Rudy Romo

If you are counting on real estate values rebounding soon, think again.

Here are some numbers that will be major factors in the real estate market recovery:

$14 Trillion Dollar U.S. Deficit. The 2-year extension of the Bush era tax cuts will continue to drive up these numbers.

$9 Trillion loss in real estate value since prices peaked in 2005.

9.4% U.S Unemployment & 12.5% CA Unemployment. Last month we gained 103,000 jobs nationwide while the workforce grows by $150,000 every month. Even if we gained 200,000 new jobs a month, it would take until 2022 to get back to 2005 employment levels.

$28 Billion California Deficit. Expect cuts, cuts and more cuts in public services.

$36M Sonoma County Deficit. Same situation in our beloved Wine Country.

There are 54M mortgages in the US. 27M have had at least one late payment over the last 6 months.

1 in 7 homeowners nationwide are at least 3 months late.

4 Million more foreclosures are expected in 2011.

World-Renowned economist Nouriel Roubini (aka Dr. Doom) was one of only a handful of experts who predicted the collapse of real estate prices well before they happened. He's predicting another trillion $'s in real estate value losses.

http://dealbook.nytimes.com/2010/12/06/dr-doom-predicts-another-1-trillion-in-housing-losses/

I believe the douple-dip in prices will be felt more on the mid to upper end market here in Sonoma County (>$500,000). While we may see a reduction of 3-10% on the low end, we could see up to a 20-25% further price erosion on the mid to high end properties.

If I was a homeowners whose mortgage payment is above 25% of fair market rental even if the home was not underwater, I would seriously consider renting.

For homeowners whose house value has dropped to below the loan(s) levels, the best option is a HAMP Loan Modification and/or a HAFA Short Sale.

There are many experts predicting values may not rebound for 5-7 or more years. This projection has to be a major factor when making that crucial decision.

Happy & Prosperous 2011!

I just signed up with PartnerFirst, a nationwide Real Estate Network designed to serve homeowners & agents/brokers with Short Sales. I took their intensive online course on Short Sales and acquired their PSC (Pre-Foreclosure Specialist Certification). Whether you are agent or financially-stressed homeowner, I recommend you visit their website. PartnerFirst link: http://members.partnerfirst.org/

I also have been certified by Equator with their Platiinum Short Sale & REO Certification. I also have been certified by NABPOP ) National Association of Broker Price Opinion Professionals), Titanium Solutions, Distressed Sales University and Harris Real Estate University.

Why would I focus so much time and effort on this, you may ask?

Please consider these facts which essentially guarantee a steady flow of Short Sales & REOs for several years to come:

• Half of the 55 million mortgages nationwide are in some form of distress.
• There are roughly 11 Trillion in total loans.
• Three Trillion are in pools of investors.
• Three Trillion are in whole loans (1 owner owns entire loan & 1/2 -1.5 Trillion- are in distress).
• Whole Loans are the easiest ones to get Short Sales approved.
• Ben Bernanke, Chairman of the US Federal Reserve Board, recently stated in CBS's 60 Minutes that he expects unemployment rate to remain high for 4-5 years.
• Economists predict another drop in real estate prices in 2011. Forbes predicts a 20% loss in values while Moody's predicts 8%. Like politics, real estate prices are LOCAL. Different area will be hit differently.
• As underwater homeowners realize the economic advantage of renting vs having an unreonably high mortgage payment, more and more Short Sales will hit the market.

Happy Holidays!!!

ADVANTAGES OF SHORT SALES

If your home is under water (you owe more than what it's currently worth), and/or you are having problems making your mortgage payments, it's important you carefully consider all options available to you:

Loan Modification- Banks are more flexible than ever to reduce mortgage payments by reducing the interest rate and at least some banks will reduce your principal in some cases. In order to qualify, you must prove you have income above and beyond your monthly expenses. Even in situations where the bank offers a Loan Modification and/or principal reduction, if the new payments are still well above the current fair market rents, a Short Sale could be the best solution.

While nobody can predict exactly what will happen, most experts believe real estate prices will stay stagnant for 5-7 years and consistent year-to-year appreciation may not resume for another 10-15 years.

Foreclosure- This is likely the worst option because of the long term effects it can have on your credit, your employment opportunities, income taxes etc.

Short Sale- This option is worth considering for the following reasons:

GROW YOUR SAVINGS

In most cases, once a homeowner decides a Short Sale in the best option, the sellers stop making mortgage payments. In most cases the decision is made AFTER the seller is already behind not before. The Short Sale process could take anywhere between 3-12 months or even longer in some isolated cases. I had two that lasted more than a year because the lenders took that long to approve them.

SAVE YOUR CREDIT (FICO) SCORE

With a Short Sale only late payments show up on the credit report.

Once Short Sale is closed, it is reported as "settled for less than full amount due". As long as your credit is kept clean in the rest of the accounts, the impact to the FICO Credit score could be as little as 50 points. A foreclosure could impact FICO scores by up to 200 points and stay on record for 7-10 years.

PURCHASING A NEW HOME

A person selling their home as a Short Sale can be eligible for a FNMA (Fannie Mae) loan after only 2 years. I have heard of cases where Short Sales sellers can purchase another home immediately as long as they stay current on the mortgage payments on the house they sold as a Short Sale. A foreclosure, on the other hand, can prevent the previous owner from getting a FNMA-backed loan for 7 years.

OBTAINING FINANCING

At this time, there are no questions related to Short Sales on the financing application. On a foreclosure, there is a question related to foreclosure in Section V111 of the Standard 1003 Application.

LOAN DEFICIENCY CONSEQUENCES

In a Short Sale, it is possible to negotiate that the seller be released of the deficiency in writing by one or more lenders. In many states, including California, lenders have the right to pursue a deficiency against the homeowner. It is more likely that lenders will seek a deficiency from the sellers on a foreclosure than on a Short Sale.

SALES PRICE VS DEFICIENCY JUDGMENT

It is likely that a Short Sale be closer to market value than a foreclosure (REO or Bank-Owned). Therefore, the amount lost by the lenders will be less on a Short Sale than on a foreclosure. In the rare event the lenders seek a deficiency judgment, the amount owed will be less on a Short Sale.

INCOME TAX IMPLICATIONS

On a Short Sale, the lender sends the IRS a 1099-C for the amount "written off". As long as the home was the seller's primary residence and was not refinanced, the Mortgage Debt Relief Act of 2007 protects homeowners from owing additional income taxes. In cases where the seller did not occupy the home and/or the home was refinanced and money was taken out, insolvency (Chapter 7, 11 or 13) could be considered.

EMPLOYMENT

A Short Sale is not a public record and is reported separately on a credit report. Prospective employers will only be able to see the late payments and the account has been settled. A foreclosure could pose a bigger obstacle to employment.

SECURITY CLEARANCE

A Short Sale does not pose any problems for Security Clearances. A foreclosure could be a problem when applying for police officer, military, CIA, FBI etc.

Disclaimer- In matters with potential tax and legal implications, it is always recommended that professionals be consulted (CPAs, Tax Advisors, Attorneys).

Rudy Romo

REO PRO REALTY

T: (707) 235-4773

F: (707) 526-5790

www.RudyRomo.com

rsraaron@comcast.net