Monday, April 20, 2009

If You Think You’re Facing Foreclosure, You Need To Understand the New California Law.

As a California real estate professional, my clients have been asking me quite a few questions about the new law that will take effect on May 21, 2009 involving extending foreclosure periods by 90 days.

Instead of explaining all of the legal mumbo-jumbo (and believe me there is a lot of it); let me take a few moments to explain the new law in easy-to-understand terms.

The first and most important thing to do if you’re facing a possible foreclosure situation is to check with your mortgage lender. The new law (extension of time) does not apply to lenders that currently offer a loan modification program.

The new law only applies to owner-occupied homes only where the first loan was recorded between January 1, 2003 and January 1, 2008. The new law will extend the time period before the filing of notice of sale by 90 days beyond the current three month period following the filing of the original notice of default.

In order for your lender to qualify for an exemption from this new law, your lender must offer a comprehensive loan modification program that includes the following features:

1. The program is intended to keep borrowers (you) in your home when the anticipated recovery period under a loan modification exceeds the recovery period through foreclosure on a net value present basis.

2. It targets a debt-to-income ratio of 38% or less.

3. It includes a combination of the following features:

· An interest rate reduction for at least five years
· An extension of loan term to no more than 40 years
· A deferral of some portion of the unpaid principal balance
· A reduction in principal
· Full compliance with a federally mandated loan modification program
· Seeks to achieve long-term sustainability for the borrower (you) when determining a loan modification solution.

Additionally it’s very important to understand that the following loans are exempted from the 90 day extension under the new law.

1. A loan made, purchased, serviced or used as collateral by a California State or local housing finance agency.

2. Loans where the borrower (you) has surrendered the property, contracted with an organization regarding how to extend the foreclosure process, or filed for bankruptcy and the case has not been closed or dismissed.

All of the provisions of this new law will be repealed on January 1st, 2011 unless the California Legislature extends them.

To learn more about the law or other real estate issues visit
If you’re thinking of foreclosing or doing a short sale, please contact us. We will be glad to spend time answering all of your questions and helping you find the critical resources you will need during this challenging time.

Wednesday, April 15, 2009

Real Estate Market Update - Some Markets Red Hot Others Ice Cold

It's April 15th and the first thing we'd like to do is have you read no further and go pay your taxes if you have not already. Now then , let's get to the fun stuff. The real estate market across Los Angeles and Orange Counties seems to be a hot topic and nobody can seem to get a straight answer when it comes to its' condition. Here's what we can tell you from our "boots on the ground" experience.

Hot Markets

Entry level single family residences - Without a doubt the hottest selling market in the area is that for entry level homes. In particular, single family residences priced between $250,000 and $350,000. This is the same market that was the hottest selling during the boom days and the same that has been hit hardest by foreclosure. Most of the property in this price range is some sort of distress sale, whether it be bank owned or short sale. Homes priced well for their features are seeing multiple offers, overbids, and short market times. These homes are selling so well because of three factors:

  1. The banks are pricing them ultra aggressively.
  2. The monthly payments on these homes often makes more sense than renting so we're seeing a boom of first time buyers. With interest rates around 4.5-4.75% and the potential for $8,000 in tax credit, and homes selling for nearly half price, this is no surprise.
  3. Investors (not to be confused with speculators) are reappearing in the market to snatch these homes up with cash-heavy offers and turn them into income-producing rental properties.
Any Lower Priced Neighborhood - From Santa Ana to Long Beach, Downey to Anaheim, the story remains the same. If the neighborhood is seen as "affordable", and had substantial sales activity due to sub prime mortgages, it is sure to again be a hot-selling neighborhood. Only now, the prices are nearly half of what they were previously selling at.

Luxury Real Estate - Guess it goes without saying that those who are able to afford estate property aren't terribly concerned with the absence of 100% financing. Low interest rates and realistic pricing on these homes have helped the luxury market to see an increase in sales activity. Again, it pales in comparison to the entry level market pace but its still a better market than many think.

Cold Markets

Mid-Range Housing - While it may not be seeing the largest amount of price drops, the coldest market has to be homes falling somewhere between upper-end and entry-level. There just is not a lot of action on these homes for a few reasons:

  1. There are less foreclosures in this price range; therefore, less motivated sellers. Despite possibly being "upside down", owners are looking to hold on to their homes and ride out the market cycle. (Something many owners in the entry-level market are not able to do.)

  2. This segment of the market relies on people in the entry-level market moving up to the mid-range in order to spur home sales. Without a large pool of owners in the entry-level market with equity AND the need to sell, the mid level just isn't seeing many of the step-up buyers.

  3. Lateral moving buyers (or buyers moving from one house to a similar priced house, just in a different location) are the majority of the buyers in this market. The problem is that these people will face the same issues with sale; lower prices and slower sale times.
The bottom line for this market is motivation. If you are motivated to sell (and by this we mean ready to price very competitively) the job can get done. If you are looking to buy and sell in this market, the current market may not matter as much as evidenced by our 10% sales theory.

Many factors such as location, updates, and overall condition of the property are really helping to keep some neighborhoods and houses from being on the market for too long. We've had some very recent success in this market, something we attribute to our unique marketing plan and maybe more importantly, our clients willingness to trust our judgement and sincerely listen to our recommendations.

Who Is Buying?

Investors and first time buyers for the most part.

Who Is Selling?

Banks with their REO entry-level homes priced under market to induce a bidding war. Still, homes in all market segments are still selling with the right combination of price and marketing.

Loan Market

Wow! We're seeing loan rates hit the mid to high 4% range these days. FHA loans for first time buyers are also still available, requiring only 3-5% down payment, and following suit with interest rates under 5%. And yes, this is for a 30 year fixed rate. Buyers should expect to be asked for full documentation of income, credit, and proof of funds for down payment.

Even if your not in the market to buy a home, you may want to consider refinancing if you have some equity . If you haven't refinanced your house in the last 4 months, you need to call us for a recommendation to some loan officers who can save you some money with these types of rates.

New Laws and Trends

The Stimulus Package - Already taking affect as it relates to first time buyers. First time buyers will be receiving a tax credit, not just a deduction, for up to $8000 if they purchase a home this year. For more information please see our guide to understanding the stimulus package.

Foreclosure Time Frames Extended in CA - Assembly Bill 7 (ABX27) has extended foreclosure proceedings an extra 90 days from the original 3 months needed from the time a notice of default was filed until the time they could post a trustee sale. The idea is to let many homeowners who are in trouble have time to reinstate the loan or consummate a short sale. We are seeing this law pan out by limiting the amount of bank owned listing coming to market the last two months. We are unsure whether this will continue to slow the flow of REO listings and increase the amount of approved short pay sales, but do know that it will at least give troubled owners a chance to keep their house or avoid foreclosure.

FOUST Team News

We're excited to announce that we just had one of our articles published by not only Realty Times, a great real estate news publication, but also Yahoo Real Estate. If you'd like to check it out just do a quick Google search with keywords "Todd Foust on Yahoo Real Estate" and it should be your first organic result.

Thank you for reading our real estate update, if you found it useful feel free to bookmark it, send it to a friend, save it as a favorite, or subscribe to our blogs RSS feed for automated updates. If you have any questions feel free to contact us at