Short Sales and Foreclosure Victories

I don't usually like talking about short sales and foreclosures, but they have become a way of life in the Sarasota area.  I have successfully completed 3 short sales in the past month. 

One was difficult to get done as it had a 1st lien, 2nd lien, Condo fees owed and an IRS lien.  It took about 3 months to complete, but with the help of several others, the property will be closing on 4/23/2013.  What makes this particular short sale unique is the fact that the second was a credit union and we got them to waive the deficiency on the balance of the loan amount.  The trick was to get the first to put in writing that they would only give $6,000 to the second if the second waived their right to seek a judgment on the balance.  Since Credit Unions rarely waive their right to seek a deficiency when they do a lien release, I thought it a significant victory!!  My client was thrilled.  He completed his short sale without an additional tax burden and got the potential deficiencies waived.

The other interesting pre-foreclosure involved a client who had let their foreclosure drag on for nearly 3 years and thought they were in good hands with a local attorney. The ball had been dropped several times and the owner was now faced with a trial that was only 2 weeks away.  At this point in the foreclosure process very rarely is a short sale completed or a modification accomplished by the Defendant. I referred her to another attorney who believed that, while he may not be able to stop the foreclosure, he could get a ruling that favored the Defendant.  He argued that he could get the deficiency waived at this late stage of the game.  In a matter of a week, he had successfully subpoenaed several bank executives and the bank agreed to waive the deficiency.  In essence, because of his efforts, the Defendant was spared a potential deficiency of nearly $400,000.

People tend to just give up on these foreclosures thinking they will not get them done, BUT THEY CAN GET DONE!  It takes work, but as you can see from these two stories, they are possible.

If you are in a situation like this, or know someone who is, have them call me.  I can assist or refer them out to someone who can!!

Tips on Disputing Credit Report Erros

Yesterday, I received a call from a client who had sold their home over 3 years ago as a short sale. They were reaching out because they were interested in purchasing a new home in Idaho.  They had made an offer and were in the process of applying for a new loan.  The loan officer informed them that they would only qualify for an FHA loan which would require that they carry PMI insurance.  The loan officer informed them that they had a foreclosure on their credit report.

I made a call to a mortgage broker to inquire as to whether this was a common occurrence and if it was something that could be fixed.  He told me that these mistakes happen all the time, and with credit harder to secure, this was a huge issue in underwriting.  He shared with me that there are several options for the consumer if they believe a credit agency has made a mistake.

This mistake can cost you as it can lead to higher interest rates on loans and credit cards.  Yes, the task of repairing your credit can be time consuming and frustrating, but the effort can save you thousands of dollars.

Here are some tips that I saw in an article that was recently published on this timely issue.

 Get your credit reportsThe first step is to get a copy of your credit report from each of the major credit reporting firms – Experian, TransUnion and Equifax. Consumers are entitled to a free report every 12 months from each of the credit bureaus. You can get copies at www.annualcreditreport.com.

It’s important to review your credit history periodically. For one thing, lenders can make errors when they report client accounts to credit bureaus. And if an identity thief opens an account in your name without your knowledge, that can hurt your credit until you discover what’s happened.

Get your credit reports  The first step is to get a copy of your credit report from each of the major credit reporting firms – Experian, TransUnion and Equifax. Consumers are entitled to a free report every 12 months from each of the credit bureaus. You can get copies at www.annualcreditreport.com.

File a dispute If you believe there’s an error in a report, you can submit disputes online at http://www.equifax.com, http://www.experian.com, www.transunion.com. (Link all three of these to their respective websites.) You can also submit the dispute by mail or phone, the address or number should be on your credit report.

The FTC’s study found that four out of five consumers who found erroneous information in their credit report and filed a dispute with the credit bureaus had a correction made to at least one of their credit reports.

Be patient Once a dispute is received, credit bureaus are required to respond within 30 days. The credit bureau will contact the lender that provided the information that is under dispute. At that point, the lender looks into the matter. If a fix is made, the lender must alert all three credit bureaus of the error.

When the investigation is complete, the credit bureau must provide written results and a free copy of your report if the dispute results in a change. This report does not count as your free annual report.

Contact lenders Another option: Reach out to the lender on the account where the error showed up and ask that they update the credit bureaus with correct information.

Avoid credit repair firms The Federal Trade Commission has warned consumers against firms that offer services claiming to improve a person’s credit report for a fee. Such firms can’t do anything that you couldn’t do yourself.

I hope this helps.


 

Debt Forgiveness Extended Through 2013

Lots of people who have been in the short sale process have been waiting for the government to make a final decision as to whether debt forgiveness would be extended into 2013.  If the government did not extend the debt forgiveness act, many people in their primary properties would not be able to escape the 1099 they would be getting at the end of the year from the IRS.

As it stood, the resolution allowed up to $2 million in debt relief on a primary property.  The resolution was set to expire at the end of 2012 and would expose millions of people to additional tax burdens when they could little afford the additional expense.

People would have to make some very tough decisions about their short sale. They could close them and hope for the best or they could just let them go to to foreclosure. My bet is most people would just let them go to foreclosure. 

With the extension, people now have 12 months to get a short sale done and not have to incur any additional taxes as a result of the sale of their home.

To read more about this provision, please read the attached article:

http://www.housingwire.com/news/2013/01/02/mortgage-industry-fares-well-fiscal-cliff-deal-debt-forgiveness-law-survives?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+(HousingWire)

If you had put off a short sale on your primary home, now would be the time to reconsider selling it.  If you have any questions, feel free to call me or email me.

Strong September Sales and Building Perils

The September housing market in Sarasota continued to show strength.  Sales of existing homes stayed steady and applications for new construction rose last month.  With all that in mind, there are still some concerns, especially with new construction.  Several builders are failing and putting their clients at risk if they can't complete the homes they started.

As the inventory of homes drop, more and more people look for the opportunity to build something new.  In order to protect yourself in the building process, Berlin Patten published an article this week that addresses this topic.  Below are their recommendation:

While there is no substitute for engaging a qualified attorney to address the nuances associated with all construction contract negotiations, some general issues to consider prior to entering a contract for new construction are:

1. Construction Timeframes.  Does the contract provide for a definitive commencement date and completion schedule, and are there penalties if the builder misses those marks?
2. Change Orders. Is the scope of the project very clear, and what is the written process (and price) for requested changes?
3. Deposits. Does the contract require a substantial amount of upfront money be paid to the builder?
4. Draw Schedule. Does the contract provide for a sufficient number of draws so that the money paid to the contractor is  proportional to the work performed to date?
5. Inspections.  Does the contract permit inspections as a condition to each draw, and, more importantly, as a condition to final payment?
6. Punch List.  Does the contract address the manner in which punch list items are to be completed and by when? Does the contract require final payment prior to the completion of punch list items?
7. Lien Waivers.  Does the contract require lien waivers as a condition to each draw, and more importantly, as a condition to final payment?
8. Holdbacks/Final Payment.  Does the contract provide for an adequate holdback from each draw, as well as a reasonably sufficient final payment, to better insure that there will be sufficient funds to complete the project if the builder fails to perform?

If you are considering the prospect of building, these import considerations will help in ensuring you sleep better at night.

Buy It now!!!

September-November is usually a time when realtors in Sarasota are gearing up for the season and recharging their batteries.  But this year is different.  I was just talking to a realtor next to me and he had made 7 offers the past week on behalf of a client and he only got one.  He got into highest and best offer scenerios and lost out on all of them.

That got me to thinking....Is It the Right Time To Buy?

I have said it before, but I am confident in saying it again, it is time to buy!!

Why?

The economy had hit its stride in the early 2000's, and Sarasota was red hot.  Most people who wanted to buy at that time felt like they had missed their chance as properties had become too expense to buy.  The window closed quickly and those properties were unattainable to the average person who visited Sarasota.  They left in hopes of finding properties that were within their reach.

8 years later and prices have dropped by 50% in Sarasota.  Interest rates that hovered around 6.5% 6 years ago are now at historic lows sitting around 3.5%. This may be the perfect time to purchase that second home.

In 2006 lots of people may have seen that perfect home when they were in Sarasota, but at $400,000 it was slightly out of reach.  Today, that same home might sell for $250,000.  When you also take into account that interest rates are nearly half of what they were 6 years ago, people have to give second thought to whether this is the right time to buy.

Let's look at the numbers and see what impact falling prices and rates have on a purchase today:

DATE                          PRICE               INTEREST RATE                          P&I PAYMENT

2006                            $400,000                   6.50                                           $2,528..27

2012                            $250,000                   3.50                                           $1,122.61

If you are in a position to make a purchase, now may be the time!!!

A Bike Ride Leads to a Startling Discovery

I just recently returned from my annual pilgrimage to Rangeley, Maine with my lovely wife, Marie, and our two boys, Zach and Chris.  We had a wonderful time.  While there, I love to ride my bike or get into my car and look at properties.  It is just something I enjoy doing.  I must have done it at least 3 times while I was in Rangeley.

One of the things I discovered on several of my bike rides was the number of properties that were on the market.  I do not think I had ever seen so many active properties for sale.  I spoke to one agent and he told me that he had 115 listings.  That is just one agent in one office.  Stunning!!  My jaw hit the floor.

I began to wonder if things in Sarasota were going to look as bleak as it looked in Rangeley when I got home.  So, upon returning to Sarasota, I got on my bike and started doing my daily ride from my house down to the end of Siesta Key.  The last time I had taken my bike ride on that route was early July.....so nearly a month had gone by since my last ride.  I was stunned.  I could not believe how many real estate signs said, "Pending" or "Sold". I must have seen 10 or eleven signs that reflected a change status on property signs.

Upon getting home from my ride, I visited a house down the street that was having a garage sale.  I asked the tenant if they were moving.  She said the new owner wanted them to stay.  I asked, "Did you just sell the house?"  She informed me that her previous owner had put out a sign and sold the house in 3 hours.  I looked out on Webber Street and noticed that several new houses on the market were already pending.  To me, those would be the last houses selling with all the inventory on the market.

The market has changed.  We are in a different place than we were in 12 months ago.  The numbers released by the Sarasota Association of Realtors reflect a market that is red hot.  We almost topped 1,000 closings again for the month.

If you are thinking about buying, don't wait.  Most people are 6 months behind where the market really is.  So, if you think it is at the bottom now, the bottom was probably 6 months ago and is now on the upswing.  If you don't believe me, get out on your bike and try to find some properties that are not pending.

Are Low Ball Offers a Thing of The Past?

This is always a tricky topic as everyone seems to have a differing opinion of the market and its stability.  I like to think that we have stabilized and these low ball offers are tougher to come  and harder to get accepted by Seller's.

I consider a low ball offer to be 25% off the asking price.  Now, one must take into account that if the property is grossly overpriced, the offer may only be off  by 10% in realty.  When there is a glut of Seller's, as has been the case in the past few years,  the prices were falling.  But in the last few months, we have seen the inventory fall to less than a 4 month average.  A healthy market is at about 6 months of inventory.  That means that if no more new listings came on the market, it would take 6 months to sell everything.  Ask local realtor's in Sarasota, and they will tell you they can't get enough listings.

If that is true, low ball offers are not even likely to be countered, much less accepted.  What usually happens is a more realistic Buyer comes along and will pay what the property is worth. Or the Seller counters less than 1% of the asking price.

I have an example of someone thinking they could STEAL a property.  The property was built in 2007 to the highest standards.  It had all of the new updated impact windows, tile roof, gated community, etc.  Under air was 3,548 square feet with a 3 car garage and an enclosed pool area.  It needed about $7,000 in repairs.  The bank asking price on the property was $279,000 or $78 a foot.  To replace the house would have cost at least $100 a foot according to sources I spoke to in the building industry.

I took my client to the property and there were two other agents there.  I told them it was a fantastic deal and I encouraged them to offer more than the asking price.  They discussed it amongst themselves and offered $800 more than the asking price, or $280,000.  I explained that there would be 6 offers on the house and they would not get it at that price.  I suggested a price just north of $300,000.

Well, as you might have guessed, they did not get it.  Now they call me and ask if they can offer more on the property.

I think people still believe that we are in a downward turn, but I would beg to differ.  There are going to be a handful of deals out there, but guess what the other 5 people are doing who did not get that property?  They are out there looking, too.  It wasn't like just one individual had made an offer on the property, there were many. 

Happy House Hunting!

Banktruptcy as an Option has Obstacles

Many folks today are using bankruptcy as a way to lengthen the foreclosure process and allowing them an opportunity to stay in their homes for a longer period of time.  For most, it has been a savoy move.  But that train of thought may be changing.

Berlin Patten recently published an article that could be helpful to people who are considering bankruptcy, and especially those who are trying to stretch out the time that they might be hoping to stay in their homes.

Here is the article:

 

Many homeowners resort to filing bankruptcy in order to stop an imminent foreclosure on homestead property when no other legal options are available.  While, in most cases, the mortgage holder can still foreclose on the property, it cannot do so until the property is released from the bankruptcy estate.  This can take several weeks or even months (if not longer).  Traditionally, where real property in bankruptcy has no equity, the trustee eventually abandons the property, as a sale would not yield funds to pay unsecured creditors.  However, it has come to our attention that some bankruptcy trustees and third parties have found a way to profit from underwater homes in Chapter 7 bankruptcy.
  

In a recent bankruptcy case pending in the Tampa Bankruptcy Court, the Trustee served a notice to an unsuspecting homeowner that their home was going to be sold in three weeks time.  However, the property is encumbered by a mortgage and has no equity.  The notice stated that the Trustee was selling the property to a land trust "as is" for $1,500.  This means that the Trustee was essentially selling title to the property with the mortgage still attached.  Thus, the new owner of the property would only keep title until/unless the mortgage holder foreclosed.  The obvious question resulting from this scenario is: why would anyone pay for property that will eventually be lost in foreclosure? 

Further investigation revealed that the land trust purchasing the property actually reviews bankruptcy filings to see if the homestead property is the subject of a "slow paced" or early stage mortgage foreclosure. When they find one, they approach the bankruptcy trustee to acquire the property, which they can accomplish relatively quickly in bankruptcy. They then evict the homeowner and rent the property out to a third party until the bankforecloses.  Given that it can take over a year for a bank to foreclose on a property, the land trust stands to gain a considerable profit from its $1,500 investment.  The bankruptcy trustee benefits from its commission on the sale and will obtain $1,500 to pay the debtor's creditors.

Should this practice gain momentum, the ability of homeowners to use bankruptcy as a means to protect their homes (or as a means to remain in their homes longer) will be lost.  In fact, this practice could result in a much swifter eviction process for homeowners than would be the case outside of bankruptcy. In other words, the bankruptcy filing could backfire on an unsuspecting homeowner. So homeowners considering bankruptcy as an alternative to the voluntary sale of their property should be very careful. For further information regarding options for homeowners facing foreclosure and/or bankruptcy, contact an attorney.

Berlin-Patten, PLLC.

2012 Will Be The Year of The Short Sale

While Sarasota seems to found its footing in the real estate market the past few months.  Yes, pending sales are up 38 percent for January.  not only are the numbers of units up, but so are prices.  In January of 2012, a total of 963 contracts were signed.  Single family homes have risen to a median price of $162,000.  So, what is going to happen in 2012?

I think there are two scenarios:

1. There certainly seems to be some inertia gathering around the housing market and prospects for a strong 2012 seem to be in the making.  The inventory is down, rates have remained low and Sarasota continues to get great publicity as a destination for people who are looking to invest or want to purchase a second home.  I am predicting a strong year for our area.

2. We still have some pressure from foreclosures.  If you look at the tax records that are available to realtor's, there are still a large number of foreclosures that are looming out in the market place.  Another stress on the market will be people who want to short sale their primary residences in 2012.  They may have been waiting to ride out the foreclosure process and drag out the proceedings, but after 2012, there will not be tax forgiveness given with regards to the 1099 someone might receive at the end of the year .  The government enacted legislation in 2008 that would give relief to  homeowners who might have had a large tax burden otherwise.  The cap on the forgiveness is $2,000,000.  Even at a 15% tax rate, a $2,000,000 mortgage forgiveness would save a homeowner $300,000 in taxes.  These factors will cause many people to go ahead and put their homes on the market.  This will keep home prices depressed, but I think we will see some relief as these short sales get absorbed into the market.

If the banks are smart (that will of course be questioned), they will slowly release their foreclosed properties back onto the market.  I think that will be one of the keys as to whether Sarasota makes a strong comeback in 2012.

Bank of America Deal Can Put Money in Your Pocket

Bank of America is offering up to $20,000 to people who will put their house up for sale if it is in the foreclosure process.  Bank of America contends that thousands of people will benefit from the the new program.  To date, only 60 Floridians have received anything from BOA (BAC) through the program.  The program lasts until August of 2012 and the hope is there will be thousands more who will take advantage of the program.

Bank of America said that the program is being offered to qualified homeowners (homesteaded properties) who will list their property and get an offer that is acceptable to the bank.  The owners would get 5% of the unpaid mortgage balance as of August 2011, with a minimum payment of $5,000 up to a maximum payment of $20,000.  The guidelines state that the sales price will not impact the payout.  My guess is that the rules and guidelines are a moving target and in flux.

Why is Bank of America offering the incentive?  The goal is to save the lender thousands of dollars in attorney fees, taxes, carrying costs if it goes to foreclosure, damages to the house that hurt the value, and court costs.  It also helps the bank get their bad loans off the books.

I guess you have to make a decision as to whether it is worth it to try the program.  If you are paying $5,000 and can fight the foreclosure for 3 years, it may not make sense to try the program. But, if you are along in the foreclosure process, it might make sense to give the program a try.

The other aspect of the program that might be more  appealing is the fact that the bank may waive the deficiency.  If that is the case, that would be a win win situation for a homeowner.

If you want to discuss your options, feel free to email me and I can put you in touch with a foreclosure attorney.

Condo Sales Rise in Sarasota

I know I sound like a broken record every time I blog these days, but the indicators seem to be pointing the Sarasota market in the right direction.  My last 7 or 8 blogs regarding the state of the market locally have been generally favorable.  That is a marked change over the past few years when looking at the overall market her.

Even nationally, news seems to be indicating a bottoming out in the housing market.  Sarasota saw another rise in units sold in October.  Sales of condos rose 10% in October with over 250 units changing hands in Sarasota-Bradenton.  There is still some pressure (1.5% decrease in prices from September) on pricing, but it seems to be leveling off.

Most of the pressure seems to be coming from the banks who have gotten their acts together and are slowly releasing some of their inventory back onto the market. That will continue to put pressure on  market prices, but could begin to ease in 2013 as they begin to get absorbed by buyers.

But with all the publicity that Sarasota has gotten over the past few months, mortgage rates still at historic lows, no major hurricanes for the last 6 years, no state income tax, and the great weather, we should see lots of folks looking for properties during the season.

Happy Holiday House Hunting!!!

Sarasota Leading the Pack as market begins to rebound

Sarasota had, until recently, been on the receiving end of many articles that did not depict the Sarasota housing  market in a favorable light. The content of most article seemed to be pushing us further into the real estate abyss.  it was as if we might never recover.  But in a shocking turn of events, the paper has founds ways to now put a new spin on the housing market.  A recent article seemed to suggest that Sarasota was on the rebound, not only in terms of inventory, but in the rise of the median sale prices.

Not only that, but there seems to be some sentiment out there that Sarasota could be poised for an exceptional season.  There have been  more than twice as many inbound searches, in metro areas that include Sarasota- where prices have fallen by more than 50%- for properties than outbound, suggesting that Sarasota has become a hot spot for people looking to move to Florida. The numbers are eye-popping!!  With people feeling more confident about the economy and more people not sure what is going to happen to the Euro, real estate, because it has been so depressed, will give people a moment to pause and consider the benefits of having a house in Sarasota. 


5 years from now, if you purchase, you will look back and say you made a wise investment!  You will look like a genious to your friends who did not get off the fence and make a decision to purchase in the Sarasota area.

Luxury Home Sales On the Rise

High-end Seller's may finally have something to smile about with regards to sales in the $1 million-plus-market.  Everyone has been waiting for some good news and it seems that the tide has started to turn...slowly, at least.  Sales in the higher end showed a 42 percent increase from August to September and were up a whopping 170% over the same time last year as reported by MSC.

The market has also seen the number of pending contracts increase, too.  Nearly a 77% increase from last year. 

What is also interesting is that home sales are down 23% from last year.  This suggests that the market is continuing to find its balance.  If these numbers hold true, we are likely to see small increases in property values.

With a strong inventory of homes over $1 million dollars, Sarasota is primed to move a large number of homes during the upcoming season.  And with rates hovering around 4%, there may not be a better time.  People will look back in 5 years and will look like geniuses.

Importnat Information about Bank Of America Short Sales

Both Buyer's and Seller's are always looking for more information about the short sale process and how they work so that they can have their eyes wide open when they choose to sell their home as a short sale or what they need to know when entering into a contract to purchase a short sale.  In either case, you may sometimes need the patience of Job.  I have had a short sale take as long as 16 months, or I have seen approvals in less than a month.

Here are some details as it regards to Bank of America Short Sales:

1. They want to know there is a TRUE hardship and the net proceeds are very important.

2. Investors do not care if it is a cash transaction or financed.

3. Case loads, at the height of the crisis, were nearly 600 per agent assigned to a file.  that number has dropped to just over 100 cases per negotiator.

4.  People want to know how long the process will take.  The average number of days from start to an approval is about 50 days.  HAFA  (Home Affordability Federal Assistance) can take almost twice as long or longer.

5.  Borrowers in the HAFA program usually receive $3,000 for relocation.  Those funds can now be used to pay off 2nd liens, HOA fees, money used towards the deficiency, etc.

6. BOA has a new program that they have rolled out where they are offering $20,000 for the Seller to move out of the house.  You must not have an offer on the house and you must apply between 9/26-11/30/11.  It is a short window of opportunity, but it is a great incentive to move.

7. A great number of people are not aware that most banks are not the investor with a loan.  They are the SERVICER of the loan and really stop making money once the loan has stopped being paid.  A loan may have more than one investor.  It could be a pension fund in Australia that only meets quarterly and therefore, it take a great deal of time to get these transactions completed.  Some investors cannot agree on an acceptable amount for the short sale. Once you counter on an offer, it may involve several parties that need to agree in order to get a final approval.

8.  Structural damage to a property requires that the Seller file a claim with their insurance company in order to have repairs completed prior to a sale.

9. A BPO (Broker's Price Opinion) is completed once a contract is in place.  These will normally be valid for 90-120 days.  Banks will also complete full appraisals on certain properties.  As a Buyer or Buyer's agent, the BPO is the property of the banks and will not be released.

As I have seen over the past few years, these rules are always in flux.  They can change daily.  But, if you are patient enough, there are some very good deals in the Sarasota market.

Inventory of Homes on the Decrease

I remember the year well.  It was September of 2007.  I had gone to do some research for a client in the realtor's MLX system, a system that lets us track information about the number of listings that are on the market.  It was a quiet morning until I hit the button that showed me how many total listings there were in Sarasota County.  the search included all active listings of single family homes, vacant land, condos, etc.  The number that appeared was so unbelievable that I started my search over again in the hopes that I had been tricked by the data I had inserted.  Same data had the same results: 17,823 listings.  The numbers were so staggering that I turned off my computer.  At that rate, the time that it would take to sell all the inventory at the rate of absorption for 2007, it would have taken over 3 years to sell all the inventory. That would have to take into account that no other listing would come on the market during that same time.

Fast forward to September 2011.  In Sarasota County, there are 6,305 homes for sale verses almost 9,000 last year at the same time. In Manatee County, there are 4,348 houses for sale versus 6,200 last year.  In other words, the inventories in our area continue to drop.  These numbers are starting to tell us that we are almost at a 6 month supply of homes, a level that is considered healthy. the biggest drops took place in Lakewood Ranch and Siesta Key.

I can;t speak to the number of houses that banks are holding back from the market, but one does get that feeling that housing is finding its footing in Sarasota.

Shortsale or Foreclosure for the Seller?

Many people today are asking whether they should continue making their payments on their homes. We are tied into the idea that it is the right and honorable thing to do and so much of our identities and sense of self-worth are connected to our credit score.  Having a great credit score enables people to negotiate rates and determine what classification of Buyers they wish to be.  At the other end of the spectrum, people with lower scores are typically going to pay more for certain items.

Putting all that aside, the question for many people should be: Is a Short Sale of a Foreclosure better for me?  The answer seems obvious, but I see so many people ignore the sensible answer.  A recent article helped solidify my feeling that if you are able to do a Short Sale, you should.  Now, I know everyone has a different set of circumstances, but for the average person, the answer is clear:  Short Sale.

Below is an article about this very topic.  I hope you enjoy and think twice before just walking away from your mortgage.

Short Sale vs. Foreclosure: A Short Sale Always Wins

by Christopher Reale on October 4, 2011 ·

We are again honored to have Christopher Reale, Director of Short Sale Operations at Lepizzera and Laprocina Title and Escrow Services, as today’s guest blogger. He is an expert on the short sale process and will share his knowledge with us on a regular basis. – The KCM Crew

Today’s ever changing real estate industry has brought upon some very challenging questions from our clients. We as counselors, want to put forth the best, non-emotional advice that we can, in hopes that we can help our clients and their families navigate the rough waters of the short sale process.

The most prevalent question and one that continues to permeate the industry is:

“Why should a seller go through the short sale process rather than letting their house be foreclosed upon?”

While we cannot speak to every client circumstance, we can say one thing with complete conviction. In almost all instances in which a potential seller is contemplating whether they should short sell their house or let it go through the foreclosure process, a short sale is the better option. The following are examples to consider:

Example A- Short Sale

Mr. Smith owns a home in which he has a mortgage balance of $220,000 and a current market value of $150,000. Mr. Smith has elected to short sell his property. His Realtor successfully obtains a buyer who puts forth an offer price of $120,000 (80% current market value according to Realty Trac Foreclosure Report 5/26/2011). After reviewing the buyers offer and the financial hardship information from Mr. Smith, Mr Smith’s bank agrees to accept the short payoff of $120,000 which would leave a deficiency balance of $100,000.

The transaction closes and is final. Mr. Smith then pulls his credit report 30 days after the transaction takes place. On the report he notices that the mortgage trade line states “Mortgage debt was settled for less than full” and the balance on the mortgage is $0. Mr. Smith is now on the road to financial recovery.

Example B- Foreclosure

For the ease of illustration we will use the same value and mortgage debt amounts as in Example A. However, Mr. Smith has elected to forgo the short sale process and let the bank foreclose on the property. The bank holding his mortgage facilitates the proper legal procedures to foreclose on the property, all of which are costly. Mr. Smith is notified and his property foreclosed upon of which is taken back by the bank to sell as an REO.

Six months later, the bank finally sells Mr. Smith’s home only they sell it for $90,000 (60% of current market value according to Realty Trac Foreclosure report dated 5/26/2011). Remember, as a short sale, the home would have sold for $120,000 keeping the deficiency to $100,000. In addition to the deficiency now being $130,000, the bank has elected to add on legal costs of $15,000 and asset preservation costs of another $5000 for a total deficiency liability of $150,000. Mr. Smith pulls his credit report 30 days after being notified that the bank has sold his property and of his liability.

On the report he notices that the mortgage trade line states “Foreclosure” and the balance is $150,000. Because of Mr Smith’s choice to choose foreclosure vs. short sale his road to financial recovery has taken a major detour. He not only has a foreclosure on his credit report but now has a much larger deficiency balance in which the bank, in most cases, will report on his credit report as a balance owed.

The Best Option is Clear

While the financial and credit advantages are clear when choosing a short sale over a foreclosure, other advantages are sometimes overlooked. The most important of all of them is maintaining the seller’s dignity and peace of mind. We have heard too many stories of families having to leave their homes because of a Sheriff’s order or some other type of legal action. The short sale process alleviates this negative social impact. The process puts the control back in the seller’s hands so that they can get back on the road to financial recovery and start providing for their families. In the battle of the two evils, a short sale always wins!!!

Foreign Buyers Are Driving Sarasota Market

It seems that more and more buyer's in the Sarasota market are from somewhere outside of Sarasota.  Many Buyer's today are coming from places like Canada, Germany, Britain, and France, along with others.  The percentage of foreign owners has increased 34% over the past 3 years.  While this might seem startling, one must remember that places that are rich in resources, like Canada, have seen their personal wealth increase, and the value of the Canadian dollar is now on par with the US dollar.  It makes sense that it costs less to live in Sarasota now than it might in Canada. 

The Euro, while facing pressure, has remained quite strong.  With more pressure on the Euro, Europeans may begin moving their money out of the Euro and into properties in places like Sarasota.  With the downward movement of property values still pressuring the market, many people are positioned well to take advantage of the depressed market.

These factors, along with historically low mortgage rates, makes this the right time to be moving into the Sarasota market.

To this end,  The Herald Tribune wrote an article about the impact of the foreign Buyer in Sarasota.  To read the article, go to the link at http://db.tt/uldKVQz.

Rates Just Keep Falling!!

After all the recent political haggling and the potential fallout from the last minute agreement regarding the debt ceiling, I was one of those that certianly was skeptical about the direction of interest rates.  It looked as though they had no place to go but up.  To my surprise, and I am sure to many others, the rates have not only stayed flat, they have continued to fall.  Whether that leads to a rush on re-financing or new purchases, is not clear yet, but it certainly has not hurt that the rates are still at historic lows.

I was at the Signature Sotheby's company meeting yesterday and we heard from The Penny Hill Group regarding rates.  The numbers I heard were astounishing.  Here are the numbers for jumbo loans:

3 year arm was at 3.00 %
5 year arm was at 3.75%
30 year fixed was at 4.625%

Those are pretty amazing numbers!!  I had heard recently that those same numbers were even lower last week.  Conforming rates are even lower in some instances.

If you are even thinking about buying, now is a great opportunity!  Prices are depressed, but may have it the bottom in Sarasota, and rates are attractive.  Don't wait too long!!  You will have missed the window of opportunity and will regret that you got caught on the upswing of rates and home prices.

Good Things Happening in the Sarasota Market

Just when lots of folks thought the real estate market would settle into its summer doldrums around here, I was of the impression that the market was going to be quite busy, and it seems that I was correct, for once.

Judy Green, President and CEO of Signature Sotheby's International Realty in Sarasota, reported that this was a "landmark year in the Sunshine State, and especially in greater Sarasota."

The Sarasota Association of Realtors reported that the inventory for houses that are listed for sale was at it lowest point in over 6 years (down from over 17,089 in 2007 to just over 5,000 units today).  That puts us in a place we haven't been for quite some time.  This is the place we have been striving to land for since the boom ended.  To prove the point that the demand is way up, I had a customer make an offer in June on a bank-owned property.  When we arrived to look at the property, there were four cars in the driveway and people walking all around the property.  We made an offer and discovered that we were 1 of 9 offers.  Needless to say, my customer did not get the highest bid.  He made another offer two weeks later on a bank-owned property and we found out there were 5 offers that had already been received.  My client sent in a higher counter and now has the property under contract.  But this is indicative of where the market may be heading in Sarasota.

In the same article, Judy points out that 31% of international buyers, spending some $82 billion dollars, choose Florida as their final destination.  Being named the #1 beach in the nation did not hurt us either.

One might be led to believe that only the lower priced homes are selling, but Sarasota Herald Tribune columnist Michael Braga, one who has generally not put Sarasota housing in a good light, recently said, "Drive around Bird Key and you will get the impression that the Great Recession is receding into memory."

Could it be that the times are a changing?  Let's hope so.

Welcome to 2011

I hope everyone had a great holiday season.  It is now out with the old and in with the new.  2011 looks to be a great year!!

Well, after enjoying freezing weather, I feel like we are getting back to normal here in Sarasota.  I only hope that the fish did not suffer as badly this year as they did last year when cold weather settled into our area.  Fishing is on my radar, but not until next week.  I will try to provide an update.

It is my hope this year to delve into lots of topics.  It might get boring to just talk about the water and all that it provides for those who really enjoy the water all the time.

Today, I wanted to highlight a different aspect of Sarasota living: theater.  Sarasota was recently recognized in the Wall Street Journal's "Best Theater of 2010" list.  Quite a feat for a small city such as ours.  I have attached a list of the upcoming productions that will be on tap for 2011.  Enjoy!



Asolo Rep’s Life of Galileo Makes Wall Street Journal’s “Best Of 2010 List”The December 24, 2010 issue of the Wall Street Journal named Asolo Rep’s production of Life of Galileo in its annual “Best Theatre of 2010” list. Terry Treachout, WSJ drama critic mentioned “…the best-designed show I've seen in ages, Michael Donald Edwards's modern-dress production of Bertolt Brecht's Life of Galileo at Asolo Rep in Sarasota, Fla. (sets and costumes by Clint Ramos, digital projections by Dan Scully, lighting by Peter West and music by Fabian Obispo).” Life of Galileo shared the WSJ list with several Broadway and Off-Broadway productions as well as shows from Oregon Shakespeare Festival, Chicago’s Steppenwolf Theatre and Long Wharf Theatre in New Haven, Connecticut. Click here to read the full article.


Asolo Rep’s Antigone Now Featured Tonight on Gulf Coast Journal with Jack Perkins