Home buying not for faint-hearted

To purchase her house this fall, Sally Murphy was required to sign twice as many loan documents as she had done for each of her past four homes.

The 66-year-old dietician then watched in horror as the title company took until the final day to meet a bank's deadline for transferring ownership on a four-bedroom house in east Windsor, a short sale.

Murphy received title for the house with just 20 minutes to spare, the same amount of time she had remaining to rush across town and pick up keys so her flooring contractor could gain entrance to the home the next morning. She moved in about a week ago.

Buying a house today isn't for the faint-hearted.

Even though home prices in Sonoma County are the lowest in a decade and interest rates are hovering near historic lows, completing a deal is no easy task.

With more than 10,000 homes lost in foreclosures and short sales in Sonoma County during the past four years, buyers are finding the market has been reshaped by an abundance of distressed homeowners and by so many loans gone bad.

"We're all operating under a cloud of fear," said Pete Phillippe, a loan officer with Princeton Capital in Santa Rosa. "And it's that fear that I think is really putting a damper on the market."

Banks are taking every precaution to make sure they aren't held responsible for any more loans that go delinquent, loan officers said. As a result, buyers who want to get a mortgage today are expected to reveal much more about their personal finances. Bank deposits and tax returns receive extra scrutiny.

"The process of getting a mortgage is much more intrusive now than it's ever been," said Otto Kobler, branch manager at Summit Funding in Santa Rosa.

The files are twice as thick as they were five years ago, Kobler said. And if an underwriter sees any anomaly in an applicant's tax returns, "she's all over it."

U.S. real estate agents are reporting more difficulty in closing deals this fall. A third of agents and brokers surveyed in October said their last sales contract had fallen through, up from 18 percent in September and 8 percent a year earlier, according to the National Association of Realtors. Reasons included rejected loan applications and appraisals that came in under the proposed purchase price.

"There are no easy deals in real estate anymore," said Mike Kelly, an agent with Keller Williams Realty in Santa Rosa.

Jamie Tuell thought he might become one of those people who tried to buy a home but failed.

A year ago, lenders twice approved and each time rescinded loans for a home in southeast Santa Rosa for the cinematographer and his wife, Jennifer. The rescinding of the loans meant the Tuells were in danger of losing a $5,000 deposit on the bank-owned foreclosure they had agreed to buy.

The couple received a loan on their third try and purchased their home three months after the bank had first accepted their offer. Tuell attributes the long-shot success to the extra effort of Adam Menconi, an agent with Sotheby's International Realty.

He loves his home in the Ragle Ranch subdivision south of the Sonoma County fairgrounds. But if he had it to do over again, Tuell wouldn't put his wife and two young children through the ordeal.

"It was emotionally devastating to go through the process," Tuell said. "And we have a happy ending. I can't imagine the people who go through the process and don't get it."

Buyers are expected to purchase more than 4,300 single-family homes this year in Sonoma County, a fairly typical year by historical standards, when the boom years of the past decade are excluded.

But for the first 10 months of the year, the county's median home price has dipped to $325,000 — on track to become the lowest annual price since 2000.

In contrast, the annual median peaked in 2005 at $595,000.

With prices down and 30-year mortgage rates hovering around 4 percent, homes are more affordable than they've been in years, real estate agents say.

But the county's housing market has been transformed in the last four years by more than 8,000 foreclosures. As well, in the past three years there have been more than 2,500 short sales — transactions where the property is sold for less than the amount owed on the mortgage.

Together, those lost properties amount to roughly one in every 10 county homes with mortgages.

This year nearly half the homes sold have been foreclosures or short sales — already nearly 2,000 such purchases. Agents said first-time buyers need to understand the reality of that change.

"The houses they're going to see are not traditional houses on the market where the owner's got the fresh-baked cookie smell," said Julie Dempsey, an agent with Coldwell Banker in Petaluma and the incoming president of the North Bay Association of Realtors.