Guest blog by Christie Tjong

Foreclosure Market on the Rise

In San Luis Obispo and Santa Barbara County; the foreclosure market is steadily rising and the increase in numbers doesn’t appear to be dissipating anytime soon.  To give you an idea of the foreclosure inventory, here are some statistics on the foreclosure market and housing inventory in California.

• There is an average of 2.6 months of REO Inventory
• There is an average of 5.9 months of Equity Sale Inventory
• There is an average of 7.9 months of Short Sale Inventory

Now for San Luis Obispo and Santa Barbara Counties:

• 25% of closed sales in San Luis Obispo County are REO (foreclosures) and 16% are short sale. (We are in good shape compared to Solano County which has a percentage of closed sales coming in at 42% REO and 31% Short Sale.)

At this time of this writing, in San Luis Obispo City, there are currently:

• 50 homes are in Pre Foreclosure meaning they have received a Notice of Default
• 34 homes are set for Auction meaning they have received a Notice of Trustee’s Sale
• 13 are Bank Owned, Real Estate Owned

Compare San Luis Obispo statistics  to Sacramento, which is experiencing 2667 home in Pre Foreclosure, 1776 going to auction and 1281 are bank owned!

Actual Sales of Foreclosed Homes in San Luis Obispo Coounty in 2011

When a foreclosed home is sold and ownership transferred to the new buyer, it is recorded as a Trustee’s Deed.  Below are numbers of Trustee’s Deeds recorded in SLO County for 2010.

January: 413
February: 820
March: 483
April: 365
May: 451
June: 433
July: 413
August: 298
September: 532
October: 256
November: 264
December: 320

The spike in Trustee’s Deeds in February can be attributed to a rise in Notice of Defaults recorded in the latter part of 2010.  This is true because once a Notice of Default is recorded; the bank has to wait at least 111 days to post a Notice of Trustee’s Sale.

Amy Hoak, a real estate columnist for MarketWatch, summarized foreclosures statistics provided by RealtyTrac:  “Sales of foreclosures accounted for 20% of all U.S home sales in the third quarter of last year. The average sales price: $165,322, 34% lower than the average sales price of homes not in foreclosure.”

Forecast

As for San Luis Obispo, I don’t foresee the foreclosure market going away anytime soon. In a conversation with a local Foreclosure Service Company; I asked them what the percentage of homes were bought at auction on the Courthouse steps compared to the number of homes that go back to the bank as an REO sale. The owner of the local Foreclosure Company stated less than 5 % of homes are purchased all cash at time of sale.   He also said that number had been rising over the last few months due to more out of town investors coming to the area and more investor groups who pooled cash to invest in the foreclosure market.

From a title company point of view, this is the market we live in today and foreclosures and short sales are part of real estate.  It is necessary to understand and educate our community about the foreclosure market. There can be investment potential in the foreclosure market which will in the end result in a more active real estate economy.

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Christie Tjong is a Sales Manager for Fidelity Title on the Central Coast.  You can reach her at (805) 782-9600.

Guest blog post by Cyndi Nunez

The tremendous drop in real estate values since 2008 has left many homeowners facing the question of what to do with their home.  Some are still considering either foreclosure or short sale.  In this article, I will answer some of the most frequently asked questions I hear related to Short Sales in 2012.

What is a Short Sale?

Short sale is a sale of real estate in which 1) the proceeds from selling the property will fall short of the balance of debts secured by liens against it and 2) the property owner cannot afford to repay the liens’ full amounts.

When this occurs, the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency balance. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.
A short sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower; however both will often result in a negative credit report against the property owner.

How does a short sale affect your ability to purchase another home in the future?

One of the biggest concern you may have when considering a short sale is how it will impact your ability to buy in the future.  As you may know there are several loan types: Conventional (FNMA/FHLMC), FHA, VA and USDA. Each has their own set of guidelines with respect to a short sale.

VA Loans

If you are purchasing using a VA loan, the Veterans Administration views your short sales the same as a Foreclosure or Bankruptcy. The waiting period is two full years from the date that your short sale closed.

FHA

FHA has two sets of guidelines. If you were delinquent in the 12 months preceding the short sale, the time period must be 3 years from the sale date.
If the property sold in the short sale was your primary residence and you had no delinquencies in the 12 months preceding the sale, you are eligible with no waiting period!

Conventional Fannie Mae

On a Conventional loan, FNMA has different waiting periods according to down payment. The following guidelines apply:

• 2 year waiting period with 20% down payment
• 4 year waiting period with 10% down payment (primary residence only)
• 7 years to obtain maximum financing.

Conventional Freddie Mac

With Freddie Mac, you are eligible after 2 years with a 10% down payment.

USDA

This rural housing program requires a 3 year waiting period after the short sale

What are the tax consequences of doing a short sale?

Currently through 2012, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation is in effect. This act generally allows taxpayers to exclude income from the discharge of debt on your primary residence.E xtensive information can be found in the following document: IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Click here to see it online.

Coming Soon:  Ten Facts for Mortgage Debt Forgiveness

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Cyndi Nunez is the Branch Manager and Mortgage Loan Officer with Guild Mortgage Company in Santa Maria, CA    http://www.guildmortgage.net/cyndinunez

How would you like to own a property that would allow so many different enjoyable features and activities such as:
1. Riding horses
2. Fishing for bass, bluegill, and catfish in an amazing one-acre pond
3. Enjoying a 1,000 sq. ft. shop for hobbyists
4. Living in a five-bedroom home with a downstairs area fitted with two rooms for guest quarters and another room to build a separate detached home!

House on top of a hill

What I just described would be an incredible haven on the popular coastal town of Nipomo California. This much-coveted, multi-feature property on the Central Coast of California is now available at an unbelievable low price under $900,000.

The residents of this retreat home can rise in the morning to pick and eat some fresh fruits from the lavish orchard of grapefruit (the best around), apples, and oranges. When lunchtime comes, they can also opt to walk down to the lake to catch some fish to grill up along with fresh avocados from the avocados orchard. From the gourmet kitchen windows, gaze at the over a dozen of mature coastal oak trees that surround the 10-acre valley or get your daily exercise through a horse ride right on site.

The Gourmet Kitchen

I haven’t seen a property with all of these incredible features in a long time. It is completely fenced and gated for your security and peace of mind. You will be impressed.

A safe, gated haven on Central Coast

Many of my clients are downsizing these days.  Having done that myself, I can honestly say -  it is nice to be able to donate or sell items I haven’t used in a long time.

But if you own a boat or a recreational vehicle, sometimes moving to a small home can create a challenge.  And some clients are moving to temporary situations and need affordable, safe and convenient self-storage.

So I want to let you know about the new self-storage in north county.  It has a very convenient location for those who live in Paso Robles, Templeton or Atascadero  and only about 25 miles from San Luis Obispo.  The rates are very competitive.

So if you need to store an RV, boat or looking for affordable self-storage units, check out the Self Storage Park in Templeton.

With the great deals on homes on the Central Coast comes a certain frustration level in trying to purchase one. Buyers are finding a lot of unwanted competition when making an offer on a home. It is not unlikely to have 10-20 offers submitted on the same property. This is due to the lack of inventory of homes for sale and the great bargains available through bank-owned properties (REOs and foreclosures.)

How can you increase your chances of having your offer accepted by the bank who owns the foreclosure you want?
1. If possible, pay cash. Cash buyers are considered “gold” to the lender and have the strongest chance of being accepted. Unfortunately, this makes it very difficult for first time buyers and buyers with little down payment. But don’t let that discourage you, because things could fall in your favor. We have been able to get offers accepted for our first-time buyers.
2. If you need a loan, get pre-qualified for it before you try to make an offer. It’s absolutely necessary.
3. Be willing to offer more than the listed price. With this much competition, foreclosures are often selling for more than the listed price. Be realistic with your offer. Don’t expect to get a “deal” on the “deal” when you’ve got this much competition.
4. Find an agent who knows how to negotiate, who has experience with bank-owned properties, knows how to advise you, and be loyal. Here’s why: Real estate agents are trying to make a living just like everyone else. It makes sense that they are going to work hardest for those who they know are loyal to them as it means they will be compensated for their efforts.

As you may know, Obama’s stimulus package includes help for home owners who may be facing foreclosure or who are having difficulty making their mortgage payment. If you are wondering if you qualify to refinance or a loan modification program, check out this link that walks you through some basic questions regarding your situation:
Do I Qualify?

It is great time to buy a home, but not such a great time to sell one.  As a result, many smart investors are taking advantage of declining real estate prices by buying a “move-up” home and turning an existing home into a rental.

If you are considering this option, be aware that new guidelines are coming into effect that makes it more difficult to purchase a home as a primary residence with the intention of keeping and renting an existing residence.  The reason behind the new guidelines is due to what is now referred to as “Buy and Bail.” It is becoming a huge problem and FHA, Fannie Mae and Freddie Mac are dedicated to putting a stop to it. Buy and Bail happens when a borrower purchases a new primary residence and then allows an existing home to go to foreclosure once escrow closes on the new residence. 

To reduce the number of “Buy and Bails”, lenders are requiring that:

•You will need to have a minimum of 30% equity in your existing home
•You will need a copy of your new Rental Agreement on your existing residence and a copy of the tenants deposit check
•You will need to demonstrate the capacity to repay and be current on any debt obligations.

What if you do not have 30% equity in your existing home but still wish to
purchase a new primary residence?
The good news is you can still purchase but you will need to:
•Provide a down payment. The amount depends on the particular loan program in which you are applying for.
•Be able to qualify for both payments. The existing payment and your new proposed payment.
•Have sufficient funds left in the bank as reserves for both properties.

Although certainly more stringent, these steps are needed to insure the long-term health of the real estate market and the long-term health of your investment.

Aimee Ritz,Town & Country Home Loans & Shea Hutchinson, Century 21 Hometown Realty

Would you love to own a second home or condominium on the Central Coast but question whether you’ll use it enough to warrant the expense?  You may be interested in a condo hotel (also known as condotel.) What is a condo hotel or condotel?  Think of it as a hotel comprised of condominiums instead of a bedroom and bath.  It is operated as hotel or vacation rental but most or all the units are individually owned.  Most hotel guests never know that different individuals own each unit.  In some condotels all units are identical while others will allow the individual owners to personalize their units. (One of our Central Coast condotels allows each unit to be personalized).

Condotels make great second or vacation homes while giving you the benefit of someone helping you make the payment.  They are not sold as a primary residence due to the fact that the owner’s usage is normally limited because each unit is expected to be included in the hotel’s inventory of rentable units.  But one of the great benefits of this type of unit is that it is maintained and rented out for you, just like any other room in a hotel.  You don’t have to worry about advertising, collecting rent, cleaning or any of the stress that normally goes with having a vacation rental.  As owner, you’ll receive a percentage of the revenue that is generated, so you’ll want to do your research to determine what amount of income you can realistically expect.

Some of the advantages of this type of ownership:

a) Rental revenue to offset some of your ownership expenses (in some cases maybe all your expenses.)
b) A worry-free vacation home in a great location.
c) Hassle free ownership; no landlord issues.
d) Own instead of rent.

Some disadvantages:
a) Pets may not be allowed.
b) Your unit is subject to the same trends in the real estate market that affect hotels.
c) Your unit may not always be available on short notice (but most manager’s will try to work with you).

We are fortunate to have two hotel/condotels on the Central Coast.  And remember location, location, and location when purchasing this kind of unit.  We have one condotel that sits right on the sand in Pismo Beach and one that is only one block from the water in Oceano.

If you are interested in finding out more about condo hotels on the Central Coast, well be glad to answer your questions and help you explore your options.

Nancy Tucker, Realtor Associate
HomesCentralCoast.com Team
   

I continue to see below market pricing of foreclosure properties in the Santa Maria and Orcutt area resulting in a large number of offers which drive up the price.  Last week, a bank owned property came on the market in Old Orcutt which was listed at $189,900.  The previous owner bought the property for $469,500 in September 2004 and it was subsequently valued at $665,000 in December 2006, per a title search.  The property is over 2300 square feet on a 10,000+ square foot lot, has a swimming pool (in disrepair) and has a number of upgrades, including kitchen and bath.  It still needs a lot of work and is an ideal property for a contractor or handyman.  I showed it to several buyers and we had to wait in line for our turn.  There were multiple offers on the property and we won’t know the final price until it closes escrow, but I can assure you that it is going well over the asking price.