Hemet, CA

When considering the purchase of aHemet home that has been foreclosed on by the lender (REO property - or Real Estate Owned), you should know going into the transaction that there will be some sweat equity that you will have to put into the property if it is going to be a worthwhile endeavor.

By sweat equity, I am referring to the fact that as a bare bones minimum, you are going to have to paint and probably deal with the flooring - one way or another. What I would like to address in this series of articles is some tips on minimizing the costs of rehabbing a property perhaps most importantly keeping the job as simple as possible.

This first article in the series will be on painting tips - since 99.9% of the REO homes I have seen for sale in Hemet are going to require some sort of painting to make the house a move-in ready home for either your family or that of your net tenant - if this is an investment property.

First you must educate yourself on the different types of paint that are on the market. Each type of paint has it's own specific use for a specific surface. You will need to learn about water-based paints as well as oil-based paints. Then there are the acrylics and primers and even more specialized paints for different types of projects. I won't spend time here going through each - talk to a knowledgeable paint salesman at either your local paint store or hardware store.

HINT: Before you start painting or using any sort of glue, I would recommend using a ordinary anti-static dryer sheet on your hands. When it comes time to wash up, you will get your hands cleaner a lot quicker!

Every paint job requires prep work - perhaps the most difficult and time consuming aspect of a paint job - unless you have trouble staying on the intended surface you are suppose to be painting, like I often do... Lets start with caulking.

CAULKING

If you ever watch a home improvement show, the pro's make it look so easy - trust me, it's not. At least it's not easy until you practice and perfect what you will be doing. I strongly suggest you get a tube of the cheapest caulk they have and practice on scraps of wood - places that will not matter at all.

The best advice I can give on actual technique is you need to learn how to push the bead forward and pull back on it at the same time. Remember that every caulk is different, so be sure to follow the instructions printed on the can.

As you practice, use your finger or better yet a plastic spoon to shape the bead.

HINT: You will come across some difficult to reach spots that your regular caulk gun will never reach or is just very difficult to use. When you run across this situation, use a 20CC plastic syringe as your mini-caulk gun.

Types & Uses for Different Caulking

Acrylic Latex - Perhaps the most common caulk for interior jobs. This is commonly used on counters and around sinks and tubs. It is relatively easy to use and inexpensive. Depending on the abuse the caulk takes; this should last indoors from 3 to 10 years.

Butyl Rubber - This is a very durable exterior caulk that should last in even the most extreme weather conditions for 10 years. You need to be careful when using this, as it is very difficult to clean up.

Siliconized Acrylic - This caulk is relatively easy to use and clean up. Even better, it will last for 20 to 30 years. It is, however, on the pricey side. Just remember, you get what you pay for in life.

Urethane Foam - This is not your traditional caulk, as it is dispensed from an aerosol can. It is very useful for filing hard to reach areas. When dispensed, it expands into foam that cures solid. This is a great product for filing in around electrical junction boxes and new windows, when they are installed. This is a pricey product and a single can does not go very far - so prepare yourself.

Well, this will give you some idea of the prep work that goes into painting. In the next article, I'll discuss some of the equipment - from the basics to the heavy-duty stuff the pros use.

Blessings to all who read this,

John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud to be a contributing member of the ActiveRain community.

The holidays are here and many REALTORS® are in slow down mode, spending valuable time with family and loved ones. Rightfully so, this time is well deserved and priceless as memories are created.

However, in order to survive the Hemet, CA Real Estate market that we are in, that by everyone's expectations will only get worse in 2008 we have to figure out what we are going to do to survive. I'm sure, I'm not the only one who receives emails soliciting my services to get into some other venture - using my REALTOR® skills and resources. Well, if it's OK, I'm going to stick with this wonderful industry we call Real Estate.

I will be doing things a bit differently though. This is the time to plan and figure out just what you can do and what you will do for the next year, so once all of the memory-making holidays are over, you can hit the pavement with both feet on the ground running.

I believe the key to success in this market is to keep doing what got you here - assuming you have a system for it. If you are working EXPIREDS or FSBOS and you have a system in place - then by all means keep plugging away. The same is for any other system.

I am going to implement a new system for first time homebuyers. My lenders don't know it yet, but I will be looking to them to foot part of the bill for this endeavor.

My New Niche - and What I plan to Do

RENTERS- That's right, nothing new...but new for me. Yes I have done business with renters in the past, but I have never targeted them as a group. 2008 will be different. I should point out that in my market, most of my qualified renters are currently renting single-family homes. We do have a number of duplexes and four-plex's in the market - but those rents are usually very low and in many cases are subsidized with Section-8 funds. We have very few actual apartment complexes - but there are a few and the rents tend to be a bit higher there. The main focus though, the renter in the single-family residence.

Step 1 - Identify my market. To do this, I will be working hand-in-hand with my Title rep to identify the criteria to identify a list of properties that are non-owner occupied. (If they are not owner-occupied, then chances are they are inhabited by renters - my target).

In order to kick-start the program and keeping it manageable and affordable to start, I will be looking for 500 properties to market to. I will want to keep the prospect list as close together geographically as possible, because at some point during the year, I will knock on every door at least once.

Step 2 - Load into my Database for easy management. Because Title will give me my information in an electronic form, downloading will be rather simple, once I get it figured out.

Step 3 - Start Marketing. It does not take a lot of genius to figure out that for a plan to work, it has to be put in play. Isn't there a law of physics that talks about motion and energy and how one creates the other? I think a guy named Einstein was made famous with this theory. So, having a plan is the easy part - implementing it is what matters. This is what I am looking at - again, allowing myself room to adjust as needed.

January - Send out initial Postcard with a picture of a typical newer home in my market (hopefully, one of my own REO listings). On the back I will have the necessary financial information that includes the monthly payment (and all disclosures) with a headline that might read: "You can OWN this home for only $1500 a Month!" I'll then direct them to call a toll free number to find out more details. Of course, the toll free number will be a call-capture system for easy follow-up by both the lender and myself.

February - Time to get intense. The January mailing will have scrubbed the list for bad addresses and such. Now it is time to get serious, since 40% of all tenants end up moving in the spring. Here I will do a series of 3 postcards, spread out evenly throughout the month. I'm still playing with ideas for the headlines, but one may be, "Where will You Leave When Your Lease is Up?" and another I am playing with will be something like, "Isn't it Time You started Paying for Your Own Home, and Not Your Landlords Retirement?"

March - Hold First time homebuyer seminar in a neutral location. This is not to sell any particular home or loan program. It will be a short and sweet 1-hour to 90-minute presentation - TOPS! Since this is TAX SEASON, a great topic would be the tax advantages of homeownership followed up by mistakes first-time homebuyers make in the shopping and buying process. To announce this, I will send out a postcard, with the call-capture toll free number for registration and information as well as running a small ad in a number of local weekly publications we have in our market (The Valley Chronicle, Easy Ad & The Penny Saver)

April - Time for another postcard. Here I can use a headline that offers a suggestion like, "Whatever You Do, Don't Renew Your Lease Until We've Had a Chance to Talk". I'm thinking instead of showcasing a particular property that I might showcase a wealthy real estate investor - perhaps an icon like Donald Trump and tell a bit of his story on the back of the card. End with a call to action for more information.

May - Switch up the marketing. Now, instead of showcasing a SFR, highlight a local Condo (we do have a few nice complexes in the valley). Not everyone wants to move into a home with a yard and maintenance. There are those that thrive in a tighter community with amenities.

June - Here I am going to talk about the benefits of working with a REALTOR® and his team when shopping for a home. I'll send out a postcard with a group photo with as many local vendors as I can muster together for a shot in front of my office with a headline along the lines of, "Did You Know...When You Buy a Home You Don't Pay Your REALTOR® or his team a Dime!" Having a group photo, I can charge the vendors for participation and marketing and remain RESPA compliant.

July - Here I will repeat the steps taken in February; sending out a series of 3 postcards with different headlines since about 30% of all tenants move in the fall. For this campaign, I'll again work on the financial side with a headline that might read, "What You Will Pay in Move-In Costs in a new Rental Might Allow You to Own a Home Instead!"

August - Again, I will repeat what I did in a previous month - looking back to January, I'll create a new postcard with a similar headline and message.

September - Following in the footsteps of March, it will be time to hold yet another first-time buyers seminar with marketing campaign similar to the one held earlier in the year - always willing to make adjustments as necessary.

October - Again follow the footsteps of April, creating a new story on a new icon with a different call to action

November - There is not much activity in November, but it is important to stay in front of the market, so I will probably send out a holiday greeting with a very subtle message.

December - Like November, there is not much going on, but a simple holiday card would be a nice way to stay in front of the prospects and their family. Here, instead of a postcard, I may hand address actual Christmas Cards - with no business message, what so ever.

STEP 4 - Gather Data. I already mentioned that I would be knocking on every door at least once. While I am in the field, I will take digital pictures of every home in my database. This will allow for some custom marketing pieces.

STEP 5 - Market to Investor / Absentee Landlords. I also plan on sending a mail piece to each of the property owners at least once a quarter. Imagine the impact of a property owner receiving an envelope with a picture of their investment property printed on the envelop, with a tile reading, "Have You Seen Your Investment Property Lately?" Yes, this will be a bit labor intensive to get going, but once the database has been created it is there and can be used for many different functions. So, if an out of town investor is looking to either buy more Hemet CA properties or wants to sell the one they have, hopefully, I will be the one that stands out form the crowd - proving that I am an effective marketer.

As far as my marketing choice, I have chosen postcards because they are the least labor intensive and the message will be seen by everyone who goes through the mail (including the mailman).

There are 3 different size postcards - a "standard" would be the 4" by 5". These should be avoided, as they too easily get lost in the shuffle. Rather select a card that is larger than most of the mail the prospect will read. The 5" x 7" is a good size. If budget allows, step up to the 8" x 10".

If you can keep all of your mailings into a single zip code, you may consider bulk postage to save money. However, when doing direct mail, I am an advocate of using designer stamps and putting them on the card myself. Sooner or later, you will be in a home and a 10 year old kid will come and thank you for all of the pretty stamps you have sent that they have collected - and looked forward to every month.

Aside from being to corporate, bulk mail will typically take up to 10 days to be delivered - even if you drop it off at your local post office. Usually, it has to go somewhere else to be processed and returned.

I have been debating with myself, as I develop this niche, and have decided that none of the marketing is about me. Yes, I will do a piece on my team, but the focus is the value of the team and the fact that we get paid from the seller and not the homebuyer.

Staying focused on the message that appeals to first-time homebuyers in Hemet, CA will build my credibility. The whole idea is to generate phone calls because they like and trust what I have provided them with, because in the process, I am establishing myself as the expert

So, go ahead now...identify your own niche market and figure out a plan to implement so you have something going on next year. I believe that every niche if designed and implemented properly can generate 1 or 2 good solid transactions a month. Yes, it may take time to get that, but it will happen. A well document system for servicing your niche is the true value of your business - not the book of business you have done in the past. So document your system and build your business.

Until Next Time, Have a Blessed Day,

John Occhi, Hemet CA REALTOR®

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner please call (951-443-6259) for your free copy.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

I have mentioned before that buying and selling real estate in Hemet, CA is a team sport that requires skill, coordination and spirit - just like any professional or amateur sports team. A team cannot function if it cannot coordinate its efforts, if it does not have the skill to play in their league or team spirit with a drive to be #1.

I have a friend, Joey Aszterbaum, one of my preferred lenders with Patrion Mortgage - a division of Altura Credit Union who uses the phrase, "His Success Team" to describe all of the people he surrounds himself with to conduct business

Real estate in Hemet is no different. Not only does it take a realtor to buy or sell real estate, there are many other players, each of which plays an integral role in the process - a process that must be coordinated so the right player is on the filed at the right time.

For sake of this series of articles, I will consider the purchase team, since it is more complex - the sellers team has many of the same players doing many of the same tasks - but for this article, we will focus on buying real estate.

It should be pointed out that team members may work together, but each is either an independent business or an employee of an independent business. If any tam member were to have a financial interest in another company that they refer you to do business with, they would have to fully disclose that under the Real Estate Settlement ProceduresAct, also known as RESPA

1. The REALTOR® is perhaps the most important player to the buyer, because the REALTOR® is the individual that will have the most contact with the buyer - from the very beginning to the very end of the transaction.

I have used the analogy that the REALTOR® is to the real estate transaction what the conductor is to the symphony orchestra. It is the REALTOR® who is constantly in the spotlight and is totally responsible for the outcome of each section of the orchestra as well as each individual player.

2. The Loan Officer will be the second most important person in the formula to success. It is the Loan Officer who will be called on to bring the money to the table, in a timely fashion. The Loan Officer does not set the rules; he just follows them (or he goes to jail for mortgage fraud) and gathers the information required by the lender. A good loan officer will have many resources available to obtain loans and will place a loan in a program that is best for the client - not the one that earns him the biggest commission check.

In addition to using Joey Aszterbaum, I have a back up mortgage broker, John Severino of Symphony Mortgage that is a very integral part of my Success Team. The reason for two players is not to keep each of them honest, but rather because they each serve and specialize in different segments of the market. As the Conductor of the Hemet Real Estate Symphony Orchestra, it is my job to go in the right direction and lead the Hemet homebuyer to the lender that will be the most responsive to the particular situation at hand.

3. The Appraiser is rarely someone that you get to choose. The typical scenario is that each lender has their list of approved appraisers. Many times the loan officer is tasked with coordinating with the Appraiser and you may be able to influence the decision as to whom they will use. As an investor, it is always good to have an appraiser available that you know will get the right job done. As a consumer, it is more important that your loan officer is confident in the appraiser and that it will be honest, fair and come in where you need it to be. A good REALTOR® will always have a referral to the best appraisers for the area the REALTOR® works.

4. Escrow Company plays a critical role in each and every transaction. Your REALTOR® should negotiate firmly with the other REALTOR® for selection of this vendor in every transaction. A good Escrow Officer can make all of the difference in a smooth transaction closing on time and a total disaster.

Escrow in California may be a bit different than most other states in the country. Here, escrow is responsible for making sure that all the terms of the purchase agreement are adhered to and that the funds are dispersed according to the contract. The Escrow officer has a unique position in that they represent each party individually - the buyer and the seller.

Escrow is in place to minimize the potential for fraud, loss, theft, errors and even a conflict of interest.

When selecting an escrow company/escrow officer you should be looking for experience and not price. In boom times, escrow offices sprout up all over the place. Many realty offices will have their own in-house escrow companies. I do my best to avoid these as a potential for a conflict-of-interest or preferential treatment to one party over the other.

Although most escrow companies charge similar rates - typically a small flat fee and then so much per every thousand dollars of a transaction. Some do charge a flat fee. My advice is to never select an escrow company based on price - in case you may have forgotten, you get what you pay for and escrow is no different!

For real estate transactions in Hemet CA, I always prefer to work exclusively with Michelle Hewitt of Fidelity Title & Escrow; she can be reached at (951) 652-5522.

5. Title Company is another integral team member. You should find one through your REALTOR®, as your REALTOR® will do consistent business with the Title companies and should know which one do what they are suppose to do and which ones don't perform at the speed you need. Many an escrow has been held up due to a slow Title Company.

The Title Company will guarantee a clean title to the property when you take possession - meaning there are no liens or other encumbrances on the property that may come back and haunt you.

Although, every now and then, something can go wrong. I had my own personal experience. My home is on an acre and a half - consisting of two different parcel numbers. When we refinanced and set up a impound account for our taxes and insurance, it turned out they were only collecting the taxes on the larger parcel and not the smaller.

Advance the calendar five years and Riverside County is now ready to auction my smaller lot - leaving me land locked. Well, the Title Company stepped up and paid 5 years of delinquent property taxes and penalties to avoid the auction.

My choice for Title in the Hemet market area is Fidelity Title and Escrow with Mr. Mike McKinlay taking care of the needs of my clients. Mike can be reached at (951) 852-2262.

6. Real Estate Attorney is an important team member for the real estate investor and less important for the family looking to buy a home to live in. I say this because there is typically little to resolve in the purchase of a home that the REALTORS® can't work out with the help of their clients

A good real estate attorney can be instrumental in obtaining legal advice and creating strategy.

Remember, in California; only an attorney can give legal advise. As your REALTOR® I can offer an opinion based on how I feel something may happen - but only an attorney can give you sound legal advise on the consequences and what to expect in the case of a dispute. Nothing can replace a true understanding of the law and how it applies to your own unique situation.

A real estate attorney can also provide the investor or For Sale by Owner seller with the necessary legal documents to facilitate a transaction. As a licensed California real estate agent and member of the California Association of REALTORS® (CAR) I have direct access to an entire library of legal contracts and forms that comply with all of the necessary laws - both state and federal. An investor working without a member of CAR (not all licensed real estate agents are REALTORS® or members of CAR) may not legally use CAR forms.

Because no one wants to use a lawyer because they are involved in litigation, it is best advised to seek one out early in the process of building a real estate business. I can hear my Grandmother now, "An ounce of prevention is worth a pound of cure".

7. Home Inspector is a team member that you need to rely on. If you are only involved in one or two transactions a year - either as a consumer or as an investor, then it is best to rely on your REALTOR® to select the home inspector he typically uses. However, if you are involved in multiple purchases on a regular basis - find someone you know and can trust to deliver the unbiased analysis of the condition of the subject property.

A good home inspector will spend anywhere from an hour to two (longer for larger homes) and literally inspect every system in the home. Any questionable items will be identified as well as those in outright need of repair. The Home Inspector will also point out any code violations, based on today's building and safety code.

When the inspection is completed, you should receive a printed out report with a detailed explanation of the issues that were raised, including color photographs. In today's era of technology, most home inspectors will also generate a version that can be emailed to you or accessed from a secure website. (Make sure you save a copy to your own computer, as it may not be available a year down the road.)

I suggest you make certain that you are at the property when the inspector is working and stay close to them. This way you can see the thoroughness of the work they are doing and get a good feel for the home. Certainly, at the end of the inspection, the Home Inspector should walk you through the entire home, pointing out every issue that they raised and the seriousness of each issue.

Most inspectors I have dealt with separate themselves from any conflict of interest by not making themselves available to do the work. Then there are those investors who have a "go-to" guy that will thoroughly check the home out and then be paid a fee to correct the deficiencies.

Know what works for you.

8. Insurance Agent is probably the most overlooked team player. I can't begin to tell you how many escrows are delayed (never one of mine) because the new homeowner neglected to acquire the right insurance before the close of escrow.

You probably already have an agent for your existing home (if you are a homeowner) or even your automobile insurance. Most companies offer multi-policy discounts, so make sure you ask and consolidate if possible.

When buying a home, you should let your insurance agent know with as much advance warning as possible. No one likes to jump through hoops and obtaining the right policy for you will typically take a few days.

Insurance is similar to an attorney - no one want to ever use it, but it is nice to know they are available when the need does present itself.

A good Insurance Agent will also be your "go-to guy" if you need to file a claim. Recently in our area, we had some 130 mph Santa Ana winds rip through portions of our valley. A local agent who has space in my office, Chris Skeeters, was on the phone checking out his policyholders, initiating action on behalf of the company - great service is a great thing to find and should not be overlooked. Like every other service you contract for, price should never be the deciding factor.

As an investor, you should consider an umbrella policy. This is a policy that kicks in when the limits of your regular policy are exhausted. An umbrella policy will not only cover you for losses on your rental properties but your primary residence, your vehicles and even business claims. Umbrella policies are generally issued in $1 million increments and will typically run about $20 per month, per million - a small investment for the piece of mind they bring.

You may want to check with any Associations you may belong to for special packages. I personally have a great policy through AARP.

9. Chattel Appraiser is definitely the most overlooked member of the real estate investor's team. Most people don't even know that Chattel is - because it is not a term used very often. It simply means personal property - both the moveable and unmovable type.


As in investor of rental property, you should have the home appraised as soon as the rehab is complete - before your first tenant moves in. The fee the Chattel Appraiser will charge will be nothing on comparison to the tax benefits you will legitimately be able to claim with his report. If you are ever audited, then you know you will not have any issues with your properties and the tax deductions you have taken.

So other than your spouse or partner, you should have a solid team of seasoned professionals that you can call into action for the acquisition or disposal of your real estate investments. As time allows, I plan on re-visiting each of these team members and expanding on the use of each and the criteria to select the best player for your real estate investing team.

Until Next Time, Have a Blessed Day,

John Occhi, Hemet CA REALTOR®
Mission Grove Realty

Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner please call (951-443-6259) for your free copy.

This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® with Mission Grove Realty who is proud to be a contributing member of the ActiveRain community.

Critical Mistakes for the Investor to Avoid: The Loan
by John Occhi REALTOR
Realtor Consultant to Foreclosure Investors

Many real estate investment mistakes can be avoided all together if the investor simply compares apples to apples when considering different loans.

I know, it sounds obvious, but sometimes I think loan packages are as confusing as buying a mattress. You know, you have seen the news expose on the mattress industry where a manufacturer will produce the exact same mattress and sell it under a different model name to each of its retail distributors so the retail guys can advertise the lowest price on that model...because it only exists in that one store.

And that's the way loans can be spun. The same item can be called so many different things and the pricing can either be in basis points, a percentage or even a flat dollar amount - almost impossible for all but the sharpest of experienced investors to sit down and truly compare loan opportunities.

Now, I am a REALTOR®, I don't pretend to be an expert on mortgages - those guys make enough money putting together loans that they don't need my input any more than I want your lender driving around with us throughout Riverside County or any where else in California, looking at investment real estate. They do their thing and I do mine. Together we form your team - so it is important that you work with a lender that can give it to you straight and if there are variances in any of the products he suggests to you, make him break it down so you are comparing apples to apples and leave the oranges in the trees.

Hoping to make your California Real Estate Investment...
A Pleasant and Profitable Experience,

John Occhi, Hemet CA REALTOR

California Foreclosures and Deficiencies Balances
by John Occhi, Hemet CA REALTOR  
Mission Grove REALTY


I just received an email from a member of the public, Reid Pi*zz*   who found Brad Andersohn's  post The California Foreclosure Process & Timeline.

                                                                                               

Reid is in a jam and on top of that his wife is stressed.  Anyone who has read much of my work knows how I feel about keeping the wife happy, I cover my personal story in great detail in the blog article I wrote called, Why Do I work the PreForeclosure Market and Want to Help?

Reid is upside down in his mortgage.  He owes $305K on a home that is worth $250K and the mortgage has triggered to a new higher payment that he and his family just cannot afford.  The debt is not for purchase money, but for equity that he has taken out of the home and spent - allegedly on credit card debt, yet he is still buried by credit card debt today.  (I don't want to sound judgmental Reid, but this was foolish and in hindsight I am sure you would agree.) The big concern that Reid has is about a deficiency balance and whether the lender can or will come after him for the difference.

Reid has been very diligent.  He has spoken with a number of bankruptcy attorneys and has conflicting answers.  It is interesting that he divides the two answers into attorney that he has dubbed the "old-timers" and the "newer and younger".  Brad reports:

Some said that in a foreclosure in California there is really no need to worry about the deficiency...they said it would be too much trouble for them to do (the old timer bankruptcy lawyers said this) The old timers said "Foreclose, walk away and don't worry about it". And some said that they WILL in fact go after us for the remaining money.... (the newer (younger)  lawyers said this).

Bear in mind that the bankruptcy laws recently changed and much has changed with them.

Reid did additional research at this official looking website and found:

One of the major differences between the two foreclosure methods is your right to obtain a deficiency judgment, which is available when the loan is a "non-purchase money" mortgage or deed of trust. If the Property is other than one to four residential units, or if it is one to four residential units and the borrower did not intend to occupy, your loan (as distinct from a seller "carry-back") would be "non-purchase money." When your loan is used to finance or refinance the equity of the Property (no sale transaction is involved), the loan is also "non-purchase money."

If your loan is "non-purchase money" and you determine the protective equity is insufficient to repay the entire amount owed by the borrower, including all of the fees, costs, and expenses of the foreclosure, you may want to consider a judicial foreclosure. Deficiency judgments are not available when the non-judicial foreclosure method is utilized. However, collateral actions (a separate judicial action) for fraud, waste, or malicious destruction of the Property may still be possible.

Reid had a very interesting observation based on his extensive research and concluded: 

**I seems as if CA has strict anti-deficiency laws in place that came from the great depression where owners had to foreclose and then were further burdened by the lender suing for the deficiency! Which in turn made borrowers even "broker" after losing their home. 

Reid has read much of what I have written on the topic, so he has asked me to chime in and offer what information I could.  Please understand Reid, that I am not an attorney and cannot give you legal advise.  I have summarized what I believe to be your situation - I may have some of it wrong and there may be elements that have been left out - so what I have to say is just that, what I have to say and that and $5 and you can get a cup of coffee at Starbucks.

Will There Be a Deficiency Balance Owed?

I do not know of any lender that has perused a deficiency judgment against anyone.  This does not make it so.  My guess, if they are going to start, they will start with the homeowners who live with a bitter taste in their mouth and act destructively towards the home as they leave.

I also know that in order to obtain a deficiency balance they have to take judicial action against you this means to sue you in court.  To do so is time consuming and expensive.  Certainly to foreclose is much more advantageous because they get their home back so much quicker and they then can go ahead and sell that much quicker and recover at least some funds.  In case you missed it, you might want to read Why would a Lender Consider a "Short Sale"?.  The principals between a judicial and non-judicial foreclosure are pretty much the same as discussed here.

I suppose the big unknown is what will happen when the 2^nd gets wiped out in foreclosure or a short sale.  The first will be barred from pursuing you for a deficiency (if there is one on the first) - but what about the second who might receive nothing in a foreclosure or only $1,000 in a short sale?  No one really knows.

TIMES CHANGE

However Reid, there are no guarantees, as you well know.  My fear is that we will see a class of scum sucking bottom feeder attorneys who emerge buying these types of debts (non-purchase money second mortgages) and pursuing them - happy to make ten cents on the dollar.  For them it will be a windfall - for those they target it can mean nothing but additional hardship and pain on top of an already ugly situation.

                                                            

Based on what I know of your situation Reid, you need to consider listing your home with a REALTOR® right away and pursue a short sale.  It can be a complicated process, time confusing and stressful for everyone involved.  Not everyone is cut out for them and not every REALTOR® should be handling them.  I have written over 25 articles on the topic of short sales here in ActiveRain that you should consider reading.  They describe the process from several points of view - which will give you a good overall understanding of the process.  In addition to the other articles I have directed you to, I would suggest you start with What Is A Short Sale?

Reid, give me a call and lets chat.  You can reach me direct at 951-443-6259

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR®
Hemet California Real Estate