Those short sale flipper investors are really getting active now. As a Sacramento short sale agent, I have been receiving a lot of calls lately from investors and their agents asking if they can lowball some of my short sale listings. It’s not that I have anything against a guy trying to make a buck. Buy low, sell high is the name of the game in real estate. But I do object when those offers affect my sellers’ chances of closing escrow.

My sellers don’t hire me to make money for investors. They hire me to protect their interests, get them the highest price possible and to close the short sale in a timely manner.

A new twist that seems to be developing among short sale flippers is to submit an offer at list price with the buyer paying all of the closing costs. It is customary for the seller / short sale bank to pay those fees.  One might, at first glance, wonder what’s wrong with that; full-price offer and the short sale bank pays no closing costs except commission. I’ll tell you. When the buyer pays title and escrow fees, the buyer chooses the title and escrow company. Generally, the escrow officer is a person the buyer knows, and this person may or may not share certain information about the transaction with the listing agent. It means the buyer controls the transaction.

Why would a buyer need to control a transaction? Because there might be something going on that the buyer doesn’t want the listing agent to know. It could be anything. It could be the buyer is planning to do a double escrow, that is, turn around and resell the property to an end buyer, and close both escrows concurrently without disclosing this plan to the seller. Many short sale banks prohibit resale within a certain number of days, and they try to hold the parties accountable. If a buyer agrees not to sell the property within a particular time period and instead immediately sells it, that action might be considered mortgage fraud.

It could also mean the buyer has signed an all-cash offer but is actually borrowing the funds from a private source, which may or may not be qualified to make such a loan. If the loan doesn’t fund, the escrow doesn’t close. Or, the buyer may be counting on transferring funds from escrow #2 to close escrow #1. So, if escrow #2 falls out, so does escrow #1. The seller has a right to know if the purchase is contingent upon resale, but often those intentions are not disclosed.

The title companies I work with in Sacramento typically will not open a short sale escrow on behalf of strangers. The liability is too great. The potential for fraud is too high. They work with me because they trust that I am ethical and are assured that I won’t any allow hanky-panky to go on in my transactions if I can help it. I advise my sellers to just say no to those short sale flippers.

Photo: Big Stock Photo

Some mornings it’s difficult to select one topic to write about. That’s because so many things happen to this Sacramento short sale agent in one day. Since I generally write about my previous day’s experiences, to pick just one situation is hard. I don’t have time to write another book.

Do I write about the agent who sent me an offer on a short sale and included a copy of an earnest money deposit check dated in January? When I see red flags like that, I check my Supra website to see if the agent had even shown the property. Nope. When I asked the agent to promise in writing that the agent will not write any other offers for the buyer and will withdraw outstanding offers upon seller’s acceptance, per the seller’s instructions, the agent hesitated, saying the buyer would like to view the home one more time.

Yeah, right. It would be a good idea for the buyer to eventually view the home.

Or maybe I should write about the potential seller with a Wachovia short sale situation, who, for some reason, needed to put a home in Sacramento on the market immediately? This seller requested listing paperwork, which I prepared and emailed. The seller had refinanced the home and was most likely mortgaged over basis. When I suggested to the seller that tax advice was very important and to call an accountant for such advice, I was shot down and pretty much told to mind my own business.

Which I decided to do by not working with that seller. Good idea to mind my own business.

There was also the seller who wanted to do a short sale on a rental because the negative cash flow was never ending. The seller felt that continuing to make mortgage payments every month was a huge financial drain on resources. The rental is a condo in Sacramento. When I inquired about the status of the homeowner’s association payments, the seller hadn’t made a payment for almost two years. Well, the bank is unlikely to pay those delinquent HOA dues. I asked if the seller was making more money in 2010 than at the time of loan origination. Affirmative.

So, there is disposable income then? All of a sudden, the seller switched gears and retracted that statement. The words of Hugh Laurie from that TV show HOUSE entered my head: Everybody lies.

There are only so many hours in a day. It was more important that I work on bringing two short sale banks to an agreement over a seller contribution through a mutual compromise. Equally important that I get an extension and postponement of trustee’s sale on another pending short sale escrow. And extremely important that I get MGIC to back-off on its unreasonable demands and let the seller’s bank approve the short sale like it wants to do.

Not to mention, I have to occassionally stop what I’m doing and pet the cats. My cats don’t lie to me.

Photo: Big Stock Photo

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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.

The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.

The views expressed herein are Weintraub’s personal views and do not reflect the views of Lyon Real Estate.

Just when I know the California Residential Purchase Agreement (RPA) by heart — I can practically recite each paragraph in my sleep — the purchase agreement is being revamped in 2010 by the California Association of REALTORS (C.A.R.). Nothing is written in stone yet, and there may be many more additions and deletions before C.A.R. is finished with its revision, but holy toledo, some of these proposed changes are huge.

There are really good changes proposed such as including the fact that the buyer’s earnest money deposit may be handled in accordance with the short sale addendum, and a notice that increased deposits require a separate liquidated damages clause initialed by all parties — which has always been true but never spelled out so clearly before in the RPA.

A proposed change that is not so good for my Sacramento buyers is the type of financing — whether it’s a conventional mortgage, FHA loan or VA — is now clearly indicated on the purchase agreement. In the past, one had to identify FHA / VA financing only if the seller was contributing. It meant that if a buyer was putting down, say, 10%, and the preapproval letter did not indicate the type of financing, neither the seller nor listing agent could really tell what type of loan the buyer intended to get without asking. Good for sellers, bad for buyers.

The WPA (wood destroying pest addendum) may now require seller payment for completion. In the old WPA, we had the option of designating whether the buyer or the seller would pay for a pest completion and whether it covered Section I or II. The proposed version specifies Section I. Good for buyers, bad for sellers.

It spells out that flat screen TVs and speakers, which are not attached, even if a bracket is used, remain personal property and are not a fixture. I also like the fact that is may require sellers to keep all the utilities on for buyer’s inspections and investigations through the final walk-through.

My favorite paragraph, 14B has several proposed changes, including that sellers no longer can give buyers 24 hours to perform. Now it must be a minimum of 2 days. But it also clearly spells out that the seller must release the earnest money deposit on contract cancellation, if the cancellation falls under the time periods when a buyer has a legal right to cancel.

But a proposed change that I imagine many real estate agents will welcome with open arms is the provision for buyers and sellers to sign electronically at paragraph 30 and 31. I know that thrills me to no end. I just hope the lenders jump on board with this as so many insist on wet ink signatures.

I realize not everybody’s favorite thing to do is read purchase contracts, but there are so many proposed changes in this one that I think it’s prudent to review what’s coming up down the pipeline. It will affect all California real estate agents and their buyers / sellers. These may not take affect until April, assuming all the changes are approved, but April is one of the busiest months in real estate for most of us. If I were you, I’d read it now. Here is the link for new drafts and forms from C.A.R.

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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.

The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.

It seems to be some sort of secret in Sacramento, and perhaps elsewhere in the country, that nobody talks about. Of course, when I talk about it to my husband, he says I shouldn’t care and, if I care strongly enough, maybe I should be working for a nonprofit instead of selling real estate, but the truth is I do care. I can’t help but care. It’s in my nature.

It pains me to see offer after offer from eager first-time home buyers that quite clearly illustrate why those home buyers will probably never buy a home, regardless of how many offers they write.

For example, an agent faxed an offer to my office yesterday. He never called nor emailed to say an offer was coming. Fortunately, my office calls me every time a document or package is received. The first thing that came to mind was evidently the buyer’s agent didn’t read the MLS offer submission instruction, which asks for offers to be emailed. He also didn’t send it to my fax number in MLS. That’s starting out on the wrong foot right off the bat.

Here are the terms of that offer and how they reflect poorly on that buyer:

• $500 earnest money deposit. You know what that says, right? It says the buyer may be broke.
• The earnest money check is a cashier’s check. Why doesn’t the buyer have a checking acount?
• The earnest money check is dated 2 months ago. Is the buyer writing 10 offers a week to see which stick?
• Purchase price is 10% under the sales price. In a hot Sacramento market of multiple offers, this is just plain goofy.
• Borrower is obtaining a special down payment assistance loan. This may not close in 30 days as dictated by the terms of most short sale approval letters.
• Seller to pay 5% of buyer’s closing costs. Now the offer is 15% under the list price. I have offers 15% over list price.
• The buyer’s agent is the mortgage broker. Some mortage brokers know very little about selling real estate.
• The buyer’s agent did not include a short sale addendum on a short sale listing. Does the agent and / or buyer even know this is a short sale?

Of course I’ll email the offer to the seller. It’s my fiduciary duty to do so. But she’ll probably just toss it in the recycle bin. And that’s a shame.

Photo: Big Stock Photo

Everybody knows that short sales in Sacramento — or anywhere in the country, for that matter — can take a long time to close. That’s happens mostly because some banks and the PSAs take forever to respond.

But most of my short sales get approval between 6 and 8 weeks. Many receive multiple offers. An unfortunate aspect for buyers, though, is when buyers have patiently waited for months to get approval on the short sale, some other buyer can sneak in and outbid them.

It happens. It’s happened several times this year on my short sale listings. Now, you’ll hear that banks don’t want multiple offers, but that’s not always true. Depends on the bank. You’ll also hear that submitting more than one offer will hold up the short sale process, and that’s a fallacy as well.

Here’s a true story about how Sacramento Short Sale buyers lost their dream home at the 11th hour:

Let’s say this Sacramento short sale home was listed for $300,000. We didn’t receive a lot of offers, only two. One was, oh, $315,000 and the other, $318,000. At the bank’s request, we submitted both offers to the bank. Suddenly, after 3 months, we received another offer, completely out of the blue, for $350,000 from a third buyer. This happened at the same time we received short sale approval on the $318,000 offer.

We sent the new offer to the seller and the bank. The bank ignored the offer. The seller was livid. Her rationale was why should she have to pay taxes to the state of California on a higher mortgage debt relief balance when she was offered a better price! I explained that the decision was hers, and if she wanted the bank to consider the other offer, she should call the negotiator, as would I.

Turned out the bank approved the $318,000 offer because the BPO was $295,000. The bank was worried the home would not appraise at $350,000. (Shows you how much those BPOs are worth, especially when calculated by an inexperienced appraiser.)

The question was did the seller want to take the short sale approval of $318,000 in hand or did she want the bank to reconsider the $350,000 offer? Time was of essence. We were scheduled to close in 4 weeks. A new approval could delay the process. Due to HVCC, the buyer’s appraisal may be an issue.

In the end, the seller chose the higher offer and directed the bank to consider it. We resubmitted the higher offer to the bank on a Friday. By Tuesday, we had the new short sale approval at the higher price.

During this time, I notified the agent who had submitted the offer for $318,000, to give her advance warning. I didn’t want her to find out that her buyers were kicked out of the deal days or weeks later. That’s not how I do business. The agent immediately submitted an addendum, increasing her buyer’s price, but it wasn’t enough to beat the other offer.

Sacramento short sale buyers, please be aware that this can happen to you. You can wait months and months for approval and, lacking specific language to the contrary in your contract, some other buyer can kick you out at the very last minute.

Photo: Big Stock Photo

Now, I know what you’re thinking: Oh, she just made up that blog title about a Sacramento short sale agent making a porno to attract attention, right? Well, yes and no.

See, my husband and I love that 2008 movie “Zack and Miri Make a Porno.” If you haven’t seen it that delightful film, it’s one of the funniest movies of last year, and not at all what you would think. You can get it from Netflix. In case you’re wondering, it’s rated R not X. Warning: if you’re under the age of 18, this blog is not for you.

The premise of the movie is about two long-term friends, Seth Rogin and Elizabeth Banks, who make a financial decision to form a business partnership. They set out to make a porno movie, starring Traci Lords, Justin Long (I wonder how Apple felt about that?), Jason Mewes (that guy from Jay and Silent Bob Strike Back), among others. Zack and Miri also decide to film themselves performing an intimate act — just for the money.

Along the way, they discover that their business relationship wasn’t really all about business. It’s about two people whose feelings run much deeper. The movie is about human relationships.

Where I’m going with this is that writing a short sale offer is not all about the paperwork. Of course, the paperwork is important because it forms a legal and binding relationship between the parties. But to get your short sale offer accepted, especially among multiple offers like we have in Sacramento at the moment, you’ve got to put a human face on that offer.

Technology and legalities aside, real estate is still a people business. It requires communication and making a connection on a personal level.

I often receive more than one offer for my Sacramento short sale sellers. Those sellers are then asked to select the best offer, and we sometimes put another into back-up position. The seller may ask for my professional advice, and I will render it. But I will not make the decision for the seller.

One of the biggest obstacles facing Sacramento short sale agents right now is that often when an agent receives the short sale approval letter from the bank, the #1 buyer has vanished. When that happens,  I call some of the other agents whose buyers had submitted offers.  Often, I’ll receive offers from agents who simply email or FAX the offer to me without warning. No phone call, no email. Just the offer. They share nothing about the buyer nor about themselves.

Which offers do you suspect my short sale sellers tend to place on the bottom of the pile?

Photo: Big Stock Photo

Sometimes that’s what I feel like saying to listing agents who go hog wild writing counter offers: Who died and made you ruler of counter offers? You know, in my book, a good counter offer should address essential elements of the purchase offer that require further negotiation. End of story. But I’ve seen my share of goofy counter offers that contain unnecessary garbage, which typically do not evoke a favorable reaction from buyers. In fact, those types of counters can make a buyer feel like scratching a big red X over the entire form.

Buyers today are a precious commodity. Some sellers are lucky to receive an offer at all. Sellers don’t need their agent mounting a high horse and scribbling lines of meaningless nonsense into a counter offer because all that does is tick off the buyer and irritate the buyer’s agent.

I say, stick to the essentials, agents. If certain verbiage is already contained in the purchase offer, it doesn’t need to be restated in the counter offer. Buyers in California, by default, have 17 days for contingencies. It makes no sense whatsoever to try to eliminate a contingency because the buyer needs only one inspection contingency to cancel, and it can be for any reason at all.

I received a counter on a home in Sacramento where the listing agent had noted the interest rate mentioned on page one was not a contingency of the contract. Hello? What difference does it make? The buyer’s loan contingencies and inspection contingencies both run for the same period of time. If the buyer truly wants to cancel the contract, the buyer doesn’t need to rely on an increased interest rate to do it. Paragraph 14-b1 will handle it for them.

I’ve also seen lots of counters lately where agents (not their sellers) have dictated a laundry list of demands, many of which are completely unnecessary such as personal property contains no warranties or earnest money deposit to be deposited within 3 business days. Those clauses are already printed in the purchase offer.

Why don’t these listing agents read their purchase contracts? How can they possibly ask a seller to sign a document they haven’t read?

Many buyers are fragile. Be gentle, agents. Buyers don’t want a listing agent hammering on their heads. If the object of contention is price, then address the price. The purpose is to reach a compromise. Not fill up the page with empty words.

Photo: Big Stock Photo

short sale listings

I wanted to write this post to give you an idea of how obtaining a mortgage for a short sale will differ from a private party or bank owned home.

When you make an offer on a foreclosed home, you are dealing directly with the bank because they are the current owner. The bank has already completed the foreclosure process, set the sales price, and are actively waiting for offers to come in so they can sell the home and get it off their books.

A short sale is a little different in that the bank does not technically own the property… they only have a mortgage lien against the property. When you make an offer on a short sale home, your offer goes first to the homeowner for their approval and signature. Then the accepted offer is sent to the bank(s) that hold the mortgage lien(s) for the home in order to obtain a short sale approval.

The short sale approval is a document that gives the homeowner permission to sell the home for a specified amount and the bank agrees to release the mortgage lien even though they will not be paid in full. This process can take days or months… it really just depends on the bank(s) that currently hold the mortgage lien(s) for the home.

When you make an offer on a bank owned home, you usually know right away if your offer is accepted. Making an offer on a short sale is a little different in that the bank has to get clear about the current value of the home through broker price opinions and appraisals. They also need to review the current owner’s hardship and financial documents to make sure the owner qualifies for the short sale. This is what takes so much time and can test your patience as the home buyer.

If you are patient and do your homework upfront, purchasing a short sale can provide you a great way to get a deal in today’s market with less competition.

Even though the bank takes their time making the decision to approval the short sale… they will often ask the buyer to close escrow in a matter of weeks once the short sale is approved.

Right now the real estate market can be a little hectic. Mortgage lenders are picking apart perfect files and closing escrow in less than 30 days can prove to be a real challenge.

In order to make sure your loan goes through as quickly as possible here are a couple tips:

•1. Make sure you work with a mortgage professional who asks you for a complete loan file upfront!
A complete loan file should at least include (tax returns and W-2s, 2 months banks statements, most recent retirement statements, and 30 days worth of pay stubs). You need to make sure you are working with someone who will take your loan seriously and thoroughly review all of your documentation looking for red flags. Your mortgage professional will want to do as much work upfront as possible so there is no time wasted tracking these items down once you are in contract.

•2. Keep a file for new information as it is received!
You will want to create a file where you can hold any new bank statements, paystubs, or retirement statements as they come in. Your mortgage professional will needs these items once you are in contract. The quicker you can get these items to them, the quicker your loan can be submitted.

•3. Respond quickly to your real estate agent or mortgage professional when they ask you for something!
Even though you are in escrow… life still goes on as normal. You need to make it a priority to get back ANY items requested of you as quickly as possible. Remember your real estate team can only work as quickly as you allow then to! Every day wasted just makes your real estate transaction that much harder to close.

If you have patience, understand the short sale process upfront, and respond quickly when asked…short sales can prove to be a pot of golden opportunities for a homebuyer!

I hope this information has helped you understand the short sale process better. Please post a comment if you have any questions on this topic and I would be happy to answer them!

As always… Happy hunting!

Erin Newington
First Priority Financial
(916) 687-6868

Homes: About to get much cheaper

• By Les Christie, CNNMoney.com staff writer

If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.

Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.

In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope.

Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said.

In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.

If Fiserv’s forecast holds, Miami real median home price will tumble to $142,000 by June 2011.

In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they’re expected to fall 26.8% and then flatten out.

Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%.

Prices had stabilized

The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%.

Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however.

“I’m afraid Case-Shiller may be just a temporary reprieve,” he said.

He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1.

Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

Winners

A handful of metro areas will buck the trend, according to Fiserv. Six markets will remain flat, and 33 will actually post gains. The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up 8.9% over the past three years and are expected to increase another 3.4% by June 2010.

Fairbanks, Alaska, prices are anticipated to rise 2.5%, while Anchorage will climb 2.1%. Elmira, N.Y., prices may inch up 1.8%.

The nation’s biggest metro area, New York City, will underperform the nation as a whole over the next two years, according to Fiserv. Prices, which have already fallen 21.7% to a median of $375,000, are expected to fall 17.4% by June 2011.

Home values in the nation’s second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. Chicago prices, which have fallen 25.2% to $227,000, will drop only 4.1% over the next 12 months and then starting to climb.

The Detroit metro area now has the dubious distinction of having the lowest home prices in the country. Prices have dropped 51.7% to a median of $50,000. They’re expected to fall another 9.1% and then stabilize.