Patty's "All Things Real Estate" Blog.

I was having a discussion recently at an event with a group of people about the state of the economy.  Eventually that topic morphed into a discussion about the state of the real estate market.  More than several people expressed the opinion that working on a short sale is a waste of time because it wont’ ever close.  The truth is, working on a short sale that won’t close is a waste of time.  Do you see the difference here?

In order to have a short sale close successfully, the homeowner must have reasonable expectations, be motivated to go through with the deal, cooperate by keeping the property presentable, and respond promptly to communications. They must also be honest, open, and  willing to submit all financial documentation to justify a verifiable financial hardship. The homeowner must be prepared to give the bank EVERY financial document they ask for.  This could include pay-stubs, bank statements, tax returns, financial worksheets that show monthly household expenses, W-2′s, layoff notices, employment termination letters, divorce or separation decrees, death certificates, and rental income statements.  The bank must have  FULL COOPERATION.

The agent must do their part by making sure any buyers submitting an offer are qualified financially AND committed to the transaction for the long haul. They must also be diligent in their dealing and follow up with the bank, know how and when to escalate an issue to get a response, be willing to spend hours on the phone, work on the banks terms, be calm and non-confrontational when working with the decision makers, and be available and responsive when the bank needs information.

It is also a benefit to work with an agent that has a Certified Distressed Property Expert (CDPE ) designation from the Charfin Institute.  Many banks are recognizing agents with this designation as agents they prefer to work with.  The banks know the agents have been trained on what the needs are and how to get the job done.

Any agent can list a short sale, however, not all agent know how to be successful at doing so.   If you talk to a real estate agent and they tell you “well let’s just list your house and see what happens” – please don’t!  You could be setting yourself up for a half a year’s worth of frustration and misery only to have your home foreclosed on anyway.  If you are having a financial hardship and think you may be able to sell your home rather than face foreclosure, please enlist the help of an experienced, professional, CDPE agent.

Someone once said, “if you think its expensive to hire a professional, just wait until you hire an amateur’.

I just attended a round-table discussion by the Tri-Valley Housing Opportunities Center (TVHOC) held at the offices of Bay East Association of Realtors in Pleasanton, CA.  This was a very informative hour of information about an alarming trend of squatters in our area occupying vacant properties.  Even more alarming is that groups are organizing and becoming very sophisticated in the respect that they are obtaining free legal council from local agencies to prevent them from being evicted from the properties they illegally occupy.

There are many vacant properties out there, some owned by banks, some still owned by the property owner who has moved out and waiting for a foreclosure to occur.  Some are listed for sale and in escrow to be sold.  In a nutshell, here’s what is happening.

Squatters find a vacant property and gain entry, either through windows, unlocked doors, or by breaking in to the property.  When it is discovered that a squatter is in the property, the authorities are generally able to remove the tenant on the grounds of trespassing.

However, here’s where it gets scary.  There are groups of ‘savvy squatters’ that are falsifying Grant Deeds to reflect they own the property, or providing fraudulent rental agreements showing they have a lease on the property.  In these cases, the actual homeowner is burdened with taking legal action through an Unlawful Detainer to evict the tenant.  Unfortunately, these savvy squatters have become educated with the help of free legal services on how to respond to the eviction and tie up the case for many months, or in recently reported cases, years.  They are able to stay in the property, without paying rent to anyone, until the civil case is resolved and a judgement or eviction order is issued.  Some are even paying the property taxes & utilities on the properties, making a case for ‘adverse possession‘.

In addition, there are an increasing number of unscrupulous parties out there that will gain entry into a vacant property, have it re-keyed, advertise it for rent, secure a tenant, and collect rent.  The renter is none-the-wiser, they believe they are dealing with the property owner or management company.  The tenant signs the lease, moves in, and starts paying their rent.  Shortly thereafter, they are approached by the actual property owner,  a new buyer of the property, or a bank representative and asked to leave the property.  The tenant is in a real dilemma.  They have an actual rental agreement and are paying rent on a property that their ‘landlord’ has no legal ownership of.

If you are looking for a rental property, BE SURE YOU VERIFY THAT THE LANDLORD OWNS THE HOME.  I cannot stress this enough! Property owners names are public record and can be found on your local county tax assessors office website.  Ask to see the landlords identification.  Enlist the help of a reputable real estate agent or broker to help you find a rental property.  They have access to records that can verify the ownership of the property.  Talk to neighbors of the property, neighbors are nosy, they will generally have insight to valuable information.  Although online ads are a great vehicle to market rental properties, be wary of the ‘too good to be true’ advertisements.  If the advertised rental price is below the going market rate, you have to stop and question why.

This is an unfortunate circumstance of our current real estate market and economy, and one that I hope is eradicated very soon!

TO VIEW VIDEO, CLICK THE LINK HERE: HAFA Short Sale update from Alex Charfen @ CDPE.

As always, if you have any questions or need to see if you qualify for a short sale, contact me!

I am asked on a regular basis the following question:  “What is the best way to make sure I get a rental property in this very active rental market?”

Right now the inventory of rental properties is very low, but the amount of renters looking for properties to rent is at an all time high.  This makes it very challenging for people to find a place to rent.  Not only that, but when a rental property hits the market, there is a flood of prospective renters all wanting the same unit. Our rental properties are only staying on the market for a few days before they are rented.

Here are some tips for how you can set yourself apart from the crowd and hopefully ensure that you have the best possible chance of getting a unit rented to you vs. someone else.  Three top things a landlord is looking for is:  Good credit, stable past rental history, and appropriate amount of income.

1. BE PREPARED WITH YOUR DOCUMENTATION:  You will need to have verification of employment and income (pay stubs) for the past 2 months, bank statements, documentation on any other income, and photos of your pets (if they are allowed).
2. The amount of your income is very important.  Landlords in California can require that a tenants income be two to three time the amount of the rent.  So if you make $2,000 per month, and your rent would be $1500 per month, a landlord can see that you don’t have enough left over for taxes, food, utilities and would surmise that you are not a good candidate.  Landlords can also require that the security deposit be up to two times the rent amount.
3. Have a copy of your credit report on hand.  Some landlords will want to run their own report as part of their screening process, and this is okay, but having yours to submit with your application shows that you are serious about the process and can give the landlord an idea of your credit worthiness.  You can get a FREE copy of your credit report from any of the three credit reporting agencies (Experian, TransUnion, Equifax) by going to www.annualcreditreport.com.  This site does not require a credit card to sign up, and you are entitled to these reports from each agency one time per year.
4. When you see an ad listed for a property that you are interested in, CALL IMMEDIATELY to make an appointment.  Don’t wait until the weekend or after work.  The property may be gone by then.  When you do make an appointment to see the property BE FLEXIBLE.  In this active market you cannot say, “Oh I cant see it until a week from Tuesday”.  Many times the owner, or their agent, may only hold the property open for an hour on a particular day.  Do whatever you can to be there during that time.  If you are applying for the property with a spouse or roommates, it is advisable for you ALL to view the property together as a group.
5. Be prepared to complete applications on the spot.  Carry packets of your information with you so its ready to go.  Landlords will require a separate application and screening for each person over the age of 18 that will be residing in a property.  This includes adult children.  Many landlords now screen for criminal convictions and eviction history in addition to credit history.
6. Be prepared to pay  an application fee and/or credit screening fees.  Most landlords will accept cash or checks, not credit cards, ATM cards, or other electronic means.  Some property management companies (like us) use Pay Pal, but you should verify this before going to the appointment. Fees can be anywhere from $25.00 or more per person.  Typically the fees are non-refundable.
7. CREDIT SCORES MATTER!  I am not saying that your credit scores have to be perfect.  Many peoples credit scores have taken a hit in recent years due to short sales, foreclosures, and the economy.   However, be honest about your situation. If you tell the owner you have “a few negative” things on your credit report and the owner pulls the report and sees that you have ALL collections and late payments on your report, your chances are probably not good.  But if your credit score has been reduced by an isolated incident, like a foreclosure or a short sale, and all your other credit history is good, you will have a better chance despite a low score.  Its olay to include a letter to explain anything you wish to clarify.
8. Have your move in funds ready to go.  In California, a landlord can collect the first months rent at the time your lease is signed.  The security deposit is typically due at move-in or walk-through.  The landlord can require that all move in funds are in the form of a cashiers check or cash.  Most landlords will not accept “payments” for the security deposit over time.  Be prepared to have all the funds up front before you move in.
9. As soon as your application is approved, be prepared to sign the lease. The approval of an application is not a guarantee the landlord will hold the property for you.  In our property management company, once an applicant is approved, the property continues to be advertised and shown until the lease is signed and the first months rent is delivered to the office.  This might mean that you have to start paying rent for a unit before you are ready to move in.  For example; if the unit is available March 1st and you cannot move in until the 15th, you may have to make a choice to start paying on the 1st or lose the property to another applicant that can move in sooner.
10. Ask up front if pets are allowed.  Many landlords have size, weight and breed restrictions – make sure you know this before you apply for the property.  Be prepared to pay an increase to your security deposit for pets.
11. Consider working with a real estate agent to find a property for you.  Agents can sign up for auto-notification on the local MLS to email property information to you when new properties become available.  This does not cost you anything,  agent commission is paid by the landlord.
12. If you are not in the market to rent now, but foresee that you need to rent in the future and you having credit issues, start cleaning them up now so you can improve your credit score by the time you are ready to rent.

As always, I am here to help if you need assistance, have questions or need additional information.

At our Realty World Action 1 Properties office here in Pleasanton, California, (where in addition to selling real estate we manage about 70 rental properties), we received a call from a couple who rent a property from a private party.  They are not one of our rental clients, but were looking for a rental property and some advise on a disturbing situation.

They reported to us that their landlord advised them just about a month ago that they planned to sell the home and that the landlords real estate agent would be contacting the tenant.  The real estate agent contacted the tenant, put a sign up in the yard, and made arrangements to show the property.  An offer was received very quickly and the property went into escrow. The tenants were cooperative with the agent, after all, they are under a lease and it didn’t matter to them that they would have a new landlord.

The tenant received a call this week from the real estate agent stating escrow will be closing on February 29th and that they had to move out immediately.  The tenant is in a panic over having less than 2 weeks notice to move.  We gave the tenant the phone number to the local Fair Housing office so they could be advised of their rights in this situation and open a case with Fair Housing.

There are many things wrong with this entire situation, but three important issues immediately present themselves;

First of all, when an owner wants to sell a property that is leased to a tenant, the owner has to provide the tenant with 120 days prior written notice.  This means that 120 days have to elapse BEFORE the owner can start the sale process.    After the 120 days notice, the owner can place a for sale sign on the property, advertise it for sale, or show the property to prospective buyers.

Secondly, when an owner is selling a tenant-occupied property in which the tenant has a lease for a set term, the owner is selling the property complete with the tenant & the lease.  Unless there was a prior written agreement and acceptance between the owner and the tenant to terminate the lease at the time the sale is final, the lease of the property is part of the sale.

Thirdly, even if (heavy emphasis on the ‘if’) this particular tenant were to comply with this agents current request to be out of the property at the close of escrow, the owner has to give a 30-day written notice, or a 60-day written notice if the tenant has been in the property for longer than 365 days.

Many people, especially in markets such as the one we are in now, buy investment properties to rent.  Prices are low and it is a great way to build wealth.  However, if you are intending to rent the property to tenants, you must be aware of the Fair Housing Laws of the State of California, and be aware of what Landlord and the Tenant rights are.  If you are not aware of the laws and get into a legal proceeding over violations of the law, you could lose some or all of the money that you have made or will potentially make on your investment property.

The Fair Housing laws are in place to protect landlords and tenants.  It does not matter what kind of lease you have, written or verbal, or whether that lease is a formal lease form or written on a bar napkin, the laws of the State prevail.  You cannot make up your own rules.

This particular property owner and the real estate agent either were not aware of, or maybe chose to ignore, the Fair Housing laws. Unfortunately for them, they are going to be placed in a very uncomfortable situation.  They are closing escrow on a property where the buyer is expecting to move into their new home on February 29th, but they are not going to be granted access to their new home until the current tenant lease has expired.

You can download a copy of the publication “California Tenants, A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities” by clicking here.