Chico Real Estate Reality

The Elephant in the Room.

2010-05-25T15:12:00.000-07:00

This is a Real Estate Blog, right? It’s logical to assume that you’re going to get some commentary when a GREAT BIG story appears on the front page of the paper about a local developer being charged with fraud (and more), right? The fact is that I DID post a very critical column on the issue, too critical, and I was advised to delete it, which I did. The advice was good I believe. After all who am I to judge until all of the facts are known?

Every real estate office and meeting this week features this great big elephant in the middle of the room. It’s the topic on the minds of many of our customers and all of our associates. But we are justifiably cautioned not to jump to conclusions or point fingers…we are expected to not have too strong an opinion.

The point I was trying to make in my deleted post however is still valid; that too often when the term real estate is used in the media: “Real Estate Developer Charged…” or “Real Estate Lender Arrested…” all people hear is “Real Estate”. And when people think real estate they think agent. And so to some people every story about some under-handed, illegal, profit-scamming REAL ESTATE scheme becomes just another hash-mark on the list of reasons to dislike real estate agents.

Not fair! The Realtors that I know are all highly ethical, family oriented and community minded individuals. They coach kids sports teams, serve on City commissions, sit on the boards of local charities and hold blood drives. And they take their commitment to the best interests of their clients seriously.

And so…let us all reserve judgement on the recent headlines until all of the facts are known. In the meantime let’s try to remember that when you see the term Real Estate used in the newspaper it just might be a story about all of the good things Realtors do!

Farming for Sellers

2010-05-21T13:45:00.000-07:00

In Real Estate jargon the term ‘farming’ describes the process of actively seeking, contacting and cultivating potential home sellers via door-knocking, phone-calling and by mail. Does it work in Chico? Absolutely! Here’s how a chance meeting at an open house turned into a successful search for a California Park lakefront home.

About 3 months ago while holding an open house at the Sierra Lakeside condominium complex a friendly gentleman wandered into the home for a quick look around “let me know if you ever get one of these right on the lake” he said offhandedly as he started to leave. “Do you mean it?” I replied, immediately thinking of how I might locate a seller willing to part with their home on the water. “Definitely” he replied.

The following day I composed a postcard with a colorful photo of the lake and a description of what I was looking for, and mailed it out to about 40 owners of lakefront condos in both Sierra Lakeside and Windmill Falls. After a week with no response I moved on to more pressing projects.

The following weekend while hosting another open house in a different location I had a call from Mary. Mary had fixed up a lake-view condo for herself but a job change prevented her from occupying it, so she had been renting it out for the last 4 years. She hadn’t been thinking about selling but since she’d gotten my letter she’d at least “find out what it’s worth”. As it turned out it was worth slightly more than she had thought, and she encouraged me to run it by the gentleman that had inspired my search.

When Steve saw the view of the lake he was hooked, and offered to pay Mary’s asking price. Within 3 weeks of Mary accepting Steve’s offer we had Steve’s home for sale and a month later it too had attracted a buyer. Both sales will conclude the end of June, just in time for the buyers to receive the Federal Home Buyers tax credit.

Farming works! All you need is an agent willing to put in the extra effort to search for the specific home-type you’re seeking.

Just like most crops, all this farming effort needed for success was a little water…front

Starting Over.

2010-05-12T12:29:00.000-07:00

Many Chico area families who have either recently lost their home to foreclosure or short-sale, or are expecting too, are left wondering “what do we do next”? With home-ownership a thing of the past and credit red-lined for a minimum of 3-7 years most return rather dejectedly to renting a home or apartment. For those determined to begin anew in the home ownership game there is one option…seller financing.

With housing prices so low, the best time for buyers to get back into ownership is now, just when they’re still reeling from losing their home. By purchasing now, with values down as much as 40-50% there is actually a chance of building equity again, a condition that has not existed for about 4 years locally. With their credit shot - seller financing is likely their sole method of getting back into the game.

It may be a tough sell but it’s possible. With gobs of homes on the market and prices low, sellers who own their home free-and-clear have the ability to carry a personal loan and may find it to be one way to move their property or to compete with low priced bank-owned homes. With so much coverage of unemployment, income reduction and the huge number of foreclosures, sellers may also be more apt to understand the circumstances behind a buyer’s recent default. One of the keys is for the buyers to be completely upfront and honest about their situation.

Did the default happen because of a predatory loan? A reduction in income? A temporary job loss? Have most of those issues been resolved? Does the monthly cost of the home they’ll be buying fit within their revised budget? Was their credit good before their job loss or change of income? It is to their advantage to offer the answers to all of these questions right alongside their offer to purchase. Overcoming the seller’s reluctance to work with the buyer by honestly explaining the circumstances behind their default may be just what it takes to get them on the buyers side. A Realtor can help by explaining the benefits to the seller.

Down payment may be a problem. Most people who have recently defaulted on their homes are unlikely to have the standard 20% down payment many sellers may require. Aside from borrowing the money from sympathetic family or friends, perhaps the seller would consider a smaller down (e.g.5-10%) and/or a staggered down payment. Let’s say the seller agrees to a $10,000 down payment, might they also agree to letting the buyer make four installments of $2500, two before allowing the escrow to close the escrow and two more within 60 days after the close? It’s worth trying…we’ve seen it work!

Few listed properties advertise that the seller will carry so buyers should ask their Realtor to enquire about seller financing for homes in their target price range (a buyer should figure out what they can afford in monthly payments and work backwards to arrive at price), some listings state whether the home is owned free and clear or encumbered. To keep payments very low while getting their foot back in the door of ownership – buyers should consider older manufactured homes on land. Pre-1979 mobiles can not be financed commercially, thus the owners generally MUST carry the financing.

Advice to buyers in this situation: Keep trying, if they can demonstrate that they were a reliable mortgagee before their financial problems, can earn a seller’s trust, and are being realistic about the amount they can afford, eventually they should be able to find a seller willing to give them a chance!

Listings, Listings Everywhere...But Will The Buyers Keep Buying?

2010-05-09T11:02:00.000-07:00

Well that dreaded date has past – the ‘sun-downing’ of the Government’s Home Buyer Tax Credit on April 30. Things got pretty busy there in April, our Chico office opened dozens of escrows in the final weeks of the month. Now the big question is: with the tax credit over will people still buy?

The tax-credit fever, combined with the first weeks of warm spring weather even seemed to incite sellers into a listing frenzy. Mark and I substantially increased our listing inventory in April and we were able to find buyers for a couple of them soon after putting them on the market. Those that we didn’t find buyers for are now waiting to see if there are enough ‘non-tax-credit-motivated’ shoppers out there to continue the increased purchasing activity.

One positive sign is that sellers know that there may be a window of opportunity left in the spring/summer buying season to complete a sale, and many are pro-actively adjusting the price of their homes weekly to assure that it stay’s fresh in the mind of buyers and to find that ‘sweet-spot’ pricing that motivates buyers to take action.

Savvy sellers, educated by the market and driven by a long period of anemic sales are making the right choices to keep the momentum started by the Home Buyer Tax Credit alive.

Comparing Apples to Oranges...

2010-05-04T14:14:00.000-07:00

I was in the Los Angeles area (San Fernando Valley actually) last weekend to visit some friends and was amazed by property values. I know what you’re probably thinking: that it’s incredible how high real estate prices are in metropolitan areas. In fact, it’s the opposite that amazed me…how similar Chico prices are to prices in San Fernando!

My friends home is very cool, not unlike a lot of properties you see on the outskirts of Chico – a rambling 60’s vintage ranch-style home with a garage-to-den conversion, knotty cedar interior walls, on a deep lot with an in-ground pool and a detached guest house…like something you might find off of Garner, Hicks or Keefer.

At the top of the market in 2005-2006 they received an assessment of the homes value at approximately $950,000, much higher than it would have commanded in Chico at that time. But now it seems things have equalized. While home values in the San Fernando Valley dropped like a lead sinker, home prices in Chico suffered a much smaller decrease – somewhere around 30% off of their highest.

Take a guess what the above L.A. area home is currently worth…try about $450,000. How about in Chico? I found three homes with similar qualities; one on Sheridan and two on Vallombrosa… range of prices? A low of $340,000 a high of $555,000.

In other words, Chico prices for this type of home might actually be HIGHER! But then, to compare Chico to the San Fernando Valley might be a little like comparing apples to oranges.

Credit Where It's Due.

2010-04-26T09:39:00.000-07:00

Gotta’ give em’ props – Coldwell Banker saw the opportunity to get some valuable press this morning and jump ahead of the competition by supplying a private extension to a public program. As we’ve reported here many times – the Federal Home Buyers Tax Credit will sunset this coming Saturday. Indicators suggest that the program has been at least partially responsible for a dramatic monthly gain in existing home sales in the past couple of months. With the pending demise of this popular program team Blue and White has stepped in to prolong it…it is unknown whether Chico area Coldwell Banker offices will participate, but if they do expect something similar from Century 21, Keller Williams, Prudential and others. Here’s commentary direct from the CB spin machine.

"The federal government did its part to encourage millions of Americans to achieve their dream of home ownership with the help of the home buyer tax credit," said Jim Gillespie, president and chief executive officer for Coldwell Banker Real Estate LLC. "As the credit expires, Coldwell Banker Real Estate is encouraging buyers who haven't found a home yet to continue looking, while bringing a new audience of home buyers who were unable to qualify for the tax credit into the market. We are confident that this private sector solution will represent a significant step toward continued recovery of the housing market."

"The Buyer Bonus Sales Event will allow participating Coldwell Banker home sellers to essentially extend the benefits of the credit," said Gillespie. "Without restrictions such as household income caps, the Coldwell Banker Buyer Bonus Sales Event allows for greater participation for all homebuyers. And our sellers have a unique opportunity to allow their home to stand out from the competition in their marketplace."

Finding a Pulse.

2010-04-20T11:19:00.000-07:00

The home buyer tax credit that we have been touting for months is about to sunset…has it done any good and will buyers rush to take advantage of it in these last 2 weeks? “Yes” and “Sort of”…

The market is definitely more active now than it was when the tax credit was extended last fall, it now has a pulse and blood pressure is rising! Multiple offers are not unusual on well priced or particularly appealing Chico area properties. Those pesky short-sale and bank owned properties are still around but now they’re more like just another option for buyers who are shopping. Is this a function of buyers wanting to take advantage of the tax credit? According to my buyer clients the tax credit isn’t what induced them to start looking for a home, but it has definitely created an incentive to find a home sooner (before April 30) than later.

Example: I worked with a buyer for several months and he found a ‘short-sale’ (pre-foreclosure) home he really liked, so we made an offer. Because the short-sale process is so dysfunctional and the banks so poor at handling them, we had waited almost a month and a half just for a response to his ALL CASH, 14 DAY CLOSE OFFER. Two weeks ago, with the tax credit deadline looming he abandoned the home he most wanted and opted for a very nice home that did not require bank approval to sell. The compliant sellers agreed to almost every request and we closed escrow in record time.

If not for the federal tax credit who knows how long we might have waited for the bank to respond to our offer? There are numerous tales of banks taking six to eighteen months to process these.

Trend or "Bump"?

2010-04-15T13:21:00.000-07:00

The Chico market has ‘felt’ significantly busier the last few weeks – we’ve personally listed four properties and sold three, but is it indicative of a ‘trend’ or just a seasonal ‘bump’? Some prognosticators are forecasting a ‘turn’ in the market.

According to Michael Brush in an article for MSN Money, eight months of rising home prices has buyers itching to make a deal while prices are still low. Expert investors such as Warren Buffett, Michael Rehaut of JP Morgan Chase and George Putnam of The Turnaround Letter are now actively considering investments in residential housing. They stress that savvy investors are getting in early, with a time horizon of three to five years.
More conservative investors like Stu Feldstein of SMR Research expect a moderate pickup in the next two years followed by a stronger recovery during 2012-2015.

Low housing prices, low interest rates and pent up demand are all factors being considered in these rosy predictions. The true test should come in May, as Federal Home-Buyer tax incentives expire…then we’ll find out how strong our market really is!

Take Heart - Cash is Still King!

2010-04-10T08:25:00.000-07:00

Just when everyone (myself included) seems to be lamenting the complications involved in lengthy short sales and foreclosures, cash comes along to save the day! Yes, believe it or not, homes can and ARE being bought for cash these days AND the transactions are simple and quick. Here is a case study from the past week:

The San Jose Inheritance.

Ron’s father left him his 50+ year old home in San Jose, purchased for $5,000 in the 1950’s. Even in our deflated market the home sold for $415,000. Ron banked the cash and came to stay with relatives in Gridley, where he had spent time as a child.

Being careful with his money, Ron determined to get the best buy possible and save the rest of the money for his future. Fortunately for Ron (unfortunately for others), homes in the Gridley, Live Oak, Biggs area have seen incredible price drops. With Ron’s money and prices low it seemed that getting him into the home would be simple, but there was a hitch…

Enter the short sale / bank-owned property problem. Even with CASH in hand and an offer of 14 days to close, we could not get a response from the banks that controlled the short sales, had to compete with multiple offers for bank owned properties or had to look at eviscerated houses where distressed owners had removed appliances and trashed the interiors. Even cash seemed impotent.

Then along came a home in small-town Biggs. One year old, custom-built with upgraded amenities and a detached shop perfect for Ron’s music recording hobby. The anxious seller, knowing how difficult to sell Biggs had become in the current climate was extremely accommodating on price and every other aspect of the transaction. Two weeks from the day that our cash offer was made Ron began moving his things into his new home.

Return of the CONDO?!

2010-04-06T12:11:00.000-07:00

Having just sold two Chico condominiums and listed two others it occurred to me that perhaps the golden era of the condo is finally upon us, when the much maligned townhouse realizes it’s full potential in the real estate pantheon…or not.

A recent article intimated that condos or condo-like housing developments would be the dwelling of choice in the coming decade, as retirees, empty nesters and young buyers recover from the real estate bust and prepare for a more fiscally conservative, lwo maintenance and socially connected housing plan. So I did a little data sleuthing to find out just how condos are faring in today’s marketplace.

As the bubble ‘leaked’ and housing sales slowed in 2006 condos took the first and worst blow as buyers retreated to the more predictable values of single family homes. Now that it appears that we are on the backside of the slump condo sales are actually holding their own, with price per foot values approaching those of single family residences (SFR).

Looking at sales within a five mile circle centering on downtown Chico from October 2009 to present, there have been 33 condos sold compared to 420 SFR’s, although this figure is deceptive due to the fact that there exist far fewer condos in the area. Houses still sold quicker than condos, averaging 74 days on the market compared to 129 for condos. More telling is the closing gap between average price per foot. While houses sold at $166 on average during this period, condos (always cheaper to construct) sold for 87% of what houses sold for – or $145 per foot.

If you too suspect that condos may be the newest old thing in the coming years, there are currently 40 of them (compared to 293 houses) for you to choose from.

When is a House Not a Home?

2010-03-29T09:08:00.000-07:00

According to the City Planner contracted to represent the City of Biggs a house is not a home when it is not permitted as a ‘livable unit’. Here’s how we found this out and what it means…

I am representing a buyer for a home in Biggs. The seller of the home represented the compact studio in the back as having the potential to be considered a rentable unit. It has all of the amenities someone would need to live a simple life: a sink, washer dryer, shower, microwave, heat and AC, a bed, a chair and a dining table – all within about 200 sq. ft.!

When my buyer began getting serious about making an offer he naturally had questions about this small unit in the back. Although his plans are to use it as a recording studio and maybe a room for out-of-area guests to sleep-over he nevertheless wanted to know the legality of these uses and the potential for it to be an income-producing rental at some point in the future. The more questions we asked the more varied the answers we got in return. As it turns out the seller had NO permits for any of the work done on this unit and had made NO provisions for converting it into a livable, rentable unit.

The best course of action when faced with these sort of questions is to go to the source, and that’s just what we did. Scott Friend works for a consulting firm in Chico that contracts it planning services to small municipalities that can’t afford a full time Planner. We met Mr. Friend in his Chico office and he provided us with clear, succinct answers to our queries.

Q “What can we use this building for?”
A “Almost anything except living in”.
Q “And what does ‘living in’ mean?”
A “Technically any occupancy exceeding 14 days.”
Q “Can it be used as a recording studio?”
A “Absolutely.”
Q “Can it be used for over-night guests?”
A “Certainly, up to 14 days.”
Q “Under what conditions might it be permitted as a livable or rentable unit ?”
A. “In it’s current configuration only by a variance issued by the City of Biggs and that’s not likely. Absent a variance you’d need to go through the permit process, move it farther from the property boundary or modify the property line, disconnect utility connections from the main house and have utilities connected independent of the main house.”
Q “Can I as the new owner ever be penalized or forced to tear down the building because of modifications that were made to the building without a permit prior to my
ownership ?”
A “No.”

So…when is a house not a home?…ANSWER when it is a recording studio!

Bloomin' Chico

2010-03-26T09:18:00.000-07:00

Look around Chico and you’ll find that, despite people watching their budgets carefully they are still investing in their yards! One of the reasons is likely the desire to engage in outdoor activities to take advantage of our beautiful spring weather. Another reason is that more vacation time will be spent at home this year, rather than tropical destinations or national parks.

According to MarketWatch.com, about 94% of residential landscape architects polled by the American Society of Landscape Architects earlier this year said that outdoor living spaces, including cooking and entertaining areas, would be popular in 2010. That said, improvements are expected to have few frills as homeowners stick to the basics in this cool economy.

“Homeowners want to create a sense of place for their family, friends, and neighbors to enjoy outside, but an uncertain economy means many will dial back some of the extra features we’ve seen in past years,” said Nancy Somerville, executive vice president for the group.

According to the survey results, some of the most popular features this year include: outdoor seating and dining areas, including benches and seat-walls or weatherized outdoor furniture, as well as fire pits and fireplaces, the classic outdoor grill and outdoor counter space. More lavish outdoor kitchen appliances, including refrigerators and sinks, are expected to be less popular, as are stereo systems and outdoor heaters. Survey results found a growing interest in low-maintenance landscapes and native plants. There’s also a continued resurgence of the home garden.

If you’re going to be putting in more ‘yard-time’ this spring, don’t forget that creating ‘curb-appeal’ in the form of long term landscaping such as shade trees can be an inexpensive, healthy and enjoyable way to build value into your home.

A Frugal Home in Chico?!

2010-03-24T17:38:00.000-07:00

During my morning shift guest hosting the KCHO Radio Pledge Drive this morning my friend Louise Phillipi-Derr got to talking about Chico Real Estate and told me about a home in Chico being promoted as ‘frugal’.

It’s safe to say that most northern Californians are living within stricter household budgets these days, but this dwelling truly warrants the title of a ‘Frugal House’.

No it’s not your depression era (the last one) in-law’s home. This home is ‘staged’ by interior design students from Chico State and Butte College, using recycled and refurbished furniture and décor. Like what you see? Buy it! All pieces are sold as a fundraiser for the North State Symphony (Louise in on the board).

The home, at 716 Brookwood Way is on tour Thursday April 15 through Sunday April 18, with a grand opening preview party Thursday evening from 6-8 pm. For more information visit the Frugal House Facebook Page.

Oh by the way, the house itself is not for sale, in fact it JUST sold, fortunately the new owner agreed to honor the agreement to hold the benefit!

The BALE to Break Their Back

2010-03-23T10:04:00.001-07:00

At a meeting of the fifty agents in my office this morning we were stunned to hear that owners of homes that are ‘short-saled’ or foreclosed upon in the Chico area are now susceptible to after-the-fact collections on their second or third mortgages.

Foreclosure has long been seen as the ‘final-word’ with regards to a borrower’s financial collapse… NOT SO ANYMORE! Now the holders of second and third mortgages can continue to attempt to collect on the unpaid loans long after there is no longer any house to secure them!

According to an article in the Sacramento Bee, as distributed by RISMEDIA “the reason this is happening is because lenders have been quietly selling second mortgages and home equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim. If they win court judgments, these collectors could have years to pursue borrowers with repayment plans, and even garnish their wages, said Scott CoBen, a Sacramento bankruptcy attorney”.

“The only relief a consumer will have is entering into a debt negotiating plan or filing for bankruptcy,” said Sylvia Alayon, a vice president with the New York-based Consumer Mortgage Audit Center. The firm provides mortgage analysis to lenders, advocacy groups and attorneys”.

“The phenomenon suggests an ominous, looming echo of today’s real estate meltdown. As debt collectors surely seek at least partial repayment of millions of dollars in unpaid home loans, some say renewed financial stresses on tens of thousands of local consumers could dampen economic recovery”.

“I think there will be a lot of unhappy people when it hits,” said CoBen. “We saw this in the ’90s. This is not really new. Just when you think you’re back on your feet, you’re making money and the economy’s good, they hit you with this.”

“Alayon said most people are so stressed out and exhausted by trying to save their homes today that they are unaware they could face another hit later. And many who are losing homes don’t get the advice necessary to prevent future fallout, say nonprofit loan counselors”.

For the 214 homeowners currently listing their homes as short sales in Butte and Northern Yuba County area, and the 141 former homeowners whose previous dwellings are now listed for sale by the banks in our area this is just one more straw.

Survival Mode: Back to the Land

2010-03-20T16:59:00.000-07:00

I spent a couple of eye-opening days in the hills east of Chico and Oroville earlier this week with a lady and her son from Alaska. They are doing what I call ‘survival shopping’…looking for a cheap piece of land upon which to build some retirement plans.

In other words, they want low cost, low risk, low additional investments and minimal amenities. It just makes sense (for some people anyway). Sitting it out is no strategy – renting doesn’t build any ownership towards one’s retirement location. And with prices down significantly it would seem like a low-risk proposition.

There are some bargains out there, especially if one is willing to do a little work. Acreage within 30 minutes of Chico starts at $5,000 but will need power, water and various other investments of time, energy and cash. Properties with well and septic are going for well under $100,000. Manufactured homes on land start in the $30,000’s. Many sellers of bare land and mobiles grudgingly agree to seller financing due to the difficulty of bank financing, and the initial investment (down payment) is typically as low as 10-30%.

So, me and my new friends from Alaska looked at land and manufactured homes from Bangor to Yankee Hill to Forest Ranch. Most in this price range had some challenges – needed a well or had questionable neighbors or a remote location. To their way of thinking a 2003 single-wide on over an acre in Bangor for $79,000 with existing well and septic was the most appealing. Here they could escape Alaska’s cold winters, raise their own food, buy for well under what a home in town would cost with perhaps $20,000 down.

Maybe some day they’d build a home and sell the trailer…for now it seems like a pretty cool place to survive.

Attention Shoppers: Blue Light Special!

2010-03-16T11:31:00.000-07:00

Have the home buyer tax credits affected sales here in Chico? If statistics from the State are any indication the ‘bump’ in local sales because of this program should be significant.

According to the California Association of Realtors the percent of first-time buyers increased dramatically in 2009, from 35.9 percent in 2008 to 47 percent in 2009, according to the report. The share of first-time buyers exceeded the long-run average of 38.6 percent and was the highest since 1995, when more than half of all buyers were first timers.

“It is clear that the federal tax credit for home buyers worked well in 2009 and is continuing to drive home sales,” said C.A.R. President Steve Goddard. “The home buyers’ tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the economy.”

According to a survey conducted by C.A.R. on the effectiveness of the federal tax credit for home buyers, nearly 40 percent said they would not have purchased a home if the federal tax credit was not offered. On the same note, nearly 70 percent of these buyers said the tax credit was either “very important” or “most important” in their decision to buy a home. The large number of distressed properties led to more than half of all first-time buyers purchasing an REO/foreclosure or short sale property.

With Chico area home prices down 30% or more from 4 years ago, and a consistent flow of distressed and bank owned properties flooding the local market it’s no wonder that first time buyers are once again shopping for homes. If the absence of young families moving into or staying in the community, that led to declines in school attendance was caused by lack of affordable housing, perhaps the combination of tax incentive and greatly reduced entry level home prices will help to get our school back on track too!

Do Unto the Bank...?

2010-03-12T17:29:00.000-08:00

An Oroville client of mine called me today…said he was feeling guilty about not making the payments on his home because at last Sunday’s Church sermon the preacher told the congregation to “honor your contracts”.

Now I’m not advocating any particular position on whether it’s right or wrong to stop making the payments on your home, but I did provide him with some thoughts to consider.

Part of his contract with the bank says that the bank’s remedy for default is that they get the house…by giving them the house back he’s just honoring the contract.

If the bank instead allows him to short sale the house for less than is owed, there will be an amended contract, one that allows him out of his loan in exchange for finding a buyer who will pay an acceptable price to the bank. He’d be honoring that amended contract.

The bank was happy to make him a terrible ‘no-interest loan’ because they figured (wrongly) that the house would go UP in value and if they had to foreclose they’d easily make all of their money back…WHOOPS big mistake bank!

The bank has no conscience and wouldn’t (didn’t) think twice about scr**ing him, should he feel bad for doing the same to the bank?

The Short and Long of it...

2010-03-10T09:41:00.000-08:00

There are currently about 95 properties (homes, condos, mobiles) for sale in the Chico Area that are designated as ‘short sales’. The joke is that the sales are anything but short…here’s why:

A short sale is a process whereby a mortgage holder is asked to accept a mortgage payoff that is less than they are owed as an alternative to foreclosure. This is typically accomplished by listing the home for sale at a price that is competitive with current sales values… in the new economy this amount is usually significantly less than what is owed.

For buyers this can mean getting a good deal on a home, IF you are willing to endure the hassles.

One of the reasons short sales take so long is that before the mortgage holder(s) will consider it they are going to try very hard to make sure that the borrower (the current homeowner) is on the verge of foreclosure…if the borrower is not in default or if they are not having any income problems or ‘hardships’ the bank is not likely to be in a rush to take a loss.

Next – the bank wants to make sure the current homeowner can’t make up the difference without short-selling. If they are not essentially financially insolvent, the bank is not going to hurry to assist with a short sale.

Then there’s the issue of FRAUD. As quickly as the real estate tailspin started crooks were looking for ways to take advantage of it. One common problem is defaulting borrowers making a deal with a ‘straw-buyer’ who purchases the home and sells it back to the defaulted buyer at the lower short sale price. Banks spend time worrying about this.

Even once the bank finally says okay to the short sale it still has to be approved by the many investors who own pieces of the loan, and they may all want to have a say!

Lastly (and perhaps most importantly) the banks are still under-staffed and under-prepared for the explosion in loan defaults. Temporary employees are fielding back-to-back phone calls from stressed out borrowers, buyers and real estate agents 24/7. Phone calls are lost, dropped or not recorded. Letters and paperwork are moved from pile to pile, from top to bottom, mislabeled, lost and destroyed.

Given all of the above, it is not unusual for a short sale to take 90 days or more to result in a consummated sale…and there are ample examples of them taking 18 months or more! It is also very common for short sale offers to NEVER get approval…not even a eliciting a response after months of waiting. The bottom line is: if you are able to secure a great deal on a short sale property AND you have the time to wait-it-out AND you’re okay with the possibility that it may not go through and you may have to start all over again on another property…GO FOR IT! Some real estate agent around town would love to have a patient buyer like you that understands the process and pitfalls!

BTW: Even the ‘experts’ agree that buying a short sale property is one of those processes where having an experienced Realtor or attorney is a must to have any hope of success!

Down-sizing or: Honey I Shrunk The House!

2010-03-08T09:02:00.000-08:00

If Open Houses are an indication of what people are interested in these days, the answer is ‘downsizing’.

This weekend I hosted two open homes – one a lovely, bright and airy 2800 sq. ft. ranchette on 2 acres, 5 minutes north of town for $675,000, the other an 840 sq. ft condo in the California Park area for $178,000.

In five hours I had just five visitors at the roomy ranchette – four of whom were curious neighbors. I had almost double that number through the cozy condo within the first hour!...and each visitor had a similar story “we’re looking for something smaller” and “we want to be closer in”.

Recent predictions regarding the future of the real estate market have focused on the desires of older buyers looking for ‘walkable’ properties, central to shopping and amenities, with a built-in social network. Condominiums and townhomes fit this bill well.

This is a promising development for the owners of condominiums who often see their units languish and prices drop when housing sales slow. Maybe not such great news for all those beautiful big country homes on the outskirts of town…

Window Shopping for Homes.

2010-03-02T18:25:00.000-08:00

At an office meeting this morning real estate agents volunteered information on the turnout at their ‘open houses’ from this past weekend. “I had 18 people through”, “I had 10 groups”…results were mixed but these numbers would generally be considered a normal turnout - just like the ‘old days’. But as you already know these days are anything but normal when it comes to real estate sales. And although the attendance at open homes was impressive, these days they just don’t seem to turn into sales. So if the majority of last weekends guests were ‘window-shoppers’ thinking about buying a home, wishing they could but not ready or able to or if they’re just out to keep abreast of what’s happening with home prices…what IS selling?

Based on a search of all the homes in the Chico area that have gone ‘pending’ (reported a signed contract and opened escrow) since January 1, 2010, here’s what’s getting offers:

Land – Eight parcels. One offered @ $50,000, five @ $85,000, one commercial parcel and one acre-plus ranchette property with an old house.

Manufactured/Mobile Homes – Three, priced from $19,500 to $85,000

Condos – Six, from 90,000 to $230,000

Residential Income (rental) Properties – Four with asking prices from $329,000 - $850,000

Commercial – Two sales: listed at $295,000 and $745,000

Homes – Of the 114 contracts during the period, 89 were single family homes. Of those – one was for sale under $100,000, fourteen from $100,000 - $199,999, thirty-eight from $200,000 - $299,999, twenty-two from $300,000 - $399,999, four between $400,000 and $499,999, eight from $500,000 - $599,999, one in the $600’s, none in the $700’s or $800,s and one for $925,000.

What does this tell us? Among other things it tells us that of the approximately 475 real estate agents in the Chico Association, each agent has sold, on average, one quarter of one property in the last two months…

What a way to make a living!

* above prices are the ‘list prices’ of properties that became pending. These do not represent the actual sold prices, as those figures are not recorded until the sale closes escrow. It may be assumed that most sold prices will be less than list price.

The Return of the Lease Option

2010-03-01T09:31:00.000-08:00

With the competition of ridiculously under-priced short-sales, foreclosures and bank-owned homes driving down prices in the Chico area, normal ‘undistressed’ homes are languishing on the market as sellers continue to try to get a reasonable value for their homes. Likewise, buyers with anything other than platinum credit are having trouble getting loans. It might just be time again to consider lease-with-an-option-to-buy, otherwise known as lease option.

For example, a couple from Durham that I just me at an open house are interested in buying their first home, but they recently had a credit problem that stemmed from an auto accident they were involved in. They are looking for a starter home around $200,000. They asked me if I was aware of any lease options? While they are often not advertised as such, certain home-sellers might just be interested in such a scenario. Here’s how it works:

Seller’s home has been on the market for an extended period of time because seller does not want to drop price to the level that foreclosed homes are selling for. If seller owns another home that they can move into, or can buy without needing immediate cash from the sale of their home, or if the home they are selling is not their primary residence (in other words it’s a rental or vacation home) they could possibly get closer to their price if willing to take a lease option.

Using a standardized contract specifically for Lease Options, a Realtor will help a buyer (optionee) craft an offer that includes the following parts: 1. Option Consideration – how much upfront money is being offered to start the agreement? 2. Lease – how much and how long? 3. Purchase Agreement – what is the agreed upon price if option is consummated, how much of the option consideration and lease payments will be applied to the purchase price? (be advised: the full amount of the option consideration applied toward any down payment MAY not be counted by a lender for financing purposes).

If there is agreement on all of these points a lease option may be a win-win for seller and buyer.

Help Chico Home Sales, Drink More Pale Ale!

2010-02-26T10:45:00.000-08:00

While the governments ‘buyers tax credits’ may be helping get some Butte County buyers into the house shopping mode experts are predicting that jobs will determine whether people will remain in a buying mood after April 30.

Lawrence Yun, Chief Economist of the National Association of Realtors in an article in REALTOR Magazine states “The health of housing for the second half of the year is dependent on jobs, and on this point the picture is mixed. Although we expect GDP growth of about 3% this year, job growth will lag and we could see unemployment worsen to about 10.5% in the second quarter before it improves.”

According to the website SimplyHired, Chico has an unemployment rate of 12.3%, compared to the national average of 6.9%, and jobs have decreased in Chico by 39% since June 2008. If these numbers are true we here in the Chico area have a ways to go before winter turns into spring for real estate sales.

So, our question is...how much do we need to increase our consumption of Sierra Nevada Pale Ale before they have to go on a hiring spree?

“SOLD! To the man in the white hat” . . . Buying Chico Area Homes at Auction

2010-02-24T09:58:00.001-08:00

To say that the Real estate business is evolving is an understatement these days, as everyday is a new learning experience even for seasoned real estate veterans. An example of that evolution is the trend toward real estate auctions. Real estate auctions are actually a recycled phenomena, and a natural progression of the industry in light of the huge volume of bank owned properties. They are an effective tool for moving large a number of homes rapidly.

Lenders – owners of foreclosed upon homes, contract with an auction company to sell off a property. The auction company posts big signs all over the house letting prospective buyers know of the upcoming event. These days auction offerings are marketed at the auction company’s website with photos and some basic information. A long list of terms and conditions accompany the listing – read carefully and get a second reading by your realtor. Yes, Realtor…your realtor can assist you before, during and after the auction – the auction company will often offer a 1% fee to your agent if they accompany you to the auction and many buyers are offering to pay their agent an additional 1-2% to help them investigate the property, determine a good price and a bidding strategy. You’ll want to know that the title will be free of damaging liens and encumbrances, if the auction company doesn’t guarantee clean title be sure to have your local title company investigate ahead of time (there’s a fee for this service). You may also want to arrange to have a home inspector or contractor walk through the home to point out any potential construction or maintenance problems before you start bidding. The auction company will typically pool a bunch of properties in your area, perhaps as part of a larger event with properties in other nearby cities. The bigger auctions will allow both on-line real-time bidding along with live bidding at the auction.

A client of mine watched the process last weekend from the comfort of her Durham home (the auction was held in Sacramento). She and her husband were mildly interested in a couple of properties but mainly just wanted to learn the process. Here were some of the results for Chico area properties:

A property on Saurat in Chico, which had been recently offered for sale through a Chico real estate brokerage at $279,000, required a minimum bid of $99,000. The bidding went to $190,000 - $89,000 under what it had previously been listed for! The Chico area buyer was thrilled and offered to pay his agent that accompanied him 2% for assisting.

A remote 5 acre property with a clean but small home on Doe Mill Road in Forest Ranch had previously been on the market for $159,000. The minimum bid was $25,000. The property ended up fetching $120,000 at the auction - $39,000 under the last asking price.
The caveat to these sales is that they are ‘subject to bank approval of price and terms’, in other words, the bank can still void the sale if they don’t like the price….stay tuned for more on whether the buyers actually got their house at their price or not!

Responsible Choices, Unresponsive Lenders

2010-02-22T11:10:00.000-08:00

People in our community are trying hard to hang onto their homes, in many cases the lending institutions are not helping, case-in-point:

A Chico man in an industry heavily impacted by the downturn experienced a ninety percent income reduction beginning in 2006. Sensing the market collapse he and his family sold their newer home and bought a fixer in a modest location. After working a couple of low-paying retail jobs his wife eventually secured a middle management position. They’ve cutback on everything: hair-cuts, cable, food and clothing. With all of these adaptations their monthly bills still exceed their income.

For over a year they’ve petitioned the lender for a loan modification. Dozens of calls, four applications, and reams of supporting paperwork have yielded claims by the lender of lost files, inaccurate records of phone conversations and correspondence. The bank claims that estimates of the family’s monthly expenses are over-stated because grocery costs exceeded $400 per month.

With their debt growing this family must again try to make the most responsible decision. Absent a workable modification they are left with the options of short-sale or foreclosure. The home is worth $140,000 less than they owe. Why would the bank choose to take this loss rather than make changes to a loan that would eventually pay them back all of their principal with a profit?

If we want to avoid the scourge of foreclosed homes more pressure must be applied to the lending institutions to actually help troubled borrowers.

Who’ll be Buying In Butte 2010-2019?

2010-02-17T11:26:00.000-08:00

So you’ve decided to wait to sell your home until prices go back up? You’ll be hearing lots of predictions on what’s to come, most fortune-tellers are saying that prices still have not hit bottom. These same soothsayers are projecting that once the rebound does occur, prices will begin to rise slowly. How should you prepare for that day when it does arrive?

According to an article distributed by RISMedia, there are 4 major demographic developments to watch for in the coming decade:

Aging Baby Boomers (55-64 years old) – Butte County has long been a retirement destination for metro California retirees, in 2008 15% of the county population was over age 65. While the new wave of retirees are less predictable in their housing preferences, look for them to move away from traditional retirement housing scenarios, opting instead for mixed age settings that suit a higher activity level. Walkable neighborhoods near suburban town centers also suit this age group.

Younger Baby Boomers (46-54 years old) – This age set will have a more challenging time moving due to the poor equity positions that the housing crash has contributed to. When they can sell it’s predicted that they will be looking for somewhat the same situation as their older counterparts.

Generation Y (techies) – Look for Butte County’s percentage of home ownership to dip from the current (2000) 60.7 percent, as this group has had their home ownership dreams tempered by the reality of market changes. Rentals that serve their connectivity needs and are close-in will be of the most interest to this group, so apartments, townhomes and rental housing that meets these needs will be in the highest demand.

Immigrants – As of the 2000 U.S. Census 7.7% of Butte County residents were foreign born and in 2008 people of Hispanic descent made up 12.9 %of the county population. As these groups grow by both internal (births) and external (immigration) methods, their preference for clustered housing will benefit larger homes and those in neighborhoods with strong communal opportunities.

“All of these groups have some characteristics that reflect a desire to live in more pedestrian-friendly, transit-oriented, mixed-use environments that de-emphasize auto dependency, whether the location is urban or suburban. Among the majors factors driving urbanization: 1) growth of two-person households and single households without children (among both baby boomers and Generation Y); 2) a halt to baby boomer migration to the suburbs; 3) the likelihood of Generation Y to rent rather than own; and 4) public policies encouraging compact development.”

Based on these factors look for developments that follow the ‘new urbanism’ model best demonstrated in Chico by Doe Mill Neighborhood and other projects by New Urban Builders.

Fears, Tears and a New Resolve.

2010-02-12T10:35:00.000-08:00

Are Butte County homeowners distressed about the mortgage crisis? If our February 11 Loan Modification Workshop was any indication, the level of frustration has reached the boiling point. We received 30 phone calls about the workshop and had 16 homeowners attend. What was intended to be straightforward presentation on the mechanics of applying for a modification, quickly evolved into an opportunity for bitter borrowers to vent their anger over the treatment that they have received from the major lending institutions.

Some cried, some groaned, some shouted, we listened. Once feelings were aired we got down to the business of explaining the problem, defining eligibility, detailing the options, providing contact information and filling out forms. By the end of the nearly two hour session attendees had developed a sense of direction. Regrettably, some participants determined that they were likely ineligible for a modification, others were buoyed by new possibilities and alternatives, a few concluded that perhaps it was time throw-in-the-towel, more left with a new resolve to hang on to their homes.

What we learned from this workshop was to allow homeowners time to share their stories, we all gleaned a new understanding of the depth of the challenge with each personal account and were able to target topics requiring more information. We will include this information in our next workshop, the way things are going we expect a full-house.

What to do About #2, or Can a Second Mortgage be Modified?

2010-02-11T10:26:00.001-08:00

When we talk about loan modifications it may sound like we’re departing from the local, Chico perspective…nothing could be farther from correct. We recently mailed flyers to ONE HUNDRED Butte County homeowners who had received Notices of Default from their lenders within the last month. Local issue? We think so!

The conversation about loan mods has focused on first mortgages, but according to Credit Suisse Group in a Wall Street Journal article “About half of seriously delinquent borrowers have a second mortgage”. In fact, it seems to us that the second mortgages are one of the biggest parts of the problem. Consider this: a home sold 4 years ago in Chico for $500,000, the buyer put almost nothing down (common practice at that time), the first mortgage was for 80% of the value (at that time) or $400,000, a second mortgage covered most of the rest or approximately $100,000. Since then, local home values have dropped 20%-50%. The home is now worth maybe $350,000. The first mortgage holder only stands to lose $50,000, while the second stands to lose all $100,000.

So at 6% the payment on the first is app. $2400 and on the second app. $600, in other words: one-fifth of the home-owners monthly nut is the payment on the second. Modifying the first by a couple hundred dollars is great, but if the $600 doesn’t change, a loan modification may not solve the problem.

Because of that the Obama administration went back to the drawing board last year to revise their foreclosure prevention program to address adjusting second mortgages in addition to the plans original goal of modifying firsts.

According to the article “Under the revised plan, mortgage-servicing companies that participate in the loan-modification program for second liens must automatically modify the second mortgage when the first mortgage is reworked. The government will share in the cost of reducing the interest rate on second mortgages for five years. As an alternative, it will pay holders of second mortgages to extinguish that debt.”

So, if you have been agonizing over a loan modification because you think it still won’t get your monthly payments where they need to be, there’s hope that your second may be reduced or removed as well.

Your Tax Dollars at Work . . . Making Bankers Rich

2010-02-09T18:56:00.000-08:00

An informative video is worth a thousand words so I'll let this one speak for itself. Feeling sorry for the banks yet? Despite this information we're still hosting our Loan Modification Workshop this Thursday night, sounds like they might have better luck with a Short-Sale!
Video Marketing and Mortgage News Designed for Mortgage and Real Estate Sales

Drive a Little...Save a Lot?

2010-02-05T09:34:00.000-08:00

We’ve heard the hypothesis (in fact we’ve perpetuated it) that homes are significantly more affordable if a buyer is willing to drive to the outlying areas outside of Chico to purchase…but is that true? To test this theory lets look at average sales prices in: Chico, Durham, Orland, Forest Ranch, Oroville and Paradise.

For the purpose of this comparison we applied the following parameters: Sold prices of all homes on under 6 acres between June 1 and August 31 of 2009. We chose sold prices because ‘for sale’ prices can range from ridiculously over-priced to strategically under-priced…SOLD prices being the true market value. Many homes in the outlying area are by nature on larger parcels, to make sure that they were included we set the bar at 6 acre lots or less. And we chose the window of June – August as representing the busy summer buying season to obtain the greatest number of comparables.

Because the size, quality and other features of the homes varied so much, rather than focus on price we decided to compare COST PER FOOT. Averaging the cost per foot eliminates the disparity of size etc. and gives us a good waypoint for comparison. Foreclosure and distress sales brought the average down across the board.

Leading the list of most affordable communities was Oroville. At slightly over $86 per foot the Butte County seat had lower prices than much of the rest of the state.

Next was the Glenn County community of Orland at $116 per foot. During the heyday of the real estate boom Orland underwent a hasty transformation from rural hamlet to bedroom community as many Chico families sought lower priced homes in exchange for a 20 minute commute. Outside of the town’s core however the country feeling still prevails.

Paradise, long a retirement haven just 15 minutes from Chico averaged $128 per foot, significantly lower than the nearby wooded ridge community of Forest Ranch at $145 per foot.

Durham, a sought after location because of it’s high performing schools and rural charm came in at $163 per foot, providing a small price discount by way of the seven mile drive from the much larger Chico

There were 210 sales of residential homes in the area immediately in and around Chico during that period, far more than in any of the other areas we compared. The average price per foot was $172, infinitely more affordable than L.A. or the San Francisco bay area, but at the top of the pile for Butte County.

So, here was a ‘myth’ that proved true. For a home-buyer on a budget, that doesn’t mind the commute, shopping for a home in the outlying communities within 20 minutes of Chico might be the key to making home buying a reality!

Mad as hell? . . . You're Not Alone!

2010-02-03T09:45:00.000-08:00

Are there many people in the Chico area needing loan modifications? If response to our LOAN MODIFICATION WORKSHOP is any indication the answer must be yes. In just a few days of promoting it we already have ten signed up. Here’s what they’re saying:

“thank you so much for doing this, it is sooo needed, we’ve been getting the run-around from our bank for months…we’re hoping this helps”.

“please put me down for FOUR…I’ve been telling all of my friends that are in the same situation about it”.

“thank you for offering it…we really need it”

People are frustrated, people are ANGRY! Good, honest, hard working people, especially those that have suffered a loss of income due to current economic factors are TRYING LIKE HELL to pay their bills each month and KEEP THEIR HOMES. Putting aside the fact that their homes are worth only 70%-50% of what they paid for them they are willing and wanting to hang on to their homes, but in many cases their monthly debt now exceeds their monthly income. They try to get the banks to work with them but the behemoth institutions either don’t want or aren’t equipped to help. Homeowners send in application after application only to have a different, confusing response to each attempt. Often the response to a loan modification request is to ask the borrower to INCREASE their monthly payment!…WHO WOULDN’T BE ANGRY?!

Our LOAN MODIFICATION WORKSHOP is NOT a silver bullet, and there’s a possibility that a loan mod. request may still be denied even after following the procedure recommended. But there’s a chance. The workshop will provide a framework, an outline of how best to proceed based on the Making Home Affordable guidelines, and we’ll provide a few extra suggestions to try to help make it work. Follow the link in the sidebar for more details on the workshop.

Retiring in Paradise. . . and Chico

2010-01-31T19:35:00.000-08:00

The Chico / Paradise area has long been a popular retirement choice, based in part on our wonderful summer weather (‘warmer weather’ was identified in a 1996 Del Webb survey as the primary criteria in choosing a retirement location). Add to that the cultural opportunities provided by a major California University in Chico and quality hospitals and medical care in both communities and it becomes clear why retirees from the bay area and southern California have found the region to be a good choice to spend their golden years.

But with nest-eggs reduced or eliminated by the financial collapse of the past two years seniors are re-prioritizing when considering a retirement destination. According to an article on MarketWatch.com as reported by RISMEDIA seniors are making different housing and location choices in the new environment. Will the Chico/Paradise area still hold it’s appeal based on these new criteria?

Those 55+ still plan on moving in retirement, between 30-40% according to one survey, but ‘cost of living’ has replaced ‘warmer climate’ as the number one quality that seniors are looking for. To most this means downsizing, and homes that come equipped with sensible, cost-efficient amenities that will make living both comfortable and budget-conscious. According to a survey by the National Association of Home Builders (NAHB), important features currently on the minds of those approaching retirement are:

-Bathroom aids such as grab bars

-Kitchen aids

-Light home-repair services

-Outdoor maintenance services

-An entrance without steps

-Accessible public transportation

-Wider doorways

-Nonslip flooring

A lot of the more popular features in new homes these days don’t appeal all that much to older buyers:
-Island work areas-Separate showers

-Private toilet compartments

-Sun rooms

-Woodburning fireplaces

-Exercise rooms

Retirees want technology but not flash – they want security systems, energy management, structured wiring and lighting controls, but they don’t want to spend extra for home theaters, distributed audio or home automation. “These older buyers are frugal, probably on a fixed income and so expensive tech items are not that big on their lists,” said Rose Quint, the NAHB assistant vice president for survey research.

Will Chico and Paradise continue to be Meccas of retirement? We still have the desirable weather – hot summers, mild winters and large number of cloudless days. Our home prices are well below those of California’s major metro areas. We also have a reasonable supply of senior housing and assisted living facilities, but do we have enough? Whether the retirees will continue to come depends on how well local builders prepare in the near term with sensible and affordable homes and condominiums.

Short Sales May Actually Start Becoming Short!

2010-01-27T18:52:00.000-08:00

Many of my posts have mentioned and discussed short-sales, that most inappropriately named process of selling a home that is in trouble but not yet foreclosed upon. Misnamed because short sales generally take anywhere from about 90 days on the quick side to over a year for longish transactions. The process is rife with pitfalls: competitive offers, appraisal problems, lender mistakes, lender inaccuracies, and outright lender lies!

Adding to it’s list of available homeowner assistance programs, the Obama administration has unveiled it’s new Home Affordable Foreclosure Alternative Program (HAFA is a smaller mouthful!). HAFA provides a road map and tools to a short-sale, for borrowers who are unable to satisfactorily work out there mortgage problems and are facing foreclosure. The program should streamline the complicated and unsavory process and will hopefully lead to fewer foreclosures.

Incentives for lenders to participate is one of the ways that HAFA should be able to get more buy-in. Borrowers too get a little cash: $1500 to defray moving costs – better than having the door hit you in the back as you move out! Standardized forms, procedures and timelines and preapproved short-sale terms will provide a higher level of confidence to potential buyers who, up until now had no guarantee that their accepted offer would ever actually end up in home ownership!

There are restrictions and limitations to which types of loans qualify, so if you are considering short-selling your home be sure to have your Chico area Realtor help you determine if you qualify.

Non-Stop Rain in Chico, The Real Estate Reality

2010-01-25T19:48:00.000-08:00

After more than a week of steady rain, Chico area neighborhoods are pretty water-logged. Sometimes the culprit behind localized street flooding is a debris clogged storm-drain. Other times it’s indicative of a bigger drainage issue. Here’s what you need to know about disclosing flooding issues and buying a home on a street that has flooded.

As a seller you should disclose to a buyer any material fact, such as street flooding that could have an affect on your homes future value and safety. This is normally done by way of a form called a Transfer Disclosure Statement. The good news is that this disclosure can actually work to your benefit. Let’s say that a buyer ‘heard’ that your street had flooded. If you can truthfully explain that the flooding was an isolated occurrence, caused by a one-time event, it might dispel the buyers fears. If on the other hand the flooding turns out to be a recurring issue, you must disclose what you know. It’s always better to disclose up-front and let the buyer decide whether to proceed with the purchase than to hide a problem and be sued for it afterwards!

Your homes value may be affected by the incident depending on the seriousness of the problem. FEMA – the Federal Emergency Management Agency keeps flood maps of the entire country. These maps show which areas of your community are designated ‘flood zones’. There are different designations of flood zones, from those that flood regularly, to those that only flood based on the hypothetical ‘500 year event’ and areas that may be prone to flooding if a nearby dam breaks. The maps are quite detailed and will help you determine if your home is in danger of flooding. Your lender is savvy to these maps and will probably insist that you carry flood insurance if your home is within one of the zones.

Homes in flood zones are typically more difficult to sell and thus the value can be negatively affected by this designation. Buyers should be sure to have their Realtor require a Natural Hazard Disclosure that provides this information before they purchase. Once again, the extent of the problem will determine whether the homes value is negatively impacted. Some homes are actually more valuable and because they ARE in a flood zone, for example homes with incredible stream, river or ocean views, but it takes a brave (some would call it otherwise) and well-informed buyer to purchase this type of property!

The Lowest Home Prices Around?

2010-01-22T09:15:00.000-08:00

Remember 2005? You could buy a house in January for $300,000 and sell it in December for nearly $400,000! Or you could list a house for $250,000, get ten offers and end up getting $300,000! Folks were so hungry to get in on the bonanza that Sacramentans were buying new homes in Gridley for $350,000 and commuting.

But when the real estate apocalypse hit, poor Gridley got the short end of the stick. Sacramentans went back to buying homes in Sac, Chicoans couldn’t afford the 30 mile commute and nobody from Gridley was buying $300,000-$500,000 homes in Gridley.

The beautiful new subdivisions nearly became ghost towns. But then foreclosures drove the prices on those homes so low that they again became attractive as the lowest priced newer homes around.

I’ve been showing Gridley area homes to a client for the last 3 weeks. He’s a young man whose father died and left him his home in San Jose. It took him two years to sell the home, but thanks to it being owned by his dad since the 1960’s the home that they had bought for $15,000 sold for $420,000, more than enough to buy him a clean newer home near where his extended family resides…in Gridley. He wants to keep the price under $200,000. How much home in Gridley will that buy at today’s prices?

We looked at probably 20 homes, primarily in Gridley but also in Live Oak and Oroville. The best prices on the nicest, newest homes, in the best neighborhoods seemed to be in Gridley. The homes were all built between 2002 and 2007. All were between approximately 1600 -2500 square feet. Amenities ranged from above average quality to custom tile, granite, stainless appliances and more. Some of these homes were owner occupied, the majority were either short-sales or bank-owned. Prices ranged from $167,000- $225,000! This equates to a price per foot ranging from around $89 to $113 per foot. As the old saying goes: “you can’t build ‘em for that”!

Compare this to the price per foot being paid in the middle of the last decade - $250 per foot was not uncommon in our area.

If you’re looking for a great deal in Butte County, you may want to reconsider Gridley!

Water Water Everywhere But Not a Drop To Drink*…

2010-01-20T09:12:00.000-08:00

Given the torrential, El Nino induced downpour this week you wouldn’t think that water availability would be at the top of anyone’s mind, but in California water means power.

As such it also plays a major role in development, and that means home construction. As reported in this mornings Enterprise Record, during a Board of Supervisors review of the draft Butte County General Plan yesterday long-time Chico Developer Mo West raised the question of the “W” word during the public discourse. Mo it seems has seen the writing-on-the-wall and it’s not in ‘water’-color. Indeed, Mr. West appears to know his stuff, citing the fact that “80 percent of the water used in a community ends up going into the sewer system”. Mo knows…no water, no houses, but… “there are technologies that can purify that water and make it drinkable again”. So he encouraged the board to make sure that the topic of converting wastewater to drinking water was included in the plan.

Indeed, Butte County water now seems to have risen to a level of importance formerly seen in southern California and the Owens Valley. Butte Environmental Council has been at the forefront of battling for our underground water rights in recent years, fighting to make sure that our aquifer is not sold out from under us.

Are we ready to embrace ‘toilet-to-tap’ here in the land of sky blue waters? When locals see three creeks running through town, A major river five miles to the west, another to the south with a giant reservoir (Lake Oroville) attached to it…isn’t drinking recycled sludge a hard-sell?

I’m all for making the hard (gulp) switch that Mo suggests when the time comes, but for now how about this instead…WE keep OUR water and sell THEM the pee!

*From: The Rime of the Ancient Mariner

Blindsided by a Credit ‘Hit’

2010-01-19T08:01:00.000-08:00

Just when loan modifications look to be the possible ‘silver-bullet’ to ward off foreclosure and credit damage, we now find out that they can adversely affect credit scores.

Even borrowers who have worked diligently to maintain good credit can be ‘dinged’ by a loan modification. “A modification temporarily reduces the monthly payment, which can be helpful if someone’s dealing with a pay cut. Typically, the principal amount owed on the loan is not reduced or changed and the amount of debt owed is not forgiven.” So what’s the point of additional credit damage?

Inconsistencies in credit reporting and the manner in which modified payments are viewed by the lender are part of the problem. Although there appears to be no ‘rhyme-or-reason’ to which lenders choose to report the modification as a negative credit event, the one apparently safe avenue these days is the Government’s Making Home Affordable program. Modifications created under this program are listed as ‘modified under a federal plan’ and appear to be exempt from negative credit reporting. If you are interested in finding out more about this program Mark and I are hosting a free workshop on February 11 (see blog sidebar for more information).

Even though a loan modifications affect on one’s credit is far less damaging than a short-sale or foreclosure, borrowers considering this option should speak with a nonprofit credit counselor before proceeding.

Some information for this post from an article in the Detroit Free Press, distributed via RISMedia

There’s Homeless and Then There’s Homelessness.

2010-01-17T16:39:00.000-08:00

There’s the hopeful and exciting state of wanting, saving for and shopping for one’s first home. There’s the disappointment and loss that comes from losing one’s home in foreclosure. And then there is homelessness: that desperate state of existence without one of humankind’s most basic needs – a safe and weatherproof shelter.

Last week the Chico Enterprise Record ran a story about the upcoming Chico Homeless Census. We signed up for the training session on January 22 (others are scheduled for the 20th and 23rd). As Realtors our mission is to help people find homes, so we figured that anything that helps out the homeless fits within our mission. The actual count day is January 27. To volunteer in Chico, contact Meagan Meloy at meaganm@butte-housing.com or 514-7168.

Why census the homeless? One major reason is that they are not otherwise counted in our once a decade U.S. Census. Another is that this census provides a rare opportunity to get volunteers mobilized to check on the condition of homeless persons, and determine whether there are some who “might not be receiving services”. As described at change.org “the findings help quantify for policy makers (and, indeed, for the rest of us) our society's failure to ensure that every person has a safe, decent place to call home.”

While censusing the homeless would seem to be universally considered to be a desirable activity…it’s not. Why? “Although there is no direct connection between how many homeless are counted and the doling out of federal dough, that doesn't mean politics is left out of this national census. The image and perception of governors, mayors, and city counselors everywhere is at stake. If the number of homeless people drops, the local government cites this as an achievement. If the number increases, local government officials are criticized and advocates pressure for more support”. And then of course there are those who insist that homelessness is a choice, that the homeless are just ‘lazy’ and that they are nothing more than a drain on our social welfare system.

Other criticisms of the homeless census are that they are unscientific and subjective, that the census is not all-encompassing and that weather can distort the results.

We feel that the Homeless Census is a worthwhile investment of our time: after all, we’re Realtors…helping people who are without homes is what we do.

Upcoming Loan Modification Assistance Workshop FREE!

2010-01-13T09:06:00.000-08:00

On February 11 at 6:30 pm we will be hosting a free workshop designed to assist troubled homeowners with understanding their options and filling out the necessary paperwork to apply for a loan modification.

Under the Government’s Making Home Affordable Program lenders throughout the country have received incentives to provide borrowers with relief in the form of modified home loans. At this workshop we will provide: a list of the nearly 100 participating lenders along with their phone numbers; addresses and fax numbers; a list of materials that the lender will require to modify your loan and Loan Modification Applications for you to submit to your lender. In addition to providing detailed instructions on how to fill out the forms we will be available to try to answer any questions about the forms or the program.

This workshop is provided as a public service to anyone looking for assistance and there are no fees or obligations of any kind. All information is strictly confidential and will not be shared or sold. The workshop location is the upstairs meeting room at 1101 El Monte Avenue, off of Humboldt Avenue, Chico

You Have to Ask Yourself . . .

2010-01-09T10:13:00.001-08:00

Yesterday Mark and I attended a clinic on the subject of foreclosures and options, in preparation for the Loan Modification Assistance Workshop we plan on hosting in February. The clinic was provided by Legal Services of Northern California at 541 Normal Street in Chico. A young attorney gave his thoughts on the subject and answered numerous questions. Besides Mark and I there was a young couple concerned about the future of their home investment and a single contractor/homeowner whose income from construction work had tapered off sharply forcing him to make partial payments on his mortgage. The information and answers provided ranged from eye-opening to shocking!

The presentation and discussion generally dealt with two areas of interest: loan modifications and foreclosure. The information on loan modifications was helpful but also equal parts encouraging and discouraging: Encouraging was the fact that the federal government has designed a very ‘well-intentioned’ plan to encourage lenders to modify the loans of distressed homeowners, the Making Home Affordable program. This program has a ‘user-friendly’ website and by all appearances gives hope that one may, without too much hassle, be able to obtain a loan modification. Discouraging was how poorly prepared the banks are to implement the plan, and stories abounded of endless phone calls, run-arounds and dropped calls! The advice provided for those deciding that loan modification is their preferred option is to call daily, stay on the phone, ask for a supervisor and don’t give up!

The more surprising advice however was that troubled homeowners should consider the sacrifices they are making in their lives – retirement savings, kids college funds, family time, etc.; to decide whether or not trying to keep their home is really the right thing to do! Questions were raised and discussed regarding the wisdom of ‘throwing money’ at a home that is worth $100,000 less than the loan on it – when other investments might actually improve the financial position of the borrower. The questions of whether it was ‘moral’ to walk away from an obligation and the impacts of a foreclosure on neighboring properties were dismissed as misplaced, and the emphasis on being true to ones own financial self-interest were deemed a more moral choice. Banks were demonized as uncaring, faceless corporations, interested only in their own profitability.

The take-away message from the clinic was that distressed homeowners must ask themselves one big question: Do I really want (love) this home? If the answer is yes, and keeping the home is a higher priority than other things that might have to be sacrificed to keep it, than attempt a loan modification to ease the burden in these challenging times. If however the answer is no, the advice given was to “stop making the payments, invest the saved money in other things, do not leave the house until you absolutely have to, let the bank foreclose and get on with your life”!

Saving Your Home by Making Your Loan More Affordable

2010-01-06T15:23:00.000-08:00

During the heady times of the real estate ‘bubble’ Chico homeowners enjoyed some of the highest appreciation in the nation. Two to three years now after the bubble first leaked and then burst, Chico infamously has among the higher default rates in the country.

If declining home values were the only issue there wouldn’t be too much of a problem, but the compounding impacts of payment increases on adjustable rate mortgages and higher unemployment has exacerbated the problem. For awhile distressed borrowers floundered in attempting to negotiate loan modifications with lenders who were unwilling to deal with borrowers or acknowledge the magnitude of the problem.

Enter the Making Home Affordable Program introduced by President Obama (watch video at http://www.youtube.com/watch?v=PnGqRcn476U ) . Per the T.A.R.P. (Troubled Asset Relief Plan) bailout plan, lenders who received federal bailout funds are obligated to work with borrowers who are having trouble making their mortgage payments. The Making Home Affordable Program provides troubled borrowers with free counseling services, a generic application form and instructions for what type of documentation they will need to convince their lender of the need for a modification. It also provides contact information for the 100 +/- loan servicing companies enrolled in the program nationwide, which includes most major lending institutions.

To find out more about the program go to http://www.makinghomeaffordable.gov/ .

Make 2010 a Great 'Real Estate Year' for You.

2010-01-04T10:52:00.000-08:00

It’s the first working day of 2010, what options are there for making this a ‘growth year’ for your personal finances? You’ll likely get lots of advice on the issue from numerous sources. Our advice is specific to the Chico area, and how real estate can contribute to making this a successful year for you.

1. BUY LOW. Butte County home prices are the lowest they’ve been in 5-8 years, and that’s just listed prices. Some bank owned and pre-foreclosure properties are selling well below listed prices. Some cash buyers are purchasing foreclosures at auction for less than their current value and ‘flipping’ them for a profit.
2. BECOME A RESIDENTIAL OR COMMERCIAL LANDLORD. Loans for investors are harder to come by, which has made commercial properties harder to sell and has led to some great deals on investment properties. Business closures over the past two years have left a higher than usual number of commercial buildings available. From apartment houses to automotive shops, if you’re in the position to do so this can be a great time to pick up a building to house your own business or to rent out to others.
3. SELL FAST. There is a common misconception that Chico-area houses are not selling, that’s just not true. Homes priced competitively based on current values and especially those in the ‘entry-level’ home category are regularly receiving multiple offers, over asking-price offers and quick closes. If you’ve owned your home for 10 years or more it’s worth well more than what you paid for it.
4. IMPROVE FOR THE FUTURE. If buying or selling are not in the cards this year perhaps this is a good time to focus on updating or upgrading your property. Adding inexpensive square footage like a family room, adding a bathroom to a one bathroom home or remodeling an outdated kitchen can provide a good return when the time comes to sell down the road. Simple cosmetic fixes like exterior paint and landscaping can do wonders for your homes value. Government programs designed to help the economy contain rebates and incentives for home improvements including energy efficiency and updating. Unless you’re doing it for other than investment purposes you may want to avoid changes that cost more than the return they provide, like a swimming pool.
5. GET ‘FREE MONEY’. Two assistance programs available through April 30 of 2010 provide $6500-$8,000 dollars in incentive money for purchasing a primary residence depending on whether you are a ‘first-time’ or ‘move-up’ buyer.

2009 and it’s limiting economic factors - both real and imagined are old news. Let’s look at 2010 with optimism and make it the year we dream big and make our dreams happen!

Neighbors Helping Neighbors

2009-12-31T10:32:00.000-08:00

With so many homeowners facing financial challenges these days and the threat of foreclosure, good Samaritans in communities around the country are stepping forward to help.

An article in the Chicago Tribune, distributed by RISMedia provides examples from around the country of community groups and individuals that are volunteering to personally visit homeowners who are behind on their mortgage payment and offer assistance in preparing the paperwork necessary to obtain loan modifications. According to the article an “estimated 3.2 million delinquent borrowers nationally that may be eligible for a mortgage modification under the federal government’s Home Affordable Modification Program”.

In a similar effort, Bank of America is enlisting community minded homeowners in Chicago to counsel their neighbors who are delinquent in their mortgage payments to seek loan modifications. Bank of America reportedly has an estimated 990,000 home loans in danger of default nationally.

Could a program of this nature work in the Chico area? Perhaps a local civic group, fraternal organization or church group could mobilize to the cause, or maybe adjacent homeowners – concerned with the well-being of their neighbors and the declining neighborhood home values that come with nearby foreclosures could be affective in helping.

What is House Flipping and Will it Work in Chico?

2009-12-30T11:04:00.000-08:00

The term house flipping conjures up images of a judo move, but actually the pejorative term applies to the practice of buying a home at a low price and quickly reselling it at a higher, profit making price. House flipping is in the news right now as the conditions for it are ideal…for those who have cash and some courage!

Conditions are perfect for house flipping because of the high rate of distressed properties available. While pre-foreclosure and bank owned properties can be flipped for a profit, the competition for them is usually intense, which can drive the price up just enough to make them to risky for flippers. The flippers dream is foreclosures, those homes that are sold by auction, often on the steps of the county courthouse (as is the case in Butte County). Here is where the real deals are had. Because the auctions require cash or immediate proof of it’s availability, the competition is greatly reduced. Those with ready funds can often buy foreclosed homes for pennies-on-the-dollar, leaving lot’s of upside when they go to resell.

Buying foreclosures is risky business though. To be successful buyers must carefully research the property they will be bidding on for unseen liens and easements that can come back to make the property unprofitable or unsellable. They should also inspect the property physically for defects and possible repair costs. Potential buyers should work with a Realtor to get the most relevant ‘comparable sales prices’ for similar properties, so they have a clear picture of what price they will have to put on it to resell it quickly, and a real estate agent can help assure the property receives the proper marketing to flip it in the shortest amount of time.

With proper research, preparation, cash and nerves…and the help of a Realtor, houses can be flipped as profitably in Chico as anywhere in the country!

Realtors Give Regularly

2009-12-28T10:17:00.000-08:00

When you go to your doctor do you ever ask him to discount his fee? How about your attorney? CPA? Your child’s teacher?

Have any of these professionals volunteered to help you with costs associated to their services? Does the doctor ever offer to pay for part of your prescription? Your CPA help you pay your taxes?

Enter your friendly Chico Realtor. Like your doctor, attorney or CPA your professional Realtor runs a small business. We have professional and association dues, continuing education costs, advertising bills, office fees and more. Each agent or office sets their commission based in part on what their expenses are. An agents commission gets divided up many different ways, generally every commission: 1. is split 50/50 between the buyers and sellers agent 2. is split again between the agent and their broker 3. has franchise fees, title company fees and errors and omissions insurance deducted from it. and 4. pays back advertising costs, vehicle expenses, professional dues and other costs.

Unlike other professionals Realtors are often asked to reduce their fee by their customers. Depending on the situation Realtors sometimes give up a part of their income to help make a transaction work for their clients. More often they assist by helping either the buyer or seller with some of the costs associated with selling or buying a home, like paying for an inspection or a repair. These contributions come directly out of the Realtors household income.

Realtors representing buyers often spend weeks and months showing their clients homes. Sometimes these clients end up either not buying or not using their agent to buy a home in the end. In cases like this the agent has worked long hours for no pay.

To better appreciate how generous Realtors are, try asking any other small business person if they will give you 20% off their advertised price, or only charge you if they win your case or cure your illness… And Realtors never make you wait in the exam room for a half an hour!

Cash at Close For Repairs?

2009-12-26T09:24:00.000-08:00

Just this week while representing a buyer I ‘re’learned a lesson about repairs. My buyer is purchasing a resale south Chico home using an FHA loan. We have completed our inspections and, while the home is basically sound there is one troubling area of potential problem – the Heating/Air Conditioning unit is about 26 years old and (according to the inspectors report) this type of unit has a normal life expectancy of about 20 years. The inspector said we should be concerned about hairline cracks that develop allowing dangerous gases to permeate the house!

No problem thought I, we’ll ask the seller (in this case it is a bank owned property) to provide us with a ‘credit’ or ‘rebate’ for repairs, which the buyer will use to make the repairs once they take possession of the house….WHOOPS! The other agent quickly stated his belief that to rebate funds to the buyer is “illegal”. While I can find no evidence that to do so would be illegal the reality is that most lenders do not allow money for repairs to be paid to the buyers at the close of escrow. The FHA goes further in stating that any conditions affecting the ‘Safety, security or soundness’ dictate that “appropriately registered/licensed trades person, as applicable, must provide documentation that all deficiencies have been acceptably corrected upon completion of repairs”. And those repairs must be completed before the loan is funded aka close of escrow.

The reasons for this is are understandable: 1. the lender doesn’t want to know that the house has problems, cut a check to the buyer to fix it and find out later that the money was used for a trip to Hawaii! and/or 2. the lender wants to know that the buyer has used all of their own funds (or approved gift funds) for the down payment and closing costs and is not using the repair rebate money to pay back a loan shark that lent them the money for their down payment (thus increasing the buyers monthly obligations).

Sooo… back to the conference room to draw up a differently worded request – this time we will probably ask the seller to pay for a new Heat-A/C unit to be installed prior to the close!

A Home For The Holidays?

2009-12-23T12:18:00.001-08:00

According to the National Association of Realtors as reported by RISMEDIA “existing home sales rose again in November 2009 as first-time buyers rushed to close sales before the original November 30 deadline for the recently extended and expanded tax credit”.

In Chico however the strong jump in sales occurred in September and October, while November sales actually declined slightly. We’ll have December’s figures for the Chico area in early January.

On a nationwide basis existing home sales–including single-family, townhomes, condominiums and co-ops– rose 7.4% to a seasonally adjusted annual rate of 6.54 million units in November from 6.09 million in October, and are 44.1% higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.

Lawrence Yun, NAR chief economist, attributes the healthy sales to the homebuyers tax credit “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” Yun notes that the extended (through April 30, 2010) and expanded (to include existing and prior home owners) tax credits should have a similar effect on 2010. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”

Walking the Walk in Chico

2009-12-21T16:33:00.000-08:00

One of the newest trends to emerge in residential real estate development in recent years is the concept of ‘walkable neighborhoods’ aka “homes located within walking distance of amenities such as schools, parks and shopping”.

Here in the Chico area New Urban Builders has been methodically educating home buyers on the advantages of so-called new urbanism. Doe Mill Neighborhood, built in the early 2000’s near 20th Street and Bruce Road surprised those accustomed to sprawling acre plus ranchettes by quickly selling out block after block of craftsman styled homes on small lots with front porches, narrow streets and almost no yards!

The developers much anticipated Meriam Park Project, on hold until current economic conditions improve, continues the evolution of ‘walkability’, envisioning a “range of housing types, sizes and prices, a mix of civic and commercial uses, and a network of connected slow-speed streets”.

As a fringe benefit to the lifestyle advantages that this sort of neighborhood provides, there is evidence that this type of development will also lead to higher resale home values later on when it comes time to sell. According to Amy Hoak of MarketWatch as reported on MSN.com, homes in walkable neighborhoods are “worth more than homes in neighborhoods where driving is the rule”.

According to a report entitled “Walking the Walk: How Walkability Raises Housing Values in U.S. Cities," which looked at 94,000 real-estate transactions in 15 markets, higher levels of "walkability" were directly linked to higher home values in 13 of the 15.

How to Fight a High Property Tax Assessment in Butte County.

2009-12-18T15:15:00.001-08:00

Depending on how long you’ve owned your home you may find yourself with a tax assessment that is significantly lower, or significantly higher than it’s current value.

If it is lower, thank 1970’s tax crusader Howard Jarvis, relentless promoter of Proposition 13. Prop. 13 limits the amount your property taxes can adjust upward to a maximum 0f 2% per year, even if property values are appreciating at 18% a year as they did between 2000 and 2006. If you purchased your home before those years, chances are it is still assessed at less than it’s current value.

If on the other hand your property tax assessment is higher, it is probably because you bought your home during those same ‘boom years’. The property was reassessed when you bought it AT the purchase price. Now that values have dropped steeply you need to check your tax bill and find out whether the county assessor has decreased the assessment of the value of your home. If not - you can asked that it be reduced and challenge the assessment if the county will not agree to your request.

The following is from the Butte County website:
“The property taxes you pay are based on your property's assessed values as determined by the County Assessor. If you disagree with the Assessor's value, you can appeal that value to the Assessment Appeals Board. Assessment Appeals are filed with the Clerk of the Board.
Prior to filing a formal appeal, you are encouraged to talk to the staff at the County Assessor's Office (530) 538-7721. The Assessor's Office can explain to you your assessed value, answer questions you may have about the assessment, and review additional information you may have to support your appeal. Often a disputed assessment can be resolved prior to filing an appeal. If you cannot reach agreement with the Assessor's Office, you may obtain an Application for Changed Assessment from the Clerk of the Board's Office by calling 530-538-7631.
The Assessment Appeals Board is an independent entity, separate from the Assessor's Office. Appeals Boards can lower or raise a property's assessed value, remove penalties imposed by the Assessor's Office, and/or reverse a change in ownership or new construction assessment. The Assessment Appeals Board cannot reduce your property's assessed value based on what your neighbors are paying for their taxes, remove penalties and interest for late payment of taxes, reduce taxes based on ability to pay, fix the tax rate, levy taxes, change tax rates, grant or deny exemptions, extend filing periods or rehear an issue already ruled upon.
The State Board of Equalization has prepared a pamphlet which details the Assessment Appeals process. You can view that publication at http://www.boe.ca.gov/proptaxes/pdf/pub30.pdf.
You can also view a video developed by the State Board of Equalization to provide information to taxpayers reagrding the appeals process at the following link: http://www.boe.ca.gov/info/AssessmentVideo/AppealAssessmentIndex.html
Should you have any additional questions, please contact the Assessor's Office or the Clerk of the Board's Office at the numbers listed above, or email the Clerk's Office at kmoghannam@buttecounty.net”

$44,000 Tax Assessment Increase in One Year?!

2009-12-16T11:45:00.001-08:00

It would have Howard Jarvis turning in his grave! But that’s just what happened to a friend of mine that I spoke with this morning. She had just returned from a hearing of the Butte County Assessment Appeals Board. Her property assessment was raised $44,000 in one year, supposedly due to the in-ground pool she had put in her yard.

As far as she is concerned there are a couple of problems with this scenario: 1. Prop 13 dictates that no increase in property tax in excess of 2% may be levied from year to year. 2. Although the pool cost $44,000 to construct, sales data demonstrates that the market value of the house is only increased by perhaps 10-20% of the cost of adding the pool (pools are a poor investment if your goal is increasing your homes value, but that’s a topic for another day) .

The board it seems had a different way of looking at it. They wanted to know the actual current value of the home, which in this case is perhaps $100,000 or more in excess of the assessment. Is their reasoning based on Article XIII-A, which (from the Butte County Website) “requires the Assessor to reappraise all property at its full market value when any of the following occurs:

A change in ownership (with some exclusions).
New construction is completed.
New construction is partially completed on the lien date.”

The explanation of the county’s obligations under Prop 13 goes on to state “As long as there is no new construction or change in title, the base value is not increased more than 2% annually, regardless of the rate of inflation.”

Who is right? The three member Assessment Appeals Board has not rendered a final judgement in this case yet – stay tuned for the outcome.

Up next: How to appeal your tax assessment

How do Real Estate Agents Help in a Short Sale?

2009-12-15T11:10:00.001-08:00

If a defaulting borrower feels that they have exhausted their options for keeping the home (loan counseling, loan modification, etc.) and are looking for a way to divest themselves of the property without the major blow to their credit that a foreclosure brings, short-sale may be a less damaging method. Borrowers often find the red-tape of dealing with a financial institution a daunting and frustrating process. A real estate agent can help by knowing and speaking the ‘language’ of the lender, and can often successfully mediate a satisfactory compromise between the lender(s), the borrower and a new buyer that will allow the home to be sold prior to foreclosure.

As part of the process the lender will likely want to know that the property has been actively listed for sale on a Multiple Listing Service, and that there was an opportunity for showings. At some point they will require a Brokers Price Opinion (BPO) from a real estate agent who works in the area where the home is listed (though likely not the agent that has the home listed or who has submitted an offer on the home). The lender will also require a third party authorization, to allow the listing real estate agent to speak on behalf of the borrower in representing an offer. Some real estate agents prefer to hire a professional negotiator to assist them in presenting their case for the short-sale price to the lender.

If there is a second mortgage, like the City of Chico example in my last post, the real estate agent works with both lenders, and the lenders with each other to see if a compromise is possible. Typically when a short-sale is successful the holder of the first mortgage gets the majority of the available money from the sale to offset their loss, the second mortgage lender gets only a very nominal portion of what they’re owed and the real estate agent collects a commission for the work they’ve done in putting the sale together. If the holder of the first is receiving an amount within their parameters for loss they will normally give the deal their blessing, if the amount is insufficient they may let the real estate agent know what the minimum amount they will take is, or they may reject the offer outright and foreclose. If the lender ‘counters’ the price the agent must go back to the buyer (or buyers agent) and attempt to negotiate a higher offer amount. In the case of a second mortgage the mortgage holder is in a weak negotiating position and may have to agree to a very minimal return. If they reject the amount offered they can ‘kill’ the sale and allow it to be foreclosed, in which case they can try to purchase the home and resell it themselves or they can allow it to be foreclosed upon and lose all of the money they’ve invested. When possible, the real estate agent attempts to mediate a settlement that has buy-in from the second mortgage lender.

In some cases lenders may be able to go after the borrower personally in an attempt to recoup some of their loss after the foreclosure.

Anatomy of a City of Chico Short-Sale

2009-12-11T09:51:00.000-08:00

Here are the factors that have lead up to one of the short-sale proposals facing the City of Chico Mortgage Subsidy Program (MSP). The homeowners name has been changed for this account.

-Sue (the buyer/borrower) paid top price for the home during a period of depreciating home prices – home was immediately worth less than purchase price.

-MSP loaned money in the form of a second mortgage on the home.

-Sue miscalculated her personal budget and ability to repay. Sue became late on a number of accounts and incurred fees and penalties which exacerbated her ability to repay mortgage loans.

-Already depreciating home prices suffered a steep decline.

-Sue goes deeper in debt, unable to find a solution to multiple past due mortgage payments and penalties.

-Sue consults with a real estate agent (me) for alternatives to foreclosure. I ask Sue if she has explored credit counseling, or loan modification. Sue feels all options have been exhausted. For the purpose of salvaging some of Sue’s credit I suggest a short-sale as a possible alternative to foreclosure.

-Home is listed as a ‘short-sale’ offering at or slightly below the current market value – in this case significantly under the original purchase price (about the same amount that was loaned by the City).

-Within 2 weeks a contract to purchase is secured with a new buyer.

-I contact the first and second mortgage holders and provide a 30 page ‘short-sale’ package that includes a copy of the new offer-to- purchase, a copy of the listing contract an explanation letter from the borrower, paycheck stubs, tax statements and other documentation of income and expenses to both.

-City of Chico Housing and Neighborhood Services Department schedules review of the proposal for late January.

What comes next?

Both the first and second (MSP) will seek a second opinion on the market value of the home. Based on that opinion, the first and second mortgage holders will negotiate with each other to determine how the funds from the sale would be divided – typically the first mortgage holder will offer the second a ‘token’ of what they are owed (1-2% of what they loaned). Based on the amount of the offer and how the split is negotiated, mortgage holders will decide whether to accept the short-sale offering or foreclose. As second mortgage holders the Chico MSP options in the case of foreclosure are 1.) to hope that the home sells on the steps of the county courthouse for more than what the first mortgage holder is owed OR 2.) to pay off the first mortgage and take title to the home. The City would then own a home worth significantly less than they just paid for it.

To be continued…

Short Sales Strike City Subsidy Program

2009-12-10T10:28:00.000-08:00

The specter of foreclosures reared it’s head in Chico this week as the City of Chico Mortgage Subsidy Program (TMP) was presented it’s first default scenario… unfortunately not the last they’ll encounter.

The TMP is a well intentioned and popular program that in recent years has assisted numerous first time buyers of homes within the city limits of Chico in obtaining no-to-low interest second mortgages to help in dealing with upward spiraling entry level home prices. The program, administered by the Chico Housing and Neighborhood Services Department has been so popular in fact that it was recently discontinued as a result of all of the available funds having been loaned out. The first-blow to the program came on Monday of this week as the committee overseeing the program was presented with a ‘short-sale’ proposal from a defaulting home-owner.

Short-sales are a procedure designed to prevent foreclosure. Whereas foreclosure means that all loans other than the first mortgage are wiped out as the bank acquires the home and create a long-lasting credit hit for the borrower, a short-sale allows the home-owner to attempt to sell the home prior to the foreclosure (usually with the help of a real estate agent), saving the first mortgage lender the cost and risk of taking back the property, offering the chance of some return for second mortgage holders, and salvaging some of the borrowers credit.

At issue in regards to the TMP is the question of ‘some return for second mortgage holders’. With home prices depreciated by as much as 50% in some areas, when it comes time to sell the home there is not enough value to even fully repay the first, let alone ‘some’ funds leftover for the second. This second-place is the unsavory position that the TMP now finds itself in.

Options for the City are few. If the Home is foreclosed upon the City can pay off the first mortgage and take possession of the home, hoping to re-sell it and recoup some it’s investment, but this is a very risky proposition. The City will have costs involved in the purchase of the home, The City will find itself in the home ownership business and there is no guarantee that the City will be able to find another buyer for the home willing to pay more than the City itself has purchased it for. If, on the other hand, a ‘short-sale’ occurs the price may very well be so low that the City receives either nothing or only a token repayment.

Monday’s meeting focused on the first of at least two short-sale proposals before the city. The first scenario involves a $30,000 loan, the second, scheduled for consideration in late January for $50,000.

To be continued.

A Warming Trend No Matter How You Slice it.

2009-12-08T12:12:00.000-08:00

Another way to slice up Chico Home sales statistics for the last 2 years is by Supply and Demand.

Clearly listing inventory (homes listed as available to purchase) dropped significantly in November, to the lowest level in 6 months. While seasonal factors (holidays, weather) may have contributed to the decrease in available listings, certainly the (mostly) steadily increased ‘under contract’s and ‘solds’ since February of 2009 has contributed to the depletion. June, July, September and October of this year saw especially energetic sales.

The longer view also suggests a warming trend for the real estate market. In November of 2007 there were 658 homes for sale in the Chico area with only 59 under contract. In the same month this year 67 homes were under contract while there were far fewer homes to choose from at 499.

As Days on Market Decrease - Prices Increase

2009-12-04T19:08:00.000-08:00

A logical extension of the previous bar chart showing reduced time on the market is a corresponding increase in median sales price. The same increased demand that leads to homes being purchased sooner means that demand is up…as demand increases so does competition for the best deals. Competition equals multiple offers (in the entry level price range) and multiple offers drive up price. As this chart shows, the median price for a home in December rose nearly $20,000 over the preceding 3 months - to approximately $270,000.

In September I listed a 3 bedroom, 2 bath home on Ceres Avenue for $215,000. Within two weeks we had three offers. The competition among buyers drove the price up to what the market would bear - $222,000 with $1,500 in seller concessions. The home closed in app. 45 days.

If you’re considering selling your home allow me to assist you with a pricing and marketing strategy that will get you the best possible price for your home. If you’re looking to buy let me help you get the jump on the competition by providing you with immediate information on newly listed homes the moment they become available.

A Bar-Chart is Worth a Thousand Words

2009-12-04T06:45:00.000-08:00

After three months of increased market time for Chico area homes to sell, ‘Days on Market’ (DOM) plummeted in November, 2009. This is a departure from the normal pattern of a holiday season slow-down in November as seen in the November 2008 DOM.

Indicative of a the success of the First Time Home Buyer Tax Credit? increased consumer confidence? or a general turn-around in housing sales? Only time will tell…

I'm on the road this week - more recent sales stats to come!

Is There Any Special Home Financing Available to me as a ?

2009-12-02T09:43:00.000-08:00

This question was posed to me by a young firefighter considering using the $6500 Federal ‘existing homeowner tax credit’ to purchase his second home.

If you fall into any of a multitude of State or public agencies the answer is YES! According to Wikipedia: The California Public Employees' Retirement System (CalPERS) is an agency in the California executive branch that "manages pension and health benefits for more than 1.6 million California public employees, retirees, and their families”

The types of employees covered include California state agencies and universities, counties, cities, towns, special districts, auxiliary agencies, fire districts, and other government entities, school districts, national guard and more.

In addition to managing retirement savings for it’s members, CalPERS also has a home loan program. These loans feature a number of advantages over standard loans including controlled closing costs, reduced processing fees, discounted mortgage insurance, discounted title and escrow fees, free interest rate locks and more! Plus the CalPERS loan allows employees to borrow the money from their retirement for their down payment to reduce up-front costs.

If you work for a California or public agency and wonder if you can take advantage of all of the benefits of the CalPERS loan program, please call me today!

Why Not a Black Friday Real Estate Sale?

2009-11-29T20:33:00.000-08:00

Retailers pin their hopes for the season, perhaps even for the year on one very special day: ‘Black Friday’ - the day after Thanksgiving and the biggest shopping day of the year. Could home sellers and Realtors learn something from this?

What if one day a year Realtors could work with their sellers to provide buyers a ‘sale day’ ala Black Friday? Here’s how it might work.

-A national campaign promotes ‘Green Wednesday’ (any color or day would work!) as the one day per year that buyers could save THOUSANDS of dollars on a home purchase.

-Real Estate agents work with the owners of their listed properties on a combination of reduced price/reduced commissions. Perhaps even the Title companies would agree to reduce their fees in order to enhance the volume of home sales that would be created on this day. Example: Sellers of homes that have been listed with little activity for months would reduce the price of the home for Green Wednesday by 2%. The listing real estate agent would agree to reduce their commission by ½ percent for this day, and any agent who writes an offer for buyers on this day would also agree to a ½ percent reduction. The Title company agrees to cut their fees to the home-seller to compensate for their price reduction.

In this way, a buyer purchasing a home in Butte County on Green Wednesday at the current median price of $279,000 could save $8,370! How does that stack up to how much YOU saved on Black Friday?

How many sales of ‘stagnant’ listings might be stimulated by this campaign?

Tough times call for creative solutions. If you’re looking for a creative solution to getting your home sold in today’s market please contact me.

How to Get Your Free Money to Buy a Home in Chico.

2009-11-28T13:58:00.000-08:00

The U.S. government has finally come up with a plan that doesn’t involve too much red tape. You needn’t fill out a single form in advance of the process, all you need to do is 1. Make sure you meet the criteria 2. Find a house that fits within the very broad criteria and 3. Make sure you’ve completed the purchase by a certain date.

The criteria is – if you’ve never owned a home before or have not owned one within the last 3 years you qualify for $8,000 free. If you’ve owned a home for 5 of the last 8 years you qualify for $6,500 free. You may earn up to $125,000 individually or $225,000 if you will be buying as a couple.

The home can be any owner occupied residence of 1- 4 units, it can’t cost more than $800,000

You must have a contract to purchase the home prior to April 30, 2010 and you must complete the purchase prior to June 30, 2010.

Once you’ve purchased your home according to the above guidelines you will request the appropriate tax credit amount on your 2009 or 2010 tax return. If you don’t owe any taxes you will receive a check for the amount of the credit. If you owe taxes the amount of the credit will offset what you owe and the difference will be sent to you.

Soooo…claim your part of this pile of money! Contact me for more information on the tax credits (and be sure to run any scenario by your tax adviser or CPA). The funnest part is finding the home that will allow you to apply your credit. And…Chico area home prices are at their lowest in years! I’d welcome the opportunity to assist you in finding the ideal home before the deadline.

Things to be Thankful for II

2009-11-25T15:58:00.001-08:00

It’s all perspective…if you own property, or if you’re thinking about owning property here are some items to consider giving thanks for:

If you’ve owned your own home since before 2000: give thanks for the nearly 120% appreciation you enjoyed before 2006 which means you’re home is still worth at LEAST 75% more than you paid for it.

If you purchased your home between 2000 - 2003, give thanks that it is likely still worth more than you paid for it.

If you purchased your home since 2003 and plan to live there for a long time be thankful that once we get through all of the foreclosures, appreciation on homes should return to the normal 2-4% per year (maybe more). Also be thankful for economic stimulus money that provides rebates and incentives for upgrading your home and making it more energy efficient.

If you purchased your home since 2003 and you would like to move, be happy for all of the programs that have been put into place to help you – loan modifications, existing home buyer tax credits and more. Although the home you’re selling is worth less, the home you’re buying is a lot cheaper too !

If you’re thinking of buying a home, be thankful that homes are much more affordable than they were 2 – 5 years ago, and for the $8,000 first time buyer home credit being extended to April 30, 2010.

Most of all, be thankful for family, good health and freedom.

Chico Home Sales Slow? Here’s the Reality.

2009-11-24T16:15:00.000-08:00

For some time now the ‘word-on-the-street’ has been that Chico homes are not selling, and that they’re selling for ‘pennies-on-the-dollar’. Let’s separate that myth from the reality…

REALITY: Homes in certain price ranges are experiencing longer marketing time and are undergoing greater discounts off asking price than others. For instance, the median number of ‘days on the market’ to date in 2009 was just 27 days for homes in the $200,000-$250,000 range. In the $400,000 - $500,000 range they were nearly three times as long at 76 days. High end homes have seen price reductions of up to $95,000 in order to sell.

REALITY: Homes in the ‘entry-level’ or ‘first time buyer’ price range of app. $275,000 and less are experiencing brisk sales, here are some examples:

184 Pauletah Place sold in 3 days for $6,000 over the $208,000 asking price.
2621 Swallow Tail Way sold in 2 days for $3000 over $207,200 asking price.
206 Rochester sold in 1 day at the asking price of $223,000.

REALITY: Homes in all price ranges, if they are priced in accordance with what comparably appointed homes are selling for in the area AND if they are easy to show and in very good condition are selling quickly. Here are some higher priced 2009 sales:

3356 Summit Ridge Terrace sold in 9 days for $1250 over the $557,750 asking price.
10306 Fimple sold in 8 days at the asking price of $849,000.
824 Whispering Winds sold in 6 days for the $600,000 asking price.

So...home sales slow? Not necessarily...there are definitely buyers out there for homes that show well and are priced right!

Chico Housing at Most Affordable Level in Years!

2009-11-23T11:10:00.000-08:00

“Nationwide housing affordability, bolstered by affordable interest rates and low house prices, hovered for the third consecutive quarter near its highest level since the series was first compiled 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The HOI showed that 70.1% of all new and existing homes sold in the third quarter of 2009 were affordable to families earning the national median income of $64,000, down slightly from a near-record 72.3% during the previous quarter and up from 56.1% during the third quarter of 2008.” This according to RISMEDIA

In the Chico Area, the median price for a single family home purchased in the month of November became app. $46,000 more affordable, down from a high of $325,000 in November 2006 to the current month-to-date median of $279,000.

What does this mean in terms of monthly payments? At $325,000 a buyer obtaining an FHA loan with $9750 (3%) down at 5% interest had monthly principal and interest (P&I) payments of $1697.50. Today’s buyer at $279,000 can put down $1380 less and end up with payments of only $1452.80 on the same loan, a savings of $244 per month!
Click this Link for a look at what you can buy at the median price of $279,000 in the Chico Area today.

Things to be Thankful For (Real Estate Version)…

2009-11-19T16:50:00.000-08:00

This just in from RISMEDIA: Lawrence Yun, chief economist for the National Association of Realtors (NAR) says the housing market and the economy are headed for a sustainable recovery “Given the success of the first-time buyer tax credit to date, and the need for qualified buyers to continue to absorb inventory that will include additional foreclosures over the coming year, we are hopeful about the impact of the expanded tax credit because it will stabilize home prices,” he said. “In fact, the credit is working better than first projected – it now looks like we’ll have 2.3 to 2.4 million first-time buyers this year.”

Here’s an example of how the first-time buyer credit is working in Chico:

I’m currently working with a first-time buyer who is looking for a home in the $190,000 price range. This buyer is getting an FHA loan which requires a 3% down payment (app. $5700). The buyer will be borrowing the down payment money short-term from a family member. When the buyer receives the $8,000 tax credit money in the spring the buyer will be able to pay back her family member AND have app. $2300 left over for furnishings!

Already a home-owner but wanting to change neighborhoods? Be Thankful for the new $6500 tax credit for existing homeowners wanting to purchase a replacement property. More information at Tax Credit Details.

Ask Not What You Can do For Your Realtor…

2009-11-18T11:26:00.000-08:00

...Ask what your Realtor can do for you! Answer: calREDD

The Chico Association of Realtors unveiled their new Property Search program for agents ‘calREDD’ at an introductory training meeting yesterday at the Chico Elks Lodge. So how you ask does that help you?

Speed: the system appears so intuitive to use your agent can navigate it quickly to seek out the properties or data you want instantly.

Connectivity: The automated email updates are easy to set-up so that you receive news of hot properties as soon as they hit the market. For sellers it means that news of your home for sale is automatically emailed to waiting buyers searching for a home similar to yours.

Efficient: many new ways to seek out properties like a variety of map search options and customizable amenities searches.

Expanded Range: The calREDD system is built with the long-term goal of allowing access to property listing data from the entire state of California. Want to know what your mom’s house is worth in San Diego? Your Chico agent can now access the comps for her neighborhood within moments!

Like to see how it works? follow this link for a 16 minute demo video!

The switch-over to this system is still weeks away, plenty of time for Chico area agents to become familiar with all of the new features. I look forward to putting calREDD to work for you!

Chico Foreclosures: Looking Ahead

2009-11-17T15:22:00.000-08:00

Will there be more pre-foreclosures and REO’s in the coming months, or fewer? Here are some indicators to ponder…

According to the credit reporting agency TransUnion (as reported in the 11/17 Enterprise Record) 6.25 % of U.S. mortgages were past due 60 days + in the third quarter of 2009, which is up 58% from one year prior when the percentage was 3.96. The 60+ late category is a good clue that a borrower is headed towards default.

Another consideration is seasonal buying patterns. The typical scenario in Butte County is a winter slow-down in home purchases. As home sales slow, inventory goes up, prices nudge down and distressed properties become more distressed!

These factors suggest that for the next few months anyway the availability of short-sale and bank-owned properties will continue to grow.

Although this is a prolonging of the dark cloud of distressed properties, for buyers there is the silver lining of lower prices and higher inventory which create an even better buying environment for home-seekers and investors. So if buyers are watching market conditions they’ll know that this winter is a great time to buy.

Click these links for a list of all short-sale and REO properties currently for sale in the Chico Multiple Listing Service.

More Free Money* for Chico Homebuyers!

2009-11-16T15:25:00.000-08:00

Okay, you already have 8,000 free dollars waiting for you in the form of the recently extended Federal First Time Home-buyer Tax Credit…where else can you wrangle a few more dollars to help you to buy your first home? If you live in the City limits of Chico here is an incredible opportunity to obtain interest free, payment free money!

City of Chico Mortgage Subsidy Program. The City is generously offering to loan you money to help with your down payment. The amount they’ll help you with depends in part on your income, low income buyers can borrow up to $70,000, moderate income buyers up to $30,000. You must be a first-time home-buyer, you must contribute at least $5,000 of your own money towards the purchase, the home must be located within a residential area within the City and it must be safe, sound and sanitary.

The coolest part is the repayment arrangement. The loan is classified as a ‘deferred payment loan’ – no (zero) monthly payments required! Interest on the amount borrowed accrues for the first 10 years. For each of the five years between year 11 and year 15 the city forgives 20 percent of the interest, meaning that after 15 years all you owe is the principal amount you borrowed, without ever having had to make a payment! The flip side is that you must remain living in that home for 15 years to get full interest forgiveness – if you sell within the first 10 years you’ll owe all principal AND all interest. The point is, you pay nothing until you sell (or otherwise leave this earth). For more information and specifics on the Chico Mortgage Subsidy Program visit the Mortgage Subsidy Program Web Page or call Sherry Morgado - Housing and Neighborhood Services Director (530) 879-6301

* my friend Anthony Watts conscientiously replied to my last post on this subject with "And who's paying for this - you and me. There IS NO FREE MONEY"... Especially if you don't get some of it Anthony!

The New Face of a Foreclosed Chico Home.

2009-11-13T09:40:00.002-08:00

Foreclosures…REO’s…bank-owned properties… where are they and what do they look like?

The iconic image that comes to mind when you hear the term foreclosure is either the demonic banker driving the residents out of the home and into the snow or the boarded up home with chains across the door and notices posted all over. The first image is definitely an outdated scene from the last century and the second is only partially true.

Sometimes but not often - resentful homeowners will ‘trash’ the home before the bank takes it back, other times they will pull anything of value out of the home, like cabinets, dishwasher etc. Generally though, by the time the bank puts the property back up for sale they have (often by way of the real estate agent they are listing it with) fixed any major damages that occurred during the foreclosure.

Here are images of a couple of bank-owned properties currently on the market in Chico.

2009-11-13T09:40:00.001-08:00

2009-11-13T09:38:00.002-08:00

(continued from above) Another common misconception is that foreclosures only occur in depressed or low-priced neighborhoods. In fact, high-end home-owners have perhaps been hit the hardest recently as most of the current buyers are ‘first-timers’ and therefore purchasing homes in the starter-home price range, while more affluent buyers are biding their time waiting for the market to come back so they can sell their homes for a decent price before buying a replacement home. This can leave owners of more expensive homes high and dry for the present time, and those affected by job-losses or salary reductions are just as likely to have been foreclosed upon as the owners of lower priced homes.

Here are examples of higher priced bank-owned properties in the Chico area

2009-11-13T09:38:00.001-08:00

2009-11-13T09:36:00.000-08:00

(continued from above) Click this link for a look at all Current REO listings in the Chico Area . If this link is broken or, if you’d like more information on any home you see here, to set an appointment to take a look inside or for more information on financing please email me at greatscottwhatarealtor@msn.com or call (530) 321-5579

What’s the Deal With Foreclosures in the Chico Area?

2009-11-12T10:26:00.000-08:00

As reported on KHSL Channel 12 on October 28, Chico has earned the dubious distinction of being named a ‘Foreclosure Hot-spot’ based on a reported 284 foreclosures in 2008. So what does that mean and what’s happening with these foreclosed properties?

Foreclosure is the process by which a lender attempts to either sell or take back a home, usually initiated after 3-6 months of missed payments. The first step in the process is a Notice of Default, where the borrower is notified of the lenders intent to foreclose. If the borrower doesn’t work things out with the lender a Notice of Trustee Sale is filed and posted, specifying a date that the property will be sold by the bank. Even at this late date homeowners may be able to work things out with the bank to avoid foreclosure (see your attorney!), but if not the home is sold at the county courthouse to the highest bidder. If there are no bidders or the highest bid is lower than the bank is willing to take, the bank itself claims title to the home and it then becomes what is known as an REO (Real Estate Owned).

Buying a foreclosed property does not disadvantage the previous home-owner, they gave up the property well before it became available for purchase as an REO. And buying a ‘short-sale’ property (buying it from the owner BEFORE it is foreclosed on for less than the bank is owed) in many cases is a relief to the current home-owner, who may be able to salvage some vestige of their credit if it is sold rather than being taken back.

Many short-sale or pre-foreclosure properties are listed for sale in the Chico Multiple Listing Service, please contact me if you’d like to receive automatic notification each time one is listed for sale. In many other cases, owners have already ‘given-up’ and conceded that the home will be foreclosed on when in fact they, the bank and a potential buyer may be able to benefit from a short-sale. I regularly receive lists of these unlisted pre-foreclosures that never show up on the multi-listing service, if you’re serious about finding an unlisted short-sale property please let me know.

Likewise with REO or bank-owned foreclosures. Many eventually hit the market, and are typically priced so competitively that they receive multiple offers. Savvy agents and buyers know that there is a ‘lag-time’ between the Foreclosure and the home being listed for sale when an offer may find favor with a bank before being exposed to the masses. Once again, please contact me if you have an interest in this process.

Some information for this article was found at http://www.biggerpockets.com/foreclosure-process.html

Home Buying Assistance for Veterans

2009-11-11T12:00:00.000-08:00

In honor of our Veterans and Active Military on Veterans Day I’ve compiled some information on loans and incentives for U.S. Military personnel.

One of the most utilized services for Veterans is the VA Guaranteed Home Loan. The Veteran’s administration doesn’t make the loan, but guarantees the loan to the lender (bank etc.) you are borrowing from. The current guarantee is $417,000, which can buy a lot of house these days in Butte County! In addition to guaranteeing a loan for the purchase of an existing home, the VA also guarantees loans for the construction, remodel and weatherization of a home. Financing for condos and manufactured homes are also guaranteed (with certain restrictions).

Some other qualities of a VA backed loan include: requirement that new home builders provide a one-year warranty, assurance of structural repairs if needed within 4 years of the guarantee, no prepayment penalties and a requirement that certain loan and transaction costs and fees not be paid by the buyer. The greatest benefit for most VA buyers is the allowance for purchasers to get into the home with zero down-payment.

California Veterans receive some additional benefits via a Cal-Vet Home Loan which include: lower than market interest rates and down payment amounts. Cal-vet also provides home and loan protection plans that allow for a $500 deductable on flood, earthquake and mudslide claims as well as fire and hazard coverage.

Information for this article was found at Military.com, visit their site for information on all veteran’s benefits. For more information on how to get the most from your veteran status when buying a home in Butte County please contact me at (530) 321-5579

(continued below)

2009-11-11T11:52:00.000-08:00

(continued from above) p.s. Don’t forget that Applebee’s is offering free meals for Veterans today!

The Market for Bare Land in the Chico Area

2009-11-10T15:06:00.001-08:00

Bare land lots and parcels were selling at premium prices in 2005 as move up buyers, cashing in on the appreciation of their current homes competed for the best cul-de-sac, oversized and view lots on which to build their dream homes.

At that time in-town residential lots, if you could find one, were selling for as much as $215,000 (Godman Ave.) and estate-sized view lots for $365,000 (Canyon Oaks). This 6 acre lot (see photo below), 15 minutes from town with beautiful views but no water, power or pavement sold for $120,000 cash. (continued below)

2009-11-10T15:02:00.000-08:00

(continued from above) 2 acre lots in nearby Orland were selling for $200,000.

Flash forward to today and some great news for buyers – much greater selection and inventory is available with prices down a minimum of 25%-50% or more. In-town residential lots are currently being sold for $72,000-$106,000 and the highest price paid for a Canyon Oaks estate lot is $280,000.

That 6 acre lot 15 minutes from Chico that sold for $120,000 cash? The lot next door (continued below)

2009-11-10T14:59:00.000-08:00

2009-11-10T14:55:00.000-08:00

(see video of parcel above) is currently listed for $61,500 and the owner will carry the financing! Those 2 acre Ranchette Lots in Orland that were selling for $200,000 are now selling for $100,000.

Whether you’ve been wanting to make a change from old to new or have been longing to build that close-in dream home, prices on bare lots and land in the Chico area have not been this good in years!

Free Money !?!

2009-11-10T10:26:00.000-08:00

Who say’s there’s no such thing as a free lunch? The U.S Government is giving away $6,500-$8,000 to you with no strings! – just for buying a home.

Here’s how it works: buy a home before April 30, 2010 and the government will mail you a check in conjunction with your tax return, or if you owe taxes they’ll apply it as a credit against what you owe.

Eligibility requirements:
Be a first-time buyer – their definition is that you have not owned a home in 3 years.
Be an existing homeowner – you must have lived in your current home the last 5 years or more.
Purchase the home as your primary residence only.
$125,000 maximum income for an individual, $225,000 for a couple.
Home can’t cost more than $800,000
You must live in the home you purchase for at least 3 years (exceptions if you’re in the military).

More questions? Want to find a home to apply your credit towards? Please call or email me AND double-check all information with your CPA or professional tax adviser.

Buying Foreclosed Chico Area Properties

2009-11-08T19:52:00.000-08:00

Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.

If you’re considering the purchase of a home that is now owned by a bank, it’s important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.

Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.

And that’s not always true.

First: allow an experienced agent like myself to assist you. My partners Mark Reaman, John Spain and I work regularly with REO’s so we are better able to track down the properties than agents who avoid REO’s. The Chico Multiple Listing Service currently has approximately twenty-three Bank owned properties listed for sale and another forty-five ‘short-sale’ (pre-foreclosure) listings, and that’s just in the immediate Chico area. There are many more that are unlisted and we regularly track these properties.

Some other things to be aware of are:

Lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial. I always recommend that my buyer clients allow me to order a home inspection for them to flesh out any potential problems.

“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.

“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.

You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.

Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, clean the gutters and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.

“When we live at home or drive the car, if something is off we notice it. We notice it and we deal with it,” Steward said. When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.

The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly, Goldman said. Other lenders are disorganized.

“It really depends on who you’re doing business with,” Goldman said.

But for your best chance at having an offer accepted and for a quick closing process, have everything in order before making the offer, said Duane Andrews, CEO of Clear Capital, a company that provides valuation products for the mortgage and lending industries. That includes having the financing firmed up and writing a clean offer — for example, asking for new oven racks as part of the deal could peg you as a demanding buyer who will be annoying to deal with, he said.

“What this tells the seller is this guy is going to be a pain and they don’t have time for this pain,” Andrews said.

In fact, most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering, Melvin said.

But don’t expect to bargain the listing price way down, Melvin added.

Banks typically price their properties at a 20 percent to 30 percent discount anyway, he said. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power, he said.

Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer, Melvin said.

Above all, make sure to follow directions when submitting the offer, he said. That likely includes having an approval letter from the bank and the correct amount of earnest money.

“Most listing agents will have instructions how we want buyers agents to submit the offer,” he said. Delays can occur when instructions aren’t followed exactly.

Portions of this Article Courtesy RISMedia, October 5 2009 ‘Market Watch’

What is the Real Estate Value of a Chico Tree?

2009-11-06T12:33:00.000-08:00

One of the many nick-names for Chico - ‘The City of Trees’…got me wondering how trees relate to Real Estate values here in Chico. Personally I’m a big fan of trees, as a birdwatcher trees are generally the feature that I spend most of my time looking at. As a Real Estate agent I imagine that I sometimes ‘impose’ my affinity for trees on my clients – I assign a higher value to homes with mature trees and have often told buyers and sellers that a particular house is ‘worth more because of it’s trees’…is it true?

A Google search of the words ‘trees add real estate value’ provided me with a number of different sites and articles on the subject.

According to an article by Valerie Finholm for Frontdoor.com, trees add from “7-19%” additional value to the price of a home. Finholm quotes Vredevoogd Combs, immediate past president of the National Association of Realtors. "People tell us they want trees and privacy behind," she said. Well-landscaped yards with mature trees and bushes that provide privacy not only fetch higher prices -- they sell more quickly than houses with little or no landscaping, she said, noting that they provide the ultimate "curb appeal" by impressing buyers before they even walk into a house.

Another site belonging to the Southern Urban Forestry Associates claims that their research shows that the value trees add to a particular property ranges from 7 to 25 percent of the total land value. This site contains links and specifics for appraising the dollar value of trees!

With these statistics in mind I decided to check out sales figures for Chico homes featuring prominent trees in an attempt to determine whether the sales prices were positively affected by the presence of the trees. (continued below)

2009-11-06T12:32:00.000-08:00

(continued from above) Two neighborhoods featuring some massive valley oaks are just off of Springfield drive in southeast Chico. Skymountain Circle in the Village Park subdivision and Heritage Oak Drive in the Heritage Oaks subdivision both feature homes with giant trees in their front yards. Of these, homes at 65 and 67 Skymountain Circle share a massive oak tree, and both addresses sold in 2006 and 2007. While this assessment is patently not-scientific or definitive it does support the claim that these dominant trees add value. (continued below)

2009-11-06T12:30:00.000-08:00

(continued from above) Because homes vary in age and size, a valuable statistic in determining relative value is the PRICE PER SQUARE FOOT that a home sells for, relative to other homes that it’s being compared to. In the case of the homes sold on the attached chart (below) I’ve compared the two homes with the dominant tree to other home sales on the same street of homes without the benefit of a large tree. Although the homes may have featured other amenities that contributed to a higher selling price per foot, it is interesting to note that the two homes with the beautiful tree also shared the highest sold price per foot of any in their neighborhood. (continued below)

2009-11-06T12:29:00.001-08:00

(continued from above) The moral of the story? Don’t underestimate the value of mature trees. In addition to the obvious aesthetics of the tree and it’s tenants (birds, squirrels, butterflies, etc.) trees have some very real energy saving benefits, providing cooling shade in summer and, in the case of deciduous trees lose their shading qualities in winter to allow the sun in. Trees provide a necessary haven and nesting site for resident and migrating birds. And, as suggested above, mature trees can add tangible financial benefits when the time comes to sell. Therefore, preserving and nurturing existing trees, and even planting trees (if you plan on staying in the home long enough to reap the benefits) should be as much a part of your home maintenance and upgrading planning as remodeling the kitchen or painting the exterior! (continued below)

2009-11-06T12:26:00.000-08:00

(continued from above) *An interesting footnote to my research for this post is that as I was out photographing trees I happened upon a city tree-trimming crew preparing to prune one of the largest of these giant oaks on Heritage Oaks Drive. Because these trees are within ten feet of the city street, their health is the responsibility of the Chico Urban Forester. The city is also responsible for damage caused by falling limbs.

The length of Time it Takes to Sell a Chico Area Home

2009-11-05T20:04:00.000-08:00

The length of time that a home listed for sale in the Chico area remains unsold can be an indicator of the state of the market. As you can see from the chart, while overall the number of days that it has taken for homes to sell in our area has increased 7% over the past 24 months, there have been a series of peaks and valleys in the interim. One factor causing this is the seasonality of the local real estate market. The period of time before and after the Thanksgiving and Christmas Holidays, in combination with the onset of wet weather conspire to reduce the number of home showings, which in turn lengthens time on the market. Spring and fall show a corresponding shortening of time on the market. The dog days of mid-summer can keep some buyers away but July of 2009 saw shortened marketing times in part thanks to buyer incentives.

The 7% increase noted therefore may not be indicative of the overall trend but more likely demonstrates short term changes in incentives, weather or other factors. Hopefully the introduction of the $6500 existing home-owner tax credit will, by encouraging a new pool of buyers into the market, help reduce the days on market from their recent spike.

In general, pricing homes more than 5% over the sold price of comparable homes will lengthen marketing time. In a depreciating market homes may need to be priced slightly below comparable sales if a short marketing period is desired by the seller.

FHA and FNMA Paying More Attention to Details

2009-11-04T11:23:00.000-08:00

NPR (National Public Radio) ran a story on Morning Edition (click link to listen) this morning regarding FHA’s reining-in of irresponsible vendors of it’s loan products.

This comes on the heels of tightening up of other lending practices. Yesterday our office listened to a presentation by Milly Pollock of Stanford Mortgage on Fannie Mae’s (FNMA) new loan eligibility guidelines. Here they are in a nutshell:

Residential borrowers must have a debt-to-income ratio generally no higher than 45% (50% with strong compensating factors).

Borrowers with a foreclosure on their record are not eligible for a loan for 5 years, and then must have 10% down and a credit score of 680 or above (borrowers who have given up their deed in-lieu-of foreclosure or who have filed bankruptcy are not eligible for 4 years).

Buyers of two unit properties, where one of the units is their primary residence, must have a minimum of 20% down for a fully amortized loan (25% for interest only loans). If the two unit property is strictly an investment, with no owner occupancy, the minimum down is 25% for a fully amortized loan and interest only loans do not qualify.

Additionally, there are new requirements for the amount of reserves a borrower must have available – two months reserves for the purchase of a second home, 6 months reserves for investment properties.

Recent Chico Area Real Estate Sales Trends

2009-11-03T11:37:00.000-08:00

In keeping with our good news/bad news theme I’ve attached graphs and tables demonstrating 2 year market trends for Chico and surrounding rural areas and communities.

The news is virtually all good for buyers: the median sold price for Chico homes is 16 % lower than the median price two years ago. This doesn’t take into account the first wave of price drops in late 2006 and early 2007. By showing only the median price the chart also doesn’t illustrate the exceptionally low prices that bank R.E.O.’s (Real Estate Owned), Trustee Sales (foreclosures) and short sales (allowed to sell for less than bank is owed) sold for, but the median is dragged down by these sales. These charts only show sales in which a real estate agent participated.

For sellers who have owned their homes for more than six years or so this 16 percent drop still did not wipe out the 18 percent per year appreciation they achieved in the glory years of 2000-2006. Prices on homes rose nearly 100% (+/-) over that period so depreciation between 16-30% still leaves seasoned owners in the black. Summer 2009 was a bright spot for many sellers as home prices enjoyed a short upward run which peaked in July.

2009-11-03T11:35:00.000-08:00

The Table gives us a slightly different view of trends. One interesting observation is that while the median asking price (FOR SALE column) has only dropped $3,450 in eighteen months, the median price that homes actually sold for dropped by $33,500 during the same period. Another informational statistic is that while the median price that Chico area homes were listed for in September 2009 was $319,000, the median price for a home that SOLD was $254,000, a significant disparity between listing and selling prices.

More on recent Chico Real Estate Market Statistics in coming posts…

Chico Real Estate Customers Now Have Access to Statewide Information

2009-11-02T11:59:00.000-08:00

The Chico Association of Realtors is switching multiple listing services to a company called calREDD, giving you, the home-buyer or seller a larger geographic reach.

calREDD is built from cutting edge technology. It’s very fast and intuitive, and it works with all operating systems (including Apple systems). These qualities allow me as your agent to help you research real estate purchases anywhere in the state, and your Chico property for sale can also be viewed by all calREDD members, and therefore their buyer-clients throughout the state.

Imagine this scenario: Someone from San Diego puts an offer in on your Chico home, contingent on the sale of their San Diego home. As your agent I am now able to do a CMA on their home to help you make a more educated decision on the acceptance of that offer.

Additionally, by the end of the year all the forms necessary to do a transaction will be built right into the site, allowing for a more seamless and efficient use of your valuable time!

Even Better Tax Credit for Homebuyers Moving Forward

2009-11-01T15:03:00.000-08:00

Though it still has to be ratified by full Senate and House votes, the senate has put forward a proposal to not only extend the $8,000 tax credit of summer/fall 2009, but to also make it available to existing home owners (with restrictions) and raises the maximum income levels. Read a more detailed description at http://rismedia.com/2009-10-29/breaking-news-senate-plans-to-extend-and-expand-tax-credit/ .

Homeowner's Poison is Buyer's Medicine

2009-11-01T14:21:00.000-08:00

In the ying-yang of real estate the misfortune of a pending foreclosure means opportunities for buyers. The owner of the condominium shown in the video in this link http://www.youtube.com/watch?v=V4FAkP8cXbY lost his job shortly after purchasing the property and the bank has filed a notice of default. In order to try to salvage his credit, the owner is hoping the bank will accept a 'short-sale' - accepting less than they are owed so that they too can avoid the unknowns of foreclosure. For the homeowner and lender this may provide for a better-than worst-case scenario.

For the buyer however it's all good. The property is priced at exactly what comparable sales data say's it should sell for - no padding or inflated price to allow for negotiating room. The homeowner is generally willing to endorse any offer and pass it on to the lender, who will make the ultimate decision on what price is acceptable. If there is a drawback for the buyer it is the long processing time that it currently takes lenders to respond to short-sale offers and close - ninety day escrow (or more) are the norm.

The condominium in the video is currently for sale, please contact Scott Huber (530)321-5579 for more information.