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Sellers Who Delay May Miss Out

Daily Real Estate News |      Monday, March 25, 2013
Some would-be move-up home sellers are eyeing home prices carefully. They’re waiting to see how much home prices appreciate more before they consider selling their home. But they may be missing their perfect opportunity, some housing experts say.

The best time to move may depend on when the home owner purchased their current residence, says Daren Blomquist, vice president of RealtyTrac. Blomquist says that home owners who purchased their home during the sluggish market the last two to three years may find moving up in 2013 may be their prime opportunity.
“Because they bought near the bottom, these home owners should have built up some good equity that can go toward the purchase of a new home, and waiting longer to build more equity likely won’t provide much advantage given that other homes that they might want to move up to will also be appreciating at roughly the same pace,” Blomquist told HousingWire.
Home owners who wait much longer to sell their home may miss out.
“If you’re selling one house just to move up to another, it does you no good to wait for prices to rise — the price of the move-up home will increase faster than the price of the place you’re leaving behind,” says Redfin CEO Glenn Kelman.
Plus, mortgage rates are expected to come off the 3.5 percent range and reach 4.4 percent in the next year, according to the Mortgage Bankers Association. That will increase the costs of financing your next home.
Source: “The Time to Sell Is a Waiting Game for Some,” HousingWire (March 21, 2013)

LANDLORD-TENANT RULES ABOUT PETS
03/20/2013Bob HuntLandlords, Tenants Rights, UncategorizedNo comments
Recently the legal department of the California Association of Realtors® (CAR) released a memorandum dealing with the portion of landlord-tenant law that relates to the subject of pets and animals. It provides useful information for both landlords and tenants, as well as for real estate agents who get involved with leasing and/or managing property.
In reviewing such laws it is important to keep in mind that most of the rules need to come with a footnote or to be stated as “in general.” This is because there are all sorts of exceptions if the animal is a service animal (such as a seeing-eye dog) or an animal (sometimes called a companion or comfort animal) that is used to ameliorate a disability. By law, animals that fit into those categories are not considered pets, and different standards apply.
First, then, let us review the rules as they apply in general, remembering that there will be exceptions for service animals and animals used to mitigate a disability.
It is perfectly legal for landlords to prohibit pets. Moreover, it is legal for a landlord to discriminate among pets. A landlord could have a “no-dogs” policy, but might allow other kinds of pets. Conversely, a “cats-only” policy would also be legal. Landlords may even specify that certain breeds are prohibited whereas others may be allowed.
In California – thanks to a law passed just last year– a landlord cannot require that a dog or cat, or any other type of animal, be declawed or devocalized as a condition of rental. A landlord could, though, require that any pets be spayed or neutered. Who knew such things?
Often landlords are willing to take on pets provided that the tenant will pay a deposit that is higher than normal. This is perfectly legal; but it is subject to California’s security deposit law which only allows for a maximum security deposit of two months for unfurnished rentals and three months for furnished rentals. Calling it a “pet deposit” does not put it into a special category which avoids that limit.
As a matter of fact, the CAR memo suggests, “it makes more sense to simply charge a higher security deposit rather than creating a separate pet deposit fee.” Among other things, doing that “prevents unnecessary arguments or confusion if money in the pet deposit is needed for cleaning or damages not caused by pets.” Another pet-related recommendation is that, “it is a good idea to add some specific provisions to the lease itself or in an addendum to the lease which directly regulate animal activity.” “The benefit of adding such detailed provisions is that it makes it clear what rules the tenant must follow when keeping a pet on the property. Also it makes it easier for the landlord to address and possibly evict a tenant for not following the specified rules.”
As we have noted, the rules are different when it comes to service or companion animals. In those cases, even if there is a no-pets policy, if a disabled tenant “requests to keep a service animal or other animal and it is a reasonable accommodation of the tenant’s disability, the owner would have to allow the tenant to keep the animal.”
This can be dicey. As a general rule, landlords may not inquire about a tenant’s disability. But the CAR memo points out the following:
However, if a tenant asks for an animal and need for the animal is not obvious, then the landlord may further inquire. For example, a tenant who suffers from an anxiety disorder, which may not be apparent, may require a cat as a comfort animal. When a tenant asks for an accommodation, the tenant and landlord must engage in what is called a “good faith interactive process” to determine how best to accommodate the tenant’s disability. If the need for the animal is not obvious the landlord could ask for verification regarding the nexus between keeping the animal and the tenant’s disability. A tenant can satisfy this by providing written verification. Typically this written verification is from a medical practitioner, although it is not required that it be from a medical doctor and other forms of proof may be acceptable depending on the circumstances.
As noted, this can be dicey.
While California and Federal law are generally the same regarding service and comfort animals, California law goes further in that the same “reasonable accommodations” must also be made for a person who is licensed to train a service animal.
California landlords have no special liability with respect to the behavior of pets allowed on the premises, unless the landlord has knowledge of a pet’s dangerous propensities and the landlord has done nothing about it. It is the owner of the pet who has strict liability. Nonetheless, landlords who allow pets should review their insurance with respect to coverage for injury or damages caused by a tenant’s pet. They also should be sure what, if any, exemptions are made for certain breeds. Finally, it’s not a bad idea for a landlord to require that the tenant maintain a ‘renter’s insurance’ policy that will provide the tenant with coverage if his or her animal causes harm to someone.
Source: Bob Hunt is a CAR “California Association of Realtors” director and is the author of Real Estate the Ethical Way.

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HappLand! (Photo credit: Wikipedia)
Shadow inventory has been in the media lately as a sign that a tsunami of bank owned homes will eventually hit the market and flood the inventory further driving down home prices and leading to homes being left vacant on the market for lack of buyers.  Its created buyers who remain on the fence thinking we have not reached the bottom of the market and our region in Sacramento could see further price decreases upwards of 25%.  Let’s delve into the reality of the situation.
Initially shadow inventory was defined as the amount of homes that had went through the foreclosure process, were sold at trustee sale but had not yet made it to the market.  This is the best defined meaning of the term.  Media reports failed to mention many of the reasons why these homes had not made it to the  market including:

Bankruptcy – many homeowners would exhaust the eviction process and simply file for bankruptcy.  This delayed the marketing of the property for about 6 months but homeowners then found they could fine bankruptcy up to 3 times with an automatic delay in the process.  They would file for bankruptcy and for a variety of reasons the bankruptcy would be dismissed and then refiled up to three times.  The reality is this could result in delays of up to a year or more in the process.
Protecting Tenants at Foreclosure act of 2009- many times upon verifying occupancy after the trustees sale, it would be found that tenants had long term leases in place which would result in the bank honoring the lease and that asset would remain off of the market during that lease period.
Settlements with banks- several banks that were involved in lawsuits involving loan types like Alt-A products entered into settlements that required them to offer modifications to homeowners who were foreclosed on.
NSP Non Profit Sales- many assets were sold by the major banks to “non profit” organizations who would purchase the asset from the bank prior to being marketing in the MLS and the non profit would rehab the property and sell the asset themselves.  The reality is the Sacramento market is many of the “non profits” were and continue to be allowing their non profit status to be used by 3rd party investors to make an end run around the MLS process and benefit from taxpayer NSP money but thats a discussion for another post.
The Eviction Process- after the trustees sale, the asset would be assigned to an agent and if the occupant didn’t cooperate, every effort had to be made to make sure the occupant was not active military or a tenant.  Many banks would assume the occupant was a tenant to make sure they were in compliance and would issue a 90 day notice.  Evictions went from simply 90 day notices to many additional months as tenants or occupants would google delay tactics and attempt them or produce false leases from relatives confusing the courts and further delaying the evictions process.

Then the media moved the definition of shadow inventory to the amount of homes that had a Notice of Default filed against the homeowner but had no yet been foreclosed on.  On top of the above mentioned reasons, the flaws with this calculation adds the additional reasons why its an unrealistic number:

Well intentioned government programs- Programs like HAMP, HAFA, the built in modification programs required for FHA loans delays these numbers and if successful pulls these homes from the eventual numbers as the loans are modified and no longer face the foreclosure process.
REALTOR driven short sales- REALTORS initially started working to resolve the foreclosure mess by initiating short sales while the banks were still scrambling to pull together the processes and as we move forward, the processes are getting more reliable and more embraced  by banks which in my opinion will lead to short sales outpacing bank owned property sales in 2o12 and maybe through 2013 and beyond.  Organizations like NRBA whose membership is experienced in managing all aspects of the default industry expanded their training beyond REOs and included short sale training before it was industry popular because of their experience with the same lenders and servicers who were dominant in REO management.  CDPE became the industry leader for short sale training.  While I state short sales were REALTOR driven, I have to clarify that it is my opinion that NAR has been late to the party during this foreclosure mess which has led organizations like NRBA and CDPE to lead the charge in training their membership and working with servicers and lenders to work in processes to get short sales moving forward more streamlined.  While short sales were mainly REALTOR driven, it has been from membership up, not NAR down to membership which has been the one embarrassment in  my eyes but also a strong indication as to why consumers should use a REALTOR for their short sales.

Now the media is starting to define shadow inventory as those loans that are 60 day late or more on their house payments.  They obtain these through credit agencies.  Of course this increases the “tsunami” of homes the media says will hit the market.  There are many additional reasons other than those stated above as to why these numbers are even more of a hoax of an indication of shadow inventory including:

HARP-The HARP program is resulting in homeowners who are struggling decrease their monthly payments through a refinance program even if they are underwater.  Of course the homeowner can only qualify if they have missed only one payment in the last 12 months but I am hearing savings of $300-$400 a month for some homeowners and that can make the difference between walking away or staying.
2012 Robosigning and Mortgage Servicing Settlement- the settlement which is just reaching implementation will result in principal reductions and increased focus on short sale incentives further decreasing the eventual number of homes going through the foreclosure process.

Now let’s deal with the current real estate market and things to consider when determining if we have “reached the bottom”, let’s consider these realities of the market including:

3rd Party Investors- trustees sales are seeing more participation of 3rd party investors purchasing homes at the trustee sale and rehabbing them and selling them as “investor flips”, almost every flip you see on the market is in reality a bank owned home just purchased before hitting the market and being brought to the market through 3rd party investors.
We are in an election year- You cannot forget this slight calculation.  Wall street results are all about consumer confidence and you can say politics are same on steriods.  If you haven’t seen or read “To Big To Fail” I recommend it.  Every asset manager I have spoken to in 2012 has stated the same, “inventory should increase in 4th quarter and after the elections”.  Depending on who occupies the White House after the next election will make a huge difference or not as well.  My calculation is you see the results of any action about 6 months after the action.  For example if a bank decides to start foreclosing on loans you would not see those assets hitting the market for 6-8 months later.
Shared Appreciation Principal Reductions- Ocwen Financial has found success with shared appreciation principal reduction programs and now a bipartisan bill has been introduced for FHA andthe GSEs in June of 2012.  SAMs have been attempted before in 2008 through the H4H program which was administered through FHA but in 2012 only a handful of loans were refinanced through this program.  This program I believe will solve the moral hazard concern shared by many in terms of principal reduction.  Ocwen Financial is in the best position to roll out this concept with their acquisitions of sub prime lenders Homeq, Saxon Mortgage and Litton.  Look for movement in regards to this concept going into 2013.
Hedge Funds-  I’ll save the best for last, Hedge Funds continue to increase their presence in the market and will continue to do so through this market.  Hedge funds are not only acquiring pools of assets from banks but are now acquiring pools of non performing loans including FHA loans.  Some pools have restrictions like the GSE pools which will require the hedge fund or investor to rent out the majority of the acquired assets for periods of time averaging 5 years.  This will further decrease the eventual units of properties hitting the market.  Hedge funds are also usually in the better position to truly modify a loan and make it performing again since the hedge fund will acquire the loan at a discount and they have the ability to hold for long term.

So should we consult our clients that we are at the bottom of the market and tight inventory levels indicate we are in recovery and they should buy today?  I think we should educate the consumers of the reality of the market, the affordability of homes today and the great interest rates and home prices being under the cost of construction and educate them to purchase for long term growth and not for goals of again using their homes as ATMSs in as little as 2 years.  This is the market for homeowners who are purchasing homes to live in , not to flip in a couple of years for a bigger home.
Oh I forgot the Unicorns.  P.T. Barnum once exhibited a skeleton of a unicorn.  Of course eventually it was discovered to be a hoax but think of how many people were drawn to the exhibit before it was found to be a hoax.  I find the endless media moving targets of shadow inventory and the conspiracy theories out there to be just over hyped and generalized without looking into whats going on in the background that makes the hype more hoax.  But think of how many agendas are being promoted by a variety of organizations as well as our ever eroding political parties, shadow inventory is becoming the elusive unicorn.  Find me a real unicorn and I’ll find you a real honest politician without an agenda.
These are of course my opinions and anyone who reads my blog posts should do their own research and come to their own opinions.  If I have missed anything or misstated anything, feel free to email me at bruce@ecurbrealty.com
Related articles

That New Foreclosure Tsunami? Still Waiting(blogs.wsj.com)

Analyst: Housing’s shadow continues to shrink(lansner.ocregister.com)

Hedge Funds Are Not Like Banks (and That’s Okay!)(nymag.com)