Diane’s Blog

Foreclosure is a legal procedure which must follow a pre-determined order of events and time-line. The shortest possible foreclosure in California takes about 121 days, but often takes much longer.

First, California is a non-judicial state, meaning that a court and a judge is not involved. Actually, the procedure for California, a non-judicial state, is fairly straightforward. To simplify, it works like this:

After the homeowner has stopped making payments, the lender, either of the primary loan or any secondary loan, may begin the foreclosure process.

These days, many lenders are waiting months to begin the process; however, some lenders always start the moment it is legally possible after just one missed payment. If a homeowner is to miss a mortgage payment it is ALWAYS advisable to call the lender to try and negotiate forbearance or a different loan. NEVER just miss payments saying nothing to the lender.

The first legal notice is the Notice of Default [NOD], sent to the borrower and recorded on the title of the property with the County Recorder. Now, the NOD makes the situation of the homeowner public knowledge. In this day of electronic data-gathering, many individuals and entities are collecting and acting upon this information. As mentioned in a previous post, Losing Your Home? Avoid These Scams, scam artists are everywhere. Be careful. Seek out the counsel of a reliable real estate professional or an attorney.

Following the legal procedure, now the lender must wait for 90 days. This 90-day period is known as the Redemption Period because the homeowner can bring his payments current or “redeem” his loan at any time.

After the Redemption Period, comes the Publication Period, which lasts for 21 days begins. During this time, the lender advertises the coming sale in various newspapers following set rules. At the end of this period, the Trustee’s Sale is held. If no one bids over what is owed the lender, then the lender “takes back” or repossesses, “repos” the property.

At this point, the homeowner should have vacated the property. Those who fail to leave will then face  eviction, another legal procedure which can result in the Sheriff appearing at the homeowner’s door and forcing the occupants to move while removing all personal possessions to the curb. This is not pleasant.

It’s interesting and vital knowledge for homeowners that this is the fastest possible scenario for a foreclosure in California. Frequently, though,  the procedure is held up, delayed, or postponed for many reasons. The main reason a sale is delayed or put off occurs because the home has a “short sale” offer and the lender wants to consider it. Should that offer fail to please the lender or if the buyer fails to follow through, then the lender can proceed to sale. Other reasons might include possible negotiations with the delinquent homeowner. These days many lenders delay as a matter of course simply because they are overwhelmed by the sheer numbers.

The price of crude has dropped quite a bit. Around here the price of gas at the pump has dropped
$.10. Yipee! Now it’s $4.37 a gallon…Seems like we need more laughs to stop from crying…

Then, there’s this one

Everybody wants good credit. How do you get it?  But what makes up good credit?

Three organizations collect credit information, Equifax, Experian and Trans-Union. In turn, these companies factor the credit into a single credit “score”, called a  FICO, Fair Issac rating, and sell this information to lenders, credit card companies,banks, basically any credit-granting organization. Each company collects slightly  difference information and computes the score slightly differently, so your FICO is different for each credit-reporting agency. Mortgage lenders usually collect all three and use your “middle” score as your rating. Anything in the 400s or 500s is bad credit, in the 600s is OK and in the 700s, especially above 750  is very good to excellent.  In the 800s is golden. 850 is the max.

So, what makes up your credit report? Of course, the most important component in your credit report is your payment history. This represent about 35% of your final “score”. Typically, your landlord does not report your payment history to credit reporting agencies so good payments there will not build your credit. Some utility companies do report; some do not. To find out, ask. What will build your credit? Well, buy a car and pay for it in installments, making every payment on time. Or, get a Macy’s or Kohl’s card or a gas card and make your payments every month on time.

The next component is the amount owed. This represents about 30% of your credit score. Paradoxically, the more debt you have, the better your credit score--to a point. Each credit card, for instance, has a credit limit associated with it, perhaps $10,000 or $15,000 or $30,000 or $50,000. Let’s say you have three cards with $10,000 credit limit each. You now have $30,000 in potential credit. You can borrow  up to $15,000 and increase your credit score, as long as you allocate it correctly. Never use more than 50% of your credit limit. So, in this case, you could borrow $5,000 from each card.  As you accumulate cards and debt, as long as you pay at least the minimum every month, though, obviously more is better, your score will continue to rise. Further, your credit card companies will continue to raise your credit limits. Eventually, that $1000 limit you started with may rise to $50,000.

The next component of your score is the length of your credit history. That’s worth about 15%. Youth is not an advantage here. The longer you have had credit and managed it well, the better for you. If you have had a bankruptcy or a foreclosure or lates on credit cards, it takes time to “get over” these events before your score begins to rise again. As long as you handle what credit you have correctly, your score will rise.

Getting new credit accounts for about 10%. Be careful here. Try not to collect too many cards or too many loans. If you can keep track of all of them, fine, but it’s easy to miss payments if you have 20 active cards and loans, so take it slow.

The last component making up about 10% of your credit score is types of credit. Vary your credit among revolving accounts, such as department store cards; credit cards; auto loans and mortgages.Gas cards are an easy type of credit to get and manage. Mortgages are more difficult to get and more difficult to manage well. Most lenders put a limit on the number of mortgages you can have.

Once you’ve established credit, there are many ways to improve it quickly and, as we all realize to our chagrin, it is very easy to drop your score by a huge amount for a relatively minor infraction. If you would like to know what our credit score is right now, several sites give it to you for free. Check out Annual Credit Report, Credit Karma or Quizzle.

In an earlier post, Short Sale v Foreclosure, we saw the difference between a short sale and a foreclosure, but there is another option for a distressed  homeowner. This is the Short Payoff. This option makes sense only under special circumstances.

What’s the difference between Short Sale v Short Payoff?

Victorian houses 3

In our current real estate environment, short sales are becoming more common. A short sale occurs when  the lender or investor agrees to accept an amount less than actually owed on the property. The lender sells the property “short.” In this case, it’s up to the homeowner, usually using a real estate agent, to market and sell the property. The new buyer usually gets a bargain. The previous homeowner gets out from under an unmanageable mortgage by giving up the house.

In order to qualify for a short sale, generally speaking, the homeowner must demonstrate a verifiable long-term hardship rendering him unable to pay the mortgage. These days,  many homeowners, especially those who bought within the last several years or those who refinanced and took big chunks of equity out of their properties, becoming “upside down” in their home loans or owing more than the home is worth. Now, more and more often, these homeowners are also doing short sales.

So far, this doesn’t sound like such a bad deal. The house I bought loses value, so I sell it at current market rates and the lender takes the loss. Well, true, but the homeowner no longer has a home. And, the former homeowner will probably be a renter for several years to come as his credit report’s FICO score will immediately drop by about 300 points. The newest loan guidelines from Fannie Mae and Freddie Mac specify that after a short sale, a prospective borrower must wait for 2 years to qualify for any  FHA- or government-backed loan.

So, what’s the alternative that will NOT damage credit to such a degree?

That option is called a Short Payoff. It also carries some tough restrictions. If the homeowner is upside down by a smallish amount, say $10,000 to $50,000, depending on his  financial perspective, he might try to negotiate a short payoff with his lender.  In this scenario, the lender agrees to release the lien, his interest in the property, allowing it to be  “conveyed” or sold to a new owner.  The lender agrees to accept less than the amount owed on the property to release the lien, thus “short payoff,”   However,  in return, the former homeowner signs a promissory note for the difference or some of the difference agreeing to “pay off ” this unsecured line of credit according to the terms of the note.

To do a Short Payoff, the mortgage must be  current, the borrower must have  great credit, and must demonstrate the ability to pay off the debt.  The upside of this situation? The former homeowner keeps his great credit and can purchase another home or anything else he desires.

When is a  Short Payoff appropriate? A homeowner might  request a short payoff when the home has lost value dramatically or even just enough to make it impossible to sell, and he does  not have the ability to pay the large amount to get completely out of the property.

Not all lenders will allow for a Short Payoff; however,  you will never know if you never ask.
Of course, the advantages of short Pay-offs are the borrower are able to move out of the property and get on with his life, there SHOULD receive no negative feedback on the former homeowner’s  credit.

If for some  reason down the line, the borrower’s  ability to pay changes and cannot pay on the note, the credit ramifications are significantly smaller.

For further clarification of the entire short sale, foreclosure and short payoff differences, I have just posted an E-Book, Should I Short Sale My Home or How To Survive the Worst Real Estate Market in History, available as a free download, on my website. Plus, it appears in Links to the right of this post.

Yesterday, crude oil hit $147 a barrel. Only cartoonists can help us now…Here are a couple.

Here’s another

The national news is full of all the foreclosure and short sale news, so buyers are starting to feel pretty good about themselves…as well they should with a few important caveats…

Prepare Financially. Any buyer must take care of the preliminaries before even looking at his or her first open house. More homes are on the market today, at better prices than in years, but the easy credit of yesteryear is gone, probably for good. Today’s home buyer needs to be pre-qualifed by a reputable lender. This is a process that takes just a few minutes over the phone, answering a few questions and doing a credit check. Relax. It’s much easier than a trip to the destist. The lender does all the work. Find out what programs might fit your situation. Plenty of good loans are still out there. Figure out what your price range really is before you go shopping.

Make the Decision. You may be financially prepared, but is this the right time to buy for you? Make sure you are not too stretched financially because the foreclosure you saw last weekend is such a “great deal”. If it’s too rich for you, you may find yourself in foreclosure a few years hence. Plus, foreclosures in highly desirable areas usually attract plenty of attention and multiple offers, so many sell for well over list price. Are you ready for that?

Buy at the Right Time. When is the right time? Really, that’s up to you. The best time to buy is when you want to. Kids out of school? Job transfer? New baby? Downsizing? Inheritance? Any of these events might kick you into gear, but if you’re waiting for the market to go down more, you may be waiting in vain. Timing the market, as discussed in an earlier post, is a fool’s game.Buy when you are ready.

Do Your Homework. National news reports make it seem homes are available for pennies…Maybe so, nationally, somewhere, but here in California, despite the downturn and despite the slide in value, homes are still plenty pricey. So, find out what homes are selling for in the neighborhood where you want to live. Check with a reliable real estate broker for prices or look at homes for sale on Realtor.com where you can search all Realtor-listed property all over the country and in your own neighborhood.

Ready, Set, Go.Now, financially prepared, credit report and pre-qual in hand, you can venture forth into this wonderful Buyers’ Market. Having done your homework, you are set and need only secure the assistance of an able and reliable Realtor, such as yours truly, to help you get through the thickets of listings out there to your bargain dream home.

It seems too fortuitous to be true, but having written my professional observation that so many male clients are more interested in the garage than the house, what should arrive in my email inbox but a solicitation for a new real estate website?

Yep. You guessed it. Called CarProperty.com, it features fabulous garages with homes attached, peripherally, I imagine. This 6,000-square-foot garage, for instance, found at an undisclosed location in the Sierras, must’ve been someone’s dream “home” at one time and comes with a 7,000-square-foot house which is not pictured.

Now we know what’s really important to any potential buyer of this property.

As the ad copy for the site proclaims:

You don’t have to feel bad anymore because you love your garage or you want a “car property” just because of the awesome garage. You’re not alone anymore, now you have www.CarProperty.com and over 680,000 registered members to help you celebrate the cool garage and the house that comes with it. We have unearthed an upswell in sentiment from all types of car enthusiasts, car collectors, people who work in their garages, people who entertain in their garages and everyone else who simply love a great garage! Our membership ranks are growing fast, so if you have not already, sign up today and while you’re at email this newletter to a friend and ask them to join to.

Well, there you have it. Never mind the house. Where’s the garage?

Now all we need is a website for gigantic garages with oil wells attached. WWW.GaragewithOilWell.com?

Hey, it’s July and the living is easy. The 4th is coming..The Dodgers and Angels are making the history books and the great time of home repair is upon us, as suburbanites head by the thousands to Home Depot or EXPO as the case may be. Great projects in mind to enhance the quality and value of their homes, every year homeowners make horrendous mistakes in home “improvement” as they discover, to their dismay, a few years down the road when they try to sell their “enhanced” homes.
What are some of the major mistakes, you may ask?

Costly Upkeep

Well, for one putting in an improvement proving to be high maintenance or high expense. An example might include a pool even here in sunny Southern Cal. In my experience, unless it’s a luxury or near-luxury home, value-conscious shoppers veer away from pools unless it’s summer and unless the pool is in pristine condition. Then, many buyers seemingly ignore the obvious–it’s gonna cost plenty to keep that pool in top shape. As for putting in a pool where none now exists, that is a costly operation which almost assuredly will not give a return on the investment.

How about redoing an existing pool and adding a waterfall and spa? That sounds great. Just make sure you are not taking up the entire backyard. Future buyers may want that yard for dodgeball or croquet. Families with very small children could not buy a home with a pool for a backyard due to safety concerns.

Had to have that complicated landscaping design? It’s certainly beautiful, but, then again, you have the gardeners come twice a week to keep it that way. Buyers have a sneaky way of figuring these things out with all their child-like questions…They are most likely going to notice the lawn costs an arm and a leg and shy away…

Overkill?

If you live in an entry-level home in an entry-level neighborhood and you want to put up expensive wrought-iron fencing with brick pillars and sculpted rock gardens, go for it. Just don’t think a buyer will pay for it or even like it.

Before jumping into your project, check around the neighborhood. Are you planning to put in your “dream kitchen” modeled on one you saw in Architectural Digest with custom Brazilian cherry cabinets, granite countertops, and travertine floors? If all the homes in your neighborhood generally have stock cabinets from Home Depot, it’s probably not going to give you return on your investment, though it may attract buyers to your home.

Quirky?

Let’s say you take a trip to Vegas and fall in love with the decor at the Bellagio. Your upscale, yet still tract home, cries out to you…Damning the torpedoes, expense-wise, so to speak, you put in trompe l’oeil murals, built-in wine cabinets and Tuscan-style detailing throughout your pad. Cool, no? To you, but to buyers? Most likely the next buyer will just rip it all out.

Other example? How about a fancy barbecue island with built-in speakers and tiki bar? It’s great for you, but don’t expect a buyer to pay for it. In fact, buyers may drop their offering prices complaining that all the “improvements” have to be removed.

Unpopular?

Maybe you feel you just have to have an office, and the garage is the only place for it, so you make over the garage as an office. Good idea? Well, no, even though hardly anyone around here seems to use their garages for cars, the vast majority of buyers will want to have one. In fact, in my experience male buyers are more interested in the garage than the house. It could be all those toys or it’s a place to tinker.

The love of your life is gardening, so you build a fancy “garden house”. Good idea? Enjoy it because the next buyer almost assuredly won’t want it and won’t want to pay for it. Ditto for children’s play houses, tree houses and you get the picture…

One of the great things about living in California is the availability of fresh, quality produce. Of course, as we all know the rising price of gas has driven up other prices, especially groceries trucked or shipped in from far-away locales to astronomical heights. Luckily for us, we don’t have to buy our produce from far away. In fact, we have an abundance of fresh, organic and quality produce, flowers and many other products right here in town.

Almost every town has a Farmers’ Market where local growers bring their crops from not-so-far away and sell it for reasonable prices. Many of these markets are Certified Farmers’ Markets [CFM] which does not mean they sell only organic, though many do, but, rather, the County Agricultural Commissioner has approved these markets. Here, California producers can sell directly to the consumer, us…and are we happy about that.

Some of the towns turn Market Day into a festival with local bands and other vendors in attendance. Some of these include Monrovia, Glendora, San Dimas. Almost every night of the week you can find a Farmers’ Market somewhere close. Mondays are dark. And, only Claremont has a market open Sunday mornings. One of the best and largest around is at Victory Park in Pasadena on Saturday mornings.

Here’s a convenient chart listing all the local markets which are open usually from May through September or October.

Babies need mamas, and if their own aren’t available…The urge to mother and the urge to be mothered overcomes all obstacles as the pictures show…

To me the most heart-rending is the baby macaque clinging to the pigeon.
How, I wonder, will the baby mouse fare when the frog-mama dives underwater? Will the mouselet become a water-mouse?