Raymond Ong's Blog

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Lenders and the federal government, prompted by the sheer volume of loan modification and short sale requests, have overhauled their systems and programs, making the foreclosure avoidance process much easier than in the past.

If you are considering short selling your home to avoid the financial and emotional fallout of foreclosure, you should be aware of the five steps you should take to increase your chances of a successful transaction.

First, do you qualify?

You must:

1. Have a verifiable hardship, like unemployment, medical bills, or relocation
2. Must have a monthly income shortfall
3. Be insolvent (you have no cash or assets that can be sold to pay down the mortgage), or headed towards insolvency

 If you meet these qualifications, follow these five steps to a successful short sale:

1. Contact me so we can identify your servicer, fill out a short sale packet for the lender, and assemble all the required information needed to list your home for sale
2. Gather financial information (i.e., bank statements, pay stubs) from at least the last three months
3. Keep your house in showcase condition for showings, and make as many repairs as necessary and that you can afford
4. Expect the lender, junior lien holders, and private insurance companies to request more paperwork, and try to gather requested information quickly to ensure transaction efficiency
5. Set realistic expectations and work with me, the lender, and the buyer to the satisfaction and benefit of all parties involved

For more information about how the short sale process works, or about any other foreclosure alternatives you may qualify for, call me today. I can help you alleviate the burden that the threat of foreclosure brings, and we can develop a strategy to help you breathe a little easier.

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If you are a first time home buyer or if you just start looking for a home recently, there are several new problems that you should be aware of as you beginning to look for a home.  Here is a list of them:

1. More short sale listings.  As we getting into the third year of home financing crisis, one would think that most of distressed property phenomenon should be behind us.  But if you check the multiple listing services, you will find more and more homes are short sale and REO properties.  In certain zip codes, almost 50 percent of the inventory is distressed properties.  At first, it doesn’t seem to make sense because as economy improves, home owners should be able to start making mortgage payments and less of them need to sell their homes.  But if you look at the days on the market information, you will find that many of these homes have been on the market for 150 days or longer.  This means that the bank and the realtors have not been able to sell these distressed properties quick enough to take them off the market.  Hence, the short sale homes are piling up. 
2. Many homes that aren’t really for sale anymore.  This is also a unique problem for the home buyers.  For example, if you see a home listed for sale on the computer, and you want to make an appointment to see it but upon contacting the agent or the home owner, you find out that the property already has several offers.  The listing agent is “collecting more offers” for the bank and ignoring the rules that every property that has an accepted offer must listed as pending sale.  This practice is not only unethical and improper; it also makes the inventory of home looks much larger and wastes everyone time because you need to confirm each and every listing to make sure they are actually for sale. 
3. REO agents and their notorious lack of response.  During the past three years since the housing crisis begin, there is a special class of realtors that begin to impact the market.  They are the agents that specialize in handling REO (bank owned) properties.  REO agents are notorious in their lack of response to your inquiry and your offer.  Granted that they have many extra duties to perform, such as evicting the existing tenants and repairing the damaged homes, but their attitude toward buyers and other agents is simply “take it or leave it”.  This is appalling.  You often find homes have been sold with several offers that are still listed for sale.  And the questions about the update on status of an offer are often ignored.  You can call and call and send many emails but nothing happens.  One realtor working out of Oakland that is particularly notorious for her lack-of-response practice that one can only wonder how they ever get anything done with their escrow. 

These problems have no easy and quick solutions.  As a buyer looking for homes, you need to be aware of the problems and be patient and persistent in your search and not be bug down by these market impediments.  I welcome your comments and solutions to these issues.  Please send me your comment and I will be happy to post them on my blog in the future.

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I just thought you like to see this.  After working with a couple who wants to buy a house for many months and after several un-successful bids on the homes, the husband finally wrote to me and asked me to tell him what is the best strategy to negotiate.  So I wrote my response to him and I post it here.  Some of the detail has been changed to protect their privacy. 

Regarding the price negotiation, here are some of the tips that I have learned that will really help… This is based on many, many difficult experiences working with buyers who just refuse to accept reality and insist on giving unrealistic low ball offers.

1. Understand your market.  Very few sellers are willing to sell below market. If you know the last sale in the area was for $650,000, trying to negotiate below that is unlikely.  Even if the listing price is $599,000, that is just a way to attract more buyers to bid up the price.  So the time you spent learning the market and the offers you made all serve a useful purpose – to help you understand the value.  Other factors that would affect the real estate, such as interest rate, the number of properties for sale in the same area, as well as the condition of the property, all have an impact on the value.  The most important thing is to study and learn the value so that you can protect yourself from making un-successful bids.

2. Look for property opposite to the popular taste.  If you look for the best location and best condition home, expect everybody else is looking for the same thing.  As a result, it is difficult to negotiate the price.  Instead, look for “diamond-in-the-rough,” the place that may not be perfect.  For example, instead of two bathrooms, look for home that has only one bath.  Instead of brand new kitchen, the kitchen and bath needed to be updated.  Find a place and use your imagination to see what it will look like if you put in some sweat equity.  Anyone can pick up a can of paint to work on an interior wall over the weekend.  If you are willing to work, the imperfect place can be a great deal. 

3. Look for property that has been on the market for a while and still hasn’t reduced the price.  This is not hard to understand.  For example, Palo Alto homes are very popular, and they sell quickly.   So if a house in Palo Alto has been on the market for over a month, it tells you that the asking price is too high.  You can wait for it to drop the price, or better yet, make an offer and try to negotiate.  I had many successful experiences negotiate the price down when the home had been on the market for over 4 to 6 weeks. Seller may not want to drop the price but secretly willing to negotiate.  Seller’s logic never make too much sense to me but it is part of the human nature and we just had to learn to live with it.  

It is important to understand that while trying to negotiate the best deal is important, timing of your buy is more crucial.  With the interest rate being so low, the housing price is down, anything you buy, even at fully price, will turn out to be a good deal in the long run.  Proper care for your home, location and patience will give you the best return in the house you own. Losing a good property because you want to negotiate extra $10,000 off from the seller will cause you more.  This is just common sense.

I am happy to report that my client has just brought a house after my letter to them.   If you have any questions concerning real estate market or the value of your home, you are welcome to send me an email at Ray@RaymondOng.com.  I look forward to talking to you soon.

Related articles

• Tips for Negotiating a Home Selling Contract (brighthub.com)
• Negotiating Tactics for Home Buyers (mint.com)

Where is Rivermark

Rivermark is a master planned community located in Santa Clara, California.  It is renowned for its convenient location close to major employers such as Cisco, Intel Semiconductor, Marvell and Yahoo, as well as the attractive life style and amenities.

The Rivermark area is loosely defined as the area between Montague Expressway, Lafayette St., Hope Dr., and the Guadalupe River. However, the official Rivermark of Santa Clara development is better defined as a sum of the parts, such as the Rivermark retail center, and the housing developments including The Arbors by Centex, The Park by Centex, The Promenade by Lennar, The Greens by Lennar, The Landings by Shea, and The Glen by Shea. Developments not included in the Rivermark of Santa Clara development, but included in the loosely defined area above include Mission Gardens, Miraval, and 550 Moreland.

 At one point, the largest town homes were selling for over $920,000. Obviously, after the financial crisis of 2008 and 2009, the market had been adjusted to the new reality. 

Market Trend

We have seen the low point of the market where the townhouses were selling in low to mid $600,000 at the beginning of this year.  However, since the economy and the high-technology industry are slowly making a recovery, we are seeing the price have rebound.  Currently, there are 4 townhouses for sale.  Their asking prices are ranging between $670,000 and $689,000.  And the lowest price one is the $670,000 on Kelley Way being a short sale property that has been on the market for over a year.  There are two pending sales, one for $689,000 and the other one $699,000.  The two recent sold properties were $690,000 and $700,000, respectively.  Last weekend, I drove through the neighborhood and saw a dozen open house signs.  Apparently there were a lot of interests and activities in the market for these homes. 

Here is a summary of the current list of homes and their list-and-sold price.  DOM represents “days on the market”, it is an important gauge of the market velocity.  (Please note: * represent short sales, not a regular sale)

   Look for a exceptional lifestyle, not just a home

The best part about Rivermark is its lifestyle.  With over 138,000 sq ft of retail spaces, the “Village” has many exceptional restaurants as well as casual outdoor cafes including:  Piatti restaurant, Baja Fresh, Coldstone, Posh Bagel and Peet’s Café and Teas, to just name a few.  During lunch and dinner time, it is often difficult to find parking.  The local school Don Callejon serves grades k-8 and has an API score over 840.  There are many small parks and playgrounds throughout the area for the kids to enjoy.  There is also an outdoor swimming pool serving the community.  It is a very safe and quiet neighborhood where many of the residents enjoy leisurely walks during the morning or late afternoon hours. 

If you are looking for an exceptional value in the Silicon Valley, take a look at Rivermark.  It pays to visit one of the restaurants and take a walk in the area and then talk to a local specialist about what is happening in the market.  What you will find will pleasantly surprise you.

Following the expiration of the federal home buyers tax credit, sales of existing, single-family homes in California declined 4.2 percent during the month of June compared with the prior year, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) June sales and price report. Meanwhile, the median price of existing homes in California rose 13.6 percent on a year-to-year basis to $311,950. The median price is the point at which half of the homes on the market sell for more and half for less.

• Although the median home price in California rose in June on a year-to-year basis, in month-to-month comparisons the median price declined 3.8 percent, according to C.A.R.’s report. Despite the slight decline in month-to-month home sales, California’s housing market continues to recover at a quicker pace than the national housing market. Nationwide, home sales declined 5 percent in June and the median price rose only 1 percent, according to a report from the NATIONAL ASSOCIATION OF REALTORS® (NAR).

• C.A.R. expects home sales to be lower in the second half of the year because of the absence of the federal home buyers tax credit, but sales should remain above the long-run average and be significantly higher than the trough in 2007.

• According to C.A.R. President Steve Goddard, “It’s important to keep in mind that home prices are substantially below their peaks and interest rates remain at historic lows, making this a very affordable time for many first-time buyers to purchase a home of their own.”

• Home prices continued to post modest gains in June, due in large part to the lean inventory of homes for sale in many regions of the state. C.A.R.’s Unsold Inventory Index slightly rose to 4.8 months in June compared with 4.6 months in May and 4.2 months in June 2009. However, inventory remains well below the long-run average of a 7.1-month supply. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

To read the full story, please click here:

http://www.sacbee.com/2010/07/23/2909637/home-prices-rise-despite-fewer.html

Today I attended a seminar hosted by Bank of America, one of the largest bank in California. The purpose of the seminar is to educate Realtors on how to submit their listing for short saleapproval.  There were about 800 Realtors from the South Bay congregated at the Computer History Museum in Mountain View.   Many of us know that there are increasing numbers of short sales on the market and most banks are having difficulties to handle the volume of short sales that they have.  So I applaud the effort from the BOA to trying to make the process more efficient and less time consuming. 

There were several points that I took away from this meeting:

First, it is going to get tougher, not easier, to get a short sale approved.  Most of the loans have already been sold to investors in the secondary market.  As the economy improves, more and more investors are a lot less lenient in their approval for short sales.  For example, if there is a job loss in the family, the investors would want to see if there are other assets that can satisfy the debt.  The loss of income in of itself cannot qualify the borrower for a short sale.  For the borrower, loss of income and decrease in market value of their home may make short sale seem like an attractive option.  However, if the borrower find out that they are still on the hook for any deficiency amounts (that is, the loss that bank suffers), the short sale may not be so attractive anymore.

Second, there seems to be more short sales coming.  The BOA representative told us that there are almost 6 million loans that are either 60 days or more behind on their payments. Of all these loans, many could be resolved by either a loan modification or some other means, such as deed-in-lieu of foreclosure or bankruptcy.  But there are still about 25 % of the home owner will seek short sales as a way to settle their mortgage problem.  And by his admission, the BOA rep told us that the BOA represents almost a third of the short sales in the market.  This is a huge problem for BOA.  The bank has increase its short sales negotiation team to over 1600 negotiators.  It also adopts a transaction platform to increase communication and efficiency in managing all the short sales.  But during the question and answers session, one can tell from many of the answers that even with increase staffs and new transaction platform, a short sale remain a complicated and confusing process that requires patience, experience, and diligent exercise of due cares to complete.  Many agents are telling the speaker that it had taken them sometime 9 to 12 months to sell a short sale property.  BOA rep assured us the bank is doing its best to handle the problem. But it doesn’t seem to get any easier.

Third, a stunning revelation that most short sales fails.  The BOA rep told us that last year only 30% of the short sales request was successfully completed.  This year the number has improved.  About 50% of the short sales succeed.  There were many reasons for the failure:  fake offers, buyer walk away after the short sale were approved, and most often, the buyer’s offer were too low to the investor.   If one consider this from the investors point of view it would make a lot of sense, since the investor’s objective is to minimize their loss.  They have little, if any, incentive to approve a short sale.  But consider this from agent and even BOA negotiator’s standpoint; it is such a colossal waste of time and resource.  Each short sale file would require 4 to 6 weeks to compile and be ready for review.  Then the sale fails for one reason or another.  The process will have to be repeated again from the beginning.  And from the seller’s standpoint, they had already lost their credit rating due to late payment.  Once the short sale is denied, they would suffer further by having their property foreclosed by the bank.  For the home owners, this is like double jeopardy.

Upon reflection, this would probably be the most troubling issue that I had to deal with:  Who is really helping the distressed home owners?  There are six million families that are behind on their mortgage payment.  They may have lost their job or having difficulties finding a job.  They are worried that the bank will take their home in foreclosure.  They had lost the equity in their home, which for many Americans represents their life saving and retirement funds.  Although the Government, through its TARP program, billed out the Wall Street and many of the large banks, including BOA, but no one, not the government, not the Wall Street, or the banks seem to be able to do anything to help middle class Americans to keep their homes.  I, as a realtor, can only do so much but I can’t change the system or the monetary policy to fix this problem.  Perhaps this is the one question missing from the Q& A that I really would like to get answers from the Bank.

Selling a property in this tough market can seem like a challenge. There are many reasons that a person need to sell their home. Some are personal, such as needing a larger home for an expanding family or the house is just too big for the empty nesters.  There are also financial reasons, such as job changes, cash flow problems, or relocation needs.  Here are five factors that actually make this a good time to post a For-Sale sign.

1. Sell low and buy low. Because all property values are down, the sellers’ loss on a property is really only a paper loss because the next property they buy also will be a bargain. If they buy smartly, when prices come back up in a few years, they’ll be in better shape.

2. Market has stabilized in many areas.  We are seeing that for the single family homes, many of the markets in the South Bay Area had bottom out during 2009.  We expect that market will continue to improve as the inventory remains low and the demand for housing is strong. 

3. Down-payment help is widely available. While nothing-down loans have disappeared, it is easy to find down-payment assistance for lower-income and first-time home buyers. Programs vary all over the country, but one good way to find them is to search online for “down-payment assistance programs” and the name of your region.

4. Your uncle has money to share. Besides the $8,000 first-time home buyer tax credit and the $6,500 move-up credit, there are an array of energy tax credits that can make home improvements pay off in cash.

5. Good help is available. Really talented real estate agents, contractors, and designers are available and eager for business.

If you are thinking about selling to upgrade to a better home or area, the first thing to do is to sit down with a financial planner to figure out what is your budget and then talk to a realtor to define about your housing needs and learn about your options.  If the home in the desired location is too expensive, looking for a condo or townhome in the same area could be an alternative.  Please feel free to contact me if you have any specific questions regarding your situation or the value of your home.  We are always here to help.

Another exciting index to follow is the absorption rate, which is an indicator that we watch very carefully every month.  The absorption rate is simply total available homes for sale versus number of pending sales.  The available home for sale is the supply of homes and the pending sales is the demand for homes.  In January ’09, there were 134 homes listed for sale and there were only 14 pending sales.  So the absorption rate is about 10.45%. That was the highest absorption rate we had in the past several years.  Last month, there were 51 homes for sale and 33 homes were under contract or pending sales.  The current absorption rate is about 64.71%.  This is a dramatic difference considering the fact that the unemployment rate in Silicon Valley is still above 11% and the news media continued to report lack of confidence in consumer spending.  We just don’t see that in the Cupertino housing market!  With such high absorption rate, we believe the home price will move up as there is more demand for homes and low inventory situation continues.

If you like to read the complete 21 page market statics report or, if you like to find out what is the value of your home, please send us an email or give us a call.  We welcome your questions and comments.

Median Home Sold Price During Last Year

Ken, a good friend of mine also a past client, has heard about the bargain deals in real estate. Being a first time investor, he has a lot of questions about the short sales and REO (bank owned properties). Here is a list of the questions that he asked me which I thought would be useful for anyone who is also thinking about taking advantage of the current real estate market as an investor.

Q: What is the difference between Short Sales and REO?

A: Short sale means that the current mortgage is higher than the listing price on the house. For example, if the owner owes $580,000 but the house is only listed for sale at $425,000, it is a short sale. Because the list price is less than the mortgage, either the seller must bring cash to the escrow to close, in this case perhaps $190,000 (the difference of $160,000 plus closing costs); or the lender will take a loss at closing.
The REO (real estate owned by the bank) means that the bank has foreclosed on this home and it is part of the bank’s inventory.
The major difference between short sale and REO is the ownership, in that short sale the owner still owns the property, whereas the REO the bank owns the property.

Q: Are there any chance that buyer may pick up a property that has lots un-paid bills?

A: No. By the close of escrow (that is, at the end of the long process of buying a house), the seller should provide buyer with a clear title (no lien, no back taxes, no un-paid utilities, no garbage fees, etc) and a title insurance which will insure against any UNRECORDED liens. The buyer don’t have to worry about any charges from the previous owner.

Q: Are there any additional costs that buyer should pay?

A: The buyer is responsible for paying any inspections that buyer had ordered, plus if the buyer is getting a new mortgage, the buyer will be paying the costs associated with that. Since most short sales are “AS-IS” sale, any repairs and remodeling will be your responsibilities too.

Q: Can there be more than one bank involved in a short sale?

A: Yes, there is possibility that there are a first mortgage and a line of credit against the property. But many times those two mortgages are from the same bank. Therefore there are two mortgages but there is only one bank involved.

Q: what is the procedure of the short sale?

A: The seller will sign the purchase contract, but the bank will ultimately decide whether or not the property is sold. The bank will review the offer and based on its own appraisal, and it will talk to the investor of this loan to decide if the offer is acceptable. If the offer is rejected by the bank, the property will be put back on the market and the buyer will get their deposit money back. But the buyer doesn’t get a refund for the inspections or other expenses that buyer must pay.

One of the complains with regarding to the short sales is that there is no easy way to know whether the bank will approve the sale and this leaves the buyer waiting and waiting. Fortunately, the federal government recently issued guidelines to speed up the process and provide more clarity for the buyer, seller and the lenders. The new Home Affordable Foreclosure Alternative Program, known as HAFA, provides a well-mapped route for executing a short sale. Although they don’t take effect until April, however, mortgage servicing companies have the option to implement them early.   I will discuss more about HAFA and its impact for the home sellers in my future blogs.

The news should not come as a surprise to anyone who has been watching the market in the past several months – Cupertino Home Sales show a healthy recovery from last year.  In fact, according the statistic from MLS, the median sold price for homes in Cupertino area increased by 27%, up from $870,000 to $1,106,004.  And the number of sold properties in November increased from 11 in November 2008 to 38 in November of 2009, a whapping 245% increase in sales.

There are many more signs showing the market strength:

• The number of pending sales (home under contract) increase from 20 homes in 2008 to 41 homes this November.  A 105% increase in sales activities!
• The number of new listings decline from 47 homes in 2008 to 32 homes this year.  The new listings represent the supply of inventory to the market.
• The months supply of inventory decrease from 6.8 month last year to 1.5 month this year.  The months supply of inventory measure how many month it takes to sell all the current inventory of homes.  The smaller the supply means more likely that the price will move up because the market is changing into a seller’s market.

Currently, there are 53 active listings on the market -  10 of which are asking 1.5 million or above, 25 homes are listed between 1 million to 1.5 million, and 18 homes are listed below 1 million.  For the  pending sales, there are 5 homes that are listed above 1.5 Million, 19 homes are listed between 1 million to 1.5 million and 24 homes are below 1 million.  The lowest pending sale home is Betlin Avenue, 3 bedroom, 2 bath, asking for $675,000.  The highest pending sale is the 5,300 sq ft, 5 bedrooms, 3 and half bath home on Stauffer Lane.  Asking price?  $3,500,000!

It appears that homes sales below a 1 million is the most active segment of the market and it follows by 1 million to 1.5 million.  The home sales above 1.5 million still face a bit of challenge. 

In short, sales are up.  Inventory is down. Median home sales price is increasing.  All these points to a healthy recovery of the Cupertino home market.  Despites the economic downturn and high unemployment figures in Silicon Valley, the real estate market in Cupertino is un-affected. 

I have been selling homes in Cupertino, Saratoga, Los Altos, Mountain View and Palo Alto since 1990.  If you wish to discuss your real estate needs or ask a question, please give me a call.