Erin Attardi's Blog

Per a press release from Governor Schwarzenegger's office, he signed several real estate and lending related bills today. Yay for California! A brief summary of some of them;

SB 1461; real estate licensees required to publish license info in certain advertising
SB 870; allows CalHFA to structure a refinance program
SB 1055; mortgage debt forgiveness similar to the federal legislation
SB 1675; provides the California Department of Veterans Affairs with the discretion to structure the terms and conditions of any authorized debt issuance

Good stuff...to see other state and federal legislation pertaining to the real estate industry, click here.

Yahoo News is reporting that HR 6694, aka The FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008, has been approved by the House Financial Services Committee...just one of many hurdles to reform and maintain seller-funded downpayment assistance programs such as Nehemiah, Ameridream, HART. As of right now, seller-funded downpayment assistance is set to end as of the end of September, due to provisions in HR 3221. Stay tuned...

Get ready for another long-winded blog...I am often asked these question by sellers facing the possibility of attempting a short sale of their property. Having successfully closed several of these, I will tell ya'll what I know to be true based on my experiences.

-Who pays agent commissions? In a short sale scenario, the lender(s) who agree to forgive debt and allow a short payoff of the loan(s) pay the agent commissions. Sometimes these are re-negotiated by the lender(s) during the process. For example, if the seller and listing agent agree to a 6% total commission (3% to the listing agent, 3% to the selling agent) initially when the property is listed, the lender may re-negotiate that fee later to perhaps 5% total (2.5% / 2.5%) or less.

-Who pays title, escrow, and transfer tax fees? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). For example, perhaps the buyer and seller agree initially that the seller will pay for 100% of title and escrow fees, 100% of county transfer tax, 50% the city transfer tax. The lender(s) may negotiate that the buyer pay a different split of these fees...however the portion that is paid by "the seller" is absorbed in to the overall debt forgiveness and short payoff. So basically, again, the lender(s) pay these fees in some.

-Who pays for inspections or certifications? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). I have seen this vary widely from the short sale lender(s) agreeing to pay for pest inspections, pest clearances, roof certifications, etc., to lender(s) that do not agree to pay for any inspections or clearances. A lot will depend on the circumstances with the condition of the property, how many loans are involved, the buyers loan program, if the property is in default, the length of time of negotiation, etc. As a safety net - buyers, do not expect that lenders will grant these requests. Generally short sale properties are sold "as-is."

-Will the lender(s) give the buyer credits for closing costs? These are negotiable between buyer and seller when the offer is initially negotiated (before it is submitted to the lenders for approval). I have seen this vary widely from the short sale lender(s) agreeing to pay up to 6% closing costs for the buyer (including an instance of seller-funded downpayment assistance...which is now a long shot thanks to HR 3221), to the lender(s) rejecting those requests. Again, much will depend on the circumstances surrounding the sale of the property.

-Who pays delinquent property taxes or liens? Sellers - if you have not been paying your property taxes or county utilities, you really need to let your agent know this ASAP! I work closely with the title company on this to make sure that we know of any lien issues in advance, but because it can take several weeks or months to get approval, new liens may pop up during the lender negotiation process. When I negotiate short sales, one of my worst fears is that after the short sale is approved an unexpected lien will pop up. This has happened to me before, and for lack of a better way of describing it - this sucks! If you can let your agent know in advance that these items are unpaid, it will save lots of headaches all the way around. IF WE KNOW in advance that these liens exist, there is a great chance that the short sale lender will absorb these costs into their overall debt forgiveness and short payoff. IF WE DO NOT KNOW in advance that liens exist, once the short sale is approved - this will halt the transaction until we can find a way to pay these liens. The seller is often financially unable to pay them, the buyer does not want to pay, the agents commission has already been reduced, and the lender has already taken a loss on the loan. Sellers - communicate with your agents.

Unless asked to carry an unsecured promissary note (which has not happened in any of my short sales), the seller usually pays nothing out of pocket to close the transaction. The seller can not make any money from a short sale either. Hope that answers some frequently asked short sale questions...cheers! 

I am often asked this question. Well, the stats are out for Sacramento County for August 2008, and for the first time in a LONG TIME, there was an increase in the median home price. Keep in mind that certain micro-markets within Sacramento County have had ongoing increases to the median price for the better part of 2008...this county-wide increase is very exciting though. This is not exactly enough information to consider a trend, but exciting nonetheless.  The average price for Sacramento County also increased (graph not shown - increased from $235k to $241k). What else is happening from a statistal standpoint? The overall number of closed sales in Sacramento County decreased a bit from July 2008 to August 2008 (1,784 closed in August / 2,060 in July), but the pendings went up substantially (2,539 pending in August / 2,238 in July). REO's still dominate a large percentage of the pendings and solds. County-wide, there is 3.9 months of listing inventory. 6 months of inventory is widely regarded as a balanced buyer/seller market. Stay tuned...

After my long-winded post the other day about Buyer Investigation, Inspections, and Request for Repairs, I received a call and an email from two separate folks asking about sewer lines...coincidentally enough, these people were neither current buyers nor sellers...

For anyone wondering, for sewer camera scoping, I recommend Express Plumbing at 916-488-1215. They are great, really knowledgable, and will show you and explain what the camera sees during the process. They also do outstanding repair work.

Many of Sacramento's older neighborhoods have orangeburg sewer lines...this stuff deteriorates over time, and is prone to collapse and obstruction by things like tree roots. If you are buying a pre-1960's era home in Land Park, Curtis Park, Hollywood Park, Tahoe Park, Downtown or Midtown Sacramento, East Sacramento, Arden Park, Sierra Oaks, Garden of the Gods, Carmichael, Wilhaggin, Del Dayo, etc., and if the home still has its original sewer pipe - it is likely orangeburg, or perhaps another material that has not held up well. It is well worth the $150 to inspect the line and find out!!

If you obtain a home warranty with your home purchase, many home warranty plans exclude coverage of your sewer line.

Rumor has it that HR 6694 is building momentum, and seller-funded downpayment assistance programs may have life after September 30th after all! Even HUD, which has traditionally opposed programs such as Nehemiah, Ameridream, etc. seems to be supporting HR 6694. If it is passed, the legislation will create some new requirements for the use of seller-funded downpayment assistance (such as a minimum credit score). Stay tuned...

In the ever-changing world of lending, it has been announced that non-traditional credit will be ineligible for use on FHA and VA loans effective Monday, September 15, 2008. All borrowers must have a traditional credit history, with the exception of certain types of refinance transactions.

What is "Non-Traditional Credit?" Non-Traditional Credit is payment history that can not be documented by one of the major credit bureaus (TransUnion, Experian, Equifax). It is not uncommon for folks to pay cash for their belongings, not have credit cards, no car loans, etc...however maybe they have been paying their other bills in a timely manner - like a cell phone, rent, utilities, etc. Those types of items are not generally reported to the credit bureaus. In the past, a prospective buyer could document on-time payments by producing bank statements, cancelled checks, letters from the landlord, etc. This type of documenting of credit history not found on a credit bureau report will no longer be allowed for FHA and VA loans.

So under the revised guidelines, while a borrwer may have a stellar payment history and ability to repay a mortgage obligation - options for these types of borrowers are going away.

Per Marlena Olson with the Vitek Mortgage Group, these sweeping changes are being implemented by lenders across the board.

Listed below are several scenarios in order to provide additional clarification:
-Two borrowers with no credit scores: Ineligible for purchase.
-One occupant borrower with a credit score and one occupant borrower without a credit score: Eligible for purchase. The reported credit score is used for qualification and non-traditional credit does not need to be built for the borrower with no credit score. (Minimum 580 credit score is required for manual underwrites, Automated Underwriting decisioning requires one credit score.)
-Occupant borrower with no credit score and a non-occupant borrower with a credit score: Ineligible for purchase since the occupant borrower would be required to build non-traditional credit which is no longer acceptable.
-Occupant borrower with a credit score and a non-occupant borrower without a credit score: Eligible for purchase. The occupant borrower's credit score is used for qualification. (Minimum 580 credit score is required for manual underwrites, Automated Underwriting decisioning requires one credit score.)
The last day to lock under current guidelines that allow Non-Traditional Credit scoring is September 14, 2008.

The title of this post pretty much says it all...for the 3rd time this year out of 8 possible months thus far, I was the top listing agent in my office for August (and March, and July). Pretty cool accomplishment...there are about 100 agents in my office, and some pretty heavy hitting ones at that. I am taking a pretty nice new listing tomorrow, and turned down another listing where the seller is trying to do a "Buy and Bail" scam (sorry sellers, I won't help you commit fraud!), so the begining of this month has started a bit more slowly than my last two months...can I bowl a turkey???

I have been showing bank-owned REO properties in the central city areas a lot lately...mainly to investors, but also to buyers looking to owner-occupy. I am often asked what it takes to be able to purchase one of these listings.

Let me start by saying that of Sacramento Core neighborhoods - 95811, 95814, 95816, 95817, 95818, 95819, 95820 - there are two zips that have been adversly affected by a glut of REO properties. A small sliver of 95817 is considered East Sacramento (Elmhurst, Med Center), while the rest of it is mainly Oak Park. 95820 has some nice areas as well (Tahoe Park, Tallac Village), however it also covers Oak Park.

Oak Park has suffered steep declines in value, and there are many REO's listed there. Most of these listings are uninhabitable as-is, sporting issues like severe vandalism, leaky roofs, structural problems, electrical and plumbing issues. There are MANY listings under $100k.

The rest of the zip codes above (95811, 95814, 95816, 95818, 95819) represent some of the most desirable places to live in all of Sacramento between the Downtown / Midtown areas, Land Park, Curtis Park, and East Sacramento.

So back to what it takes to purchase one of these listings...there are three things.

(1) CASH! Most of these properties are being sold to buyers that have all cash --OR-- at least 20% down. Many of the homes that appear to be the most attractively priced will not qualify for FHA or VA lending programs. The FHA Streamline(K) rehabilitation loan can be a good fit for borrowers without a large downpaument - but beware many banks will not entertain that sort of financing because of the longer timeframes, and numerous inspections.

(2) SPEED! The cherries are picked quickly, sell with multiple offers, and there is very little standing inventory to choose from. If you see a home priced in a range that looks too good to be true - it probably is. Banks are pricing properties artificially low in order to attract the most attention. If you are enticed by a certain property, keep in mind that your competition (other buyers) are also seeing the same information you are. Be prepared to view and write an offer on the right home quickly.

(3) REALISTIC GAME PLAN! Be on top of your game. Sign up for an automated listings portal and get these listings emailed to you as they come on the market in real time. Have your financing in order or cash accessible and ready to go. Be prepared to jump through certain lender hoops, like pre-qualifying with their lender (if you are financing) or make certain you can verify your funds are available. Be prepared to offer more than the asking price in certain cases.



There is a very limited REO inventory in these areas...the graphs above and below illustrate the REO inventory and non-REO inventory. The top graph represents REO inventory in these zips, and the bottom graph represents Non-REO inventory (including short sales). To view REO listings in these areas, click here. 

The City of Sacramento Parks and Recreation Department presents a movie night at William Land Park on Friday, September 5th. The "Bee Movie" will be starting at dusk (which if Friday night is anything like tonight, that will be around 8:00pm), and will be at the section of William Land Park that is near Riverside and 12th Avenue. Admission is free!

This is just the first in a series of three Movies in the Park in Sacramento. On Friday 9/12, the movie "Cars" will be shown at Reichmuth Park, and on 9/19 "Enchanted" will be shown at Fremont Park.