Homeowners Who Are Upside Down on Loans Should Be Careful When Considering to List a Short Sale

Upside Down Homeowners Should Be Careful When Considering to List a Short Sale

With home loan foreclosure or deed-in-lieu of foreclosure, sellers will take a hit of 200 to 300 points on their FICO scores. The exact penalty on FICO will depend on overall condition of credit.

The effect of a short sale on a seller's credit FICO score is the same as a foreclosure. The penalty on a credit report will appear as a pre-foreclosure in redemption status and result in a loss of 200 to 300 points on FICO.

With a foreclosure or deed-in-lieu of foreclosure situation, a seller who wants to buy another home later will end up waiting about 36 months before a lender will offer a reasonable opportunity.

With a short sale, the notation on a seller's credit profile of 'settled for less than owed' (short sale) prevents the consumer from obtaining an institutional loan for about 24 months, depending on the lender program (Fannie Mae guidelines).

More bad news is that the short sale seller could be subject to lawsuit and deficiency court judgment for the difference between the loan amount and the amount paid.

In California, purchase money loans are not subject to lawsuit and deficiency judgments. However, hard money loans, equity loans and refinances are subject to lawsuit and deficiency judgments. Other states have laws regarding personal guarantees on loans, which could also result in lawsuit and deficiency judgment against the owner.

This is complicated. Homeowners considering to list for a short sale should be careful and consult a qualified real estate or tax attorney in their state and jurisdiction.

Posted by Harrison K. Long, Explore Properties Group, April 30, 2008

Rising Gas Prices Is Not Good For Our Economy, Business & Real Estate

Some folks believe our high prices at the gas pump can be blamed on the big oil companies. Wrong.

Rising prices in free markets result from an increase in demand and/or decrease in supply. Supplies of oil have been reduced by environmentalists’ demands that no more oil wells be drilled, that no petroleum products be refined and that no oil be transported. Supplies of oil have been taken off the market by OPEC (which has a monopoly), not the big oil companies. Producing, refining and transporting oil has become more expensive, at least in part because of pressure from environmental activists.

Demand for gasoline has increased to some extent by growing economies of China and India, and others, and to some extent by wars in Iraq and Afghanistan.

The desire for safety and convenience causes some people to prefer larger, heavier, safer cars, which use more oil and gas.

The global warming movement criticizes the use of petroleum products, causing additional costs in taxes, regulation, carbon permits.

Let's discuss this as business people and Realtors, asking our policy and lawmakers to plan and focus on getting us better supply of oil products.

Posted by Harrison K. Long, Explore Properties Group, Irvine, CA, April 28, 2008

Sellers Should Require Serious Earnest Money Deposits On The Sale of a Home

Sellers sometimes make the mistake of contracting with a buyer for a home sale and asking earnest money deposits of less than three percent of the price. That's painful when the buyer backs out of the deal.
One way to assure that a buyer is serious is to require 3 percent or more of earnest money deposit. If the buyer doesn't and later backs out, he would only lose the small deposit and cause financial hardship for the seller. The seller would also lose the benefit of finding a buyer during the time the home was taken off the market.
Smart sellers ask buyer deposit of at least 3 percent, so that the buyer will think twice about walking away.
In some states and according to contract, if the buyer defaults prior to sale closing, the earnest money goes to the seller. In some states, the seller can also sue the buyer for damages, if the house subsequently sells for less than the original contract price, plus costs sellers incurred to carry the house until it sells. In some situations, seller can sue the buyer for specific performance, which is asking the court to force the buyer to close the deal.

Be careful and consult a local attorney for guidance on this. Keep in mind that litigation is time-consuming, expensive and uncertain.

Posted by Harrison K. Long, Explore Group, April 28, 2008

Do Lower FED Rates Signal That Mortgage Rates Will Fall?

Do Lower FED Rates Signal That Mortgage Rates Will Fall?
That depends.
The 30-year fixed rate mortgage is not tied to short-term treasuries. Fixed mortgage rates are tied to long-term bond yields that move based on anticipation of the economy and inflation. Fixed rates usually come down when there is outlook for slow economic growth. Long term mortgages are securitized and sold on the global market, and investors now demand a higher risk premium on these mortgages.
If you have 7 and 5-1 Adjustable Rate Mortgages (ARMs), there is good news, and it's tied to the treasury index. If the FED cuts rates, it usually signals better rates for ARMs.
If the FED cuts rates, those with Home Equity Lines of Credit (HELOC) will be pleased. HELOCs are mostly pegged to the prime rate, which moves in step with the Federal Reserve.

For good mortgage information, rates and products, contact Tim Sibley, First Capital Mortgage, 949-718-1511.

Posted by Harrison K. Long, Explore Group, Coldwell Banker Previews, April 27, 2008.

At The Center of Our Housing Crisis Is That Many People Have No Equity Or Are Upside Down on Loans

At the center of our housing crisis is that many people here in California and the United States have no remaining home equity or that they are upside down on their loans.
Too many people purchased homes during the past five years with no or little down payment, based upon no document loans, and with lending practices so relaxed that mortgage agents and brokers participated with at least some knowledge that loans should not be approved and funded.
Whose fault is that? Is it possible that mortgage brokers and lenders are at least partly responsible?
Even if it is determined that mortgage brokers and lenders are partly responsible, the individual borrower and homeowner has no comfort. Their primary focus would be on pressuring the mortgage broker or lender to assume the loan back and take over the property. The homeowner would ask that they be cleared of responsibility for the loan.

Posted by Harrison K. Long, Explore Properties Group, April 26, 2008

Tags: Lending, Mortgage, Ethics & broker practices

Good News that NAR Will Consider New Rules for Listing & Advertising of Short Sales

News is that the National Assoc. of Realtors is considering new rules for listing and advertising of short sale and distressed properties. That's good. We need strict rules to bind owners and sellers, listing agents, and lenders, int the short sale process. The market needs all such MLS listings to identify whether there is lender approval of offers on short-sale. The market needs to have specific MLS rules on commission offered by the owner and lender to the broker Realtors for the buyers. The market and buyers deserve to know by MLS whether the property will be tied up in a lengthy process of lender determination of eligibility, whether there is non-judicial foreclosure in the works, and what is exactly being offered. After the new rules are established, the NAR, California Association of Realtors, and local MLS groups, must enforce those rules, and not allow listings that don't comply. Banks and lenders must not be allowed to set all rules and information to be provided in the MLS listings.
Posted by Harrison K. Long, Explore Group, April 24, 2008.

City of Mission Viejo Patriotic Decision about "In God We Trust"

The Mission Viejo, California, City Council on April 21, 2008, joined a growing list of cities in OC adopting the national motto “In God We Trust” after unanimously deciding to display it. This is the fourth Orange County city to follow the trend to post the display in council chambers. Mission Viejo joins San Clemente, Cypress, and Westminster in displaying “In God We Trust.” Villa Park, Tustin and Huntington Beach are considering the issue. Other California cities that have adopted the motto are Artesia, Hawthorne, Carson, Paso Robles, Oceanside, Victorville, Compton and Bakersfield.
We believe this is patriotic and a good thing.
Posted by Harrison K. Long, Explore Properties Group, April 22, 2008

The Market Needs More Control Over Information on MLS Listings for Distressed Properties

The Market Needs More Control Over Information on MLS Listings for Distressed Properties.
Consumers and buyers need more accurate information on distressed property listings. The markets and MLS should have better control over listings of distressed properties, including foreclosures and short sales.
On a short sale, the owner lister should be responsible for accuracy of information and sign to certify it. The owner and their agent should be contractually and legally responsible to pay the buyer's broker the amount of commission set forth on the listing.
On a bank owned property, the bank should certify its contractual agreement to pay the buyer's broker the set commission prior to the property being listed by the MLS.
These and other simple measures would help Realtors provide better service, assure the consumer a better handle on whether and how to purchase such properties.

As of April 19, 2008, distressed properties, short sales and foreclosures, were 35.1 percent of MLS listings in Orange County, California.

Posted by Harrison K. Long, Explore Properties Group, April 22, 2008

Top Five Reasons to Use a REALTOR®

Top Five Reasons to Use a REALTOR®
1. REALTORS® subscribe to a strict Code of Ethics—a set of obligations that often go above those mandated by law. Known as the REALTOR® Code of Ethics, these principles embody a strong commitment to fairness, integrity, and moral conduct in business relations. Under the Code of Ethics, REALTORS® put the needs and well-being of their clients above anything else.
2. As members of C.A.R., California REALTORS® have access to confidential legal counsel, innovative marketing tools, and an extensive repository of market data. With these resources, REALTORS® are equipped to help you make important decisions throughout the home-buying or –selling process, such as how much home you can afford or what information you must disclose to the other party.
3. Among the top skills REALTORS®’ bring to the table is the ability to negotiate a favorable price. REALTORS® are knowledgeable about the small repairs and improvements you can make to enhance the “salability” of your home. According to the NATIONAL ASSOCIATION OF REALTORS®, the median price of a home sold using an agent is 16 percent higher than a home sold without the guidance of an agent.
4. Your REALTOR® acts as your advocate during each step of the transaction. Whether evaluating buyer proposals or preparing counteroffers, your REALTOR® saves you time by serving as a liaison between you and the other parties of the transaction, prepares and reviews necessary paperwork, and guides you through the process to make sure everything is handled appropriately.
5. REALTORS® are well-versed in up-to-date market data, such as inventory levels, time on market, and ratios of list-to-sold prices. Backed by education and experience in the real estate industry, your REALTOR® can help you leverage this market information to aid in your decision-making process.

Source: California Association of Realtors, 2008
Posted by Harrison K. Long, Explore Properties Group

Is Cancellation of Debt Always Income Taxable?

Is Cancellation of Debt Always Income Taxable? What does IRS say? Not always. There are exceptions. Some situations when cancellation of debt income is not taxable involve:
A. Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
B. Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Insolvency is complex to determine and the assistance of a tax professional is recommended for consideration.
C. Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. The rules applicable to farmers are complex. The assistance of a tax professional is recommended.
D. Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. In this situation, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
We provide this for information only, and these are complicated issues. We recommend you hire a qualified income tax professional.
Posted by Harrison K. Long, Explore Properties Group, April 18, 2008

Ask Whether Your Business or Company Implements Its Ethics and Values

It's true that most every business or company will tell you that they have and believe in values and high ethical standards. You need to dig deeper and ask how they implement those values. Ask what they do to reinforce them. Ask whether they have a plan or a program to instill and support these values. Find out about their response.
Posted by Harrison K. Long, Explore Group, April 13, 2008
Source: Bob Hunt, OC Register, April 12, 2008

Developers & Builders Calculate What It Means to Be Green

A recent article by American Institute of Architects suggests that environmentally savvy consumers ask for more tools for people to know why going green can also involve saving money. The Center for Neighborhood Technology’s (CNT’s) calculators, like the Green Values Stormwater Calculator and TravelMatters Emission Calculator, are said to help figure out the costs, benefits of actions, as well as providing information on how to change habits that may be costing you more and impacting the planet more severely. The Green Values Calculator is said to help with understanding of the role that green infrastructure can play in alternative infrastructure provisions. Does this tool allows developers, regulators, and property owners to assess economic and hydrologic impact of green versus conventional stormwater management? What do you think? Check it out at greenvalues.cnt.org/calculator.
Posted by Harrison K. Long, Explore Group, April 11, 2008

Bush Administration & Lending Industry Correctly Oppose Giving Bankruptcy Judges More Power

The U.S. Senate passed legislation April 10, 2008, that would provide billions in tax cuts for home builders, banks and other businesses. However, the U.S. House of Representatives is considering other legislation that would provide more help for individuals, but no breaks for businesses. The Senate's bill is compromise that didn't include a provision to allow bankruptcy judges to reduce the principal on in trouble borrowers' mortgages. The Bush administration and the lending industry correctly opposed giving bankruptcy judges power to force "cram downs" of loan principal on lenders.
Posted by Harrison K. Long, Explore Group, April 10, 2008

Huntington Beach to Post U.S. Motto "In God We Trust"

Huntington Beach, CA, became the latest city in the state to display U.S. Motto "In God We Trust" at City Hall. This is a sign about patriotism and not religion. San Clemente, Westminster and Cypress, CA, have also adopted "In God We Trust" to be displayed.
U.S. Congress adopted the nation's first official motto, "E pluribus unum" ("Out of many, one"), in 1782.
In 1956, President Dwight Eisenhower and Congress changed it to "In God We Trust."
We believe this is a good thing. What do you think?
Posted by Harrison K. Long, Explore Group, April 9, 2008.

Out Of These Four We Will Have An NCAA Champion in Men's Basketball

As the men's final four NCAA basketball games tip off on Saturday, April 5, 2008, we know that a champion will appear on Monday evening.
Will it be the University of North Carolina Tarheals? What a great basketball program they have lead by Roy Williams, a true champion himself.
Let's take time to celebrate the achievements of the players, coaches and administrations from these four great schools and athletic: University of North Carolina, University of Kansas, Memphis State University and UCLA.Posted by Harrison K. Long, Explore Group, April 4, 2008

The Art of Life is to Show Your Hand

"The Art of Life is to show your hand. There is no diplomacy like candor. You may lose by it now and then, but it will be a loss well gained if you do. Nothing is so boring as having to keep up a deception."
-- E.V. Lucas, 1868-1938, prolific British author

Posted by Harrison K. Long, Explore Group, April 3, 2008

EXPLORE GROUP BLOG: Credibility Is All We Have At The End of the Day

EXPLORE GROUP BLOG: Credibility Is All We Have At The End of the Day

Proposed FHA Expansion of Loan Guarantee Program Got Help Today

Proposed Expansion of FHA Loan Guarantee Program Got Help Today
It's good that proposed expansion of FHA loan guarantee programs got help when U.S. Senate Republicans agreed to include the idea in a compromise bill. Some Democrats agreed on April2, 2008, to drop their controversial proposal to allow bankruptcy courts to "cram down" the mortgage debt of troubled borrowers. We could now have congressional debate over the planned FHA expansion. The Bush administration has made FHA loan guarantee programs part of its foreclosure prevention concept. Democrats apparently are dropping their idea about changing of the U.S. bankruptcy code. That idea was bad anyway.
Posted by Harrison K. Long, Explore Group, April 2, 2008.

EXPLORE GROUP BLOG: Bob Knight's Hiring by ESPN Sends The Wrong Message to Our Young People

EXPLORE GROUP BLOG: Bob Knight's Hiring by ESPN Sends The Wrong Message to Our Young People

Credibility Is All We Have At The End of the Day

A journalist once said: "In our business, credibility is all we have at the end of the day. If you can't believe what's published in the newspaper, or the magazine, you move on. The lesson may be in how we think when we become the leaders. Too often, the best lesson of leadership - only by being last can you be first - is lost amid the power. Rocket scientists aren't the only ones who can pick out the people in the room acting better than the rest."
[Source: Craig Reem, OC Metro magazine, July 2007].
We agree.
Posted by Harrison K. Long, Explore Group.

Battle Over Rent Control and Eminent Domain, California Election June 2008

Rent control is a major election issue in June, 2008, over two California ballot measures. The primary focus of the two initiatives — Prop. 98 and Prop. 99 — is to remedy the state’s eminent domain law to prevent government from taking private property for private uses. Proposition 98, spearheaded by the conservative Howard Jarvis Taxpayers Association and the mobile home park industry, adds another provision that would phase out rent control in California apartments and mobile homes as they are vacated. Rent control proponents, led by a coalition of renters, seniors, mobile home associations and environmental groups, countered with Prop. 99, which they say would provide eminent domain protection without stripping renters of their rights. We like proposition 98.
What do you think?
Posted by Harrison K. Long, Explore Group, April 1, 2008 [Source: OC Register.com]