardest escrow to conclude. Even when we have a Willing buyer, and a willing Seller - the Seller's lender will do a variety of evil things to kill the process. Only 25% of escrows on Short Sales are actually making it to COE (Close of Escrow). The other 75%? Who knows. Default (foreclosure), Loan Modification, or the Seller "catching up" are the other likely outcomes.

One of our least favorite actions is when the Short Sale lender comes after our wages. We can get through the entire negotiation process, inspection period, escrow .... and then have the lender say "by the way, we are cutting your commissions to ZERO". Yep. Working for free. Or - more realistically, since we've invested a great deal of time, energy, and our own funds - we are working for a loss. Now factor in that the majority of the houses on the market are short sales. Do the math, earnings risk is pretty high concern in this profession.

Why does this Freddie Mac news help?

We can now work with less fear of "Short Sale Earnings Theft". More confidence when showing Short Sale homes to Buyers. More faith that we can operate a business as a business - not as a collections agency.

We have more assurance that the industry is recovering, and some level of logic is returning to the key principles who drive this market. Stability is around the corner!

Freddie Mac Issues Written Short Sales Commission Policy

On August 20, 2009, Freddie Mac confirmed in writing that its servicers are not allowed to renegotiate short sales commissions. According to the policy, as a condition of the servicer’s acceptance of a short sale offer, servicers cannot renegotiate the sales commission below the amount agreed to by the real estate broker and the seller/borrower. However, if the negotiated commission exceeds 6 percent, servicers are required to limit it to 6 percent. This Freddie policy is consistent with Fannie Mae’s policy.

NAR has asked Freddie to establish an appeals process for cases when servicers refuse to comply with Freddie Mac’s policy.

Links to more in depth information can be found here:

Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2009-22 (August 20, 2009)

Fannie Mae Short Sales Commissions Policy and Appeals Process

NAR’s Short Sales Website

Just another sign that logic is returning (if slowly).

- Jim

Wooo Whooo !! - Home Sales Up and Steady

Hello Neighbors,

The recovery is upon us!

(Note to self though - the rumored zillions of foreclosures still to hit the market could drive things down again... but when will those homes hit the market? I've been told "next month" for 11 months now...)

Thank you NAR (National Association of Realtors) for the updates posted below!

STRONG Gain in Existing-Home Sales Maintains Uptrend

Washington, August 21, 2009

For the first time in five years, existing-home sales have increased for four months in a row, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.2 percent to a seasonally adjusted annual rate1 of 5.24 million units in July from a level of 4.89 million in June, and are 5.0 percent above the 4.99 million-unit pace in July 2008. The last time sales rose for four consecutive months was in June 2004, and the last time sales were higher than a year earlier was November 2005.
Lawrence Yun, NAR chief economist, said he is encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said.

The monthly sales gain was the largest on record for the total existing-home sales series dating back to 1999.

“Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix, and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.22 percent in July from 5.42 percent in June; the rate was 6.43 percent in July 2008.

An NAR practitioner survey showed first-time buyers purchased 30 percent of homes in July, and that distressed homes accounted for 31 percent of transactions.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the first-time buyer tax credit is working. “In addition to first-time buyers, we’re also seeing increased activity by repeat buyers. While many entry-level buyers are focused on the discounted prices of distressed homes, they’re also freeing some existing owners to sell and make a move,” he said.

“Realtors® are the best resource for consumers in these changing market conditions because the transaction process has become more complex. Since it’s now taking longer to complete a home sale, first-time buyers who want to take advantage of the $8,000 tax credit should try to make contract offers by the end of September,” McMillan said. “Otherwise, they may miss the November 30 closing deadline.”

Total housing inventory at the end of July rose 7.3 percent to 4.09 million existing homes available for sale, which represents a 9.4-month supply2 at the current sales pace, which was unchanged from June because of the strong sales gain. Raw inventory totals are 10.6 percent lower than a year ago when the number of unsold homes was at a record.

The national median existing-home price3 for all housing types was $178,400 in July, which is 15.1 percent lower than July 2008. Distressed properties continue to weigh down the median price because they typically sell for 15 to 20 percent less than traditional homes.

Single-family home sales increased 6.5 percent to a seasonally adjusted annual rate of 4.61 million in July from a pace of 4.33 million in June, and are 5.0 percent higher than the 4.39 million-unit level in July 2008. The median existing single-family home price was $178,300 in July, which is 14.6 percent below a year ago.
Existing condominium and co-op sales jumped 12.5 percent to a seasonally adjusted annual rate of 630,000 units in July from 560,000 in June, and are 5.9 percent above the 595,000-unit level a year ago. The median existing condo price4 was $178,800 in July, down 18.9 percent from July 2008.

Regionally, existing-home sales in the Northeast surged 13.4 percent to an annual pace of 930,000 in July, and are 3.3 percent higher than July 2008. The median price in the Northeast was $236,700, down 15.0 percent from a year ago.

Existing-home sales in the Midwest jumped 10.9 percent in July to a level of 1.22 million and are 8.0 percent above a year ago. The median price in the Midwest was $157,200, which is 5.9 percent less than July 2008.

In the South, existing-home sales rose 7.1 percent to an annual pace of 1.95 million in July and are 5.4 percent higher than July 2008. The median price in the South was $164,500, down 7.1 percent from a year ago.

Existing-home sales in the West slipped 1.7 percent to an annual rate of 1.13 million in July, but are 1.8 percent above a year ago. The median price in the West was $202,300, which is 28.0 percent below July 2008.

Buyers, we are getting close to the "now or never" point.

- Jim

Aug 21, 2009

Folsom Treehouse Update (Out of Bankruptcy)

Hello Neighbors,

Another sign that things are stabilizing a bit. You've heard about this in the local news... some of the larger foreclosures / failures are getting bought up, like the Folsom Treehouse project.

This just in from the Sac Business Journal - thank you SBJ!

Folsom Project Bought out of Foreclosure

Aug 17, 2009 - The Sacramento Business Journal

A real estate investment firm said Monday it has acquired a 25-acre residential development in Folsom through foreclosure proceedings and plans to develop the property with new homes.

PCCP LLC, which has an office in Sacramento, will resume construction at the Folsom Treehouse master-planned community, located at Prairie City and Iron Point roads, in a partnership with Signature Properties. The company acquired the project last week. The property had been in possession of the Federal Deposit Insurance Corp. and United Commercial Bank, after the original loan of $22.5 million went into default last year. PCCP acquired a discounted note from the FDIC and United Commercial in March.

The development is made up of 291 finished lots, with 99 single-family lots, 164 condominium lots and 28 constructed or partially constructed homes.
The terms of the acquisition were not disclosed.

Company vice president Jim Galovan said PCCP, which focuses on recapitalizing distressed real estate, has targeted Folsom for investment in the past due to its strong job base anchored by the 7,000-employee Intel campus. The area currently has a low inventory of new homes, he said.

- Jim

Aug 18, 2009

HUD Homes, We Got 'em !!

Hello Neighbors!

It is with great enthusiasm that we announce our affiliation with HUD! After pushing for 11 months with their subcontractor, we now have keys! Yep, we can get into any HUD home in California, help you write offers ("Bids" in the HUD world), and get you into one of these homes.

What is a HUD Home?

A HUD Home is a single family home or other type of residence that is backed by the Federal Housing Administration / FHA (through "Mortgage Insurance" aka "MIP") and is now in foreclosure. Once a home backed by the FHA goes into foreclosure, it is deeded back to HUD by the lending mortgage company. This is how HUD "forecloses" on Mortgage Insurance when the Buyer defaults.

Why is this Important?

1) It's not rocket science. As more home owners default, the amount of "inventory" HUD will take back will grow.

2) HUD doesn't use the same MLS lockbox system that 99% of the homes for sale use. They have keys to the locks on the doors, that they issue to HUD approved Real Estate companies. A regular Realtor can't get in with a lockbox to a HUD home - they need the keys! We've Got Them !!

3) The purchase offer process is different with HUD homes. They don't use the normal contracts that we use for most transactions in California. They use their own on-line systems to make offers (bids) and to let the Buyers know where they stand. Real Estate companies can't submit offers on HUD homes unless they've been pre-approved by HUD and issued a special code (called a "NAID" number". We've got a NAID number and are ready to go!

Next steps?

Take a look at the items to the right. You will see a section on HUD Homes. You can review inventory (see what is on the market).

Call us and we can help you with a HUD home!

- Jim

Aug 10, 2009

Become a Fan in Facebook !!

Hello Neighbors,

Join us in Facebook!

Become a Fan of Neighborly Realty & Neighborly Financial today! We just added this within the last few minutes, so please excuse the lack of fans as we create this blog entry. We'll do better soon!

Why Facebook?

It is a wonderful way to get real time information out quickly - specifically to those who want it, without intruding on your email!

Thanks Neighbors - and now fans!

- Jim

Aug 7, 2009

Are Appraisals Useless?

It sure looks that way.

Hello Neighbors,

It happened again yesterday. An appraisal came in on a great Granite Bay home (we are in escrow on) at roughly $46,000 below purchase price. Yep, that’s right. A HUGE gap between what we’ve agreed to pay and what the bank’s appraisers say it is worth.

Unfortunately, this is to be expected – but it sure makes this process difficult, and can really challenge the buyer / borrower confidence.

For me, it started in 2006. We had an appraisal come in at $6,000 below the agreed upon purchase price.

Since then, the appraisals have been close to worthless.

Remember – we do loans too. Every purchase loan or re-fi loan requires an appraisal. In the last year, we’ve had two different transactions that required 4 appraisals each !! Why? To account for appraiser fear and appraiser incompetence. Multiply 4 by the average appraisal price of $350 - $490 and you can see how hard this is on the buyers and borrowers. It’s awful.

Why is it happening?

1) Appraisers are afraid. Collusion between some appraisers and some lenders was the first step to this downturn, as far back as 2005 – 2006. So? Appraisers got scared and started getting overly conservative in their valuations. Of course, since the markets have continued to decline – the conservative nature of appraisers has only increased.

2) Appraisers aren’t able to talk to anyone relevant! As of May 1st 2009, appraisers aren’t allowed to discuss values directly with the parties involved in the transaction. That’s right – they go in blind without much data or insight on the specific property. It’s now illegal for us to talk to them. We do a ton of work making sure an offer is at the right market value – but aren’t allowed to discuss this research with the appraiser! Insane. Google this one – “HVCC legislation”. It will explain how the appraisal rules have changed, and the creation of these new “Appraisal Management Companies” (AMC’s).

3) Appraisers aren’t familiar with the area they are appraising. This one is the worst. Lenders used to be able to pick the appraisers they used. Not anymore. Obviously, lenders would choose local appraisers who knew the neighborhoods and areas well. Now? The appraiser may not even be from the same County in California! The example I gave of our $46,000 gap yesterday? The appraiser was from El Dorado Hills – that’s a County away from the property in question in Placer County’s Granite Bay. The appraiser used comps that were 50 years old, backed to Auburn-Folsom road, and sat under major power lines… with no adjustments. She was not at the slightest familiar with the different Granite Bay neighborhoods and nuances.

Also yesterday - I was sitting with 80 or 90 mortgage brokers at the monthly Sacramento Association of Realtors finance session. One lender shared a scary story…. Two appraisers from San Diego were flying up here to appraise 15 houses – during a 1 day trip. All for a bank. The appraisers were earning $150 per house. Wow. Out of the area appraisers, working for below market wages, and spending a few minutes per home. What does that tell you about this process?

In summary? Appraisals are very near worthless.

What is important is making sure you have confidence in the agent representing you, and making sure that person is doing a very thorough job of reviewing home values.

Want to talk more about appraisals, give me a call.

- Jim

Aug 3, 2009

Be Prepared - 45 Day and 60 Day Escrows

Hello Neighbors,

As we continue to recover from these crazy times, the Feds are creating new legislation at an alarming rate. These new rules are rolling out a bit too quickly - and without a thorough analysis of the impact to the consumer.

Don't get me wrong - the goals are important, and the steps needed. We simply need to know how to manage in these new environments.

One immediate impact, probably 45 day purchase escrows. 60 days are even on the horizon.

These changes impact purchase loans AND re-finance loans.


The two most important changes were rolled out on May 1st and early in July.

The first is called the "HVCC" or Home Valuation Code of Conduct. It dictates how people in these industries work with Appraisers. In short, we can't talk to them!

The second is a change to the Truth-In-Lending laws. These laws force new disclosures to borrowers if there is a change of 1/8th of a point in APR. ...and a 3 day "hold" period for the analysis of that new disclosure.

What does this last item mean?

Let's say interest rates change between your lock and your close of escrow. NOTE THAT THEY ALWAYS WILL since rates are based on the daily US bond markets!! You could end up reviewing and reviewing changes and changes for days.

More review, more 3 day wait periods = longer escrows. Please plan accordingly!

- NeighborlyJim

Where is the Bottom ?? How About HERE !!

Hello Neighbors,

My sincere apologies for the gap! It's been 4 weeks since a "fresh" blog post... lots going on in these crazy markets. So many changes with lenders (new Appraisal rules, new Truth-in-Lending rules, a pipeline so full that we are seeing 45 and 60 day escrows..)

It's just plain nutty right now.

But it does feel like we are at the bottom, and the Associated Press just put out this fine (and long) article on just that topic. Take a read below.

From a practical standpoint - we are still offering like crazy for Buyers at entry level price points (roughly below $200,000). Most of that inventory is now Short Sales. We've seen a drop in REOs (foreclosures).

Happily - we are starting to see "private party sales" again! That's the regular old sale we are all used to. Family to family. No extra banks or lenders involved. It's like 2005 and earlier...

Here's the AP article.

- NeighborlyJim

From our friends at the Associated Press - thanks AP for the great content and the good data points !!

Welcome to the bottom: Housing begins slow rebound

By ADRIAN SAINZ, DAVID TWIDDY, DANIEL WAGNER, ALEX VEIGA, Associated Press Writers Adrian Sainz, David Twiddy, Daniel Wagner, Alex Veiga, Associated Press Writers – Sun Aug 2, 5:26 am ET

It was — note the past tense — the worst housing recession anyone but survivors of the Great Depression can remember.

From the frenzied peak of the real estate boom in 2005-2006 to the recession's trough earlier this year, home resales fell 38 percent and sales of new homes tumbled 76 percent. Construction of homes and apartments skidded 79 percent. And for the first time in more than four decades of record keeping, home prices posted consecutive annual declines.

A staggering $4 trillion in home equity was wiped out, and millions of Americans lost their homes through foreclosure.

Now take a deep breath and exhale. The worst is over.

By every measure, except foreclosures, the housing market has stabilized and many areas are recovering, according to a spate of data released in the past two weeks. Nationwide, home resales in June are up 9 percent from January, on a seasonally adjusted basis. Sales of new homes have climbed 17 percent during the same period. And construction, while still anemic, has risen almost 20 percent since the beginning of the year.

Even home prices, down one third from the top, edged up in May, the first monthly increase since June 2006.

"The freefall is over," says Dean Baker of the Center for Economic and Policy Research.

The problem is that, Baker, like many economists, expects the housing market will "be bouncing around the bottom" for the second half of the year.

There are also real threats that could poison this budding recovery. The unemployment rate, which is 9.5 percent, is expected to surpass 10 percent, leaving even more homeowners unable to pay their mortgages. Mortgage rates could rise, making homeownership less affordable. And the federal tax credit for first-time homebuyers, which as lured many into the market, is set to expire on Nov. 30.

"As long as jobs are being lost, regardless of all the federal programs out there to help the borrowers, you're still going to have problems in the housing market," says Steve Cumbie, executive director of the Center for Real Estate Development at the University of North Carolina's Kenan-Flagler Business School.

True, but when you've got bidding wars for foreclosures in places like Las Vegas, Phoenix and Los Angeles, it's time to call the bottom.


For years Las Vegas symbolized the boom, as mile after mile of desert gave way to three-bedroom homes and swimming pools. Then came the crash and it symbolized something else: a decade of speculation and excess.

Now, Las Vegas is one of the hottest housing markets in the region again. This city has always profited from others' misfortune, and the same can be said of the current housing market.

In Clark County, Nev., home to Sin City, one in every 11 homes had received at least one foreclosure-related notice in June, according to RealtyTrac. The glut of deeply discounted foreclosures has almost doubled sales activity for most of this year.

"In January the market was busy, and since that time, it's gone a little haywire," says Brad Snyder, an agent with ZipRealty in Las Vegas. "There's (sales) activity now that we haven't seen even since '04."

The situation is similar in California's Riverside, San Joaquin and San Bernardino counties, where one out of every 14 homes was in foreclosure.

After falling 18 percent in the second half of 2008, monthly home prices were flat in the first half of this year, on a seasonally adjusted basis, according to the National Association of Realtors.

Markets like these have seen a surge this year in all-cash buyers, many of them investors, scooping up the sharply discounted properties. It's not uncommon to see multiple offers on a single property, and that's helped slow the rate of price declines a little. The demand also has helped whittle down the inventory of homes for sale to the lowest level since the boom.

"We have seen such a steep decline in supply right now, that when a home comes on the market it's first day there could be seven or eight or 10 people there in a matter of hours," Snyder says.

To lure buyers away from foreclosures, homebuilders have slashed prices or are simply tearing down vacant homes. New home sales jumped almost 59 percent in the first half of the year, while construction in these grossly overbuilt markets slid 12 percent.

In the Pacific Northwest and states such as Utah, by contrast, housing markets are on a different timer than the rest of the West. Home sales and values held up better and longer while markets in the Southwest were already in decline. These markets also haven't seen as many foreclosures wreaking havoc with home prices.

States in the region: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming

Data compares June vs. January and June 2008:

Home resales: down 1 percent, up 12 percent

Median price: $214,800, flat, down 25 percent

New home sales: up 59 percent, down 10 percent

New home construction: down 12 percent, down 42 percent

Mortgage delinquencies as of March: 12 percent

Regional outlook: The recession remains the region's wild card. Unemployment is at 10.2 percent in the West, but that could go higher if the economy worsens. If that happens, expect more foreclosures and a slower turnaround