Q. What is the reason the Legislature passed the Buyer’s Choice Act?

A. The Legislative findings and declarations state that the recent troubled real estate market has resulted in a concentration of the majority of homes available for resale within the hand of foreclosing lenders and has dramatically changed the market dynamics affecting ordinary home buyers. The act declares that the potential for unfairness occasioned by the resale of large numbers of foreclosed home requires that protections against abused be made effective immediately.

Q. What is the Buyer’s Choice Act?

A. The Buyers’ Choice Act is a new law that prohibits a seller who acquired property as a foreclosure sale from requiring a buyer to purchase title and escrow services from a company chosen by the seller as a condition to receiving offers or selling the property. It was enacted by Assembly Bill 957 (Galgiani).

 Q. When does the Buyer’s Choice Act become law? 

A. Yes, provided that a written notice of the right to make an independent selection of those services is first given by the seller to the buyer.

A. The law covers title insurance and escrow services.

A. Yes. A seller who violates the new law is liable to the buyer for three times all charges made for the title insurance or escrow service. In addition, a seller who violates the law is also considered to have violated their licensing law.

A. No. A transaction cannot be invalidated solely because of the failure to comply with the law.

Q. Does the Act continue indefinitely? 

A. The Act is only effective until January 1, 2015 unless it is extended by the Legislature.

Pleasanton Real Estate Market Update for August 2009

Sales Activity Is Very Strong

August 2009 Pleasanton Single Family Home Sales are up 48% from August 2008.

 The charts below show the sales activity for Pleasanton single family homes since January 1^st, 2009.

Starting in April 2009, the average monthly sales activity is 71 homes per month.

As you can see, homes sales doubled in the 2^nd quarter of 2009 and posted the strongest quarterly sales activity since the 2^nd quarter of 2007. 

Inventory Is On Steady Downward Trend

The inventory of single family homes for sale has dropped 37% since August of 2008.

The chart below shows the inventory level at the end of each month for Pleasanton single family homes since January 2009.

With the pace of sales for August 2009 at 77 homes, the unsold inventory index stands at 2.2 months of inventory.  This is the amount of time it would take to sell through the current inventory of 169 homes.  This number is considered to be very low.                                                               

Commentary

With the high sales activity and low inventory levels, it would be tempting to call this a sellers’ market.  However there is no evidence of any improvement on pricing levels. The median sales price for August 2009 of $706,500 for Pleasanton is down 3.22% from $730,000 for August of 2008.  Of the 126 homes currently reported as “pending” or under contract 52 of the 126 are either short sale properties or REO properties.  Short sale properties are homes being sold by the current owner where the home’s value is less than the amount owed.  The owner attempts to negotiate with the bank to accept less than the amount owed in order to avoid foreclosure.  REO properties are homes being sold by the bank that has taken a property through a foreclosure process.  The 52 properties represent 41%of all the current “pendings”. In other words 4 out of every 10 sales currently under contract represent a distress sale.  

No one knows what lies ahead, but looking at the current supply of homes for sale there is some bright news.  Of the 167 homes currently for sale as of 9/14/2009, only 11(or 6.5%) and 3(or 1.8%) are distress sales for a total of 14 or 8.3% of the total of 167. An abundance of distressed properties in a market can bring values down. For now, Pleasanton has a very limited number of distress sales and that has kept property values from free falling as much as we have seen in communities like Brentwood and Hayward.

Mohr Park Market In a Minute

How many homes are on the market in Pleasanton?

As of 4/29/2009, there were 242single family homes available for sale in Pleasanton.  Since the beginning of this year, the inventory has increased at a pattern consistent with the 1^st quarter of the last two years.  By mid April, the inventory had increased to 255.  However, the last two weeks of April have seen strong sales activity with 60 “pending” transactions in April.

How many homes are on the market in Mohr Park?

As of 4/29/2009, only three homes are available for sale in Mohr Park.  This includes the Glens, the Gardens and the Estates of Mohr Park.  Unfortunately the two homes on Rheem Drive are “short sale” transactions so both prices are far below market value.

*Short Sales are distress sales where the current owners mortgage debt exceeds the current market value. Negotiations are in progress with the lender to accept less than the amount owed to complete the sale and avoid foreclosure.

How many homes have gone “pending” in Pleasanton in 2009?.
 

May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan09	Feb09	Mar09
55	50	44	52	58	31	22	25	33	30	43

As of 4/29/2009, 60homes have gone to “pending” status during the month of April. This will represent the highest number of monthly “pendings” since April of 2008.

How many homes have gone “pending” in Mohr Park?

1987 Rheem	List Price $519,000	Sales Price	Calliope(Glens)	1314 SF	2 BR	2.5 Bath	COE Date6/2/2009
2092 Eilene Dr	$599,750		Woodstar(Glens)	1586 SF	3 BR	3  Bath	COE Date5/31/2009
2223 Oakland	$525,000	Short sale	Woodstar(Glens)	1586 SF	3 BR	3 BATH	COE DATEUnknown

 

No Mohr Park homes have closed escrow thus far in 2009.

Two steps: Second liens now covered by modification program; servicers must offer eligible borrowers principal reduction under Hope for Homeowners.

The Obama administration is expanding its foreclosure prevention program to cover second mortgages and to direct more troubled borrowers to the Hope for Homeowners program.

The president’s $75 billion program has gotten off to a slow start. Loan servicers only recently started taking applications and many delinquent borrowers have complained about being left in the cold because their home values have dropped or they’ve lost their jobs.

The administration is seeking to address some of the concerns by tweaking the original modification plan, which calls for adjusting eligible borrowers’ loans so monthly payments are no more than 31% of pre-tax income.

Servicers covering 75% of the nation’s mortgages are now participating in the program, which also allows some homeowners with little or no equity to refinance their mortgages.

During the housing frenzy, many borrowers obtained second mortgages to allow them to put little or nothing down when buying a home. Up to half of at-risk borrowers have second liens, according to the administration.

These loans have complicated the modification process. For one thing, they add to troubled homeowners’ debt levels. Also, mortgage investors have balked at reducing payments on first mortgages when the second loan was left intact.

Under the administration’s new program, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

Investors can also receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers’ debt levels.

Servicers who join the new program must modify second loans when a borrower’s first mortgage is adjusted. It will likely take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.

“By bringing both the first lien and second lien program together, we can reduce monthly payments for borrowers and make it much more likely that they can stay in their homes,” a senior administration official said.

Hope for Homeowners option:

The administration said it is now requiring servicers to offer troubled borrowers access to Hope for Homeowners as a modification option if they qualify.

Expanding Hope for Homeowners would address one of the major holes in the original Obama foreclosure prevention plan. It helps homeowners whose homes are now worth far less than their mortgages.

Servicers had balked at participating in the Hope program because it required they reduce the mortgage principal balance to 90% of a home’s current value.

Hope for Homeowners, which began in October, is being revamped in Congress. Servicers would have to reduce the principal to 93% of the home’s value. The change would also reduce the program’s high fees, which turned off many troubled borrowers.

As an incentive to participate, servicers will be paid $2,500 for each refinancing, while lenders who originate the new loans will receive up to $1,000 a year for three years, as long as the loan remains current. (Source:CNN)

Click here to read the entire article.

A recent article in Money Magazine highlighted the pros and cons of purchasing a short sale. Here are some of the key points from the article:

Not along ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth.

If you’re in the market for a home today, you’re almost guaranteed to be looking at some short sales. Nationwide, 14% of homeowners are currently underwater on their mortgages, calculates real estate website Zillow.com.

The good news is that short sellers are likely to still be living in the home and some may even be current on their payments. That means these aren’t the run-down, distressed properties that you often find among foreclosures; in fact, there’s a good chance that some of the most deluxe homes for sale in your market are underwater.

Before you get too excited about buying a short sale, know that they generally aren’t, well, short. For the sale to go through, the seller’s lender must approve the price and agree to take the shortfall as a loss. That extra step can cause the process to drag on three times as long as a normal home sale.

The hassles can be well worth it. Some buyers and realtors don’t want to deal with short sales, leaving many choice homes with very few bidders. So if you’re willing to brave the intricacies of the process, you’ll be far more likely to land the home you always wanted. The key to snagging a good deal is knowing how to avoid the land mines.

Know what you’re getting into. In a short sale, you are dealing with several parties: the sellers, their agent and the sellers’ lender. That’s why a short sale can take anywhere between two and six months to execute, compared with about 30 days for a typical sale. Though many banks are willing to take a loss on a mortgage in a short sale if it means avoiding an even bigger loss in a foreclosure, with so many owners trying to unload properties, the lender’s negotiators are flooded with short-sale offers. So if you’re moving or selling another property, keep in mind that you’ll likely need to budget for a few months’ worth of rental payments so you have somewhere to live in the interim.

Find the right pro. Lenders often make realtors who work on short sales take a hit on their commission, so some brokers may be loath to show you the listings. But don’t even think about going solo. These deals take a lot of work and persistence. Before you sign up with an agent, ask him how many short sales he’s closed. If he hasn’t done at least two, find someone more experienced.

Weed out candidates. In most cities, home listings will indicate in the description whether the property is a short sale. Ideally, you want to knock off ones that come with extra complexities. If possible, pass on any home that has more than one lien against it; having to negotiate loans with two lenders can greatly increase the amount of time it takes to complete the deal. Also avoid homes where the seller has other offers. That’s because if another offer is pending, the seller’s agent isn’t likely to even submit yours for approval until the first one is rejected, meaning you’ll have to wait for another negotiation to play out before you even get a chance.

Set the right price.The first step is to have your agent submit your offer to the seller. Don’t just rely on the current list price to come up with your initial bid. The seller’s agent may have far underpriced it in hopes of attracting buyers, but the bank likely won’t accept a lowball offer. Ask your agent to determine the home’s fair market value by searching comparable sales in the area, with an emphasis on other short sales and foreclosures (or get a rough estimate yourself at zillow.com). If the fair market value is lower than the list price, set your offer 10% lower than that.

At this point, you’ll also want to get pre-approval for a mortgage; many banks won’t even consider your offer if you don’t have one.

Protect yourself. Next, the seller’s agent will submit your offer to the seller’s lender. At this point, you’ll be asked to sign a sales contract. See if the lender will agree to pick up all closing costs as part of the contract. Also ask your realtor to specify that you won’t do an appraisal or inspection of the property until the offer is approved. That way you won’t have to shell out hundreds of dollars until you know you realistically have a good chance of getting the home.

Finally, though most lenders will require you to make some kind of deposit along with the contract, don’t put down more than $3,000 before your bid is accepted. That will give you room to put offers on other homes or even to pull out of the sale if it drags on for too long.

Be a pain in the neck. After your offer is submitted to the lender, you’re likely to hear nothing for weeks, if not months. This is no time to relax. Call your agent at least once a week, and make sure the seller’s agent is contacting the bank’s negotiator nearly every day.

Keep your eye on the market. When the bank finally sends its counter-offer, use it as a guideline rather than an ultimatum. Most of the time, the lender’s number is based on its own research, that of a local realtor it hires and the outstanding loan balance. Usually its goal is to sell for at least 90% of the home’s value.

The lender’s offer may not be what you’d hoped for, but don’t despair: You have a chance to counter. If the market has been flat since your initial bid, try for 5% to 10% less than the bank’s number. If the market has been sinking rapidly, however, you may be able to prove that the home’s value has shrunk further and offer even less. Once you have the lender’s ear, the new offer should take less time to process.

Click here to read the entire article.

Click here to learn more about short sales.

Curious about short sale opportunities in the Pleasanton area? Contact us.

Do you need to sell your home but you owe more on your home than the current market value? We have short sale strategy to help you succeed. Contact us for a consultation.