Marti Kilby, Broker Associate, San Diego, CA

Getting Your Offer Accepted: Price Isn’t Everything

It is a very rewarding moment when you learn that your offer on a highly desirable property was accepted over other competing offers….especially when the buyer is your best friend!

This last week I showed my dearest friend and her husband several properties. They are looking to move-up to a larger single-story home on a private lot with a swimming pool. Nothing seemed to be the exact fit, until the PERFECT home came on the market as a short sale; a gracious single-story home, on a beautifully landscaped one acre private lot with a gorgeous pool and its own 9-hole putting green, complete with sand traps! As we toured the property, my friend just fell in love, and I knew this was the one.

The home is being sold because the owners are sadly divorcing. However, every corner of the home and yard is full of personal touches that reflect how much love went into creating the home. From the Koi pond filled with beautiful golden fish to the landscaping and surprising garden art, you can see how much this property was loved and enjoyed.

We wrote a very strong offer just a bit under the asking price with a 20% down payment and $25,000 to be immediately deposited to escrow, (despite it being a short sale), no requested termite report or clearance and no warranties. However, this was a hot property, and I was nervous that despite our offer, there would be a bidding war with above asking price offers.

In the cover page to their offer I made the case for my buyer. I shared that my buyers truly loved the property and would like to adopt the Koi, with the seller’s permission and guidance for keeping them healthy. I also mentioned that the buyer’s son was on the high school varsity golf team and was already planning a great pool/golf party for the team. I shared their desire to cherish the home and share it with their children and grandchildren as their “forever” home.

The listing agent read the cover page of my offer to the sellers, and that did the trick! They accepted our offer over other higher offers because the sellers felt that not only would my buyers truly love the home that they had put so much work into, but they believed that because they had expressed such strong feelings about the property my buyers were more likely to wait out the short sale process (with 2 loans), than the other potential buyers. My friend of course is thrilled that I made it happen J

What I was reminded: Home buying and selling is still largely an emotional decision and letting the love shine through just might earn you your next accepted offer!

FHA Loan after Short Sale: Bet You Didn’t See This Coming!

A couple of days ago one of my favorite loan officers shared some information about a problem facing many would-be buyers who are trying to get approved for an FHA mortgage after a short sale. Here’s a couple of surprising things I learned that could squelch some dreams.

Most of us probably know that FHA requires a 3 year wait from the date of the short sale, (conventional 4 years), but here is the kicker: Did you know that for DU underwriting it is actually 3 years from the reported date? That means that if the 1^st or 2^nd lien holder didn’t report the account as closed until 10 months after the close of escrow, a buyer would not qualify until 3 years and 10 months after closing!

And it’s not just short sales. FHA looks at a short sale, deed-in-lieu, foreclosure, and loan modification, (YES, even a loan mod) as the same derogatory event, and as noted above they require a 3 year wait from the reported date. Approval for an FHA loan is normally based on running the application through the Desktop Underwriter (DU) automated underwriting program. The DU program reads the dates entered on the credit report so if that is incorrectly reported, the loan will be denied. In the case of a short sale, it might be helpful to find a lender who agrees to manually underwrite the loan so that the correct dates are used.

Besides the date, the other item that could trip up a buyer is how the old mortgage debt is reported. If the account is reported as closed, but still shows the amount not paid off in the short sale as a balance on the account, the reported balance will probably disqualify them in DU by calculating a payment and inaccurately increasing their debt-to-income ratio.

Advice from my loan officer: Following a short sale, borrowers should check their credit report from all 3 reporting agencies about 6-8 weeks after closing. If the sale is not reported, and/or it does not show a zero balance they should contact their previous lender to get it corrected. Then, get a DU or manual underwriting approval well before shopping for a home. It may mean the difference between buying again in 3 years versus facing an unanticipated and disappointing wait!

Enjoying Life in La Mesa at LakeMurray

If you’re lucky enough to live in La Mesa, CA, or in nearby areas of San Diego, you’ve probably discovered Lake Murray. The lake is one of my favorite places in the whole county and visited by hundreds of people every day who come to walk, cycle, picnic and fish. Unlike some other lake locations in town, no vehicle traffic is allowed on the perimeter road, making it an ideal place to safely enjoy a casual stroll or a full-on run. The road does not go all the way around and ends at the dam which is approximately 3.2 miles from the park entrance.

The reservoir is part of the sprawling MissionTrails Regiona lPark which also includes Cowles Mountain. There is no admission charge, but a small daily fee is required for fishing along with a valid state fishing license. The lake is stocked with trout from November to May, and you can also fish for bass, bluegill, catfish and crappie. Many choose to fish from the shore which is easily accessible, or bring a boat. There are boat launch facilities, but no rentals.

The lake is a popular location for get-togethers and offers plenty of tables and barbecues in the picnic areas, and ample parking. There used to be a concession stand, but it was closed several years ago, so plan on bringing your own food.

I jog or fast-walk at the lake several times a week and enjoy being a “regular”. I think there are some folks who practically live there as I always see them walking, no matter what day or time I show up! I especially love this time of year as the wild fuchsias and lilac are beginning to bloom with all of their bright orange and purple. I live about seven miles away, and to me Lake Murray is one of the best parts of enjoying life in La Mesa.

For more information about living in La Mesa, or to view some of the wonderful homes available, please give me a call!

Marti Kilby

Broker, Realtor©

619-846-9249

An Interesting Twist on Principal Reduction

For most of the 22 million homeowners who owe an average of $40,000 - $65,000 more than their home is worth, the recent $25 billion dollar settlement with the banks will bring no relief. According to Robert Menendez, Chairman of the Senate’s housing subcommittee, “When you owe more than your house is worth, relief can be hard to come by.” Among borrowers whose homes have dropped in value through no fault of their own, many choose to simply walk away, which according to Menendez, “Only exacerbates the problem.”

Menendez has introduced a bill that provides an interesting twist on the idea of principal reduction. The Preserving American Homeownership Act would encourage lenders to write down principal balances by allowing them to share in the home’s appreciation at a later date. The principal balance would be written down in increments over a three year period to 95% of the current value, so long as the homeowner remains current on their payments.

In exchange for the write-down, the lender would receive a fixed percentage of any future appreciation when the home is either sold or re-financed. That share could not exceed 50%. So if a principal balance was reduced by 25%, the bank would receive 25% of any future appreciation.

The Act would apply to primary residences only, but any homeowner could apply. Borrowers who are in default or even in foreclosure could qualify, but would be required to make their reduced mortgage payment on time in order to remain in the program.

The article in DSNews where I read about the bill did not indicate if the Act would apply to all types of loans or whether or not the modified loans would be re-written at today’s lower interest rates. Presuming so, this Act could provide enough incentive to many underwater homeowners to persuade them to stay in their home versus initiating a strategic default.

As a fan of principal reduction, I like this idea as it seems to be a win-win situation for both homeowners and the banks. Banks don’t take as big a hit as they would with a short sale or foreclosure, and the write-down is taken over a three year period, AND homeowners get to keep their homes with reduced payments and principal. Even the opponents of principal reduction might find something to like about this plan!

Before You Call Your Lender, Be Prepared!

If you owe more than your home is worth, and are having difficulty making your payments, you may be a good candidate for a loan modification or a short sale. The important thing to realize is that this problem won’t go away on its own and the sooner you attempt to deal with it, the better your opportunity for a positive outcome.

However, before you pick-up the phone to call your lender, be prepared! The person on the other end of the call is going to do a phone interview during which they will ask very detailed questions about your income and expenses. In order to be ready you will need the following items:

• A completed financial worksheet which outlines ALL of your income and monthly expenses. Make sure that the income you state matches the deposits to your bank accounts!
• Last 2 months pay stubs or year-to-date profit and loss statement if self-employed.
• 2 most recent bank statements for all accounts
• Hardship letter
• Last 2 years federal tax returns

This initial interview is a sort of triage, where they try to determine, what program, (if any), might work for your situation. The more information you have available, the quicker you will be able to move to the next step. Even if the interview doesn’t include questions related to your tax returns, these are the items they will want you to send to them so it’s best to gather everything before you get started. When you do send or fax, make sure that your name, phone number, email and loan number are on a cover sheet with a list of the items included. For the initial packet of information it may be best to send with a delivery confirmation so that you have proof of mailing and delivery.

Your hardship letter should clearly explain why you can no longer afford your mortgage payments. You obviously could afford them at the time the loan was originated, what happened to change that? Job loss? Death of a spouse? Divorce? This should be a heart-felt letter addressed To Whom It May Concern and be no longer than a couple of paragraphs. Just state the facts. It is helpful to write the letter before you call so that you have an answer ready when the interviewer asks.

On this initial interview, and all subsequent phone conversations keep a log, noting the date, time, who you spoke with and the key points of your conversation. Always ask about the time frame for the next steps and be prepared to follow-up! Never assume that something is happening….chances are good that your paperwork may become lost, so be ready to re-send it. And if you don’t feel like you’re getting anywhere, ask to speak to a supervisor. But remember that the folks working in the loan workout department are probably over-worked, and a nice comment and a polite “thank you” will make the process less stressful for everyone involved.

Best of luck! Don’t hesitate to call or email with any questions. I also have a great Excel Financial Worksheet that I’m happy to share. Just send me a request to marti@kilby.com.