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How do I submit an offer on one of your REO properties?

If you are a real estate agent, please visit: www.HowToFillOutREOForms.com. There are certain forms and procedures that are required before we can submit your offers to the bank. At this site you can download all necessary forms that need to be submitted with an offer on our REO properties. If you are a buyer who wished to submit an offer please call us at: (951) 784-2500.

How do we determine the value of a home?

Many people have the misconception that home valuation is an exact science, in fact, it is not. The ultimate value of a home is what a buyer is willing to pay for it. Therefore the price of your home will depend on the market, your specific location and amenities, and the potential buyer.

One buyer, for example, may be willing to pay you more for the pool your home has while another buyer may not be interested in the pool at all and hence, its value will be less to him.

As real estate agents, our job is to determine a price that will engage potential buyers to look at your home. We come up with a value range by examining what homes in the nearby area have sold for and also what they are currently listed for. From there most agents will narrow down the value based on a home's square footage, its lot size, the useability of the lot (flat, zoned for horses, etc.) and the amount of upgrades and appeal it has.

Real estate agents must also take into account the current market forces. When the real estate market is in an up-trend, for example, it is not uncommon to see listings priced 2-5% more than the last comparable sale and it is for no other reason except that the general demand for homes has gone up. Likewise, in a down-market there are often listings priced 2-5% below the last previous sale because they simply are not able to sell at the previous levels because the demand is down. In this regard, homes are not unlike stocks. They go up in value and, yes, the do go down as well.

How do the banks determine the pricing of their REO (foreclosed) homes?

That is a great question! I wish we knew the definitive answer. The exact formula that banks use for setting prices is unknown to us as real estate agents but we do know that they make their decision based on at least one evaluation from a licensed appraiser and at least one price opinion from a licensed real estate agent. Occassionally, the bank will request additional information from another appraiser or real estate agent in order to arrive at a price. As best as we can see, the banks tend to give the most weight to the appraiser's valuation of the property.

With that said, some of the REO homes tend to be priced very aggressively. And, on the other hand, some of the REO homes seem overpriced. This is can be the result of many things but most of the time this is the result of the differences between appraisers and their estimation of home value. Property appraisal is not an exact science and, as such, many times different appraisers will give the exact same property two completely different values.

How do we list our home?

The easiest answer is to call a real estate agent. Your agent will guide you through the process of listing your home. Generally, most agents will recommend that you first prepare your home for sale. Many agents will come to your home and give you specific suggestions to aid in this process.

Depending on the condition of your home and the type of market that you are in, preparation can include anything from a few minor repairs and a good cleaning, or as much as a complete staging of the house and major repair or renovation work, such as new carpet and paint.

Once your home is ready for the market, your agent will help you determine a fair price by comparing your home to others in the neighborhood that have recently sold or are actively for sale. Your agent will also take into account the unique features of your property and determine what they add to the overall value of the home.

Once a price is agreed upon, the process is fairly easy. You will sign a listing contract with a real estate agent for a specified period of time. In good markets it is not uncommon for agents to ask for only a 3 month listing term, meaning that you would have the right to list with someone else after 3 months with no penalty to you if he/she has not sold your home. In slower markets most agents will ask for at least a 6 month contract since it takes longer to sell a home in down real estate cycles. Everything, however, is negotiable including commission.

As a general rule, you never pay a real estate agent a dime until they actually sell your home. At that point, when the home actually closes, the agent will take his/her commission from the net proceeds on the sale of your home.

As a seller, what do I customarily pay for when I sell my home?

In Southern California, it is customary for the seller(s) to pay for the following items:

- All Real Estate Commissions

- The Title Insurance for the Buyer (to insure clear title)

- Half of the total escrow fees

- Transfer Taxes (Charged by either the city or county you live in)

- A Termite Report and all required Repairs

- A Natural Hazard Disclosure Report

- Any Home Owner's Association Transfer Fees

- Any fees associated with paying off your current mortgage.

It is also increasingly common for sellers to pay for the buyer's closing costs (up to 3% of the purchase price)and also for repair work requested by the buyer. Everything, however, is negotiable and depends on the specific transaction.

As a rough estimate, I generally tell sellers that their total costs to sell will likely run between 8-10% of the total price of the home. Most agents will provide you a net sheet to give you a more precise estimation of your costs when they list your home.

When you accept an offer, an agent will generally give you another net sheet based on the agreed upon purchase price and any costs you may (or may not) have agreed to pay on behalf of the buyer, which is common in a slower market.

What are current interest rates at?

Great Question! Each bank and organization will offer slightly different rates but if you go to a site like www.BankRate.com you can get a general average of the interest rates offered for different products such as mortgages, home equity loans, auto loans, etc.

How long are most real estate loans?

There are many different financing options when you purchase a home. The vast majority of people who buy a home will opt for either a 30 year mortgage or a 15 year mortgage. Lenders also occasionally offer loans with 20 or 40 year terms as well.

How much cash can a seller credit to a buyer at closing and how does it work?

Theoretically, sellers can credit as much as they want. If the buyer is getting a new conventional mortgage, however, the lender's policies about credit-backs will prevail. Most lenders in our area allow the seller to credit back no more than 3% of the purchse price. Depending on the loan program, occasionally they will allow more.

Here's how a credit-back works. A buyer offers to pay $200,000 for the house, and the seller agrees to pay for the buyers' loan points, which total $6,000 (3%) for instance. At closing, $6,000 would be subtracted from the seller's sale proceeds and credited to the buyers, which lowers the amount of cash the buyers need to close by $6,000.

Most lenders will not allow a buyer to receive cash, in hand, at the closing from a seller. (For repairs, for instance, or towards new furniture) The lender will generally require that any money given by the seller be used for an actual fee or cost associated with the loan.

Regarding property taxes, i just purchased a home. What are my responsibilities?

You are responsible for any taxes which were not paid as of the time escrow closed. Even though taxes are prorated between the buyer and seller during escrow and proper credit is given to each, the actual taxes may not have been paid to the Tax Collector at that time. You should read your escrow papers and/or title report to determine if any portion of the annual taxes were paid by the previous owner before the close of escrow. The Tax Collector will try, but may not be able, to send you a bill for the remainder of the year in which you acquired the property prior to the tax installment deadlines unless you request it. Annual tax bills, which can be paid in two installments, are mailed once a year by November 1. Since the bill contains payment stubs for both installments, this is the only bill regularly mailed each year by the Tax Collector. Depending on when the ownership change is placed on the tax roll, the annual tax bill could be sent either to the previous owner or directly to you. If there are any remaining unpaid taxes, and if you did not receive an annual tax bill from either the previous owner or the Tax Collector, you should contact the Tax Collector immediately and request one. It is your responsibility to obtain the bill. State law stipulates that failure to receive a bill does not permit the Tax Collector to excuse penalties on late payments.

In addition to annual taxes, you will probably be responsible for paying supplemental property taxes. Any time property is sold or new construction occurs, the property is reassessed. If the property has been reassessed at a higher value, you will receive one supplemental tax bill in addition to the annual bill mentioned above. If the property has been reassessed at a lower value, you will receive a refund.

Are real estate values always stable?

No, real estate values rise and fall, and they tend to move upward and downward in a cyclical fashion. If you buy at the beginning of a cycle of rising home values, there is usually less risk of overpaying. The risk of overpaying is usually highest when the market has been appreciating at a fast pace for years. In this case, the market could be due for a downward correction.

Do I have any recourse if I disagree with the Tax Assessor regarding the valuation placed on my property by the Assessor?

Yes. You may take the matter up with the Assessor to see if that office will change the valuation. Additionally, in Riverside County the Board of Supervisors has established an Assessment Appeals Board for the purpose of resolving valuation problems. Appeals on regular assessments must be filed each year between July 2 and September 15 (valuation information is available July 1 at the Assessor's regional offices). Appeals on corrected assessments and escaped assessments (assessments that did not take place when they should have) must be filed no later than 60 days from the mailing date on the corrected or escaped tax bill. For supplemental assessments, appeals must be filed within 60 days of the mailing of the Assessor's "Notice of Supplemental Assessment".

If you choose to appeal your assessment, you should still pay your tax installments in full by the appropriate deadlines; otherwise, you may incur penalties while the case is in appeals. If your appeal is granted, a refund will be issued to you. For Riverside County appeals applications and further information about the appeals process can be obtained by calling (951) 955-1060 or writing to Assessment Appeals Board, P.O. Box 1147, Riverside, CA 92502-1147 or on their web site at http://riverside.asrclkrec.com/FO.asp. .

What is a short sale?

A short sale is a term used to describe an owner who would like to sell his/her home but currently owes more on the property than it is worth. An actual "short sale" only occurs after the bank has agreed to forgive the difference between what a homeowner owes on the property and what it sells for. Generally, a bank will only do this if the seller is already late on his/her payments and is approaching upon foreclosure of the home. When a seller opts for a short sale and completes it, he will usually still have significant damage to his credit as a result of not being able to re-pay the loan in full.

If my house is now worth less than I owe on it, can I refinance?

You'll have a difficult if not impossible time finding a lender willing to refinance any of your loans. You have to have at least some equity, usually 5% or more, before the great majority of banks or mortgage companies will even consider a refinancing. I wish we could offer a brilliant solution for this dilemma. There are literally hundreds of thousands of homeowners facing the same problem with their adjustable rate mortgages. They can't keep up with rapidly the rising payments, but can't sell or refinance because they owe more than their homes are worth. In most cases that's because they financed 100% of the purchase price expecting the home to appreciate in value. Only it didn't. It's declined. That's why we're seeing a spike in foreclosures across the country. About all you can do is make some calls and see if you can find a lender who will help you out. Definitely call your current mortgage holder and some local mortgage brokers who have been dealing with this problem. If you can't find a new loan, then you'll have to hunker down and make the higher payments until home prices start rising again. Most experts expect homes will begin appreciating again in mid '09 or early 2010.

As a buyer, can I save on costs by closing late in the month?

Lenders usually collect interest for the current month at closing. If you close on the fifth day of the month, you will owe the lender 25 days of interest at closing. If you close on the 25th day of the month, the lender will collect five days of interest when you close. Closing at the end of the month can reduce your closing costs considerably if your loan balance and interest rate are high.

Besides a mortgage payment, what other costs should be factored into my monthly payment?

This is typically called your monthly PITI:

Principal - The monthly portion of your mortgage payment

Interest - The monthly interest on your loan

Taxes - Your monthly property taxes (this can be escrowed monthly or paid twice a year, up to you)

Insurance - Your monthly property insurance (this can be escrowed monthly or paid yearly)

Above only relates to mortgage payment, your HOA fees are external to mortgage, just like your utility bills. Hope that helps!

Are all closing costs deductible?

No. Many of your closing costs can't be deducted immediately but can be taken into account when you sell the property. Such costs include transfer taxes, title insurance, inspection fees, appraisal and credit fees, attorney's fees, and notary and recording fees. These costs can be used to offset some of your capital gain tax liability when you sell.

How does an impound account work?

The lender collects funds from borrowers based on projected property taxes and insurance bills. Money is usually collected at closing to fund the impound account. After closing, funds to cover property tax and insurance bills are collected from the borrower, usually on a monthly basis. The mortgage bill will outline how much is in your impound account and how much they collect each month that goes towards your impound account. The borrower receives interest on the money in the account. The lender pays the property tax and insurance bills.

Should I Rent or Buy?

Obviously, this is a question that only you can answer and it will depend on whether you have long-term or short-term plans to stay in a specific area but there are tax advantages that you gain through homeownership.

Most renters have enough income to buy a home, but they simply don't know it. For various rent levels, the chart below shows the home price the renter could afford without paying more than their current rent, after tax deductions are figured in. The chart assumes a 10% downpayment and average interest rate and debt ratios. Each person will be a little bit different depending on their downpayment and interest rate but this should give you a general idea of when it may make sense to buy as opposed to rent.

Rent Purchase Price Mortgage Payment Tax Savings
$800 $168,000 $1,110 $310
$1,000 $210,000 $1,390 $390
$1,200 $255,000 $1,670 $470
$1,400 $295,000 $1,950 $550
$1,600 $335,000 $2,200 $600
$1,800 $375,000 $2,500 $700
$2,000 $420,000 $2,750 $750

Are home inspectors licensed?

Generally no. Most are not required to have a state license. However, home inspectors in many states are accredited by the American Society of Home Inspectors, which requires members to adhere to strict standards of practice and a code of ethics. Look for an accredited home inspector. Many inspectors also are licensed contractors, another safeguard for you since most states have stringent contractors licensing standards. A reputable home inspector also carries errors-and-omissions insurance.

Should I sell a home before I buy one?

Generally, yes. If you purchase another home before you have sold your current home (assuming it is not an investment property) than you risk having to make two mortgage payments if your current homes fails to sell in the time frame you expect. The most prudent approach is to sell your old house first, then buy the new one contingent on the actual closing of the old house.

The builder we bought from is now selling our model for significantly less than the price we paid. Can we take any legal action against the builder?

The short answer is probably no. You will have a hard time convincing a judge that the developer is in the wrong. One common thread that runs through real estate law is that real estate values are unpredictable and that no one can guarantee escalation of prices. If property values go up, you cannot be ordered to give all or some of your gain back to the developer. Similarly, if values go down, why should the developer be required to pay you any money?

How much can I afford to buy?

Depending on the following factors, you can afford to buy a house priced up to three times your gross annual income:

Cash available for down payment, closing costs and cash reserves required by the lender
Outstanding debts
Credit history
Loan type
Loan rate

Your best bet, however, is to talk with a lender so that you can discuss your individual situation with him or her. There are many,many different options out there.

Should I buy a home when prices are falling?

You can often find a real bargain when prices are declining in a market. But be sure that you understand why prices are falling. If a neighborhood is in decline, it may not be a wise investment. Also, you will have to make an educated guess when you make your offer. Prices could decline further, meaning your property value could decline, too. It generally is unwise to buy in such a market unless you are planning to stay for a while, and can recoup your initial investment. In the long run, most real estate investments are a sound decision.

Can the sellers listen to other offers while they are negotiating with me?

In most cases, the owners are not obligated to sell you the property until a purchase contract is signed by the sellers and delivered to you or your agent. Until this occurs, the sellers can accept other offers. Once acceptance of the offer has been delivered to you or your agent, you have a binding contract.

Can I back out of my home purchase contract because I had a change of heart?

You could risk the loss of your deposit money, a lawsuit from the seller, an arbitration proceeding, mediation or a small claims court action. It all depends on the terms of the contract. Check with your real estate agent right away if these feelings begin to surface.

Are appliances such as refrigerators and ovens included in the sale?

Do not assume that appliances will be included in the sale. Unless they are included in the purchase agreement, the sellers are not obligated to leave them for you.

As a general rule of thumb, however, In California it is customary for the seller to leave the stove and any built-in appliances such as dishwashers, built-in microwaves, etc. Most sellers will take the refrigerator and washer and dryer unless, again, it is agreed to otherwise in the purchase contract.

If there are free-standing appliances on the property that you do not want and you are afraid the sellers will leave them, be sure to include in the contract that the sellers remove the items by closing.

Can I still purchase a home after filing for bankruptcy?

Yes, though you will have more difficulty than if you hadn't filed bankruptcy. Bankruptcies may appear on your credit report for up 10 years and significantly drop your credit rating. Borrowers are rated from A to E, with A-rated borrowers being the best credit risks. If you filed bankruptcy more than a year ago but less than 10, expect to be rated C. As a C-rated borrower, you can expect to be required to make a down payment from 20 to 35 percent for a loan with an interest rate one to three percent higher than an A-rated loan. If your credit rating is less than an A, your best bet for getting a mortgage is to bypass the banks altogether and head straight for a mortgage broker specializing in difficult loans.