If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:
- Your property is worth less than the total mortgage you owe on it.
- You have a financial hardship, such as a job loss or major medical bills.
- You have contacted your lender and it is willing to entertain a short sale.
2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won't try to take advantage of your situation or pressure you to do something that isn't in your best interest. A qualified real estate professional can:
- Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
- Help you set an appropriate listing price for your home, market the home, and get it sold.
- Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
- Ease the process of working with your lender or lenders.
- Negotiate the contract with the buyers.
- Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.
3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:
- A hardship letter detailing your financial situation and why you need the short sale
- A copy of the purchase contract and listing agreement
- Proof of your income and assets
- Copies of your federal income tax returns for the past two years
4. Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:
- If you have only one mortgage, the review can take about two months.
- With a first and second mortgage with the same lender, the review can take about three months.
- With two or more mortgages with different lenders, it can take four months or longer.
When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don't expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
- You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
- Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
- Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy
Make sure you choose a REALTOR® who will provide top-notch service and meet your unique needs.
1. How long have you been in residential real estate sales? Is it your full-time job? While experience is no guarantee of skill, real estate — like many other professions — is mostly learned on the job.
2. What designations do you hold? Designations such as GRI and CRS® — which require that agents take additional, specialized real estate training — are held by only about one-quarter of real estate practitioners.
3. How many homes did you and your real estate brokerage sell last year? By asking this question, you’ll get a good idea of how much experience the practitioner has.
4. How many days did it take you to sell the average home? How did that compare to the overall market?
The REALTOR® you interview should have these facts on hand, and be able to present market statistics from the local MLS to provide a comparison.
5. How close to the initial asking prices of the homes you sold were the final sale prices? This is one indication of how skilled the REALTOR® is at pricing homes and marketing to suitable buyers. Of course, other factors also may be at play, including an exceptionally hot or cool real estate market.
6. What types of specific marketing systems and approaches will you use to sell my home? You don’t want someone who’s going to put a For Sale sign in the yard and hope for the best. Look for someone who has aggressive and innovative approaches, and knows how to market your property competitively on the Internet. Buyers today want information fast, so it’s important that your REALTOR® is responsive.
7. Will you represent me exclusively, or will you represent both the buyer and the seller in the transaction? While it’s usually legal to represent both parties in a transaction, it’s important to understand where the practitioner’s obligations lie. Your REALTOR® should explain his or her agency relationship to you and describe the rights of each party.
8. Can you recommend service providers who can help me obtain a mortgage, make home repairs, and help with other things I need done? Because REALTORS® are immersed in the industry, they’re wonderful resources as you seek lenders, home improvement companies, and other home service providers. Practitioners should generally recommend more than one provider and let you know if they have any special relationship with or receive compensation from any of the providers.
9. What type of support and supervision does your brokerage office provide to you? Having resources such as in-house support staff, access to a real estate attorney, and assistance with technology can help an agent sell your home.
10. What’s your business philosophy? While there’s no right answer to this question, the response will help you assess what’s important to the agent and determine how closely the agent’s goals and business match yours
Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here are five reasons why it pays to work with a REALTOR®.
1. You’ll have an expert to guide you through the process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multi-page settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Get objective information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
3. Find the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
4. Benefit from their negotiating experience. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
6. Real estate has its own language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
7. REALTORS® have done it before. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. And even if you’ve done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
8. Buying and selling is emotional. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, home buying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll ever make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
9. Ethical treatment. Every member of the NATIONAL ASSOCIATION of REALTORS® makes a commitment to adhere to a strict Code of Ethics, which is based on professionalism and protection of the public. As a customer of a REALTOR®, you can expect honest and ethical treatment in all transaction-related matters. It is mandatory for REALTORS® to take the Code of Ethics orientation and they are also required to complete a refresher course every four years.
If you’re looking at a relatively easy way of making your home more attractive to today’s buyer, consider sprucing up that scraggly vegetable garden. With today’s rising food prices, concerns about the quality of imported produce and the desire for fresh-picked, ripe fruits and vegetables, a vegetable garden can be a real selling point in a down market, even for luxury homes.
Gardens are coming back in vogue as people try to cut back on food costs. Food prices can be significantly offset by a well-stocked garden, allowing the home owner to spend their food budget on more expensive/higher quality items that they could not afford otherwise. A vegetable garden can be dug and planted for pennies. Surplus produce can be sold or traded at local farmer’s markets. An already-dug and planted garden can make your potential buyers see your property as a money savings.
Imported produce comes with the problems of ripeness, freshness and cost. It’s likely to have been picked while green so that it can survive the trip to the supermarket. A home garden offers fresh fruits and vegetables that have been picked ripe off the plant. Some home buyers may even be concerned about the safety of imported produce, so you can play up the healthful lifestyle benefits of a garden.
Vegetable gardens are becoming a hot item for people with money to spend. Today, professionally planned vegetable gardens are becoming a selling point for well-to-do families. They are often referred to by the French term “potager”, meaning kitchen garden. Potagers are an exercise in beauty as well as utility. Paths, careful positioning of plants and decorative accents make these vegetable gardens into an ornamental retreat with the added charm of providing food for the dinner table.
More and more upscale homes are featuring potagers as out-of-door entertaining venues. These “edible showpieces” are becoming a new status symbol as homeowners invite their guests to tour elegant beds of various in-season vegetables and fruits and relax in arbors draped with grape vines. These gardens are also a selling point, as buyers are ever on the lookout for appealing “extras” when they are touring properties.
While many homeowners can’t afford the thousands of dollars that some people spend on their vegetable gardens, a garden that has been freshly weeded and planted with in-season plants can be a definite plus to the home’s sellability. For those with a little more money to spend, perhaps a certain sum can improve the aesthetics of the boring old kitchen garden and transform it into something a buyer will look twice at.
For many homeowners, selling their house can be stressful and somewhat confusing. Whether you use a real estate salesperson or sell it yourself, you have to be objective. As a former real estate broker in South Florida, I sold many beautiful homes and some that weren’t so beautiful. But, there are ways to make your home more appealing to buyers.
1. Set a fair selling price.
You have to be objective and take into consideration what the market is for similar homes in your area. If you are considering having a real estate salesperson handle it for you, they will provide you with a market analysis and explain how they arrived at a fair selling price. They do this by checking the recent sales of homes similar to yours within your area, using steadfast parameters, such as square footage, number of rooms and bathrooms, lot size and view, as well as interior home improvements.
Keep in mind that the appraised value of your home (also called assessed value) is based on the steadfast values mentioned above and the sales of similar homes in your area. The Property Appraiser assesses your property yearly, based on aerial photography (which is usually done every three years) and permits that were pulled. If you added a new roof, extra room, porch, patio or a pool after the assessment, you should include it when you set your selling price. There are other things you can do to improve your home (such as modernizing your kitchen with new cabinets and appliances or modernizing your bathroom) that do not require pulling a permit. These types of home improvements won’t be included in the appraised value, but should be included when arriving at a fair selling price.
2. Be objective.
Most sellers find it difficult to be objective. You have lived in your house for years and have formed an emotional bond. You think that the cost for the new wallpaper in the kitchen or the new carpet in the living room should be included when setting a price. Unfortunately, that new carpet you just installed may not impress a buyer who wants tile or wood floors in their house and they absolutely hate the wallpaper that you chose. Don’t incur the extra cost unless you have to.
3. Thoroughly clean your house.
Bathrooms and kitchens, including appliances, should be clean. If there is rust in your sinks or tubs, have the porcelain repaired, and clean the sliding doors in your shower. Make sure your oven is clean and organize the inside of your cabinets. Buyers will always look at these things.
4. Have your carpets professionally cleaned.
Even if your carpet is a little worn, a good cleaning will help. If you feel that it needs to be replaced, you can always offer a reduced sale price equal to what you would have paid to replace the carpet. That way, a buyer who wanted a different color carpet or tile or wood flooring doesn’t have to rip up the brand new carpet you just installed.
5. Touch up your walls with new paint.
If you are repainting an entire room, use neutral shades. Also, pay attention to the paint on the outside of your house. Touch up if you can. Clean the brown stains from the walls left by your sprinkler. If not, paint the house in a neutral shade or a shade accepted by your homeowner’s association.
6. Light some candles.
Fragrance candles are good if they all have the same scent. Vanilla scent is always pleasing. Place one in each room of the house.
7. Outside maintenance is important for a good first impression.
Clean your pool and remove all leaves. Mow your lawn and weed a little too. Buyers love nicely maintained lawns and clean pool areas.
8. Store clutter away.
Put everything that is on top of your dressers into drawers, including your jewelry. Put all of your bathroom toiletries inside drawers or cabinets and hang some nice guest towels on the rack. If you are in the middle of moving to another home prior to selling your home, please be sure to store boxes in the garage. A buyer would rather see a totally empty house than one with boxes stacked everywhere.
9. Pets and litter boxes should be out of sight.
Pets should be kept outside or in the garage while showing your house. Some buyers do not like animals, regardless of how well-behaved they may be, and some may have pet allergies. If you have cats, make sure the litter box is not in the house.
10. Try to schedule appointments with buyers.
It might not always be possible to schedule a showing and invariably, walk-ins will show up just when you’re in the middle of cleaning or cooking. If you can, try to schedule the viewing time around dusk and turn on some low lighting. If it’s cold outside, light a fire in your fireplace. Homes always look better when the bright sun isn’t shining on all your windows (in case you haven’t had a chance to thoroughly clean all the windows). This way, the buyer can still see the outside area of your home, and the inside will be clean and cozy.
Buying a home is the single largest investment a family will make. Buyers will be finicky and their designing tastes will be different from yours. Keep in mind, you were a buyer once, so try to remember what you looked for when buying your house. Good luck
If you are wondering what Home Staging (or House Fluffing) is all about, here is a definition for you: MSN Encarta dictionary defines Home Staging as the act of "beautifying a home for sale: cleaning, repairing and updating the decor and furnishings of an older home to make it more attractive when shown to potential buyers." Actually, I believe that ANY home can use some staging before being put on the market. Remember, the way we live in a home and the way we want to sell a property are two completely different things. When we sell a property, there is no room for emotions - after all, it's probably our biggest financial investment and, so, we want the biggest possible return on it!
The concept dates from 1970s, when a California realtor and decorator noticed that the properties she took the time to «stage» sold faster and for more money than the average. Today, it's an important marketing/merchandizing tool in the USA (and spreading to Canada from the West) for the realtors and the home owners alike and it's especially important in a slow market, where you need every advantage over your competition. TV shows, such as Designed to Sell and Flip that House demonstrate that a bit of effort and a small investment can transform a property and make a BIG difference at sale time!
The logic is strikingly simple: when you decide to sell your used car, wouldn't you clean, wash and fix it up before reselling it? You should do the same for your house, which is probably your biggest investment and presents an opportunity for a biggest return.
First impressions count for a lot, especially today, when most buyers pre-select the properties they are interested in on Internet. If your photos don't show your house at its best, you are probably missing out on dozens of potential buyers. The same is true for the visitors - when they come, make them feel «at home», create that first impression which will make them fall for YOUR house.
Statistics vary from marketplace to marketplace but, on average, a staged home can sell 30%-50% faster and for 2%-10% more money than a comparable unstaged home. So, a few hundred dollars invested can bring you back thousands! And a home staging consultation costs a lot less than a first price reduction on the property.
A professional Staging consultant looks at your property with a buyer's eye and will recommend some easy and inexpensive solutions to enhance its value - such as decluttering, depersonalizing, and reorganizing your furniture and artwork.
The end result: your house «shows» better than its competition and it sell faster and for more money!
Single-family home sales in the Santa Clarita Valley during April fell 10.3 percent compared to a year ago as the effects of a limited supply of properties listed for sale and the end of federal tax credits combined to slow activity, the Southland Regional Association of Realtors reported on Friday, May 21. A total of 192 homes changed owners, 22 fewer sales than in April 2009.
“I’m very optimistic, but I know the market would look much better if more properties were available,” said Andrew Walter, president of the Association’s Santa Clarita Valley Division. “The key to capturing today’s opportunities is to make decisions based on the best information available today.
“Owners thinking about moving up need to be creative, realizing that the tradeoffs they make on one side of a transaction most likely will be offset by gains on the other end,” Walter said. “There are some great values out there. Just be sure to buy a home for the right reasons — the quality of life benefits, the advantages of owning versus renting, the tax benefits and the long-term cost effectiveness.”
The real estate industry is in a virtually constant state of flux with the rules changing on almost a daily basis, he said. That won’t change until distressed properties move through the system.
Still, Walter and Jim Link, the Association’s chief executive officer, said there are more buyers than properties up for sale partly because many people realize that homes that not long ago were out of reach now are affordable, even as prices again begin to rise.
The median price of single-family homes sold last month came in at $420,000, up 2.4 percent from a year ago and 5.0 percent higher than this March. The single-family median is down 34.7 percent from its record high of $643,000 set in April 2006, but has been steadily climbing higher from its low point.
“The April median price was the highest it’s been since the recession began and the median fell to its low of $385,000 in December 2009,” Link said. “Recovery clearly is underway, even as distressed properties make up the majority of homes listed for sale.”
The condominium median price of $221,000 was off 11.6 percent from a year ago when it stood at $250,000, the highest figure seen since the recession began. Attractive interest rates on home loans, federal tax credits and low condo prices have attracted more interest from buyers, especially as the supply of single-family homes dwindles.
Condo sales during April increased 25.4 percent from a year ago. Realtors closed 74 condo escrows last month, up 15 transactions from the prior year.
“April sales would have been much higher except for the lack of inventory,” Walter said. “The $8,000 federal tax credit gave the market momentum, which likely will continue now that the state’s $10,000 credit is in place. Hopefully, the state’s funds, which were used up very quickly last year, will hold out long enough to ensure the market maintains its momentum.”
Pending escrows — a measure of future resale activity — suggest the market will pick up in the months ahead. There were 489 open escrows at the end of April, up 18.7 percent from a year ago.
“But to keep the recovery going, we need more inventory,” Link said, “which is likely to remain very tight at least until traditional sellers again start listing their homes for sale.”
The inventory of 909 active listings at the end of April throughout the Santa Clarita Valley was down 18.8 percent from a year ago. At the current pace of sales, the inventory is a mere 3.4-month supply, well below the desired 5- to 6-month supply that would indicate a balanced market. A year ago this indicator of market health stood at a 4.1-month supply.
“Real estate, while not as volatile, is somewhat like the stock market in that it’s an equity investment,” Walter said. “A lot of its health is based on the public’s perception, on emotional factors, which may or may not be based on facts. Even if most of the current conditions are favorable enough to make owners willing to list properties for sale, that won’t happen if they remain uncomfortable, unsure of what’s ahead.
“It’s a fact that the market is improving,” Walter said. “Yet recovery will be slow, until the public truly believes that fact.”
The Southland Regional Association of Realtors is a local trade association comprised of more than 10,000 members serving the San Fernando and Santa Clarita valleys. SRAR is one of the largest local associations in the nation.
It’s a bit like guessing how many pennies are in a gallon jug at the state fair, but housing analysts keep trying to count how many foreclosed homes banks and mortgage investors own.
Why should we care? Unlike at the state fair, there is no prize for guessing right. Still, if we can track the number of these REO (“real estate owned”) homes, we can get some sense of how banks and others are doing in their efforts to dispose of the properties and how much longer they will be weighing on the housing market.
The good news is that two of the leading contenders in this guesstimating game–Tom Lawler, an independent housing economist and gentleman farmer in Leesburg, Va., and Robert Tayon, an analyst at Barclays Capital in New York–have been comparing their methods recently and learning from each other. Both are in the same ballpark and both say the REO count is on the rise.
Mr. Lawler estimates there were 574,000 one- to four-family REO homes at the end of the first quarter, up from 518,000 at the end of 2009 but well below a peak of 668,000 in the third quarter of 2008. More modest (honest?) than most economists, Mr. Lawler describes his estimates as “crude” and “a work in progress.” He figures his tally is too low–he can’t find good data on all of the thousands of REO owners– but still “indicative” of the trend.
Mr. Tayon of Barclays estimates that REOs totaled 522,000 in March, up from 479,000 at the end of 2009 but below the peak of 688,000 in September 2008.
After soaring in 2008, the REO total shrank for most of 2009 as foreclosure-prevention efforts slowed the flow of defaulted loans toward resolution and investors rushed to buy what they saw as bargains in hard-hit areas such as Phoenix and Las Vegas. Now, as banks and other loan servicers work their way through the backlog of loan-modification applicants and reject many of them, the REO count is rising again. Mr. Tayon expects it to peak at 538,000 in August 2011 before starting to decline gradually.
Fannie Mae and Freddie Mac, two of the biggest holders of REO, both expect their REO inventories to increase in the next few quarters, Mr. Lawler says.
The expected rise in REO supply will “challenge” housing markets in areas with high concentrations of foreclosures, Mr. Lawler adds. But he doesn’t think the effect on prices will be as severe as it was in late 2008 and early 2009, when loan servicers dumped huge amounts of property on the market.
There are still plenty of struggling borrowers at risk of losing their homes. The Mortgage Bankers Association, a trade group, last week reported that 14% of mortgage loans on one-to-four-unit homes were 30 days or more delinquent or in the foreclosure process as of March 31. That represents about 7.3 million households. The rate was 12% a year earlier. At the same time, fewer people have fallen behind in recent months as the economy has improved.
Those who want to guess how many REOs will be in the jug two years from now will have to take a view on whether the economy is going to produce enough jobs to create demand for all those houses.
Please follow me for housing news on Twitter @jamesrhagerty
An exceptionally limited inventory restrained sales of existing single-family homes during March throughout the San Fernando Valley with multiple offers common on many of the 594 homes that closed escrow, the Southland Regional Association of Realtors said.
Compared to a year ago, single-family sales fell 7.2 percent, but were up 29.7 percent from the February 2010 tally.
Realtors also closed escrow on 211 condominium sales last month, up 1.9 percent from March 2009 and 11.1 percent ahead of this February’s tally.
"Rising resale prices and multiple offers typically indicate a sellers’ market," said Patti Petralia, president of the Southland Regional Association of Realtors. "While that rule doesn’t totally fit this market, because the lender is the one making the decision in a foreclosure or short sale, it’s still a much better time for traditional sellers to list a home for sale.
"There are plenty of qualified buyers," Petralia said, "and simply not enough properties listed for sale to satisfy pent-up demand."
Petralia and Jim Link, the Association’s chief executive officer, said that with fewer bank-owned properties coming on the market and traditional sellers still hesitant to list their properties, the selection of homes listed for sale is concentrated on properties being sold through a short sale, where a lender is willing to accept less than what is owed to avoid the typically higher expense of foreclosure.
"Some lenders are being more proactive in working with short pays," Petralia said, "but it remains unpredictable. Some lenders respond quickly, others take six months or longer to say yes or no."
"Along with the lack of inventory, the biggest problem Realtors have right now is that short sales are taking too long to close escrow," Link said. "Even traditional sales are taking longer as lenders are being more than cautious.
"You can’t blame lenders for being a little gun shy," Link said, "but we’re confident that sales would be much higher if lenders acted faster and if there were more homes listed for sale."
While new listings showed signs of improvement - which typically happens every Spring - the total active inventory remains low, tipping the scale in favor of sellers.
There were 3,091 active listings throughout the San Fernando Valley at the end of March, down 24.5 percent from a year ago. At the current pace of sales, the inventory represents a 3.8-month supply, compared to the 4.8-month supply of March 2009. A 5- to 6-month supply presents a balanced market.
The median price of the 594 single-family homes sold last month was $400,000, up 15.6 percent from a year ago when it stood at $345,900, and 6.7 percent higher than the median reported this February. The median rose to $400,000 in two other months - July and December 2009 - and has been tracking higher since the record-low for this cycle of $339,000 in February 2009.
The condominium median price of $214,000 was up 7.0 percent from a year ago, but down 5.7 percent from February. The condo median price was as high as $240,000 in December and appears to be moving higher, yet remains volatile.
Pending escrows, a measure of future resale activity, suggest that there will be limited resale activity over the coming months. There were 1,272 open escrows at the end of March, down 1.5 percent from a year ago.
With the impending expiration of the federal tax credits, which fueled resale activity in the closing months of 2009, Realtors wonder if the California tax credits will make up the difference and how long the state’s tax credits will be available. Last year’s program was so popular that it ran out of money eight months before it was set to expire, Link noted.
"The new State program is available to new and existing homes and, like last year’s program, will be very popular, so I think the funds will disappear quickly," Petralia said. "The tax credit is worth trying to get if you can move quickly, but first-time buyers should not hinge a decision to buy a home weighted heavily on the availability of the tax credit."
With buyers clamoring for properties priced under $400,000 and eager to capture federal tax credits, home sales in the Santa Clarita Valley increased 13.6 percent during March compared to the prior year, the median increased and the inventory continued to tighten, the Southland Regional Association of Realtors® reported.
Two hundred existing single-family homes closed escrow during March, up 13.5 percent from the 176 sales of March 2009 and 42.9 percent higher than the 140 sales of this February. It was the highest monthly total in seven months and well above the low point of this cycle of 99 sales posted in January 2008.
Realtors® also closed escrow on 91 condominiums throughout the Santa Clarita Valley. That was 59.6 percent higher than a year ago and 42.9 percent ahead of the 140 sales closed this February.
"I expected sales to be higher in March," said Andrew Walter, president of the Association’s Santa Clarita Valley Division. "In December we had lost momentum because most buyers thought that the tax credit was going to expire at the end of November. It took 30 days to gain that momentum back.
"The federal tax credit program truly helped local home sales and its end will definitely have an impact on sales," Walter said. "We’re hopeful that the new California $10,000 tax credit will offset the loss of the federal program, but those funds likely will be used up just as quickly as they were with the 2009 state tax credit."
Walter and Jim Link, the Association’s chief executive officer, agreed that virtually every active listing is being flooded with multiple offers, so long as it is priced correctly.
"The lack of inventory is impeding sales and fueling competition on most listings, pushing prices higher," Link said. "There would have been even more sales if the inventory was larger and if lenders could speed up the review process, especially when it comes to short sales."
Short sales, where a lender agrees to accept less then the outstanding loan to avoid the typically higher cost of foreclosure, continue to play a dominant role in the market. Some lenders are striving to make a decision faster while others take six months or longer to let buyers know if their offer has been accepted.
"Many of the large lenders are only now developing and implementing programs so they can give an answer within 30 days and close escrow within a reasonable time," Link said. "When that happens, we should see the market improve further."
The median price of the 200 homes that closed escrow was unchanged from the $400,000 median of in March 2009, but increased 2.4 percent over the median reported this February.
With activity concentrated in the lower price ranges combined with sporadic sales of higher-priced homes, the median has been bouncing between $400,000 and $420,000 since December of 2008. That was when the median came in at $385,000, the lowest median for this economic cycle.
The median price of condominiums sold last month was $240,000, up 20.3 percent from a year ago and down 4.0 percent from this February.
"Despite the competition, it’s a great market for first-time buyers," Walter said. "Loans are available, although lenders are still cautious and making most buyers jump through numerous hoops to prove their credit worthiness."
The inventory of homes listed for sale continues to drop with only 887 active listings throughout the Santa Clarita Valley at the end of March. That was 25.8 percent below the inventory reported a year ago. At the current pace of sales, the inventory represents a 3.0-month supply, compared to the 5.1-month supply of March 2009. A 5- to 6-month supply is a balanced market.
Pending escrows, a measure of future resale activity, suggest that the market will grow more active in the coming months. There were 471 open escrows at the end of March. That was up 14.3 percent from a year ago
