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In one of my kids’ Winnie the Pooh books, Pooh is encouraged to “try, try again” when faced with an obstacle. That is sage advice, and I’m going to urge some of you to “try, try again” with the “Keep Your Home California” program.

This is a program that the State of California created in response to a large amount of money they received from the Federal Government as part of the “Hardest Hit Fund.” When it was first released, only a few lenders were participating, and the qualifications were strict. Since then, more and more lenders have come on board, to where there are now roughly 100 lenders and loan servicers participating. This means that if you called before and were disappointed that your lender wasn’t participating, you should call back, because the odds are VERY good now that they now ARE!

And on top of all that, there have been some recent changes to the PRINCIPAL REDUCTION program that are very interesting. In the past, Keep Your Home California would match $1 for every $1 that your lender dropped your balance. That appears to be changing now, to where nearly all of the principal reduction money is coming from Keep Your Home California and not your lender, so lenders are obviously much more interested in that program all of a sudden! It’s basically free money to them (thanks, taxpayers!).

They have several programs to choose from: from money to help you catch up on your payments, principal reductions, relocation assistance, etc. So check in with them if you need some help with your mortgage. For more info, call 888-954-KEEP(5337) from 7 A.M. and 7 P.M. Mon-Friday, and 9 A.M. to 3 P.M. on Saturdays. Or check out their website at www.KeepYourHomeCalifornia.org. Their website is now interactive so you can find out online instantly if you may qualify for any of their programs.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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For years the main question I would get was, “What’s my home worth?” People were buying homes they couldn’t afford banking on the hope that the home was going to keep going up in value, and they did, for a while. Then the meltdown happened, and people stopped asking me what their home was worth but instead asked about loan mods and short sales.

Now, they are back asking about how much their home is worth again. Prices have recovered to the point where a LOT of people that were upside-down just a year or two ago now have hope that they actually get out of their home without having to do a short sale. Some of them even get surprised when I tell them they’ll actually get some money out of the deal!

The challenge we face now is that there is a lot of “noise” in our data. There are still a few trashed bank-owned homes out there dragging the comps down, and then there will be the pristine, super-upgraded home that will sell WAY high. And then there are the “suspicious” ones where I’ll see a home sell before it gets exposed to the market and sometimes it’s $50-75K less than what you’d expect it to sell for. On top of that, due to low inventory, low rates and high buyer demand, buyers are sometimes bidding homes up in a bidding war once they hit the market. So what I’m saying is that it is hard right now to really set an exact price for ANY home in our market!

If you’d like an “estimate” of your home’s value, I’ll be happy to run the actives, pendings and solds for you and do my best to give you my best guess on the value. Just call me or send an email to Brian@SharpHomesOnline.com and give me the address and some basic info about the home and I’ll send you back a report.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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Renters have had it hard the last few years. There has been more “renters” than “rentals” for a while. Many potential homebuyers were scared of jumping into the housing market when prices were collapsing and at the same time former homeowners were becoming renters after losing their homes to short sale or foreclosure. This means landlords could be fairly picky about who they’d rent their properties to and rental prices were increasing.

We may be seeing this situation thaw a little bit. We are seeing an increase in the number of properties for rent and that’s leading to a flattening out of rental prices. We are even seeing some rental price reductions as it takes longer to get a property rented out. Smart landlords know that it’s better to take $100-200 less a month but get it rented than to have it sit vacant for 2-3 months. [For the record, I’ve been predicting that rents would fall the last few years, and I’ve been dead-wrong!]

The situation that was causing rents to go up may be reversing itself. Potential homebuyers have gone from being scared of buying a home to being scared of getting “priced out” of the market if they don’t buy soon. And many of the people that lost homes due to foreclosure or short sale over the past 2-5 years can now potentially qualify to buy homes. So many tenants are really “wanna-be” homeowners right now who would rather buy than rent, and over the past year or two the number of investors buying homes to rent out has skyrocketed. So at the same time that demand for rentals is slowing, supply is increasing.

So if you are a tenant, just know that you may be gaining a little bit more leverage within the next few years to negotiate on rent. And if you are a potential landlord thinking of buying a home to rent, it would be wise to factor in a little “cushion” to your numbers. So if the property rents at $1,700 a month now, make sure you can handle it if rents drop to $1,500.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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Wow, what a turnaround! It feels like I’ve been writing doom and gloom articles for forever. But now I finally get to report on some POSITIVE things for a change! (Well, everything depends on your perspective. Rising prices are NOT great news for buyers...)

Our market definitely hit the proverbial “bottom” last year and it’s been appreciating rapidly since then. The average sales price for homes in our area is up a little more than 30% the past 12 months

You always have to take housing numbers with a grain of salt. It’s often not as bad as it looks, or not as good as it looks, either. Back when average prices were collapsing, it was partly because the higher-end homes just weren’t selling AT ALL and a lot of the lower-priced homes DID sell, which brings the average down. Now it may be the reverse, in that we are seeing a lot of new builders re-enter the marketplace and they are putting their homes on the MLS to get more exposure, which can shift the average price higher.

But the bottom line is that all the band-aids on top of band-aids for the real estate market are starting to work. Yes, the banks and the Federal government have found ways to keep homes off the market that really should be on the market. Yes, the Fed is driving interest rates artificially low. Will we look back on this in 20 years as a big mistake? Probably. But for right now, the market is hot, prices are up, buyers are desperate, and it looks like it’s going to continue that way for a while. If this keeps up, pretty soon we’ll be talking about another “bubble” forming that is unsustainable. I don’t think we are there yet. I think this has some more steam left in the run before it gets to that point. But the basic math says if we go up another 20-30%, then we may be approaching “bubble” territory again because the average person will no longer be able to afford the average home.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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The “Homeowner Bill of Rights” went into effect Jan. 1, 2013. The general purpose of the law is to do away with the ability of lenders to do something called “dual tracking” (when a borrower is trying to work out some alternative to foreclosure, yet the lender continues the foreclosure process). This is NOT an across-the-board foreclosure moratorium. Lenders ARE prohibited from foreclosing, but only in certain instances, and the rules are different if it’s a loan mod or a short sale.

For a loan modification, the lender cannot file any foreclosure notices (notice of default or notice of sale) and they cannot hold a trustee’s sale if the borrower has submitted a “complete” loan modification package and it’s being reviewed. The kicker here is that it appears to be up to the lender to decide what a “complete” package means. And stories about borrowers sending in documents, only to have the lender lose them are frequent. My advice is to document whenever the lender tells you your file is “complete.” They are supposed to acknowledge that in writing, but I’ll be surprised if that happens very regularly. If they do turn you down for a loan mod, they are supposed to do so in writing, and then they STILL can’t foreclose for 30 days, which gives you the ability to appeal their decision.

The rules for short sales are quite different, and actually quite inferior, in my opinion. The hold on foreclosure activity doesn’t start at application. It only starts once the short sale is APPROVED by all lien holders AND “proof of funds or financing has been provided to the servicer.” I know what “proof of funds” means (liquid funds sufficient to close the deal) but they don’t define what “proof of financing” means? Will they accept a pre-qual letter? Or do they require an underwritten pre-approval letter? Or do they mean formal loan approval? Or loan docs in title, signed and lender has funded? BIG differences between each of these!

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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One... That’s how many “regular” equity sellers there were one month a few years back. I can’t remember the exact date, but I’m guessing it was somewhere around 2007 or 2008 when we were deep in the throes of the “mortgage meltdown.” I was compiling some market data for a report and was shocked to see that that month only ONE of the closed escrows in Brentwood was a “regular” seller. All the rest were either short sale, or bank-owned, or an investor “flipping” the property. Since that point, the vast majority of sales continued to be distressed sales of some kind. Most months they hovered around 70-90% of the sales. And when you saw a home for sale that wasn’t a distressed sale, it was usually just over-priced because they were trying to get what they owed on it.

Well, we’ve had QUITE the turnaround recently. Last year, 61% of the sold homes in our area were distressed sales of some kind. And so far in 2013, only 46% were distressed sales. When you look at the active homes for sale, only 33% of them are distressed sales. And many of the actives are legitimate equity sellers, as in they aren’t just over-priced to avoid being a short sale. I don’t think we are going to see a wave of bank-owned homes like we kept fearing. I do think we’ll have significant short sales for a while, but less than in the past.

There are many contributing factors to this turnaround. It’s mostly due to the fact that there have been massive foreclosures and short sales the past 5-6 years, and they aren’t making the “crazy” loans anymore. So if you think of any assembly line in a factory, they are going out the output side, but very few are going in the input side. Most of the buyers that bought homes the last few years can actually afford their payment, and it is a 30 year fixed rate loan, or the buyer paid cash. On top of that, our market “bottomed” about the middle of last year, and prices are up 20-30% since then. This is helping those people that were just a little upside-down get back to where they have a little equity.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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When you have a foreclosure, deed-in-lieu of foreclosure, loan mod with principal reduction or a short sale, it’s possible that you will have “phantom income” in the form of forgiven debt. The Federal government extended the Mortgage Forgiveness Debt Relief Act through the end of 2013. So if your loan was used to buy, build or improve a principal residence, or you are insolvent or have filed for bankruptcy, you probably won’t owe Federal tax. You may owe California tax because California’s Mortgage Forgiveness Act expired 12/31/2013. Regardless of either the Federal or State Acts, if you are solvent and you pulled cash out of a property, you may owe phantom income tax.

However, there is possible good news on two fronts. First, SB 30 (Calderon, D-Montebello) was recently introduced as a CA Senate bill, which will make California’s law like the Federal law again if it passes. I would say odds are better than 50% that it will pass

The other good news is hard to explain in the remaining space because it’s a complicated legal argument, so I can only summarize. Back in 2011 California law changed to where if a lender agrees to a short sale, in most cases, they are forbidden from pursuing the borrower for the deficiency. So the argument goes that when you do a short sale, the loan becomes equivalent to a “purchase-money loan,” which means the lender’s only option in the event of default is to pursue the property, not the borrower. That means there WAS no “forgiveness of debt” and therefore there should be NO 1099. So if this argument holds up, that COULD mean that ALL short sales in California for 1-4 unit properties are free from ANY phantom income taxes for California. So this is one more reason to consider a short sale if you are facing difficulties paying your mortgage instead of letting it foreclose because it MAY have favorable tax treatment, depending on your situation. I AM NOT A TAX OR LEGAL EXPERT. I’VE JUST DONE SOME RESEARCH ONLINE. CHECK WITH TAX AND LEGAL EXPERTS FOR YOUR SITUATION. THIS IS A CONFUSING AREA OF LAW AND THERE ARE DIFFERENCES IF PROPERTY IS A RESIDENCE, RENTAL OR LAND BEYOND WHAT I HAVE SPACE TO EXPLAIN.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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PMI stands for Private Mortgage Insurance. If you are looking to buy a home, and you are putting less than 20% down, you will likely have to pay PMI. The purpose is to insure your lender in the event that you don’t pay them back.

A few years ago lenders got creative and they would make you one loan at 80% of the appraised value of the property, thereby avoiding PMI, but then they’d make you another loan at 10% of the value, so you’d only have to come up with 10% down. The problem is that the interest rate on this second loan was often quite high, but it was still cheaper than paying PMI. But then a few years ago, the tax laws changed to where PMI was tax-deductible, so then the pendulum swung back in favor of PMI, and the 80/10/10 loans fell out of favor. But recently I learned that PMI is not tax-deductible for everyone. There are income phase-outs starting at $50K per year for single-filers and $100K per year for joint filers. So this makes the PMI look less attractive for many home buyers.

Then I just heard that the rates for PMI for FHA loans are about to go up, again. And that starting in June, the rules for when PMI come off your FHA loan are changing, again. Many years ago, when you had 20% equity in your home, the PMI would come off automatically. But then some lenders said that they wouldn’t count appreciation any longer in that calculation. You had to have paid your loan DOWN by 20% since it started, no matter how much your home appraised for. But now the new rules may be that PMI NEVER comes off your FHA loan...  So the only way to get it off is to go get a whole NEW loan and payoff the old one. So if rates go up in the future, you may be STUCK in your FHA loan with PMI.

So if you are looking to buy a home, and you have less than 20% down, be sure to ask your lender about ALL your options and weigh them all carefully. And read ALL the fine print about the PMI!

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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I’ve heard a lot of heart-breaking stories the last few years as a result of the real estate meltdown. Some of them were just “bad luck” stories of people losing their jobs, divorce, health, issues, etc. But then there is another whole category of stories I hear that were caused by someone’s actions of trying to take advantage of someone else. Some of the worst ones are when someone rents out a property, and the landlord says they’ll discount the rent substantially if the tenant will pay 2-3 months ahead of time. The tenant is ecstatic, until they move in and find out the home gets foreclosed on soon after. There is a new law in California where the landlord has to disclose if foreclosure has begun on the property. So IF the landlord complies with this new law, that will help protect tenants from the situation I describe above. However, if someone was going to lie to you in order to take your money, I don’t hold out a lot of hope that they’ll follow this disclosure law. Best to do your own research on any property you are thinking of renting and find out if the foreclosure process has been started. Another good idea is to ask your potential landlord to see a copy of their mortgage statement. See if the payments are current, and also see if their payment is significantly more than what you will be paying for rent, which would be a big red flag!

Here is the verbiage that is mandated by this new law: "The foreclosure process has begun on this property, and this property may be sold at foreclosure. If you rent this property, and a foreclosure sale occurs, the sale may affect your right to continue to live in this property in the future. Your tenancy may continue after the sale. The new owner must honor the lease unless the new owner will occupy the property as a primary residence, or in other limited circumstances. Also, in some cases and in some cities with a ‘just cause for eviction’ law, you may not have to move at all. In order for the new owner to evict you, the new owner must provide you with at least 90 days’ written eviction notice in most cases."

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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So a lot of people took a big collective sigh of relief when we heard that the US Congress agreed to extend the Mortgage Forgiveness Debt Relief Act for another year. Just to clarify, this Act means that forgiven debt on your mortgage is generally not taxable, but only to the extent that the loan was used to buy, build or improve the property. So if you took cash out, you could still face a tax liability. There are other exemptions, notably bankruptcy or if you are insolvent (your debts exceed your assets). But there is more to the story, unfortunately...

Don’t you pay both federal AND state income taxes? That’s right. California has their OWN rules in regards to taxing mortgage forgiveness. For a while several years ago, the federal government was not taxing most mortgage forgiveness, but California (and some other states) were. After a sufficient hue and cry, California agreed to match the federal rules on this topic. But their rules also expired on 12/31/2012 just like the federal program.

I checked in with the Franchise Tax Board in Sacramento and asked if they had extended theirs to match the federal rules again. The answer was a disappointing, “No.” That means that some people may be in a situation where you don’t pay federal income taxes on your forgiven mortgage debt, but you may owe California income tax. I then asked if there are any bills pending to match up the rules to the federal rules again, and they didn’t think so. I would imagine someone will submit a bill shortly. The question is whether California will extend theirs again. If they do, it’s also likely that they will back-date it to 1/1/2013. And as a reminder, if you will owe tax on the forgiven debt, letting it go to foreclosure will probably NOT solve your tax problem! PLEASE CHECK WITH A TAX EXPERT FOR SPECIFICS TO YOUR SITUATION.

If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty