The numbers don’t lie, and if you think that California real estate is better check out the information below, and you determine for your self.
Every one knows of the hardest hit states in the country through the foreclosure crisis has been California.
California Pre Foreclosures have been consistently high in Los Angeles County, which has 3.08 percent of its households in foreclosure; Orange County has 3.42 percent of families in foreclosure, followed by San Diego at 4.26, San Bernardino with 7.31, and Riverside is still first with 9.27 percent of families in foreclosure.

With Los Angeles Pre Foreclosure down, the outlook for the region is positive you would suspect, as the area has seen foreclosure rates decline on average 25 percent from the November 2008 to November 2009;however we have not seen the eye of the storm as of yet.
The cities with the highest numbers of Notice of Default and Notice of Trustee Sales are Los Angeles (1120), San Diego (1067), Riverside (717), and Corona (505).
Jeff Coga, a short sale investor in Southern California pulled local data, and it clearly showed over 20,000 notice of defaults, and over 31,000 trust deed sales set between January- March. This is a frightening number as it could even be higher as the holiday Moratorium is now officially over today 1/04/2010.
Bernie Germani, another short sale investor in Southern California said ” that 2010 will be no different than 2009 as far as the real estate market in California. We are still declining, and I don’t care what the media tells you, We Aren’t On A Recovery Road Yet. The option arms that are going to adjust this year, and next year we will see many many new foreclosures, and these are good credit borrowers. Don’t let the media trick you into believing we have the bottom of the market.”

Written By:
Susan Park

Bernie Germani, a short sale investor in Southern California said “He personally knows of siutations where the homeowner was notified the foreclosure was postponed until further notice, and Bernie said some of these familes cried with joy that they could stay through the holidays.”

Written By Susan Park

Jeff Coga, a Los Angeles, California real-estate investor, learned late in the morning of Oct. 28 that a never-occupied custom house on the northern fringes of Los Angeles County a beautiful property was going up for auction around noon the same day. The six-bedroom home, built on a 15,000 square foot lot. The kitchen with two dishwashers, four ovens, “antibacterial” copper sinks, and a master “spa” bathroom with space for a flat-screen TV visible from the tub. Jeff, knew the area and knew the exact house that was being auctioned off that day.
Jeff, decided to go to that particular L.A. County auction to see if we might be able to purchase this luxury home.

The minimum bid, as set by a unit of Citigroup Inc., which had a $1.7 million mortgage on the home, was $389,900. After several minutes of bidding among investors and their representatives, some wearing shorts and flip-flops, Mr. Coga won the home for $549,900. A week later, he agreed to sell it for $698,000 to a woman who moved in this month.

During the housing boom, millions of Americans tried to make money by buying and then quickly reselling new houses and condominiums. That kind of flipping stopped several years ago as home sales stalled amid a surge in foreclosures and curtailed lending.

Now, a different breed of flipper is proliferating: one who seeks bargains at foreclosure auctions. Unlike the boom-time flippers, the latest generation needs cold cash, lots of local-market knowledge and strong nerves.

Investors compete mostly with other full-time professionals who monitor foreclosure auctions at county courthouses across the country. The bidders often haven’t had a chance to inspect the property or determine whether it’s occupied by tenants, who may be hard to evict.

Sometimes ‘you have half an hour to make a half-million-dollar decision,” says Jesus Yinh, another real estate investor at “That’s something most people can’t or aren’t willing to do.”

In the states where home prices have fallen the most, many local real-estate markets are dominated by foreclosed property, dragging down the value of neighboring homes. Barclays Capital estimates that banks and mortgage investors have 639,000 foreclosed homes for sale across the U.S., largely concentrated in Florida, California, Arizona and Nevada. That’s equivalent to more than 10% of expected U.S. home sales this year.

“Flippers swoop in at public auctions of foreclosed homes, known as trustee (California) or sheriff sales. In many states, the lender sets the minimum bid, and takes possession of the property only if no one bids more. In the past, the minimum generally was about equal to the mortgage balance due”. Susan Park, real estate investor in Southern California said” in today’s market, in which many home values have dropped far below the loan balance, lenders wouldn’t attract investors if they set the minimum at that level.

So lenders, or the loan-servicing firms that represent banks and investors, are increasingly likely to set the minimum much lower. Their goal is to tempt others to buy the house and spare banks the headaches and costs that come with taking possession”.

November about 21% of homes sold in trustee sales in California went to investors rather than to a foreclosing lender, up from 6% a year earlier. The trend is similar in some other areas with high foreclosure rates, including Phoenix and Miami.

The real advantage of such an outcome for the bank is that it gets money for the property right immediately, even if it isn’t enough to cover the loan balance due. The bank doesn’t need to make repairs to the home, cover the taxes and insurance, or pay real-estate-agent commissions. Is this a smart business decision for the banks?

The risk for banks is that if they set the minimum bid too low, the home might end up selling for much less than they could reap if they took ownership of it and sold it themselves; however with some 7.5 million U.S. households behind on their mortgage payments or in foreclosure, many lenders are overwhelmed, and over worked. They’re negotiating with distressed borrowers and figuring out how to sell the growing supply of foreclosed homes, and don’t see an end to this challenge for many years to come.

To help them set the minimum bid, banks often consult with local real-estate agents and use software that estimates housing values. American Home Mortgage Servicing Inc., which collects payments and handles foreclosures on behalf of banks and loan investors, uses a formula designed to “achieve a fair value for the property and induce third-party bidders,” says Christine Sullivan, a spokeswoman for the Coppell, Texas-based firm.

American Home starts with a broker’s estimate and subtracts the expected costs of taking ownership of the house and selling it. The minimum bid is above the net proceeds American Homes believes it could get by acquiring and selling the property itself, she says.

Outside the Los Angeles County court building in Norwalk, California trustees, companies that are hired to handle foreclosure auctions, offer as many as 800 – 1000 houses every weekday. A typical auction lasts only a few minutes. On a recent afternoon, a few dozen bidders and onlookers were clustered around a trustee employee seated on a lawn chair conducting auctions. He kept track of the bids on a laptop computer perched on one knee.

Many of the bidders are regulars at the sale, bidding for themselves or on behalf of investor clients. “We’re all kind of like a little dysfunctional family,” said Jeff.

Buying at these auctions is perilous. There are no public viewings, so bidders often can’t know how much damage may have been done inside a house by occupants facing foreclosure. We’ve seen people pour concrete down the toilets. Unless they’ve done their homework, bidders also don’t always know whether they’re buying a home subject to a lien from another lender, which can happen in cases where the borrower took out more than one home loan.

If you have the time, and our dilligent, you can really pick up some amazing deals at the court house steps, and turn around and sell those for some great profits.
We help struggling investors find their niche in today’s market place. Please feel free to email us at info@getsswb.com or call us directly at 310-776-5032.

Written By:
Bernie Germani

Resetting Rates: Current interest rates are at or near historic lows with 30 year fixed mortgages below 5 percent while ARM’s are likely to readjust and drive the cost of monthly mortgage payments to double their former payments. Unfortunately, many current ARM holders do not qualify for refinancing due to changes in employment status, high loan to value ratios and increased debt to income percentages.

Evaporating Equity: Not only did millions of Americans take out Adjustable rate mortgages but they built additions and over-improved their homes based upon loans. As home values fell, so did the equity reserves required to refinance their ARM mortgages. Whether it was a first mortgage with minimal down payment or a second (and even third) mortgage, lower property values have all but erased excess equity from a large number of buyers.

Cheaper to Walk: Many homeowners are finding it less expensive to simply walk away from rapidly rising mortgage, rent for awhile then repurchase. According to industry experts, a significant number of homeowners are capable of making the mortgage payment but simply don’t desire to do so given the cost of purchasing the same home after foreclosure. Jesus Yinh of Exit Real Estate Group, said ” he has seen a trend of this happening in the mid Wilshire area of Los Angeles.” Current homeowners are eligible for FHA loans in as few as three years after default – creating an inverse incentive to continuing paying on a property worth tens (or even hundreds) of thousands dollars less than the existing mortgage.

Renting an Increased Option: Throughout the nation lenders are getting creative in order to reduce the inflow of defaulting properties on their portfolio; one of the more popular options among existing homeowners is the ability to rent your current property for a specified period of time.

ReFi with an ARM? It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later. However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses. It also has the benefit of “buying time” for the banks and lenders who are in no hurry to acquire even more properties given the current backlog of non-performing properties in their portfolio.

What is a California short sale investor to do? Get ready for the coming wave of ARM properties to hit the market. Be sure your mindset is in place and position yourself to solve problems for both homeowners and lenders in need of a new start. Well first off, please come back shortly to http://www.shortsalewealthbuilders.com/
We can show you how to take advantage of California’s short sale market, and in 2010-2011 it will become California’s second Gold Rush… So saddle up, and get ready for the ride of your life.

The guidelines are to help encourage the use of short sale transactions in which the borrower with lenders approval sells the home for less than what is owed on the loan.
The program taunts that it will now become easier for borrowers to voluntarily relinquish ownership of properties through a “deed in lieu of foreclosure.” (In the past banks said this program would be rolled out, but it has never quite taken off.) A homeowner just gives the property back voluntary to the bank while being in default, and it was not to have as much damage as a foreclosure to the credit score, but banks balked at this program.

Short sales generally results in higher profits for the bank than a foreclosure, and will have less economic effects to the local neighborhood, because homes aren’t left vacant, they are not exposed to squatters, and vandalism.

The new proposal would allow borrowers to receive $1,500 from the government if they sell their home as a short sale. Mortgage-servicing companies(the companies who manage the mortgage for the investor.) will receive $1,000 for each completed short sale. Is this a big enough incentive for them to get the job done?

The program is open to borrowers who have 1st pursued a government loan modification but did not qualify, or are delinquent on their modification.

This program was first introduced in May, but did not include short sales. This is the Obama administration’s $75 million foreclosure-prevention plan, which include incentives fore mortgage companies and investors to rework these troubled loans.

Under the new guidelines, second- mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens.

Another great idea(hopefully it works) is that borrowers who complete a short sale under the new program must be “fully released” from the future liability for the debt.  Susan Park, an Exit Real Estate Group Realtor said ” this will be a huge opportunity for homeowners to help insure no further repercussions of worrying if they will be sued from their lender over the remainder of the mortgage balance.”

Bernie Germani, a short sale investor in California said “he has been waiting for this day to come, but has some reservation that it will not be able to help more people out who truly need this program.”

Jeff Coga, said ” If this program works out the way it is designed to, this will have a very positive impact on the real estate community across the country.”

In most cases, a short sale is a sale by an owner in which the amount owed on the property is greater than the amount the seller will receive from the sale. We Recommend to our clients that they must obtain an agreement from the lender that the proceeds from the sale will satisfy the debt in full in order to convey clear title to the property to the  new buyer. Lenders are sneaky they will try and have you sign a promissory note for the remainder of the balance, but we always tell our clients to say “No” to this.

A foreclosure or a deed in lieu of foreclosure results in the repossession of a property by the lender due to default on the loan on the part of the borrower. We have heard the Government is offering cash for keys, but we have yet to find 1 homeowner who have recieved that alleged cash.

Each of these events can carry significant tax consequences unless the borrower meets specific exclusions.

With either a short sale or a foreclosure, two distinct, potentially taxable events may occur.
These include: (1) income resulting from the forgiveness of the debt is realized by the homeowner.
(2) gain or loss resulting from the sale of the residence to a third party or deemed sale of the residence to the lender in satisfaction of the debt must also be considered.

The Mortgage Debt Foregiveness Act of 2007 and the Emergency Economic Stabilization Act of 2009 provide tax relief for debt forgiven through a short sale, foreclosure or deed in lieu of foreclosure on a principal residence.

In most cases, in order to qualify as a taxpayer’s principal residence, the taxpayer must own and use the property as their primary residence for periods totaling two out of five years before the sale.  Under Internal Revenue Code Section 108, the discharge of qualified debt incurred to buy, construct or substantially improve a principal residence can be excluded from income if the discharge occurs in calendar years 2007 through 2012. The residence must secure the debt. Up to $2 million of forgiven debt is eligible for this exclusion for married couples filing joint tax returns.

If the taxpayer does not meet the Principal Residence Debt Exclusion under the Mortgage Debt Forgiveness Act of 2007 or the Emergency Economic Stabilization Act of 2009 discussed above, they must look to other provisions for possible tax relief.

Recourse versus non-recourse

The first step is to determine if the debt is “recourse” or “non-recourse.” If the debt is recourse, the borrower is personally liable for the debt and the lender is able to pursue the borrower’s other assets in satisfaction of the debt.

If the debt is non-recourse, the lender’s remedy is limited to the property and the borrower is not personally liable for any deficiency. In California, most loans incurred to purchase a home are non-recourse. Mortgages from refinancing a previous mortgage or home equity line of credit are typically recourse.

Cancellation of indebtedness

The second step is to determine if a taxpayer has cancellation of indebtedness (COI) income. When a property subject to non-recourse debt is foreclosed on or is sold subject to a short sale, the property is treated as being sold for the balance of the mortgage. Therefore, there is no COI income.

For property subject to a recourse loan, COI income is the difference between the principal balance of the debt and the fair market value of the property securing the debt.

There are specific exceptions to this, including the Principal Residence Debt Exclusion, which blurs the distinction between recourse and non-recourse debt in determining the type and amount of discharged debt eligible for favorable tax treatment.

Gain or loss on sale

The third step is to determine the gain or loss on the sale of the property.

Short sales, foreclosures and deeds in lieu of foreclosure are treated as sales or deemed sales for tax purposes.

The gain or loss is determined by subtracting the net sales price of the property from the owner’s adjusted basis in the property.

The adjusted basis of the property is generally equal to the purchase price plus costs to acquire the property and improvement costs less any depreciation taken.

The selling price is equal to the outstanding principal balance of the loan in the case of non-recourse debt and the price that a third party would pay for the property if the loan is recourse, less any transaction expenses related to the sale.

This article focuses on the income tax aspects of foreclosures and short sales involving principal residences and other personal property.

The above information relates only to federal income taxes under the Internal Revenue Code. SB 1055 in California was intended to make California laws more closely conform to federal legislation and was only effective for 2007 and 2008. This legislation has expired. Conformity legislation has been introduced that would adopt the same rules as provided under federal law through 2010.

But with the current budget situation in California, its enactment may be in jeopardy.

Our local economy has been heavily impacted by the tightening mortgage market and the liberal loan policies of the early to mid 2000s.

If you are involved in any form of debt restructuring or a forced sale of property, you should consult with your tax adviser to gain an understanding of how these settlements will affect your federal and California income tax returns.

It is our expectation that The Mortgage Debt Relief Act of 2007 and the Emergency Economic Stabilization Act of 2008 will provide some tax relief to those individuals having to face these difficult decisions.

We are not tax experts, we are just an Exit Real Estate Group/ short sale investorsin Southern California. Please consult your own CPA or attorney for more clarification that would pertain to your situation.

Commercial property prices have clearly taken a nosedive, but Moody’s says the pace of decline appears to be moderating. From February to May of this year, the Moody’s/REAL CPPI averaged a drop of 4.6 percent, falling more than 7 percent during the months of April and May. But looking at the June to September four-month period, the average decline has retreated to just 3.2 percent.

Still, the agency’s analysts expect commercial property values to fall in the coming months by as much as 12 percent more from the October 2007 peak before experiencing a modest rebound to be followed by a long, gradual recovery.

In a report accompanying the agency’s price index, Nick Levidy, Moody’s managing director, explained that cash flows for properties with short-term lease structures, such as hotels and multifamily, are likely to hit bottom in 2010 or early 2011. The bottom for office, retail, and industrial properties, he says, will take longer to form.

“We believe that valuations will rebound off the bottom and settle in for the longer term at levels 30 percent to 40 percent below the market top as liquidity and investors return to the sector and property cash flows begin to recover,” Levidy said.

According to Levidy, in general, commercial real estate lags the overall economy and is dependent on both business and consumers for demand, but he says specific property types are strongly affected by certain macroeconomic metrics. “Employment growth is fundamental, for example, to the office property market,” Levidy said. “The health of the residential housing market is a key for the multifamily sector and retail properties are greatly dependent on rising consumer confidence.”

Cash flows from properties that back commercial mortgage backed securities (CMBS) will recover slowly over a period of several years, Moody’s said in its report. In addition, refinancing risk on CMBS will grow as maturities near on bonds issued during the 2007 peak of the market.

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A record-high 23,117 trustee sales are scheduled for sale Monday, November 30^th coverage area (CA, AZ, NV, WA, OR).

Since state laws do not allow trustee sales on state holidays, we are now hit with an overabandunce of sales today. The total number of trustee sales per day for the region is typically five to six thousand.

To cover Thursday, Friday and Monday, the number of sales should reflect three days (15,000 – 18,000). In addition, trustee sales typically slow during the holidays and see a bump in January.

So it’s a little surprising to see four-day’s worth of sales from a three-day period right after Thanksgiving. That being said, it doesn’t mean 23,117 families will lose their homes on Monday. Lately, ninety percent of trustee sales are just postponed to another day.

Susan Park, a short sale investor in Southern California mentioned “that she could not believe all the trust deed sales scheduled for today just in Los Angeles County.”

Jeff Coga, said “more than likely half of those foreclosures will get postponed.”

Bernie Germani, another short sale investor said in his market place Lakewood, Long Beach California that he is starting to see the affects of the mortgage meltdown starting to affect the higher end luxury homes, and a lot more people from the higher economic financial status is now starting to call me more in need of help.”

Jesus Yinh, and Exit Real Estate Group Realtor, said that he got a large number of calls over this Thansgiving weekend to help new clients from foreclosure.”

Fannie Mae announced a program aimed at helping ordinary home buyers compete with investors for foreclosed homes. We are not sure this is a right choice, because across the nation real estate investors have less than 10% foreclosure rate.

Under the program, dubbed First Look, Fannie plans to consider offers only from potential owner-occupants and certain public-housing entities during the first 15 days in which a foreclosed home is on the market.

Fannie and its main rival, Freddie Mac, are government-controlled companies that buy or guarantee home mortgages. They are among the biggest owners of foreclosed homes. As of Sept. 30, Fannie said it had 72,275 single-family foreclosed homes on its books. Freddie had 41,133 as of that date.

Bernie Germani said” many of us real estate investors can move faster on home purchases because we are able to pay cash and don’t have to wait to qualify for a loan and get an appraisal. Investors often turn the homes into rental units or resell them to other buyers for a quick profit. People seeking to take advantage of the drop in housing prices to buy their first homes have been grousing that they often lose bidding wars to investors.”

Fannie said it also would help owner-occupants acquire homes by reducing deposit requirements to as little as $500 and giving them a chance to renegotiate offers after appraisals. Such buyers also are to be allowed as many as 45 days to complete the transaction, up from the usual 30 days.

A Freddie spokesman said the company has similar pilot programs and is helping owner-occupants pay closing costs.

Fannie announced Tuesday that 4.72% of the single-family home loans it owns or guarantees were 90 days or more overdue in September, up from 4.45% in August and 1.72% in September 2008.

Jesus Yinh, and Susan Park, short sale investors in Southern California said ” We are not sure why Fannie would even consider this program. Us investors are the ones who are helping the economy not adding to the foreclosure challenges, but at the same time we welcome the competition of non-investors.”