Obama’s extension of the 2011′s payroll tax cut should come as welcome relief to the millions of working and unemployed Americans struggling through these difficult times. The $143 billion measure passed with overwhelming bipartisan support in congress earlier this month. The payroll tax cut extension continues the 2 percent reduction in the tax that funds Social Security, cutting it from 6.2 to 4.2 percent for employees. Other provisions in the payroll tax cut include maintaining the current level of reimbursement for doctors treating Medicare patients and extending jobless benefits to the unemployed.

What does this mean in the real world? A worker earning $50,000 a year, for example, will take home an extra $80 a month – higher paid employees could save as much as $2,200 a year from the 2 percent deduction. Benefits for the long-term unemployed average about $300 a week and should last, depending on the State, anywhere from 63 to 73 weeks.

All told, the 2 percent reduction in the Social Security payroll tax deducted from workers’ paychecks is going to cost the Federal government $93 billion through 2022. Additionally, the cost of extending jobless benefits for 63-73 weeks comes out to $30 billion, half of which will be paid by auctioning off portions of the communications spectrum to wireless companies and the other half by increasing federal workers pension contributions from 0.8 percent to 2.3 percent.

A big bone of contention among some homebuyers is a measure that was snuck in to the payroll tax cut bill allowing HUD (Department of Housing and Urban Development) to increase insurance premiums on FHA (Federal Housing Administration) backed loans. This measure will permanently increases the fee government-backed mortgage giants, Fannie Mae and Freddie Mac, charge to insure home mortgages by one-tenth of a percentage point, or 0.1%.

Basically what this translates to is a $17 monthly house payment increase for a $200,000 mortgage from Freddie or Fannie. Keep in mind that this increase will only affect people who want to refinance or apply for new loans from Freddie Mac or Fannie Mae from Jan. 1 2012 onwards.

Any rumors of increasing mortgage rates to pay for the 2012 payroll tax cuts extensions are greatly exaggerated. Here are the facts:

- The hike only affects FHA backed loans (i.e. Freddie Mac or Fannie Mae).
- Only new FHA loans that have been applied for from Jan. 1 2012 onwards are affected.
- The increase in insurance premiums for FHA loans will go up by 0.1% – which will be an average increase of $17 a month for a typical Fannie or Freddie mortgage holder.

If you are worried about these new FHA insurance hikes affecting your mortgage or are looking to refinance your home loan for better a better rate, do not hesitate to contact me or Carlos at Team Aguilar today!

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Many of you have already heard of the huge $26 billion settlement State and Federal governments have reached with five of the largest banks in the country. Technically this money is restitution for improper and potentially fraudulent foreclosure practices (robosigning, seizures made without proper paperwork, etc.) by these banks in the wake of the 2008 – 2011 foreclosure crisis. Most of the settlement money will be used to provide some form of restitution to homeowners who have been directly or indirectly affected by these acts.

The details of the settlement, however, are not entirely clear. Struggling homeowners will have many questions like how exactly will this money be distributed, what is the time frame of the payments and, finally, who is eligible to be compensated? We try to answer some of these questions here.

Details of the Settlement

The settlement came as a result of a 14 month investigation started in the fall of 2010 into the mortgage servicing industry by 49 state Attorney Generals amid uproar over revelations that banks evicted people with false or incomplete documentation. 4 million families have lost their homes to foreclosure since the start of the housing crisis in 2007 and 3.3 million more homeowners are currently undergoing or close to foreclosure.

The settlement involves mortgage servicers Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC), all of whom decided to settle after being investigated for fraudulent foreclosure practices.

The amounts paid by each bank are directly connected to their market share of the mortgage servicing industry. Bank of America has the biggest share, and will provide $11.8 billion to the settlement, followed by Wells Fargo with $5.4 billion, JP Morgan Chase with $5.3 billion, Citigroup with $2.2 billion and $310 million from Ally Financial. Bank of America will also contribute an additional $1 billion for Federal Housing Administration loans.

Keep in mind that out of the $26 billion only $5 billion will be in paid out cash – the remaining $17 billion will be used to reduce the principal for homeowners how are underwater on their mortgages over a period of 3 years. It should also be pointed out that mortgages owned by the Fannie Mae and Freddie Mac are not covered, which excludes about half the nation’s mortgages from this settlement.

The often quoted $26 billion figure might even balloon to $30 billion if the government can bring nine other major mortgage servicers join the settlement – something that is currently under consideration by the government.

Who Is Eligible For Compensation and How Much Should They Expect?

The settlement money will be doled out under a complex formula created that incentivizes banks to help hardest-hit borrowers. The banks will get varying degrees of credit for different kinds of help.  Banks will get more credit for things like reducing principal owed on underwater mortgages and renegotiating mortgages to help families keep their homes. They will get less credit, however, for short sales or taking losses on loans that were likely to go bad anyway.

To be eligible for the settlement homeowners must have mortgages that are owned and held by the nation’s largest mortgage servicers, i.e. the five big banks mentioned above. Benefits could range from loan modifications, principal reductions or direct payments from lenders. Remember that only homeowners in the states who joined the settlement are eligible for compensation; borrowers from Oklahoma, for example, are not be eligible for direct relief because the Oklahoma state government elected to not take part in the settlement. This table contains the complete list of which states took part in the settlement and how much each state will receive in compensation: http://www.scribd.com/webber3292/d/81077696-State-Settlement-Amounts

The banks participating in the settlement will grant homeowners with underwater mortgages $10 billion worth of principal reduction, $3 billion in refinancing and $7 billion in other forms of mortgage relief such as forbearance for unemployed borrowers. All of this will cover roughly one million borrowers in total. Another $1.5 billion will be spent on direct cash payments of $1,500 – $2,000 to around 750,000 borrowers who lost their homes to questionable foreclosure practices from 2008 to 2011. $3.5 billion will go to various state and federal governments to bolster resources for legal aid, counseling services for borrowers facing foreclosure and to help fund future investigations into mortgage-fraud.

Time Frame of the Settlement

Bureaucracy, as the saying goes, moves slowly. Under the terms of this settlement the banks will have six to nine months to determine who is eligible for relief and three years in which to distribute the aid. This is, of course, little comfort to the millions of struggling homeowners who need help right now.

Long Term Prognosis

Economists have little hope of any immediate boost to the economy from this settlement partly because it affects comparatively so few people (just under 2 million), and the repayment terms are stretched out over 3 years. There is hope, however, that the settlement will have a positive effect in the long term.

Homeowners not directly eligible to get help from this settlement might still see benefits in the form of reduced  foreclosure rates in their area, stabilized home values and powerful new mortgage servicing standards and consumer protections. This settlement is the first step in the federal government’s multi-year fight to hold the big banks accountable for their actions leading up to and during the financial crisis.

The banks involved in the settlement could still be liable to further criminal prosecution related to the housing crisis as well as private lawsuits. From now on banks and other mortgage servicers will have to adhere to tougher standards for servicing loans and executing foreclosures.

California has been hit harder than most by the foreclosure crisis. A disproportionate number of housing loans in the state are either delinquent or exceed the value of the underlying property. In recognition of the extraordinary hardship faced by homeowners in California, the state will get $16 billion of the $26 billion settlement – the largest share of all 49 States.

If you had any questions about your mortgage or wanted to see if you qualify for this settlement, contact Team Aguilar today!

For more information on the settlement please visit: http://www.nationalmortgagesettlement.com/faq

Image sources: http://www.scribd.com/webber3292/d/81059707-Settlement-Graphic

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Despite all the doom and gloom in the news about the domestic real estate market, the US still remains a highly desirable destination for international investors. While US real estate has always attracted foreign buyers, recent events have pushed this interest even further.

Major reasons for this surge in interest include: the comparative weakening of the US Dollar; plentiful available inventory; lower property prices due to foreclosures; and depressed local real estate markets. Another huge factor is the potential of a gradual economic recovery in the US and a rapidly worsening situation in continental Europe.

Compared to the likes of Spain, Italy or Greece, the US has a stable and secure real estate market with much lower barriers for international buyers to enter into. American homes are also generally less expensive than their European counterparts and offer the tantalizing prospect of long-term appreciation. Foreign buyers are also well aware of the thriving rental property market.

Many countries have laws in place that make it almost impossible for non-citizens to buy land or own property. This is not the case in the US, where wealthy foreigners are welcome to invest in American real estate (there are some notable exceptions to this, as we will see below). Immigrants to the US still see home ownership as a key step in achieving the American dream; nearly 80% of foreign-born U.S. residents owned a home in 2009, according to the National Association of Realtors. Compare that to the national home ownership rate of around 67% in 2009.

What do Foreign Buyers look for in a Property?

Besides price and long-term appreciation, there are many other factors that motivate foreign buyers looking to invest in US property. Families with children studying in the US will look to purchase homes near the colleges and universities their kids are enrolled in. Foreign executives temporarily working in the US typically rent accommodation, but some execs on long-term assignments may prefer buying homes instead. On average, foreign buyers of US property tend to spend significantly more than their American counterparts. Stats from 2009 show that foreign buyers lean towards the upper end of the market, with 16 percent purchasing homes worth more than $500,000.

Where Do They Come From and Where Do They Buy?

The latest figures in 2011 show that international buyers came from 70 different countries, up from 53 countries in 2010. Unsurprisingly, most foreign buyers were Canadian – our neighbors from the North accounted for 23 percent of all foreign sales of US property in 2011. Buyers from China are second, making up 9 percent of all international sales. Mexico, India and the U.K are tied at third, with Argentina and Brazil in fourth place. Leaving out Canada, the bulk of foreign buyers come from emerging economies in Asia and South America – a trend that is set to grow in the coming years.

The four states with the heaviest concentration of overseas buyers are Florida, Arizona, California and Texas. 31 percent of all international transactions took place in Florida, the most out of any state. California is next with 12 percent, followed by Texas with 9 percent and Arizona bringing up the rear with 6 percent.

The three primary factors overseas investors look for when buying a house in the US are: proximity to their home country, climate and location, and accessibility to air transport. Generally speaking Europeans favor the East Coast, while the West Coast is popular with Asians. Mexicans tend to go for Southwestern states, while South Americans, Europeans and Canadians flock to Florida’s warmer climes.

Emerging Trends in Foreign Real Estate Investment

The U.S. continues to be a top destination for international buyers from all over the world. Foreign buyers comprising of recent immigrants, temporary visa holders and those with residency outside the US have purchased some $82 billion worth of American real estate for the period ending in March 2011 – a rise of $16 billion over the previous year.

A survey released by the National Association of Realtors, ‘The 2011 Profile of International Home Buying Activity,’ shows that 61 percent of foreign buyers purchased a single-family home while 36 percent bought a condo/apartment or townhouse. Furthermore, 62 percent of all foreign buyers paid in cash. Many analysts speculate that without foreign investment real estate markets in key areas like Miami, Florida or Phoenix Arizona would be stagnant or in decline.

Government Encouragement of Foreign Investment in US Real Estate

State and Federal legislators are not blind to the positive influence foreign investment can have in depressed real estate markets in the US. In an effort to encourage international interest in US real estate, Senators Charles Schumer (D-NY) and Mike Lee (R-UT) have introduced Visa Improvements to Stimulate International Tourism to the United States of America, or VISIT USA Act.

The bill aims to encourage foreign home ownership by offering overseas buyers and their families residential visas for buying at least $500,000 worth of real estate anywhere in the United States. The bill will also remove red tape for foreign investors and reduce the waiting time for visa applications for qualified applicants who have passed all the necessary background checks.

There are limitations to the program, however. Applicants will have to purchase their homes with cash, will not be allowed to take out home-equity loans against their properties, will not be allowed to work in the US and will not be eligible for government benefits such as Medicare, Medicaid or Social Security.

Challenges Faced by Foreign Buyers

While foreign ownership of US property has never been higher, there are still many barriers for international buyers looking to penetrate the US housing market. Getting any kind of financing is a major hurdle, as are problems with tax and immigration laws. This difficulty in finding financing is the primary reason 60 percent of international buyers pay cash for their properties. While having wealthy foreigners pay cash upfront may sound great, keep in mind that problems getting financing is also the reason 34 percent of all foreign buyers in the US are unable to complete their transactions.

Foreign buyers also have to deal with State laws that sometimes actively discourages international investment in that particular State. Oklahoma’s state constitution, for example, stipulates that non-U.S. citizens cannot own land for more than five years if they are not “bona fide residents of the state.” Being a bona fide resident of Oklahoma essentially means being a legal resident there, which is fine if you’re a non-US citizen living and working in Oklahoma thinking about buying a primary residence – but disqualifies any non-citizen from buying vacation homes or investing in rental properties.

Rules vary State by State, but the States most popular with foreign buyers (California, New York, Arizona and North Carolina) don’t have Oklahoma’s restrictive laws on foreign property ownership.

Where REALTORS Fit In

REALTORS nowadays must have a global perspective when it comes to their client base. They should have the expertise necessary to guide foreign buyers through the often byzantine process of buying a property in the US. Keep in mind that while the average US homebuyer spends about $218,000, the average international buyer will spend $315,000 – and most will pay in cash.

According to Trulia.com, San Diego is among the most popular destinations for international visitors, coming in at number 14 out of 51 US cities. The highest number of European visitors looking for properties in San Diego came from Germany, Italy and Sweden.

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Forecasting where the real estate market will go in 2012 is no easy task, but that didn’t stop analysts at the country’s top investment banks and financial institutions from putting forth their best guesses in their end-of-year reports.

The ongoing recession, the upcoming presidential race and a looming economic crisis in Europe all paint a pessimistic picture for real estate in 2012 – but there is reason to be hopeful in the new year, according to analysts. While a complete recovery of real estate markets nationwide is certainly a long way off, there are some positive indicators.

Here are six things to look out for in 2012:

1. Rise of Rental Properties

Even the most casual observer will have noticed the boom in rental properties in 2011, a trend that is set to continue in 2012. A study from Reis Inc. shows a sharp drop of vacancy rates in the third quarter of 2011 to a nationwide average of just 5.6%. The same study also highlights a 3.6% increase in rents over 2011.

Property developers were not unmindful of the demand for rental properties. Rental unit construction was up 33% nationwide in the third quarter of 2011 – 48 million new units. The high demand in rental properties will inevitably drive up home prices in 2012 as investors look to snap up rental properties and homeowners look to become landlords.

With real estate prices still low in many markets around the country, 2012 is shaping up to be a great year for buying and holding rental properties.

2. The Rise of Shadow Inventory and Its Effect on Home Prices

The specter of shadow inventory looms large in 2012, bringing with it the threat of depressed property values and increased underwater mortgages. Shadow inventory is comprised of properties undergoing foreclosure, properties that have already been foreclosed but not put up for sale, and houses where the borrowers are unable to maintain their monthly mortgage payments. This glut of unsold and foreclosed properties will have the unfortunate effect of reducing property values in affected areas and suppressing buyer demand.

3. Increasing Short Sales

Most analysts agree that home prices are set to decline in the first half of 2012. Falling prices will force more homeowners into a position of negative equity (where they end up owing more than their homes are worth) – which in turn can trigger them to strategically default on their mortgage obligations.

To prevent borrowers from walking away from their debt obligations banks are expected to encourage short sales for homeowners with negative equity. Expect banks and other lending institutions to aggressively pursue short sales in 2012.

4. Fallout from Europe

The ongoing European financial crisis will have a huge effect on not only the real estate sector, but the US economy as a whole. The economic fates of Europe and the United States are closely intertwined – US exports to Europe total around two trillion Dollars a year. A financial collapse in Europe will have dire consequences for US companies at home and abroad. A Europe-wide recession and the ensuing lack of demand for US goods would cause many companies to reduce their operations at home leading to shrinking demand for offices and industrial spaces – a disastrous outcome for the already weak commercial real estate market.

5. Unemployment

The national unemployment rate will have a significant impact on the real estate market in the coming year. Although the national unemployment rate will remain higher than average, experts predict a gradual improvement in 2012. The numbers are encouraging – December saw the rate drop to 8.5 percent, a three-year low, demonstrating that the job market is gaining momentum. Analysts predict the rate will drop even further to 7.5% in the new year. This is encouraging news for real estate markets – moderate economic growth will result in increased demand for both residential and commercial real estate. Improving local job markets will have a knock on effect improving local housing markets, starting first with rental units and spilling into home sales.

6. Commercial Real Estate Woes

2011 was not a good year for commercial real estate. Tight credit markets and a sluggish economy meant there was little incentive for companies to expand their operations, resulting in lower demand for industrial, retail and commercial properties.

It’s not all bad news for commercial real estate in 2012, however. Steve Hentschel, head of Real Estate Banking at Gleacher & Co. indicates “there will be a continued emphasis on major market 24/7 cities that have global appeal.” Cities that are major business and transportation hubs (New York, Atlanta, San Diego, Chicago, etc.) should see positive growth in the commercial real estate sector in 2012.

Things are Looking Good for San Diego Real Estate!

While there’s still a long way to go before a complete recovery, things are looking much brighter closer to home. According to the Emerging Trends in Real Estate 2012 Forecast conducted by PricewaterhouseCoopers and the Urban Land Institute, San Diego is ranked as one of the top ten “real estate markets to watch in 2012.” According to the report, “San Diego benefits from the near-perfect year-round weather, which helps attract talent pools to local biotech companies, as well as a steady stream of upscale retirees.”

Regardless of the overall market trends in 2012, you can always rely on the experienced agents at Team Aguilar with all your real estate needs. Call Carlos or myself today and find out how we can help you!

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

As the Holiday Season is upon us, we find ourselves reflecting on the past year and on those who have helped to shape our business in a most significant way. We value our relationship with you and look forward to working with you in the year to come. We wish you and your family a very happy Holiday Season and a New Year filled with peace and prosperity.

All the best to you and your family,

Carlos & Alex Aguilar
www.TeamAguilar.com

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

It’s important to remind everyone that the Mortgage Forgiveness Debt Relief Act of 2007 was extended through 2012. If you’re thinking that you may let your home go to foreclosure think again because completing a short sale may be a better option.

Originally introduced to protect homeowners who are struggling in today’s troubled housing market by providing tax relief for homeowners who had part of their debt forgiven as a result of cancellation-of-debt (COD). Essentially this bill provides debt relief for homeowners struggling with underwater mortgages or are otherwise having a hard time keeping up with their debt obligations.

The various Federal and State debt obligation reduction schemes can be a confusing and baffling topic for homeowners. Good hearted legislation designed to help homeowners mired in debt can be lost in a sea of confusing legalese. If your thinking of a real estate short sale in San Diego please give us a call. In addition make sure you talk to your tax preparer and/ or a real estate attorney. Every situation is a bit different but it’s important to know what all of your options are.

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Proposed Senate Plan Seeks to Award Residency Visas to Foreign Investors in U.S. Real Estate

The collapse of the housing market and the ensuing recession has left a massive supply of unsold homes all over the country. Since the peak of the housing bubble in 2006 home values have seen an average decline of 33%. The drop in home prices combined with a lack of demand means that there is a glut of unsold homes in the market today. This excess supply is slowing down the recovery of the U.S. housing market, and is the impetus behind a bold new bipartisan plan by Senators Charles E. Schumer (D-NY) and Mike Lee (R-UT) to boost demand by encouraging foreign investors.

The Proposed Program

Essentially the bipartisan proposal offers residency visas to foreign nationals who invest at least $500,000 in residential real estate (single-family house, condo or townhouse) in the United States. Applicants have the option of splitting their investment between a primary residence, and an additional rental property. At least $250,000 must be spent on a primary residence where the applicant will have to stay for at least 180 days out of the year, while the remainder can be spent on a rental property investment. The visa would also allow spouses and minor children to enter the U.S. on the same conditions as the home purchaser.

Limitations of the Program
The proposed visa program, while offering foreign nationals a convenient way to invest and stay in the U.S., is not a path to citizenship. There are several limitations to the program

* Real estate investment visa holder will not be eligible to work in the country – he or she will have to apply for a regular work visa to seek employment in the U.S.

* Visa holder will have to stay in the U.S. for 180 days out of each year and pay all local and federal taxes.

* All applicants to the real estate investment visa program will be subject to standard criminal and national security background checks.

* Visa holders and their families will not be eligible for government benefits such as Medicare, Medicaid, and Social Security.

*If the invested property is sold to another party, the visa automatically lapses, requiring the visa holder and their family to leave the country.

In spite of the above limitations, the proposed visa plan has already generated a huge amount of buzz both at home and abroad, and is projected to attract a sizable investment in the U.S. real estate market.

Backers of the Proposed Real Estate Investment Visa Plan
Real estate analysts who have studied the proposal have stated that it could raise demand for U.S. homes and help ease the housing crisis. Supporters of the plan believe that the initiative would soak up an excess supply of inventory at a time when the vast majority of American home buyers are holding back.

The plan even has some heavy hitters of the financial markets excited. Mortgage-bond pioneer Lewis Ranieri hopes that the measure could also help turn around buyer psychology, saying that the proposed program represented “triage” for a housing market that needs more fixes.

Even Warren Buffet, who recently made headlines calling for higher taxes on millionaires, is a supporter of the plan. Buffet, a long-time advocate of encouraging “rich immigrants” to buy homes, states:

“If you wanted to change your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you’d solve things very quickly.”

The Schumer-Lee bill has also received endorsements from the U.S. Chamber of Commerce, the U.S. Travel Association, the American Hotel & Lodging Association and the U.S. Olympic Committee.

Foreign Investment in U.S. Real Estate – Facts & Figures
Regardless of the success or failure of the proposed plan in the Senate, foreign buyers are already taking advantage of the weak U.S. housing market, snapping up investment properties at bargain prices.

Attracted by reduced prices and (thanks to a declining value of the U.S. Dollar) a favorable exchange rate, foreigners now account for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit real estate markets.

Figures from the National Association of Realtors show that over the past year Canadians accounted for one quarter of foreign home buyers, with buyers from India, China, Mexico and Great Britain making up another quarter.

International buyers were responsible for $82 billion in U.S. residential real-estate sales for the year ending in March, a huge increase over the $66 billion invested in the previous year period, according to data from the National Association of REALTORS. Australians alone invested $600 million in US property last year.

Closer to home, it’s hard to know what the figures are and what percentage of buyers in San Diego are foreign nationals. (I Tried searching but could not find any credible information) I know personally that we have helped dozens of foreign home buyers from Mexico and Canada purchase second homes. If they had an additional incentive I think we would see a large increase in purchases.

Markets with warmer climates are especially attractive to foreign buyers, many of whom are Canadian “snowbirds” looking for a warm place to escape to during the winter. A great climate, strong local economy and highly desirable housing prices make San Diego real estate an ideal target for foreign buyers.

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Banks Now Offering Delinquent Homeowners a Cash Bonus for Short Sales
In a move that has surprised many analysts, banks are now approaching select San Diego County homeowners with offers of cash for completing short sales on their properties. A short sale, where the lender accepts less than what the borrower owes on their mortgage, is often the only way many homeowners burdened with underwater mortgages can walk away from their debt obligations without being foreclosed. This relatively new practice of banks offering cash incentives for short sales has cropped up all over the country. The scheme mostly targets borrowers burdened with underwater mortgages as well as those who are behind on their mortgage payments, are jobless, or are facing some kind of financial difficulty.

Why are the likes of Chase, Bank of America and Wells Fargo offering homeowners lump-sum cash bonuses for completing short sales on their properties? No one knows for sure – the banks certainly aren’t divulging their motives. The selection criteria for homeowners eligible for this program are also unknown. There’s simply no way of knowing if you qualify for this scheme or not until you or the bank approaches you with an offer letter.

Statements made by bank officials indicate that the selection process for eligible homeowners and the amount of cash offered to them takes place on a case by case basis. Although they decline to give any hard numbers, officials at Chase state that the program is in full swing and they have started sending out letters to eligible homeowners all over San Diego County and neighboring areas. Along with Chase, both Bank of America and Wells Fargo have started offering cash incentives for completing short sales to homeowners who meet “certain borrower profiles.”

How the Program Works
A typical offer letter to a homeowner strikes up a conciliatory tone, offering hope and promising a “path to avoid the specter of foreclosure.” The real selling point in these letters is the offer of a cash bonus for selling their property. Obviously the letters are designed to grab the homeowner’s attention and notify them of their short sale options. Upon completion of the short sale the homeowner will be eligible for a hefty cash bonus that can be used for moving expenses and a fresh start, free from any debt obligations on their property.

The process starts when the homeowner and a real estate broker files a listing agreement and issues a letter authorizing the broker’s and bank’s negotiators to discuss the terms of the short sale. Since the broker, lender and borrower are all on the same page the short sale happens relatively quickly – about three months to complete. This is much quicker than a traditional short sale, which can take three to six months to close, with some cases lasting as long as a year. According to data from real estate tracking company RealtyTrac, completing a typical short sale takes between five and six months.

How much is the cash incentive?
Cash bonuses given to sellers at the end of a successful short sale vary widely, ranging from a few thousand Dollars to as much as $35,000. While the banks remain tight lipped about how they calculate the cash incentive amounts, the amount roughly corresponds to the value of the loans owed in the mortgage.

What’s in it for the banks?
The bank’s motivating factor for encouraging short sales is to cut down on their backlog of foreclosed properties. In a move known as loss mitigation the real estate world, banks and other lending institutions are proactively removing nonperforming loans from their balance sheets. The ultimate goal here is to prevent a delinquent borrower’s property from going into foreclosure. Foreclosure is a long and messy process taking an average of 318 days to process, according to the latest figures from RealtyTrac.

Properties subject to drawn-out foreclosures proceedings often decline in value due to a lack of maintenance and even deliberate vandalism. Such properties are expensive to fix and difficult to sell from the bank’s point of view. Selling off the property through an incentivized short-sale process reduces lengthy foreclosures, converts a potentially bad loan into a good one, and even gives the current homeowners an incentive to maintain their properties until they sell it.

What’s in it for the borrowers?
So we know this is good news for the banks, but why would a homeowner who has been approached with an incentivized short sale offer want to take part in it? For one, most of the homeowners who receive these incentive letters are behind on their mortgage payments and are facing other financial difficulties. The short sale incentive offered by the banks is, for many, an easy way out of their debt obligations.

Short sales also have less impact on credit scores than foreclosures; although the actual impact depends on how far being they are on their mortgage payments and some other factors. The banks also assure any homeowner who has received a short sale incentive letter will not be liable for deficiency judgments after they sell their homes.

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate

Chula Vista, particularly the Eastlake area continues to be the one area in San Diego County that provides great value and here is another example. We just listed an amazing home on the golf course in Eastlake.

It features custom upgrades throughout! This home is gorgeous inside and out shows like a model home. Numerous upgrades such as custom crafted doors to all rooms, light fixtures, floor finishes, and more make this a one of a kind home in Eastlake Greens. On the Eastlake Greens Golf Course, beautiful views to the 13th Fairway. This home is a 3 bed plus loft model but was also offered by developer as a 4 bed, loft can easily be converted to 4th bedroom. Living Room & large family room open to beautiful kitchen, This is a Must See!

This home, 2375 Forest Meadow Ct Chula Vista CA 91915 can be viewed with a 24 hour notice. It is priced very well considering that it backs up to the golf course.

Alex Aguilar
Team Aguilar
Real Estate Agent, Blogger!
Alex@TeamAguilar.com
www.TeamAguilar.com
Real Estate Blog
San Diego Real Estate