Myth #1:  Buyers agents want you to pay more to get a higher commission.

Wrong. The value of the home has to meet the lenders appraisal.  If it doesn’t meet the lender’s appraisal the mortgage loan won’t get  approved.  The seller, having now expected a higher price,  will be disappointed having to  accept a lower offer.    Your agent wont get paid and you don’t get the home because the seller becomes uncertain and reluctant.   It is always better to make a reasonable market wise offer that has potential for negotiating, especially if there are multiple offers.

Myth #2:   Listing agents want you to accept any offer quickly so they can get paid.

Wrong. If you are provided a Market Analysis then you should know the current market price.   This puts you in the driver’s seat to consider only those offers that are reasonable.  Most listing agents want you to get the most for your home. That allows them bragging rights to gain more listings.   Simply ask for a new market survey to give you comfort in support of accepting an offer for your home.

Myth #3:  All agents conspire against their buyers/sellers to get a sale.

Wrong. While they are sales persons, they have a fiduciary responsibility to show good care and ”Realtors” abide by a strict code of ethics.   The best agents enjoy the art of negotiation (fighting for their client). It’s in their DNA to win and only win- losing sucks.   However, every industry and market sector have their bad apples and Real Estate is not immune from worms.   Always ask for at least 3 referrals from an agent’s past clients, call them and you will know if your agent really cares about you.

Myth #4:  Foreclosures are the best deals.

Wrong. While buying a foreclosure feels like a great deal they really aren’t.   There are inherent issues with foreclosures that price alone does not overcome.   In today’s volatile market foreclosures are often found in distressed areas.  Location is still the number one factor in home value.  Historically distressed areas reduce the upside potential. If the home is below market now it will likely be below market when you want to sell.    Not to mention the number of potential hidden conditions that are not readily identified or disclosed.   Be sure to have a thorough property inspection from a reputable inspection company, analyze every value factor and consider future upgrade costs that will meet the neighborhood standard.

Myth #5: Making a cash offer is better than one with a mortgage loan.

Wrong. The process of escrow still remains.   While a cash offer can close escrow in a short 21 day period, an offer with lending can close in the same period or within 30 days, typically.   The seller still gets cash in the end so, waiting an extra week or two and sell for a higher price trumps a cash offer.

Myth #6:  Having an Open House will sell your home.

Wrong: Having an open house does not sell your home 99% of the time.    Statistics show that only 1% of homes sold actually sold from  having an open house.    With so many internet sites providing virtual tours and numerous pictures more and more buyers pass on spending the time to visit an open house. An open house does allow all the neighborhood looky loos and wannabe buyers to traipse through your home.   Serious buyers  will call an agent to schedule a private tour.   Great Pictures, a Virtual Tour and a liberal showing schedule will sell your home 100% of the time.

Myth #7:  Short Sales are a waste of time.

Wrong. If the best home that suits you is a short sale then it is never a waste of time.    Agents often refer to short sales as a waste of time because it takes so long to close the sale.   Waiting an extra month or two to get the perfect home is worth every delay. Buying Real Estate should always be done in a patient and thoughtful manner.  Hire an experienced Realtor who has a track record in all types of sales to help overcome foreseeable delays.

Myth #8:  Making a low ball offer for your primary home is the best way to get a deal.

Wrong. When you have identified a home that you want make an offer that is market worthy, at least. Low ball offers always create an adversarial environment and will cause your offer to be rejected out of hand. Low ball offers are best suited for investment property strategies where the outcome is based solely on numbers and not where you want to live. Offers that will initiate some negotiation are far wiser and more successful.

Myth #9:   Listing my home at the highest price leaves room for negotiation.

Wrong. Buyers search for homes in specific price ranges.   If you would accept a lower price then list it closer to that price where more buyers will find it. Listing your home at the highest price reduces the number of buyers that will consider making an offer. Most buyers search for homes priced below what they actually qualify for.  Price your home competitively to increase your pool of buyers and encourage multiple offers.

Myth #10:  If one Agent is good two is better.

Wrong. Trust is more important than pitting one against another.  Partnering with a trusted professional will always prove to be more beneficial.  A full time committed Realtor will present guidance and opportunities not found if you waste their time.   Interviewing a few recommended Realtors and committing to one will prove to be more advantageous to you.

Can we be of assistance to you?  Please let us know.

first time buyer credit

Gov short sale guide

Q:  Short Sale definition.  What is a Short Sale?

Answer: In ”short”, a shortsale is when the lender agrees to settle the debt owed on the property for less than the full amount of the debt. In most cases “Settled” means the lender writes off the debt. You usually will receive a 1099 after a short sale for the amount of debt forgiven. The bank is agreeing not to go after you for the money they lost by filing a deficiency judgment in the future. The exception is the HELOC loan where they reserve the right to file a default judgment.

Answer: If you have a heavy asset portfolio that would cover the amount above the home’s value then the answer is likely to be no.  Each case is different and would be better answered after a professional review to help learn how to short sale.

Answer:  There is a lot of misinformation on the internet about this. A short sale is recorded on your credit report as “debt settled for less than the amount owed”.  In plain English, this will result in a relatively minor hit to your credit compared to a foreclosure or late payments on your mortgage. A short sale will affect everyone’s credit differently. The more established your credit, the less of an impact it will have on your score.

If you stop making your mortgage payments for 4 months, regardless of whether you do a short sale or not, 4 months of missed mortgage payments will have a significant negative impact on your credit.  A short sale will drop your credit 100 points or more.

If you are already behind on your payments, you have already incurred the majority of the hit that a short sale will have on your credit.  Moving forward with a successful short sale will insure that your debt is settled with your lender.

However, if you are current on your payments and can stay current throughout the short sale process, you will save your credit to a large extent.

When you do a short sale, your lender is agreeing to settle the debt on the property for less than the amount they are owed. As a result the IRS allows them to write off this loss, which is why your lender will send you a 1099-C after the short sale.

The IRS considers “debt relief” to be income for tax purposes. If your lender writes off $20,000 on your short sale, they will send you a 1099-C for that amount, and you would include that when you file your income taxes. The “C” stands for “Cancellation of Debt” and the law says canceled debt is taxable as income.

However there are EXCEPTIONS that most people who do a short sale qualify for, excluding them from having to pay taxes on their short sale.

Thanks to the Mortgage Tax Debt Relief Act that George W. Bush signed into law in January of 2008, homeowners who do a short sale on their primary residence, and have a purchase money loan (in other words, they have not pulled cash out of their home with a cash-out refinance HELOC) pay no taxes on the loss that their lender incurs in a short sale.

What is… pull cash out/Equity?
Answer: Homeowners who have pulled out cash from their home but have put that money back into their home to “substantially improve” their home, also are excluded from taxes on the short sale.

All other short sale scenarios – if you pulled cash out on your primary residence and spent it on something other than upgrading your home or if you are doing a short sale on a second home or investment property – result in a taxable event unless you qualify for the “Insolvency” exclusion.

The IRS does not require you to pay taxes on the loss the lender takes in a short sale if, at the time of the short sale, you are insolvent. “Insolvency” means your debts (including your mortgage) exceed the value of all your assets. In other words, if, at the time of the short sale, you have more debt than you do money or assets, you are considered insolvent.

Many people who short sale are insolvent and excluded from paying taxes on a short sale. I recommend you check with your accountant or  IRS form 982, which is the IRS form for debt relief and short sales. The IRS gives an explanation of “Insolvency” on this form.

Answer: California has passed its own version of the federal Mortgage Tax Debt Relief Act. It is Senate Bill 1055, which conforms to the federal law described in detail above, but applies to California state income taxes on a short sale.

There are differences between the state and federal law.

The term of the California law was only until the end of 2008. As of Jan 2009, this law is no longer in effect.

However,  CA, Tax Code Section 17131 provides that, unless there is some specific California statute to the contrary, California law tracks federal law on what income is excluded from taxation. Since there is currently no specific California law on this issue, short sales do not produce taxable income under California law as long as the Federal Mortgage Tax Debt Forgiveness Act is in effect (until the end of 2012).

I recommend you speak with your accountant and have them answer any tax questions that you have. I am not a tax accountant and do not give tax advice.

Answer:   The whole point of a mortgage short sale is to get out from under the debt of the mortgage. Your lender cannot write off their loss on their corporate taxes, send you a 1099-C, so you have to pay taxes on the loss, report the short sale as a “settled debt” on your credit and then turn around and go after you for the money.

This is why your lender will send you a 1099-C after the short sale. The “C” in “1099-C” stands for “Cancellation of Debt.”

Hiring an inexperienced short sale consultant or negotiator who does not negotiate a FULL release from your lender, could result in the liability becoming yours for the money the lender loses in a short sale or you could find yourself being forced to sign a promissory note to close escrow.

Answer: In most cases where people have a first and a second loan, they often are with 2 different lenders. For the short sale process to close escrow, both lenders have to agree to the short sale and agree to settle the debt. Thankfully, both lenders have a vested interest in doing this. The lender with the first loan does not want to foreclose, and therefore is willing to give a little money to the second in order to get them to agree to the short sale.

The second lender will get nothing if the first mortgage forecloses.  The attitude that something is better than nothing is becoming more prevalent.

The difference between these two loans is that in a “recourse loan” the lender has recourse to go after the borrower for the money they lose in a foreclosure, technically.  For this to take place, the lender has to file a judicial foreclosure, which is rarely done in CA.

The majority of foreclosures in CA are “non-judicial” foreclosures, where the property is sold at a trustee sale.

Answer: You will know that you have been released from the debt right on the front in plain English. “releasing the lien”, “accepting a short payoff to satisfy the lien”, “reporting the sale as a settled debt to the reporting agencies”, “issuing a full satisfaction of the mortgage”, “not pursuing a deficiency judgment”, or some other variation that states they are settling the debt for less than what they were owed.

More importantly, your bank will issue a 1099-C to you, the borrower, after the short sale, confirming that the debt has been written off and is settled. Your lender cannot write off the debt, issue a 1099-C and subsequently go after you for the deficiency.

Answer: Many people ask this question: The primary advantage is that in a short sale, the debt is settled and you no longer owe the bank any money. If you foreclosure, you may still be liable for the deficiency in the event that the bank files a judicial foreclosure.

Secondly, in a short sale, your credit takes much less of a hit compared to a foreclosure.

Finally, Fannie Mae & Freddie Mac revised their guidelines in August of 2008 with regard to how they view borrowers who have filed bankruptcy, gone through foreclosure or done a short sale. Through these new guidelines, they are in effect severely penalizing those who go the route of foreclosure or bankruptcy, and rewarding or encouraging those who do short sales, which they view as the borrower doing the responsible thing in light of the circumstances.

Recent Fannie Mae / Freddie Mac guidelines stated borrowers, filing bankruptcy or foreclosure, may have to wait up to 7 years to buy another home.

In contrast, the new guidelines stipulate only a 24 month period after a short sale.

Answer: I have yet to hear a good premise for letting your home go to foreclosure vs. short sale. Depending on whether you have recourse or non-recourse loan, when you let your home go to foreclosure you either run the risk of being liable for the deficiency amount or liable for the income taxes on that loss.

Secondly, your credit will drop up to 400-500 points and you will not be able to buy a home or obtain respectable credit for up to 7 years.

Comparison: With a short sale, the lender agrees to SETTLE the debt for less than the amount owed. If you have a recourse loan, you may be liable for income taxes on the lender’s loss (just as in a foreclosure) but you will not be liable for the deficiency (and if you qualify for the “Insolvency” exclusion, you will avoid the income taxes as well).

Furthermore, the loss that the lender takes in a short sale will be MUCH LESS than the loss the lender will incur following a foreclosure. The foreclosure process takes months & months, at the end of which the lender has to process the property through its overwhelmed system (another 3 -5 months) and then put the property back on the market, all while the market forces move against them.

Most importantly, the impact on your credit from a short sale will be significantly less than with a foreclosure and you will be able to buy again within 2 years, in most cases, compared to a 7 year waiting period to buy a home following the path of foreclosure.

Answer: Nothing –lender pays all closing costs, escrow fees, commissions etc. The lender may also pay any outstanding property taxes if negotiated properly.

Answer: The short sale process typically takes from 2-4 months, start to finish. It can take longer depending on the subject lender, the abilities of your chosen professional and your personal level of determination. You can choose to live in the property for the entire duration of the short sale or you can simply move out whenever you wish.

Answer: No, however lenders are known to be more motivated if you are not making payments or behind.   If you have a forbearance agreement it should not affect the commencement of a short sale.

Answer: You will be better represented in a short sale by an experienced Realtor who practices real estate sales on a daily basis.  A Realtor is an integral part of the short sale and possesses the experience to market your property aggressively in order to attract, screen and deliver buyers to successfully execute the sale.

With that said a word of caution.  Many attorneys seem to be preying on the fear and desperation of people facing foreclosure. Their websites use scare tactics to make people think that they would be crazy to do a short sale without first hiring an attorney.  They wrongly attorneys as the only people qualified to interpret a short sale approval, and that hiring an attorney is normal and an accepted part of doing a short sale, like hiring an attorney for divorce proceedings.

The overwhelming majority of short sales are conducted by real estate brokers who are experienced at negotiating with the lenders and charge NO UPFRONT FEES for their services.   You can hire a realtor who employs a team of professionals that include an advising attorney to help.

The California Foreclosure Consultant Act (July 1 2009) applies to foreclosure consultants – those who collect an advance fee for modifying loans or helping borrowers avoid foreclosure in situations where a Notice of Default has been filed on the property. This Act has an exclusion in it Realtors
Per CA Civic Code and the CA Assoc of Realtors, The California Foreclosure Consultant Act does not apply to real estate agents facilitating a short sale except in the extremely unusual event that an agent is 1) Making a direct loan for a residence in foreclosure, 2) Acquiring an interest in a residence in foreclosure, 3) Receiving an advance fee before performing services for a residence in foreclosure, or 4) Assisting an owner in obtaining the remaining proceeds if any from a foreclosure sale of an owner’s residence.

Chapter 13 encompasses setting up a 3-5 year repayment plan to repay debts. It requires you have a steady income, as you will be repaying all of your debt. Both have a very negative impact on your credit and remain on your credit report for 10 years.

Due to the new 2005 bankruptcy law, which raised the bar for people to qualify for Chapter 7 “fresh start” bankruptcy proceedings, fewer and fewer people pass the “means” test to qualify for Chapter 7 and for this reason can only qualify for Chapter 13 bankruptcy (a 3-5 year repayment plan).

Chapter 7 Bankruptcy, in a foreclosure stay process, allows the bank trustee to choose the Realtor and the price for the impending bankruptcy sale of your home.   While a Chapter 13 allows you to have some control of the sale of your home and who you employ.

Unfortunately, both Chapter 7 and Chapter 13 temporarily delay foreclosure proceedings, neither allows you to keep your home unless you can bring your mortgage current.

Answer: NO. Many agents have no interest in doing short sales because they require a tremendous amount of time and expertise. If you don’t know what you are doing, they often go to foreclosure.   93% percent of short sales do not sell due to poor representation.

You get one shot at doing a short sale – if your Realtor has not learned the many strategies, necessary, through experience, you will likely find yourself in a foreclosure proceeding.

Tip:  Taking  action quickly will serve you well in preventing foreclosure through the short sale process.

Our Short Sale team is qualified to provide professional advice and the ability to secure short sale approvals  in all 151 counties in California and refer other tested professionals throughout the Nation upon request.

this faqs document created in collaboration with Justin DeCesare SdHomeGuy.com

131 Millrich Dr.  this Los Gatos house sold for nearly 1% less than the asking and 411 Clearview Dr., a townhome, sold for nearly 5% over the listing price !

A reminder that ’sweet spotting’ your asking price will always pay off.

The good news….neither property was a short sale.

2 Los Gatos Houses sold this week,

131 MILLRICH DR, Los Gatos 95030 (Los Gatos)Single Family Home 3 bed(s) Baths: 4|1 bath(s)   SqFt: 2,593  Lot: 9,100 sq ft

List Price: $1,449,000     Sold Price $1,332,000.00

______________________________________________________

411 CLEARVIEW DR, Los Gatos 95032 (Los Gatos)Townhouse  3 Beds, 2|1 Baths:  SqFt: 2,122 Lot: 2,220 sq ft

List Price: $749,000 Sale Price: $780,000

Assoc. Fee: $428

We see a crossroads ahead…one where the buyers in the Los Gatos Real Estate Market aren’t in the driver’s seat.    Could this mean the homes for sale are in a Seller’s market?

Remember…

Spring is coming and the end of the $8000 First time buyer’s credit is there waiting.   I wonder if will  lead to more vigorous sales?…bidding?

Rismedia reported this weekend…

The Department of Housing and Urban Development (HUD) said it’s taking a closer look at 15 mortgage companies to determine why they had such high rates of problems with FHA insured mortgages.

Can I answer that?  Lending to anyone who could fog a mirror tends to do that.    I told you Fannie Mae was getting a spanking before this new investigation.

“Each loan on this list will be thoroughly examined and we will track down the reasons why it failed. Once we determine the causes, we will look to see whether there is a need for further review or remedial action. We want to send a message to the industry that as the mortgage landscape has shifted, we are watching very carefully and that we are poised to take action against bad performers,” Donohue said.

I wonder if this has anything to do with the fact Fannie Mae is approving foreclosure without notifying banks.

I don’t think Ken Donahue has tried to actually apply for a Home Purchase loan lately.  In our local Los Gatos and Santa Clara County Real Estate market it is very difficult.  The symptoms have passed.

I am glad to see someone is checking up, but if it does not relieve distressed markets,  DON’T BOTHER!  It’s  glaringly obvious focus on future Real Estate recovery measures, rather than looking back,  is the best medicine.

Below are the companies that received subpoenas from HUD’s Office of Inspector General:

-First Tennessee Bank N.A., Memphis, Tenn.
-Alethes LLC, Lakeway, Texas
-Security Atlantic Mortgage Co., Edison, N.J.
-Pine State Mortgage Corporation, Atlanta.
-Birmingham Bancorp Mortgage Corporation, West Bloomfield, Mich.
-Alacrity Financial Services, LLC, Southlake, Texas
-Assurity Financial Services, LLC, Englewood, Colo.
-D and R Mortgage Corporation, Farmington, Mich.
-Webster Bank, Cheshire, Conn.
-Mac-Clair Mortgage Corporation, Flint, Mich.
-Americare Investment Group, Inc., Arlington, Texas
-1st Advantage Mortgage, Lombard, Ill.
-American Sterling Bank, Independence, Mo.
-Sterling National Mortgage Company Inc., Great Neck, N.Y.
-Dell Franklin Financial LLC, Columbia, Md.

I bet these companies end up walking away from the testimony with more bailout money.  Want to bet?

The new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period.

what you can and cannot deduct as a homeowner

Get your taxes done FREE

Great short Video Explanation of Credit

Create a Quip Contest!  Choose One of the Perils and Create a Quip Contest.

Pick a Peril from the list below, create a quip and post it as a comment below.  We will take a community vote at the end of the month.

The winner will have a $100.00 donation made, in their name, to their favorite charity helping the Haitian earthquake victims!

David Letterman announced where donations can be made directly.

You can text to 90999 and enter Haiti  to make a $10 donationtoo.

2 silly Contest Examples:

Why do transactions fail?

8. Applicant makes large purchase on credit before closing.

Quip: At least the store was still open.

9. Illness, injury, divorce or other financial setback during escrow.

Quip: You should know better! Mom warned you about escrowing!

Help others! Choose one of the 88 snags -below the video – and create a quip then post it in the comment section below.   It’s Easy and will help someone in need.  Do It Now!  Please.

Pick Your comment to create a quip…

The Haitian earthquake reminded me of the 1989 Loma Prieta earthquake and how hard it hit Los Gatos.    I was lucky no one I knew was hurt.   I only had to fix a cracked coupling on my grandmothers gas pipe in the Carlton Meadows neighborhood where she lived.

Think ahead!

I added a couple of links below this post to help you obtain the items discussed here.

‘Safe Up’ your home by addressing these 10 things.

1. Make sure shelves are fastened securely to the walls.
2. Place large, heavy objects on lower shelves or on the floor. They might fall. You can also screw them onto things, such as on desks.
3. Place breakable items (bottles, glass, china, etc.) in closed cabinets that have latches. Make sure to board them up so that the cabinet doors won’t fly open.
4. Heavy pictures and mirrors should be hung away from beds, couches, and anywhere that someone might sit.
5. Overhead light fixtures should be braced to prevent falling.
6. Evaluate your electrical wiring and gas connections and repair if needed. During an earthquake, these can become potential fire hazards. Additionally, turn them off and unplug them, so the outlet is not neat the metal part of the cord.
7. Secure your water heater by strapping it to wall studs (not just the drywall) and bolting it to the floor.
8. If you have any deep cracks in the ceiling or foundations, repair these immediately. You might need to consult an expert if there are signs of structural weakness.
9. Store flammable products in closed cabinets with latches on the bottom shelf.
10. Prepare a Grab Bag

Have you ever watched a spy movie or the TV series “24″?

Every good spy has what is called a ‘Grab Bag’.  This is a bag you can grab on the run in an emergency.  Your Grab Bag should have these items in it.  If one bag is too heavy have 2 or put heavy stuff in your car trunk.

Gather these  disaster supplies to place in your ‘Grab Bag’.

1. Flashlight light with extra batteries (preferably one for each individual)Portable, battery-operated radio with extra batteries
2. Purchase and use “Self Powered Radios” and “Self Powered Flashlights”. Batteries will be hard to find, if you can find them. Some models will charge cell phones, but the cell phone towers may be damaged, even destroyed.
3. Purchase and use “Glow Sticks”. These are SAFER than candles, since you will be dealing with ruptured gas lines, flammable, explosive gas.
4. First aid kit and manual
5. Emergency food and water (some sources say you should have up to 2 weeks worth of extra food on hand in case rescue workers cannot reach your location)
6. Nonelectric can opener
7. Essential medicines
8. Cash and credit cards
9. Sturdy shoes for each family member

Home Survival kits

Car Earthquake kits