California led the U.S. into the worst housing recession since the 1930s. Now the most populous state may be the first to find the bottom.

In Stockton, the U.S. metro area with the highest foreclosure rate, home sales more than doubled in the second quarter after prices fell by an average 37 percent. Across the state, sales rose for three consecutive months starting in April after 30 straight months of declines, the California Association of Realtors said. About 40 percent of those transactions were foreclosure sales, DataQuick Information Systems reported.

Discounts of as much as 50 percent will extend into 2010, helping clear a glut of foreclosures and leading to a more balanced housing market.

“Half off in a decent neighborhood is close to the bottom,” said Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., manager of the world’s biggest bond fund. Property markdowns of 30 percent to 40 percent give the market “price illumination if not sunshine,” he said. (Bloomberg.com)

`Beginning to Happen’

California led the U.S. in default notices and bank seizures for the 18th straight month in June and had seven of the 10 metro areas with the highest foreclosure rates, according to Irvine, California-based RealtyTrac Inc., which sells default data. That drove down prices and led to “discounted distressed sales,” with two-thirds of transactions under $500,000, compared with 40 percent a year earlier, the California Association of Realtors said.

The amount of time it would take to deplete the supply of homes decreased to 7.7 months from 10.2 months a year earlier, and the median price fell 38 percent to $368,250 last month.

Foreclosure sales accounted for 75 percent of June’s total in Merced County, home to the Merced metro area with the country’s second-highest foreclosure rate; 72 percent in Stanislaus County, home to the Modesto metro area with the third-highest foreclosure rate; and 66 percent in San Joaquin County, home to Stockton, data from DataQuick in La Jolla, California, and RealtyTrac show.

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Sales of foreclosed properties equaled 63 percent of the total in Sacramento County, 62 percent in Riverside County, 58 percent in Solano County, 57 percent in San Bernardino County and 49 percent in Contra Costa County. Prices dropped as much 37 percent in those counties, DataQuick reported.

`Seen the Light’

About 1 million U.S. homes will be in some stage of foreclosure by the end of the year, and properties seized by banks will eventually sell at an average discount of 30 percent to 33 percent, said Rick Sharga, executive vice president for marketing at RealtyTrac.

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Discounts will be higher in areas such as Stockton, about 80 miles east of San Francisco in California’s agricultural Central Valley, and Riverside, 50 miles east of Los Angeles, that experienced above-average levels of new construction at the peak of the housing boom and where lenders made a disproportionate number of subprime loans, Sharga said.

PMZ, the Stockton-based brokerage, closed 1,707 home transactions in the second quarter, about 80 percent of them foreclosure sales, said Michael Zagaris, the company’s president. Foreclosed homes are now getting multiple bids and the supply of homes for sale in San Joaquin and Stanislaus counties shrank to 4.9 months in June from 18.2 months a year earlier, he said.

“We’ve found the bottom,” Zagaris said. “The financial institutions have seen the light and are allowing the market to find its own level.”

Housing Bill

Banks will foreclose on about 700,000 properties with subprime mortgages this year, more than double the number a year ago.

Executives from Charlotte, North Carolina-based Bank of America Corp. and Wells Fargo & Co. in San Francisco told Congress last week that they’ve accelerated the pace of loan modifications and added personnel to help homeowners avoid foreclosure. Wells Fargo, which services one in eight U.S. mortgages, expanded its staff to more than 1,000 from 200 in 2005.

The housing bill signed by President George W. Bush yesterday is intended to stem foreclosures and includes a program backed by the Federal Housing Administration to insure as much as $300 billion in refinanced mortgages, including many subprime loans.

There is a lot of misinformation concerning how a short sale or a foreclosure affects a FICO score. From our research the initial credit hit of a foreclosure and a shortsale are virtually the same. Credit experts report that there will be up to a 300 point credit hit when someone does a short sale or a foreclosure. However, the long term effects of either are radically different..

The main difference is how long the credit is damaged and if there will be any deficiency judgements.

Even well known financial experts like Suzy Ormond ( we love Suzy btw) are offering misinformation about this. I was watching her on Larry King just last night offering advice to a home owner who was upside down in their home….Suzy told her to “send the keys back to the lender”. She didn’t even mention doing a short sale. Nor did she explain the credit ramifications.

No wonder people are so confused.

Lets be clear about this next point. There are definite advantages to a short sale  but it has little to do with how many points a short sale will drop a FICO (in the short term) versus a foreclosure.

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Unfortunately, in most communities, houses are over valued and markets will no longer support asking prices. There was a study released recently that reported that at least 50% of all homes in the US were ‘upside down’ or at least have no equity. Another report showed that there are  only three communities in the US that have rising appreciation, strong sales and few if any foreclosures. Did you read that…ONLY 3. In many cases the homeowner is unable to structure a workout or a forbearance agreement with the foreclosing lender. A short sale is the next best option.

Clear benefits of the short sale. (New Information)

Fannie Mae recently established a 2-year elapsed time period for reestablishing credit for homeowners who sell their homes through a short sale. Two years may seem like a long time to wait before being able to get a new loan, but compare this to what happens if the homeowner goes through the foreclosure process. According to the Fannie Mae guidelines, effective May 31, 2008, a homeowner who has filed a foreclosure will be “ineligible” for a loan for five years. (You can get a full report on the new guidelines on
www.TimandJulieHarris.com)

Again..this is a crucial point. Someone goes through foreclosure…no Fannie Mae backed mortgage for FIVE YEARS…in all reality that means that they will be renters for at least 5 years. To put his into perspective if someone has a bankruptcy they can’t buy for 7 years. This should tell you how much Fannie Mae prefers homeowners short selling over foreclosure.

Consider the fact that property values will most likely fall for the next 12-24 months anyway so, not being able to buy a home for 24 months really isn’t all that bad.

The other huge benefit of doing a short sale involves something called a deficiency judgment. When a house is sold at auction (foreclosure), the chances of the foreclosing lender filing a deficiency judgment increases dramatically.

How does this work?… , a deficiency judgment is obtained when a property is foreclosed and sold (usually at the courthouse by the clerk of the court) to the highest bidder. In most states a deficiency judgment can be obtained for the difference between the high bid and the higher foreclosure judgment amount. Usually the court determines which value is higher, the high bid or the appraised value of the property on the date of the public sale. The higher of the two is taken to determine the difference from the judgment amount, and this difference is the deficiency judgment (what was owed subtracted by the final sale price).

Deficiency judgments are just that: judgments. In other words, a debt that has to be paid. They are an albatross around the neck of the debtor and can only be removed by paying it off or by bankruptcy. Furthermore, deficiency judgments usually earn interest until paid.

If a homeowner has deficiency judgment, guess what? They won’t be able to buy anything using credit. New house? Forget it. New car? Nope!

In the past few deficiency judgments have been filed against foreclosing homeowners, that may change. Banks seldom enforce deficiency judgments, they sell the judgments for 5 to 10 cents on the dollar. Here’s the deal that the bank has to consider . . .for a $100,000 deficiency judgment they invest $500 in attorney fees and get $10,000 in return just for pushing paper. In other words, they get the judgement…then sell it to a 3rd party for 10% of the amount.

Free 7 Part Agent Short Sale Secrets Crash Course. Download Your Free Book Now.

Our short sale students know that they can negotiate an unsecured promissory notes.  Sometimes when the second lien holder won’t  release their lien in order for the short sale to close our students know how to structure an unsecured load for 10% or less of the amount. Usually at no or very low interest. The banks do the same thing –– getting 5 cents on the dollar.

Another point of consider, if the house goes into foreclosure and is taken back by the bank to be listed as an REO, the meter keeps running on the costs incurred by the bank until the REO dept. sells the house. This can make the deficiency huge. In other words, the former homeowner is on the hook for all the banks costs…not just the loss from the negative equity.

Realtors who know how to do short sales offer homeowners a way out. Whatever effect a short sale has versus a foreclosure on one’s FICO score pales in comparison to the long term harm of a deficiency judgment and the inability to be approved for a loan for years to come.

WANTED: Realtors to list REOs. Grab out newest book..Agent REO Secrets…NOW. Free Instant Download.

Realtor coaching, real estate coaching, coaching for real estate agents, Realtor coaching classes, Tim and Julie Harris, Harris Real Estate University, Harris Realtor Coaching, Tim and Julie Realtor coaching.

WOW….

Todays Agent REO Secrets teleconference was amazing.
Based on the feedback after the call….we helped hundreds of you learn exactly
how to cash in on the REO listings cash machine.

We received dozens of emails asking for a copy of today’s REO call. And if you
missed today’s call here is your opportunity to learn exactly how to take REOs now.

Here is the link to the replay of todays call. LISTEN NOW:

http://instantTeleseminar.com/?eventid=3319059 ←—————-LISTEN NOW.

You will hear directly from  2 agents who have become REO listing machines…

#     Mark, an agent from LA who just started listing REOs 3 months ago …
and he is now taking 4-6 new listings directly from REOs per week.
He is making more money and its taking 50% less time and effort.

#     You will hear from Nick. You won’t believe Nick’s REO experience…
He is listing 300 homes directly from ONE REO source this week.
That is not a typo…300 listings. You will learn exactly how he is doing it…
We are holding nothing back! Nick will share you the names of the REO companies
he is working with. You want this info now.

We only had 300 spots available for this teleconference.
If you couldn’t attend today or you’re locked out because all the spots were taken
..you can still learn now what you need to know about REOs.

Here is your opportunity to LISTEN NOW:

http://instantTeleseminar.com/?eventid=3319059 ←—— Go Here Now. Call REPLAY

When you listen to the replay of this event here is what you will learn:

#     How to contact the lenders…YES…we are giving out names and numbers of
the largest REO companies.
#     We will tell you exactly how to ‘present’ to the REO companies so they will
want to list their homes with you.
#     You will learn the 3 biggest mistakes you must avoid at all costs.
#     How to form your REO team.

On this 90 minute call you will learn our proven step-by-step process to becoming
a REO listing agent. We aren’t holding anything back on this call.
Get ready to take pages of great notes.

Here is the best part about these 2 agents…neither had any REO listings 90 days ago.
They applied what they learned from Agent REO Secrets and are now having their
best years ever.

Here is that link again:

http://instantTeleseminar.com/?eventid=3319059 ←—– Important link. Listen NOW

Realtor coaching, real estate coaching, coaching for real estate agents, Realtor coaching classes, Tim and Julie Harris, Harris Real Estate University, Harris Realtor Coaching, Tim and Julie Realtor coaching.

Due to popular demand (more like dozens of  demanding emails )

We are opening the doors for our Agent REO Secrets class this week.

This is a free event. We have room for about 300 agents for this call.

When you attend this call you will learn:

1) How to form your REO Team.

2) Access to our exclusive top secret list of the banks who are looking for agents to take REO listings.

3) Who to contact at the lenders…names, numbers….we are sharing it all.

4) How to present yourself to the REO departments at the lenders so they choose you over the hundreds of other agents who are looking for REO listings.

5) This is an important one….we will tell you which BPO companies assign REOs and which don’t. Thats right, you may be doing BPOs in anticipation of being assigned an REO listng..but, the company you are doing the BPOs for may not actually assign the REOs.

And loads more must know info.

Almost forgot…we are giving away our new Agent REO Secrets guide book when you go to the link below.

Here is the important link for this Wednesdays call..

AgentREOSecrets.com <—————–Important link. Go here now for the Free Book and Call info.

Get ready to take pages of great notes!

Realtor coaching, real estate coaching, coaching for real estate agents, Realtor coaching classes, Tim and Julie Harris, Harris Real Estate University, Harris Realtor Coaching, Tim and Julie Realtor coaching.

From: HREU, Realtor coaching, real estate training.

It Happens Again…..TOMORROW!

Reminder, tomorrow is the Harris Real Estate University Super Star Interview.

You will definitely want to attend this F-R-E-E event tomorrow….many of you have requested that we interview our HREU REO Experts..so thats what we are doing.

WHEN: TOMORROW Friday June 6th 2008

TIME: 9:30 am PST/ 12:30 EST/ 10:30 MNT/ 11:30 CNT.

FEATURED SUPERSTARS: We are interviewing HREU Superstar and REO Coach Jon Harris. Coach Dan will also be joining us.
Remember, this event is no charge to you.

Now, for all the call in and webinar info CLICK HERE NOW.

Speak with you tomorrow.

Tim and Julie Harris

Harris Real Estate Univeristy

P.S. Feel free to forward this email to other agents.

P.P.S. The direct dial in number for the event is 419-400-0202 and then enter code 737234#
Realtor coaching, real estate coaching, coaching for real estate agents, Realtor coaching classes, Tim and Julie Harris, Harris Real Estate University, Harris Realtor Coaching, Tim and Julie Realtor coaching.