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An Appraisal, A Lender or a Short Sale be

December 4, 2011 By Leave a Comment
Meeting the Appraiser

After the contracts have been signed an appraisal is one more step in the process of buying a house. If issues arise it typically involves the house appraising for less than the purchase price. If this occurs, there may be some additional negotiation or sometimes the deal may fall apart.

Meeting the Appraiaser

But what happens if the reverse occurs and the appraisal comes in at such an inflated value there is no interest in the property?

The word appraise is defined as “to assess the value or quality”. This can be much different than “market value” which defines what a buyer is willing to pay. In most instances the two are close, in this instance, the two are worlds apart.

A Simplified Short Sale?

A HAFA Short Sale is a process whereby the transaction has been given a set of parameters in advance which should result in a smoother, uncomplicated transaction. The homeowner has been through the loan modification process and very likely has been denied. Therefore the next step is probably to sell the property. You could call it a hybrid transaction. The price and terms are provided in advance. Find a buyer, submit the required documentation and proceed to closing. Saving lots of time and frustration.

Everything is set to run smoothly, unless you are given an appraised value which far exceeds the value of the property based on the poor condition. There is one issue here that remains unknown as to how the value of the property was determined.

Did the Lender Escalate the Appraised Value?

If you consult Occupy Wall Street you might get an affirmative response. Given the fact that the initial sales price is too high and if by a miracle the property were to sell at the inflated price, the short sale may be eliminated because there is no “shortage”, the balance would have been paid in full.

However, in reality the property fails to close within the 120 day listing period, therefore another appraisal is ordered and the new sales price is 5% higher than the one completed 4 months ago. Now we have an equity sale and the homeowner receiving this new found money at closing. According to this progressive thinking, the bull real estate market has returned, therefore you can expect an annual appreciation rate of 15%. Home sellers will be glad to know.

One thing we will never know……did the appraisals truly reflect the professional opinions of the two separate appraisers that conducted and completed licensed appraisals, or was the value actually propped as a disguised attempt to increase the offer price?

You May Pass Go

Finally, through a series of appeals and resubmission of mounds of paperwork (something that a HAFA Short Sale was supposed to eliminate) we were able to close the transaction and save a homeowner from foreclosure.

As for me, maybe next time I will take my chances with the traditional short sale.

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Foreclosure Update on South Pasadena Real Estate

June 8, 2011 By Leave a Comment

South Pasadena. Just mentioning those two words creates a very positive connotation. The location means many different things to people. A great school system. Old established tree lined neighborhoods and above average home prices. One of the things least associated with South Pasadena real estate has been the foreclosure crisis. It’s typically a term not mentioned with South Pasadena. After all, the median price of a single family home has usually maintained at least a $200,000 cushion above the neighbor to the north, Pasadena.

You may think the term foreclosure applies to other areas of California and Los Angeles County, not South Pasadena. It just doesn’t happen here or does it?

Foreclosure begins when a homeowner is late on the mortgage payment. A “Notice of Default” is filed letting the homeowner know that unless the debt is cured (brought current) along with the outstanding fees, etc., the property will be sold at auction. This pre-foreclosure process can last approximately 3 months until the “Notice of Trustee Sale” is recorded and an auction date is set. The auction date can be a minimum of 20 days after the Notice of Trustee Sale is recorded. Once in the auction process they can be postponed, sold to the bank, sold to a 3rd party or cancelled.

How many homes are actually sold according to the above time frame? Very, very few. I have seen some homes stay in the foreclosure process anywhere from at least a year to a year and half and have heard of 2 years in some cases. Banks are giving the appearance of understanding and a desire to work with homeowners through loan modifications and being very patient with allowing owners to stay in their home payment free. But is a loan modification really productive and advantageous if the bank reduces the payment balance by say $50,000 and tacks it on to the back end of the loan. Kind of like the old TV commercials for auto parts…..”you can pay me now or pay me later”.

The bad news is many homeowners will not be helped and cannot qualify under many of the federal programs which were designed to assist these individuals. Therefore how long can the inevitable be delayed? The good news is that after a long trail and error period, many banks are now encouraging and even paying relocation fees to property owners who are underwater and in distress, encouraging them to do a “short sale’. A short sale occurs when the market value of the property is less than the mortgage balance. A contract is written, signed by the property owner and contingent upon the banks approval. Many times there is no additional cost to the homeowner as the bank pays for the escrow, real estate fees, past due taxes, etc. If the property is sold with a real estate agent, the banks are providing as much as $2500 to $3000 and possibly more depending upon the lender to the owners upon a successful close of escrow.

The unfortunate thing is many people are still being foreclosed upon. They ignore the notices in the mail, they don’t return phone calls from their lender and for reasons I cannot explain they fall victim to foreclosure. Granted not everyone may be a candidate for a short sale, but given the list of pros and cons, short sale or foreclosure, I know what path I would follow. This is not a time to play ostrich and stick your head in the sand. Talk to someone, an attorney or a real estate agent who works with short sales and distressed homeowners. Help is available.

South Pasadena Foreclosure Filings

South Pasadena Foreclosure Outcomes

In my next post regarding South Pasadena real estate, I will take a look at home prices over the last few years. We will see where we were and compare that with where we are today.

Lastly, this is not intended as legal advice. You should contact the appropriate professional (CPA, Attorney) as to your own individual situation.

Filed Under: Foreclosure, South Pasadena Home Sales, videos Tagged With:

Pasadena Homes In Foreclosure, An Update

February 15, 2011 By 7 Comments
Will Banks Pick Up the Pace?

Reports, rumors and rumblings suggest 2011 could be the year that banks and other financial institutions move more homeowners and distressed properties into “Column F” as in foreclosure. After 2 to 3 years of government intervention and a half hearted attempt at loan modifications the industry now seems convinced that

Will Banks Pick Up the Pace?

good intentions don’t usually address a crisis of epic proportion. With months of cancellations, postponements, moratoriums, robo signing, and government mandated stays of foreclosurecution (as in execution), the real estate industry may begin the long journey of self correction.

With states battling their own budget issues and seeking additional sources of revenue, house in foreclosure become wildfire on a windy day. Homeowners who are not making a mortgage payment are very likely not paying their property taxes. Compound this with the impact of reduced property values and you begin to see how it escalates. Local and State governments need these houses to be occupied by people who can afford them and to have the past due tax bills brought current.

Completing the Foreclosure Cycle

Cancellations which have seemed ubiquitous in the foreclosure process have been declining while bank repossessions and auction sales have shown small increases.

Pasadena Foreclosure Outcome

Estimated Market Value

The majority of homes in the foreclosure process have an estimated market value below $600,000 as indicated by the filings recorded in January. Possibly due to the ease of financing options that were available with no money down and a combination of 100% loans with an 80% first and a 20% second. If there was no equity or investment by the owner (buyer) is there a reason to stay when market values begin to drop? Strategic foreclosure became an option.

Est Mkt Value-Pasadena Filings

Foreclosure Inventory in Pasadena

Preforeclosure filings reached thier peak in June and have steadily declined but one has to wonder if this represents an accurate assesment of the market. Properties which are Scheduled for Sale and Bank Owned have shown slight increases in the last few months.Pasadena Foreclosure Inventory

What’s Next?

Whether or not we see an increase in foreclosures, one thing is definitely certain. Banks are ramping up their distressed property efforts by sending letters to homeowner’s suggesting they do a short sale (it’s about time; as I advocated this in a similar post about the foreclosure lottery) to avoid foreclosure and also promising shorter response times and expeditied approval processes. This is welcome news for many reasons, but a clear indication that progress is on the horizon.

Filed Under: Current News, Foreclosure Tagged With: ,

The Survey Said, “Auction, Postpone or Cancel,” A Foreclosure Enigma

November 30, 2010 By 2 Comments
A Pasadena condo was in the foreclosure process for 15 months

Results of the latest government foray into the housing crisis have recently been reported. It seems that only 342 sales were completed through September. The Home Affordable Foreclosure Alternative (HAFA) program premiered in April with great anticipation.

The new process for deciding foreclosures?

It finally seemed a program had been put in place to deal with escalating homeowner defaults. Realizing modifications were getting nowhere, it appeared legislation had finally arrived to address the non-response from lenders and provide answers which consumers were seeking. A time line was published along with parameters enabling homeowners to qualify. Now it seems that the people and institutions which the program was to address never got the email.

In fact most of the attempts to address the high rates of mortgage defaults and foreclosure have met with less than satisfactory results. Maybe the reason can be attributed to the size and scope of the problem. When the sky begins to fall, providing a quick and equitable solution to a problem may seem good in theory, but in all practicality proves useless.

A condo was in foreclosure for 15 months

The major benefit which has been provided to consumers by the government was similar to the discovery of rubber. It was unintended. The benefit being bureaucracy and delay. In most cases. In a recent post, I wrote about the unfair process. Some lenders seem to be very lenient and bend the rules like a rubber wishbone and other lenders enforce the default process to the letter of the law.

Draw Straws

On Monday, November 29, a total of 18 properties were scheduled for foreclosure in Pasadena. The auctions were to be held at various courthouse locations in Los Angeles County. How many do you think actually went back to the bank or were sold to a third party. If you said “zero” you are correct. 16 were postponed and 2 were canceled. When you hear the housing market can’t find a bottom and it is a result of the shadow inventory, this is what is being referred to. The properties in foreclosure which are not being foreclosed upon.

No delays & foreclosed in about 122 days

As stated before, empirical data seems to suggest the lender will have their own policy in regards to foreclosing. If I am in the unfortunate situation of being late on my house payment and have received a “Notice of Default” what do I do? I know confusion reigns supreme at this point. Do I stay or do I go? Do I attempt a Short Sale or take my chances with Foreclosure? The uncertainty of forecloure could be much worse than the eventual action.

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Playing the Foreclosure Lottery? Don’t Count on Winning

November 15, 2010 By 1 Comment

In gambling, there are two keys to winning. The first one is knowing when to walk away. Number two is just don’t play. Unless you’re Rain Man, eventually you will loose. How much and how often you lose is determined by your aversion to risk.

Has foreclosure become a game of chance?

More and more California homeowners are playing the foreclosure lottery. However in this game, there doesn’t appear to be any chance of a winning payoff. Possibly the only opportunity is to sit a while longer at the table and enjoy a round or two on the house. But in the end, you will lose and probably lose big.

Who hasn’t purchased a lottery ticket? When the jackpot climbs to over $100 Million, many decide to go against better judgment and plop down $5 for a quick pick. Why are so many California homeowner’s gambling their homes and credit as if it were a $5 lottery ticket?

Is the Threat of Foreclosure a Conditioned Response?

Has the finality of foreclosure ceased to be a threat? With many people in the foreclosure queue, continuing delays, bank moratoriums, refiling of Notice of Defaults and monthly postponements may have convinced consumers that their pending foreclosure is on hold for an indefinite amount of time. What appears to be happening to these homeowners is they have become pawns in a game which allows a short term gain in exchange for a more perilous penalty when the bank finally decides to pull the lifeline of support. The only question is when is the lifeline going to be pulled?

Banks and other lending institutions have lulled the consumer into a false sense of security that something will be done or worked out to keep you in your home, when they should have been actively encouraging homeowners to look for other alternatives. Alternatives that would lessen the negative impact of foreclosure and allow for a planned exit. Anyone ever heard of a short sale? Instead they seem to consider the 15 month moratorium a “gift” that allows the inhabitants to live mortgage free until they deem its time to go ahead and pull the foreclosure trigger.

I look at the number of foreclosures in the Pasadena, South Pasadena and Altadena area’s and I cannot understand why some people lose their home in 6 months while others have been on the list for a year and a half and are once again delayed for another month. Issues involving court decisions and Civil Rights have long focused on Housing Discrimination. Would anyone like to tackle the perceived inequity that so frequently seems to involve the issue that says, “Sorry Mr. & Mrs. Smith but today is your day. However the Johnson’s have another 30 days?”

Time to Quit Postponing the Inevitable

There is a much fanfare and lip service being paid to loan modifications which seem to be generating only a limited number of success. Homeowners receiving a “Notice of Default” are given specific instructions stating that unless the debt is cured the house will be sold to satisfy the debt. That in itself is very definitive. But with extension after extension the message looses its meaning. Homeowners should also be advised to seek out the possibility of conducting a short sale as a more favorable option versus a foreclosure. If banks don’t want to repossess the house, they seem to be doing a poor job of informing their customers of the available options.

But then again, maybe the banks like stacking the odds in favor of the house.

Filed Under: Foreclosure Tagged With: ,