Sunday, August 27, 2006

Sac Bee Article on Short Sales

Article Link: http://www.sacbee.com/content/homes/re_news/story/14308559p-15198889c.html

Highlights:

Sam Webber had it all during the real estate boom. The former accountant bought old houses, fixed them up and resold them for more than he paid. It was a good independent living until four months ago when the bottom fell out of his game.

Now as home prices have declined 5 percent from last year in Sacramento County, Webber is what analysts call "upside down." He owes banks more than his two remaining fixer-uppers are worth. He's missed mortgage payments on each. Worse, he's tied up his entire savings and previous profits in remodeling the houses.

"The house in North Sacramento, I'm $305,000 into the bank, and it's worth $280,000. I'm trying to get the bank to agree to $280,000," he said. Webber says he has a buyer at that price. If the bank agrees, it would avoid not only the lost time and legal expense of foreclosure but also the financial risk of resale in a depreciating market.

Although mortgage bankers and federal agencies offer few statistics on the phenomenon, its re-emergence shows how hard, fast rules that normally govern the real estate game can become flexible as buyers and lenders alike teeter on the edge of declining home values.

Agents say many banks are being stern and even resistant as they gauge the depth of the slowdown. But most believe short sales will increasingly become a safety valve for sellers -- and source of better deals for some buyers -- as more investors or homeowners end up in Webber's shoes.


"I made a decision to do this as my livelihood," Webber said recently as he begins a job search at age 47. "All my income was coming from the houses. This time it's burned me. I've tapped out every dime I have."

Across the region, say 1990s-era short sale veterans, homeowners are facing serious financial setbacks from illnesses, divorce, job loss, and car or home repairs. But this time many also have risky financing because they borrowed to the very edge of their ability and took out home equity loans. In Watkin's words, they have an "albatross that's dragging them under" at the same time their home values are falling.

It's little wonder many are stressed. Last year up to 77 percent of capital-area homebuyers used riskier adjustable-rate financing to help them buy homes they couldn't otherwise have afforded. Many are falling behind on mortgage payments. In April, May and June, Sacramento, Sutter and Placer counties showed some of California's biggest increases in missed mortgage payments, according to La Jolla-based researcher DataQuick Information Systems.

Williams expects the game is just getting started. Recalling the 1990s, he said: "Twenty percent of the homes in Sacramento then were short sales. We had a five-year downturn. Prices dropped 25 to 30 percent, and a whole lot of people had no equity."

1 comment :

Anonymous said...

Love your blog - very interesting and informative! One feature I haven't been able to find on any of the Sac housing bubble blogs is a sort of calendar for the upcoming bits of (bad) news, like the NAR, Dataquick, and federal new and existing home sale reports, foreclosure reports, etc. Thanks again for sharing your views.