Danville Home Owners

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The Clash

If I go it could be trouble, if I stay it could be double!! Remember those lyrics from The Clash? Wow – that has NEVER been more true regarding selling your home now – or not. If you are anywhere near being “short” (your home value is equal to or less than your loan amounts) get ready to sell NOW!! Here’s why . . .

California just passed CCP 580e (more on that in a second), and who knows, it could be repealed at any time. So if you need to sell short or just sell, DO IT NOW! It’s estimated that as many as 50% of the homes in California are now worth less than their loan amount. While our little world is probably closer to 20-30%, it’s still a huge number and something we should all be thinking about because the laws are changing and what could be a simple short sale now, could be a big financial mess in a few short months.

What is CCP 580e? Let me try to explain (a lawyer nor accountant am I)  . . .When one buys a home – the first loan is called a “purchase money loan”. There is no recourse on a purchase money loan by the bank. In other words, if you default or sell below the loan amount, if the loan is your first (purchase money) loan, the banks can’t come after you for the deficiency. But if you EVER refinanced – 1st, 2nd or wrapped – that is a recourse loan that the bank can come after you for the deficiency. They rarely did, but they COULD, and that possibility prompted CCP 580e.

The California legislature decided to protect the borrower and make second loans non-recourse too, by passing and implementing CCP 580e. So for now, if you sell your home for less than the loan amount owed, whether it’s a first, second or whatever kind of loan – it is now a non-deficiency loan. The bank can’t come back after you to repay the difference between what you owe and what you sell your home for.

Banks giving us the finger?How long do you think the banks are going to let that happen? Who knows, but better safe than sorry. If you know your home is worth less than the loan amount and you think there is any chance you won’t be in it “until death do you part” – it’s worth having a conversation with an attorney or accountant – or both. I can get you started, but I can’t answer legal questions. I just know things are changing – and fast – and there is a window right now for individuals to sell if they think they may need to do so in the next few years.

And here’s the other reason – the tax situation around these short sales is going to change too. As of now, the state and federal governments are not coming after borrowers to pay income taxes on the money they pulled out of their home. So if you got a $200,000 equity loan, and spent that money – on anything from home improvements, to college tuition to that new Porsche in the driveway, as of today you won’t pay income tax on that $200,000. But come December of 2012 – that is changing and both the IRS and state governments are expected to let that tax law expire so they can collect all the income tax on all that money that Americans pulled out of their homes.

As we all know, it’s virtually impossible to get a Home Equity loan these days – so there will be very little “new” money exposed to this expired tax law, but any money borrowed against a home could then be subject to a deficiency judgment (you may need to pay it back), but it could also be taxed as income. OUCH!!

Hmmmm – are we surprised that big banks and the government are aggressively seeking new avenues of income for their strapped divisions and agencies? I get it, and I even get that there is personal responsibility for those who over borrowed on their houses – but let’s not be naïve or ignorant and sit back and not be strategic and smart on how this entire financial meltdown could affect us.

So if you find yourself in a questionable circumstance – talk with someone who can properly advise you on your income, tax and liability surrounding your mortgage. I have several very specialized attorneys I work with who can coach you through your options.

There are also big credit rating ramifications on short sale v. foreclosure v. deed in lieu of etc. It’s all gotten sooooooo complicated, and I am far from the expert – but I know enough to know now is the time to be considering your options because while the freefall in pricing may have stopped, home values are not going back up any time soon, and the laws surrounding how that could affect YOU and your family and your family’s future are changing fast.

Information OverloadI know that was a lot of information to digest, so let’s reduce it to the bottom line. However much you may be emotionally attached to your home, you need to think strategically about your financial future for the long run. If you are not sure where you stand regarding your mortgage, home value and how the changing laws may affect you, pick up the phone and get some professional advise right now, rather than later.

If you need somewhere to start, start by calling me and I’ll send you in the right direction. You are important to me and I want you to know that I am always here to help.

IMPORTANT NOTICE: I am not an attorney or tax expert. Any comments I make in regards to tax/legal issues are of a general nature and should not be relied upon. Please seek expert counsel in these areas for specifics to your situation.

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Have you noticed my newsletter has been missing the past couple of weeks? Why you ask? Well, all the normal stuff: two graduations, kids home from college, very busy with “the Spring market” (which actually hit in June!) and then this little item . . . I put my own house on the market last week.

OH MY GOSH!! I have never worked so hard, been so exhausted or completely frazzled. Every Realtor should put their own house on the market every few years!! It has been all the things I warn my clients about – space invasion, stagers moving my personal things and worse, stagers not liking my personal things (“But I LOVE that painting there!!”), thinking (wishing) my home was worth more than I logically know it is. It’s all very difficult.

My husband took a new job which offered a re-lo (relocation) package (yea!!), so the time was right to sell our big Alamo house (www.306CanterburyCt.com) and buy down. Because it’s a re-lo, and no relation to the employee (I’m his wife!) can benefit financially from the sale – I had to hire an agent to sell my own home! Weird. So my first step was to interview agents. Weird again! We had to interview three Realtors (Sirva re-lo requirements).

306 Canterbury Ct

Wow – it is all about style and who you click with. We all have about the same tools and marketing, but who you click with, trust and feel comfortable with makes all the difference!! All the agents we spoke with were great – it’s just that they are in MY home, with my stuff, and my dogs and kids!! But just like a lawyer, accountant, doctor or dentist – when hiring a service provider, check their credentials and verify their experience – then go with your gut. This is such a personal transaction – it’s critical that you are comfortable opening your home to this person.

Being an agent myself, I didn’t want to be a “difficult seller”. So I promised myself I would do everything my agent asked me to do. I am very easy with all that – my husband – not so much.

First we had to get the house clean, clean, clean!! (have you heard me say that before?) We keep our home pretty clean, but now it had to sparkle. So I started having the cleaners there every week – and that can get expensive. I have an awesome cleaning crew if you need one.

This cleaning included carpets. I have a big house, so even getting ALL the carpets cleaned was expensive (I’ve usually only done the rooms that particularly needed it). Not this time – all 5000+ square feet got cleaned! And then it rained that afternoon, so with two dogs and two kids home, I had wet carpets for two days. Great.

The stager came in and “tagged” furniture and accessories that needed to go. Fortunately our office administrator was hosting her annual garage sale benefitting Breast Cancer prevention – so I told her if she would come get it, it was all hers. Oh my! Imagine the wails of “but I love that bookshelf – I’ve had it since I was in college!”, “I’ve had that couch since my first house in Maryland in 1985!!” to which the garage sale husband said “that’s ok, you’ll have a garage in your new house too”.

306 Canterbury Ct

I don’t think he was even trying to be funny – but I laughed out loud. Why exactly are we keeping a 30 year old couch that hasn’t left our garage since we moved into the house eight years ago? But we did. They filled an entire big truck with stuff that was going – just going away. We’d probably had it too long anyway – uh, ya think?

The big sectional in the family room where “Big Brown“, our Vizsla/Lab mix has slept every afternoon of her five years with the family, and where “Tank” the 15 pound male cat has decided to mark his territory and use as a scratching pole had to go. I couldn’t even find anyone to take it!! Even the garage sale people didn’t want it!! Ha!! (For those of you who are wondering, my no less than perfect “Cookie” my 4 1/2 pound Maltese has been my perfect stress soothing dog throughout.)

We didn’t want to buy a big new sectional since we were moving DOWN not UP – so we ended up renting furniture. Beautiful stuff – but not very comfortable (and it’s rental). Guess what kind of success I’ve had with “Big Brown”? Good thing we have insurance on the rental furniture!

We had to hire a landscape stager to spruce up the front – two days and several thousand dollars later – we had cleaned, pruned and manicured hedges and bushes, lots of fresh bark and beautiful new carpet of roses, petunias, geraniums and other lovelies I have no idea of their names. Wow – it looked GREAT!! The photographer was coming in the morning – all good. Unfortunately the deer got there before the photographer did and had a fine breakfast of all our new color in front. AAAUUURRRGGH!!!

306 Canterbury Ct

So we are sparkling clean, staged inside and out – not a thing out of place. How long do you think that lasted with three kids, two dogs and a husband? Oh my gosh, the pain of it all.

I have felt your pain. While I will still ask you, my beloved sellers, to do all the things you need to do to get your house in its best possible condition to sell, at least now I’ll know the pain, stress and anxiety it is causing you!! Been there, done that!!


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