Simon Mills

I am often asked what the benefits of a short sale over a foreclosure are. Most real estate agents would agree that the borrower's credit score is affected less with a short sale, but there are not any real facts to back that up.

When was the last time you filled out a Uniform Residential Loan Application also known as Form 1003? On page 3 under section VIII Declarations question C asks, "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?

It would seem to me that 7 years is an awfully long time that you would have to declare that you were involved in a foreclosure which will certainly have an adverse effect on the lender's decision to give you a loan. It is a Federal offense to lie on a credit application, so not declaring the truth is not an option.

There is nothing on the application that states that you have to admit to a short sale.

With the current tax benefits and the future benefits of being much more attractive to a lender it just does not make any sense not to at least attempt to do a short sale.

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Simon Mills of Mills Realty is in the top 1% of listings sold in California. He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Here is the scenario that led me to this revelation...

I have been working on a short sale for 14 months and have finally received an approval from the lender and the property is now in escrow. The buyers want to do an inspection, but there is no power and the seller has no money to pay to get it turned on. I proceeded to call the Los Angeles Department of Water and Power in order to get the service turned on. After following the maze of prompts I finally made it through the 45 minute hold period to talk to a human.

These 45 minutes did not go to waste. I was thinking wouldn't it be great to put together an information website that had all of the prompts figured out so you could get directly to a human to answer your questions. Then I realized that I have a hard enough time updating my blog once a week how would I ever be able to complete the task of going through thousands of merchants' telephone systems to figure out their prompts.

Google to the rescue. I found a site appropriately called www.GetHuman.com. Every merchant I could think of is there with all of the telephone push button prompt to get you to a live person quickly.

I love the Internet!

...and yes I did get the power turned on!

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Picture provided by Harry Cobra

Simon Mills of Mills Realty is in the top 1% of listings sold in California. He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

The economic downturn and the current real estate market have made HOA's (Homeowner Associations) very hard pressed to collect their monthly payments from homeowners. I am often asked by seller's facing foreclosure or trying to negotiate a short sale if the HOA back dues that they owe will be wiped clean.

The simple answer is no, but there are some variables that can apply.

In a short sale situation I am often able to negotiate with the lender to pay the HOA. Sometimes negotiations have to be done with the HOA themselves in order to arrive at a palatable figure for the lender, but most HOA's are willing to negotiate as they know the possibilities of collecting from the current owner are slim and they are looking forward to a new financially secure owner who will be paying the dues.

In a foreclosure where the property has no equity (if it did it probably wouldn't have to be a foreclosure!) the situation is a little different. Although the HOA has a recorded position on the title report it does NOT have a priority lien position over the mortgage encumbrances. A HOA would have to file a lien and the lien position would be dictated by the recording date. In most cases since there is no equity in the property the HOA's only recourse is to go after the former owner personally.

So the answer to the question, "Are HOA dues a personal liability?" the answer is YES!

HOA have the right to go to court and get a judgment against the former property owner. Depending on the amount they can go to Small Claims Court or to a Civil Court. Whether they can collect is an entirely different subject!

An important point to mention is that the new owner of the property is NOT responsible for any past arrears. I have often heard of an HOA trying to collect past arrears from new owners. These past due arrears are not the responsibility of the new owner unless the new owner assumed the debt as part of the purchase.

If you are part of an HOA with a large foreclosure problem then get ready for an increase in your dues. The HOA needs the funds from the monthly collections to pay for the maintenance of the building. If there is a shortage an assessment will be levied upon all of the owners.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow. Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home. Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California. He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

The economic snowball effect is reaching the pace of an avalanche. First it was bad loans putting pressure on home prices and now unemployment is adding to the downturn. The circle is vicious as unemployment fuels the borrowers to miss their payments and the bad loans have spooked banks from lending to business so they cannot hire new employees.

Negative equity is when your loan balance is higher than the current value of your home. Generally speaking if a borrower put down 20% to purchase their home and they are in a negative equity position they still will make their mortgage payment as they feel that they have something to lose...even though currently it has already been lost. On the other hand borrowers who put little to nothing down are not financially attached to their property and can walk-away knowing that it was not their money that was lost.

With unemployment at over 10% in California and rising it looks like this avalanche is going to continue for sometime. These indicators would lead one to believe that prices will continue to fall.

I am taking a more positive approach. My feelings are that investors who have been on the sidelines for years are about to come out and purchase. Investors will purchase when they can buy with 20% down and have the rent cover the expenses. We are at that point on many properties listed today.

I also believe that a person who is looking to buy a primary residence should not be overly worried about what is going to happen over the next 12-months. If a home buyer has a horizon of 7 plus years then they can easily ride out any short term drop in prices and will reap the benefits of appreciation. Nobody knows when the bottom of the market is until it has passed. Hind site will always be 20/20.

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow. Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home. Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California. He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.

Fannie Mae Eases Credit To Aid Mortgage Lending. This was an article headline from the NY times on September 30^th, 1999. Fannie Mae was under "increasing pressure" from President Clinton's administration to expand mortgages to moderate income people. The problem was that moderate income people in general did not have a traditional 20% down payment and often their credit was below a level that would lead to a loan being approved.

Fannie Mae succumbed to the pressure and eased their credit requirements. Franklin D. Raines, Fannie Mae's then chairman and CEO was quoted as saying, "Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements" and "Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."

So to get more people into homes sub-prime became Main Street and 100% financing was born.

There were some that questioned the lending changes and were concerned with the risks involved, but the "everyone should be a homeowner" policy leaders pushed ahead and made loans affordable for everyone.

The rest is history!

It would be great if everyone could own their own home, but the truth is we need renters, too. Lending guidelines were in place to prevent the current catastrophe from happening. When we make changes to these guidelines we put ourselves in a position to have great success, but also dramatic failures.

The current changes to lending requirements are really not changes at all. They are simply reverting back to before and only lending to qualified individuals who have good credit and a down payment. That actually sounds like a good plan.

President Clinton recently said that he was not to blame for the economic mess we are currently in. I would not argue that he is totally to blame, but he has to admit some responsibility. Not to be political, but the liberal approach of everyone should own a home just does not work.

Here is a link to the NY Times article: http://tinyurl.com/4ulb87

Simon Mills of Mills Realty list properties for a flat fee of $500 plus 1/3 of 1% at close of escrow. Comparing that to full priced agents a seller can save over 5.5% of the sales price of their home. Mills Realty also offers buyers a 1.5% cash back rebate up to 1/2 of their commission.

Simon Mills of Mills Realty is in the top 1% of listings sold in California. He has pioneered a low cost yet full service listing that is revolutionizing the way people buy and sell property.