Short sales continued to soar in January, reaching their highest level in California in three years as we enter our 5th year of the mortgage meltdown.

The California Association of Realtors reported in its Pending Homes Sales Index that the number of short sales increased from January last year and also from the previous month.

A short sale is a real estate transaction in which a homeowner sells a property for less than is owed on it and the lender agrees to discount the payoff.

Statewide, short sales accounted for 23.8 percent of all homes in escrow, up from 22.2 percent a year earlier, CAR reported. California Coast Property Group has reported that 98 percent of their business is focused and successful in accomplishing the daunting task of of completing short sale with a 100% success rate on the seller side. Why? Because we're committed to the very best outcome for our clients recovery.

The CAR index also reported:

• Equity sales dropped in January to 49.9 percent. Standard sales hit 52.7 percent in December 2011 and 46.5 percent in January 2011.

• Distressed properties, including short sales and bank-owned homes, increased to 50.1 percent in January, from 47.3 percent in December. They reached 53.5 percent a year earlier.

• Bank-owned REOs increased in January to 25.9 percent, up from 24.6 percent in December. REOs reached 30.8 percent in January 2011.

ATTITUDES SHIFT

A survey of homeowners last month showed that 83 percent of those who bought short sales were satisfied with their purchase, according to online real estate resource HomeGain. Short sale buyers were the most satisfied of any other sale type, the study indicated. Buyers are becoming more and more educated in the area of short sales and a good Realtor will inform them of the process and what to expect.

As short sales continue to flood the market, the survey shows attitudes are changing among home buyers and real estate agents, who once avoided short sales because of the stigma associated with longer escrows and high fallout rates. The banks are in the business to LOAN money and want to rid themselves of delinquencies and WANT the borrower to short sale vs. taking the property back and foreclose.

But the fact is, short sales are the best values around for home buyers. And buyers are coming around. Here’s why:

Better Prices: In the hierarchy of pricing for a neighborhood, new homes and standard equity sales trend to the top of the price range. Short sales and REOs sell near the bottom. Again, the bank needs funds to lend out to new loans and cannot do so until the delinquent mortgages are off the books.

Banks are willing to accept a lower price on a short sale because it’s their favorite method to avoid having to foreclose on the property. And foreclosures mean the bank will lose 8 percent to 12 percent more than from a short sale.

Better Condition: Short sales tend to be owner-occupied homes in better condition than vacant bank-owned properties. They are less likely to be vandalized, squatted on or stripped of appliances and fixtures. Homeowners tend to maintain their homes during the short sale process, as well. California Coast Property Group, headed by Sheila Rasak, informs their client that it's in their best interest to cooperate with the bank and keep the home in good condition until the close of escrow.

Less Competition: Because many buyers and agent avoid short sales, there is less competition among buyers. Many buyers aren’t willing to wait for a short sale, which can add a couple months to the purchase time line. But for those who are willing to wait, the payoff is handsome.

SHORT SALES DOMINATE

Because short sales have become more socially tolerable and economically acceptable, consumers choose them as the best remedy to their economic woes. With the California Debt Relief Act expiring on 12/31/12, Sheila Rasak makes it clear that the time is right to start the short sale process. CAR tends to believe that this debt relief act will NOT be renewed causing the distressed homeowner added stress with the chance of forgiven debt being a taxable event.

Short sales have a less-severe impact on credit history and allow a consumer to re-enter the housing market sooner than if they had a foreclosure in their past. A short sale also gives a homeowner the sense of control to handle their problems on their own terms. We like to say that the short sale process tends to put the borrower in the driver's seat.

More and more agents have gained experience and are better equipped to help guide their clients through the often-frustrating and sometimes treacherous short-sale process. Though the majority of agents still have little or no actual experience, those who have successfully completed short sales, and more importantly negotiate with the bank on their seller's behalf, can be counted on to help protect homeowners from the liability and tax consequences of such a transaction.

Legislators have created laws to protect homeowners impacted by the current recession from deficiency judgments and hefty tax bills. Again, there is talk of the California law getting ready to expire on 12/31/12 and the possibility of the federal law as well.

Waiting for that loan modification to go through is a tedious process and oftentimes end up either upping the house payment or making the terms of the modification a losing situation for the borrower.

So why wait? Call Sheila Rasak at the California Coast Property Group to find out how you can begin your recovery.

Short Sale Guidelines Are Making a Difference

By Sheila A. Rasak, SFR

The theory behind short sales seems simple enough: If a homeowner owes more money on a house than the house can sell for, and the homeowner is struggling to pay the mortgage, the lender will allow the house to be sold for less than is owed.

For obvious reasons, lenders are not big fans of short sales and often make it a complicated process. More and more we are finding that lenders are getting on board as they realize the over 80% of the few loan modifications they’ve granted end up in default.

In April 2010, The Home Affordable Alternatives Program (HAFA) released new guidelines designed to streamline the short-sale process and allow more delinquent homeowners to sell their homes and move on with their lives.

In its first year, participating servicers initiated 12,266 HAFA agreements and completed 5,447 transactions. Many loan servicers opted out.

According to the National Association of Realtors, the share of distressed homes—bank-owned properties and pre-foreclosure short sales— in April 2011 dropped to 37% of total sales volume, down from 40% in March and an average of 39% over the first quarter.

HAFA complements the Home Affordable Modification Program (HAMP), a loan modification program designed to reduce delinquent and at-risk borrowers’ monthly mortgage payments by providing alternatives for borrowers who don’t qualify for or don’t complete a trial modification.

“[HAFA short-sale guidelines] are designed to help people who are unable to keep their home under the HAMP loan modification program,” said Jeff Lischer, managing director for regulatory policy for The National Association of Realtors. “Let’s say you can’t keep your property under HAMP, the next step is a short sale, which is better than a foreclosure.”

It’s estimated that lenders lose about 40% of a property’s value on a foreclosure, whereas the figure is reduced to about 19% on a short sale. Moreover, the short sale is a graceful exit from the ownership, which can often be better for people’s credit scores and tax liability as foreclosure is a taxable event.

New rules also add incentives for the short-sale process. One incentive helps sellers relocate by providing them with $3,000 for moving expenses. A second incentive is for mortgage servicers, who receive $1,500 from the federal government for each completed short sale. Under new guidelines, homeowners can secure a short sale approval in advance from the bank representing a minimum net amount the bank will accept.

Lenders participating in the HAFA program maintain the following requirements for homeowners considering short sale: The loan must be less than $729,750, made before Jan. 1, 2009, and the home must be the owner’s primary residence. Also, the homeowner must be delinquent and unable to pay the mortgage, and the homeowner’s mortgage payment must be more than 31% of his or her before-tax income. For some of my clients, missing payments are their last resort as they struggle to salvage what’s left of their credit rating in hopes of returning to the housing market while prices are still low. Many loan servicers prefer that the borrower not skip their payments if they can find a way to pay while going through the short sale process.

Sheila can be reached at (805) 628-2898. www.SheilaRasakEstates.com Prudential California Realty is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

If William Shakespeare financed a home today he’d probably ask on the subject of mortgage points: “To pay or not to pay? That is the question.”

Homebuyers direct the same question to their real estate agents. Here are some perspectives:

In its simplest definition, a point is an additional loan fee that is paid to the lender in exchange for a lower interest rate. It’s called “buying down,” and it allows you to reduce your rate for the life of the loan.

Let’s say you secured a mortgage loan for $500,000 without points, at 4.6% on a 30-year mortgage, your payment would be approximately $2,560 a month. If you paid two points ($10,000), the interest rate in this example would go down to 4.1% and the monthly payment would decrease to around $2,415, a savings of $145 a month.

In this scenario, it would take you about eight years to recoup the money you paid up front, so if you are planning on staying in your home a while, this will save you money in the long-run.

Home buyers must answer some key questions to determine if paying points is a wise decision. Specifically:

· How long will you keep the home?

· Do you have extra money to pay points?

· Could that money be better used for something else?

Money managers may suggest that a smarter option is to invest that $10,000 because you could do much better than your $140 savings, but you have to weigh the variables.

“Paying points depends on your career, your interests and all the things that predict your future,” said financial advisor Thomas Watkins of Total Mortgage Services in Milford, Conn. “Points are paid up front while your savings will be spread out into the future. Therefore, you get more benefit if you own your home longer, or if you don’t refinance for a long time.”

The rule of thumb when it comes to points is simple: If you plan to stay in the house for less than three years, do not pay points. If you plan to stay in the house for more than five years, pay 1 to 2 points. If you’ll be in the house for three to five years, paying points doesn’t make a significant difference.

Another important aspect to consider: Since points are interest-payment related, they are fully deductible on your taxes in the year that you close. See your tax advisor for details.

Mortgage points can add up to valuable savings over the course of your loan, but the future isn’t always predictable. Even if you “plan” on staying in your home for

20 years, changes in your career or family life could alter the plan.

Sheila can be reached at (805) 628-2898. www.SheilaRasakEstates.com Prudential California Realty is an independently owned and operated member of Prudential Real Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.

but for some reason you're still living in La La Land and you think your property is never going back to the bank because we're playing Monopoly? I regret to inform you that you cannot pass go and you're not going to collect $200 if you tie my hands behind my back.

I'm a dedicated professional and enjoy my work. I work harder than I've ever worked before because of the current economic climate, but I still persevere. I meet buyer and seller objections on a daily basis and work hard at negotiating your contact so that you and the other party enjoy a mutually beneficial outcome even when you're facing foreclosure. In fact, especially when you're facing foreclosure because this is a serious event and I'd like to see you and our nation recover.

How is it that you've been listed on the MLS for over 80 days, have not reduced your list price, have employed one of the best selling agents in the county, and yet managed to make your home unavailable for showings because you don't want to be inconvenienced?

Bottom line, I'll not be showing your home anytime soon to my qualified buyer who can help you. There's a house next door that is open and is showing with a keysafe, has listed at or is slightly below market level, and the people inside have trusted their Realtor to do the best job they can and actually listened to sage advice.

Off to open escrow...

Jeez, nothing like waking at 4:00 am to check the status of your short sale(s) with Equator to see that your offer has been rejected for "Other". Excuse me? I had multiple offers on this property and did extensive bargaining to obtain an offer that is at or slightly above market (the market is still sliding downward) and $10k over the list price to receive a rejection that merely states "Other"? Does anyone out there know the meaning of "other"?

Needless to say, as John Paul Jones once said, "I have not yet begun to fight" and I briefly explained (electronically) my position and uploaded the offer to purchase, again. Time will tell, but I'm over here shaking my head until the next phase.

Like it or not, the banks are now seller negotiators and need to understand that the process on their part should include a counter when applicable.

The buyer may want the property, but I don't think they'll be willing to wait if they see the other unit that was just listed as a foreclosure for my original listing price!