By Joel Perisnger,
with information from the California Association of Realtors
Contrary to what many believe, the recently enacted Senate Bill 306 does NOT require lenders to review short sale requests from sellers and their agents within 21 days. The new California law, which addresses certain escrow procedures, has been mischaracterized by some real estate agents as landmark legislation calling for a 21-day turnaround for short sale approvals. Unfortunately, the new law is nothing of the kind.
Basically, the bill inserts a short payoff amount request into the existing payoff demand law which generally requires a lender to respond to a request for a payoff demand statement within 21 days from when it is requested, typically by escrow or a short sale negotiator.
OK... So what is a payoff demand anyway? A payoff demand is simply a document provided by the short sale lender stating exactly how much the borrower would have to pay in order to pay off the loan. This figure will include principle, interest and any late fees or other charges. Payoff demands are requested by escrow officers so that escrow companies can know exactly how much money must be allocated to the short sale lender at close of escrow.
The new law essentially requires that lender respond to a request for a short-pay demand statement within 21 days. Since short payoffs are generally requested AFTER the short sale has already been approved, the law will have little or no effect on the time it takes to actually get an approval. Additionally, the lender’s response to escrow can be a short-pay demand statement or even, depending on the circumstances, a written statement electing not to proceed with the proposed transaction.
There is another provision of SB 306 which has caused some confusion as well. In practice, a lender may approve a short sale subject to its review of a closing statement prepared by escrow, but the lender does not necessarily review that closing statement right away. This can sometimes cause short sales to drag on. Under the new law, if a lender fails to approve the closing statement within four days, the closing statement shall be deemed approved, but only if it is "not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrow holder." In other words, the closing statement will be considered approved after the time has elapsed, but it cannot be substantially different than the deal the lender had earlier approved. So, while the new law may help move the process along, it does NOT bind a lender to a short payoff amount in an offer that the lender has not approved.
Senate Bill 306 contains other technical changes in real estate related laws. This new law comes into effect Jan. 1, 2010. The full text of Senate Bill 306 is available at http://takeaction.realtoractioncenter.com/ct/YdL8hFF1jrqu/.
Thursday, October 8, 2009
Monday, May 11, 2009
Borrowing Money Isn’t Getting Easier.
By Joel Persinger
While it has become obvious that many people have an almost religious reverence for our current president, his attempts to rescue the mortgage industry have brought about anything but a heavenly result. He has thrown hundreds of billions of dollars of taxpayer money at the problem, only to find that the problem is far from going away. The only thing that went away was the taxpayer’s money and he can’t really account for where the money went.
There are very few things that government does well. Spending your money wisely and accounting for where your money went are not among them. Not only does your government really have no idea where your money went, the “solution” you paid for did not end up solving anything. Loans are just as difficult to get after the so called “Stimulus” as they were before, if not more so.
To add insult to injury, the right hand of government seems to be working against the left hand. For every program or law the government creates with the idea of getting the money to flow, another government program or law springs up designed to clog up the financial plumbing all over again. Take HVCC for example. HVCC is the Home Valuation Code of Conduct. It was revised as of May first of this year to included sweeping changes to the way that appraisals of residential property are ordered and performed.
Under the new law, appraisals can no longer be ordered directly by your loan officer. Instead, the loan officer must contact a third party organization that will manage and control the process. Regulation requires that all communication between the appraiser and your loan officer must be carried out through the third party. Your loan officer and your appraiser may no longer communicate with each other directly.
The purpose behind the law is to reduce the amount of corruption in the appraisal process. The idea is to keep the appraiser and the loan officer from conspiring to slip bad loans through the system. But, in actual fact the law creates more problems than it solves. Here are some examples: Your loan officer can no longer select experienced appraisers and weed out the inexperienced ones. Neither can your loan officer speak to the appraiser to get a detailed explanation of any issues that have affected the appraised value. Additionally, the third party organization will derive its fee by taking as much as half of the appraiser’s fee! That means that appraisers will have to do twice the work to make the same amount of money. Quality decreases as work loads increase. So, expect the quality of appraisals to suffer and to see more inexperienced appraisers than ever before. Last, but certainly not least, is the fact that adding this additional layer of management increases the amount of time it takes to get the job done. So, the time it takes to close any given escrow will increase. If you put your house in escrow today, don’t count on closing escrow for at least 60 to 90 days, if you’re lucky.
The HVCC issue is just one of many examples of the government throwing monkey wrenches in the works with one hand while trying to grease the machinery to get it working faster with the other. It’s a counter productive approach to “stimulus.” When added to the fact that banks have continued to tighten their lending rules to make borrowing more difficult in spite of having received a ton of taxpayer money, it becomes clear that the only things the “stimulus” packages have stimulated are greed and controversy. Still, one thing remains uncontroversial. If you’re looking for a home loan in this market, you’d better put your sneakers on and get ready to jump through hoops. It will be more work than you think and will take more time.
While it has become obvious that many people have an almost religious reverence for our current president, his attempts to rescue the mortgage industry have brought about anything but a heavenly result. He has thrown hundreds of billions of dollars of taxpayer money at the problem, only to find that the problem is far from going away. The only thing that went away was the taxpayer’s money and he can’t really account for where the money went.
There are very few things that government does well. Spending your money wisely and accounting for where your money went are not among them. Not only does your government really have no idea where your money went, the “solution” you paid for did not end up solving anything. Loans are just as difficult to get after the so called “Stimulus” as they were before, if not more so.
To add insult to injury, the right hand of government seems to be working against the left hand. For every program or law the government creates with the idea of getting the money to flow, another government program or law springs up designed to clog up the financial plumbing all over again. Take HVCC for example. HVCC is the Home Valuation Code of Conduct. It was revised as of May first of this year to included sweeping changes to the way that appraisals of residential property are ordered and performed.
Under the new law, appraisals can no longer be ordered directly by your loan officer. Instead, the loan officer must contact a third party organization that will manage and control the process. Regulation requires that all communication between the appraiser and your loan officer must be carried out through the third party. Your loan officer and your appraiser may no longer communicate with each other directly.
The purpose behind the law is to reduce the amount of corruption in the appraisal process. The idea is to keep the appraiser and the loan officer from conspiring to slip bad loans through the system. But, in actual fact the law creates more problems than it solves. Here are some examples: Your loan officer can no longer select experienced appraisers and weed out the inexperienced ones. Neither can your loan officer speak to the appraiser to get a detailed explanation of any issues that have affected the appraised value. Additionally, the third party organization will derive its fee by taking as much as half of the appraiser’s fee! That means that appraisers will have to do twice the work to make the same amount of money. Quality decreases as work loads increase. So, expect the quality of appraisals to suffer and to see more inexperienced appraisers than ever before. Last, but certainly not least, is the fact that adding this additional layer of management increases the amount of time it takes to get the job done. So, the time it takes to close any given escrow will increase. If you put your house in escrow today, don’t count on closing escrow for at least 60 to 90 days, if you’re lucky.
The HVCC issue is just one of many examples of the government throwing monkey wrenches in the works with one hand while trying to grease the machinery to get it working faster with the other. It’s a counter productive approach to “stimulus.” When added to the fact that banks have continued to tighten their lending rules to make borrowing more difficult in spite of having received a ton of taxpayer money, it becomes clear that the only things the “stimulus” packages have stimulated are greed and controversy. Still, one thing remains uncontroversial. If you’re looking for a home loan in this market, you’d better put your sneakers on and get ready to jump through hoops. It will be more work than you think and will take more time.
Monday, April 27, 2009
Homes Are Selling If The Price Is Right.
By Joel Persinger
Some years back there was a popular TV game show called, “The Price is Right.” It had nothing to do with real estate, but the name of the show has a ring to it when you think about today’s real estate market. Not long ago homes were sitting on the market for months and months without being sold. That is no longer the case in the San Diego marketplace. If the price is right, as the old TV show title goes, the house will sell and sell quickly!
My office has been busy with buyers lately. Every one of my agents who are working with buyers has had the same experience. We have all selected 5 or 6 homes to show our buyers on any given day, only to find out that all but one or two have multiple offers on them before we even get our buyers in the car. In order to find five houses that our buyers may have a chance of buying, we often have to research around twenty homes. Prices are at rock bottom and interest rates are low, so there is a lot of competition out there. That means that buyers have to be ready to compete for the available homes even in a “depressed” real estate market.
Nevertheless, some houses are still not selling. Some sellers are still hoping to squeeze every cent out of the sale. As a result, they price their homes too high and they sit unsold. The message here is simple. If the price is right the house will sell. Therefore, if the house isn’t selling, then the price isn’t right. There is one additional piece to this puzzle. If the price is right, there will be multiple offers on the house. So, if you have only one offer or you have offers that come in slowly and one at a time, then the price isn’t right. Lower it and the number and frequency of offers will increase. This is important because many of the buyers currently making offers on houses are flakey. Just like a mist, they are here one second and gone the next. Having multiple buyers to buy your house will increase your chances of finding a real buyer among all the flakes.
So, if you’re buying, you should prepare yourself for some competition. If you're selling, think about that old game show and make sure the price is right.
Some years back there was a popular TV game show called, “The Price is Right.” It had nothing to do with real estate, but the name of the show has a ring to it when you think about today’s real estate market. Not long ago homes were sitting on the market for months and months without being sold. That is no longer the case in the San Diego marketplace. If the price is right, as the old TV show title goes, the house will sell and sell quickly!
My office has been busy with buyers lately. Every one of my agents who are working with buyers has had the same experience. We have all selected 5 or 6 homes to show our buyers on any given day, only to find out that all but one or two have multiple offers on them before we even get our buyers in the car. In order to find five houses that our buyers may have a chance of buying, we often have to research around twenty homes. Prices are at rock bottom and interest rates are low, so there is a lot of competition out there. That means that buyers have to be ready to compete for the available homes even in a “depressed” real estate market.
Nevertheless, some houses are still not selling. Some sellers are still hoping to squeeze every cent out of the sale. As a result, they price their homes too high and they sit unsold. The message here is simple. If the price is right the house will sell. Therefore, if the house isn’t selling, then the price isn’t right. There is one additional piece to this puzzle. If the price is right, there will be multiple offers on the house. So, if you have only one offer or you have offers that come in slowly and one at a time, then the price isn’t right. Lower it and the number and frequency of offers will increase. This is important because many of the buyers currently making offers on houses are flakey. Just like a mist, they are here one second and gone the next. Having multiple buyers to buy your house will increase your chances of finding a real buyer among all the flakes.
So, if you’re buying, you should prepare yourself for some competition. If you're selling, think about that old game show and make sure the price is right.
Monday, April 6, 2009
Be Prepared for the Long Haul
By Joel Persinger
One of my grandfather’s favorite sayings was, “The more bends you put in the plumbing, the easier it is to stop up the drain.” Well, my dear reader let me tell you… the mind boggling number of changes to the real estate and lending market this past few years have put a lot of bends in the plumbing. When you throw in the oddball things that can sometimes happen with real estate purchases, the drain can be stopped up more often than not.
One of my sellers moved out of the area and left her house to be sold while vacant. So, I sold it for her. The buyers were happy and everything was moving along just fine until the buyer’s lender wanted to know if the room addition was completed with the proper permits. When asked about this, the seller said, “Of course there are permits” and directed me to one of the kitchen drawers where she had left the permits and the plans for the room addition. Naturally, I went to the property at once to secure the permits. The problem is the permits weren’t there.
It seems that a potential buyer who had visited the home had absconded with the permits. We found this out surreptitiously when that buyer contacted escrow and asked, “So, when do we get the house?” The escrow officer was naturally confused by this turn of events and said, “Ah… you don’t have an escrow on that house.” As it turned out, this buyer had been under the impression that she was buying the house even though she didn’t have an accepted offer and had never opened escrow. It took me three weeks to get her give us back the permits. In the meantime, I checked with the city and county only to find that they had lost the originals. So, the only copies were those that the confused buyer had taken. By the time I got them back the real buyer had given up and cancelled escrow.
In another instance, an Army veteran and his wife worked with me to find them a home. We found a great house for them at a wonderful price. The escrow appeared to be moving along smoothly and all appeared to be right with the world. It was then that we discovered that his certificate of eligibility for his V.A loan was being held up. It seems that the V.A. records did not show his entire length of service. In fact, the records only indicated that he was in the military for the short time he was stationed in California. Since his discharge papers and other related paperwork did in fact show his entire service record, the V.A. indicated that all he had to do was to send the paperwork to the appropriate V.A. office and they would make the change. The problem was that we were supposed to close escrow in 15 days and nobody on the planet believed that the V.A. would move that fast. Not even the V.A.
In yet another strange situation, a client of mine was in line to buy a home only to find out that his lender would not accept the appraised value of the house. This was in spite of the fact that it was the lender’s appraiser who came up with the value. No matter how clear we were about the fact that the house in question was a custom home on over an acre of land with a 300 degree mountain view, the lender insisted on deriving their opinion of value by comparing the home to the many tract houses that surround the area at the bottom of the hill. It should be mentioned that the tract houses were on small lots and did not have a view. The decision to reject the appraisal was made by a junior underwriter located somewhere in Pennsylvania.
These are just three of the many screwball situations my clients have faced over the past several months. In most cases, the problems were able to be resolved and the escrows went through just fine. But, in every case an extraordinary measure of patience and perseverance was required on the parts of the clients (as well as everyone else). It should also be noted that every one of the escrows we have closed over the past three years has been a challenge, to one degree or another. The days of the easy home purchase, if they ever existed, are gone!
The bright side to this otherwise dismal tale is the opportunity it presents for you as the home buyer. Since we know that the overwhelming majority of home purchases in this current environment are difficult, it is the buyer who is willing to hang in there for the long haul who will succeed. While other buyers are giving up, you will persevere and thereby accomplish your goal of buying a home. So, here’s my advice: hang in there and be prepared for the long haul. Buying a home in this marketplace is challenging. But, those who are up to the challenge can swing some terrific deals.
One of my grandfather’s favorite sayings was, “The more bends you put in the plumbing, the easier it is to stop up the drain.” Well, my dear reader let me tell you… the mind boggling number of changes to the real estate and lending market this past few years have put a lot of bends in the plumbing. When you throw in the oddball things that can sometimes happen with real estate purchases, the drain can be stopped up more often than not.
One of my sellers moved out of the area and left her house to be sold while vacant. So, I sold it for her. The buyers were happy and everything was moving along just fine until the buyer’s lender wanted to know if the room addition was completed with the proper permits. When asked about this, the seller said, “Of course there are permits” and directed me to one of the kitchen drawers where she had left the permits and the plans for the room addition. Naturally, I went to the property at once to secure the permits. The problem is the permits weren’t there.
It seems that a potential buyer who had visited the home had absconded with the permits. We found this out surreptitiously when that buyer contacted escrow and asked, “So, when do we get the house?” The escrow officer was naturally confused by this turn of events and said, “Ah… you don’t have an escrow on that house.” As it turned out, this buyer had been under the impression that she was buying the house even though she didn’t have an accepted offer and had never opened escrow. It took me three weeks to get her give us back the permits. In the meantime, I checked with the city and county only to find that they had lost the originals. So, the only copies were those that the confused buyer had taken. By the time I got them back the real buyer had given up and cancelled escrow.
In another instance, an Army veteran and his wife worked with me to find them a home. We found a great house for them at a wonderful price. The escrow appeared to be moving along smoothly and all appeared to be right with the world. It was then that we discovered that his certificate of eligibility for his V.A loan was being held up. It seems that the V.A. records did not show his entire length of service. In fact, the records only indicated that he was in the military for the short time he was stationed in California. Since his discharge papers and other related paperwork did in fact show his entire service record, the V.A. indicated that all he had to do was to send the paperwork to the appropriate V.A. office and they would make the change. The problem was that we were supposed to close escrow in 15 days and nobody on the planet believed that the V.A. would move that fast. Not even the V.A.
In yet another strange situation, a client of mine was in line to buy a home only to find out that his lender would not accept the appraised value of the house. This was in spite of the fact that it was the lender’s appraiser who came up with the value. No matter how clear we were about the fact that the house in question was a custom home on over an acre of land with a 300 degree mountain view, the lender insisted on deriving their opinion of value by comparing the home to the many tract houses that surround the area at the bottom of the hill. It should be mentioned that the tract houses were on small lots and did not have a view. The decision to reject the appraisal was made by a junior underwriter located somewhere in Pennsylvania.
These are just three of the many screwball situations my clients have faced over the past several months. In most cases, the problems were able to be resolved and the escrows went through just fine. But, in every case an extraordinary measure of patience and perseverance was required on the parts of the clients (as well as everyone else). It should also be noted that every one of the escrows we have closed over the past three years has been a challenge, to one degree or another. The days of the easy home purchase, if they ever existed, are gone!
The bright side to this otherwise dismal tale is the opportunity it presents for you as the home buyer. Since we know that the overwhelming majority of home purchases in this current environment are difficult, it is the buyer who is willing to hang in there for the long haul who will succeed. While other buyers are giving up, you will persevere and thereby accomplish your goal of buying a home. So, here’s my advice: hang in there and be prepared for the long haul. Buying a home in this marketplace is challenging. But, those who are up to the challenge can swing some terrific deals.
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