Elizabeth Weintraub • Sacramento Short Sale Agent • Land Park

A reporter called yesterday morning to ask me about the rising real estate prices and market recovery in Sacramento. After all, our Trendgraphix reports show a 42% increase in pending sales for June. That's the message delivered by Lyon Real Estate. However, inventory is up about 8% and sales are down by 2%. The average per-square-foot price also dropped by 2% to $125. The reporter asked me to comment on our market stabilization in Sacramento.

Much as I would like to paint a rosy picture of the real estate market in Sacramento, I have to call it the way I see it. And I don't see a big recovery. In fact, I see prices falling. I haven't heard much about this elsewhere but it's going on, I'm telling you. Just wait a few months. You'll see.

In the first half of the year, I could slap a price on my short sale listings close to the prices of comparable sales and expect to get it. MLS reports that more than half of the listings in Sacramento right now are short sales. However, when I pull up the listings and sales for any given area with a lot of short sales, what I see are the active listings, active short contingent listings and pending listings all priced LESS than the comparable sales. What does that tell you?

It tells me that I'm going to have a heck of a time arguing with agents who are doing BPOs for the banks on my Sacramento short sales. Because those agents will consider the comparable sales, which appear to have very little bearing on market movement. I don't like it when the comp prices are higher than the activity in the marketplace, in part because people can't think upside down. But also because it means that prices are falling. You just don't see it yet.

As a Sacramento short sale agent, it doesn't really matter to me personally which way the market moves because, like Eddie Murphy in Trading Places, there is always movement. I don't control it. I can't control it. I just go with the flow and sell those listings.

It's a squirrelly market, and that's what I told the reporter. I said, "Among those who qualified for the home buyer tax credit, anybody with half a brain already bought before June." She probably thought that I said the market was full of squirrels, I guess, which wasn't really what I meant. It's that the buyers who didn't qualify for or missed the tax credit now want to compensate for that loss by slamming those list prices. They want some assurance against future market fluctuation. And who can blame them, really?

Photo: Trendgraphix

Some real estate agents don't want to say anything to a home seller that sounds negative about a home. I suspect they are afraid of offending the seller. Besides, lots of sellers don't notice the negative aspects of their home, especially after a number of years go by. They get used to it, whatever the problems are -- deferred maintenance, dated condition, undesirable location or bad layout, to name a few.

I'll tell you who will immediately spot those problems, though, and that person is the buyer. Those problems will become drawbacks, obstacles to overcome in order to sell. If a seller and her agent do not address the negative aspects, the home won't sell.

Of course, you know me, I have no problem being straight with a seller. Nobody ever accuses me of skirting around the bush. I lay it on the line. It's not always a comfortable thing to do, to be realistic and share bad news with a seller. But it's necessary to properly do my job. I've got to tell sellers the bad stuff and then devise a plan to overcome a buyer's objection.

I do that partly by figuring out who the buyer will be and appealing to what is important to that buyer. If an agent or the seller don't know who the buyer is, how can the agent create a home marketing plan to target those specific buyers? The other thing I do is find out why the seller bought the home. Because the reason that seller bought is the same reason a new buyer will. The last thing is to address the negative.

For example, one of my Sacramento short sale listings has a very small back yard. And the lawn is dead. There is a dried-up creek behind it that has been converted into a dumping ground for unwanted trash and garbage. That factor has been a constant comment from buyer feedback. We have three choices:

• Replace the lawn and plant trees to block the unwanted view
• Drop the price to compensate for it.
• Bury our heads in the sand and hope a buyer doesn't notice it.

Guess which one the seller picked?

Photo: Big Stock Photo

The California Housing Finance Agency (CalHFA) is launching a "Keep Your Home" initiative on Nov. 1 that is designed to pay down mortgages, up to $50,000, for qualified homeowners in foreclosure or in danger of going into foreclosure. CalHFA announced it will allocate $700 million for the program, which will also help to pay for six months of mortgage payments or give homeowners (who can't afford to stay) $5,000 to move.

CalHFA is encouraging lenders to match the $50,000 mortgage buy down. The problem that I see with this program is how many underwater Sacramento homeowners will benefit from a $100,000 principal balance mortgage reduction?

First, it doesn't apply to homeowners who did a cash-out refinance. Investors don't qualify, either. Plus only low- to moderate-income households can apply, which means earning less than $68,000 a year. And who's to say a bank will agree to match that $50,000 principal balance reduction? Maybe all we're talking about is $50,000.

Two of the hardest hit areas in Sacramento are Natomas and Elk Grove. Over the past 7 years, those values have fallen by more than 50%. Many homes that were once worth over half a million are now selling for less than $250,000. $50,000 is a drop in the bucket to these people. It won't make much of a dent in anything. It will probably just delay foreclosure filings from Nov. 1 to May 1.

I mean, I can see a homeowner who fit those qualifications saying: "Sure, I'll take $1,500 a month for 6 months to make my mortgage payments and a $50,000 to $100,000 mortgage reduction. Because come next spring, maybe I'll get $5,000 to move and have enjoyed six months of payment relief."

And then they'll do a short sale.

Photo: Big Stock Photo

Sometimes, people think I have all the answers. Well, I don't. I don't have a crystal ball on my desk, either. I can't predict the future. Couldn't tell ya if it was gonna rain tomorrow. OK, in Sacramento, in June, highly unlikely. And although I've never put my shoes on backwards, I have been known to show up at the office wearing two different shoes: one black, one navy blue. But who hasn't? You perhaps? You've never accidentally slipped your feet into shoes that don't match? Well, then, I've just given you something that you can feel good about today.

When you're feeling bummed out over that long and troublesome short sale, you could do something more productive with your time than fret. You can put together a list of stupid things you've never done and feel proud of yourself. I'll start. Hey, I've never fallen face first into a mud puddle. I've never walked out the door without my pants. I've never thrown up on my brother. Oh, wait. But you get my point. Because goodness knows, it's important to keep up your spirits. To laugh a little.

Now that you're chuckling and hopefully in a better mood, see, this is when I'm gonna lower the boom and say that if you're buying a Sacramento short sale, there is really nothing you can do to speed up that short sale. You can ask your agent to call the listing agent daily. You can threaten to cancel the escrow. You can issue ultimatums and deadlines, scream and shout until your face turns blue, but none of this will make that short sale zip along any faster.

If you're lucky and an experienced Sacramento short sale agent is working on your file, you've got to be patient. Short sale agents don't have any aces up their sleeves. Hey, Rocky, watch me pull a rabbit out of my hat! If I could drive down to the bank and beat the negotiator on the head with my laptop, I'd do it, but that's not how it works. If that short sale agent isn't experienced, well, even dead fish float downstream.

And you know what else? I've never accidentally set my hair on fire.

I've done it on purpose.

Photo: Big Stock Photo

Sellers of short sales in Sacramento are not required to do a short sale if they don't want to. Even if they have signed a listing agreement and a purchase contract. That's because short sales are subject to the seller's approval of the terms and conditions set forth by the bank's approval letter. But even if the short sale approval letter is clean, without deficiency verbiage, and there is nothing in that letter to cause the seller any concern, if the seller wants to cancel the transaction, I'll let the seller do it.

Some agents don't want to let sellers cancel the short sale, and I say why not? What point is there? Why drag out the inevitable, plus, make the seller miserable and yourself look bad on top of it? Besides, what court of law would make a seller do a short sale?

Other agents might say but what about the commission? You brought together a willing seller and a willing and able buyer, right? Actually, no, I didn't. If you want to know the truth, I brought together a seller in distress and a buyer eager to capitalize on a distressed sales price.

The question then becomes what to do with the listing when a seller wants to cancel. Sellers may want to cancel for all kinds of reasons. They might decide to try to do a loan modification, for example. I'm certainly not going to deny them that opportunity. Generally, a loan modification is discussed upfront, before I ever take the listing, but sometimes circumstances change and a seller might elect to try to save the house. That's the seller's prerogative.

In situations where there are two loans on a short sale and the seller wants to do a loan modification mid-stream, I'll stop the short sale process and put that home into TOM status, which means "temporarily off the market." This removes the listing from MLS feeds to public websites. I take the sign out of the yard. Because I know that 9 times out of 10, that second lender will not agree to a loan modification and the first lender is unlikely to significantly reduce the principal balance, which means the seller will be back asking for a short sale.

Then, when the seller is ready to start the short sale process again, I simply flip the switch in MLS and the listing is live again. I don't have to start over from scratch. The seller is happy because it means less paperwork and that listing is immediately back on the market.

But under no circumstances would I ever hold a gun to a seller's head and make them stick with me and my brokerage if they asked to be released. Sellers have enough stress; I'm certainly not going to add to it.

Oh, crap, now I've got a Tom Jones tune running through my head.

Photo: Big Stock Photo

An associate asked me yesterday how things were going in my real estate business. With tongue in cheek I laughed, "Well, my real estate horoscope said things would be going my way today, but that doesn't seem to be happening."

I have a seller who can't understand that homes around her, very similar to her home, have dropped in price far less than hers. So, she may lose her buyer to one of those. Even if a buyer does make an offer that is accepted on her home, the appraiser for that buyer will pick up those sold comps, and her home won't appraise at value. Which means her buyer won't close escrow because that buyer's loan may be rejected. This seller also made improvements to her home that don't substantially increase the value. Her response? She's going to remove those improvements. OK, well do it before an offer arrives. No, she plans to except those items when signing an offer.

That's not a good plan. The time to tell a buyer that you're planning to remove fixtures from a home is not when that buyer makes an offer. A seller in that position is effectively saying: "Yes, you can buy my home, but what you see is not what you get. In fact, I'm removing the windows and tearing out the ceiling fans."

How do you think a first-time home buyer will react to that?

Another buyer made an offer on a rural property, which happens to be a short sale. That seller decided that she wants to sell a structure on that land separately from the purchase contract and as personal property, without telling the bank. I asked the listing agent what kind of plan the agent has in place when the short sale bank makes the sellers and buyers sign an arms-length affidavit, which will state that there are no under-the-table agreements. The agent abruptly hung up the phone.

Talk about potential short sale mortgage fraud.

A third seller, after rejecting a short sale bank's terms of approval, has gone into foreclosure. As a favor to that seller, I canceled the listing so the seller could enjoy some peace and quiet during the foreclosure process. The PSA guidelines require certain terms for that short sale. The seller refused to comply. Game over. No, not quite. The seller re-listed that property with another Sacramento short sale agent, and that agent blatantly swiped my photographs off of MLS.

Well, that short sale still won't close because the seller has no change of heart and the PSA won't budge.

When my days go like this, I think of the seller who sent me an email the other day. Her email said, "My husband dropped off our seller disclosures at your office and left with the receptionist." When I jokingly quipped that I hoped she wasn't getting divorced, the seller responded with a straight face in the negative. I love her to pieces, though. Ya gotta keep your sense of humor in this business. Nothing messes up my days.

Photo: Big Stock Photo

If you're thinking about doing a short sale in Sacramento, the second thing you may want to consider is whether your loans are hard money or purchase money. The first thing, of course, is whether you qualify for a short sale, which means, in part, that you have a hardship of some sort. Sellers who do not have a hardship might qualify for a short sale but the lender is likely to negotiate some kind of payback.

Senate Bill 1178, which passed the Senate and is now in the Assembly, will prohibit banks from pursuing sellers after a foreclosure or a short sale, providing those hard money loans were not cash-out refinances. Should this bill be signed into law, at present it's slated to apply to transactions originating on June 1, 2011. So, that legislation, should it come to fruition, will not apply to short sales between now and next summer.

With a hard money loan in California, lenders have the right to pursue collection, providing certain conditions are met. In the case of a second hard money loan such as a home equity line of credit or a second equity loan, when the bank loses that security for the loan, the bank has the right to pursue a deficiency judgment. It doesn't matter whether the home goes to foreclosure or a short sale is granted.

Some short sale sellers refuse to sign a short sale approval letter because the verbiage doesn't release them from liability. They expect the bank to release them. But if the bank has a legal right to collect, there is little reason for a bank to agree to the release. In fact, it's unrealistic to expect otherwise. Banks don't think like you and I.

I've spoken to other short sale sellers with hard money loans who have been advised by their lawyers that doing a short sale, accepting the liability and later filing for bankruptcy is the route to take. I imagine those sellers later file for bankruptcy to discharge the collection debt. That makes me wonder if a short sale + bankruptcy is better than a foreclosure + bankruptcy.

Hmmm . . . a foreclosure stays on your credit report for a minimum of 7 years. Every time you fill out a credit application and are asked if you've had a foreclosure, if true, you need to say yes. Then, credit will most likely be denied. You probably can't buy another home for at least 5 years.

FHA guidelines say borrowers can qualify to buy a home 3 years after a bankruptcy. Most lenders will give delinquent borrowers another chance 2 years after a short sale. If a short sale seller stays current without any late payments, FHA has no waiting period after a short sale.

It would seem to me that a Sacramento short sale agent would be wise to ask whether the seller is willing to accept liability on a hard money loan before taking a listing on that home as a short sale. Otherwise, all that work to sell a Sacramento short sale is an exercise in futility. And of course, it goes without saying, all sellers should seek the advice of a qualified lawyer and tax accountant before attempting to pursue a short sale. Agents cannot give legal advice.

I'd like to go on the record by saying if Al Gore had not given his wife Tipper a weed wacker for her birthday, they might not be getting divorced after 40 years of marriage. But some things you can't go back and undo. Once you do something stupid, you're often stuck with those results.

That's not necessarily so with a short sale. A short sale lets you undo a mistake. Maybe you refinanced at a time when everybody and his uncle were tapping equity and ripping cash out of their homes like there was no tomorrow. Maybe you paid too much for that home in the first place. Or maybe you paid a fair price, put down a huge chunk of change and simply got wedged into a place and time when home values plummeted.

As a Sacramento short sale agent, I often hear from sellers at the 11th hour. Just before an auction. It's like suddenly a light bulb goes off and the impending doom becomes crystal clear. I wonder why sellers in these situations wait so long. The odds are against them, but sometimes I accept these challenges. Because I must be a glutton for punishment. Which probably explains why I am no longer a Catholic.

The thing is if you've got a Notice of Default filed, that's your wake up call. You should not wait until you're a week away from a trustee's sale to call a short sale agent. In fact, the time to call a short sale agent is when you realize that you can no longer make your mortgage payments or are no longer willing to do it. Don't wait for the County of Sacramento to nail a notice to your door.

And just for the record, in case my husband is reading this blog, my birthday is at the end of this month. I do not want a weed wacker. But I suspect that although he's never won a Nobel Peace Prize, he's smart enough to figure that one out.

Photo: Big Stock Photo

For the most part, my Sacramento short sales are closing faster but they aren't closing any easier. I was looking at my website this morning. My listings rotate on my homepage. Agents who don't have any listings often link to their broker's listings on their homepages so it won't look like they don't have any. But all the rotating listings on my homepage are homes I have listed or co-listed. These are homes that are either for sale or are active contingent short sales. Not all of them are a short sale, either. Some are regular transactions.

My pending sales don't show up in that spot. If  visitors to my website want to know how many of my listings are pending, they will need to click on "Elizabeth's Sold Listings" to see my pending sales. Those don't include the pending sales for my buyers. Just the pending sales in which I represent the seller.

As I was looking at my rotating listings, I decided to play this little game. Could I correctly identify each of my listings? Hey, you may laugh, but I have a couple in that bunch which, due to a series of unfortunate circumstances, have been active contingent for more than a year. Now, I shoot and upload my own photographs. Which means I had personally visited the home, stood in the front yard as well and shot a series of photos. Then, I went back to my home office, opened those photographs in Preview, compared each of them to each other, clicked back and forth, narrowed it to the 2 best photos and selected the winning photo.

Next, I opened the photograph of the front of the home in Photoshop and tweaked it. One of my favorite enhancing tools in Photoshop is lightening shadows.  I might even manually select a feature on the front of the home, generally the front door or maybe part of the roof, and lighten that a bit as well. I want my photos to pop because I distribute my listings everywhere online and realize I am competing for eyeballs. After all that work, one would think I would remember each home. But I wasn't so sure.

So I am sitting in front of my computer this morning and trying to name the street in the 3 seconds it takes for each photograph to rotate. To be honest, I missed one in the first go around. Hey, it looked familiar at least. Give me a break, why doncha. And by the time it came around the second time, the name of the street appeared in my head. Thank goodness, for that. Because if I can't recognize my listings, then I might have too many of them, but I am pleased to report that is not the case. Memory intact. Whew.

Photo: Sacramento Short Sale in Land Park by Elizabeth Weintraub

One of the million-dollar questions that I receive from Sacramento short sale sellers is when should they stop showing their homes. The answer to that question depends on the individual short sale, they are each unique, but typically the answer is when the seller has accepted an offer. However, it also depends on the type of offer the seller has agreed to accept.

See, the thing is when a short sale goes into active contingent status, it's basically no different than a pending sale status on a regular transaction. The implied difference between a regular pending transaction and an active contingent short sale is the short sale will take longer to close.

Whether the transaction is a short sale or a regular sale doesn't make much difference because in each there is a seller who has agreed to sell to a buyer and a buyer who has agreed to purchase the home. Now, some buyers are writing multiple offers, hoping to grab the first short sale that gets approved. But I advise my sellers to not accept those types of short sale offers. I know the signs to look for and how to take precautions to lessen the chance that a Sacramento short sale seller will end up in contract with a buyer who is unlikely to perform.

Besides, a back-up offer received in the early stages of a short sale probably won't be in the game by the time the lender approves the short sale, even if the first buyer walks away. That's because some short sales take 3 to 4 months or longer to close, depending on the short sale lender. Very few buyers will wait months just to see if the first buyer backs out. Most buyers actually want to buy a home and close.

As a busy Sacramento short sale agent, I generally receive so many offers on my short sales that I have plenty of buyer's agents to notify if the buyer who is under contract gives up the ghost. But I always give sellers the choice of whether to let buyer's agents continue to show or to change the listing to reflect no more showings. If the seller's buyer appears solid and committed, there is not much to gain from continuing to show the home.

A seller emailed me yesterday to say that twice 2 different buyer's agents called her, demanding to see her home. She explained that short sale approval is on the horizon (because her bank told her so), that her home is listed as an active contingent, the buyer is dedicated and the listing states no more showings. In both cases, the agents insisted that active contingent meant they could show it. No, sorry, guys, it doesn't mean that at all. In my short sales, it means it's in escrow. Moreover, when a listing says no more showings, it means no more showings. But to some agents, "no more showings" must carry some other connotation.

Some buyer's agents ask if I will call them should an active short contingent blow up for some reason. Sure. But there's no special treatment. If the existing contract cancels, isn't it better for the seller to put the home back on the market? Because putting the home back on the market is exposing that home to a greater pool of buyers, some of which might pay a higher price. Making back-door deals isn't in the best interest of the seller. Buyer's agents have access to MLS, and MLS will tell them if a home is available for sale or back on the market.