Karen Fiddler, Broker/Realtor, Mission Viejo

Orange County California has been hit with the Housing Crisis as much as the rest of the country. Foreclosures, Short Sales.....many Mission Viejo families have had to deal with these realities. During the process, so many times the home owner is just trying to get through the day, and the transaction. But what happens after it's over?

Financial Recovery!

After you complete a foreclosure....or hopefully a short sale....you then need to reassess and recover. Now is the time to make good decisions to rebuild your credit. The City of Mission Viejo can help!

On March 15, 2012, the City of Mission Viejo is hosting a workshop called: Financial Recovery After Foreclosure or Short Sale.

This two hour workshop will feature local non-profit agencies there to help you get back into financial health. Everything from rebuilding your credit, how to reduce your debt and manage your money, to building assets. There are many free resources available to you as a Orange County and/or Mission Viejo Resident. The first step to getting back on your feet and becoming a home owner again is getting the right information. Come learn on March 15th.

Finacial Recovery After Foreclosure or Short Sale

Norman P Murray Community and Senior Center: 949-470-3062
Registration is required, but FREE!
March 15, 2012 from 5-7pm

Today my negotiation team and I had a shocking conversation with a short sale negotiator representing Specialized Loan Service (SLS). The negotiator threatened to contact the seller and threaten (his word) into offering something to make this deal work....or force (his word) the agents to pay from commission.

THREATEN!!

Wow....I was stunned!

Now for starters...In California, this is illegal! A law passed this past summer, SB458, the short sale sellers cannot be asked to contribute money, or promise of money, in exchange for a short sale approval. Additionally, it extends the anti-deficiency protection for sellers on all loans, not just the first.

I guess the SLS negotiator is not up to speed on laws that affect his business.

The conversation came to a halt after that outburst as he hung up the phone before I could educate him on the folly of this line of action. So far....the seller has not been contacted. Perhaps he was trying to scare US? I'm not sure! What I am wondering is whether the negotiation department of these lenders is turning to old REPO tactics....are my knee-caps in jeopardy?

In this post, I want to make it clear to all California Short Sale Sellers that you have rights! You cannot be intimidated into making poor financial decisions. You might need help.....and perhaps that's legal advice (which this post is not intended to replace....I'm not an attorney and am not giving legal advice). Do not under any circumstances listen to the scare tactics of a lender's REPO-Man without thinking it through and talking with the professionals who are helping you.

I'm so angry.....I could spit!

I feel like so much of my time these days is giving bad news to good people! It's tough! Buyers and sellers are getting bad news from me. But honest news.

Short Sale Sellers are hearing:

• The home value is so low that they have to do a short sale
• The Short Sale "might" result in an income tax bill
• There is a sale date scheduled
• The buyer walked

Equity Sellers are hearing:

• The real value of their home, not what they wish it were
• The home down the street is listed 30% less because it is a short sale
• We have an offer, a lowball offer

Short Sale Buyers are hearing:

• It's going to take a few MONTHS to hear back from the bank
• The listing agent just got a higher offer and has sent that ALSO to the bank
• The short sale approval doesn't include temite, or past HOA dues, or Hazard Reports, or title fee, or escrow costs, or, or, or
• The approval is 20% higher than our offer
• The approval is for 15 days and if we don't close there is a per diem charge

Buyers of standard sale properties are hearing:

• Just because the home down the street is listed 30% lower than this one, it's most likely not going to sell for that price....it's a short sale/bank owned.
• The sellers chose not to counter your offer because it was too low
• The sellers countered your offer to include "as-is" language
• The sellers will not pay for termite work

Just some of the many bits of bad news I have to discuss every day. It's not fun....for any of us. And each time I have to deliver this type of information, I worry. People don't like to spend time with "downers" and I feel like one.

But it's the truth....the unvarnished truth.

The current real estate market is complicated. I requires care and attention to navigate the various aspect of writing offers and getting them accepted...and of course closed. My clients are responsible adults who do not need to be babied, certainly cared for, but not lied to. We need to deal with reality as it is.....lies, distortions and omissions do not help anyone. On my part they violate the fiduciary duty I have for my clients. My job is to give the facts to the best of my knowledge and then allow my clients to make decisions......even if that means they want to work with someone who tells them what they want to hear.

I'm never going to tell a buyer or seller what they want to hear.....I'm going to tell them the truth.

I got my hair done yesterday. At my age, and with my amount of hair, this is a long process. Base color to hide my roots, highlights to pretend it's sun-streaked, trim, style...you get the idea.

I do enjoy it though...the salon I go to is filled with friends of mine. These are women that my kids have gone to school with and clients and personel all have a great time.

Yesterday, however, one poor woman was having major color correction done. She had been "impatient" (her word not mine) and a bit "cheap" and had tried a box of color on her hair. Nothing wrong with this....we've all used boxes for our color during tight times....tight on money or tight on time. This, however, was her first effort and she decided to spice it up even more by going lighter....ie, it had a lot of bleach in it.

Yes, it was a mess!

Orange in some places, still gray in others, dark underneath....pure disaster. To top it off, this was an expensive correction. We were all laughing about it....including her...but doing it right the first time would have made a lot more sense.

Later that afternoon (remember I told you how long my hair takes?) we were talking about real estate and how things were going. I said "great" which is true. One lady said that she knew people who just weren't paying for the commissions and listing on Craig's List and just "doing it on their own."

I couldn't resist reminding them that earlier they were dismayed that someone would try and color their own hair....but selling their own home? The paperwork, the disclosures, the title, the lending, the appraisals? Allowing unknown people (from a Craig's List Ad) into your home? Really?

A "do-it-yourself" real estate mess is a lot harder and a lot harder to correct than a bad hairdo.

So much of the Mission Viejo Real Estate Market is short sales. In fact, all of Southern California seems to be listing short sales. It's a sad situation that those who purchased or refinanced during the "boom" period a few years ago now find themselves stuck when they need or want to move.

In an effort to help these short sale sellers as well as the housing market in general, Washington DC had passed the Mortgage Tax Relief Act. This included the provision in which the federal tax consequences were not applied for a period of time.

Did you know that normally the amount of debt forgiven on a mortgage would be considered ordinary income to the tax payer?

For example: If you owed $400,000 on a mortgage but could only sell it for $300,000 in a short sale, the difference ($100,000) would be added to your income.

You would pay tax on an extra $100,000!!!

Obviously the intent was to help those who were already struggling financially to avoid additional burden.

Once someone decides to sell a home in a short sale...typically the seller does not pay their mortgage any longer. (I'm not suggesting this, I'm not a CPA nor attorney and these decisions should be made with professional advice) The goal being to save for the next chapter of their lives. They also expect a long time frame for short sale approvals. This is in essence rent/mortgage free living.

Sometimes this is the only thing which allows the seller to save enough to move forward.

Adding to the normal length of short sale approval is the lack of motivation for the seller. They are living free at the moment, and the longer that lasts, the more they can save. Often they are also hoping for a child to finish a school year, or job offer to come through. This can make the showing availability very limited. They lack a desire to show at all....let alone at inconvenient times. Embarrassment can also limit typical marketing activities, like a yard sign or open house.

However.....if you have been considering a short sale in Mission Viejo, or anywhere in Southern California, this might be the time to act. As of now, the Mortgage Tax Relief Act expires in December, 2012.

Maybe this seems like a long time away....but it's not. Most short sales go through a buyer or two and long approvals on each. There are many contributing factors; Buyers change their minds, the bank comes back with unrealistic approval price or terms, lack of attention from new buyers due to the length of time on the market, and some buyers will just avoid short sales altogether. Perhaps you don't need to list in January....but by March I would suggest some urgency, if you want to be safe.

Now maybe the Act will be extended, I know that would be a positive step for helping our market...and frankly, it's an election year. But if it's not...then closing January 1, 2013 vs December 31, 2012 could mean thousands of dollars of tax debt. Not a gamble I'd like to take.

If you are feeling that a short sale might be a good option.....talk to an agent. Get some information and direction. We can help....but don't come to us at the last minute, when it's too late.