Because of this glitch, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market.
|Short sales and foreclosures are both serious, negative credit events for the borrower. But for the lender, the financial losses generated by a foreclosure typically are more severe than by a short sale. (Ross D. Franklin / Associated Press)
By Kenneth R. Harney
WASHINGTON — Are large numbers of homeowners who have negotiated short sales with lenders at risk because of a startling omission in the American credit system? Do their credit reports and scores indicate that they were foreclosed upon, rather than having negotiated a mutually agreeable resolution with their lender?
The answer appears to be yes, and recently two federal agencies — the Federal Trade Commission and the Consumer Financial Protection Bureau — were asked to investigate why. The reality is this: The credit reporting system now in place does not have a separate code that distinguishes a short sale from a foreclosure. Yet there are crucial differences between the two.
In a short sale, the bank approves the sale of the house to a new buyer at a mutually acceptable price. Any unpaid remaining loan balance not covered by the sale proceeds may then be either partially or fully forgiven. The bank is an active participant throughout the process, negotiating for a higher price and higher repayment of principal from the original borrower.
In a foreclosure, the bank is essentially left holding the bag. The owners walk away at some point or live in the property rent-free until they’re evicted. Frequently there is damage to the house left by the departing owners, sometimes extensive. There is little or no cooperation between them and the bank.
Both transactions are serious, negative credit events for the borrower. After all, the mortgage wasn’t fully repaid. But the financial losses generated by a foreclosure typically are more severe for the lender than by a short sale.
Not only are there extended periods of nonpayment by the borrower but there are also substantial property management expenses, renovation costs, local property taxes and insurance while the house is being readied for resale. In some parts of the country, the average time to complete a foreclosure has exceeded two years.
The nation’s major sources of mortgage financing — Fannie Mae, Freddie Mac and the Federal Housing Administration — all recognize the differences between short sales and foreclosures in their underwriting policies regarding new mortgages. Fannie Mae generally won’t approve a new mortgage application by borrowers with a foreclosure on their credit report for up to seven years, but will consider lending to people who were involved in short sales, and who otherwise qualify in terms of recent credit behavior and available down payment, in as little as two years.
But if short sales routinely show up in credit reports coded as foreclosures, borrowers who might be able to qualify for a new mortgage two or three years after a short sale find themselves shut out of the market. George Albright, who completed a short sale on his home in New Port Richey, Fla., in 2010, has been trying for months to get through the hoops for a Fannie Mae conventional mortgage.
According to his mortgage broker, Pam Marron, Albright has a solid 720 FICO credit score, 20% down payment cash and more than adequate monthly income and reserves for a new home. But he keeps getting rejected because his credit report indicates a foreclosure, not a short sale.
That’s not unusual, Marron said, since there is no specific code to identify short sales. In a highly automated and strict underwriting environment, lenders go by the codes, according to Marron, harming creditworthy applicants like Albright.
“I did my time,” Albright said. “I’m ready to move on,” but because of the inadequacy of current credit reporting practices “I’m still paying more for rent than I’d be paying on a new mortgage.”
After a Capitol Hill hearing May 7 on credit reporting issues, Sen. Bill Nelson (D-Fla.) sent requests to both the FTC and the CFPB to investigate what he called the “disturbing practice” of misidentifying short sales, and to “penalize responsible parties in the mortgage- and credit-reporting industries, if they don’t fix this coding problem within 90 days.”
Nelson said real estate industry data indicate that there have been 2.2 million short sales nationwide during the last several years. Consumers who opted for a short-sale route rather than a more costly foreclosure are now being blocked from “reentry into the housing market,” he said, thereby “stifling economic recovery for all homeowners.”
Officials of the main trade group for the credit reporting industry, the Consumer Data Industry Assn., were not available for comment on Nelson’s short-sales complaint to the federal agencies.
The home value forecast from Pro Teck Valuation Services reveals the impact low housing inventory has on home prices, which it calls the sold-to-list price ratio.
In the May update, the Honolulu, Tucson, San Francisco and Chicago metro areas are highlighted to determine how the indicator has been useful from a historical perspective as well as in current market conditions to best predict home price appreciation in markets.
“While many were predicting that REO and the ‘shadow inventory’ would keep real estate markets depressed, in reality the shortage of housing inventory has lead buyers to bid more competitively against one another leading to significant home price increases and tighter housing conditions,” said Tom O’Grady, CEO of Pro Teck Valuation Services.
The sold-to-list price ratio typically fluctuates between 92% and 98%, but can exceed 100% in very hot markets, according to the authors of the home value forecast.
“The sold-to-listed price ratio has historically lead home prices by approximately six months over the past three real estate cycles and its turning points have been excellent signals for the same in condo prices,” added O’Grady.
The May home value forecast update also provides a listing of the top-10 best and worst performing metros as ranked by its market condition ranking model. Sales/listing activity and prices, months of remaining inventory, days on market, sold-to-list price ratio and foreclosure and REO activity are all indicators of the best and worst markets.
“Two of the top markets this month are in Nevada (Las Vegas-Paradise and Reno-Sparks), both of which had been very distressed since their respective market peaks in 2005 and 2006. Also, California continues to be well represented on the list by Los Angeles, Oakland, and Sacramento metros,” said Michael Sklarz, principal of collateral analytics and contributing author to Home Value Forecast.
Sklarz added, “Nashville’s metro area is a new entrant this month. Although the market has a more shallow correction than many of the other markets in the recent recession, it appears to be experiencing improving overall economic conditions and one of the most affordable markets in the U.S. now.”
“The bottom ranked metros also represent an interesting mix around the U.S. While all have nine to thirteen Months of Remaining Inventory, many of the indicators are showing positive trends even for the bottom metros area this month,” added Sklarz.
Mortgage rates have never been lower — but they most certainly have been higher!
This latest infographic takes mortgage loan rates back in time from the last decade, to the 90s and even back to the 80s! It turns out, you could have spent a lot more on your mortgage loan payments in the past than you could or would today.
We thought the best way to understand the savings that today’s mortgage loan interest rates brings is by comparing present day costs with the past’s.
Do you remember when Kelly Clarkson won American Idol Season One? It was in September of 2002, and 30-year home loan interest rates averaged 6.09 percent. This means that after 30 years, you would have paid a total of $653,776.93 on a $300,000 mortgage loan. That’s the equivalent of 43 Kawasaki Ultra 300X Jet Skis!
On August 6, 1991, the World Wide Web was first publicized. Interest rates stood at 9.25 percent. Your monthly payment would have $2,468.03 on a $300,000 mortgage loan. That could have bought you one first class plane ticket to Hawaii — every month!
On June 11, 1982, the film “E.T.” was released in theatres. Interest rates were a whopping 16.70 percent. Your monthly payment would have been $3,503.36. That could have bought you three-and-a-half pizzas with caviar and lobster toppings from Nino’s Restaurant in NYC.
Let’s come back to the future though, where mortgage rate trends continue to hover near historic low levels.
Scroll down to see the rest of the data for our “Back to the Future: The Cost of Mortgage Rates Past and Present” infographic.
Infographic created by loans.org
By Les Christie @CNNMoney May 15, 2013
This Jacksonville Beach, Fla., townhouse appraised for $5,000 more than asking price.
NEW YORK (CNNMoney)
Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through.
During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price.
For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers.
But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors.
Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative.
“I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.”
But now, with home prices posting such strong gains, those strategies may not be necessary anymore.
“I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman.
He was certain a recent deal in Wallingford, Wash. was going to fall through when the buyer agreed to pay $755,000 — well above the average $690,000 other homes in the area had sold for. When the appraisal came in at the full selling price “everybody’s jaws dropped,” he said.
And in some of the hottest markets, appraisals are coming in well above the selling price.
Agent Eric Tan said one appraiser did a “drive-by” of a West Covina, Calif., home he was selling in April.
“He didn’t ask for any comps, to see the inside of the house, or even schedule a time to meet with me. He wrote up the appraisal right at the purchase price,” he said. “I was able to sell the client’s home for about $40,000 more than I thought the appraiser would value it.”
In Jacksonville Beach, Fla., where prices have soared 15% over the past 12 months, agentCara Ameer was “holding her breath” when it came time to get an appraisal on a two-bedroom townhouse she sold for $5,000 more than its $189,000 asking price.
“It was FHA financing and [the FHA is] typically much more strict,” she said. That appraisal too ended up coming in above the selling price.
The California housing market continued to gain steam in April, with both home sales and prices experiencing strong increases due to high demand and tight inventory.
According to the latest data from the California Association of Realtors, the median price surpassed the $400,000-mark for the first time in five years.
CAR President Don Faught said California’s housing market maintained its momentum in April, getting the spring home-buying season off to a good start.
“Southern California regions such as Los Angeles, Orange County, and San Diego led the way in both month-to-month and year-over-year sales increases, while sales in the Bay Area region as a whole posted a healthy monthly gain but dipped slightly from last year,” said Faught.
California sales rose 1.3% from a revised 417,880 in March to 423,150 in April, according to CAR. Statewide, the median price of an existing home rose 6.3% from March’s revised median price of $378,960 to $402,760 in April.
Year-over-year, the median sales price jumped 28.9% from a revised $312,500, marking 14 consecutive months of annual price gains and the 10th straight month of double-digit annual gains.
The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values, writes CAR.
“The upsurge in the median price continues to be driven by an increase in sales in the upper-price range, where low inventory is less of an issue,” said CAR Vice President and Chief Economist Leslie Appleton-Young.
She added, “Over the past year, home sales in the $500,000-and-higher market segment posted a year-over-year gain of 35% on average, which contributed to an increase in the statewide median price of nearly 30% from the previous year.”
The available supply of homes for sale remained nearly unchanged from March, but dropped significantly from one-year prior. In April, the existing, single-family detached home supply was 2.8 months compared to 4.2 months in April 2012.
Additionally, increased competition within the market has pushed down the time on market year-over-year from 48 days to 27.9 days in April.
In 64% of metro areas nationwide, buying a home is a better financial decision than renting for residents planning to stay in their home for at least three years, Zillow claims in a new report.
The study by Zillow ($58.78 -0.22%) incorporates all possible costs associated with both buying and renting. These include upfront payments, closing costs, estimated monthly rent and mortgage payments, insurance, taxes, utilities and maintenance costs.
The study then ties in historic and anticipated home value appreciation rates, rental rates and rental appreciation rates to help determine the point at which buying becomes less expensive than renting.
Among the 30 largest metros analyzed by Zillow in the first quarter, Miami, Detroit and Phoenix were the metros with the shortest breakeven horizon. The longest breakeven horizon in the first quarter was seen in New York, Boston and San Jose.
“Locally high home value appreciation in many areas, combined with historically low mortgage rates and low home prices relative to recent peaks, has made buying a home a more advantageous financial decision than renting for many would-be buyers,” said Zillow Chief Economist Dr. Stan Humphries.
Humphries added, “The decision to buy or rent should always take into account a number of factors, one of which is how long a buyer or renter plans to stay in a property. Even in areas with relatively low breakeven horizons, buyers should resist the temptation to buy and sell properties based only on short-term goals. And renters in these areas should never feel compelled to stretch themselves to buy if it is currently beyond their means.”
In areas where home values are expected to increase more quickly in coming years, the time it takes to recoup upfront costs will be lower and thus the breakeven period will be shorter.
In metros where home values are expected to rise more slowly, or even fall, the breakeven horizon will be longer, according to Zillow.
May 14, 2013
Southern California homes sold at the fastest pace for an April in seven years amid the release of pent-up demand for move-up homes and high levels of investor purchases. The median sale price rose to a 58-month high, reflecting both home price appreciation as well as the simultaneous plunge in foreclosure resales and surge in mid- to up-market buying, a real estate information service reported.
A total of 21,415 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 4.1 percent from 20,581 sales in March, and up 9.5 percent from 19,562 sales in April 2012, according to San Diego-based DataQuick.
On average, sales between March and April have risen 1.0 percent since 1988, when DataQuick’s statistics begin.
Last month’s sales were the highest for the month of April since 27,114 Southland homes sold in April 2006, but they were 11.8 percent below the April average of 24,291 sales. The low for April sales was 15,303 in 1995, while the high was 37,905 in April 2004.
“This is a market that is still re-balancing. Sales of deeply discounted properties in affordable neighborhoods are way down. Activity in middle and high-end communities is on its way up. Now it’s catch-up time, with a healthier economy spurring more demand and rising prices tempting more people to put their homes up for sale,” said John Walsh, DataQuick president.
The median price paid for all new and resale houses and condos sold in the six-county Southland was $357,000 last month, up 3.3 percent from $345,500 in March and up 23.1 percent from $290,000 in April 2012. Last month’s median was the highest since June 2008, when the median was $360,000.
The median has risen on a year-over-year basis for 13 consecutive months, and those gains have been double-digit – between 10.8 percent and 23.5 percent – since last August. Still, last month’s median remained 29.3 percent below the peak $505,000 median in spring/summer 2007.
It appears that well over half of last month’s 23.1 percent year-over-year gain in the Southland median sale price reflects rising home prices, with the balance reflecting the change in market mix.
Some of the Southland’s most affordable housing markets, where prices were beaten down the most during the foreclosure crisis, posted some of the largest price gains. In April, the lowest-cost third of the region’s housing stock saw a 20.7 percent year-over-year gain in the median price paid per square foot for resale houses. The annual gain was 18.5 percent for the middle third of the market and 15.2 percent for the top third.
Sales rose 35.4 percent year-over-year in the $300,000 to $800,000 price range – a range that would include many move-up buyers. The number sold for $500,000 or more shot up 52.7 percent from one year earlier and was at the highest level in just over five and a half years. Sales of $800,000-plus homes increased 51.4 percent year-over-year.
In April, 29.9 percent of all Southland home sales were $500,000-plus – the highest for any month since April 2008, when 31.1 percent of sales reached or crossed the $500,000 threshold. Last month’s $500,000-plus level was up from 27.9 percent of sales in March and 21.0 percent a year earlier.
The number of homes that sold below $200,000 last month declined 29.8 percent year-over-year, while sales below $300,000 dipped 21.1 percent. Sales in many affordable markets have been limited not by a lack of demand, but by a lack of supply. The latter has two main causes: First, a relatively high percentage of owners can’t afford to put their homes up for sale because they owe more than those homes are worth. Second, foreclosures are way down, further limiting the supply of homes for sale.
Last month foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 12.4 percent of the Southland resale market. That was down from a revised 13.8 percent the month before and down from 28.8 percent a year earlier. Last month’s figure was the lowest since it was 10.0 percent in August 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.
Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 17.7 percent of Southland resales last month. That was down from an estimated 20.1 percent the month before and 24.3 percent a year earlier.
The portion of all homes sold to absentee and cash buyers dipped month-to-month but remained higher than a year ago and near peak levels.
Absentee buyers – mostly investors and some second-home purchasers – bought 30.2 percent of the Southland homes sold last month. That was down from 31.1 percent in March and up from 28.4 percent a year earlier. The record was 32.4 percent in January this year, while the monthly average since 2000, when the absentee data begin, is 18.1 percent. Last month’s absentee buyers paid a median $281,000, up 27.7 percent from a year earlier.
Buyers paying with cash accounted for 33.5 percent of last month’s home sales, compared with 35.0 percent the month before and 32.2 percent a year earlier. The peak was 36.9 percent this February, and since 1988 the monthly average is 16.0 percent. Cash buyers paid a median $295,500 last month, up 31.3 percent from a year ago. Nearly 25 percent of the homes purchased by those paying cash last month were priced $500,000 or above, compared with 17.0 percent a year earlier.
The share of homes flipped has been running higher this year compared with 2012. In April, 6.0 percent of all Southland homes sold on the open market had previously sold in the prior six months, down from a flipping rate of 6.3 percent in March and up from 4.3 percent a year ago. (The figures exclude homes that were resold after being purchased at public foreclosure auction sales on the courthouse steps).
Credit conditions appear to be improving, although only incrementally.
Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 26.1 percent of last month’s Southland purchase lending – the highest since September 2007, when jumbos made up 26.9 percent of the market. Last month’s figure was up from 23.8 percent the prior month and 18.3 percent a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40 percent of the home loan market.
Last month 7.9 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs), up from 7.4 percent the prior month and up from 7.0 percent a year earlier. Last month’s figure was the highest since ARMs were 8.5 percent of the purchase loan market in August 2011. Since 2000, a monthly average of about 33 percent of Southland purchase have been ARMs.
The most active lenders to Southern California home buyers last month were Wells Fargo with 7.9 percent of the purchase loan market, JP Morgan Chase with 2.7 percent, and Prospect Mortgage with 2.5 percent.
Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 21.8 percent of all purchase mortgages last month. That was down from 22.7 percent the month before and 30.6 percent a year earlier. In recent months the FHA share has been the lowest since spring/summer 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors.
DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,275, up from $1,252 the month before and up from $1,096 a year earlier. Adjusted for inflation, last month’s typical payment was 46.6 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 56.3 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to move in different directions. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.
Single-family home prices rose more than expected in February, posting their best annual rise since May 2006 in a fresh sign the housing recovery remains on track, a closely watched survey showed on Tuesday.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 1.2 percent on a seasonally adjusted basis compared to January, topping forecasts for 0.9 percent.
“Despite some recent mixed economic reports for March, housing continues to be one of the brighter spots in the economy,” David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a statement.
Prices in the 20 cities gained 9.3 percent year-over-year, also beating expectations for 9 percent and the biggest increase since May 2006.
On a non-adjusted basis, prices rose 0.3 percent.
Adjusted prices have been rising since last February, the first year of gains since before the housing market’s collapse. The sector started to turn the corner in 2012, helped by tighter inventories and improved sales.
May Buying Advice: Choked by a weak housing inventory, some agents are coaxing homeowners to the market with a different approach.
By Melinda Fulmer of MSN Real Estate
Frustrated with the lack of housing inventory, homebuyers in many markets are taking matters into their own hands by sending letters to homeowners and asking them to sell. In this month’s Buying Advice, we’ll consider this direct approach and its effectiveness. We’ll also check in with the latest housing numbers and dish out some tips for first-time buyers who are insuring a home.
After about nine months of unsuccessful home searching in the historic Olde Worthington neighborhood of Columbus, Ohio, real-estate agent Anne DeVoe’s clients were frustrated. No homes were coming up for the couple in the small, 10-block neighborhood.
So she suggested they make a wish list.
“I asked them to drive around and identify the houses they were interested in,” says DeVoe of Coldwell Banker King Thompson. She drafted letters to the owners of 35 homes, asking if they would consider selling. Two were interested. After looking at both houses, the couple put in an offer on one of them, a two-story Colonial. The deal is expected to close this month.
“I made the same suggestion last fall, and it was a success,” DeVoe says. “It’s great for someone who wants a particular street or neighborhood.”
Jeff Beggins of Tampa, Fla.-based Century 21 Beggins says he agrees that sellers are few and far between. He says many owners who were once underwater still mistakenly believe that property values are lower than they are. Others have seen the gains and are holding out for more appreciation, despite today’s low mortgage rates. Either way, there are far more buyers than homes to buy, he says.
To generate some listings, Beggins and his team have begun courting homeowners in coveted neighborhoods, mailing monthly newsletters with recent sale prices and current listings, as well as an offer of a free home-price analysis. In many areas, his agents are even going door to door to solicit homes to sell.
“Our message is simple: Our South Tampa market is hot. Interest rates are low. It’s a great time to move up, move down or just move around” to a new area, he says.
The appeal has had limited success, he says, but it’s worth it when an agent walks away with two or three new listings.
Suzanne Zinn Mueller, chief marketing officer for CB Bain in the Seattle area, says a letter or postcard from a local agent can be just the reassurance a would-be seller needs that there are enough buyers waiting in the wings to ensure a speedy home sale. “One of the biggest fears of sellers tends to be concern over the hassle of selling,” she says. “How long will it be on the market? How long do I have to keep my house looking perfect?”
These days, she says, this shouldn’t be a concern for most Seattleites. As of April 25, the absorption rate for homes in King County, Wash., was 105%. For every home sold, only 0.95 of a home came on the market — a far cry from the 30% to 40% absorption rate that is typical in that market.
Nationally, the inventory of for-sale homes is down 17% from last year’s levels, according to the National Association of Realtors.
Hence the flurry of agent letters hitting mailboxes around the country. Indeed, in DeVoe’s case, her letter reportedly wasn’t the only one the seller received. But her timing was spot on: Both of the owners who responded had recently contacted agents and were thinking of listing their homes this summer. Her letter was enough to speed up those plans.
Of course, agents say, the letters have more luck if they are targeted to specific types of homes, specific houses or blocks within neighborhoods. Mass mailings haven’t directly brought in listings for Kim Drusch of Century 21 Award in San Diego. But they do get her name out there as an agent, she says.
If you keep coming up empty in your search, agents say, maybe your agent should try hitting the streets for you. If he’s not willing: “Find a good, aggressive agent who is willing to go above and beyond for you,” Beggins says.
Existing-home sales declined 0.6%, to 4.92 million in March from 4.95 million in February on limited inventory. But they were 10.3% higher than in March 2012, according to the NAR.
“Buyer traffic is 25% above a year ago, when we were already seeing notable gains in shopping activity,” says Lawrence Yun, the NAR’s chief economist. “In the same time frame, housing inventories have trended much lower, which is continuing to pressure home prices.”
The median existing-home price for all housing types was $184,300 in March, an 11.8% increase from March 2012 and the strongest price bump since November 2005, before the last housing bubble burst. In the West, where inventory is particularly scarce, the median price increased 26.1% from March 2012 to $258,100.
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Homes are selling faster because of limited supply, says NAR President Gary Thomas of Evergreen Realty in Villa Park, Calif. “The typical home sold in March was on the market for one month less than it took to sell a year ago,” he says. The median time on market for all homes was 62 days in March.
Fewer foreclosures and short-sale properties are in the mix: Sales of distressed homes continued to fall, accounting for 21% of March sales, down from 25% in February and 29% in March of last year.
First-time buyers: How to insure that home
Finding insurance for that first home purchase can be just as anxiety-provoking and confusing as the negotiation itself. How much insurance do you need? And what kind of coverage should you choose?
We asked Jana Bell, vice president at HomeInsurance.com, for tips on how to select the right coverage for your new home. More can be found here.
The biggest confusion, Bell says, is how much to insure the dwelling for. Owners must insure for “replacement cost,” or the cost to rebuild the home, not what it is worth it in the market or what they paid for it.
“Today, with foreclosures and short sales, you are sometimes paying less than what it would cost to rebuild it if it was a total loss,” Bell says. You can use a number of insurance calculators, including this one on HomeInsurance.com, to get a rough idea of what it would cost to rebuild your home should disaster strike.
Next, Bell says that when you’re looking for a standard home policy, you want to make sure that it offers the “replacement cost” for your home and its contents rather than “actual cash value,” which means a depreciated reimbursement based on age that probably wouldn’t cover the cost of buying a replacement for that new roof or sofa today.
Finally, most policies will include liability coverage for people who might injure themselves on your property, such as that delivery guy who trips on your loose step and breaks his ankle, or the kid who slips on the concrete by your pool.
While the standard policy usually includes $100,000 in coverage for these types of events, you can triple that amount for just $12 to $24 more annually, Bell says.
Most policies also include coverage of a home’s contents to as much as 70% of the building’s value. You must document these items with receipts and photos to justify your claim. Snap some shots of everything after you move in and email them to yourself and your mom, or put them in a cloud server, so they are there for you even if your computer is destroyed.
“It takes 10 minutes to snap photos,” Bell says. “If anything should happen, you could always refer to those photos. It makes the claims process much easier.”
April 23, 2013 DQNews.com
The number of California homeowners entering the foreclosure process plunged to the lowest level in more than seven years last quarter. The unusually sharp drop in the number of mortgage default notices filed by lenders stems mainly from rising home values, a strengthening economy and government efforts to reduce foreclosures, a real estate information service reported.
During first-quarter 2013 lenders recorded 18,567 Notices of Default (NoDs) on California houses and condos. That was down 51.4 percent from 38,212 during the prior three months, and down 67.0 percent from 56,258 in first-quarter 2012, according to San Diego-based DataQuick.
Last quarter’s number was the lowest since 15,337 NoDs were recorded in fourth-quarter 2005. NoDs peaked in first-quarter 2009 at 135,431. DataQuick’s NoD statistics go back to 1992.
“Foreclosure starts were already trending much lower late last year because of rising home prices, a stronger labor market and the settlement agreement between the government and some lenders. But it appears last quarter’s drop was especially sharp because of a package of new state foreclosure laws – the ‘Homeowner Bill of Rights’ – that took effect January 1. Default notices fell off a cliff in January, then edged up. In recent years we’ve seen temporary lulls in foreclosure activity after new laws kick in and lenders adjust. It’s certainly possible foreclosure starts will pick up at some point this year if lenders need to play a lot of catch-up,” said John Walsh, DataQuick president.
“Rising home prices will be key to the final mop-up of the foreclosure mess,” he added. “As values rise, fewer people owe more than their homes are worth, and more people can refinance into a more favorable loan. It also means more who fall on hard times can sell their homes for enough to pay off the loan.”
The median price paid for a California home last quarter was $297,000, up 22.7 percent from a year ago, DataQuick reported.
NoD filings fell in all home price categories last quarter. But mortgage defaults remained more concentrated in California’s most affordable neighborhoods. Zip codes with first-quarter 2013 median sale prices below $200,000 collectively saw 2.9 NoDs filed for every 1,000 homes in those zip codes. The ratio was 1.9 NoDs per 1,000 homes for zip codes with $200,000 to $800,000 medians, while there were 0.7 NoDs filed per 1,000 homes for the group of zips with medians above $800,000.
Most of the loans going into default are still from the 2005-2007 period. The median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than three years, indicating that weak underwriting standards peaked then.
On primary mortgages, California homeowners were a median 8.6 months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $14,380 on a median $310,000 mortgage.
On home equity loans and lines of credit in default, borrowers owed a median $4,971 on a median $68,099 credit line. The amount of the credit line that was actually in use cannot be determined from public records.
The most active “beneficiaries” in the formal foreclosure process last quarter were Wells Fargo (5,546), JP Morgan Chase (3,863) and Bank of America (2,565).
The trustees who pursued the highest number of defaults last quarter were Recontrust Co. (mainly for Bank of America and Bank of New York), Quality Loan Service Corp (Wells Fargo and others) and Trustee Corps (for Green Tree Servicing, JP Morgan Chase and others).
San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.
Although 18,567 default notices were filed last quarter, they involved 18,010 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).
Among the state’s larger counties, loans were least likely to go into default last quarter in San Francisco, San Mateo, Santa Clara and Marin counties, based on an analysis of how many NoDs were filed for every 1,000 homes in existence. The probability was highest in Riverside, San Bernardino, Solano and San Joaquin counties. The analysis excluded counties with fewer than 50,000 homes.
Trustees Deeds recorded (TDs), or the finalized loss of a home to the formal foreclosure process, dropped to a six-year low last quarter. TDs totaled 13,591, down 35.7 percent from 21,127 foreclosures in the prior quarter, and down 55.1 percent from 30,261 foreclosures in first-quarter 2012. Last quarter’s foreclosure tally was the lowest for any quarter since first-quarter 2007, when 11,032 homes were foreclosed on. The all-time peak was 79,511 foreclosures in third-quarter 2008. The state’s all-time low was 637 in second-quarter 2005, DataQuick reported.
Just as with mortgage default filings, foreclosures remained far more concentrated in the state’s most affordable communities. Zip codes with first-quarter 2013 median sale prices below $200,000 collectively saw 2.9 homes foreclosed on for every 1,000 homes in existence. That compares with 1.2 foreclosures per 1,000 homes for zips with medians from $200,000 to $800,000, and 0.3 foreclosures per 1,000 homes in the group of zips with medians over $800,000.
On average, homes foreclosed on last quarter took 8.1 months to wind their way through the formal foreclosure process, beginning with an NoD. That’s down from an average of 8.9 months the prior quarter and down from 8.5 months a year earlier.
At formal foreclosure auctions held statewide last quarter, an estimated 47.6 percent of the foreclosed properties were bought by investors or others that don’t appear to be lender or government entities. That was up from an estimated 41.7 percent the previous quarter and up from 33.7 percent a year earlier, DataQuick reported.
Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 17.3 percent of all California resale activity last quarter. That was up slightly from 16.6 percent the prior quarter and down from 33.6 percent a year ago. Foreclosure resales peaked at 57.8 percent in first-quarter 2009. Among the state’s larger counties last quarter, foreclosure resales varied from 6.9 percent in San Francisco County to 29.9 percent in Tulare County.
Lenders’ shift toward short sales as a foreclosure alternative has helped lower foreclosure activity in recent years. Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 20.2 percent of the state’s resale market last quarter. That was down from an estimated 24.2 percent the prior quarter and 24.8 percent a year earlier. However, the estimated number (rather than percentage) of short sales last quarter dipped just 1.5 percent from first-quarter 2012.