Arn Cenedella

Archive for the 'Short Sales' Category

SF Peninsula Distressed Property

Nothing has generated more buyer interest the past few years than the words “foreclosure” and “short sale”.

Many perceive buying foreclosures and/or short sales as a way to purchase property at a very good price.

In some cases, this may very well be true.

Often times, REOs can be purchase for 40% to 50% of the previous sales price.

But I can tell for from first hand experience it is a very competitive marketplace.

And you need to know where to look and be realistic about the areas foreclosures can be found.

The table below shows 2009 sales in San Mateo, Belmont, San Carlos, Redwood City, Menlo Park, and Palo Alto broken down between REOs, short sales, and “normal” sales.

I have defined “distressed property” as being either a REO or a short sale.

The percentage of distressed property sales ranged from a low 1.97% in Palo Alto to a high of 33.61% in Redwood City.

The data above is for entire cities as a whole.

Within each city, there are areas where more distressed property can be located than in other areas.

Subsequent posts will drill down into this data to identify those specific neighborhoods where distressed property can be found.

These distressed properties offer first time buyers to buy a home at a very affordable price and offer investors the opportunity to buy and hold or fix and flip.

Foreclosure Opportunities in East Palo Alto and Menlo Park

One of the most active and strongest markets on the San Francisco Peninsula can be found in the Belle Haven area of Menlo Park and in East Palo Alto.

Most of the listings in these areas are either short sales or foreclosures.

Run-down fixer uppers can be found sometimes below $200,000 and generally between $200,00 and $250,000.

These homes when repaired can rent for $1800 per month or perhaps sold for $300,00 or more.

Buyers need a fair amount of cash to compete in this market but good properties can be found.

I have helped numerous buyers this year in East Palo Alto and Belle Haven area of east Menlo Park purchase REO foreclosure homes and attractive prices.

One client used funds from his IRA to pay cash for a rehabbed home that generates about a 6% cash return on purchase price.

Others clients have purchased REO fixers, rehabbed them, and sold at a profit.

One of my clients, a former tenant, was able to buy their first home in East Palo Alto with FHA financing – amybe $10,000 total cash investment – will receive $8000 first-time buyer credit – and have total fixed ownership monthly payments of like $1700. They are quite happy.

Whether buy, fix and flip or buy and then rent or buy to live in, all present good options in today’s real estate market.

Please contact me at 650 566-5329 or acenedella@cbnorcal.com to learn more.

I am happy to discuss your options with you – no cost – no obligation.

More information on Short Sales

Chicago Title has put together a good summary about some of the issues involved with a short sale.

A short sale generally will require a 2 year wait prior to purchasing another home.

Howver if you are not more than 60 days on your loan payment, this time period may be shorter.

A short sale does not mean you do not owe the lender any more money

Many homeowners believe that if their lender agrees to a short sale, they have no further obligation to the lender.

This is not true!

As the Wall Street Journal reports today, many lenders are being more proactive about going after homeowners for the remaining unpaid balance on loan. For example, if the mortgage balance is $400,000 and the lender agrees to accept $300,000 in a short sale – the lender can ask the homeowner to sign a note for the $100,000 remaining. Other lenders have gone to court to obtain the additional money from other borrower assets.

So be sure you understand what the lender is agreeing to when they approve a short sale. Have your attorney review the agreement or negotiate it for you.

Understanding the tax implications of a short sale

I have written several posts advising homeowners in trouble with their mortgage to consult both their attorney and their CPA before agreeing to a short sale.

The Wall Street Journal has written a good post highlighting the potential tax impacts of doing a short sale.

Homeowners could be tax on the gain in their property even if they do not get any cash out of a short sale which is how they always work. Say someone bought a home for $200,000 several years ago and at some point refinanced for $350,000. The property was then sold via short sale and the lender agreed to take say $300,000 as pay off for the loan. This homeowner could be charged tax on the $100,000 gain since they bought at $200,00 and effectively sold at $300,000.

In addition in the above example, assuming the lender forgives the $50,000 debt not collected through the short sale (lender owed $350,000 and received $300,000), the homeowner will have a taxable income of $50,000.

It is not the intent of this post to give specific concrete advice about short sales but rather just alery everyone that there are complex legal and tax issues that must be dealt with. Do not agree to anything before you get this advice. A mistake here could result in a big tax liability.

Do any of these government mortgage relief programs work?

I have generally been pretty skeptical about whether any of these much talk-about government programs will actually help any homeowners? Are these programs just more of the “promise a lot, deliver a little” that we seem to get out of Washington DC the past 10 years or will they actually help people.

I like to stay in touch with my past clients on a regular basis and try to speak with each of them at least every quarter and often once a month.

Today I called a first-time home buyer, Jim, who in January 2009 bought a home in Redwood City at a very affordable price. After a few minutes of chit chat, I suggested it might be a good time to look into a refi since rates have dropped maybe about 1% since they bought. He told me that they were already working on that through the Making Home Affordable program. They hope to reduce their rate over 1%.  Jim said since he mortgage was owned by Freddie Mac and Fannie Mae, Jim and his wife, Lynn, were eligible for an interest rate reduction. Please understand, Jim and Lynn are current on their mortgage payments – a requirement for the loan refinance. Jim and Lynn purchased with 5% down on a house a little over $500,000 – so a typical refiance that requires 20% equity is not possible for them – but with the MHA program refinances up to 105% of the value are allowed.

Jim told me they hope to know by June whether their application will be approved.

I am interested to see if the progrma will actually work as intended and reduce their loan payments to a more affordable level. Stay tuned and I will keep you posted.

Check the Making Home Affordable site for more info.

Click here to see if your loan is owned by Freddie Mac and Fannie Mae.

Do you need help selling your home with a short sale?

I have recently sold a short sale in Redwood City representing the buyer and another short sale in East Palo Alto representing the seller.

Do you need help evaluating your options? I am glad to help. I have undergone short sale specific traing and have the process and procedure down. It is still time consuming but I can handle short sale without making the mistakes that add time to the process.

One of my blog buddies in the East Bay, San Benson, has been approved by Wachovia as an approved short sale agent. He provides good useful information, click here.

Obama Home Mortgage Rescue Plan part 6

One of the things President Obama promised was greater use of the internet to make information about government programs and activites more accessible to the general public.

The MakingHomeAffordable website is now up and runnning.

This is a very useful site which will help homeowners determine if they are eligible for either the refinance plan or the loan modification. You can find out if your loan is owned by Freddie Mac or Fannie Mae.

There is a wealth of information here. Check it out.

If you need further guidance just let me know.

Obama Home Mortgage Rescue Plan part 5

Obama’s plan contains 2 main parts:

1. Refinance options for loans that are up to 105% of the current market value of the home.

2. Loan modifcation programs for people where option #1 does not apply and they are having a hard time making the monthly payments.

Obama has named the plan #1 – Making Homes Affordable.

Katie Curmutte, Zillow on Mortgages Unzipped blog provides lots of details on the plan.

Katie covers option #2.

Further details are available at: http://www.financialstability.gov/ and here and over here too.

If you are a homeowner in trouble or just want to know what your options are, just let me know.

I have written several posts on this issue and these posts contain links to other great information.

Do you qualify for Obama refinance plan?

Exact details on Obama’s refinance plan will be out March 4, 2009.

Expect the lenders to take a few weeks to digest the information and set their in-house systems up to handle these requests.

Diane Tuman of Zillow gives good detailed information on what the plan is expected to be.