We sincerely hope everyone had a wonderful Thanksgiving as we all have so much to be thankful for, even if times seem tough for many across SW Florida.  For those eager shoppers we hope Black Friday was a day to score wonderful bargains.

We were trying to come up with a name for the day after Black Friday this year and we decided on Grey Saturday, because official sales numbers were released for the Florida real estate and market and SW Florida scored mixed results, earning it the Grey Area status.

Fort Myers, Cape Coral Single Family Home Listing Inventory
SW Florida Listing Inventory

Last month we reported a change in direction in listing inventory and said we wanted to keep an eye on those numbers going forward.  For the 2nd straight month, listing inventory rose.  The numbers aren’t staggering as we’re talking about a difference of 231 homes, but it is a recent trend nonetheless.

Fort Myers, Cape Coral Florida Home Prices
Greater Fort Myers- Cape Coral Home Prices

Single family home prices were up 15% over last year, but they are down 7.69% from last month.  We are in a volatile market because agents can’t count on which closings will actually close in a given month.  Transactions are becoming trickier to count on as governmental regulations are holding up closings, causing delays, and wreaking havoc on the market.  It’s not uncommon for buyers to receive approval on their short sale and then walk from the deal because of the length of time, or because they became impatient and went for another deal more likely to close.

Banks have told us the foreclosure backlog was coming and we are starting to see more assignments in the 4th quarter.  Another large bank has told us to watch out for 1st quarter 2012 for even more.  These bank foreclosures may be just what the doctor ordered for our market though because in certain submarkets there is a feeding frenzy to buy.  We have short sales, and some traditional sales of which not all are priced at market value, which is typical in any market, up, down, or sideways.  We’ve had a lack of foreclosure properties as banks were stymied with the legal debacle of the robo-signing issue that caused them to go back and evaluate if they had legal standing to foreclose and the paperwork to prove it.

We’re starting to see rising inventory and it’s not because of foreclosures.  We are entering season which is a time when properties are gobbled up like a Thanksgiving turkey, so we’d expect to see inventory decline in the next few months even if the banks do release more foreclosure inventory.  SW Florida’s appetite when it comes to a bargain is insatiable, much like a Black Friday sale.

Last month we had Trick or Treat Day, so we’d like to see a solid direction in the market.  The past few months have brought ups and downs in median prices.  Combining the recent up and down price swings, rising inventory, predicted rising foreclosure activity, and tempering that with the upcoming season means we have a market to keep our eyes on.

We really believe we’re going to have a good season.  What good is a bargain basement sale to a shopper in an empty store?  Shoppers want inventory, and this year may be one of the last good years to get the bargain.  Even after a downward price drop of 7.69%, prices are still up 15% over last year’s prices.  The absolute statistical bottom of the market may have been last year, and we may look back on 2011 in years to come as a time when buyers say to themselves, “I wish I would have hung in there and bought that bargain.”

When the economy improves and lending standards get back to normal, we’ll all look back at 2010 and 2011 and say “I wish I would have bought more.”

Good luck and good hunting!

 

Don’t let the headline fool you, we’re a big fan of appraisals.  The key word is accurate, competent appraisals.  So many times sellers want us to overprice a home and sell it to a northern or foreign buyer assuming they don’t really know our market.  What sellers fail to realize is buyers usually look at several developments, several homes, and study the market more than sellers do.  If you overprice a home, it will sit.  This is a price sensitive market, and when you price a home at or very near its value, activity heats up and properties move.  We often tell sellers even if we were to dupe an unsuspecting buyer into overpaying for a home; the bank is still going to order an appraisal before they lend money.  Not only do buyers tend to research the market but they have a backup with bank appraisal.  Some sellers say, “Well, let’s find a foreign cash buyer.”  Sellers don’t realize cash buyers research the market perhaps more vigorously than financed buyers do, so they’re really grasping at straws trying to sell an overpriced property into a price sensitive market.

Value is in the Eye of the Beholder
Your Home as Seen By Buyer, Seller, Tax Assessor, Appraiser

Just as some sellers need to research the market better, so do some appraisers.  In the past week I’ve heard several complaints from Realtors who’ve said a bad appraisal nixed their closing.  Sometimes banks use appraisal management companies who utilize appraisers from different markets who aren’t as familiar with the local market as local appraisers. We’ve had past clients ask us to market homes in other cities as far away as Pensacola Fl and we declined simply because we’re not experts in that market.  Out of town appraisers are at a big disadvantage and couldn’t possibly know everything they should about our market.

For instance, some waterfront canal property in Cape Coral brings more value than others.  Nearby neighborhoods in SW Florida may not be good comparables even though they are located right next to each other.  Computer models and unsuspecting appraisers wouldn’t always know this.

Many times when the bank is considering a short sale or pricing a foreclosure, they utilize a BPO (Broker Price Opinion) and/or an appraisal.  If either comes back too high, the short sale is rejected or the foreclosure is priced too high.  Recently we had an asset manager contact us because our BPO came in at one figure and the bank’s appraiser came in much higher.  After studying comparable sales used by the appraiser we discovered he used gulf access homes as comps even though the subject property was not waterfront.  He also used a deed in lieu of foreclosure sale which wasn’t really a sale at all; it was simply a homeowner giving the property back to the bank for the loan amount.  We submitted documentation to have the appraisal overturned so the bank can sell the home.

Bad appraisals can cost a sale at both ends.  If the short sale appraisal is too high, the price the seller’s bank accepts may be higher than the buyer’s bank who is lending money appraisal reveals, so the deal dies unless adjustments are made, which isn’t always easy or possible with new rules placed by the government.  These new regulations, designed to protect lending and real estate values are doing the opposite.  Rarely when government gets involved does anything improve, it just takes more time, more aggravation, and blown deals, which doesn’t stabilize the market.

If the lending appraiser comes in too low, the buyer’s lender won’t loan the money at the contract price, potentially scuttling an otherwise good transaction that should have closed.  There are lots of good appraisals out there which do blow some deals, which furthers our comment to sellers that it’s not wise to purposely overprice a property.  Keep in mind, value is in the eyes of the market, not any one buyer nor any one seller.  Values are subjective, and some properties are difficult to evaluate.  Not all sales are cookie cutter sales with multiple active and sold comparables.

It pays to study the market, and if you doubt the value, ask questions.  Sellers sometimes produce appraisals that are too high and the market won’t accept, and bank ordered appraisals are sometimes too low and not at actual market value.  Do your homework and question their work.  Request a copy of the appraisal.  You paid for it.  Some banks will let you see it.  And remember, keep an objective mind.  Everyone in the transaction has their own idea of what the value is, or should be.  Make sure that idea is supported by facts, data and logic and not ignorance of the market or motivations.

Banks are contacting customers who are past due or in financial trouble and offering owners or tenants up to $20,000 in relocation assistance to move out of home and hire an experienced agent to sell the home as a short sale.  Banks are also offering owners money to agree to a deed in lieu foreclosure in some instances as well.

Benefits of Short Sale Versus Foreclosure Chart
Alternatives to Foreclosure Chart

There are several advantages for taking the bank up on their offer.  If you let the property go to foreclosure, you’ll be evicted without relocation assistance.  Additionally your credit will suffer more in a foreclosure than a short sale or deed in lieu.  The owner is more in control when actively pursuing a sale through an experienced agent than giving up all control to the bank and the legal system.

A short sale is a commonly used alternative to foreclosure. Generally, when putting your home on the market, the goal is to market and sell your house for an amount greater than any and all outstanding liens against the property. Liens include all mortgages, escrows and fees on the property.

If you can no longer afford to make your mortgage payments and your house is worth less than you owe, a short sale allows you to sell your house at the current fair market value. You then have an option to move to a more affordable situation. In a short sale, the investor or owner of your loan must approve the sale because they are entitled to repayment of the loan and will be receiving less than the amount owed.

If you have additional liens on your property with other lenders, such as a home equity loan, all investors must come to an agreement in order to complete the short sale. This process takes time, and an experienced agent is required to navigate and negotiate through these challenges.

Another alternative is a deed in lieu of foreclosure. With a deed in lieu, you voluntarily transfer ownership of the property to your investor to satisfy the amount due on your first mortgage. In some cases, you may be eligible for a deed in lieu without first attempting a short sale of your home. A deed in lieu generally takes about 90 days, depending on your situation.

In either a short sale or deed in lieu you may be responsible for paying a deficiency.  There are many factors that determine this, such as if the home was your primary residence, what state you live in, your financial situation, etc.  Sometimes this can be negotiated with your lender.

In any event, most lenders agree it is much better on your credit report and they are likely to lend you money in the future faster if you agree to a short sale or deed in lieu instead of a full blown foreclosure.

If you’ve been contacted by your lender, it may be at least worth considering your options.  Don’t throw away documents sent to you by your lender.  If they make you an offer call your attorney for legal advice or an experienced real estate agent for advice on the program and assistance selling your home.

The banks really don’t want your home back.  They’d prefer that owners pay their mortgage payments.  When that’s not possible, it may be less expensive to offer the occupant relocation assistance and get on with the process of selling the home before it gets to the costly foreclosure process.  Once the home gets into foreclosure, the costs mount, the credit suffers, and owners lose options.

If we can help, call us at 239-489-4042.  Each situation is unique and it takes time to look into each program.  The good news is we have past experience with many of these programs.