When is a House Not a Home?

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

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?!

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

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

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!

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...?

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...

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!

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.

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

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!

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

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

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?

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.

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?

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

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?

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!

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.