Find out if you can afford a Mortgage without the Mortgage!

It's natural as a First Time Home Buyer to have the "Fear" of a mortgage. Paying rent all your life and never having such a large payment does sound intimidating at first. Well I have the solution to help ease that fear!!!

Solution:

Step #1: Go talk with a Bank or Mortgage Broker/Banker to see if you can qualify for a loan. This will allow you to know how much you can purchase and what the estimated monthly payment would be for your specific scenario.

Step #2) THE MOST IMPORTANT STEP OF ALL!
Take the difference between what you currently pay in Rent and what your propsed New Mortgage payment would be. Take the difference and put it into a Savings account for 3 months. This will allow you to see what it would be like to actually have a mortgage without the committment! See how life would be.... if it feels tight consider lowering your purchase price, if it's comfortable stay at the proposed payment, and if life still seems very good, explore the opportunity to increase your purchase price.

For Example:
If you pay $2,000 a month in rent and your payment would be $3,500 a month for a mortgage. Take $1,500 a month and place it into a savings account as if you were paying a mortgage. At the end if you decide to purchase a home you will have saved money for moving expenses or even New Furniture and you will already know what it is like to have a Mortgage!

Why let Fear control your decision? Try this out and take away the fear of a mortgage and the "un-known".

New Year - New Bank Guidelines!

Ringing in the New Year seems like just another day, but 2010 will bring some changes to the lending guidelines. Below are some significant change that would affect a buyer's approval or the type of property you may purchase.

Change #1: Conventiaonal Loan Debt to Income (DTI)
2009 - DTI was 55% for Conventional
2010 - DTI is NOW 45%

**FHA will still allow DTI to be 55%

Definition for DTI: The ratio of monthly debt payments to monthly gross income. Lenders use a housing DTI ratio (house payment divided by monthly income) and a total DTI ratio (total debt payments including the house payment, divided by monthly income) to determine whether a borrower's income qualifies him or her for a mortgage.


Change #2: FHA Approved Properties
In order for FHA (Federal Housing Administration) to lend money on a property it first must be "FHA Apporved". As of February 2010 all properties that are FHA must get approved again.

What does this mean for you the bueyer?

This Process could take over a month to obtain an approval. Expect Longer escrow times in 2010 due to this change.

*** I do know of a Lender/Bank that once they approve a few of these properties FHA will allow them to administrate the approval process without getting the FHA Approval. Please feel free to contact me with further information.

If You Don't Buy a House Now, You Are Stupid OR Broke!

Have you read this article yet?

It was featured in Business Week. My first thought, wow! what a blunt andbroke harsh statement! But the writer, Mark Roth, uses this headturning title to get your attention to make excellent points for those who are on the fence. Namely that interest rates are at an all time low, in fact, the lowest in 40 years. He noted that in the late 70s, rates hit a high of 18%! Can you even imagine buying a house at 18%? I personally can't fathom that possibility. In the 80s, when rates dropped from 12% to 9%, my parents practically danced their way to the 1st refinance of their home. Generation X'ers probably would never dream of purchasing a home above 7% given all we have ever known are super low rates hovering between 5-6%. Mr. Roth points out the history of previous interest rates as well as the impact of rates on one's purchasing power. I happen to agree with his prediction that as the economy becomes more stable, interest rates WILL rise to hedge inflation. My prediction has been that by this time next year, rates will have risen 1-2% at a minimum.

What is a Grant Deed? What is a Note?

When purchasing a home you will hear these two terms from your Real Estate Agent, Lender (Mortgage Broker) or the Escrow Officer at the Title Company. So what do they mean?

Grant Deed

The most commonly used property deed to transfer title in California is the grant deed, although it is not against the law to use other types of deeds. There are two guarantees contained in a grant deed:

* The grantor states that the property has not been sold to anybody else.
* The grantor states that the property is not burdened by any encumbrances apart from those the seller has already disclosed to the buyer.

Grant deeds do not need to be recorded to be valid, nor do they need to be notarized to be valid, but most sellers do ask a notary to witness the deed, acknowledging that the seller is the person who signed the deed. And most buyers want the protection of recordation, to give "constructive notice to the world" that the property has been sold.

Under California law, and your state laws may differ, to be valid, a grant deed needs to contain six essential elements. Those six items are defined as:

* A written document.
* A clause that transfers title, called a granting clause.
* The names of the Grantor and the Grantee.
* A description of the property being transferred.
* Execution, delivery and acceptance. It must be signed by a competent grantor, meaning minors and those declared incompetent cannot sign a deed; given to the buyer while the seller is still alive (not after death) and accepted by the buyer.
* Grantor's signature.

Promissory Note:

A written, signed, unconditional promise to pay a certain amount of money on demand at a specified time. A written promise to pay money that is often used as a means to borrow funds or take out a loan.

The individual who promises to pay is the maker, and the person to whom payment is promised is called the payee or holder. If signed by the maker, a promissory note is a negotiable instrument. It contains an unconditional promise to pay a certain sum to the order of a specifically named person or to bearer—that is, to any individual presenting the note. A promissory note can be either payable on demand or at a specific time.

In conclusion:

The deed is recorded when you purchase a home that shows the change in ownership from seller to buyer.

The Promissory Note is recorded as a payment or lien against the property to pay the bank (mortgage) on time for the disclosed amount and terms that have been negotiated.

Supplemental Tax Bill - You will get one when you Purchase a home!

What is a supplemental tax bill?

As the name suggests, a supplemental tax bill is a property tax bill issued in addition to the annual regular secured property tax bill. The Assessor-Recorder’s office reappraises property whenever a change of ownership occurs or new construction is completed. The Assessor will send you a “Notice of Supplemental Assessment” to inform you of the new assessed value. Following this notification, the Office of the Treasurer & Tax Collector will send one or more supplemental tax bills to collect the difference between the taxes on the old and new values for each year. Whereas the deadlines for payment of regular property tax bills fall on the same dates each year (December 10 and April 10) the deadlines for payment of supplemental bills can vary based upon the issue date of the bill. Please note that the regular secured property tax bill reflects only the assessment amount of your property as of January 1, 2007. You will not be liable for any supplemental taxes until the date that a supplemental tax bill is issued.

This is very important to keep in mind when purchasing a home. The supplemental property tax bill will be mailed to you several months after your purchase. You may get one or two statements depending on the close of escrow date. They are triggered by the change of ownership and will apply whether or not you take a loan to purchase the property. However, a subsequent refinance of the property will not necessarily trigger a new supplemental tax bill. The completion of permitted improvements to a property may cause a supplemental tax bill to be generated, corresponding to an increase in assessed value commensurate with the cost of the improvements, but this can occur whether or not the property is refinanced when the work is completed.

For more information please visit San Francisco Treasurer & Tax Collector Website!

Housing Affordability - High Record for 3rd Straight Quarter!

November 19, 2009 - Nationwide housing affordability, bolstered by affordable interest rates and low house prices, hovered for the third consecutive quarter near its highest level since the series was first compiled 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released today.

The HOI showed that 70.1 percent of all new and existing homes sold in the third quarter of 2009 were affordable to families earning the national median income of $64,000, down slightly from a near-record 72.3 percent during the previous quarter and up from 56.1 percent during the third quarter of 2008.

"At a time when housing is at its most affordable, we applaud the recent actions taken by Congress and President Obama to stimulate housing by extending the federal tax credit beyond its Nov. 30 deadline and expanding it to a wider group of eligible home buyers," said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. "With interest rates now lower than last quarter, the tax credit will encourage even more home buyers to enter the market and help stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices."

Mortgage Impound Accounts - What are they?

Mortgage Impound Account Payments

The purpose of a mortgage impound account is to have you pay the lender each month:

-your regular loan payment

-income taxes

-hazard insurance


The first charge is a lender charge. The other two charges are third party charges that you must pay periodically or annually. Instead of waiting around to pay these amounts, the lender collects this from you monthly.

Mortgage Impound Account Purpose

The lenders collects this money and pays it on your behalf, in theory. In practice sometimes they are late with this, so you need to keep on top of this.

Lenders often give a borrower a discount on their interest rate if they agree to pay their additional expenses such as taxes and insurance on a monthly basis.

The purpose of this is to make sure you don't get behind on paying these other charges.

Some lenders can require that you do this every month. This is usually if the size of your loan is over 90% of the value of your property. This can vary from lender to lender and state to state.

When comparing offers from lenders you can check to see if the rate reflects these impound accounts and the discount that goes with it.

It is also important to know what your total monthly payment will be after you get your new mortgage loan. If it includes impounds this can end up being several hundred dollars more per month extra.

Winter Home Sales - Normally Slower...NOT this Winter!

House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather. This winter, however, might be different!

What is different for the Real Estate Market this Season?

Reason #1:

We're going to see far more interest in the fourth quarter than we generally do because of the tax credit. Traffic surged on Trulia.com on Nov. 5th due to the extension of the home buying tax credit. The new law extends tha tax credit for First-Time home buyers. This will create a higher volume of interest this Holiday Season.

(To Read more on the tax credit click on link: $8,000 Tax Credit)


Reason #2:

Low interest rates will create a desire for home buyers to take action this Winter Season. The Real Estate makret along with other aspects of the Economy have seen positive improvement creating the "act now" attitude with buyers in Today's market. Rates will not be where they are at Today a year from now. if positive movement continues with the Economy, the cost to borrow money will become higher to balance inflation.

Reason #3:

The Winter Season has always been a great time to get a "deal' in the Real Estate market. If you were Selling your home, would you want buyers coming through while you were getting ready for family and friends? Sellers that stay on the market during this time "need to sell". This allows buyers to negotiate better terms and price on homes still on the market. Also, because there will be less amount of buyers out there looking, in turn this will be less competition for you as a buyer.

If you would like a FREE buyer Consultation contact George today! (415) 336-8191

Happy Holidays!
-

Bay Area Real Estate Makes A Comeback!

Bay Area home prices have begun to rise from the depth of a 3 year slump. Homes are now selling for 3.8% more.

Prices on bank owned properties are driving the market. There was an 11% surge in home sales over $500,000. We are now seeing multiple offers and homes going for over asking price.

Inventory of homes is about 50% less than a year ago. Buyers seem to have confidence that the market has hit bottom and are taking action.


If you would like a market analysis on homes in your area please feel free to contact me and I will provide a detailed FREE report.

To watch a full report click on link! http://abclocal.go.com/kgo/video?id=6982902

9 Tips for Improving Your Credit Score

Below are 9 Tips to Help Improve your Credit Score.

1) Review your current credit report or accuracy. Everyone is entitled to one free credit report a year. You should get one from each credit bureau - Experian, Equifax and TransUnion. Check to make sure that the information (Name, Social Security Number & Address) are correct. It's very common for your credit reports to have mistakes and incorrect information. At minimum make sure the information you are being evaluated on is correct.

2) Repair credit report mistakes. If you find something on your credit report that is incorrect or missing you should dispute the mistake by contacting the credit bureaus. Each bureau has their own dispute procedures on their website. They are required by law to investigate it and have a response within 30 days.

3) Pay your bills on time. Sounds like a no-brainer, right? Payment history accounts for roughly 35% of yoru credit score.

4) Increase the length of your credit history. This accounts for about 15% of your score. Don't cancel old cards or open a lot of new ones in a short time span.

5) keep credit card balances low. It's a good idea to keep the balances below 25% of your available credit. This account for roughly 30% of your score.

6) Keep new credit requests to a minimum. This accounts for 10% of your score. If you are trying to get a loan don't apply for credit cards first.

7) Beware that paying off collection accounts will NOT remove it from your credit report. It will stay on your credit for 7 years.

8) Pay off your debt rather than moving it around. The most effective way to improve your credit scores is to pay down your debt. in fact, owing the same amount but having fewer open accounts may lower your score.

9) Beware of credit-repair scams. By all means, don't pay someone to wipe away the negative items in your file. If they don't follow through, the damaging items will reappear in two or three months.

Weekly Poll - Take the Quiz!

I am trying a new Weekly Poll. This will be done every Friday!

Please type your answer below. Results will be posted at the end of the weekend!


What's the most impressive feature you'd love in a kitchen?

A) Two Dishwashers
B) Wine Steward
C) Modern Lighting
D) Lot's of Cabinets
E) Granite Countertops
F) Built-In Expresso
G) Two Sinks
H) An Island
I) 6 Burner Professional Stove


*** Please type your answer below under comments. You may only choose one**

What is a "Good Faith Deposit?"

So you have found a home that you love and want to place an offer.

The agent says "Bring your check book for the initial deposit." What does this mean?

In the contract on page 1 (California Residential & San Francisco), there is a place for the buyer to state how much of an initial deposit they are placing into Escrow for the home they would like to purchase. This does not mean that the property will be held for you or that it gets taken off the market. Although it does show 'Pending show" on the Multiple Listing Service. This allows the seller to still market the property, but advises agents and buyers that and offer has been place on the property. Until the release of contingencies from the buyer the property is still on the market. Contingencies allows the buyer to investigate the property, disclosures and secure the appropriate financing. The initial deposit is more like a goodwill gesture, indicating to the seller that you are serious about the prospective purchase.

How much is a typical initial deposit?

A typical initial deposit is 3% (Three Percent) of the purchase price. Ex: On a $500,000 home the deposit would be $15,000. The check is made out to the Title Company and dated according to the purchase agreement. Once the offer is accepted or ratified the check is deposited into the Escrow account within 3 business days.

What happens to the Deposit when we close Escrow?

When it's time to close Escrow, the 3% will be applied toward the required funds needed from the buyer. Required funds could include lender closing costs, inspections billed to Escrow, down payment, points paid, escrow fees or anything that is non-recurring.

For a FREE Buyer Consultation on the Home Buying Process call George Today!
(415) 336-8191

Great News! $8,000 tax Credit Extended until April 2010

Today the Senate passed the extension on the $8,000 tax credit. The home buyer tax credit was due to expire in 28 days. The Senate has passed the extension until April 30th, 2010.

The $8,000 maximum first-timer credit will continue and will now be available to couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.

What is new in the law?

$6,500 maxiumum credit would be available to move-up homeowners who have lived in their current residence for five of the prior eight years.

The tax credit has fired the housing market, driving existing home sales to the highest level in over two years. Sales jumped 9.4% according to the National Association of Realtors!

Bay Area's Hottest & Coldest Real Estate Markets!

Below is a list of the Bay Area's Hottest & Coldest Zip Code's. Hot Zip codes are determined by the ratio of Sale Price to Asking Price.

Emeryville is actually one of the Top 10 Zip Codes in the Nation as of Today!

Home Priced Right, Good Condition, Good Location = SOLD!!!

HOT BAY AREA ZIP CODES BELOW: These are the Bay Area ZIP codes where houses sold for the highest ratio to their asking price in the third quarter.


City ZIP Ratio (Sales Price to List Price)

Emeryville 94608 105.65%
San Jose 95122 105.22
Oakland 94606 105.06
Berkeley 94703 104.78
San Lorenzo 94580 104.45


COLD BAY AREA ZIP CODES BELOW: These are the Bay Area ZIP codes where houses sold for the lowest ratio to their asking price in the third quarter.

City ZIP Ratio
Rio Vista 94571 93.47%
Napa 94558 93.45
Alamo 94507 93.07
Half Moon Bay 94019 92.94
Los Gatos/
Monte Sereno 95030 92.26

Search for home in your area at www.GeorgeLangford.com

Home Buying given you a sour taste? Watch Video and Call Me!

This was fun so I thought I would share. Fun Friday! If you feel like this or have experienced this give me a call today. Home Buying with a personal experience.

Happy House Hunting!

Co-Sign for Family or Friends? Need to know!

Co-Signing has always been an option when helping a family or friend get approved for a loan. It's not a bad thing if done correctly, and is used all the time to allow someone who might not qualify but can afford to pay a loan get approved. But there are some things to consider when you decide to help someone out. Remember that when you co-sign for a loan this means you become part owner of the debt acquired and the payment owed monthly.

So what happens when you want to re-finance your property or go to apply for a loan?

The bank consider the amount you co-signed for as part of debt that you owe and the monthly payment will be considered as your monthly debt.

So how do you prove to the bank that the other person makes the payment?

1) NEVER take cash from the person you co-signed for and make the payment yourself. shows the bank that you are the person making the payment

2) Try to have the individual you co-signed for make the payment directly on the loan.

3) If you feel more comfortable making the payment to ensure that it gets made every month. Have the person write you a check and not pay you in cash. Make sure they reference the loan # on the memo & payment period. You make the payment by check as well or online and reference the same loan #.

The key to remember is that banks want to see a paper trail for 12 months at minimum. This will allow the bank to see that the payment is not being made by you, this will help them not to consider this your debt and hold it against you. If you don't do this correctly and keep a paper trail, this could mean denial on a loan in the future for you.

if you have any questions please do not hesitate to call or email.

Paying off ALL debt can double your home buying power!

So people wonder from time to time how can we afford a home?

So you go to speak to a bank and they tell you that you only qualify for $300,000. So now what? What can that buy in San Francisco at that price?

Paying off ALL your debt can actually double your purchase price when qualifying from a Banks point of view. For Example: A combined gross household income of $13,000 a month with monthly debt of $662.00, and FICO scores of 750+ can only qualify for $300,000. If that household was to pay off all debt they would be able to purchase a home at least for $700,000. (This scenario is based off of Today's rates, qualification guidelines and for example purposes only.)

Why such little monthly debt can affect your qualifying?

Banks have a debt to income ratio that's tailored to specific programs and vary from each Financial institute and available loan programs. Debt to income ratios determines the borrowers liability to the bank. Such a small amount of debt could mean a minimal increase in your D.T.I. (Debt to Income Ratio) which could be the difference of approval or getting denied.

* The above scenario if based off of FHA Access program that only requires 1/2% down payment.

For a FREE consultation to see how you can pay off your debt and how you can afford to purchase more home for your money in San Francisco call me today!

See how a family with $123,000 of debt paid it off in 4.5 years!! CLICK HERE!

Credit Problems? You can still get a mortgage!

Worried that you can’t qualify for a home loan due to lack of credit?

Did you know that some lenders will approve your loan even if you have NO FICO SCORE?!

Yes NO FICO score. Work with your mortgage professional to gather documentation to submit “alternative credit” to the lender. This is done by simply getting letters from companies and/or individuals such as your auto insurance company, PG&E company, cell phone company, cable provider, or your landlord. Have them type a letter on a company letter head that simply states you have been a customer for at least a year, you are in good standing, you have paid “x” amount on-time for the past year (2 years is even better!) and their information for reference, Signed and dated. DONE! This will be submitted to the credit bureaus as alternative credit and added as a credit supplement. So if credit issues are stopping you from buying in this great real estate market…. Get off the fence and contact me today to guide you through the process of home ownership.

Does it cost to have a Realtor represent a Buyer?

I had a client (Buyer) the other day ask me how much do I charge for my service. So I thought that education is key and decided to write a post in regards to this topic.

Does a Realtor charge for representing a Buyer in a transaction? Yes!

The answer is yes. Commission is split between the Seller's Brokerage and Buyer's Brokerage. This is typically agreed upon when the Listing agent has the Seller sign the Listing agreement. This is an incentive to Buyer's agents to get the home being listed Sold.

So how much does it cost the Buyer? Nothing!!

The commission is strictly paid by the seller for both agents. Buyers do not pay a Fee or Commission to a brokerage representing them. It's free representation for the buyer. So remember that when you are purchasing a home you have a FREE service that is available to use. USE IT!

*If you are a buyer and a company requires you to pay them for you service do not pay them any money!*

(The above statement is true for Northern California, other area of the state and US may vary for commission terms and conditions of agents commissions: San Francisco, East Bay, South Bay, Peninsula, North Bay areas.)

Thanks again for reading and Happy House Hunting!

First Meeting with a Bank or Lender.

Buyers should always be prepared when meeting with a Lender or Bank to get pre-approved. Homes that are priced right and in great condition are starting to move quickly. Being prepared to write an offer at any time when looking for a home is a must. In order to get a pre-approval from a bank it's good to always have all your documentation ready for review. Not having the proper approval letter could cost you your dream home. So what do you bring to the appointment. Below I have examples of what a lender or bank might request to pre-aprove you. Keep in mind that every bank is different and that your Real Estate agent should call them prior to the meeting. A well prepared team is a successful one! Happy house hunting!

What to Bring to Your Loan Appointment:

* W2's and 1040 tax returns for the past two years

* Paycheck stubs covering one month

* Residence addresses – covering the past two years

* Names and addresses of each employer – covering the past two years

* Last two months’ statements for all assets (i.e. checking, savings, stocks, retirement accounts, etc.)

* Addresses of other real estate owned

* Payment for credit report and appraisal

* Photo ID

NEW Loan Program - .5% (half percent) down payment

There is NEW Loan Program available to buyers. The program only requires .5% (Half Percent) down payment. This program is utilized as two loans. The rate today (Rates are subject to change) would be 5.5% on the first loan and 8% on the second loan. No FICO score required. Full documentation of income, assists and debt are required by the lender. If you would like more information on this program contact me today! (415) 336-8191.

FREE Home Buying Seminar - October 24th, 2009

3R Report San Francisco - What is it?

3R Means Report of Residential Building Record. San Francisco keeps a record from the 1900's that allows buyers to see the history of a property.

**NOTE** Some records were lost in 1906 (Earthquake) and are ONLY as valid as the information given and the individual inputting the information into the computer.

What is a Residential Building?

A residential building is a building or a portion of a building containing one or
more legal dwelling units. Hotels or motels containing 30 or more guest rooms are not
considered residential buildings. Therefore, a Report of Residential Building Record (3R) is not needed.

WHAT IS A REPORT OF RESIDENTIAL BUILDING RECORD (3R REPORT)?

A 3R contains the following information about
a residential building:

- Address of the building including
condominium or unit number if an

- Block and Lot

- Present authorized occupancy or use

- If the property is classified as a
Condominium
- If the building contain any Residential Hotel
Guest Rooms

- Zoning district

- Building Code Occupancy Classification

- Expiration date for non-conforming use

- Building construction date

- Original occupancy or use

- Building permit application history and


status of building permit:

N = Unknown
I = Issued
X = Expired
C = Completed

- Franchise Tax Board lien
- Abatement case on the property
- Number of residential structures on the lot
- If energy inspection has been done and
proof of compliance has been issued The above information will be shown on the
report if available through the Department of Building Inspection microfilm records. In many cases, submittal of additional records from other city agencies such as the
Assessor’s Office and SF Water Department will be required for the completion and/or
revision/update of a 3R. Please note that a 3R does not list the electrical or plumbing permit history, cancelled or withdrawn building permit applications and any
building permits taken for the commercial portion of the building.

WHEN DO I NEED A 3R?

A 3R is needed prior to the sale or exchange of any residential building; except for the first sale or exchange of a newly constructed residential building within one year of the date of the Certificate of Final Completion of the construction of the building.

It shall be unlawful for the owner and/
or representative of a residential building
to sell or exchange without providing the
buyer a 3R.

See 2007 San Francisco Housing Code,
Section 351 (a).

HOW DO I OBTAIN A 3R?

The owner or authorized agent (person licensed by the State of California to sell
property, trustee or power of attorney) may request a 3R by filing out an application
form. Forms are available at the Public Information Counter located on the 1st floor of 1660 Mission Street or on our website at http://www.sfgov.org/dbi under “Forms and Checklists.” You may also request to have the application form mailed or faxed to you by calling (415)558-6081.

You may request 3R in person or mail your application form and payment to:

Department of Building Inspection
Customer Service Division
1660 Mission Street
San Francisco, CA 94103
Attn: 3R

What Buyers should know regarding Short Sales - PLEASE READ!

What Buyers Should Know About Short Sales

A San Francisco title company familiar with short sales estimates that only 20% of all accepted offers on short sale listings close escrow. Buyers who choose to make offers on short sales need to know that the likelihood of closing the escrow is not good and that if escrow closes the property may be in substantially different condition from when it was first viewed. This is important when buyers are expending money on inspections, appraisals, etc., or when buyers need to have occupancy by a certain date. Following is a brief description of the short sale process and a list of some of the pitfalls that can occur in a short sale.

What is a short sale? A short sale occurs when a seller owes more on their home than it is worth. As an example:

Existing Financing Negotiated Short Sale

Current market value: $600,000 $600,000
First loan: -$ 500,000 Reduced to -$450,000
Second Loan -$ 150,000 Reduced to -$110,000
Cost of sale (Commission, etc) -$ 40,000 Commission -$ 40,000
Amount Due from Seller at Close of Escrow ($ 90,000) -- 0 --

Since most sellers in this situation are unable or unwilling to bring money to the table at close of escrow the only way they can ‘sell’ the property is if the lenders agree to reduce the amounts owed them. In effect, the owners ‘own’ title to the home but the lenders have all the equity. The owners can only sign an offer to sell the home subject to the lenders agreeing to take less on their payoffs.

Lenders control the deal. Lenders will only reduce the principal amount they are owed when they believe that there is no alternative. Sellers must show hardship and lenders must be convinced that the offers received represent maximum sales price for the property. Even when the lenders have agreed to reduce the loan balances they often reserve the right to ‘change their mind’ and occasionally they do at the last minute. Changes of this kind can result in the failure of the transaction to close or the buyers’ having to bring additional funds to close the escrow.

Lenders move slowly. Lenders do not move quickly on short sales and when there is more than one lender with a lien on the property then it is necessary to negotiate with each lender and for the lenders to cooperate with each other. It can take four or five months for a lender to approve a buyer’s offer on a property in which the lender is agreeing to modify the principal balance of the loan. Often, even after the lender has approved an offer it will reserve the right to accept a better offer should one come in.

Short sale offers do not stop the foreclosure process. If the seller has not been making payments on the loan, the lender has likely started foreclosure proceedings. Most lenders have different departments for negotiating short sales and for processing foreclosures and these departments do not necessarily communicate with one another. It is possible that a property may be foreclosed upon while a short sale is being negotiated and that the buyer may be unaware that the ownership of the property has changed. A purchase agreement for a short sale does not translate into a purchase agreement for a bank owned property and it is unlikely that the buyers will be able to purchase the property directly from the lender.

Short sales are “as is”. Most short sale purchases are ‘as is’. Buyers are generally allowed to have
inspections but lenders rarely make concessions for repairs or pay for required retrofit work or other costs of sale. These costs frequently must be borne by the purchaser.

Seller’s liability may be limited by seller’s ability to pay. In a normal buyer/seller transaction if the seller does not comply with the contract the buyer can pursue the seller for damages. Because the seller in a short sale is not receiving any proceeds from the sale and usually has no other assets there is little a buyer can do to ensure the seller’s compliance with the contract as the seller may be “judgment–proof”. There is no way to guarantee that the seller will convey the property in the condition in which the buyer viewed it. Frequently all appliances and fixtures and even sometimes the copper plumbing are removed from the property; sometimes the interior has been trashed. The seller may have rented the property to tenants while in escrow and kept the rent and security deposit, leaving the buyer with a tenant occupied property. Sometimes the seller refuses to move after close of escrow and claims occupancy rights as a tenant. Sometimes the seller decides that it is in his best interest to allow the property to go to foreclosure and refuses to sign the closing papers, essentially killing the deal. Additionally, while the seller is required to fill out the Transfer Disclosure Statement in a short sale transaction, it is important to understand that a buyer has little redress against a seller who has made inaccurate or incomplete disclosures.

Foreclosure: Terms & Processes

Type Description

Short Sale : When there are not enough proceeds to close escrow per the contract terms.

REO – Real Estate Owned : The foreclosure process is completed and the property is Real Estate Owned (REO)
generally by the lender.

Sold : as per normal real estate transaction with some disclosure exceptions.

Notice of Default (NOD): Letter sent to party as reminder loan has not been paid; may include a grace period
and penalties for failing to cure the default.

Lien : holder may file a Notice of Default (NOD) against the property. Timing is days 1-90.

Notice of Sale (NOS): The next 30 days after the NOD. Days 91-120.

SD – Sale Day: Day 121.

When the property is “SOLD” or auctioned on the “Steps of City Hall”. Redemption Period Right of mortgagor to property by paying debt before sale at foreclosure; right of owner to reclaim property after its foreclosure sale to settle claims for unpaid taxes. Generally up to 5 days before the sale date by bringing loan current plus all charges for owner occupied 1-4 dwellings. Up to 90th day on other property. Civil Code Section §1695 Civil Code Section §1695 mandates various duties of the Buyer and Seller.

Note: Seller gets 5 days notice and can rescind accepted offer within this period.

Example – “within 5 days after acceptance”. Must be in state mandated form. Civil Code Section §1695 is used when it cannot be ascertained whether the property is to be owner occupied or not. Use the CAR contract form “Notice of
Default Purchase Agreement” (NODPA). This form includes the “Declaration and Proof of Real Estate License” as well as the notice required by Civil Code Section §1695 (page 11 of NODPA – rev. 4/08). Civil Code Section §1695 is issued on any property where a Notice of Default (NOD) has been filed including short sales. An equity purchaser (person who acquires title to any residence in foreclosure) is exempted from Civil Code Section §1695 if the property is to be a personal residence. Zephyr highly recommends Civil Code Section §1695 be used in all transactions whether exceptions apply or not when a property has a filed Notice of Default (NOD).




Issues in the foreclosures process:
1. How does a commission get paid?
2. How do the Buyers get financing?
3. Do I get a full title policy?
4. How do we get fire/liability insurance?
5. How and/or can we do an inspection?
6. How do we get the owner and/or tenant(s) out?
7. How do I get the security deposits for the tenant?
8. Are leases valid?
9. Why in the heck did I ever think about doing foreclosures???