by Jim the Realtor | Nov 16, 2012 | Short Sales, Short Selling, Strategic Defaults
Those who are underwater aren’t “trapped” in their homes, they are free to move.
The system has been very generous, and even if the Congress doesn’t extend the debt-tax relief, the banks will be processing short sales to enable the underwaters to move – without having to repay the debt.
The homeowners that choose the short sale – it is a choice, you can always pay it down – will probably have their credit banged up along the way and won’t be purchasing a home concurrently. But that’s OK, with the the supply-and-demand curve around here needing more supply and less demand, we welcome the sell-only short sellers.
However, as the media keeps hyping the real estate comeback, the underwater homeowners who can make their payments will be more inclined to not default/short-sale, for these reasons:
-
There aren’t cheaper alternatives in the same area.
-
Let’s wait a little longer, equity might be right around the corner.
-
Save face, and credit.
Those who have waited this long will continue to ride it out, and short-selling should diminish in the areas that see real appreciation happening. So charts like these below shouldn’t cause a lot of alarm in the NSDCC, where there are only 398 SFRs with NODs and NOTs on file currently, and half of those are in Carlsbad.
Let’s note that 91% of the San Diego homeowners with negative equity are making their payments!
From Zillow:
by Jim the Realtor | Nov 13, 2012 | North County Coastal, Short Sales, Short Selling, Thinking of Buying?, Thinking of Selling?
Yesterday we saw how the number of short-sale listings were dropping off around our north county coastal region, in spite of the expiring relief on debt-tax.
In the New Age of Coddling, we have seen the government devise several programs to rescue distressed homeowners, who enter the ‘Modification Waterfall’, where every cure is applied until one sticks. If all loan-mod attempts fail, then the next recommendation is to affect a short-sale. We’ve been hearing all year that lenders have converted to short-sales as their primary method of disposing of defaulters….by have they?
Around NSDCC, it appears that lenders took their foot of the gas altogether.
We stormed into 2012 with guns a-blazing, with both new listings of short-sale and REOs increasing rapidly in the first quarter. But then it looks like somebody pulled the plug – for the last two quarters both REO and short-sale listings have been trending lower:
If lenders don’t threaten to foreclose, there is little to no incentive for defaulting homeowners to short-sale – the free rent program is their preference!
But there are two possibilities that could cause a dual decline of REO and SS listings:
- Lenders stopped threatening to foreclose.
- Homeowners starting paying again, once they heard that the market might be coming back.
Either way, the distressed listings appear to closing out.
Of the 783 houses for sale today, there are 19 REO and short-sale listings – or 2.4% of the inventory!
by Jim the Realtor | Nov 12, 2012 | Short Sales, Short Selling
The extension of the debt-tax relief act is still up in the air.
There have been several bills submitted, and everyone from the N.A.R. to the nytimes.com thinks there is a good chance that our Congress will extend it….but will we need it?
Did the threat of it expiring cause a flood of short-sale listings to hit the market recently? Not really, for the September/October period, there were fewer short-sale listings than in previous years.
NSDCC Detached-Home New Listings, September/October
| Year |
Sept/Oct SS Listings |
Sept/Oct Non-SS Listings |
SS/Total % |
| 2009 |
67 |
698 |
8.8% |
| 2011 |
82 |
674 |
10.8% |
| 2012 |
55 |
575 |
8.7% |
With recent upbeat news about the housing market, those who are underwater and hanging on this long are thinking that if they wait just a few more months or years, it will be different – and prices might go high enough for them to make some money!
After the next high sale in each neighborhood, expect that there will be 2-3 more new listings hit the market, looking to capitalize – but only if they can get their price.
P.S. Of the 55 listed this Sept/Oct, only six are still for sale.
by Jim the Realtor | Oct 21, 2012 | Forecasts, North County Coastal, Short Sales, Short Selling
Let’s look forward to future closings – how do the active, contingent, and pending listings stack up?
San Diego County All-Residential MLS listings:
| MLS Listings |
Actives |
% of Mkt |
Pend/Cont |
% of Mkt |
Sold6mo |
% of Mkt |
| SD REO |
240 |
4% |
430 |
5% |
2,381 |
15% |
| SD SS |
466 |
8% |
4,473 |
49% |
4,250 |
27% |
| SD Non |
4,865 |
88% |
4,250 |
46% |
9,231 |
58% |
Close to half of the closed sales between April 1st and September 30th were distressed sales, but now they make up only 12% of the active inventory! While we have become dependent on the distressed sales, they get snapped up quickly. No wonder it feels dry as a bone!
What about the detached-home listings in our North SD County Coastal region?
NSDCC Detached-Home MLS listings:
| MLS Listings |
Actives |
% of Mkt |
Pend/Cont |
% of Mkt |
Sold6mo |
% of Mkt |
| NSDCC REO |
3 |
1% |
13 |
2% |
94 |
5% |
| NSDCC SS |
18 |
2% |
162 |
29% |
187 |
11% |
| NSDCC Non |
823 |
97% |
388 |
69% |
1,458 |
84% |
If you are looking for a “bank deal”, the NSDCC region looks like the Mohave Desert! The foreclosures and REO listings are really thinning out – look forward to next year being the battle between short-sales and regular equity sellers.
It is impressive how many regular sellers have been able to compete with the distressed sales – 84% of the closings in the last six months have been non-distrssed! Buyers want quality, and the distressed sales tend to be the inferior properties – the non-distressed sales averaged $389/sf, and distressed sales were $283/sf.
It looks like the 50/50 split of short sales vs. non-SS will likely prevail throughout the county for the next year or two, but it’s been quieter around NSDCC. Will more owners of over-encumbered quality properties decide to give up next year, especially if Congress only extends the debt-tax relief for 12 months? What if it doesn’t get extended?
by Jim the Realtor | Oct 20, 2012 | Foreclosures/REOs, Shadow Inventory, Short Sales, Short Selling, Thinking of Buying?, Thinking of Selling?
We have been told that banks and servicers are now using short-sales, instead of foreclosures, as their primary defaulter-disposal method.
It appears that the conversion is well underway in San Diego County – here are the number of residential distressed-sales and average pricing for the six months between April 1st and Sept. 30th:
| San Diego Co. |
2011 |
2012 |
% Chg. |
| REO Sales, # |
3,778 |
2,381 |
-37% |
| REO Avg. $/sf |
$178/sf |
$184/sf |
+3% |
| Short Sales, # |
3,465 |
4,404 |
+27% |
| SS Avg. $/sf |
$195/sf |
$189/sf |
-3% |
Yes, the conversion from foreclosures to short sales is happening, though it doesn’t look good for the pricing trend. You could call +/- 3% just statistical noise, but for those who believe that the lenders save big money by short-selling vs foreclosure should think again.
The fraud seems to be getting more outrageous too – did you see the one yesterday that if the realtor would have listed it at market value, the seller would have made money? Instead, he listed it at $100,000 below the loan amount, and called it a short sale – at least for the usual five seconds before he withdrew the listing!
(withdrawing a SS listing is common when the listing agent has his own buyer and doesn’t want competition – he shows the bank a copy of the listing taken during the five seconds that it was active)
by Jim the Realtor | Oct 7, 2012 | Mortgage News, Short Sales, Short Selling, Strategic Defaults
The fate of the mortgage-debt tax relief? It’s going to be decided in a lame-duck session, and there doesn’t seem to be enough politicians willing to create a big fight – an excerpt from the latimes.com:
One key strategy question: Could the Family and Business Tax Cut Certainty Act of 2012 — which passed the Senate Finance Committee in August and includes mortgage forgiveness relief and other housing-related tax extensions along with alternative minimum tax relief, research-and-development tax credits and dozens of other targeted tax benefits — be treated as a stand-alone bill? If not, there’s a strong risk of it getting caught up in the much larger partisan fights over spending, the federal debt ceiling and the whole fiscal-cliff debate.
Senate Democrats reportedly were prepared to bring the bill to the floor for a vote before the election recess, but it never happened. Now the fate of the legislation appears to be up in the air, and House leaders may come up with their own version.
Here’s a quick overview of what’s at stake for homeowners:
• Mortgage-debt tax relief. Besides the Senate Finance Committee’s bill awaiting action in that chamber, there are at least four bills that have been introduced in the House that would extend the law. Rep. Jim McDermott (D-Wash.) is sponsoring a bill that would extend the mortgage forgiveness relief through 2015. Rep. Charles Rangel (D-N.Y.) wants to extend it through 2014. Both McDermott and Rangel are members of the tax-writing Ways and Means Committee. Rep. Dan Lungren (R-Calif.) is pushing for a three-year extension, and Rep. Tom Reed (R-N.Y.) favors a one-year extension, through 2013.
The fact that there is significant bipartisan support for an extension in the House greatly increases the odds that mortgage forgiveness tax relief in some form will pass before the end of the session. One housing lobbyist gives it a 60% chance of passage, even better if post-election lame ducks and victors find ways to compromise on the bigger issues. The main obstacle to an extension: the cost to the federal government.
• Mortgage insurance premium deductions. Under tax code provisions that expired in December, buyers and refinancers who pay either private or government mortgage insurance premiums could write them off subject to household income limitations. The Senate Finance Committee bill would reauthorize these deductions retroactively to Jan. 1, 2012, and extend them through the end of 2013. Because this would cost the government an estimated $1.3 billion over 10 years and has not attracted as intensive a lobbying effort as mortgage debt forgiveness, it may be more vulnerable if negotiators are looking for ways to boost revenue to pay for other cuts or extensions.
• Energy-efficiency improvements to homes. The Senate Finance Committee-passed bill would extend for two years — through 2013 — tax credits for installation of energy-conserving windows, doors and other improvements. The Senate’s bill would also extend credits available to builders of energy-efficient homes. These have a reasonable shot at extension, given strong support from home builders and product manufacturers.
Bottom line: On issues such as tax-system support for financially distressed households and energy conservation, the November elections are important in the long run, but the decisions made during the lame-duck session will have an immediate effect on thousands of homeowners.
http://www.latimes.com/classified/realestate/news/la-fi-harney-20121007,0,803763.story
by Jim the Realtor | Oct 5, 2012 | CA Homeowners Bill of Rights, North County Coastal, Short Sales, Short Selling, Strategic Defaults
The gap between SD distressed and non-distressed pricing appeared to be widening yesterday.
Can we get a glimpse of what to expect for the rest of the year by analyzing the current pendings and contingents? How do they look around North SD County’s Coastal region?
We only have the list prices to consider, but you can see that the gap is substantial.
Detached-Home Pendings and Contingents in NSDCC
| Town or Area |
# of Non-Dist. |
LP Avg. $/sf |
# of Distressed |
LP Avg $/sf |
| LJ/DM/SB/CV/RSF |
165 |
$565/sf |
62 |
$347/sf |
| CDF/ENC/CSBD |
237 |
$328/sf |
118 |
$262/sf |
Will lenders ramp up their short-sale approvals to close out the books for the year?
It would make sense, especially with the California Homeowners Bill of Rights taking effect on January 1st, which will give homeowners (and their attorneys) more tools to fight. If you are selling, it would be a great time to lower your price to sell now, before nearby distressed-sales start closing around you.
For those who have specific concerns about where these properties are located, here are the lists of detached short sale and REO listings that are pending or contingent. Note that the days-on-market meter does not stop running until a contingent listing is put into pending:
List of Pending and Contingent REOs and Short Sales
List of Pending and Contingent REOs and Short Sales – CDF-ENC-CSBD
by Jim the Realtor | Oct 1, 2012 | Short Selling, Thinking of Selling?, Why You Should List With Jim
Are you thinking of selling your house?
Let’s review Jim’s Tips for Getting Ready to Sell:
FIX-UPS – Do any home improvement before you go on the open market, because the most qualified buyers will visit in the first week – and the most motivated on the first day. They have been hunting, seen all the others, and are waiting for new meat. Don’t disappoint them – once they see your house once, they decide to either buy or not, and if not, they forget about you.
Landscape/Curb Appeal has moved to the number one spot on my list of fix-ups. Buyers are making a lot of decisions based on internet pictures, and drive-bys. Lots of potted plants, green grass, and color. Clean the driveway, sidewalk, curb and gutter. Spruce up the exterior approach and entry too – buyers are getting a first impression while waiting for the door to open.
New carpet & paint is still critical, and either you do both, or your price needs to reflect it – knock off 10% for old carpet and paint/wallpaper. Because if you need carpet and paint, be honest, there’s other stuff too – old kitchens and baths, etc.
SHOWINGS – Make it easy and convenient to show the house to prospective buyers. Their interest is fleeting, to say the least. I prefer a vacant house to one with old furniture any day. People think houses show better with furniture, but I’ll take the benefit of instant showings and hope the new carpet and paint will capture the buyers’ interest – besides, it’s easier for them to visualize their stuff in the house if it is vacant.
Use a lockbox – If you are paranoid about somebody walking in on you (it happens) then stash the lcokbox in a non-obvious place. Have your listing agent note in the MLS that you have a lockbox, but call for location. The agents who want to show your house will call with some notice, hopefully, so you’ll know when they are coming. Clear out – leave the premises so buyers feel comfortable walking around, opening closets, etc.
Do open house – Any agent that tells you that open houses don’t work are just lazy or old-school. This is the age of the internet, and buyers are taking their search into their own hands. Rather than rely on their agent, they drive by the possible proeprties – and boom, “look honey, it’s open, let’s go in for a look”. I personally have a storied history of selling my listings off open houses, but even if I don’t find the buyer – they are circling. If they see me pushing the product, it creates urgency that might get them to go find their agent, who is out at the pool drinking mai-tais, and get them to write an offer before JtR sells it to somebody else.
Worried about looky-loos coming by who are casing the joint? I do open house nearly every weekend, and in 28 years I’ve had two thefts; a candle, and a bottle of Vicodin. Hide the vikes, and don’t leave cash or jewelry laying around, and you’ll be fine.
Don’t like the neighbors coming through? Whatever you have to hide – get over it. You need to change your thinking – your home is now a business decision, a commodity that you want to sell for top dollar. If you take things personal, you’re cooked. If it’s problem, just move out – you are planning on moving, right?
CLUTTER PATROL – If you don’t vacate, rent a storage locker and remove half of your belongings from the house. Take everything out of your garage, and at least half of the furniture. Remove all personal photos – this one always ticks sellers off, but imagine what happens. Buyers come through and start looking at the photos to see if they know anyone, and then start imagining why the sellers are moving. That is distracting – keep their focus on the house, and whether or not it is a good fit.
I know it’s a struggle with kids – get those big bins and right before the prospects arrive, throw in those last-minute items. I’d rather have one clean, closed bin in the family room than a dozen toys strewn about.
PETS – Put yourself in the buyers’ shoes – do you want to be defending yourself against Fido’s advances, or buying a house today? Clear out the pets – especially due to smells and allergies. My wife is allergic to cats, and the minute we walk into a house that has a cat, she bolts for the door – with the checkbook.
HIRE A GREAT AGENT – If your agent doesn’t recommend the above items, and isn’t easy to get ahold of, what exactly are they going to do to add value to the selling experience? Check their website to see what they do for their other listings, and make sure video and professional photos are being used.
Find a great agent, and then worry about commission. If you hire an agent because of their low commission rate, don’t be surprised if you have trouble selling in this market.
Find out more about their reputation in the realtor community. Ask them if they know the agents you’ve heard of – because if they haven’t, will the top agents give your listing the time of day? It’s not personal or discriminatory – there are so many properties to consider, we have to make the cut somewhere. Good agents want to work with good agents. Check their sales history at www.neighborcity.com for vital information on their experience in being able to navigate this market successfully. At least one sale per month is the mark of a professional.
OTHER TIPS
Don’t use range-pricing, unless you are OK with selling below the bottom of the range. If you’re OK with selling below the bottom, just use the bottom price only.
Fertilize and overseed the lawn – and keep it trimmed nicely.
Wash windows.
No cobwebs.
Fix screens, especially screen doors.
No booties, they inhibit buyers from going out back.
Don’t over-water the landscape.
CLEAN SELLS
Most listing agents will be happy to give you a complimentary review of your house, and make suggestions. Let me know if you’d like me to swing by for a look – jim@jimklinge.com
by Jim the Realtor | Sep 25, 2012 | Short Sales, Short Selling
The policy of lenders pre-approving an acceptable price for their short sales is becoming more common, and with this offer, they should have plenty of takers!
Bank of America is excited to offer enhanced relocation assistance.
Qualified homeowners who initiate a Preapproved Price short sale (without an offer) could be eligible to receive $5,000 – $30,000 in relocation assistance* and owe no more on their mortgage with the sale of their property, depending on the investor involved.
*Specific investor participation and eligibility criteria do apply to these programs.
Contact Jim the Realtor to get started! jim@jimklinge.com or (858) 560-7700.
by Jim the Realtor | May 17, 2012 | About the author, Market Conditions, Realtors Talking Shop, REOs, Short Sales, Short Selling |
From NAR’s Realtor Magazine:
It’s widely agreed that foreclosures and REO properties devastate nearby home values and impede the housing recovery. But we don’t hear similar complaints about short sales. How do the two categories compare where housing prices and a healthy real estate market are concerned?
Here’s my take on their differences:
– Seller motivation issues. Properties listed as short sales are often occupied by home owners who aren’t concerned with getting top dollar. Instead, their motivation may be to extend their “free rent” program or get out of their financial obligation to pay off a mortgage. Consequently, they often don’t fix up their house to sell it and may be less than cooperative about showings. On the other hand, REO listings are vacant properties and have a lockbox for easy access.
– Delays. Short sales require that home owners submit their financials to the bank every month—and if they don’t, the sale stalls. The delays and uncertainties make these listings very difficult to sell. In contrast, it takes a week or so to get a REO listing into escrow, with deals closing in about 30 to 45 days, whereas short-sale approvals these days take 30 to 60 days. To be fair, this is an improvement over a few years ago when it could take six to 12 months or more to hear from a lender.
– Pricing. Short-sale agents often price their listings aggressively low to compensate for the difficulty in selling. They hope that a lower price will draw buyers interested in a bargain. REO listings, on the other hand, are appraised by neutral third parties and priced for retail sale by the asset managers, who have a fiduciary duty to their investors to maximize return. So-called “bank deals” are largely a myth—asset managers don’t determine retail value and then knock off 10 percent or more. And if they do inadvertently price a property too low, their selling strategy enables every buyer to make an offer within the first few days. When that happens, the sales price can be bid up to retail—or even higher.
– Buyer preference. Buyers shy away from short sales because of their uncertain, murky reputations. Because of lower demand, they sell for a lower price. But there is a high demand for REOs because bank-owned properties enjoy the reputation that they are underpriced, even though they have been selling well for years.
– Fraud potential. Short sales are fertile ground for fraud. These properties, priced to sell by the listing agents, are sometimes shopped around exclusively to a small group of buyers already known by those agents. Deals that are made “prior to listing input,” and sold at an untested price without open-market exposure, are unethical in my view—and if district attorneys were to investigate, those transactions might appear fraudulent. Now, those listing agents might claim that if the bank approves the sale, then who cares? However, the NATIONAL ASSOCIATION OF REALTORS®’ Code of Ethics states that NAR members are to treat all parties honestly. It is not honest to send your short-sale package to the lender for approval and claim that you exposed the property to the open market if you haven’t actually done that. By comparison, REO asset managers insist on open-market exposure to ensure the best possible sales price.
As an industry, we should acknowledge that REOs offer a better way to sell homes and improve the housing market than short sales—for consumers and practitioners. Vacating houses, sprucing them up, putting a lockbox on them, and exposing them to the open market for a period of time is how you can sell distressed properties for the best price.
Jim Klinge has been selling homes since 1984 and is broker-owner of Klinge Realty, a company of eight agents with headquarters in Carlsbad, Calif. He and his renegade blog, bubbleinfo.com, have been featured on ABC News Nightline, CNBC TV, and Reason.tv, as well as in The Wall Street Journal, Businessweek, Grant’s Interest Rate Observer, and the Los Angeles Times.
