Is A Foreclosure Tsunami On The Housing Horizon?

By Alicia Lanier, REALTOR

This morning I returned a call from a Silicon Valley homeowner who had left me a panicky voice mail late last evening. The family had returned yesterday from an outing to find a notice pasted to their front door, saying their home would be sold at foreclosure auction on March 1. Of course they were panicky! And why is it that a lender always seems to give bad news late on Friday when the office will be closed for the next two days?

Over the past year, I have spoken with more homeowners in distress than I can count, both in California and Texas, and attempted to educate them about all their options if they were seriously delinquent on the home loans.  They have one thing in common: Almost to a person, they stay in denial far past the point at which they should shake themselves wide awake and say, “This is bigtime trouble and I must do something right now!”

When a homeowner calls to say they are 30 days or more behind on their mortgage, my first advice is always take action immediately.  Preferably, pay off the delinquent amount and make timely payments in the future. If that’s not possible, call the lender and ask about re-fi, home modification, forebearance, deed-in-lieu of. Also, consider a short sale, where a real estate professional will remain joined to your hip while selling your home and negotiating with your lender a reduced payoff amount of your mortgage. Yes, a short sale means you will lose the home but you’ll also buy some time to make an appropriate move plan and hopefully avoid having a foreclosure on your credit record for several years.

I had told this family all of this when they first contacted me about a month ago. What they had not told me then was that they had received a Notice of Default in 2010, which in California gives the homeowner 90 days to clear the debt or face immediate foreclosure. For the past year they had been trying to get a loan modification from their lender, been turned down and were now reapplying. Sadly, they had almost forgotten they had received a Notice of Default (NOD) early last year, which had been suspended during the loan mod process. However, when the loan mod was denied, that NOD had been reactivated by their lender – and it was ticking away toward the 90th day and a foreclosure. 

If I had known about the NOD when we first talked, I would have recommended an immediate short sale. Now, that is virtually impossible since a March 1 foreclosure leaves little time to prepare and sell the property and negotiate a short sale with their lender.

I am seriously concerned for this family and others who are struggling. In addition, my concern is extended to the housing market in general. Because that March 1 date prompted me to remember that rumors have been abundant lately that the “shadow inventory” of seriously delinquent home loans and foreclosed homes is going to be released by lenders this Spring.

If so, this shadow inventory release could turn into a foreclosure tsunami. And this tsunami would not just be one wave lasting for hours or days but would create giant waves cresting and rolling for three years or longer.

How big is that shadow inventory? Estimates by analysts during the last year have been as low as 1.7 million properties to as high as 7 million properties. (According to the National Association of Realtors, about 5 million homes are sold nationwide each year.) No one really has an exact count of the shadow inventory and it is broadly based:  Fannie Mae homes, Freddie Mac homes, the Big Lender homes, and more. 

What impact would a foreclosure tsunami have on the market? A higher inventory means a higher supply of homes versus lower demand for homes. Since foreclosure homes are usually offered for sale at deeply discounted prices, the effect would be dropping home prices.

By the way, California’s 90-day Notice of Default is generous compared to Texas. In Texas, when a lender issues a Notice of Substitute Trustee Sale (nice language for We’re Foreclosing!), it is issued about three weeks in advance of the sale. So Texas homeowners facing foreclosure on March 1 received their notice approximately Feb. 8.

TIP: Here’s your take-away: If you, or someone you know, is behind 30 days or more on a home loan, take action immediately. Call the lender and call a real estate professional who handles and negotiates short sales. Ask about all your options. Just do it. It won’t hurt nearly as much now, as it will later.

Alicia Lanier is a REALTOR  and represents both Home Sellers and Home Buyers throughout the Silicon Valley of California and the Dallas-Fort Worth Metroplex in Texas. Planning to sell or buy in the near future? Email Alicia@AliciaLanier.com to get started.

To Move or Stay Put, That is the Question

By Alicia Lanier, REALTOR

The most frequent comment that I hear made by homeowners thinking of a move is whether to actually buy another property (…a new home would be nice!) or to stay put and update (…what a hassle!) Obviously, resolving this issue means a serious consideration of both the costs involved and just how much construction inconvenience your family can stand.

For those of you whose home only needs a touchup by your resident decorator or handyman – and not a complete makeover by the local contractor – House Beautiful Magazine has put together 12 Easy Decorating Ideas You Can Do In A Day. Here are a few of their interior designers’ clever ideas from this article:

“Organize with Trays. Corral items like TV remotes on a tray on the coffee table. Put liquor bottles, glasses, and bar accoutrements on a tray in the living or dining room.

“Display Children’s Art. Display drawings in a colorful frame, or in a white frame with a colored mat. Hang them in an otherwise unimaginative space like a breakfast nook. They’re full of spirit — and meaningful.

“Refresh the Bath. Change your shower curtain, or just the liner. Add fragrant candles and a small bouquet. Clear the counters of everything except your prettiest essentials.

“Wallpaper the Back of Shelves. Don’t forget about closets and shelving. Try papering the back of a cabinet or bookshelf in faux-snakeskin, crocodile, or ostrich. Paint can’t come close to the impact. It will inspire you to rearrange your shelves.

“Remove Rugs. Take up some of your rugs. Bare wood and stone floors can be just as beautiful. Or get a carpet remnant and put it down in an unusual place, like a patio or balcony.”

Alicia Lanier is a REALTOR affiliated with Coldwell Banker Residential and represents both Home Sellers and Home Buyers throughout the Silicon Valley. Planning to sell or buy in 2011? Call 408-491-1634 or email Alicia.Lanier@cbnorcal.com to get started.

Short Sale Can Avoid Foreclosure in 2011

By Alicia Lanier, REALTOR

If you are a homeowner in distress and behind on mortgage payments, this new year is a good time to resolve to face the issue head on.

Luckily, California law requires that lenders send a Notice of Default to a homeowner 90 days prior to a foreclosure action. Compare this to Texas, where lenders are able to expedite a foreclosure action; only three weeks notice is required before a home can be auctioned on the steps of the county courthouse.

If you are behind on home payments, contact your lender immediately and discuss a loan modification or re-finance. If neither of those are possible, another option is a short sale of your property.

Due to job losses and rising foreclosure rates, more and more homeowners are in distress and needing to know about programs that can help them. You yourself may …

1) Be at least 30 days behind on your mortgage payment
2) Owe more than your house is worth
3) Not be able to afford to pay a Realtor commission to sell your house

What is a short sale? First of all, short selling a property facing foreclosure allows a qualified homeowner to use a licensed real estate professional without paying any Realtor commissions. In a successful short sale, the mortgage debt is eliminated by negotiating a lower-than-loan-balance amount in payment to the lender (or lenders, if there is a first- and second-mortgage). The “heavy lifting” of negotiating with the lender, marketing and selling the property to a qualified buyer – is handled by your real estate professional who also negotiates payment of his/her fees by the lender.

It is certainly best to bring your home loan payments up to date and stay current, but if this is not possible, I urge to you call a Realtor today who is experienced in the short sale process. Ask about the pros and cons of a short sale and how it might fit your personal situation. You can also ask for information about all your options as a homeowner in distress. Usually the short sale process will impact your credit far less than a foreclosure or walking away from a property. And, because of recent federal guidelines and the growing numbers of foreclosure and pre-foreclosure homes, short sales are now being handled by most lenders in a more timely fashion than in the past.

Your timing, of course, is important. The longer you wait, the less likely that you can be helped avoid foreclosure. I suggest that dealing with such a situation be listed at the very top of your New Year’s Resolutions for 2011.

Alicia Lanier is a Realtor with Coldwell Banker Residential. She has successfully negotiated short sale transactions on behalf of homeowners in distress and also works with Sellers and Buyers in traditional real estate transactions throughout the Silicon Valley. Contact her at 408-491-1634 or Alicia.Lanier@cbnorcal.com

Downsizing? Check out Tiny Home Market

By Alicia Lanier, REALTOR

Tired of keeping up with the high cost of maintaining a home? So are others, it seems. Like Jay Shafer, 46, co-founder of the Small House Society who has turned his passion for tiny into a home-grown business venture.

Jay and his small family live in a tiny 500-square foot wooden cabin in California wine country. “Living in a small house like this really entails knowing what you need to be happy and getting rid of everything else,” says Jay. He should know since he actually “moved up” from his previous 89-square foot home just next door.

Co-owner of Tumbleweed Tiny House Company and author of The Small House Book, Jay Shafer lived in his tinest house for a decade until his son was born. An AP article by Terence Chea explains: “… he designs and builds miniature homes with a minimalist style that prizes quality over quantity and makes sure no cubic inch goes to waste. Most can be hooked up to public utilities. The houses, which pack a range of amenities in spaces smaller than some people’s closets, are sold for $40,000 to $50,000 ready-made, but cost half as much if you build it yourself.”

Alicia Lanier is a REALTOR affiliated with Coldwell Banker Northern California and represents both Home Sellers and Home Buyers. If you plan to sell or buy in the near future, contact Alicia.Lanier@cbnorcal.com or 408-491-1634 to get started.

Tax Deduction for Mortgage Interest in Peril?

By Alicia Lanier, REALTOR

Most of us homeowners have become so accustomed to taking a tax deduction on the interest we pay for our home loans that it would be a shock if it disappeared. Then comes the nation’s whopping tax deficit and a bipartisan commission established earlier this year to identify ways to balance the budget by 2015.

A draft proposal floated two weeks ago by the co-chairs of President Obama’s Deficit Reduction Commission that considers proposals for modifying the mortgage interest deduction among other big changes to taxes and federal programs is already creating a chill in housing markets, NATIONAL ASSOCIATION OF REALTORS ® President Ron Phipps said in a letter to the commission chairs last week. “Some consumers already believe that the MID (mortgage interest deduction) will not be available to them,” Phipps said. “Your recommendation has sown the seeds of uncertainty as even current owners fear that they will not be able to claim the MID and that their homes will lose even more value.”  The commission chairs are former Clinton administration chief of staff Erskine Bowles and former Wyoming Senator Alan Simpson

In his letter, Phipps said REALTORS ® would reject any tax law changes, including modifications to MID, that would impair Americans’ ability to own their homes and to invest in real estate. “The federal policy choice to support home ownership has been in the Internal Revenue Code since its inception,” he said. “We see no valid reason to undermine that basic decision. Indeed, we believe that the only viable tax system is one that would continue to nurture home ownership.”

NAR estimates that any paring back of MID, whether at once or over time, would reduce home values by an average 15 percent. Phipps called that level of wealth destruction “unacceptable,” particularly since “this loss of value is never fully recouped” and it would come at a time when the U.S. economy can’t turn around without a stable housing sector.

Phipps drew on NAR analyses of previous efforts to change tax policy, including 1986, 1996, and 2005 tax reform efforts, to show the detrimental impact changes such as curtailing deductions or turning some of them into credits would have on housing and the economy. Those analyses made clear that the changes were proposed without fully understanding their negative impact on households and communities.

“Calling home ownership the American Dream is not a mere slogan,” said Phipps, “but rather it expresses a bedrock value. Owning a piece of property has been central to American values since Plymouth and Jamestown. Homes are the foundation of our culture, the place where families eat and learn together, the basis for community life. The cottage with a picket fence is an iconic part of our heritage.”

Alicia Lanier is a REALTOR affiliated with Coldwell Banker Northern California and represents both Home Sellers and Home Buyers. If you plan to sell or buy in the near future, contact Alicia.Lanier@cbnorcal.com or 408-491-1634 to get started.

Nope! No “Sales Tax” on a Home Sale

By Alicia Lanier, REALTOR

A couple of days ago a longtime friend forwarded me an e-mail she had received with a subjectline asking: “Did you know that a 3.8% real estate sales tax is part of the health care reform bill???” No surprise, but my good friend was greatly upset by this and thought I would want to know.

My first inclination was that it couldn’t be true because our national, state and local REALTOR associations had been silent on the subject, which would have been highly unlikely if this were true. We REALTORs frequently are asked to lobby our members of Congress and ask them to vote against issues that could negatively impact home buyers and sellers. A “sales tax” on all home sales would certainly appear to fall into that category.

My second thought was to check it out. So I turned to the non-partisan FactCheck.org – which works 24/7 to keep all us plain citizens straight when it comes to the tons of misinformation floating around the emailosphere – to see whether they could shed some light on this subject. And, it turns out that 99.9% of you home sellers out there can rest easy: There is definitely no tax that will be imposed on profits on all home sales. There are a few (a very few) home sellers that will be impacted.

Here are the facts from FactCheck.org:

First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

We’ve been flooded with queries about this one ever since the health care bill became law. At the last minute, Democratic lawmakers decided on a new 3.8 percent tax on the net investment income of high-income persons. But the claim that this would amount to a $15,200 tax on the sale of a typical $400,000 home is utterly false

The sort of people who would have to pay the tax might include, for example:

• A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
• An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

However, a typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors. Obviously, none of those sales could possibly generate a $250,000 profit, and so none would be subject to the tax.

The new tax on investment income (including real estate) will hit approximately the top-earning two percent of families when it takes effect in 2013, says a report by The Tax Foundation.

Alicia Lanier is a REALTOR affiliated with Coldwell Banker Northern California and represents both Home Sellers and Home Buyers. If you plan to sell or buy in the near future, contact Alicia.Lanier@cbnorcal.com or 408-491-1634 to discuss how to best move on.

Save Dollars and Go Green

By Alicia Lanier, REALTOR

Big ticket items – like solar panels to heat a pool or a whole house – can be a high cost of going green. But there are many low-cost (or no cost) tactics that can not only reduce your own impact on global warming but also save money for you and your family. Think running a ceiling fan in the bedroom(s) at night, instead of keeping the central air conditioner on to cool your entire home.  Or having your vehicle serviced regularly and keeping tires maintained at an appropriate pressure. Both can add up to some big savings.

For more ideas on saving money while helping our planet’s environmental health, here are a couple of links from U.S. News and World Report that you might want to explore:

 10 Ways to Save By Going Green

10 Ways to Reduce Your Summer Utility Bills

Alicia Lanier is a REALTOR affiliated with Coldwell Banker Northern California and represents both Home Sellers and Home Buyers. If you plan to sell or buy now or in the near future, contact Alicia.Lanier@cbnorcal.com or 408-491-1634  to discuss how to best move on.

Great Websites for Home Buyers, Sellers, Owners

By Alicia Lanier, REALTOR

Obviously I hope you will become a regular visitor to this blog but here are a few other useful websites for home buyers, sellers and owners.

Here are several you might want to check out:

CaliforniaMoves.com. Ok, I admit I’m biased. But Coldwell Banker’s consumer website offers a myriad of tools for home buyers and sellers, including advanced search engines, tips on buying and selling, relocation information, and even community facts, figures and links;

Realtor.com. In that same vein, Realtor.com is also a good consumer website, especially for those thinking about relocating to other regions or want advice on buying or selling, as well as hiring an agent. There are articles on the market, consumer tips, and even suggestions on gardening and remodeling;

Bankrate.com. Now that you’ve decided where you’re going to buy, this site will help you figure out how much you can afford. This is one of my favorite financial websites because it offers mortgage rate comparisons, links to lenders, and literally dozens of different types of calculators to figure it all out;

Local.Yahoo.com. So you’re ready to move into your new home. Now what? Go to this site to find a plethora of useful links and information on everything from local restaurants and coffee shops to city offices and police departments to public utilities to get the water and gas turned on;

Yelp.com. Another great site for newcomers to an area is Yelp, which features customer reviews and ratings on every imaginable local business. Sure there’s the usual restaurant ratings, but you’ll come here to find favorite dentists, veterinarians, gardeners and yes, even real estate agents;

ServiceMagic.com. For those homeowners planning to remodel or just looking for a contractor to do some routine work, this website can be quite useful. Service Magic prescreens a wide variety of contractors and also incorporates customer ratings in order to provide a list of recommended businesses;

HomeTips.com. Run by Don Vandervort, a host on HGTV and well-known author of do-it-yourself books, this site – as you might guess – specializes in articles on how to maintain and remodel your home. One of the favorite search engines helps the weekend warrior figure out how to do a wide variety of repairs and save money.

Planning to buy or sell in 2010? Contact Alicia Lanier to discuss your plans and develop a strategy: 408-491-1634 or Alicia.Lanier@cbnorcal.com

Homeowner in Distress: Is Bank of America your lender? Call them today about their new mortgage forgiveness plan

By Alicia Lanier, REALTOR

Homeowners in distress got some happy news today about a helping hand being extended by Bank of America, the nation’s largest mortgage servicing institution. Bank of America has announced that it will start forgiving principal for homeowners who owe more than 120 percent of their home’s value, forgiving up to 30 percent of some customers’ loan principal.

If you are behind on loan payments to Bank of America, this is good news indeed. Call that Customer Service number on your Bank of America coupon book today and ask for details!

Alicia Kay Lanier is a REALTOR affiliated with Coldwell Banker in California and Texas and helps homeowners in distress with information and services designed to help avoid foreclosure. If you are behind on your house payment and need help, contact Alicia.Lanier@cbnorcal.com or 408-491-1634.

City of San Jose Sets up Foreclosure Help Center

By Alicia Lanier, REALTOR

Kudos to the City of San Jose for setting up a One Stop Foreclosure Help Center to provide free services to homeowners who are struggling to make house payments and keep their homes.

The most recent issue of Mayor Chuck Reed’s Newsletter spotlights this program, noting that over the past three years, the number of local foreclosures has risen by about 700%.  

“Foreclosures do not just affect individual homeowners; they have a significant impact on neighbors and the surrounding community,” said Mayor Reed. “I encourage people to seek help before they find themselves in a foreclosure situation.”

“If you’ve missed a mortgage payment, the most important thing you can do is call for help. Ignoring your situation won’t make it go away, and there are a number of options that may be available if you seek assistance early. These options include:

• Forbearance, which delays payments with the understanding that another option will be used to bring payments current in the future;
• Reinstatement, in which you promise a lump sum by a certain date to bring payments current;
• Repayment Plans that lets you catch up on payments by adding to future monthly payments;
• Modifying your mortgage and extending the length of your loan; and
• Arranging a Property Give-Back where your lender agrees to forgive your debt.

“For more foreclosure tips, call the Foreclosure Help Center hotline at (408) 794-1242, or visit http://www.foreclosurehelpscc.org. The Center also has useful information on lending scams and how to avoid mortgage problems in the first place. “ 

TIP: Homeowners may also want to consider a “short sale” for a home that is valued less than their loan. Call me for more details and a consultation about your specific situation if you are thinking about selling and may need the lender to accept less than the current loan amount.

Are you planning to buy or sell in 2010? Email me at Alicia.Lanier@cbnorcal.com or phone 408-491-1634 and I would be delighted to answer any questions you may have.