California Real Estate Guy

California Real Estate Law Suit - Kickback Scheme

2007-06-01T13:06:00.000-07:00

Well you may have already seen this article but if not I suggest you take a look.

HUD is suing California hazard reporting company and four real estate brokerages in kickback scheme. Basically real estate agents are not allowed to recieve kickbacks and unerned fees in the home buying process. This is a violation of RESPA and was enacted in 1974 to protect the consumer.

The lawsuit was brought up against these companies for creating sham companies designed to generate illegal kickbacks in violation of the Real Estate Settlement Procedures Act (RESPA).

The companies involved are:

Property I.D. Corporation - a hazard repoting company in California

Real Estate Brokerages named in the suit are:

Realogy Corporation (formerly known as Cendant Corporation)
NRT/Coldwell Banker Residential Brokerage Corporation
Mason-McDuffie Real Estate (doing business as Prudential California Realty)
Pickford Realty Ltd (doing business as Prudential California Realty)

Click the link below to see the full story.
http://www.hud.gov/news/release.cfm?content=pr07-071.cfm

I am pretty sure this one is going to land a few people in jail.

California Real Estate Foreclosures

2007-05-25T11:18:00.000-07:00

Unfortunately the California foreclosures are still on the rise and home prices are getting lower, slowly but surely. Short sales are popping up all over California with their list prices dropping lower and lower to generate an offer so the bank will communicate with them.

Allot of people keep asking me about the California foreclosure homes. How can I get a foreclosure home for cheap? Aren't all the foreclosures being bought up by the investors?
How do I find foreclosure homes for sale? etc. etc.

There's something that these people don't know about the foreclosures going on in the California real estate market today. Yes you can get a foreclosure home for cheap but these are very rare. The circumstances that would allow for a foreclosure home to be sold cheap are just not likely to occur.

These California foreclosures are allot of the time new homes or homes that have been refinanced in the last couple years. So therefore, the amount of money owed to the foreclosing bank is in most cases substantially more than what the home is worth now. So the foreclosing bank wants to sell the house for what they are owed.

Small story short the foreclosing banks will not likely get what they are owed or anywhere near it for that matter. They will foreclose on the homes ,try to sell them at a foreclosure auction, list them fore sale with an agent without any repairs for the price owed plus the foreclosure process fees. Than, they will probably do some repairs and slowly drop the price in small increments until someone finally buys it. But this price won't a cheap price. it will sell for close to the current market value of the house which will most likely be less by the time the foreclosing bank pulls their head out of the sand and prices it correctly.

Why do the foreclosing banks price their foreclosed homes so high for so long that they end up losing more money than they would have by pricing it correctly to begin with?

Well for short the foreclosing banks don't know what the heck they are doing. They hire some agent out of area real estate appraiser who knows nothing about the market conditions of the town they are appraising in. They pay him/her a discounted price because they are going to give him/her more business with all their foreclosures. And, they get a discount job done. The appraiser goes in and checks the place and than goes to get comps similar the foreclosed home near the foreclosed home. often times their are no similar comps that have sold recently so the appraisers looks for older comps that sold back when the market was good.

Long story short- the appraisal comes in high(really high sometimes) and the foreclosing bank says OK. It is right we hired a professional appraiser who works in a city 200 miles away and he says so.

Even if the appraisal came back close to the real market value the bank still starts off at the price they are owed plus the foreclosure process expenses.

the foreclosure homes that sell cheap are the ones where the mortgage is alot lower then the current market value of the home. And in this case most of the time the owner will sell the home themselves for a little under market value if need be.

Working with out of area real estate agents.

2007-04-24T13:48:00.000-07:00

I've been seeing houses for sale with out of area real estate agents, and buyers working with out of area real estate agents more and more. And I think it's a bad idea for any home seller or buyer to do this.

Why would someone list their home with an out of area real estate agent?

One reason could be that the agent is their friend or relative. Or maybe a friend or relative recommended the agent.

Why would a buyer work with an out of town agent?

Maybe for one of the same reasons as above. Also, if they are selling their home in another city and relocating the agent they are selling with being entirely to money hungry tries to get them to let him/her help them find their new home.

Why is working with an out of town agent a bad thing?

It's bad for home sellers to work with out of area agents because:

The agent is not going to be available to show the home very often. When a prospective buyer calls on the sign or an ad and wants to view the homes inside, the agent doesn't live in town so they won't be able to show the home and will try to set an appointment for a later date. Or, your agent will call a local agent and give the lead to them in return for a referral fee if that person ends up buying a home(even if it's not your home).

So the prospective buyer may call on another sign and that agent will show the home they are selling and will also show your home. The other agent who ends up showing your home will try harder to sell his/her listing over yours so they can get a double commission. After all that agent doesn't work for you therefore has no fiduciary duty to you and selling your home.

Also, The out of area agent may not know exactly what is going on in your local real estate market and may recommend a price that is to high or to low. If you list your home to high your house will not sell and probably won't even get any showings. if you list to low you will be loosing money.

It's bad for home buyer work with out of area agents because:

For one, the agent may not be aware of the current market conditions in the area you are looking. Which will put him/her at a dis-advantage when negotiating the sale. You may end up paying more for your new home than if you were working with a local agent. Your out of area agent may even have difficulty obtaining access to homes due to the electronic lock boxes that may be different to than the lock boxes used in his/her area. In my town sentri lock boxes are common and require a card that must be updated weekly. These lock boxes also have contractor codes that don't require a key but agents often forget to turn that function on. So you end up skipping the house that may have been exactly what you were looking for.

__________________________________

Maybe you talked to an agent from your local real estate office and didn't like that particular agent for whatever reason. This is not a good reason to work with an out of town agent. Most real estate offices have many agents and if you don't like one of them that doesn't mean you won't like them all. There are many real estate agents and they are all different people. Don't assume they are all the same. There is an agent that is right for you, you just have to find them.

Your house will sell eventually if it's priced right for the current market conditions in your area.

Happy House Hunting

Foreclosures hurting the California real estate market

2007-04-09T11:33:00.000-07:00

The foreclosure rate in California is continuing to rise. More homes are going into foreclosure every single day.

Why are all these home going into foreclosure?
Loans. The market was booming and everyone got greedy. New loans came out that in my opinion should have been alot harder to get. 100% financing, adjustable rate, etc.

A 100% loan meens when you buy your house you are in the whole and it's usually a pretty deep one. Negative equity right from the start. A monthly payment more than double what the average renter pays. Now the problem is when something unexpected happens and someone gets layed off. Their income drops and they can't afford their mortgage. What do you do now? the bank starts the foreclosure process and if you had any equity you would probably just sell the darn house.

Now we're in a declining market and the whole is getting deeper. All the foreclosures are helping the declining market decline even more. You may have the option to do a short sale. Which in this market doesn't seem to be going over to well unless your house is in excellent condition.

Heres some info on foreclosure that most people don't know. When the bank forecloses on a property they do what they have to to sell that house. Some will do repairs and they will all drop the price they want untill the house sells.
What you didn't know is the bank can 1099 the the owner who was foreclosed on for their loss. So if you owed $400,000 and the bank made back $320,000 that's a difference of $80,000 that they can 1099.

Which means the owners who were foreclosed on, may have to pay income taxes on that $80,000 as well as whatever their real income for the year was. OUCH

Bad news
-more foreclosures = declining home values(for more reasons than 1)
-First time buyers have to save for a down payment because 100% financing will very likely be alot harder to get.

California Real Estate Update Highlights

2007-04-02T14:55:00.000-07:00

California Real Estate News Update

-First off, in California real estate home sales have decreased 9.6% in Febuary compared to this same period last year.

-The average days it took to sell a home in California last year in Febuary was 53 days compared to this year being 70 days.

-Sales peaked last year around March, so as we get closer to the traditional buying season we are likely to see smaller declines. If sellers keep their homes well maintained and price their homes correctly to reflect the reality of the market we are currently in, homes will continue to sell.

*Jerry Brown- California Attorney General is investigating the subprime mortgage business in the state. California has the largest U.S. market for subprime mortgages.
-$0.02- Could California be the largest market for subprime mortgages because the cost of living is entirely to high compared to the average income of normal people who live here.

-Heres some news for the San Diego real estate market- In the first couple months of 07, in San Diego county foreclosures have tripled, and four times more Notices of Default are being recieved by homeowners. Also more than 40,000 people left San Diego county last year, which made this area one of the top in the nation for it's loss of residents.

National Real Estate News

As for home builders there are some pretty steep accusations of using aggressive and possibly illegal tactics to sell homes and secure the financing for the home buyer.

1.5 million across the United States may be hit by foreclosure. According to experts 1.5 million Americans may loose their homes and 100,000 people working jobs related to housing could be out of work due to the slowdown in the real estate market.

What is a short sale? & How does it work?

2006-12-04T13:27:00.000-08:00

A short sale in real estate is basically "selling a house for less money than is currently owed on the loan".

Why would the lender take less money they are owed?
Normally they wouldn't. Generally a short sale will occur when the borrower has had some financial hardship and defaulted on their loan. After about 3 months of not paying their mortgage the lender will file a Notice of Default and begin the Foreclosure process. The whole foreclosure process costs the bank a lot of money. And, the borrower also owes a lot of money. Generally in a short sale situation the bank is looking to save money. If they foreclosed on a house that is worth less than what is owed they are losing money. And, remember they are loosing even more because the foreclosure process itself is expensive.

Now, if you have a good amount of equity in the home you will not need to do a short sale because you can sale it the normal way and probably come out of the transaction with some money in your pocket. In most cases we've been seeing lately in California the borrower owes more on the loan than the home is worth. So they can't just sell their house the normal way.

In the short sale process everything must be approved by the bank. So what you want to do is get a real estate agent who knows about short sales and can negotiate with the bank for you. It's a good idea to find this agent before you get the Notice of Default because you only have a small amount of time to get your house sold.

What will happen is you will list your house with this agent. The agent will get you to sign a form giving them permission to deal with the bank and anyone else involved. When you get an offer you will most likely need to accept the offer before the bank will approve it. The bank looks over the offer and decides if it's acceptable. This is where the agents bank negotiation skills come in and also the banks reasonableness.

If all goes well the offer gets approved, your house goes into escrow, and hopefully doesn't fall out of escrow for some reason.

Pros & Cons of a short sale.

Pros
You will not have a foreclosure on your credit.
You are in control.
You will most likely be able to qualify for a loan sooner than if you had a foreclosure.

Cons
You still loose your house.
Your credit isn't great anymore.
The bank files a loss and you might have to add that amount to your income and pay taxes on it.

Foreclosure Cons
You loose your house.
No feeling of control over your life.
You have a foreclosure on your credit and it could be 5 or more years before you can qualify for another loan.
The bank tries to get you to sign a note that you still owe the difference or you get same income tax implications that you might get if you do a short sale.

Got to go. If you would like me to touch up on any specific part of this just leave a comment. Don't worry if this post is old just leave a comment about what your looking to have clarified and I'll touch up on it.

Southern California Market Forecast

2006-11-28T10:35:00.000-08:00

This is simply a prediction of where the california real estate market looks to be heading and why. Some cities in california may be better off than others. I suggest you talk to a Realtor in your area for details on your specific market.

Currently in our market the prices seem to be slowly but surely dropping. Plain and simple the prices were and in some places still are overinflated. Due to this overinflation and what I like to call the loans of funk, it looks as if the prices will be slowly falling for some time.

I won't get into the loans to much because I am not a lender/mortgage broker and simply do not have the expetise in this field to appropriately explain them.

Lets start with what signs are pointing to the prices dropping. Well there are a couple things that I believe will have the biggest impact and may make this drop in value last longer than some expect.

New Construction - The builders are still building and their inventory is higher than they would like it to be. Meaning, they are getting extremely competitive. They are lowering their prices, paying closing costs and offering numerous other incentives.

Foreclosures - There are unbelievable amounts of homes in California that are going into foreclosure. One of the big reasons for this is, adjustable rate mortgages are starting to adjust. People are having trouble paying their mortgage when it adjust to a higher monthly payment. They fall behind on payments and need to find a way out. So they try a short sale .

Short sales are better on your credit than a foreclosure so it is a likely method. Also, short sales generlly have about 3 or 4 months before the bank forecloses. So, they lower the price to generate an offer. Then, it goes to bank and they decide if it is acceptable loss. Is so, the offer is accepted, escrow is opened and it goes from there.

Now this wouldn't be such a bad thing if there weren' t so many foreclosures coming up. But, since there are so many foreclosures popping up it is a very bad thing. Now, the short sale are dropping prices because they need to sell fast and the builders are dropping prices for the same reason. Other people have to move also. Job transfers, loss of a job, pay decreases, whatever the reason may be some people just have to move. If they have a good amount of equity they will leave with something but will still have to set there price competitively with the short sales and builders.

If you don't have to move and you don't have enough equity to come out with what you will settle for than I would just stay where I'm at. If you want to move and have a lot of equity then your in a better position than the lot. The decision is yours to make and if you have the equity go for it, price your house to sell in the timeframe you would like it to and move. But, Becareful not to overprice, for you may end up having to take less in 3 months than if you priced it right to begin with.

Getting a little to carried away here. That's all for now folks.