SHOULD YOU CONSIDER BUYING A SHORT SALE PROPERTY?

While there are always active buyers in the real-estate market in Truckee and Lake Tahoe it seems every one of them seems to be looking to buy a foreclosure or a short sale property.

A basic foreclosure is a fairly well-understood process and as “short-sale” signs pop up on occasion you may wonder what it really means.

When a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it’s called a short sale. Most often the lender forgives the remaining balance of the loan owned by the homeowner.

Who Really Wins?

Short sales are a combination of good and bad for the buyer, the seller and the lender.

As the seller a short sale is likely to damage your credit but not as roughly as a foreclosure. You will also walk away from your home without and money from the deal.

The buyer will get the property at a reduced price and it might have problems; and the new owner will need to go through considerable red tape to make the deal happen.

The lender will take a financial loss but perhaps not as large as it would have if it had foreclosed on the property.

There are two situations in which an attempt at a short sale is almost certain to result in failure ~

A.  No default on loan. Lenders almost never will accept short-sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued.

B.  Bankruptcy. If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy because negotiating a short sale is considered a collection activity, and collection activities are prohibited in bankruptcies.

Can it work for you?

Buying a home in a short sale can be a mess of documents, questions and communication, so why should you consider it? Frankly it could be the low price you pay. You might get the property for a significant discount. Because the lender is eager to get back as much of the money it lent out as it can, you may also get favorable financing terms.

Because the sellers will likely play an active role in the short-sale process, you will have their cooperation. This is not always the case with a property that has gone through foreclosure.

What are REOs – Real Estate Owned?

Buying an REO is similar to buying a short sale except the property is already owned by the lender. The property has already gone thru the foreclosure process and the bank typically lists the property with a qualified real estate agent.  Hopefully the agent and the lender have open lines of communication to enhance a smooth sales and purchase

Sometimes the lenders will sell foreclosure homes for less than the past loan balance. Most lenders have ‘guidelines’ for the amount they will accept.  In our Truckee and Lake Tahoe areas most lenders are looking for a number within 5% to 8% of the amount currently owed.

Bank owned properties (land or homes or apartments) are called REOs, meaning real estate owned by the lender.

Banks might end up owning the property when no offers come in at the public auction bid enough to cover the amount owed against the property. REO homes are often considered the best way to buy a distressed property because the seller is already out of the picture. At this point you are dealing with the investor’s agent, the bank and the bank’s agent who are negotiating the transaction. Some REOs can be purchased directly from the lender.

For more information, seek the advice of a real estate lawyer, and work with a competent buyers’ agent.

What Is And How to Handle A Short Sale of Your Home?

Although there are many ways one might lose ones home, most avenues are rather undignified for the seller/home owner. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a “short sale.”

Less than one third of the sales in Truckee and Lake Tahoe over the past few years have been short sales.  And even though the numbers might be low – the expertise required is high.

When lenders agree to do a real estate short sale, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose and not all sellers or all properties actually qualify for short sales.

If you are considering conducting a short sale there could be roadblocks in your path. Typically I suggest that all borrowers do the following:

A. Obtain legal advice from a competent real estate lawyer and B. Call an accountant to discuss short tax ramifications.

As a Realtor, I am not licensed as a lawyer or an accountant and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

1. Contact Your Lender
You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You want the supervisor’s name, the name of the individual capable of making a decision with regard to your potential short sale situation.

2. Submit Letter of Authorization
Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, Title Company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:  Name/Address/Loan Number/Real Estate Agent Contact/Date

3. Preliminary Net Sheet
This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the lender you will probably not need a short sale. However, if this is a negative number, it’s obvious you are in a short sale position.

4. Hardship Letter
This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized however lenders are not going to be empathetic to situations involving dishonesty.

5. Proof of Income and Assets
It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value.

Thinking of Moving Your Money From the Market to Real Estate?

Now may be the time.  With overall markets losing on a daily basis, watching your portfolio dwindle can be frustrating to say the least.  It’s not your fault, you made good investments at the time, but with things changing so rapidly it’s a difficult situation to deal with.

Is there a safer alternative to invest your monies? With real estate prices at all time lows, interest rates holding at the current lows, now may be the time to get out of the market and into real property for many.

Currently I am working with a buyer who intends to do just that.  Unfortunately, the bank has been slow in responding to her all cash offer and during a one week period, her portfolio dropped in value by a whopping 4%.  Her situation could change tomorrow if the bank continues to wait to respond to a great offer.  Common sense would tell us that cash for property is better for the bank being in the property holding mode.

So let’s look back at history…here in the Greater Truckee area, the past few years have seen close to 18% in price fall off.  Not such great news for those who just entered the housing market during or purchased during the highs of the 2005 and 2006 years and need to sell now.  Those, however, who purchased earlier or are purchasing now with a long term hold are in good financial positions. 

The Why and How of it:  interest rates are down from those years and those able to qualify can refinance into lower rates.  Those that don’t have to sell know that historically property values have always increased in eventuality.

Your personal goal, like many, was to leave a legacy for your family thru wise investments.  Property legacies have been the alternative for many wise investors over the years – rather than those stocks and bonds that are losing value all too rapidly.  The family vacation home and lifestyle might just be the perfect option for you to pass on to your family.

Give me a call and we can discuss your thoughts while I can provide you with detailed insight into our current market.  As a relatively stable housing market has provided many with family legacy trusts – it just might be the best option for you to consider.

Always your best in mind!  Bonnie Jessee 530 412 3984

WHAT’S HAPPENING WITH REAL ESTATE IN TRUCKEE?

BONNIE JESSEE, Realtor®

530 412 3984

New Properties for Sale

Over the past few weeks, I have had several new friends from out of the immediate area calling to view and potentially purchase properties in Truckee, North Tahoe and the Soda Springs area.  It has been quite a surprise to our out of town friends (or our part timers as I like to think of everyone) to see that low-ball offers are not typical and if placed are being rejected – on occasion even verbally.

For instance, today (Friday the 25^th) 25 new listings were on the MLS – of those 25 new listings, 8 were single family residences, 6 were in Truckee and pricing ranged from $459,000 to $1,350,000.  The remaining were shared ownerships, out of the immediate area properties and even 2 boat slips in Tahoe City listed for $375,000 and $385,000 (yes, a boat slip in Tahoe City)!

Bank Owned Properties

Despite the fact there are bank owned properties on the ‘market’ and there truly are some fabulous deals to be had, for the most part, these bank owned or pre-foreclosure properties sell almost immediately when displayed in the MLS.  The down fall can be that the ‘bank’ or lender will typically provide no assistance with repairs and what you see (or don’t) is what you buy!  In relation to what is for sale and what is selling, the number of these types of properties available is quite insignificant.

What is Truly Happening

On a very personal note, I have a buyer I am working with who owns a property (vacant land) that we are attempting to use as a trade/down payment.  We made an above full price offer on a new property which I felt as a professional was a terrific offer.  In any case, the following day, the seller received an additional three, yes three offer, on the same property and the result was a sale well above listing price.    Not uncommon for this much localized area.

What Does Localized Indicate?

Although Truckee has a full time base population of around 17,000 individuals and approximately 12,000 properties (including Northstar and Squaw) it appears that each ‘neighborhood’ is currently rather independent of another when it comes to the sales price point being reached in negotiations.  In other words, a property in Tahoe Donner may command a price of $750,000 which in Serene Lakes that property would be close or higher in price, in Glenshire it may command $675,000, regardless of the fact they may be almost identical properties.  And, of course, the North Shore of Lake Tahoe is another localized area.

What Now?

While most of you know I work almost exclusively with buyers, my goal has been to get the best deal for my buyers.  I do see economic healing on the horizon; I also see with that an increase in the cost of owning in our beautiful Sierras!  I truly believe, from what we see daily in this real estate industry/market (localized) now is the time to buy.

Bonnie Jessee

530 412 3984

The Business Cycle and Buying a Home ~ Home Buying Advice

How to Time Your Home Purchase to the Market Cycle?

Bonnie Jessee, Reatlor

530 412 3984

Ah, if only we had that special real estate crystal ball!  Then timing your purchase to the cycle would be an easy task!

Attempting to time your purchase to the “business” cycle is sometimes getting lucky and sometimes paying attention to the small signs.  Even economic advisors and consultants have inconsistencies accurately predicting the future economy. Even when these experts are relatively successful, the real estate market does not necessarily move in tandem with the economy as a whole.

Part of the reason is the timing and inconsistency of interest rates.

During periods of economic growth, interest rates are generally higher. Therefore fewer people can afford to purchase a home or second home unless they are cash purchases. When the economic situation is slower, interest rates fall, and more people can afford to purchase a home by obtaining a mortgage.

As you can see, this cycle does not move in conjunction with the remainder of the economy. It is also influenced by levels of employment, pay scales of various jobs, and consumer outlook for the future. Such facts make it difficult to know ~ ahead of the time ~ whether the housing market is going to be a wise investment.

The best advice is to preview the market where you intend to purchase, deal with a professional Realtor®, and plan on holding for as many years as possible. 

Unless, of course, you have a crystal ball!

The Differences Between REALTORS® & ‘Real Estate Agents’

Bonnie Jessee, Realtor® 530 412 3984

People use the terms REALTOR® and real estate agent interchangeably, however, this is not appropriate or correct. There are many differences between REALTORS® and real estate agents. The names alone are similar. Although both are licensed to sell and or list real estate, the basic difference between a real estate agent and a REALTOR® is that a REALTOR® is a member of the National Association of REALTORS®. Therefore, the main difference that we hear a lot about and might be confused by is that a REALTOR® must subscribe to the Realtors Code of Ethics. But what does this mean to you as the consumer or client of either?

The Code of Ethics is strictly enforced. It contains 17 Articles and various underlying Standards of Practice.

These are not ‘suggestions’ but rather rules that REALTORS® are sworn to uphold and adhere to at all times under all circumstances. The Standards are much more restrictive and confining as to conduct than those governing ‘real estate agents’ who simply hold a real estate license. Of course, there is no guarantee that all REALTORS® are morally and ethically better than unaffiliated real estate agents, it is a goal set by the industry to regulate and of course deserves recognition.

Here are 17 things that a REALTOR® promises, that a ‘real estate agent’ is not sworn to.

1) Pledge to put the interests of buyers and sellers ahead of their own and to treat all parties honestly and fairly.

2) Shall refrain from exaggerating, misrepresenting or concealing material facts; and is obligated to investigate and disclose when situations reasonably warrant.

3) Shall cooperate with other brokers / agents when it is in the best interests of the client to do so.

4) Have a duty to disclose if they represent family members who own or are about to buy real estate, or if they themselves are a principal in a real estate transaction, that they are licensed to sell real estate.

5) Shall not provide professional services in a transaction where the agent has a present or contemplated interest without disclosing that interest.

6) Shall not collect any commissions without the seller’s knowledge nor accept fees from a third-party without the seller’s express consent.

7) Shall refuse fees from more than one party without all parties’ informed consent.

Shall not co-mingle client funds with their own.

9) Shall attempt to ensure that all written documents are easy to understand and will give everybody a copy of what they sign.

10) Shall not discriminate in any fashion for any reason on the basis of race, color, religion, sex, handicap, familial status, or national origin.

11) Expects agents to be competent, to conform to standards of practice and to refuse to provide services for which they are unqualified.

12) Must engage in truth in advertising.

13) Shall not practice law unless they are a lawyer.

14) Shall cooperate if charges are brought against them and present all evidence requested.

15) Agree not to bad mouth competition and agree not to file unfounded ethics complaints.

16) Shall not solicit another REALTOR’S client nor interfere in a contractual relationship.

17) Shall submit to arbitration to settle matters and not seek legal remedies in the judicial system.

The National Association of REALTORS® was founded in 1908 and has more than one million members

Down Payment Assistance Planning~Truckee Real Estate

Bonnie Jessee, Realtor

530 412 3984

We have all been taught to follow the rules that it is best to put down 20(%) percent on the home you are buying (or the loan you are obtaining). With a 20 (%) percent down payment, you will secure a loan on the best terms, without paying private mortgage insurance (PMI) or the FHA equivalent of PMI, also known as MI, and typically obtain a lower monthly or annual interest rate.

And as housing prices stabilize in most states, coming up with that kind of cash can be difficult for first time buyers.  Most first-time buyers don’t have 20(%) percent to put down on a home. Many buyers are attempting to get in to a property with as little as 3(%) percent to 10(%) percent.

While getting a 100 percent loan (no down payment necessary) is still possible, it can be difficult to find a good lender who will do it at a reasonable cost. And we know that getting that 20(%) percent down payment is important.

In conjunction with saving as much as possible for that 20(%) percent down payment there are other options to consider:

401K MONIES. If you work for a company that offers a 401(k) plan, it’s in your best interest to fund it to the maximum allowed for your income. Not only will you be able to tap into the power of compounding (and have your money work harder for you), but you’ll be able to more quickly build a sizeable nest egg for your retirement. When it comes to borrowing from a 401(k) plan, not every company allows it. Check with your plan administrator to see if your company will allow you to borrow, if there are limitations on what you can do with the cash, and what the interest rate will be on the money you borrow. You should also be aware that you’ll typically need to repay this cash within 5 years. But if you should leave the company, or be fired, you’ll need to repay the cash within 60 days, or it will be considered a withdrawal (and you’ll owe federal income taxes on that money along with a 10 percent penalty, if you’re under the age of 59 1/2).

IRA MONIES (UP TO $10k).  If you have an individual retirement account (IRA), the IRS allows you to withdraw up to $10,000 for the purchase of a first home. (For those of you who have purchased a home before but haven’t owned a home in the last 3 years, you’re considered to be a “first-time buyer” for this specific purpose and can make a withdrawal). When you withdraw cash at any time from a tax-deductible, tax-deferred IRA, you’ll owe federal income taxes on the amount you’re withdrawing at your current marginal tax rate. However, if you’re withdrawing for the purchase of a first house, you will not owe the 10 percent under-age penalty if you’re less than 59 1/2 years old.

Gifts. If you’re buying a house, your parents, siblings, other relatives or friends can give you a gift of funds to be used toward your down payment. However, for a lender to accept that this is a gift, and not a loan, you’ll need your friends and family to sign a gift letter that states that this cash is a gift and does not need to be repaid. That letter will become part of the documents that you provide to the lender who will be approving your loan.

Rent-to-own or lease/options. If you don’t have enough cash in your IRA or 401(k), and you can’t get your lender to give you a 100 percent loan, you might put your plans to purchase on hold for a year or two and find a seller who is willing to do a rent-to-own or lease/purchase arrangement for his or her property. Often, the seller will provide down payment assistance by giving you a credit for a portion of your monthly rent payments. In a year or two, you can easily build up a 5 to 10 percent down payment, depending on how much of a rent credit you’re given. For example, if you pay $1,000 per month, and the seller gives you a 20 percent credit, $200 per month will accrue toward a down payment on the property. After a year, you’ll have $2,400 for your down payment. If you’re going to go down this path, be sure to work with a real estate attorney who can help you negotiate the fine print. You may want to negotiate the purchase price of the property upfront, and you will definitely want to include the down payment credit terms as part of the lease.
 

TRUCKEE’S FIRST BUILDING

Story by Guy Coates

In 1863 the town of Truckee did not exist. In fact, all that was visible along the banks of the Truckee River were rocks and virgin forest—except for one solitary log house built by pioneer Joseph Gray.

Business was good. Gray owned several freight teams, sixteen or eighteen mules, four to six horses and a number of wagons. His teams hauled freight from Grass Valley to Virginia City and the Gold Hill Districts. Huge supplies were stored near the cabin for winter consumption.

Gray’s Station, as it existed at the time, encompassed the entirety of the present downtown district of Truckee. Most of the area was a fenced corral. Next to his cabin, Gray built a horse stable and blacksmith shop; the stable was located on the land that is now Truckee’s downtown post office.

The structure exemplifies a memorial to Joseph Gray’s accurate, prophetic vision. It is a tribute not only to Truckee’s past, but also to the future of a town steeped in History and to its citizens who have accepted progress while still embracing the pioneer spirit and determination of the town’s founder, Joseph Gray.

Truckee Real Estate ~ Second Home Ownership or When Should I BUY?

March 5th, 2008 bjessee  |