What is Foreclosure?
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:
1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).
This foreclosure process allows for three opportunities for finding bargains on foreclosure homes.

Pre-Foreclosure (NOD, LIS):
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.
More about pre-foreclosures

Wondering what happens after foreclosure? Then please read on. Remember that understanding foreclosures is the first step for homeowners to stop foreclosure. It is also the first step for investors to buy foreclosure properties.

Auction (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
More about Foreclosure auctions

Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.
More about HUD foreclosures and VA foreclosures

Before you buy
You'll need to make sure you're armed with the foreclosure data you'll need to find and buy foreclosed homes. You can start by searching free on RealtyTrac’s foreclosure listings database, which includes pre-foreclosure and auction properties across the country and a nationwide bank foreclosures list.

Conti Team Realty has launched REO LISTING FINDER. REO LISTING FINDER has MLS listing of bank owned homes in the San Jose and Surrounding Cities: Monterey County, San Benito County, Santa Clara County, San Mateo County, Santa Cruz County.


You can MLS search for Santa Clara County Foreclosures (Silican Valley REOs): Campbell, Cupertino, Gilroy, Los Altos, Los Altos Hills, Los Gatos, Los Gatos Mtns, Milpitas, Monte Sereno, Morgan Hill, Mountain View, Palo Alto, San Jose, San Martin, Santa Clara, Saratoga, Sunnyvale.

Buying bank owned properties

There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often times, the information offered requires a fee to be paid, with the promise that you can make a lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and to make money in this segment of the real estate market does require some effort, and patience.

What’s an REO?

REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. And on top of all that, you’ll receive the property 100% “as is”. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not sell during its foreclosure auction. The bank now owns it. The bank will see to the removal of tax liens, evict occupants if needed and generally prepare for the issuance of a title insurance policy to the buyer at closing. Please be aware that REO’s may be exempt from normal disclosure requirements. In California, for example, banks are exempt from giving a Transfer Disclosure Statement, a document that normally requires sellers to tell you about any defects they are aware of.

Is it a bargain?

It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying a REO if your intent is to make money off of it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs or remodeling needed to prepare the house for resale. The bargains with money making potential exist, and many people do very well buying foreclosures, yet there are also many REO’s that are not good buys and not likely to turn a profit.

Ready to make an offer?

Most banks have a REO department that you’ll work with in buying a REO property from them. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Before making your offer, I will contact either the listing agent or REO department at the bank to find out as much as we can about what they know about the condition of the property and what their process is for receiving offers. Since banks almost always sell REO properties “as is”, you’ll want to be sure and include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you’ll make your offer more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender. After you’ve made your offer, you can expect the bank to make a counter offer. Then it will be up to you to decide whether to accept their counter, or offer a counter to the counter offer. Realize, you’ll be dealing with a process that probably involves multiple people at the bank, and unlike us, they don’t work evenings or weekends. It’s not unusual for the process of offers and counter offers to take days or even weeks.

Financing a REO or Bank Owned Property

In most cases, financing a bank-owned property is similar to financing a traditional purchase. In order to have your offer accepted, unless you are paying cash, you will need to be pre-approved for a new loan. Additionally, the bank that owns the property may request a more in-depth review of your assets. Please be aware that during these extremely volatile times in the mortgage industry, longer-term rate lock periods may be required to allow for your negotiation period with the bank's REO Department. One of the primary keys to strengthening your buying position is to be working with a highly-qualified, professional lender. (A generic, web-based pre-approval letter will not be sufficienct in this market.) J. Shoop, a 15-year industry veteran from Indymac Bank, will provide you with a no-obligation Mortgage Planning Session, to evaluate your long-term and short-term investment goals, as well as your cash-flow and equity objectives. Be sure to ask about our FREE credit report offer!

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"Time is on my side...yes it is" - Rolling Stones. Mortgage prices were jostled and bounced around throughout a wild week of economic news and Fed moves. But in the end, time was on the side of those who were patient, as pricing finished the week right about where it began, leaving fixed home loan rates unchanged.

Last week's highlights included a quarter point Fed rate cut, which brings the Fed Funds Rate down to 4.5%. The Prime Rate now stands at 7.5%, which is good news for home equity lines, consumer and business loans. Additionally, those who have adjustable type loans should see some benefit. But because a Fed cut can stimulate the economy and bring some inflation, fixed home loans tend to worsen a bit after the Fed cuts rates.

The latest read on Inflation was right in-line with the Fed's target. A 1.8% annual Core Inflation rate was reported, which is within the 1%-2% Fed comfort zone - good news for bonds.

Help wanted! Well at least it was for 166,000 Americans during October. This was the best report since May and twice the forecasted amount. The Report showed the rate of unemployment at a very respectable 4.7%. This type of strong report often leads to trouble for bonds, but a look deeper into the numbers showed the Hourly Earnings figure to be less inflationary than expected. The markets are concerned about wage based inflation, but Average Hourly Earnings increased by just 3 cents to $17.58 per hour.

PEOPLE OFTEN WISH FOR MORE TIME. AND THIS WEEKEND THAT'S JUST WHAT WE WILL GET - AN EXTRA HOUR TO CATCH UP ON THINGS OR MAYBE SOME EXTRA SLEEP. FIND OUT THE DETAILS ALONG WITH SOME WILD EVENTS THAT CAN HAPPEN WHEN WE CHANGE TIME, IN THIS WEEK'S MORTGAGE MARKET VIEW!

Forecast for the Week

Have you ever flipped through all your TV channels to find nothing on? Well, that's how market traders will likely feel this week as they flip around for some economic news releases. But the news calendar takes a well deserved rest next week with mostly lower to mid-level reports scheduled. That means bonds will probably trade inside the range illustrated below - unless stocks bust a major move. If stocks rally sharply higher, bonds will be sold off to raise the cash needed to chase stocks, causing home loan rates to rise. Should stocks slump on more fears about credit quality, the proceeds from the stocks sold will be parked into bonds - bidding them up and helping home loan rates improve.

Chart: Fannie Mae 6.0% Mortgage Bond (Friday Nov 02, 2007)

The Mortgage Market View...

Turning Back the Hands of Time

This weekend, the sun sets on another season of Daylight Saving Time. In case you hadn't noticed, Daylight Saving Time (DST) was actually extended this year by an entire month--it began earlier last spring and ran longer into this fall. But, alas, all good things must come to an end...and this year Daylight Saving Time ends Sunday, November 4th.

The extra month that we enjoyed was actually the result of the Energy Policy Act, which was enacted by Congress back in 2005. Originally, the bill was written to extend Daylight Saving by two months, but some very verbal opponents fought the change. Farmers say that DST has a negative impact on their livestock in general--as it is tough for them to adapt to the time change, and they consequently produce less milk, eggs, etc. Because DST is not followed uniformly around the world, airlines claim that it might mean many missed international flight connections. Additionally, TV and Cable stations argued that they would lose viewers and advertising revenue, simply due to less time spent in front of the television because of more time spent outdoors in daylight.

So a compromise of one additional month of DST was reached. However, Congress did retain the right to revert back to the old dates if the change proves to be widely unpopular, or if the energy savings aren't significant.

Why the change?

After making the adjustment to getting up an hour early, Americans overwhelmingly like Daylight Saving Time. There is simply more sunlight in the evenings to enjoy the outdoors and get things done. Additionally, there may be emotional benefits, as we typically feel better with more daylight. Plus, additional hours of daylight can help save energy on a national scale. Less electricity is needed, as fewer lights are turned on as early in the evening...and with energy costs so high, even a small amount of savings is very welcome.

And brighter is safer--studies have shown that the DST shift reduces traffic accidents. An increase in accidents in the dark mornings is more than offset by the evening decrease in accidents, due to the increased visibility gained with more sunlight. Halloween is also arguably safer. Child pedestrian deaths are four times higher on Halloween than any other night of the year. This year, however, trick-or-treaters were able to spend an extra hour gathering treats while it was still light out. Candy manufacturers are happy too, as they've lobbied for years to have DST extended through Halloween.

A study by the US Law Enforcement Admin also determined that crime is consistently lower during DST, with violent crimes down as much as 10% to 13%. For many crimes, like mugging, darkness is a factor--so more light in the evening hours reduces these types of crimes.

And throughout its long history, Daylight Saving Time has had a remarkable and sometimes unexpected impact.

A man was actually able to avoid the draft for the Vietnam War using a Daylight Saving Time loophole. When he was born, it was just after midnight, DST. When he was drafted, he successfully argued that in his home state of Delaware, standard time--not DST--was the official time for recording births. So he was technically born on the previous date--which had a much higher draft lottery number - and he was able to avoid being drafted.

In September 1999, the West Bank was on Daylight Saving Time, while Israel had switched back to standard time. A group of West Bank terrorists prepared some timed bombs--but misunderstood the time change--and the bombs exploded early, killing the terrorists themselves, rather than the intended victims--two busloads of innocent citizens.

In the 1950s and 60s, each state and locality was permitted to choose start and end DST dates as they desired. During 1965, Minneapolis and St. Paul--which are considered one metropolitan area--didn't agree on start dates, and for a period of time, these Twin Cities had a one hour time change between them. And on one Ohio to Virginia bus route, passengers technically had to change their watches seven times in 35 miles!

To keep to their published timetables, Amtrak trains cannot leave a station before the scheduled time. So when the clocks "fall back" in the fall, all trains that are running on time actually stop at 2:00am--the official time of DST change--and wait one hour before resuming their routes. In the spring, the routes instantaneously become one hour behind schedule, but they just keep going and do their best to make up the time.

So Daylight Saving Time sure can have some unexpected impact.

In particular, be sure to double-check all of your electronic devices and confirm that the time is correct. Although you may be accustomed to your computer and maybe even your digital clock in your car automatically updating, the recent change of dates for Daylight Saving Time may require that these devices be manually changed, as they now may NOT be ready to update to the correct time on the correct date!


Paul & Ginger Conti CRS
REMAX Valley Properties
408-691-7700 Cell
408-782-782-9428 Office
800-541-7837 Toll Free
Homes@PaulConti.Com
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Did you know that your knowledge about home financing can mean the difference between making and losing tens of thousands of dollars?

If you’re like most people, home financing…with all its hidden costs and games…can be a daunting and confusing event. And for about 80% of people out there, borrowing $100,000…$200,000…or even $500,000 or more is the largest financial transaction you will incur in your life.

Small mistakes can leverage themselves into big losses of money. That’s why you need to be armed to the teeth, not only with helpful knowledge, but with proven, helpful strategies and questions that will get you the very best mortgage for your situation for the absolute lowest cost available in the market.

And that’s why I created this report…to give you a number of helpful, straightforward tips for avoiding costly mistakes and getting the very best financing for your dollar.

Here are seven strategies (I call them “secrets” because so many home buyers disregard them when buying a home) you should consider when financing your home:

Secret #1: Clearly Understand How Much Financing You Can Afford

Like it or not, there are two guidelines bankers and mortgage lenders use to determine how much loan you can afford.

The first guideline is the Payment To Income Ratio. This guideline compares your income – or your total household income – to the amount of mortgage payment you’re considering.

To calculate the “payment” part of the formula, the lender will take the mortgage payment (principal + interest) and add to it Property Taxes and Insurance. Hence the term “PITI” (principal, interest, taxes, and insurance).

Usually lenders will loan up to 28% of your total household income.

But before you think you’re home free, there’s something else you need to know…

It’s called the Debt To Income Ratio. Debt refers to ALL the major monthly payments other than your mortgage payment (PITI). To arrive at this amount, the lender will consider…

Your car payment.
Your credit card debt and payments.
Any IRS liens or payments due.
Any other payments and debts you have (boat, second home, etc.)

Then, they’ll compare your total debt to your ability to make current payments with your new home loan added into the equation.

Now, here’s the “catch.” Each mortgage company sets different limits on your Debt To Income ratio, which is why it’s critically important to find a MOTIVATED LENDER!

Don’t follow the “canned” financial advice like you see on TV. Most of that advice is “rule of thumb,” and designed for the lowest credit rating and highest interest rates.

Think about this…

If you spend two or three days to find a loan that saves you $40,000 to $150,000 or more over its term, your time is WELL WORTH SPENT! Doing a little homework on your own will literally save you thousands over the term of your loan.

For the other 5 secrets email us at Homes@paulConti.com or call 408-691-7700