July 1st 2011 was the the day we finally closed a 605 day short sale for a client who tried to modify and could not qualify. As a result the sellers decided to proceed with a short sale but for a multitude of reasons we ended up going through through six different buyers and a dozen price reductions.
August 2009 was a turbulent time with most banks as they began shifting their short sale servicing systems from fax based processing to uploading documents into a task based system. Bank of America began shifting to web based short sale submissions because they just could not keep up with lost paperwork, missing documents, and lack of support staff. Soon most banks began making their own shift to prevent the endless duplication of effort.
What I Learned and What You Should Know
Through all of this I decided it was important to share the five most important changes that prevented us from closing in less than six months instead of almost two years.
1. The buyer and their agent must be totally committed to the process by putting earnest money in escrow.
2. Always have a backup offer in case the buyer backs out.
3. Investors need to know that your agent knows the value of your neighborhood. Make sure your agent knows how to prepare a broker price opinion to support the value of the purchase contract.
4. Banks and investors are always changing guidelines and requirements for submission of short sale packets. I have a network of short sale specialists that check in with each other to stay on top of recent changes.
5. Sellers must be willing to be patient with the short sale process. The sellers of the property mentioned in this post experienced a roller coaster of emotions all the way to the very end.
The Moral of The Story
Change will always be part of the short sale process, it really has improved and the success rate continues to climb from 20% to 70%. There are too many details to document in one blog post. In short, the process has improved and it can and will continue to get better.
Check out my video update for the Santana Row area neighborhoods. Find out how long it takes to sell a home in these neighborhoods and what the market is telling us about the recent sales.
Sold Data*
(See Video update)
Available Properties Data*
Total Avilable Properties: 104
Total Available Days on Market: 93
Average List Price: $647,847
Accepted Offers (Pending Properties)*
Total Accepted Offers(in contract): 87
Average Days on Market: 67
Average List price for accepted offers: $499,633
Median List price for Available and Accepted offers: $574,800*
* Source: mlslistings.com
Pilot could open the door for more
The thought of a bank or investor willing to write off a portion of your mortgage can be very attractive but it does come with it’s challenges. Over the past four years there have been attempts to have principal reduction included in modifications and up to now there have been a few clients that I am aware of to have received this opportunity.
Most have had loan amounts under the conforming amount of $417,000. My concern with this decision by Bank of America is for homeowners who have made payments on time. How are they going to feel knowing their neighbor received a principal write down? The taxpayer is most likely going to carry the burden of this move towards principal reduction. This may also be the beginning for future programs but will they make a significant impact in our community?
Santa Clara County may not have an opportunity
The conforming loan amount makes it easy for Fannie Mae or Freddy Mac to offer this in most cases. Bank of America is a servicer, they don’t own the paper on the loans they service. Fannie and Freddy inventory is primarily located in areas where homes sold under the conforming loan amount. Santa Clara County would most likely not see much activity from this pilot program.
“The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department’s Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon.”
Related Article: Bank of America set to write down principal on California mortgages (Housingwire)
The General Plan over the next 30 years
On Friday March 25th I attended the 2011 Industry Summit given by the Santa Clara County Association of REALTORS. Among the presenters was Sam Liccardo, San Jose Councilman and Co-Chair for the General Plan Task Force in the City of San Jose. Mr. Liccardo gave a preview of the tentative plan for San Jose that will be presented in 2012 for approval by the city.
Envision San Jose 2040 details the plans San Jose is working towards over the next 30 years and there are substantial changes that will affect the way we live in the Silicon Valley.
General Plan Projections
The plan for San Jose primarily focuses on real estate, jobs, transportation, schools, and retail. The following list highlights some of the specifics in the general plan.
- Adding 400,000 people to the current million plus population
- Planning for a 120,000 new hosing units(4,000 per year)
- Target green tech jobs
- Rail – San Jose Dirdon Station will be a major artery for BART, The Bullet train, and connection for light rail.
- Improve transportation methods – Express Lanes for busses in key areas
Major Attractions
Attracting jobs and professionals to San Jose especially when there is competition from San Francisco. San Jose will create a competitive advantage in the following ways;
- Create urban environments for a professional work force that creates an urban experience (Downtown high rise lifestyle)
- Diversity – San Jose is a melting pot of cultural backgrounds attracting international appeal
- Our neighborhoods – Families can live in a suburban environment yet be close to high tech jobs and access to entertainment
- Developing more charter schools and embracing the success of local school districts
- Low crime rate – Traditionally San Jose has always enjoyed being one of the safest places to live
Challenges
Of course there are always challenges in developing a plan of this magnitude.
- Cost to build housing in San Jose is too expensive at this time and can create a housing shortage once we work though the current surplus
- New rental housing is currently being built with rents in the mid $2,000 range creating an affordable housing shortage
- Opposition to urban high rise construction and the need to educate the community about high density housing
Village Concept
San Jose would like to create more retail/housing areas known as Village concepts similar to Santana Row. Santana Row has indeed created a prime example of how you can mix housing and entertainment in one location. Advantages include;
- Mixed use with ground floor retail
- Access to restaurants and entertainment
- Village concepts also reduce the need to get into your car and drive to to these locations
Development Over the Next 2-3 Years
Some of the immediate changes we can expect in the near future include;
- Construction of more downtown high-rises for high density housing
- Bus Express lanes in 2012-2013
- Construction and Expansion of San Jose Dirdon station
Affordable housing is on the chopping block while much attention is directed towards the state deficit and Governer Brown looks for ways to bring spending under control.
I wanted to bring this to your attention before the decision by our state legislature on the budget is finalized. Redevelopment agency funds are now at stake and this really affects the ability for many people to become home owners in Santa Clara County.
- The question is should we stop affordable housing in our area and focus more on rental property housing?
- Does this eliminate home ownership for families who want to have a place of their own in San Jose?
- Does this also create a void for housing programs that can’t be reinstated?
The Mercury News wrote an article that addresses this problem.
“After federal funds, the money from the redevelopment agencies is the second-biggest source of funds in California for such housing. Since San Jose created its housing department in 1988, the city has spent $834 million building 21,702 units, with an additional $3.2 billion coming from private investors.”
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