What is a short sale?

What exactly is a Silicon Valley Short Sale?

Simply put, it is when you sell a home for less than what is owed on it with the lender’s approval and the lender forgives you for the difference (what is short) between what is owed and for what it ultimately sells.





Why would the lender agree to do this?

Money. It’s always about the money isn’t it? Typically, it is cheaper for the lenders if the house is sold prior to getting into foreclosure and being sold at auction. There are costly expenses associated with foreclosing on a home (aside from the fact that owners who are going through foreclosure typically destroy the homes before they are evicted); but with silicon valley short sales, it takes less time (meaning less carrying cost for the lender) and makes more economic sense for lenders if the homeowners have an interest in and participate with the lenders in selling their homes, rather than fighting with them. The lender saves money because they don’t have to pay for eviction, go through an auction only to have to take the property back because the auction did not meet their floor price or no one attempted to bid, make repairs and then pay Realtors to sell it as a bank owned (REO) property which typically gets deeply discounted by buyers anyway, in the meanwhile, still paying for taxes, insurance, association fees, etc... that the seller failed to pay. A home where the seller still resides and maintains will fetch a much higher selling price than an abandoned eye-sore type of property.

Why would it be good for the seller?

It allows them to have control over their economic future and sense of dignity. Let’s face it, if you are contemplating foreclosure, that means your financial situation will not be changing for the better in the immediate future. Don’t let others dictate your financial future; get involved and control and participate in your own financial outcome.




The most important facet to the silicon valley short sales process is that it permits you to have control over your financial future. If you are forced into a foreclosure situation, your credit score will be devastated as you had no participation with the lender to help address the situation; additionally, after the foreclosure, the second lender will most likely come after you for the deficiency. The net result will be as devastating as a bankruptcy and you will not be able to repair your credit to buy a car, a home or apply for a credit card for many years. If you choose to take control and complete a lender approved silicon valley short sale, you will be able to salvage your credit score by multiples and give yourself the opportunity to be in a situation to buy a home again in a relatively short time. Naturally, individual situautions will vary in results.





A mis-perception floating around out there is that the short sale Realtor works for the lender. That is absolutely wrong. The listing agreement is a contractual relationship between the seller and the Realtor; the lender is not a party to the contract and has no relationship with the Realtor. WE WORK FOR YOU and have a fiduciary relationship with you! We look out for your interests.

Who pays for the commission?

Because you are facing financial difficulties, the lender is required to pay for the commission and associated closing costs for completing the silicon valley short sale. (This is why some people believe the Short Sale Realtor works for the lender).


My team has had extensive experience successfully closing silicon valley short sales, up and down Silicon Valley and the rest of Northern California for years. We have helped numerous clients navigate themselves out of their difficult situations and into better futures. Don’t struggle and try to “wing it” on your own, or worse, collapse under the pressures of stress and simply give up. There is an option available to you. Let professionals with experience help you with your financial future. Contact us to find out the details. YOUR ARE NOT ALONE DURING THESE DIFFICULT TIMES.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

What is behind the buying frenzy?

If you have been following the real estate market in the past few months, you are aware that there is a significant increase in sales activity. Buyers who have been sitting on the fence are coming out of the woodwork to compete for lower priced properties.

So what is the root cause of this purchasing activity? Well they are a combination of several factors, including the low interest rates, first time home buyer incentives, but ultimately, I believe it has to do with the First Time Buyer Affordability Index. What exactly is the Affordability Index? It “measures the percentage of households that can afford to purchase an entry-level home in California” according to California Association of Realtors (CAR). Now more Californians are able to afford an entry level home than those who are unable.

This number is important because it had gone down to 26% for California in Q2 of 2007. In Q1 of 2009, these number had increased to 69% for California and 62% in Santa Clara County! First time home buyers who were priced out of the market are now finding due to the market correction, their household income is now permitting them to buy a home.

It would be interesting to find out the numbers for Q2.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

97.5%: How to save yourself from leaving thousands of dollars on the negotiating table

I got an email today from a buyer who interviewed me and a couple of other agents over the weekend. I gave him a run down of my superior service and how that would bring added value to his home purchasing experience and gave him a run-down of what to expect on his up coming journey of home purchasing and gave him my Home Buyer Handbook.

His email today said essentially that one of the agents offered to give him a rebate and wanted to know if I would match that offer beyond my offer to help pay for his closing costs. That was all he was interested in; nothing contemplating the differences in level of service or experience or anything else for that matter regarding the different Realtors, just money. And to a certain degree, I can understand his views, but he needed to ask more profound questions.

This particular buyer was considering purchasing a $400,000 home, and his primary focus was on trying to extract a little over a thousand dollars from any agent to give him a sense that he was getting a good deal.

But I would argue he is focusing in on the wrong area of the transaction in seeking value. Trying to get value by locking in on the agent’s commission is akin to focusing in only on the single tree rather than seeing the entire forest: he needs to see the bigger picture.

The average agent commission is 2.5% of the purchase price. When you are in the market for a home in the $400,000 or less market (which happens to be the most popular buy in the South Bay), where most of these listings are getting multiple offers due to very high demand, not leaving any money on the table in dealing with the listing agent is of paramount importance [see the graphs for an illustration of the market in San Jose area]. This is where experience, negotiation skills and networking skills come into play; this is where agents demonstrate their true value to stand out from the crowd. Simply faxing in an offer and hoping it is the best offer will not get the job done. I believe everyone has heard of the saying: you get what you pay for. That statement is very appropriate here.






It is a mistake to focus only on the 2.5% of the commission to extract your true value; the other 97.5% of the purchase price is where you can truly gain or lose significant value. You may save a few hundred dollars by getting an agent to give you some rebate; but you can easily lose a few thousand dollars if your agent is not experienced or is too focused on doing quick volume business and not looking out for your best interest because they have to churn clients. Ultimately, you will end up paying for quality one way or another.

You may certainly disagree with my assessment of the situation here as everyone has the right to try to pay the least money for services. But take a moment to consider this: Is it always a good idea to look for the cheapest service available? There will be a wide range of fees that Realtors will charge; but a good Realtor, like any other profession, will command a fee that is commensurate to their skills and experiences. Look at the entire picture; don’t just look at getting a few dollars back when making the most expensive purchase of your life; look at not leaving any money on the table.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

FHA Lenders can now use $8,000 tax credit as down payment!

Most first time homebuyers are aware that the 2009 Housing Stimulus Bill permits the first time home buyer who purchases a home in the 2009 calendar year to deduct $8,000 (tax credit) or 10% of the purchase price, which ever is less.

Yesterday, the HUD announced the new decision to permit FHA lenders to allow first time home buyers to use up to the full $8,000 tax credit as down payment.

This is an interesting move which has the potential to help many first time home buyers out of a difficult situation by permitting them to use the credit up front rather than later at tax time. This will be especially helpful for us in California with one of the highest housing costs in the nation.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

Bank of America and its ridiculous Authorization Form

B of A refused to accept a general authorization form that other lenders accept which simply states that the client consents to the lender giving me, as their Realtor, any financial information as it relates to the sale of their property.



B of A doesn’t want to accept that, fine. I have to jump through their hoop, if I want to play their game: I understand.



Here is the kicker, though. Their authorization form not only asks for the client’s social security number (SSN), but it asks for the Realtor’s SSN. Their reasoning for asking me for my private information? For verification purposes, it says on the form. I don’t know about you, but I will not give my SSN to B of A or anyone else, with whom I have no direct financial relationship.







So I call up the Loss Mitigation Department and asked them why it would be necessary for them to have my SSN for me to represent my client in her silicon valley short sale. The B of A agent says it is for verification purposes. I ask what besides my SSN would verify that I am who I say I am. She puts me on hold for about 5 minutes and comes back and says the only other form of identification method B of A would accept for verification purposes is my Tax ID number.



I tell her why is it necessary for B of A to have my Tax ID number to verify who I am? They have a myriad other means of identifying me using public record, like my California Department of Real Estate ID number; why only those two highly sensitive types numbers. But I made it clear to her I would not give B of A my Tax ID number either.



She puts me on hold for another 5 minutes and comes back and tells me (this is verbatim) “we just changed our policy and, now it is OK for designees to choose any 4 digit pass code and use that to verify” themselves. She wanted me to cross out the SSN and fill in PASS CODE, in its place. Interesting how it went from only SSN or TIN to just make up any number in a matter of 10 minutes……..



Do I buy her story as to why it is necessary for B of A to have those sensitive numbers for designees to do their jobs: No! I can go into my conspiracy mode and speculate as to why B of A would want the designee to provide them with something as personal, as their SSN in this crazy era of identity theft. My guess is they keep asking because people must be giving up their SSN without pushing back, thinking in order for them to get their silicon valley short sale processed, they have to do everything the lenders ask of them. Lenders will often lie to you to get money out of your clients, so don’t think they are beyond lying about other things for other nefarious reasons.



If you are dealing with B of A and their Authorization Form asks for your SSN, it is not necessary to give it to them (we can extrapolate that the same is true for all other lenders who may be asking as well). Here is the moral to this story: push back, don’t assume you have to give lenders everything they want.



Don’t even get me started on the second portion of my story about the “servicing fee” portion on the same Authorization Form…….





Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

The Shift continues.......

The shift continues……..

I wrote about a shift that was occurring in the market place in Santa Clara County a little while back. Luckily, it seems the shift is continuing. And given the amount of activity out there in the real estate market place right now (as cited by Mercury News), we should have a lot of activity in the coming summer months as long as interest rates remain low and hopefully no more layoff notices from Valley employers.

The monthly inventory is continuing to decrease; number of properties in contract is still rising; and the number of properties actually sold is also continuing to rise. Obviously we are far from being out of the woods, but the trend is a welcome one.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

$1M short sale closed!

Finally closed my first million dollar silicon valley short sale. It was complex and involved 4 different lien holders, but managed to get them all to agree to a mutually beneficial settlement. Definitely worked hard on this one.

Steve Mun, Silicon Valley Realtor
www.stevemungroup.com

$400,000 in debt forgiven!

Truly a win win for all parties. The seller is obviously ecstatic, the lenders are happy they got this property off their books through a silicon valley short sale. I'm happy too. :-)



Steve Mun, Silicon Valley Realtor