Category Archives: Former homeowners with a short sale or foreclosure

Information for those looking to purchase a home and have a short sale or foreclosure on their credit history.

How’s the market? Different year, same pattern…

North Orange County - Expect the same cycle every year -- unless something drastic happens
North Orange County – Expect the same cycle every year — unless something drastic happens

If 2014 follows the same pattern as 2013 (and any year before that), you can expect the following to happen:

– Inventory will continue to gradually rise until the fall season

– The peak of activity (homes selling) will be between April and August.

– Home sales will decline after August

If you’re like most homeowners, you’re excited about your increased equity. Many homeowners who were barely “break even” or upside down with their loan are now wondering if they’ll have enough after selling to apply toward a downpayment. As values continue to rise and the economy improves, look for an increased number of “move-up” homeowners looking to sell their existing home to purchase a larger one. 

Here’s the California Association of Realtors (CAR)’s forecast for 2014:

After a huge surge in prices in 2013, this year looks to be more moderate.
After a huge surge in prices in 2013, this year looks to be more moderate.

Keep in mind that we are already 1/4th into 2014. As multiple offers fuel rising values, look for an uptick in supply from the move-up sellers who’ll likely sell contingent.

The big difference between 2013 and 2014? Don’t expect prices to go up 28% in California. As the chart above shows, CAR expects a 6% gain.

How long do you REALLY have to wait after a short sale or foreclosure to buy?

How long do your really have to wait?
How long do your really have to wait?

In the Real Estate community, much confusion surrounds the subject of when a buyer who experienced a short sale or foreclosure can purchase a home again. Ever since 2012 started, it seems I get weekly emails from lenders claiming they offer “no seasoning” for buyers who have a foreclosure or short sale on their credit history.

Mortgage history is only one aspect of many reviewed. Payment history of other installment loans will also be reviewed.
Mortgage history is only one aspect of many reviewed. Payment history of other installment loans will also be reviewed.

After many of my past clients got word of these programs, this prompted them to apply for home loans after 2 years. Almost all of them were declined. It appears the lenders scrutinize the circumstances of their short sale or foreclosure very heavily and are accepting only certain types of hardship. All except one buyer who’s company went belly up was able to successfully purchase using VA financing.

From what I’ve seen, the “GSE loans” (FHA, VA, Fannie Mae, Freddie Mac) are more lenient at the 3 year mark. At the 2 year mark, only a small, select group of borrowers who can thoroughly document the hardship experienced during a short sale are eligible. Of course, they must demonstrate that they have recovered from this hardship and must comply to other requirements.

Outside of the GSE loans, there are “portfolio” loans offered by some lenders. These are loan products that have their own underwriting guidelines, a higher interest rate, and will  likely will be held by the lender. Unlike the GSE guidelines, the portfolio products I’ve seen require 20% down.

In many instances, I’ve seen conflicting guidelines. For example, one requirement I read from one loan required that the applicant couldn’t miss any mortgage payments. The only way to foreclose is to miss 7 consecutive months. Most short sales required missed payments.

Here’s the summarized answer to the blog’s question:

  1. If 3 years pass, you’re eligible for VA, FHA, and conventional financing. Some documentation regarding your short sale or foreclosure may be requested.
  2. If under 3 years, the hardship for your short sale or foreclosure will be heavily scrutinized. The majority of applicants will be turned down.
  3. Outside of the 2 categories above, there are portfolio loans available, which are not offered by most high producing, experienced loan officers.

What’s the best way to look for homes online?

One of the first things I do before working with any buyer is to have a face-to-face meeting in my office for about 15-30 minutes. While I’m sure many agents will gladly just “open doors” for strangers, I have a higher standard for working with clients and want to make sure they’re making best use of their time. I have a motto that every minute spent in my office planning will save literally hours of time, expensive gas, and avoid frustration. Besides, when a customer and professional want to accomplish a project together, isn’t a meeting a no-brainer?

There are (3) main reasons why this consultation is important with a Real Estate agent:

1. The Realtor and buyer make sure that their goal is realistic and their perception is shared of today’s market.

2. The buyer and agent agree what resources will be used to determine what homes will be viewed.

3. The buyer and agent decide they want to work with each other.

In this blog, we’ll discuss buyer resources for searching for homes.

It’s no secret that the newspaper is not an accurate way of looking for homes currently listed for sale. If you want to see today’s listings for sale you look online, right?

Wrong.

Let’s examine this closer. Let’s look at the two most visited Real Estate websites: Realtor.com and Zillow.com and see how accurate their listings are.

I searched for homes in Anaheim, CA in both websites and compared them to the Multiple Listings Service (MLS), the live database that Realtors use. You’ll be surprised with the results:

Realtor.com: 603 homes for sale

Zillow.com: 500+ homes for sale (the webpage defaults to a map search that can only show 500 at one time.)

Multiple Listing Service: 222 homes for sale

Realtor.com showing 603 homes for sale in Anaheim

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Zillow.com showing 500+ homes for sale in Anaheim

The Multiple Listing Service shows there are only 222 homes for sale in Anaheim

That means that more than half of the homes you’re viewing on these popular Real Estate websites have already sold. While this may be a good way for a buyer sitting on the fence to get an idea of the market, you can imagine it’s NOT the way to go for someone looking to put together a list for their Realtor to show them properties.

Why the discrepancy?

Keep in mind that the #1 goal of just about any website is to have traffic. They want as many visits as possible so they can charge sponsors fees. Real Estate is no different than any other item being sold: the consumer wants something tangible they can browse and compare against other options. The more listings they see, the more engaged they become.

What resource should be used for looking for a home?

I always give my clients access to a tool called Listingbook. Not only does it download data from the Multiple Listing Service multiple times a day to ensure accuracy, but it’s a great way to organize what homes have been rejected or picked by either the Realtor or buyer. With Listingbook, a buyer can leave notes for their agent and vice versa. Over time, showing lists can be created and it makes for a much more efficient way of communicating than just sending emails, texts, or hand written lists back and forth.

You’ll need a Realtor to create a Listingbook account for you to have access.

While Listingbook continues to be a great tool, it doesn’t have a mobile version for the buyers constantly use their phone to look at listings. Even with that flaw, it can be much more useful than many of the websites that show listings that have sold long ago.