New Mortgage Scams – New Twists in Current Markets

New and improved mortgage scams are sweeping across the country and these scams are popping up so quickly that regulations to catch the perpetrators are lagging behind. Only seven states have passed laws to prevent what is sometimes called equity stripping or bailout mortgage scams.  For that alone prevention thru knowledge is the best remedy for avoiding mortgage scams.

Biggest and Common Scams

There are already many distinctive twists on the three most popular scams A.  The Equity Stripping or Bailout Scam…For this situation the swindler agrees to liberate the homeowner by helping get rid of the home thru a sale or transfer. In one way or another, the scammer convinces the current homeowner into surrendering the title to the house by promising that she can stay on as a renter and then buy back the house once the situation has been remedied. Typically, the homeowner cannot afford, nor qualify to buy the home and loses everything regardless while the scammers walk away with any equity in the form of cash. B. Spirit Assistance... The supposed savior charges enormous fees for basic paperwork that the homeowner could have done himself. Often, the scammer promises to represent the homeowner to his lenders in an effort to free the homeowner and never follows through. In these situations the scammer will insist that the homeowner simply ignore notices and phone calls from the lender guaranteeing that the house will enter foreclosure. By the time the homeowner knows he’s been conned it is too late and home is lost as are the dollars spent for the ‘spirit’ assistance. C.  Old Fashion Lure and Change... In this scheme the scammers pose as genuine housing counselors equipped with pages of apparent legal documents quite often for new loans that are going to resolve the homeowner financial problems. What happens is that the owner signs bogus documents that give the scammers ownership of the home. Should you be upside down in your home and need to sell – contact a reputable licensed real estate agent who can help you with a possible short sale. 

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Truckee Real Estate - Should you BUY an REO

Advantages and Disadvantages of Buying a ForeclosureMany buyers associate buying a foreclosure property with getting a steal of a deal. This can be true, but there are also potential pitfalls. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased. Missed Payments/Motivated Seller                                                 Seller will be motivated to achieve a fast sale, may create opportunity for below market purchase price. Seller may be more likely to do repairs. Seller might be amenable to providing major closing costs credits and other concessions. Buyer can use regular mortgage financing. Buyer can obtain desired inspections within standard due diligence/contingency period. Seller must legally provide complete history of property’s condition, problems, repairs, etc.                                                             Seller may not be able to negotiate price below outstanding balance of seller’s mortgage(s). Sellers still have to move out.
Pre-Foreclosure/Notice of Default (NOD) or Lis Pendens Filed by Lender/Short
Sale 

Seller will be motivated for fast sale, increasing buyer’s bargaining power. Buyer can do all standard inspections, including researching title during due diligence/contingency period. 

Unless purchase price will pay mortgage(s) and closing costs in full, lender’s approval of price and terms of sale will be required (i.e. short sale). Lender may not approve price, seller concessions or closing cost credits. Short sale may take 45-90 days to close. Sellers still have to move out. 

Real Estate Owned by Lender 

Bank is motivated to get property sold and will negotiate price, down payment, closing costs, escrow length, etc. Title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners. Inspections and mortgage financing are allowed within normal due diligence/contingency period. House will be vacant. Property will usually be listed on MLS; bank will pay real estate agent’s commission. REO sales close within a normal escrow period of time. 

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What are REOs - Real Estate Owned?

Buying an REO is similar to buying a short sale except the property is already owned by the lender. The property has already gone thru the foreclosure process and the bank typically lists the property with a qualified real estate agent.  Hopefully the agent and the lender have open lines of communication to enhance a smooth sales and purchaseSometimes the lenders will sell foreclosure homes for less than the past loan balance. Most lenders have ‘guidelines’ for the amount they will accept.  In our
Truckee and
Lake Tahoe areas most lenders are looking for a number within 5% to 8% of the amount currently owed.Bank owned properties (land or homes or apartments) are called REOs, meaning real estate owned by the lender.Banks might end up owning the property when no offers come in at the public auction bid enough to cover the amount owed against the property. REO homes are often considered the best way to buy a distressed property because the seller is already out of the picture. At this point you are dealing with the investor’s agent, the bank and the bank’s agent who are negotiating the transaction. Some REOs can be purchased directly from the lender. For more information, seek the advice of a real estate lawyer, and work with a competent buyers’ agent.

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SHOULD YOU CONSIDER BUYING A SHORT SALE PROPERTY?

While there are always active buyers in the real-estate market in
Truckee and
Lake Tahoe it seems many of them seem to be looking to buy a foreclosure or a short sale property.  

A basic foreclosure is a fairly well-understood process and as “short-sale” signs pop up on occasion your buyer may wonder what it really means. When a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it’s called a short sale. Most often the lender forgives the remaining balance of the loan owned by the homeowner. 

Who Really Wins?Short sales are a combination of good and bad for the buyer, the seller and the lender. As the seller a short sale is likely to damage your credit but not as roughly as a foreclosure. You will also walk away from your home without and money from the deal. The buyer will get the property at a reduced price and it might have problems; and the new owner will need to go through considerable red tape to make the deal happen. The lender will take a financial loss but perhaps not as large as it would have if it had foreclosed on the property.  

There are two situations in which an attempt at a short sale is almost certain to result in failure ~A.  No default on loan. Lenders almost never will accept short-sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued. B.  Bankruptcy. If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy because negotiating a short sale is considered a collection activity, and collection activities are prohibited in bankruptcies. 

Can it work for your buyer? Buying a home in a short sale can be a mess of documents, questions and communication, so why should you consider it? Frankly it could be the low price you pay. You might get the property for a significant discount. Because the lender is eager to get back as much of the money it lent out as it can, you may also get favorable financing terms.  

Because the sellers will likely play an active role in the short-sale process, you will have their cooperation. This is not always the case with a property that has gone through foreclosure. 

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Short Sales in Truckee Real Estate

Reasons Not to Buy A Short Sale Property 

Short sales occur when home values fall and sellers do not receive enough cash from a buyer to pay off their existing mortgages, providing lenders agree to take less than the amount owed to them. On the surface, it may appear that a short-sale buyer is getting a good deal. Although a slim margin of short sales may be profitable for a buyer — because there are always exceptions — much of the time, a buyer would be better off buying a home that is not in default.You are unlikely to hear real estate professionals tell you that it’s not a good idea to buy a short sale. In part, that’s because real estate professionals profit on short sales as well as standard sales. Everybody makes money except the sellers and buyers. Realize, too, that the listing agent might push sellers to list as a short sale, because if the property went through foreclosure proceedings, the listing agents might not get the listing.The following are several reasons NOT to buy a short sale property:1) Sellers Paid Too Much When Purchased Originally - If a home sold for $800,000 a few years ago and is now for sale at $700,000, that doesn’t mean the buyer is picking up $100,000 of equity for free. Your buyer agent should be well aware of this statistical information and provide this to you.2) Sellers Borrowed Too Much -Banks that were eager to lend money in appreciating markets sometimes allowed borrowers to over-mortgage the home, meaning the borrower’s loan balance exceeded the value of the property. Appraisals are subjective, and not all appraisers will place the same value on a home. 3) Homes Sell at Market Value -Lenders aren’t naive or unaware of the value of a home. Lenders will insist on a market analysis known as a CMA, or broker price opinion, known as a BPO. If a lender believes a better price can be obtained by taking the property back in foreclosure over a short-sale offer, the lender may hold out for a higher price. That price will be close to true market value. Lenders accept short sales when the home is worth the short-sale price, which means market value of the property.4) Lenders Can Change Conditions -Some lenders reserve the right to renegotiate the terms of the short sale at the last minute. If the market changes, new laws pass or new information crosses the lender’s desk, the lender can attempt to change the terms of the contract. Lenders generally have lawyers at their disposal, and ordinary buyers do not. 5) Higher Buyer Closing Costs -Because lenders rarely will pay for any extras, like a seller would be willing to do, if you want any of those extras, you will pay for them yourself. Sometimes lenders will refuse to pay for standard seller closing costs such as transfer taxes, too. If you want specific inspections you will probably pay for them yourself as well as any repairs. With the right property, a well-written offer and an educated real estate agent a short sale can always work to your advantage, however.

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Buying a Foreclosure

Advantages and Disadvantages of Buying a ForeclosureMany buyers associate buying a foreclosure property with getting a steal of a deal. This can be true, but there are also potential pitfalls. The pros and cons of buying a home involved in foreclosure vary with the phase of foreclosure the property is in when purchased. Missed Payments/Motivated Seller                                                 Seller will be motivated to achieve a fast sale, may create opportunity for below market purchase price. Seller may be more likely to do repairs. Seller might be amenable to providing major closing costs credits and other concessions. Buyer can use regular mortgage financing. Buyer can obtain desired inspections within standard due diligence/contingency period. Seller must legally provide complete history of property’s condition, problems, repairs, etc.                                                             Seller may not be able to negotiate price below outstanding balance of seller’s mortgage(s). Sellers still have to move out.
Pre-Foreclosure/Notice of Default (NOD) or Lis Pendens Filed by Lender/Short
Sale 

Seller will be motivated for fast sale, increasing buyer’s bargaining power. Buyer can do all standard inspections, including researching title during due diligence/contingency period. 

Unless purchase price will pay mortgage(s) and closing costs in full, lender’s approval of price and terms of sale will be required (i.e. short sale). Lender may not approve price, seller concessions or closing cost credits. Short sale may take 45-90 days to close. Sellers still have to move out. 

Real Estate Owned by Lender 

Bank is motivated to get property sold and will negotiate price, down payment, closing costs, escrow length, etc. Title will be clear; buyer will not take on any liens, mortgage or back taxes of prior owners. Inspections and mortgage financing are allowed within normal due diligence/contingency period. House will be vacant. Property will usually be listed on MLS; bank will pay real estate agent’s commission. REO sales close within a normal escrow period of time. 

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Tax Benefits of First and Second Home Ownership

When buying your own home, most of the expenses are not tax deductible. However, the IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for daily interest between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement. 

Much more importantly, the IRS says that loan discount points and origination fees are tax deductible to the buyer even if the seller pays them for you. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a good tax deduction.
You can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners and one of the most important deductions available for home ownership. 

In addition, you can always deduct interest on an additional $100,000 of mortgage debt (equity lines or seconds), which can be used for any purpose. This is called the home equity loan exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called shifting debt. For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then all of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.
This is one of the most important aspects of primary home ownership.  Here’s how it works:If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That’s assuming you are married while singles get up to $250,000 tax free.   You can do this as often as every two years for the rest of your life.The one restriction is that you must own and occupy the house as your principal residence, so don’t try this on a rental property by pretending you live there when you don’t.  

For your second home ownership tax situation, interest is also deductible as are the expenses as listed above that occur during the purchase period!  The Sierra lifestyle and tax deductions are a great situation for the primary and secondary home owner. 

Call for additional details!

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Making Sure Your Home Builds Equity in Truckee, California

How Do I Make Sure The Home I Buy Will Appreciate In Value? 

As a buyer’s representative and you as a buyer your best option is to connect with your Realtor and to study the area you desire to live in and do the homework to study and learn as much about the area as possible.  Your Realtor should be able to provide you with an overwhelming amount of information – if he/she knows their territory! 

In some areas, homes closer to town centers and recreation areas are valued higher and appraise at a more rapid rate because of the desire of the public to shorten their commute to and from work and play (your Realtor should be able to run a report showing the sales, listing times, properties on the market for the past several months ~ or however rapidly the local market might be changing).  It is also possible the buyer may get a nicer and larger home for the same price, if willing to consider a longer drive to work and play and the chosen home may grow over time to become a great property buy.  Studying the town future land use map, which can be obtained at the Town of
Truckee website www.TownofTruckee.com will provide useful information on
Nevada and

Placer
County plans for the future. The most often quoted rule is that location, location, location. Typically, you will want to make sure the house does not back to busy streets or front them for that matter.  Avoid corners and intersections.  Choose mid the block or a cul-de-sac.  Stay away from homes which are considered “unique” unless of course they appeal to a wide range of people. You’ll want to be sure the home has at least two bathrooms, unless you plan to remodel.  Obviously if you are buying as a second/vacation home this will be necessary for privacy!  Also, buying a smaller home in a fabulous neighborhood might provide for appreciation. You probably already about the schools and shopping convenience, as well as potentials which might detract from the property value.  Having your professional Realtor to advise you is the best bet for you the buyer.  Remember, that Realtor wants your repeat business (it’s a small town)! And chances are slim a true professional would ever tell an untruth to you, their client and friend. 

Sometimes it is just timing that works out to provide you appreciation gains; for instance buying that home before a major surge in local market prices.  This would be related to the need to be informed about the area before purchasing the home: Your Realtor, Bonnie Jessee
530 412 3984~CALL ME ANYTIME!

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Truckee, California Homes For Sale

7 Items My Buyers Are Looking For in Today’s Market 

Location, location, location – typically if my buyers do not know the areas and the various neighborhoods, we do a driving tour after a map tour.  Explaining each neighborhoods qualities, positives and negatives truly helps my buyers narrow down their choice to the particular location they desire. 

Neighborhoods – once the neighborhood is established we spend a little more time investigating a little deeper into each neighborhood.  Should my families have small children that home set up on the steep hill with awesome views may not work, while the home closer to the amenities might work for the family with teenage children. 

The “progression” principle – this is a long time rule of real estate that most savvy investors understand.  The biggest, most expensive home on the block is not necessarily the best investment.  If you are buying high range, what could you do if you had to sell sooner than expected?   

Single-family homes are king – another investment concept that has been understood for a very long time now.  While condos can be great investments, in the right location and for the right price, single family homes historically hold value more substantially.  While condos can be the best choice for second home owners averse to maintenance, be certain your purchase is a wise investment. 

Some trends endure – a typical Tahoe area buyer is usually looking for that perfect ‘mountain’ cabin, be it 1200 square feet or 6000 square feet.  Most of my buyers want the mountain ‘feel’ associated with their second home in the mountains.  Buying with re-sale in mind or buying low and making changes to the home to suit you and keeping the enduring trends in mind. 

Attractive bathrooms and kitchens – needless to say, the basic rule of thumb has always been that ‘kitchen’s’ sell homes.  Now, personally I don’t totally agree with that, however, attractive and functional kitchens and bathrooms make a HUGE difference in a buyer’s perception of a properties value and marketability. 

Upgrades for energy efficiency – especially with the climate in the Tahoe-Truckee area, my buyers are looking for energy conservation features.  Good windows, efficient heating systems, on-demand hot water systems are all at the top of the list.  Air-lock entries are always on the list of desires along with garage or storage for vehicles and toys!

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Considering a Foreclosure Purchase?

The way it used to be:  Meet a new buyer client and when I asked them what they wanted in a home, they would say something like, “3 bedrooms, 2 baths, and a 2 car garage”. Things have assuredly changed. Most times these days my homebuyers say something like, “I want to buy a foreclosure.”   These comments mean I need go the extra mile to determine the reasoning – and help them thru the process with as little aggravation as possible.The New Client ~ when a new client recently insisted that he absolutely only wanted to see bank-owned homes because he didn’t want to pay what the current market was demanding in ‘standard sales’  I was anxious to expand his sphere of properties by dealing directly into this issue. While discussing the desire to buy a foreclosure or bank owned property, it was readily determined my buyer wanted the best bang for this money.  We should all note that primarily there is nothing intrinsic about a foreclosure that means that it’s a great deal or otherwise more desirable than a standard sale. Banks are just as likely to price their properties unrealistically as individual sellers, and individuals can be easier to negotiate with. Some of the homes on the market in his price range are bank-owned homes, so we do need to be prepared for what those transactions will look like and for you to be well qualified and ‘show’ well to a bank-seller. The Getting Started Phase ~ I started briefing my client on what to expect if he went the foreclosure route, which about 50 percent of my current clients do, looking for that great deal. I informed him not be outraged if he encountered multiple offers, long delays in responses from the bank, and a somewhat sketchy escrow due to the fact the bank insisted on using their own escrow company, rather than one as a local I am familiar with. His thoughts are that the banks can’t wait to unload these ‘toxic assets’.Next Step ~ A most important aspect of buying a home from the bank is to immediately understand that this is not a logical individual you are dealing with. This is an institution and each decision runs through an inefficient administration and involves people whose motivations are not as logical or obvious as with an individual seller. So consider that there are five houses for sale in one neighborhood – three are bank owned and two are private sellers.  Due to the fact the bank owned homes are in the same area and for sale, the private sellers are going to price their properties accordingly.  When the time comes for potential repairs to be done and requests the repairs, do you really expect the bank to do as much as the private seller?And in order to keep things clear, out in the open, we again discussed the potential to purchase a bank owned or a private sale property.  After my coaching and his new understanding, the market became much more attractive to my buyers as he now would consider ALL homes for sale ~ not just foreclosures/bank owned properties..

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