An REO is a “Real Estate Owned” property that the bank has taken back when the property failed to sell in a foreclosure proceeding.

Betty Fernandez

Betty Fernandez

Such sales increased in October. Out of 63 sales Santa Barbara, 14 were REOs. Overall, there were 116 sales transactions in Santa Barbara County, and 24 percent were REOs.

There are several reasons that properties are going into foreclosure, but here are the most common:

» Unsuccessful loan modifications. Banks will ask for a large number of documents and ask for the same documents over and over again. Homeowners get frustrated and lose hope.

» Short sale wasn’t approved because owner did not occupy the property and owner couldn’t afford to move back in.

» Unsuccessful short sale due to lack of qualified buyers.

» Buyers purchased another property because they got tired of waiting for the bank to respond and there was not enough time to obtain a new buyer and get them approved with the lender.

» Agent failed to have homeowner declutter and clean the property.

» Agent failed to adjust price in a timely manner to attract buyers and showing from agents.

» Liens on the property or past-due homeowners dues that will not be paid by the bank.

» Homeowner denial. Waited too long to address the financial problems and then didn’t have options such as a short sale and let the property go into foreclosure.

» Homeowner had to file bankruptcy so short sale was postponed.

» Due to financial reasons, homeowner chose to live rent free for a longer period of time.

» Didn’t list their home with a qualified and experienced short sale agent, such as a CDPE (certified distressed property expert).

Banks are getting tougher on California homeowners since the passage of Senate Bill 458, which was signed into law on July 15 by Gov. Jerry Brown. The legislation releases homeowners from paying a deficiency judgment on one to four units after the short sale has been approved by the bank (unless owned by a corporation, limited partnership or LLC).

The effects of foreclosure are severe. Starting with the stress of not being able to pay your bills, you also receive calls from the bank and collection companies, and exposure to rescue foreclosure scams and numerous mailings offering you assistance from various individuals. The foreclosure sale will be listed in the newspaper for everyone to see, including your name and address. You may not be aware that your home is being sold at auction until someone tells you, because you failed to open your mail.

The effects on your credit will last longer than a bankruptcy, in addition to the embarrassment you must endure with friends and neighbors, and the foreclosure will affect the neighborhood with home values, lack of maintenance on the property and exposure to possible crime and vandalism.

Of course, you will lose the house and have to move out before you are evicted. Renting a new place may become difficult and may require additional deposit monies or extra months of rent in advance. If you have a federal job, you may put your job in jeopardy. Buying a new home may take years and require a much larger down payment, and interest rates may be higher for any credit obtained in the future. This will plague the homeowner for many years.

Anything you can do to fight against foreclosure is recommended. Don’t ignore the situation and give up. To assist you, find a Realtor who is specifically trained to maneuver through these types of difficult transactions and cares about you and your well-being.

Betty Fernandez is a Realtor and certified distressed property expert with Coldwell Banker in Montecito. She can be reached at 805.766.1495.

Short Sale vs. Foreclosure