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There’s been a lot of questions asked about short sales, are they good deals, are they for real, how long will it take to buy, are they even able to be bought? The answers I have seen have been pretty consistent over the last couple of years….but I’ve never seen anyone put up the hard numbers of where their claims came from, it’s mostly just been from personal experience or anecdotal evidence. So I looked them up. In the Orlando Metropolitan area (Orange, Seminole, Polk, Osceola, and Lake Counties where search) -There are currently 8,088 identified short sale properties available for sale. With an average days on market of 178 days -There are 7,633 short sales in pending status (meaning there is an accepted offer on the property, they are just waiting for bank approval to close). With an average days on market of 140 days -There have been another 5,883 short sales withdrawn from the market in 09’ (there could be many reasons for withdrawal….but most li kely the property went into foreclosure) -And the most telling number is that only 3,873 short sales that have actually sold in 2009, with average days until CLOSING of 178 days.
It’s hard to gauge an exact percentage of how many short sales actually sell in 09’ from these numbers but looking at the numbers myself, in the best case scenario it looks like only 1 in 3 short sales will ever close. What do you think the numbers show?
From personal experience, the number 1 reason by far short sales don’t close is the impatience of the buyer or the seller in the process. Six months is a VERY long time to wait on a property. So if considering a short sale, prepare for the LONG HAUL, and run away from a listing agent can say they can get an approval in only a couple weeks….unless they can produce a recent letter FROM THE BANK that shows they already approved the asking price; never take their word for it.
The close second that I’ve seen that prevents short sales from closing, are bad, incompetent, less experienced, less educated agents that do not understand how short sales work or what the best ways are to handle the short sale procedure. From not knowing how to send a clean and complete short sale package to a bank, to listing or accepting offers at prices WAY below market. There hundreds of little things that need to be PLACED correctly (nothing falls into place conveniently on short sales) to have a sale go through in even the average time frame. If you have patience, by no means eliminate short sales from your list of possibilities. But go in eyes open, be sure your agent knows what red flags to look for, be protected going into the deal, and be prepared for failure even if everything is done perfectly. The same goes for sellers, get an experienced agent, it will be a long and arduous process, nohting is speedy  so have patience and never give up!
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That’s right Mr. Seller, I am NOT going to sell your home….seriously! Heck legally I can’t sell your home, you own it, I can’t sell something I don’t own! But in reality, the statistics show that the agent you hire has about a 5% or less chance (depending on price range and location of your house) they will sell your home without a buyer agent on the other end. I hear a lot of people complain about their agent that “they NEVER show my house!” but if your agent took the time to explain the best way to sell your home, you’d know why that shouldn’t be a problem. First off, why would you want your agent to sell your home themselves anyway? You hired your agent to represent your best interests and give you the best advice for you, RIGHT? Well if a buyer comes directly to them, you run the risk of your agent having to become either a dual agent (where they are supposed to represent you AND the buyer…how that’s possible I don’t know) or they may become a transaction agent where they only represent the transaction and can’t give either party advantage. Both ways, there’s much more of a conflict of interest and you, the seller, gets the short end of the stick. Secondly there’s a very good reason why so few buyers go unrepresented….buyer’s agents work FREE, we listing agents pay them! So it doesn’t affect the buyer’s bottom line to use a professional to help them through the process. Only a small % of the population actually try to DIY a home purchase.  This brings me to my third and final point …. LEVERAGE is the key to selling a home nowadays. Parlaying from my second point above, I know the vast majority of people out there that are serious buyers are working with or are going to soon be working with an agent. So, do I want to spend the limited time and marketing dollars available chasing after 1000 tire kickers that may or may not want a house like yours? Or do I focus my time networking with 1,000 local buyer’s agents that are each working with 2-10 pre-approved buyers? And as far as MARKETING goes, studies from a few years ago show 90% of buyers (I think it’s more like 99% by now though) browse homes on the net when they are not out seeing homes with their agent. The fact is that there are literally thousands national and local real estate search sites out there and you never know what site the perfect buyer for your home is using. This is why your house has to be plastered EVERYWHERE it can be plastered. You would be surprised how many showings result from a buyer finding your house on the internet, then contacting their agent for more info and to set up an appointment. So when you agent doesn't sell your home themselves, don't blame them! The way the market works today is very different than yesterday, you have to make sure the agent you choose knows how it works and the most effective way to get people to know about your home; translating into a quicker sale and higher sales price for you.
I could make many more points on this…but I figure your eyes hurt enough after this long post and you get the jist right? Feel free to comment!
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525 Jackson St, Orlando This weeks Deal of the Week is located downtown Orlando in the Thornton Park area. Thornton Park’s brick lined streets just east of Lake Eola is known as one of Orlando’s most stylish districts. With a mix of 20’s bungalows, rebuilt Mini Mansions, and recently built high-end high-rise condo’s. Located walking distance to downtown Orlando’s entertainment district with nightclubs, sports bars, pubs, the new arena, arts center, and only blocks from eclectic local restaurants, wine bars and art galleries. 3 blocks from the newly opened Publix grocery, Lake Eola Park, and 5 blocks from the newly opened downtown movie theatre. 
“The Jackson” built in 2006 is a smaller mid-rise condo for the area with top finishes and purpose built construction (no conversions here). The HOA dues are relatively low per square foot for a downtown condo given the building lacks a community pool and gym, but include your building insurance, Security, building maintenance/repair and escrow reserves. The unit itself is a 2 bedroom 2 bath with bonus room, 1884 square feet on the third floor and includes 2 assigned parking spaces. This property actually has NOT YET HIT THE MARKET, but is soon to be listed by the bank owner as an REO property. Below are pictures from a previous listing, so current condition is unknown. Comparables show units selling for between $99 and $145 a square foot depending on size and condition. I expect the bank to price this property aggressively at or near $200,000, and will be a great deal at any price under $105/ft or under 200K if in move in condition. Given this size 2/2's (though this unit's bonus room can be considered a 3rd bedroom) may rent for between $1800-2000/mo, the owner purchaser can buy this unit and pay significantly less than renting, or an investor may be able to rent out for positive cashflow. If interested keep your eyes open or ask to be automatically updated when this property is eventually listed. As always Great deals will sell quickly, so have your financing or cash offers ready to go. This condo is eligible for Conventional financing but be sure you check to make sure your lender can lend on condo’s. 
 
UPDATE 10-29-09!!!! Property will be listed within the next few days at $189900 !!! |
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One of the major benefits of working with an excellent real estate agent is that we are constantly looking at and searching for properties, 365 days a week. We follow the trends, know the neighborhoods, and deal with the buyers and the sellers in the market. In short WE KNOW THE MARKET and know how to spot the best deals quickly. Especially in today’s market, great deals pop up frequently, but can be sold within a few days. So as a service to my readers when I come across these properties I will post a blog and update this page with my “Deal of the Week” explaining just why it’s such a great deal. I’ll do my best to bring you at least one deal per week, of course depending on what’s out there. Some weeks I will have 2-3 deals, while others may have none. Unfortunately most of the homes identified as deals are under contract within 2-10 days after they are available, so be sure to sign up for instant notification of my new deals. You won’t be put on any automated search list, you will get an actually email directly from me, giving you the extra speed advantage that can be invaluable. Just click Contact Me and ask to be signed up to receive an email as soon the deal is found and before I even have a chance to post about it!
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The Florida property tax system differs from many other states, and for you out of towners, understanding how to estimate the property tax on your Florida home can be confusing. The simple formula for calculating taxes is: (Assessed Value) X (Millage Rate) = Your Yearly Tax Bill. Finding out a property Millage Rate (millage is just a fancy term for Tax) is relatively simple. All you have to do is go onto the counties property appraisers website and see what the number is. Typical properties throughout Central Florida have a millage rate of between 16 and 20 mils (most commonly 18 mils). The number of mills however must be converted into a percentage rate in order to plug into the above formula….to keep it simple just move the decimal place over ONE to the left. 16 mils is 1.6% and 20 mils is 2.0%. How’s that for making something very simple as complicated as it they can! (Remember I only said it was RELATIVELY simple.) The confusion comes when you start looking at all the ways a properties assessed value can change. Assessed value in its simplest definition is the value of the property. The county the property resides in determines the value of every property within its borders every January 1st (or at least they are supposed to). The guidelines to determine these values follow similarly to your run of the mill appraisal; taking into account size, location, upgrades, and recent comparable sales. From year to year your value can rise AND fall based on if you add onto the size of your home, build a pool, or a sink hole swallows your neighbor’s house. Now I mentioned before that the county is SUPPOSED to reassess your property every year as of January 1, but being as some counties have hundreds of thousands if not millions of parcels to assess, rarely is your one property re-evaluated every year. An automated system adjusts for value changes and the valuation work usually occurs in Sept, Oct, and Nov of the previous year. Since these re-assessments only change on January 1 of any year, the current owner’s tax bill is always at least 1 year or more behind in values. This is why if you are looking to purchase a house today you cannot trust the current owner’s tax bill.  For example, you find a house for sale at $200,000 and they say the last tax bill was $6,000 for 2008; this doesn’t seem right at 1.8% does it? Well in this case, the house was likely worth about 330,000 when the 2008 tax bill assessed values where figured out (likely in October of 2007). Since the property is now obviously only worth at most $200,000 (that is what you are paying for it after all) you have a pretty air-tight case that when your 2009 tax valuation rolls around you can’t be assessed at that same $330,000 value. You can estimate your new tax bill come January to be at most 200K x 1.8% or $3600. I say “at most” because in previous years the property appraisers office usually took the market value of the home and subtracted about 20% to arrive at their assessed values, now that the market has turned and budget short falls abound, I doubt you will be able to get your assessed value to less than 100% of market value….but you may get lucky  So that is how you estimate your property taxes when purchasing a home here in Florida …..Oh wait, I almost forgot, here in Florida we also have something called a Homestead Exemption! There are several legal benefits to claiming a homestead, but we’ll only be talking about how it affects your property taxes. First thing is first, a homestead exemption can only by claimed on a Florida property if it is your primary residence (defined as you using the property as your residence for at least 6 months and 1 day of the year). The exemption has two large tax benefits, first being a $50,000 deduction from the assessed value of your home. So if your property is assessed at $200,000 but have it homesteaded, the millage rate will only be applied to a value of $150,000. At a 1.8% tax rate a homestead exemption will save you about $900. The second benefit of the homestead exemption is the “save our homes” tax benefit becomes effective. What save our homes basically is, is a cap placed on the amount your taxes can ever be raised in any one year. The cap is 3% a year, and is yet another reason why you cannot rely on the current owner’s tax bill as an estimate of what your taxes may be. If an owner purchased a property in 1985 and has had it homesteaded since then, their taxable value will likely be well below what would normally be assessed. There is also a new aspect to Homestead Exemption with a “portability” benefit. Explaining portability in itself requires a new blog. But basically, if you acquire significant savings because of the 3% cap on taxes, you may actually be able to carry some of that savings to the next home you purchase. To look up the most up to date tax bills on any property, to see what millage rates are effective on a property, and in some cases use an “estimate taxes” function, check out the local county property appraiser’s office (the office that determines assessed values). Orange County – Orange County Property Appraiser's Office Home(www.ocpafl.org)Seminole County – SCPA index.htmlOsceola County - Osceola County Property Appraiser's Office Polk County – Home Page
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Let’s hope! For those of you sitting under a rock the past year, if you haven’t owned a home in the last 3 years you are eligible to receive $8,000 from Uncle Sam if you buy a home before November 30th 2009. Thus far this program has actually be one of the most successful stimulus programs out there….more stimulative than cash for clunkers in my opinion even if it hasn’t received as much press. If you’ve been working with me over the past 6 months as a buyer you would have noticed this too. Anything under 200K right now is selling like hot cakes (what is a hotcake anyway?). I’ve had several of my clients outbid multiple times on multiple properties…some bidding tens of thousands OVER asking! And the news is even starting to pick up on the increased sales volume and in some area’s we’ve seen a slight uptick in prices. But enough about the OLD. That credit is expiring in a couple months, so unless you start NOW, and don’t look at short sales, you likely aren’t going to close in time to get the credit (but we can still try…I didn’t schedule a vacation in the next few months just for the last minuter’s out there). THE NEW news is that there are currently 5 bills sponsored in congress (maybe more by the time I write this) all dealing with Extending or Expanding the credit to further boost the housing market. Direct from the Congress: Senate Bill S1230 - the Home Buyer Tax Credit Act of 2009 – Home Buyer Tax Credit Act of 2009 - Amends the Internal Revenue Code to replace the current tax credit for first-time homebuyers with a one-time credit for 10% of the purchase price of a principal residence, up to $15,000. Requires repayment of credit amounts if the taxpayer sells or fails to occupy the residence within 24 months after the date of purchase. House Bill HR 2619 Amends the Internal Revenue Code to allow until June 30, 2010: (1) a first-time homebuyer tax credit for all purchasers of a principal residence (not just first-time homebuyers); and (2) a refundable tax credit, up to $3,000, for the costs of refinancing a principal residence. HR 2606 - the Home Buying Credit Expansion Act Home Buying Credit Expansion Act - Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit. HR 2801 - the Home Ownership Move the Economy (HOME) Home Ownership Moves the Economy (HOME) Act of 2009 - Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) repeal the limitation on such credit based on modified adjusted gross income. Finally, HR 2655 Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) expand the election to treat a purchase of a principal residence as made in a prior taxable year for purposes of such credit.  As of Right now, NONE of these have gone further than being introduced by a congressman, so all of them have an equal chance of being passed or outright rejected. My gut says something will be passed before the current credit expires….definitely something that at least keeps the current credit in place as-is, but I doubt they will up the credit to $15,000.
To tell the Truth, I think HOME act of 2009 is going to be a winner for one reason and one reason only…it’s catchy, like cash for clunkers. Face it, you know no one will remember to ask their congressman to pass HR-261849lglb27, but they can remember the HOME bill. In any event, be sure to contact your congressman!!! And ask them to support your favorite one (I like s1230 because it’ll stimulate my wallet the most…but I’m biased) either way something needs to be passed. Housing led the economy down, it will likely have to lead the economy up too. To find your local elected official http://www.congress.org/congressorg/dbq/officials/?lvl=L Don’t be shy calling and writing them. They are there to serve YOU.
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I had been pondering the effectiveness of one of the government's recent "bailout" plans called Hope for Homeowners after reading several articles and speaking with several mortgage professionals. Everyone was pretty unanimous in their opinions that the entire program has thus far been a failure. You can check out the details of the plan here http://portal.hud.gov/portal/page?_pageid=73,7601299&_dad=portal&_schema=PORTAL . Many have said it's a failure due to the restrictions placed on those who must qualify for the program; being only for primary residences, the need for the current lender to agree to a write down of tens of thousands on their loans without any incentive, mortgage insurance required above and beyond normal, and a "shared equity" payback of future home appreciation to the government should the homeowner ever sell. This blog isn't about why the program failed though, I was actually thinking about what idea's of the program were actually pretty good, and could have the potential to help the current housing market, and help curtail future lending abuses. Specifically I like the idea about a shared equity mortgage or SEM, and I'll tell you why. I can see an SEM as the mortgage of the future, or at least of the near future. In exchange for a lower interest for a home purchaser/refinancer, a bank could ask the homeowner to share a part of the future appreciation the house may see. The homeowner gets a below market interest rate of say 3% instead of 6%, making the home payments much more affordable, and the bank get's a potentially bigger payoff on the back end of the loan. On the surface this may look like it goes against the two sides best interest, (after all why would a bank want to shift getting paid on the front end of the mortgage to the back end, and why would a homeowner want to share in their good fortune with the bank?) but if you look deeper, the true benefits can be seen. For the lenders it makes sense because they can offer rates lower than their competitors with such a mortgage, while still making a great profit over the long term. They would also have more incentive to hold their mortgages instead of sell them. Instead of having only the upside of being paid 6% for the next 30 years on a continually declining principal balance, they could be making half of the appreciation on the full value of the home. Meaning the way mortgages are currently set up, banks make less and less money the longer the mortgage is held, but with an SEM they would potentially be making more and more the longer the mortgage is held. The example below explains what I mean: Imagine a house with a purchase price of $103, and the buyer puts $3 down on his mortgage. In Year 1, $100 is owed at 6%. The lender earns $6 of interest, and the owners' mortgage payment is $9 In Year 2, $3 has been paid off with $97 owed at 6%. The lender now earns $5.82 of interest Skip forward to the final year of the mortgage and only $3 is owed and the interest rate is still 6%. The lender at this point is only earning $0.18 in interest. What I'm basically trying to show is the diminishing returns for the bank. They make money on the front of the loan instead of the back. (not meant to be a 100% accurate representation of an amortization schedule) Now let's look at a shared equity arrangement: The same house is purchased for $103, and the buyer puts down the same $3 In year 1, $100 is owed at 3%. The lender earns $3 of interest and the owners' mortgage payment is now only $6. But to limit the banks risk at the beginning of the mortgage the bank keeps 100% of the equity including the $3 put down. On paper the bank is still making $6 In year 2, $3 has still been paid off (for the examples' sake) and $97 is owed at 3%. The lender get's $2.91 of interest, BUT the house has also appreciated 3% in value over the year before to a value of $106.09. The lender now has a 95% shared equity stake of $6.09 (the owner paid down $3 of loan and gets to keep 100% of that equity so the lenders' base is constant at $100), so on paper the lender has $2.93 in equity plus 2.91 in interest totaling 5.84, a higher return already in year 2 above than the example before. Extrapolated out to year 30, $3 owed at 3% and the lender earns $0.09 in interest, but the home is now worth $242.72 (assuming a constant 3% gain a year) the bank only made half of what it would have otherwise in interest payments, but the home in that year has appreciated by $7.07 and the lender has a 50% stake in that appreciation, or $3.53. Big difference for the bank versus getting only 18 cents! This of course is an over simplified version for example's sake, but doing the real numbers on a 103K purchase price with a 100K loan, the bank on a normal loan at 6% over 30 years would make about 115k in interest payments. The same loan at 3% would only make about 52K in interest payments but have a potential to make another 71K by sharing half of the homes appreciation (assuming 3% annual appreciation) totaling 123K; a return that could have only been reached by charging 6.3% on a normal loan. Admittedly this is not that great of an incentive for the lender to make their money on the back end instead of the front end, but with some FHA backing and insuring, I'm sure the banks could be convinced of the SEM's profitability. For the homeowner it makes sense because they can get a much more affordable mortgage, in the example above it cuts the mortgage payments by 30%! This has the bonus of making the cost to benefit analysis of renting vs. own that much more convincing to own, especially at today's prices, and could help jumpstart buying in today's market. I don't know about you, but if I could receive the benefits of a much lower payment now in exchange for a possible equity sharing later, a payout that only happens IF my home appreciates and I make money too, I'll choose the latter every time! Looking at a home as an investment, owners are limiting their upside potential by sharing future equity, but their downside risk in the short term is greatly reduced with lower payments, and further downsides could be mitigated with an agreement with the lender that shares potential losses on a sale as well. A serious investor looking to cash flow as many rental properties as possible should seriously consider such an arrangement as it relates to their investment goals. Looking at a home as a home, a place to live, the SEM a no-brainer. If someone lives in their home for a long period of time, they can save tens of thousands in interest with the lower rate. Savings they can put into their retirement accounts or children's college funds today, instead of having that money locked up in their home. There is also a greater incentive to own homes long term, under the H4H program 100% of appreciation is paid if the homeowner sells in the first year, 90% in the second, and so on, until after year 5 when the equity sharing stops at a minimum of 50%, so it makes sense that someone with one of these loans would want to stay in their home until they max out their ability to retain the highest portion of their equity they can. This also helps to keep people from thinking short term when it comes to owning real estate, speculating or flipping real estate doesn't make much sense if you will be giving away a large chunk of your equity in the first few years. For those that never plan on selling their home, the mortgage would be structured like a partnership. A partnership that ends either when they sell the house or the mortgage is paid off. In the event of a payoff, an appraisal is ordered and the lender's portion of equity is "frozen" until the eventual sale of the home. Bringing up another potential benefit, if home prices start falling, similarly to what has happened recently, those with the ability to pay off their mortgages will do so to freeze the lender's equity share. Thousands of homeowner paying off their mortgages at the same time....now that's a capital injection that would out rival anything we've seen from recent bailouts. For those that wish to refinance, it's just trading one partnership for another, one must pay off the old partner their equity share, and the new partner starts from even establishing a new base line. Second mortgages can act the same way, the homeowner would simply be limited to taking out only their portion of equity. Home improvements could get tricky, but at a minimum, any cash a homeowner puts into their home for upgrades would be credited to their portion of equity. For society as a whole it makes sense because lenders and borrowers will truly be partners in the ownership of real estate. Lenders will have more incentive to underwrite their loans to higher standards, and more people will be able to become homeowners with a stake in their communities' welfare. Plus in the short term it would really jumpstart the housing market, and give incentive to banks that hold loans that are upside down to modify them to a SEM with a starting principal down at today's values. Over the long term who knows if an SEM would prove profitable enough for lenders to offer, or popular enough with the public. I can see potential harm if another bubble is created by extremely low interest rates that may cause home values to spike, and when that bubble bursts and lenders run away from SEM's (they would no longer be making any appreciation on the back end), the burst could be even deeper than this one! These risks could be minimized however with the same cautions that could have minimized the current burst, lenders being diligent and conservative as to the real value of real estate vs. how much they will lend, and cautious underwriting (like qualifying the borrower as if they were paying a market rate of 6% even if they were getting an SEM at 3%). In the end, I think we have nothing to lose by experimenting with this type of mortgage over the next 2-4 years. Lenders could establish logical underwriting guidelines with a little research, and the government can pioneer the first mortgages through the FHA and/or VA easily. It would cost very little to implement, and wouldn't be considered a bailout since anyone could qualify for such a mortgage. What do you think? Would you consider an SEM?
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I just came across this article and thought it gave an interesting historical perspective on the price of housing and how inflation has a pretty clear role in the future of today’s housing.
Read the original article here: Commentary: House Prices Will Rise Greatly over the Next Few Years, Buy Now | RISMedia
For those that would rather have the cliff notes (why would you be reading my blog if you did though? I think I tend to get long winded for a blog!)….
The author basically goes through his memories of housing prices and inflation from the 50’s through to the early 80’s. From his father bought a home for a mere $13,000 in the 50’s and a good income was about $10,000, to when he bought his first home in the 70’s for about $33,000 and that 10K income was equivalent to about 50K, and inflation was in the 20% range!
“Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!”
This quote was what gave me the “I get it” moment for the point of the entire article. The author was simply saying his home actually wasn’t worth anything more than when he bought it, it’s just that the money used to buy it was worth so much less. Inflation was the real key to home price appreciation in those past markets.
Previously my thoughts where that the housing market would stabilize at affordable levels after over correcting a bit on the downside….and here in Orlando that day was sooner rather than later. Then once things stabilized housing prices would stay flat for some time to come. However, factoring the coming bout of inflation I also think is inevitable after pumping TRILLIONS upon TRILLIONS of dollars in “stimulus” I’m starting to think that flat housing price scenario may not be so. My home may never regain the true value it had last year at 30% above what it is now, but now I at least have hope that although my value will not go up, the dollar amount I can sell it for later may! (of course I’m ignoring that really high inflation would be bad for me and you in other ways but you get the point)
A pop in real estate prices after the true bottom has come may actually be more likely than any of us expected. In such a case, it would give me more confidence buying a home now or soon, rather than later. Not because it will make me rich by being worth twice as much in a few years, but because at the very least real estate has ALWAYS been proven a great hedge at keeping that invisible tax called inflation from eating up net worth.
Just some food for thought…  Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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Crazy Deals vs Good Deals If you’re looking to get a good deal on a foreclosure home you are starting in the right place. Banks are the quintessential “Motivated Seller” and are willing and able to sell the properties they own for less than what other sellers are asking. However, if you are looking to get a CRAZY deal on a foreclosure, think again. Those late night TV infomercials teaching you how to buy foreclosures for 20-30 cents on the dollar are just there to sell you their products. The individual buyer has about a Zero chance of acquiring a property that far undervalue, such deals certainly exist, however they are limited to those that can purchase Tens of millions of dollars worth of properties at once, in cash, and without the ability to cherry pick the best properties from the junk. So unless you’re a hedge fund or extremely high net worth individual, forget the TV gurus. For the normal buyer like you or I, the only bank owned homes available to us are also available to everyone else and will be sold to the person willing to pay the most for it. If you like a property it’s likely someone else will as well. How banks set price Like any seller, the bank that owns the home wants to net the absolute most they can from the sale of their property, but there are a great number of differences in how a bank sells their property and how you or I would sell our property. The main difference being that they have never seen the property nor do they usually even live in the same state as the property, so determining local market conditions is difficult for them to say the least. The first step banks do, is order something called a BPO or Broker Price opinion. A BPO is basically an opinion of value given by a real estate agent, not an appraiser and the bank will usually order 2-3 of these to get an accurate range of value and will usually discount the property at the lower range in order to sell the property quickly. Many times properties are already priced aggressive enough to attract multiple bids even in today’s market, so within the first 15-45 days a bank is likely not to approve a sale price for much less than they are asking. So low baller’s, don’t waste your time. On a side note, banks ALWAYS hire a local agent to list, market, and sell their properties. Do not think you can simply call a bank and ask them to sell their properties directly to you. They will simply refer you to the agent they have hired to sell the property, and if they haven’t listed it yet….guess what, they will, and until they do, it’s not for sale! Also know that the listing agents for the banks are always paid the same whether you go directly to them or have your own representation with a buyer’s agent. So always use a buyer’s agent, not only does it increases your chance of getting the property because we know how to get your offers in quickly and cleanly (the listing agents sometimes are so swamped with listings they do not have the time or inclination to hold a buyer’s hand through the process). Something you must also keep in mind when dealing with bank owned properties is that the person that makes the final decision of what price to list a property, as well as what offer to accept is usually not a person at all, it’s a computer. I’m not saying there isn’t an actual human being that has input in the sale, but banks have shareholders, regulators, and investors to answer to, so having a computer system to make all their decisions for them is a way they prove fair dealings, and that they are looking out for the best interests of those involved. An employee simply inputs numbers into a system and the computer recommends a decision. The decision maker does have some latitude, but they also have bosses to answer to for their decisions, this is another reason why bank properties are usually priced at good deals already. Most banks prefer receiving multiple offers so they can easily justify the sales price they accept, receiving the highest and best price is much more convincing to a boss if a property is sold for 10K more than asking with multiple bidders, than if a property sells for 10K less than asking with only one bidder. Part 3 of my foreclosure postings include what a lis pendens means, what a foreclosure auction is, the differences between a short sale and an REO, and which one is a better deal. Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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Foreclosure properties have by far been the #1 inquiry I have received from many buyers in the market place today. People are interested in purchasing foreclosures for very good reason too, the owners are very motivated to sell, they are usually the most aggressively priced in the market, and they (unlike short sales) can be purchased in 30 days or less like a normal sale. There are unfortunately many misconceptions out there about exactly what a foreclosure is and what to expect when purchasing one. This is part 1 of 3 posts where I will discuss many of the ins and outs of foreclosures and what everything means to you, a buyer. 
Finding foreclosures When searching for Bank-Owned, Foreclosure deals the best way to find them is through a local agent. There are no special ways or places banks exclusively list their properties available. They are under obligation to their investors, shareholders, and federal regulators to obtain the highest and best price for their Real Estate Owned. They must expose their properties to the general market, and must sell them for the highest and best price they can attain within a reasonable period of time. This means ALL foreclosure properties are listed with a real estate agent before they are sold. They are available in the local MLS, Realtor.com, and countless other websites where homes are listed. You may have even come across a few listings that are bank owned and not even known it. Key words to look for are REO, Bank Owned, and Corporate Owned, but few sites allow you to search specifically for only Foreclosure properties. What to expect when seeing foreclosures and when you bid on them Now that you know where to find foreclosures, you should know when you view them and when putting in offers. For one, it is highly recommended that you employ the expertise of a buyer’s agent. Not just simply for the convenience of being able to check out multiple properties in a single day, but because your buyers agent should have the experience and expertise to structure your offers correctly, and accepted. When checking out foreclosures, you will see a wide variety of condition each property will be in. Some can be in “move-in” condition, others maybe need paint and a carpet cleaning, but there is also a higher probability of them needing quite a bit of work. Sometimes by the time a bank has a property up for sale it has been months if not over a year since anyone has lived in the house. Musty smells are almost universal along with deferred maintenance. The more seriously damaged foreclosures occur from either frustrated owners, or thieves. Fans, light fixtures, door knobs, doors, closet shelving, appliances, a/c compressors, missing cabinets and holes in the walls can be common and easily seen. Other not so visible problems, for example, were a frustrated owner that decided to pour concrete mix into the homes toilets...... needless to say that home didn’t pass inspection. SO ALWAYS HIRE A REPUTABLE HOME INSPECTOR! Another great reason to have a buyer’s agent on your side is because simply being a foreclosure home doesn’t mean it’s the best deal available! Banks are fallible as any seller is, sometimes they overprice their listings. There are also other properties that are not foreclosures that can be purchased at similar deals to foreclosures, including short-sales and plain motivated sellers that don’t owe much on their mortgage. Performing a CMA is critical to making sure you are getting the best deal available. Placing your offer The listing agents for the banks can be handling many tens if not hundreds of properties at any one time, needless to say they are quite busy. If you do not have a buyer’s agent you can expect delays and frustration getting a listing agent to open a property up for your viewing. You should also know that banks require offers be structured in a certain way, and will not even look at an offer that is not the way they require or that does not come accompanied with a pre-approval letter or proof of funds. Common requirements are for an as-is contract and a special offer summary sheet. Other non-common things like requiring a pre-qualification from one of their own loan officers, each bank is different and only an agent can find out how the bank likes their offers. Bottom line, Get your act together BEFORE you even look at your first property. Once you have a correctly structured offer ready to submit to the bank, know that no matter how quick a deadline you give the bank to accept your offer, they will work as fast or as slow as they wish, the bank works on their own schedule. You can expect it to take anywhere from 1-3 business days to hear back on an offer. If there are multiple offers on the property expect to hear the bank asking for a final and best offer. In such a situation the bank will accept the highest and best offer and will NOT negotiate individually with each offer. If you are lucky enough to have your offer accepted, there will always be an addendum to the contract sent from the bank for you to sign. The addendums are different for every bank and are mostly just “cover your butt” disclosures. The main point of the contract is to say we represent nothing about the house other than we are selling it to you, and that you better close on the property quickly or we’ll keep your deposit; make sure to review the addendum thoroughly and understand everything it says. It is also VERY common for a bank to ask for a quicker closing than you ask for, if you are financing the purchase, always give yourself at least 30 days to close. The bank would prefer a quicker closing, but likely won’t reject the deal just because you require the normal 30 days to close. Even after you send the bank the signed addendum it can take another two to three business days to receive a fully executed contract. I have never known a bank to go back on a verbal acceptance of an offer during this time, so you should feel confident scheduling your inspections and moving forward with your loan while you wait. This is meant to be a general outline of what to expect during the search and offer stage when looking at foreclosure homes. Each home will be different with their own little hurdles to overcome. For your highest chance of success, seek the advice of an experienced buyer’s agent. Part 2 of my foreclosure postings will discuss how banks set price and the difference between expecting a crazy deal vs. a good deal. Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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I just came across this article and thought it gave an interesting historical perspective on the price of housing and how inflation has a pretty clear role in the future of today’s housing.
Read the original article here: http://rismedia.com/2009-02-19/commentary-house-prices-will-rise-greatly-over-the-next-few-years-buy-now/
For those that would rather have the cliff notes (why would you be reading my blog if you did though? I think I tend to get long winded for a blog!)…. The author basically goes through his memories of housing prices and inflation from the 50’s through to the early 80’s. From his father bought a home for a mere $13,000 in the 50’s and a good income was about $10,000, to when he bought his first home in the 70’s for about $33,000 and that 10K income was equivalent to about 50K, and inflation was in the 20% range! “Personally, I wasn’t noticing the effects of inflation, yet-after all, we sold that original home and moved into a beautiful new home that cost $86,000 just as President Carter took office. Although I sold that home for north of $200,000 a mere five years later, it never occurred to me that our currency was being debased; no, I thought I was a brilliant investor!” This quote was what gave me the “I get it” moment for the point of the entire article. The author was simply saying his home actually wasn’t worth anything more than when he bought it, it’s just that the money used to buy it was worth so much less. Inflation was the real key to home price appreciation in those past markets.
Previously my thoughts where that the housing market would stabilize at affordable levels after over correcting a bit on the downside….and here in Orlando that day was sooner rather than later. Then once things stabilized housing prices would stay flat for some time to come. However, factoring the coming bout of inflation I also think is inevitable after pumping TRILLIONS upon TRILLIONS of dollars in “stimulus” I’m starting to think that flat housing price scenario may not be so. My home may never regain the true value it had last year at 30% above what it is now, but now I at least have hope that although my value will not go up, the dollar amount I can sell it for later may! (of course I’m ignoring that really high inflation would be bad for me and you in other ways but you get the point) A pop in real estate prices after the true bottom has come may actually be more likely than any of us expected. In such a case, it would give me more confidence buying a home now or soon, rather than later. Not because it will make me rich by being worth twice as much in a few years, but because at the very least real estate has ALWAYS been proven a great hedge at keeping that invisible tax called inflation from eating up net worth.
Just some food for thought…
Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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This is the feeling of uncomfortable tension which comes from holding two conflicting thoughts in the mind at the same time. Dissonance increases with: The importance of the subject to us. (like the largest purchase most make in their lifetimes) How strongly the dissonant thoughts conflict. (Price vs. Value) Our inability to rationalize and explain away the conflict. (lack of information and/or fear) How this applies to selling your home... A buyer sees a home they like on the internet or from their broker. They like the pictures they see and think this house could be what they are looking for. The price seems a bit steep, but they beleive it is still worth a look. This is where the dissonance starts, They feel they may like the home but they don't like that price compared to other homes they've seen and especially in this market they are afraid they will lose money. So they come see your home thinking "ok for the price they are asking the home has to be PERFECT" and they start asking questions and looking very hard to make sure the home is PERFECT (which very few if ANY homes are). The buyer walks through the house, likes it.... BUT "The neighborhood has a little more traffic noise than I'd like, the yard is a little too small, the kitchen/bathrooms could use some updates, it's a little to far from the school." The home is NOT perfect, so the price is now way to high, no sale, and no offer. This happens several times, so the price dropping begins to try and compensate. If that buyer hasn't bought yet they should still be interested, right? Wrong! The dissonance is amplified by the brain to help justify eliminating a good home from the list. Now when they get that notification of new price the buyer remembers your home and is now thinking, "I remember that one! It had the really noisy neighborhood, the TINY yard, the kitchen/bathrooms that really needed work, and was way to far from the school. That's a nice price, but I didn't like the house in the first place." Even if it were the deal of the century, that buyer would not be purchasing that home because they have talked themselves into thinking there are things seriously wrong with the house. And they confirm their theory on the fact that no one else has purchased the house by now! 
Now let's imagine we priced the home appropriately in the first place. The same buyer walks in, likes the home "The neighborhood has a little more traffic noise than I'd like, the yard is a little too small, the kitchen/bathrooms could use some updates, it's a little to far from the school..... BUT it's a nice house and priced fairly. I'm sick at looking at homes already, I can get used to the noise (I don't spend that much time outside anyway) the small yard means less yard work, the kitchen/bathrooms aren't that bad, the extra mile to school won't kill the kids and they could use the exercise." Let's put an offer in! Hooray! In this instance the dissonance between value and price was much less if any, and the buyer's mind justified toward where they were already leaning on price vs. value. In short, When pricing your home in today's market, don't ever think I can list high now and see what happens then just lower the price later if it doesn't sell. ALWAYS PRICE IT RIGHT AND PRICE IT RIGHT THE FIRST TIME! Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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Sorry for getting your hopes up.....but you shouldn't be getting your hopes up when seeing such advertisements on RealtyTrac or the other sites they feed their info too. First let me start off by saying RealtyTrac has great info. There is a reason they have become the leading source of foreclosure data in the county. That being said, the interpretation of their info by the general public is terrible. RealtyTrac does have a “learn” button on their site that has some great articles and a good FAQ that explains what NOD, Lis Pendens, and other foreclosure terms mean. Unfortunately, I suspect these articles and FAQ’s go very much unread by a large portion of their visitors. Plus they syndicate their data to several listing websites (like Trulia) where many people confuse their Lis Pendens information for actual homes for sale. So for everyone out there that gets excited when they see a “listing” for a lake front, 5 bedroom, 3 bath, 3,000 square foot home in Windermere for $40,000 make sure to look at the property description. If the words Lis Pendens are in there, know that the property is NOT for sale at 50K! Just because there is a Lis Pendens for 50K doesn’t mean that is all that is owed on a property or that the bank will be selling the property for pennies of what it’s worth just because there is a small mortgage on it. My usual answer to questions involving RealtyTrac “Listings”: I am sorry, but the listing you are referencing is not actually for sale (or is for sale for a different amount). The information you pulled is likely just a public court record of pending foreclosure action and the amount indicated is simply the amount owed to the mortgage holder. This amount has little to no bearing on what the home may eventually sell for when/if it becomes available. If it’s too good to be true IT LIKELY IS! Subscribe to my blog, I will be posting more info on what it means to you as a buyer when coming across a Lis Pendens, what scenario’s are likely to be happening, and how you may or may not be able to capitalize on the information when purchasing. Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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Before I start this post, please remember, I am NOT a licensed attorney and am NOT an expert in foreclosure or bankruptcy litigation. Please consult the appropriate professionals before acting on any of the information below……. If you as a seller are considering the option of a short sale, make sure you do your research (reading posts like these being one part of that research). The short sale is by no means a cure for all your housing or financial troubles; its real intent is to simply put a tourniquet on a bleeding financial wound. I mentioned in Part 1 of my Short Sale series that an approved short sale does not mean that you are off the hook for the money you borrowed to purchase your home. Short sales are a great options for people that simply can’t afford their mortgage payments but are otherwise in good financial health. The thinking goes, for example, that instead of having to make a $3000 a month payment on principal, interest, taxes, and insurance on a property, you can simply sell the property for less than what is owed, turn the outstanding balance into an unsecured debt, and only have to make a $500/mo payment. However, today, short sales can be helpful in many different situations. Since lenders are facing massive losses connected to falling home prices and defaulting mortgages, lenders realize they may never be able to collect the amounts owed after a foreclosure/short sale from borrowers, and they will incur even more losses by going through a full foreclosure. This provides a unique opportunity for borrowers that find themselves upside down on their mortgage and have a real need to sell. Lenders have the right to pursue what is called a deficiency judgment for the balance owed on the loan they gave you to purchase/refinance your home. Recently, first mortgage lenders are not pursuing these judgments to help entice  owners to go the short sale route instead of allowing a foreclosure. However, if you have the cash to pay off more of the debt outside of your retirement accounts, owned the property as an investment, or have a second or HELOC mortgage on the property, a waived judgment may not be in the cards for you. HELOC’s in particular (Home Equity Lines of Credit) do not arbitrarily waive their judgments. Typically the lender of the HELOC will receive little to nothing in a short sale, and has little incentive to approve it (you need everyone with a lien on the property to agree to a short sale for it to work). Their only real incentive is to get a small amount in concession from a first lien holder (sometimes as little as $1000 no matter how big the loan) and the fact that they will still be able to retain their right to collect the debt from you in the future. (I’m no attorney, but last I heard they have at least 5 years to collect, with the ability to renew another 5, this may have changed or I'm remembering the number of years...either way it's a long time!). The only real protection anyone has against this collection is to file for bankruptcy. In fact the only real reason lenders consider short sales without getting a judgment is the protection bankruptcy allows. In certain types of Bankruptcy, any judgments may be wiped out, and the lender loses anyway. The tricky part comes in with recently revised rules as to who qualifies for bankruptcy and what kind of bankruptcy they qualify for. For instance some bankruptcy proceedings will simply re-organize your debts and you may still be liable to pay back much of what you owe, and generally, unless you are a complete financial wreck, you will not qualify for a bankruptcy that dismisses all un-secured debt. (remember only a bankruptcy attorney can tell you which type of BK you may or may not qualify for). So if you are in relatively sound financial health, except for your housing troubles, a short sale may solve your immediate financial problems, and push you out of qualifying for a complete wipe out of your debts, allowing the judgment to stay and keeping you in the financial gutter until you pay it off…this particularly applies to people that own more than one home. In summary, a short sale is NOT a panacea for everyone. It certainly has its place in today’s market and for many of you out there it is your best option. But always go in eyes wide open, don’t believe an agent that blindly says you should short sale….after all, we only get paid if you do, and your bankruptcy attorney only gets paid if you file for bankruptcy ;) Consult a reputable and experienced real estate agent (such as myself), as well as a recommended attorney to help layout what options you may have. AGAIN, I am NOT a licensed attorney and am NOT an expert in foreclosure or bankruptcy litigation. Please consult the appropriate professionals before acting on any of the information herein.
Your Orlando Home Expert Direct: 407-222-7281 Fax: 407-281-1848 GregMTraub@gmail.com
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To give you my standard answer to most questions involving short sales …. YES and NO. If you successfully are able to sell your property in a short sale, by definition you are paying off a debt for less than what is owed. This forgiven debt can be treated like extra income by the IRS, and you may owe income taxes on that debt that was forgiven, even if it never was cash in your pocket. HOWEVER! There is relief for those that may have previously been liable for extra income tax. The Mortgage  Forgiveness Debt Relief Act of 2007 can mean you won’t have to pay extra taxes right when you are in the middle of a financial crisis. Please read details here http://www.irs.gov/newsroom/article/0,,id=174034,00.html and here http://www.irs.gov/irs/article/0,,id=179073,00.html What this basically says, is that if the home was your primary residence, and you didn’t take out extra money from your equity (like refinancing or taking out a Home Equity Line Of Credit), you are exempt from having to pay extra income taxes on the amount of debt you have been forgiven. So you can relax, just tell your tax preparer about the forgiven debt and make sure you are eligible. For those of you that are short selling second homes, investment properties, or who have taken out equity, there is a bright side to being taxed for forgiven debt. For a bank to forgive your debt, it must mean they are writting off your debt (forgiving it) and they won't be coming after you for that debt in the future! (at least that is the opinion given to me by an attorney…verify for your particular situation). So if you actually receive a 1099 form from your lender that says you are made $100,000 in forgiven debt, you should be jumping for joy, because instead of owing $100,000 you now just have to pay taxes on it. In the 30% tax bracket that’s 30K, no small amount, but certainly much better than 100K! Just make sure you employ a great tax attorney, you may be able to spread those payments out over a few years. If your buying a short sale....DON'T WORRY! The purchase of a short sale property has the same affects on your taxes as any other sale.
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