A new government program may make it easier for homeowners to sell their house for less than they owe, known as a short sale.

The Treasury Department said it is creating a streamlined, industrywide process for short sales, and will even pay bonuses to certain borrowers, loan servicers, and second-lien holders who do them.

The plan will “provide incentives for servicers and borrowers to pursue short sales” when the borrower is generally eligible for loan modification under the Making Homes Affordable plan, but either can’t qualify (for example, due to job loss) or they have had the loan modified, but now can keep up the payments.

Treasury will pay a servicer $1,000 for completing a successful short sale, the borrower $1,500 to assist with relocation expenses, and the second lien-holder who releases claims up to $1,000. Details can be found here.

This is good news for lots of distressed sellers out there right now, and good news for the banks also. Short sales are generally better for everyone, I believe, than foreclosure, for three reasons.

1. Short sales typically sell at a higher value than foreclosures. So by selling short and taking a relatively small loss now rather than a big one later, the lender will usually get more for the house.

Foreclosures definitely carry a stigma with them, and are often in terrible shape. People who are losing their home have no incentive to take care of them, are often angry, and the condition of the home shows it. Looking at foreclosed homes can often be a very depressing experience, and the pricing reflects that.

2. Short sales are better for home values in the neighborhood. As noted, foreclosures carry a stigma and a big discount, and that sale becomes a comp for the neighborhood. Short sales will be at a discount also, but without all of the emotional trauma, overgrown lawns, etc.

3. Short sales are usually better for the owner. From a credit perspective, most experts believe a short sale is better than a foreclosure. Sellers should absolutely consult an attorney and a CPA however, because some also believe foreclosure may be a better option. In California, if the lender wants to come after you for the unpaid balance (always check that when you get the approval!) and you have never refinanced, you may be better off. That’s because in California, a loan used to buy a primary residence is non-recourse debt. So if the lender does foreclose, they cannot go after other assets.

Short sales in Marin County are quickly becoming more common beyond San Rafael and Novato, where we have seen many in the past two years. We are now seeing short sales in Larkspur, Corte Madera, Mill Valley, even Tiburon. One closed last week in fact in Tiburon, for $1.9 Million. Asking price was $2.495 Million, so that gives you an idea of what kind of discounts may be out there. Let’s hope this program is effective at helping to move these distressed sales through the system, so we can get back to a normal market!

Share This

We just had a major price reduction on 8 Butterfly Lane in Kentfield. It’s been reduced $105,000 to $995,000.

This is now the best priced three bedroom, two bath home in Kentfield, especially for the size. It is 2,006 square feet, with very generously sized rooms. The floor plan is terrific, as it has a very large living room - dining room that flows beautifully from the kitchen directly on to the flat patio and backyard. It’s all one level, on a quiet cul-de-sac, and if you know Marin County, you know that the Bacich School System is one of the most desired in the County.

This is a great house for a family that wants a comfortable place to live now but wants to build some equity as they gradually upgrade bathrooms, the kitchen, and front of the house.

You never know in this market, but we feel we now at the right price point to sell this house. Please call or email for an appointment.

Share This

We still have space available for our free First Time Home Buyers Workshop this Wednesday, May 6, at 7pm.

We’ve done a couple of these this year, and the feedback has been excellent. We’ve refined the content to make it more valuable, and give buyers the kind of information they are looking for.

The format is pretty simple. Bill Shine, owner of William Shine Company, a large accounting firm in San Francisco, will talk about the benefits of home ownership from a tax perspective. He’ll talk about the tax credit available for first time home buyers, tax deductions, and how to build equity. We consider Bill a real expert - he owns 33 pieces of real estate!

Anjie Kallas of RPM Mortgage will talk about how to qualify for a loan, what you need to do now to clean up your credit score,  loan programs and their costs, and most importantly, FHA loans. FHA loans are suddenly very popular, as you can purchase with as little as 3% down.

Pat and I will review the steps in the home buying process, including how to search for a home, working with a realtor and what it costs a buyer (the answer - nothing!),  home inspections, the escrow process, and closing. Importantly, we’ll also discuss how to get the best deal on a house in Marin.

Finally, we’ll review the best deals out there right now. And we know where they are. Pat and I each see about 20 properties a week, and our Buyer’s Agents, Rick Smith and Dino Wilson will also be there to answer questions.

We’re also available to discuss the merits of various towns, microclimates, commute times, whatever is necessary.

The whole program will run about 90 minutes.

Send an email to bravasio@fhallen.com if you’re interested in attending. It will be time well spent, and give you a leg up in finding a home at this amazing time in the market.

Share This

I’m talking to more and more buyers about short sales right now, and have two in escrow. And this question is coming up more and more.

A short sale, plain and simple, occurs when the lender agrees to take less than what they are owed. They are messy, long, and sometimes do not work out.

So why would a first time buyer bother with one?

First, because the number of buyers willing to undergo the process  is smaller, that means there is less demand, and you can often get the property cheaper than an equivalent house.

Second, first time buyers are by definition, renting. And in this market, they can often extend their lease on a month to month basis. So they have the flexibility to put up with banks that rarely respond to a short sale offer in a timely fashion.

Third, short sales are becoming more common, and banks seem to be getting more responsive. We are actually in contact with real people on the ones we are involved in, and getting concrete dates for responses.

Fourth, short sales are going to continue to become more important. We are now seeing them in Corte Madera, Larkspur, Mill Valley, and Tiburon. Six months ago, that was unheard of, as they were restricted to San Rafael and Novato.

The process is difficult. The outcome lacks certainty. But the payoff can be a real bargain.

We’ll let you know how ours turn out. If they do close, they will be amazing bargains for our clients. And there are plenty more out there!

Share This

Once again, the headlines are horrifying in the San Francisco Chronicle : “Mortgage Defaults Hit Record.”

Once again, they are missing the other half of the story. First time home buyers are jumping in all over the place, and entry level homes all over Marin County are becoming a hot commodity.

This morning when I ran my hotsheet on MLS there were 14 new homes in contract in Southern and Central Marin County. And every single one was less than $770,000.

And they weren’t all in San Rafael either. Three were in Corte Madera,  two were in San Anselmo, and one in Larkspur.

So I ran statistics for all homes in the county priced less than $750,000. Amazingly, 40% of the 651 homes for sale in that price range already are in contract. That is by anyone’s definition a Seller’s Market!

It also checks with our recent experience with buyers. I had one buyer miss out on a home in Novato (almost new construction, right off Ignacio) that had three offers. I had another buyer prevail in a short sale that had 10 offers.

Do low interest rates, tax credits for first time home buyers, and low prices make a difference? The market is giving a resounding “yes”.

Share This