David Ormonde's Central Valley Real Estate & Dinner Blog

 With all the foreclosures and short sales dominating the market in the Tracy/San Joaquin area of California, one wonders; why do we need a pest inspection if the banks are not doing repairs and sellers are not motivated to complete repairs on property they are losing?   The answer remains the same as before the foreclosure crisis.  When buying real estate, whether or not a seller is going to be willing or able to do repairs for you, it is important to know the condition of what you are buying.  

 There is a big difference between a report indicating $500.00 worth of repairs and a report indicating $5,000 worth of work needed.  Would you still buy the house and would you still think it was such a good bargain if you knew there was $5,000 worth of work needed?  The answer is probably not, but then again, maybe after factoring in the total acquisition cost is still a bargain.  However, you would not really know that until you found out exactly what the condition of the improvements were at the time you bought the house. 

 A typical clause in a contract to purchase property would include the verbiage:

Unless otherwise specified, the Agreement permits the Buyer to inspect the property and investigate its condition. One of the inspections the Buyer may obtain is for wood destroying pests and organisms “Wood Pest Report”. Whether obtained and paid for by Buyer or Seller, Buyer’s review and approval of a Wood Pest Report would generally be covered by the inspection contingency of the Agreement. Before Buyer removes or waives the inspection contingency, or other contingency specifically related to a Wood Pest Report, Buyer may cancel the Agreement if dissatisfied with the condition described in the Wood Pest Report, even if this Wood Pest Addendum is not made part of the Agreement.

 The contract should also clearly state who is going to pay for the report and what parts of the property and improvements will be inspected.  If there is a guest house or a barn of the property, will those buildings be a part of the inspection?  In addition, will the report be broken down into section 1 and section 2 types of issues?  Section 1 type of conditions usually require more immediate attention and are generally considered a must, whereas, section 2 type conditions are not generally considered to be as urgent.  

 Here is some verbiage you would find in a typical offer to purchase:

The Wood Pest Report shall be separated into sections for evident infestation or infection (Section 1) and for conditions likely to lead to infestation or infection (Section 2).

(1) (Section 1) 0 Buyer 0 Seller shall pay for work recommended to correct “Section 1″ conditions described in the Wood Pest Report and the cost of inspection, entry and closing of those inaccessible areas where active infestation or infection is discovered.

(2) (Section 2) 0 Buyer 0 Seller shall pay for work recommended to correct “Section 2″ conditions described in the Wood Pest Report if requested by Buyer.

 What about inaccessible areas -How are those areas to be handled?  Here is what to look for in your contract:

If the Wood Pest Report identifies inaccessible areas, and Buyer requests inspection of those inaccessible areas, the person identified in responsible shall pay for the cost of entry, inspection and closing of only those inaccessible areas where Section 1 conditions are discovered and Buyer shall pay for the cost of entry, inspection and closing of all other inaccessible areas.

Finally, you want to clearly state how the report is to be handled, and who is to receive a copy and at what cost?  Here is a what to look for:

Seller shall Deliver to Buyer, prior to Close Of Escrow, with a written Pest Control Certification of Completion showing that no infestation or infection is found or that required corrective work is completed. If this contract does
not refer to a specific registered Structural Pest Control company, and Seller obtains more than one Wood Pest Report pursuant to this Addendum, Seller may choose which Wood Pest Report to use as the basis of the
Certification of Completion provided that Seller Delivers to Buyer all Wood Pest Reports obtained by Seller before Buyer removes any contingency for Wood Pest inspection.

 Buying a foreclosure or a short sale in the Tracy/San Joaquin County area of California may be a great bargain right now, but know what you are buying makes a lot more sense.  Saving a few hundred dollars may end up costing you thousands of dollars if certain repairs needed are hidden from you or not disclosed.   The best way to protect your interests in buying a foreclosure or short sale is to hire a Realtor.  A Realtor is someone who has the tools and contracts available to protect you in a purchase.  For more information about this subject contact David Ormonde at 800 788-2973 david@GoTracy.com   or see www.DavidOrmonde.com  

What we know is there may be a lot of hoopla about nothing, but here are the facts:

 In late September and early October some lenders and servicers began voluntarily halting foreclosures in select states while they reviewed their foreclosure processes.
 

• So far, only Bank of America has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order.  Foreclosures in the other 23 states are processed through the court system.
   
• Non-judicial foreclosures in California, however, do have legal requirements that lenders must follow.  For example, California law requires that lenders for certain mortgage loans made between Jan. 1, 2003, and Dec. 31, 2007, attempt to make contact with borrowers to discuss options for avoiding foreclosure at least 30 days before filing a notice of default.  Lenders also must sign a declaration in the notice of default stating that they tried to contact the borrower, made contact with the borrower, or fall within an exception (such as a bankruptcy filing).
   
• The lenders and servicers that have placed their foreclosure moratorium on properties in the 23 states where courts are involved in the foreclosure process include:  Goldman Sachs Group Inc’s Litton Loan Servicing, Ally Financial Inc.’s GMAC Mortgage unit, JPMorgan Chase, and PNC Financial.
   
• These lenders/servicers have only temporarily halted their foreclosures while they review their foreclosure process.  This is in response to findings that questioned whether some lenders/servicers were following the correct procedures to foreclose on a property.
   
• This halting of foreclosures is a voluntary action taken on the part of these lenders/servicers and has not been mandated by either the states or the federal government.
   
• Some members have begun to report the immediate impact of this moratorium on transactions that involve foreclosed properties.  Delays in escrow and the removal of listed foreclosures are temporary results of this moratorium.
   
• The immediate impact on the market will be the slowing of home sales, which could put upward pressure on home prices in the short term.  The long-term effect on the market is uncertain at this point as it depends how long the moratorium remains in place.
   
• Assuming the moratorium is lifted in the next month, the flow of REOs to the market should resume, but the uncertainty created by the moratorium may cause hesitation on the part of buyers.
   
• Federal agencies, including the Office of the Comptroller of the Currency, the Federal Housing Administration, and the conservator of Fannie Mae and Freddie Mac, have asked lenders and servicers to review their foreclosure processes.  This review would apply to all states including those like California where the vast majority of foreclosures are non-judicial.
   
• The participating lenders and servicers believe their internal review processes should take anywhere from a few weeks to 30 days to complete.

 
A number of major banks recently have suspended foreclosures in 23 states due to problems with the signing of declarations in connection with judicial foreclosures — foreclosures that proceed through the court system.  Bank of America has further expanded its suspension of foreclosures to all 50 states.  In California, the vast majority of foreclosures are conducted through non-judicial foreclosure or trustee sales which do not involve a court process. 

While California foreclosures are not conducted through the court system, lenders in California must still comply with other legally required procedures for non-judicial foreclosures. The media, politicians, consumer advocates, ambitious state attorneys general, and hungry lawyers everywhere have seized on “RoboForeclo,” (the “robo-signing“/rubber-stamping foreclosure docs scandal) the nation’s newest self-destructive mania.  The question is, is there any substance to all the hoopla?

For property owners that have suffered a severe decline in market value may be eligible for property tax relief.   In 1978, California voters passed Proposition 8, a constitutional amendment that allows a temporary reduction in taxable (assessed) value when real property suffers a decline in current market value.  When the market value of a  property on the January 1 lien date falls below the assessed value, the assessor is obligated to review the property and enroll the lesser of the two values.  If it is determined that the market value of your home is less than its assessed value, your property’s assessed value will be adjusted to the level of its current market value, and consequently, your property taxes will be reduced. 

To apply, each county assessor office has implemented its own procedures for Proposition 8 applications.  Some county assessors require  the filing of a formal application with the inclusion of two comparables sales.  Others require the filing of a simple informal form or a written notification.   Some only require a phone call.

Be Aware of Scam Artists!  There is no fee for this and you should not pay anyone a fee for this service. 

Every year the assessor will review your lien date value.  The assessed value of a property with a Proposition 8 value in place may increase each lien date by more than the standard two percent maximum allowed for properties assessed under Prop. 13.  However, unless there is a change in ownership or new construction, a property’s assessed value can never increase above its factored Prop. 13 base year value after adjusting for the annual increase. 

In order to effect a change in value be prepared to provide evidence of the change in value of your property to support your opinion of that market value.  The best supporting documents are at least two comparable sales in your neighborhood as close to January 1st of the subject year.   The properties you include should have comparable size, amenities, and features to your own.  If you do not know where to get this information contact your local Realtor , or visit your Realtor’s website .

If you don’t agree with the outcome you do have some options.  You may file a formal appeal with the County Assessment Appeals Board or the County Board of Equalization.  These Boards are independent entities established these differences.   Appeals must be filed within July 2 and either September 15 or November 30 of the same year.   Go to www.boe.ca.gov/proptaxes/pdf/filingperiods.pdf.