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.

The real estate market continues to evolve as we work through short sales and foreclosures in the Pleasanton market place as well as market places all over the country. One of the difficulties surrounding short sale transactions is the amount of time it typically takes for the lender to approve the short sale-a mandate in moving the transaction forward.

Lawmakers realize that improving turn around time on these kinds of transactions will only benefit the market place as a whole.

Here is the latest news for the Senate on short sale legislation:

Recently enacted Senate Bill 306 does not require lenders to review short sale requests from sellers and their agents within 21 days.  The new California law, which addresses certain escrow procedures, has been mischaracterized by some practitioners as landmark legislation calling for a 21-day turnaround for short sale approvals.

The new law inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow.  The new law essentially requires, after a short sale has already been approved, for the lender to respond to a request for a short-pay demand statement within 21 days.  The lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.

Another provision of SB 306 may also cause confusion.  In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not review that closing statement promptly.  Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is “not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrowholder.”  The new law does not bind a lender to a short payoff amount in an offer that the lender has not approved.

Senate Bill 306 contains other technical changes in real estate related laws, such as, but not limited to, the following:

• Expanding the existing requirement for a lender to contact certain borrowers to explore options for avoiding foreclosure at least 30 days before filing a notice of default, to include not only owner-occupied residences, but also owner-occupied residential property with two-to-four dwelling units.
• Extending the existing requirement for a lender to record a notice of sale from 14 to 20 days before a trustee’s sale.  This provision does not change existing law requiring a lender to wait at least 20 days after mailing a notice of sale before conducting a trustee’s sale.

This new law comes into effect on January 1, 2010. 

Click here to read the text of Senate Bill 306.

 (Information provided by the California Association of Realtors.)

Click here to read about how short sales work.

Questions about short sales? Contact us. We are currently working with several clients who are selling their homes and are in a “short pay” sitaution. We can help you too!

Pleasanton Real Estate Market Update for May 2009

The month of May showed continued improvement in the number of Pleasanton homes that went under contract. 64 homes went under contract in May (as of May 28^th when this article was written) a significant increase over the average of 33 homes going under contract in each of the first three months of 2009.

May ended with 219 homes available for sale (note: at the end of May 2008 there were 262 homes available for sale).  This would put the unsold inventory index at 3.4 months supply of inventory.  The unsold inventory index is a unit of measure that is used to evaluate the strength of the market.  It takes the current number of sales for the last 30 days and divides it into the number of homes available for sale.  In this case, that would be 219 divided by 64= 3.4.  That is down substantially from as recently as February of this year when the unsold inventory index stood at nearly 10 months of inventory.  Many experts believe that anything under 6 months is considered a sellers’ market.

A closer look at the break down of inventory into price brackets reveals that the months supply of inventory is even lower in certain price brackets and higher in others:

This graph reveals that 80% of the sales activity is happening in the under $1 million dollar price range where the unsold inventory index is under 2.1 months.  In contrast, homes over $1 million dollars are showing a much greater months supply of inventory with the highest being 20 months for homes in excess of $2 million.  This is due in part to the difficulty of obtaining financing for loan amounts in excess of $729,000. 

 In the townhouse and condo category, Pleasanton sales are quite strong while the available inventory continues to decrease.

At this time last year there were 66 townhomes and condos available for sale in Pleasanton- nearly 3 times as many.  As recently as January of this year there were 41 available for sale with only 4 “pendings.

Despite a large number of foreclosures, lower rates of new construction, and a 41 percent decline in the median price of single-family, existing homes, there are signs that California’s housing market may be coming back to life.

Foreclosures have helped lower prices and increase affordability. During the fourth quarter of 2008, 59 percent of the state’s first-time home buyers could afford to purchase an entry-level home in California. The favorable prices also are helping potential home buyers get off the fence. Sales of existing, single-family homes rose 81 percent in February.

The director of Harvard’s Joint Center for Housing Studies predicts continued price declines in California, but at a slower rate, which generally indicates the end of price drops. One measure used to judge market trends is price per square foot. In Long Beach for example, the price per square foot increased 5 percent in February.  

The surge in sales has resulted in a drop in unsold inventory. California Association of Real Estate’s Unsold Inventory Index stood at 6.5 months in February, compared with 15.3 months in February 2008. According to C.A.R. Chief Economist, Leslie Appleton-Young, a normal market is having a six- to seven-month supply of homes. California’s inventory now compares favorably with the rest of the nation, where there’s a 9.7 month supply of homes on the market.

Pleasanton specifically saw an uptick in sales in March and that postive sales trend has continued into April.

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.