A New Year
Time seems to go by so fast now. Am I getting older? That sounds like a really “old person thing” to say! Be that as it may, it’s so true. Hello, it’s been SO long since I last blogged… I’ve been focused on our newsletter - The Thomson Times – and have neglected my blog. In work, transactions generally take longer and it makes it seem like I open a file and then when it (the short sales for the most part) closes, 4 months down the line, I am always asking myself, has it really been 4 months?
We are definitely in a new market here in San Jose and Santa Clara County that is now the norm. 2011 and on, we won’t be going back to “easy” loans where the borrower need not provide any real documentation to support their “stated” income. Lenders continue to make it difficult for self-employed borrowers to obtain financing. Rates are still great, so it makes it an easier pill to swallow that for a 30 year fixed, you are still in the low 5% range depending on the borrower’s current situation. Aside from the rates, home prices have gone down since last quarter and are planing out at the bottom. In my personal life, I have decided, this is it – this is the bottom – and I am personally in escrow to close on an investment property in San Jose with positive cash flow. Ask me about it 
All in all the consumer who is able to invest in this market has it pretty good. There are just a few pitfalls that you must be aware of when looking for a property or when selling a property in this market:
- Loan Type - if you are obtaining an FHA loan, you must be aware of certain restrictions of property type when looking for a new home as not only does the borrower need be approved for the lending, the home being purchase also needs to be approved through the FHA appraisal. The appraisal needs to show that the property is safe and adequately livable based on FHA standards.
- Financing – be sure of your pre-approval. If any item changes in your current financial situation or you are thinking about making a change, it’s best to run this by your lender first. Likewise, it is equally as important for the listing agent to stay in contact with a buyer in escrow if you are selling your home as life happens and many escrows don’t make it to closing over the buyer’s financing these days.
- Short Sales - if you are a buyer looking at short sales, it is important to truly qualify the sale as a sale that will actually close. It is not all uncommon for an agent to be representing a seller in a short sale situation that simply will never truly close because of a foreclosure sale date that cannot be postponed or because they do not qualify for a non-recourse option and will most likely end up in foreclosure. Said buyer in this situation should make sure he/she is able to get as much information as possible and make the decision upfront on whether to stay and wait it out or move on to a more stable transaction.
- Short Sale – Sellers need understand the qualification process and also what the possible tax ramifications are for a short sale vs. foreclosure so as to make the best decision for their family. Always consult a tax professional who understands short sales.
- Bank Owned - understand the risks in entering into a contract with the bank. There are new items that pose potential “hiccups” in a transaction such as investor “bundles” that could cancel an active escrow or rights of the past owner under the redemption period. There are two types of foreclosures – Judicial Sales and Trustee’s Sales. The Trustee’s Sale redemption period is only 10 days which is largely a non-issue as far as we are concerned. The kicker is the Judicial Sale where the past owner has a one year redemption period on the home. Lucky for us, most foreclosures in California are Trustee’s Sales.
- Bank Owned and Short Sale – navigation of all of the extra paperwork with these types of transactions are very tedious and may obligate certain parties to more than the C.A.R. contract that is used for regular sales. It is important to go through every piece of documentation so that all parties are aware of potential pitfalls here.
I hope this sheds a little light on what we have been experiencing in our little world of Real Estate. I know I just grazed the tip of the iceburg here with the potential hiccups that can be experienced in a transaction these days, so feel free to comment if you have your own experiences that you would like to share or if you have questions on what was listed in this post.
Happy Friday!
