As we wind down the 2010 “Year of the Short Sale” the one area that continues to challenge sellers are second lien holders who ask sellers to commit to repayment of the deficiency(Balance of unpaid loan).
Legal Warnings
The California Association of REALTORS attorneys continue to caution sellers who are being asked to wave their legal rights as a condition of second lien holders acceptance. Second lien holders may not have the ability to obtain a legal judgement against a seller who opts for foreclosure rather than moving forward with a short sale. The concern is that while there is currently no legal precedence in a non-recourse state like california for some of these second lien holders there is a concern that over time we will see a surge in collection efforts by attornies who buy these non performing notes.
Buy Your Freedom
Second lien holders are now asking for a 10% to 20% contribution from sellers who in most cases do not have the ability to pay their way out of this responsibility. Some of you may be thinking that you will just avoid paying and wait for the negative credit to fall off. The bad news is that a collection attorney has the ability to obtain a legal judgment against you and peruse you for fourteen years. Pay now or pay later.
Lesser of two Evils
Who would you rather negotiate with? The lender/servicer of your loan or a collection company. The answer is a no brainer, your servicer/lender will work with you. Collection companies add additional fees and penalties that can make any reasonable agreement difficult to negotiate. My recommendation is that you avoid letting your loan fall ninety days past due. Lenders/servicers are now closing loans and deferring them to collection companies. You may have to continue making payments on your second until you have a short sale approval in hand to prevent your loan from going to a collection company.
The Department of Real Estate has made a shift in their staff workload from licensing to fraud prevention and protection of the pubic. One of the areas that has become a priority has become short sales and how licensees are offering services to the public to deal with short sales.
A trend that has become an issue has been buyers who entice listing agents to submit their offers only to the lenders for approval. The issue is with regard to agency(who the agent represents in the transaction) and it can create a legal problem with the listing agent and the homeowner. The banks want the best offer the market supports. Flippers are more likely to make an offer lower than a competing offer. This presents a problem for the homeowner and the listing agent. Homeowners must submit highest and best to protect themselves.
Negotiators must be licensed
The primary requirement for negotiating a short sale is that the individual performing the negotiation must be a licenced real estate Broker or a salesperson supervised by a broker. Sellers must verify the negotiators licence status on the DRE website dre.ca.gov.
Paying a Short Sale negotiation fee
A listing agent that requires the buyer or buyers agent to agree to pay a short Sale negotiation fee on behalf of the seller is in violation of real estate law. An update published in September goes into detail regarding this issue. ConsumerAlert_ShortSalesUpdate
The DRE has recently issued a consumer alert with the intent to assist homeowners navigate through the short process.
DRE_ConsumerAlert_ShortSales
The California Association of REALTORS latest report tracks entry level housing requirements for the state of California over the second quarter of 2010. Santa Clara County has slipped slightly in the affordability index from 55% in Q1 2010 to 51% in Q2 2010.
The report also tracks income requirements for entry level housing and monthly principal, interest, taxes, and insurance (PITI) payments a buyer should budget towards housing. A first time home buyer would need to make a PITI payment of $2,940. This is taking into account a Santa Clara County median purchase price of $535,500.
Read report here
I uploaded the latest sales data to youtube. Please take a moment to watch this three minute video.
January 2010 sales data for Santa Clara County.
Santa Clara County sales are down but so is the inventory reported DQNews.com. The article published today states that January 2010 sales are down from December 2009 but those are normal levels for this time of year.
Limited inventory equals less sales activity
The article also attributes this to various factors including tax credit, financing and lack of inventory. I know this already but in our case our clients are experiencing very limited inventory as the main factor.
Trend should continue in 2010
While sales have fallen in recent months we are going to continue to see this trend in the Silicon Valley mostly because of HAFA and as the demand for housing continues to remain high. Another contributing factor is that sellers not in foreclosure who would normally consider selling are staying put as the economy continues to recover.
The chart below shows in increase in sales volume for Santa Clara County and an improvement in the Median sales price.
|
Sales
Volume |
Median
Price |
| County |
Jan-09 |
Jan-10 |
%Chng |
Jan-09 |
Jan-10 |
%Chng |
| Alameda |
994 |
936 |
-5.8% |
$300,000 |
$341,000 |
13.7% |
| Contra Costa |
1,333 |
1,078 |
-19.1% |
$220,000 |
$257,250 |
16.9% |
| Marin |
122 |
153 |
25.4% |
$525,000 |
$535,000 |
1.9% |
| Napa |
78 |
87 |
11.5% |
$370,000 |
$350,000 |
-5.4% |
| Santa Clara |
1,037 |
1,137 |
9.6% |
$400,000 |
$451,000 |
12.8% |
San
Francisco |
229 |
311 |
35.8% |
$562,000 |
$629,000 |
11.9% |
San
Mateo |
273 |
355 |
30.0% |
$489,500 |
$579,000 |
18.3% |
| Solano |
560 |
462 |
-17.5% |
$192,500 |
$201,000 |
4.4% |
| Sonoma |
424 |
334 |
-21.2% |
$299,750 |
$325,000 |
8.4% |
Bay
Area |
5,050 |
4,853 |
-3.9% |
$300,000 |
$350,000 |
16.7 |
source dqnews.com
Click here to read the DQNews article
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