What Does "Contingent Status" Mean?

One of the most commonly asked questions I get from people just starting the home buying process is "What does contingent in the status of a listing mean?"  What buyers need to understand is that there is a difference between the active and contingent statuses.  When a listing is active the seller is actively looking for offers.  There are no accepted offers on the property and the property is still available. 

The contingent status is a relatively new status that was created in response to the increase in the number of short sales.  Short sales have an additional step in the negotiation process.  They require the short sale lender to approve the sale and the offer in order to move forward.  There is a period of time when the buyer and seller have agreed to terms and the file is sent to the short sale lender for their approval.  During this time the property moves into contingent status.  When you see contingent it means the seller has accepted an offer on the property and they are waiting for the bank to approve, counter or reject the offer.

The contingent status is meant to alert agents and buyers that there are offers on the property and one offer has been has been accepted by the seller and submitted to the short sale lender for review.  Before there was a contingent status, buyers and their agents were viewing and submitting offers on these short sales not knowing that there was already an accepted offer.  This was very frustrating. The property will stay in the contingent status until the short sale lender makes a decision.  If the lender accepts the offer, the property will then move into a pending status (in escrow).  If the short sale lender does not accept the offer or through negotiations an agreement can not be reached, the property will move back into the active status. 

I hope this helps.  Do you have any other questions?  Feel free to let me know if you do.  I am here to help.

How to Fix The Housing Market

Many people are asking how to fix the housing market.  The issue is debated and argued but nothing seems to get done.  Big surprise right?  What all the bigwigs are missing is the old saying that the definition of insanity is doing the same thing over and over and expecting a different result.  What needs to be done is simple.  They need to stop the insanity.  They need to stop focusing on the banks and focus on the people.  Common sense needs to be injected into the situation.  The banks should not be bailed out or given incentives.  They need to stop rewarding the banks for making ridiculous decisions.  The finger pointing when things don’t work needs to stop.  The focus needs to be put back on the people.  It is the people that will fix the housing market, not the banks.

The banks and housing market reflect the fear of the shadow inventory.  The houses that have been foreclosed on but have not yet hit the market and the homes that are soon to be foreclosed on.  This shadow inventory has everyone running scared and fuels the doom and gloom attitude that does nothing to instill confidence in the market that home buyers need to confidently get off the fence.  The solution is really quite simple.  Quit worrying about it and do something.

The REO properties need to be handled in an intelligent manner.  Right now the banks use REO agents to sell their properties.  Many of these agents have so many REO listings they cannot possibly market the property in a way that would solicit the highest offer.  Many times it is nothing more than putting up a sign and putting it in the MLS at a drastically low price.  The  property is sold to the highest bidder within 7 days.  What does this do to the local market?  It is drives the prices even lower.  This hurts local homeowners and the banks as well.  The next time the bank lists a property for sale in the same neighborhood they will need to sell it for even less.   The banks are shooting themselves in the foot  simply because once it hits the market they want it sold and sold quickly.

The other part of the shadow inventory are the homes that are in foreclosure but have not been taken back by the bank as of yet.  This is where common sense definitely needs to be injected.  Time and time again I have seen banks make decisions that actually increase their REO holdings.  Here are some examples.  The home seller puts their home on the market and it is going to be a short sale.  An offer comes in and is submitted to the lender for approval.  The first mistake the bank makes is that it will take months for the bank to make a decision on whether or not to accept the short sale.  All the while the market is declining, prices are dropping.  By the time the lender makes a decision to accept the short sale, the buyer has changed their minds since the property is no longer worth what it was when they submitted the offer.  At this point rather than keeping the file open so the property can be remarketed the banks will close the file so when another offer comes in the whole long process starts over again leading to a vicious circle. 

Sometimes, the buyer stays strong and wants to proceed with the purchase once the bank has accepted, so what does the bank do?  They create yet another hurdle for the buyer.  They shorten the time the buyer has to close escrow.  They make it very clear that if the property doesn’t close in say 20 days the deal is off.  I have seen deals where Bank of America was the lien holder and demanded escrow close in 25 days from acceptance.  The buyer was getting a loan and because of all the underwriting requirements it did not get done.  The bank refused to extend the escrow and the deal was lost. The bank took the home back through foreclosure.  Oh and the ironic part was that the buyer was getting his loan with, you guessed it, Bank of America. 

The third example is probably the most insane.  The short sale has been approved.  Escrow is proceeding and the buyer’s loan is on track.  While this is all going on the bank continues with the foreclosure process and is now to the point where the trust sale date has been set.  The obvious course of action would be for the bank to postpone the foreclosure date.  But again with the lack of common sense they are known for, they refuse to postpone or cancel the foreclosure date.  They are less than 5 days away from closing in escrow and the property going to the new buyer but they foreclose and take the property back.  Congratulations, they just got themselves another REO holding.  Why?

We have been focusing on the insane, greedy banks.  Bailing them out and offering incentives to do what they were already suppose to be doing.  This is not the answer.  The banks are not going to fix the housing market, the people are.  It will be the regular home buyers and sellers who have always been the foundation of the real estate market who turn this market around.  We need to focus on the people and offer them the bailouts and incentives.  And I do not mean just the people on the verge of losing their home.  In order to stimulate the market you need to empower the masses.

Right now many homeowners are trying to do what is right and short sale their property rather than simply walking away and letting it go to foreclosure.  As described above the banks are doing nothing to simplify the process.  There needs to be new rules put into effect to protect both the seller and the potential buyers.  Once a short sale is initiated by the seller, it should be like it is with a bankruptcy.  The foreclosure process stops.  Period.  No trustee sales date can be set.  The banks should also be forced to accept the short sale at the appraised value within a 30 day timeframe.  If they do not there should be serious financial consequences to the bank.  Priority of purchase should be given to owner occupied buyers.  Rather than how it is now where the banks would rather go with an investor/cash buyer.  It is kind of funny that the banks would prefer not to go into escrow with a buyer who is getting a loan.  I guess they understand how difficult lenders are to work with.  Even they do not want to do business with themselves.

Right now one of the biggest problems in the real estate market is that people do not have equity in their homes.  They cannot sell their current home.  I talk to people all the time that would love to buy a new home but they can’t.  They are prisoners of their house.  They are upside down.  This needs to be fixed if we are going to see any significant increase in market activity.  The best way to accomplish this would be to offer these people an incentive, a bailout of sorts.  Allow them to sell their current home at current market value and buy a new home.  Force the banks accept the proceeds from this sale as payment in full for their current mortgage. But the sellers must agree to get the new mortgage with their current lender.  It is kind of like trading a mortgage.  The one thing that would also have to be considered is that the new mortgage would have to be at the going interest rate.  I can see it already, if the lender knew they were going to get the loan they would jack up the rate.  We have to watch those darn greedy banks.  This would definitely stimulate the housing market by allowing people to buy new homes and sell their current one.  With this incentive to sellers, the number of short sales would decline but more importantly the REO inventory would not continue to grow at the current rate.  The market would become stimulated with buyers and sellers.  People who are simply looking for lower mortgage rates would now be potential buyers.  Can you imagine the number of people who would hit the housing market running to take advantage of something like this?  This would help the millions of people who are trapped in their mortgage. It would help the people that want to refinance but can’t because they have no equity.  It would help the people who want to do a short sale but can’t because they are current on their payments or they do not want their credit hurt.  It would help the people who are current on their mortgage but want to make a move.  Finally it would help the masses, the people.

SB 458 Short Sale Law - What does it mean?

Last week Gov. Jerry Brown signed SB 458 into law. So what exactly does that mean to you? The new law requires all lenders that agree to a short sale, must accept the agreed upon sales price as payment in full. This applies to both first and second mortgages. Last October, California enacted SB 931 where first lien holders were prohibited from going after short sale sellers for any debt deficiency after they accepted the short sale. SB 931 did not apply to junior lien holders. So with the new law both primary and secondary lenders that accept a short sale must accept the sales price as payment in full. SB 458 includes an urgency clause that makes it effective immediately.


If you were holding off on doing a short sale for fear of having to pay the difference, you should now reconsider short selling your home. If you are struggling with your payment, behind on payments and on the verge of foreclosure, please give me a call. I have discretely assisted sellers with homes for sale in Alpine, El Cajon, Jamul, and many other areas of San Diego county. While a short sale may not be what you really want, it may be a better alternative to foreclosure.  If you would like to search local real estate to compare prices of homes simalar to yours, feel free...Property Search.

Most Foreclosed Homeowners Not Attempting Short Sale...Why?

Today we had an office meeting where I learned some interesting facts that I wanted to share. Many banks have released the next round of foreclosed homes onto the San Diego market. This means there is more inventory for buyers to choose from, which is good for buyers. Unfortunately, this same news is not so good for the sellers. If your home is on the market, you now have more competition. Make sure your home is priced very competitively or the buyers are going to pass it by. Buyers do not care how much you owe, how much you want to net or that you think the paneling in the living room increases the value. They are going to compare it to what else is available. Also, if you think you will just wait until the other houses sell and then are able to get what you want; it isn't going to work that way. You see, as other homes in the area sell for less, you have to understand that these are the numbers the appraisers are going to use when appraising your home for the future buyers.


Another interesting fact is that most of the homes that have been foreclosed on and are now on the market were not previously listed for sale. The distressed homeowners did not attempt a short sale prior to being foreclosed on! I find this remarkable and disturbing. Why would the homeowner just give it up to foreclosure? If the home had been sold through a short sale prior to the foreclosure the owner's credit would not have been hit as hard and they would have positioned themselves to purchase another home sooner into the future. Yes, a short sale requires paperwork and some effort on the homeowner’s part but it would be well worth avoiding the foreclosure.
So what is the main reason people do not do the short sale? It is actually because they are counting on a loan modification to rescue them so they can keep their homes. But the reality is that only 10% of all loan modifications that are requested actually go through and this is up from 5%. So what does this mean to the distressed owner? I recommend that you try a loan mod but do NOT beat a dead horse. If you do not get the results you want in a reasonable amount of time move on to the short sale. Do NOT keep waiting for the rescue that is never going to come while the bank files the NOD, Orders the trust sale, forecloses and then kicks you out.

Bank of America Loan Modification Program

I have been getting a lot of requests for this information so I thought I would share with it everyone.  Here is the link to Bank of America's website for Home Mortgage assistance.

Bank of America - Home Affordability Modification Program

If you do not qualify for a modification or you decide to sell your home through a short sale, please call me.  I would be happy to explain the process and get it started.

Bank of America Mortgage Principal Reduction Plan

B of A Rolls Out Principal Reduction Plan
This morning executives at Bank of America rolled out their new "Principal Reduction Enhancement" program, which is an earned principal forgiveness plan for borrowers behind on their mortgages and whose loans are at least 20 percent underwater in value.

The plan is in conjunction with the government's Home Affordable Modification Program, but the government's principal reduction plan isn't in place yet.

What makes BofA's plan so proactive is that it employs, "a principal reduction as the first step toward reaching HAMP's affordable payment target of 31 percent of household income when modifying certain NHRP-eligible mortgages - ahead of lowering the interest rate and extending the term." Source: cnbc.com

Short Sale to Avoid Foreclosure

Well, this morning I got a disappointing call, a friend of mine let me know that they had lost their home to foreclosure. To be honest I was a little shocked. I had no idea that they were having difficulties. I wish they had called me before, when they first found themselves getting into trouble. I could have helped. They could have done a Short Sale. I am not sure why they didn't call. My gut feeling is they were embarrassed, but there is nothing to be embarrassed about and chances are I am going to find out when the property is listed as an REO anyway. There are a lot of good, hardworking people who are falling victim to the economy. I urge you if you start to feel yourself getting in over your head to call me. I will not judge! Do not put your head in the sand and hope it goes away. If you wait too long, I might not be able to stop the foreclosure. Be proactive and call for help as soon as you can, that is what I am here for.
Below is a link that will compare the tax and credit consequences of a short sale vs. a foreclosure. You will also see the wait time to repurchase after a short sale is considerably shorter than with a foreclosure. Please take the time to read the information and see if a short sale is right for you. Of course check with your own tax/legal professionals. If you need more information or you are ready to start the process, please give me a call before it's too late.

http://homebuying.about.com/od/foreclosures/f/072509_Short-Sale-vs-Foreclosure.htm