Here’s an update to our SW Florida Real Estate Video Channel. The Top Agent channel has received 1,661 channel views and the videos have received 29,940 views. We have videos posted other places, so this is just the videos contained inside this channel.
It’s been 8 weeks since we last reported on short sales, and we’re happy to report short sale activity is up as we’d hoped it would be. Short sales make much more sense to all involved over a foreclosure as it helps preserve the sellers credit better, minimizes losses to the lender, and keeps the neighborhood in better condition.
I recently heard a funny quote “Why do they call it a short sale if it takes so long?” While I can’t remember who said it, it’s funny because it’s so sad. Hopefully with new initiatives in place we’ll see quicker turn-around times for short sales. As a CDPE (Certified Distressed Property Expert) we thought we’d share a few tips to help agents navigate this short sale process and make your deals quicker and smoother.
There is a clause in the Short Sale Addendum to Purchase and Sale Contract entitled #5; Multiple Offers which reads “Unless otherwise agreed by Buyer and Seller in writing, Seller may continue to market the Property for sale and accept other offers and submit those accepted offers to the lender.” We are not attorneys and we are not giving legal advice. This clause seems suspect though and we encourage listing and selling agents to amend or supersede this clause.
A purchase and sale contract is between one buyer and one seller, and once accepted you can request the lender to take less than what is owed via a short sale. In a normal transaction a seller wouldn’t enter into multiple contracts with multiple buyers, so why would you muddy the waters and try that on a short sale? Selling the property to multiple people just seems unethical and one buyer may have legal remedies against a seller for employing such a tactic.
Quite often we see sellers accepting any offer that comes down the road, but the lender certainly would not agree to the short sale because it is so far below market value. The lender wants to minimize their loss, and only agree to short sales if it makes sense. Sellers would be far better off negotiating or waiting for a reasonable offer than to accept any old offer.
When you submit multiple contracts to a lender they mistakenly think it must be a hot property and hold out for more, and many times each new offer starts the process all over again, further delaying approvals. And keep in mind when you submit more than one contract, the seller may be legally liable to more than one buyer.
You don’t submit offers to the lender, only accepted contracts. A seller should really only enter into one accepted contract. A lender cannot do anything without an accepted contract between buyer and seller as the lender is not a party to the transaction and can’t sell to anybody. This could change if they foreclose, but until then they are just the lender.
If you’re a buyer the last thing you want is the seller sending in other accepted contracts. It would be far better to move on and go buy another home and not waste any time waiting or investing in inspections, etc. As a seller, it should also be the last thing you want as well as it can hold-up or kill your sale. From a practical standpoint we don’t even know why this clause is in the addendum, or why agents or sellers would employ this tactic.
The other advice we would give is to have the sellers completely fill out a financial questionnaire upfront before taking the listing. There is no sense wasting buyers and sellers time if the seller isn’t going to qualify for hardship with their lender. You’ll need all this information with the accepted contract anyway, so it’s best to do it upfront and save everybody time. Not only will this speed up your short sale, but it will also help you skip doing deals that should never be attempted in the first place. Buyers are skittish enough on short sales anyway, so why attempt one if it has no shot at success? We’ll bring you more tips on short sales in upcoming articles. By educating the market on what works and what doesn’t, everybody wins. Good luck buying and selling. We’re all in this market together, for better or worse, and it pays to work together for success.
We’ve been talking quite a bit the past several weeks about HAFA (Home Affordable Foreclosure Alternatives) program and other programs designed to make selling a short sale easier. Going forward, these programs should provide some much needed relief for many sellers, and open up the market for more buyers.
We’ve noticed a trend this past year developing in the Lee County SW Florida real estate market. As we’ve reported, sales numbers hit record levels in 2009, and prices look like they may have stabilized. We’ve noticed that total distressed sales are down significantly since last May. Our definition of a distressed sale in either a bank foreclosure where the banks sells the property on the open market after they’ve foreclosed, or a short sale by a seller hoping to avoid foreclosure and protect their credit.
Fort Myers is showing the most strength with only 47.83% of sales being distressed in March 2010. Compare that to Cape Coral at 62.0% and Lehigh Acres at 74.19% Lehigh Acres is down from the whopping 88.5% set last June, even though they have leveled off about 75% the past 4 months.
Cape Coral has also declined, down from 78% last May to 62% now. This chart explains why prices have stabilized in Fort Myers and Cape Coral, and why Lehigh Acres is a little shakier at the moment.
Inventory levels are down in all three segments, and sales are up significantly over February in Fort Myers and Cape Coral, and up moderately in Lehigh Acres. Officially sales numbers have not been released at the time this article was written, and we believe going forward we’ll see some median price increases in Lee County, and especially in Fort Myers and Cape Coral.
We’re studying preliminary numbers, and we’re seeing an approximate 28% jump in sales over February numbers for single family homes. There was an increase in distressed sales, but the majority of the increase was regular non-distressed sales, and this is encouraging going forward in 2010.
We’ll be keeping our eye on the market after the home buyer tax credits expire on sales after April 30, and on interest rates which are creeping higher. Nationally consumer confidence is rising, and eventually that should trickle into job growth. SW Florida has been hit hard with high unemployment, and we really want to study these numbers as ultimately employment will be the engine that fuels SW Florida real estate prices in the future.
Always consult a CDPE (Certified Distressed Property Expert).
This past week we sat in on a meeting with the founder of RE/MAX, Laurie Magiano with the US Department of Treasury, Matt Vernon who heads the Bank of America Foreclosure and short sale department, and the president of Equator, the online transaction management platform for 7 of the 10 largest banks for foreclosures and short sales. The topic was HAFA, the government’s new initiative which stands for Home Affordable Foreclosure Alternatives Program.
The government’s new plan is voluntary for lenders, and it does not include Fannie Mae and Freddie Mac owned or guaranteed mortgages as they are working on their own solutions to assisting and speeding up the process. The government’s new plan allows for homeowners to receive $3,000 for moving expenses if the seller agrees to a short sale or deed in lieu of foreclosure. A short sale or deed in lieu of foreclosure is better on the sellers credit than a full blown foreclosure and will allow the seller to purchase a home much sooner than a foreclosure.
The plan also stipulates that the seller will not receive a deficiency judgment, so the seller won’t be bogged down with debt payments in the future resulting from the sale of the property. This is big as it’s been a stumbling block for many sellers in accepting a short sale. The seller’s housing expense ratio should exceed 31% or lender will believe seller can afford payment, and lenders will be particularly mindful of strategic defaults where seller has money saved but chooses to walk away anyway, especially on the higher loans.
The new regulations, if the lenders agree, stipulates that the 2nd mortgage holder will receive 6 cents on the dollar, which is far more than a foreclosure where they won’t receive anything, and much more than the 2-3 cents banks sell debt for on open market. The 2nd lien holders have held up many short sales, and now that the government has set guidelines, it should make it easier having a roadmap to negotiations.
The new guidelines also call for lenders to make decisions within 10 business days as to the viability of doing a short sale, and banks such as Bank of America are committing resources so that agents will now receive communications within 2 days, so the days of asking questions and not hearing anything for weeks or months may be over. Bank of America has put systems in place whereby an agent can contact a negotiator’s supervisor if the agent has not heard a response within 2 days, and the Treasury department has given us an e-mail address to escalate all inquiries no matter who the lender is so they can step in and help.
Everyone in the room agreed that short sale transactions could one day outnumber foreclosures, and that would be a good thing as sellers credit is better preserved, and lenders generally lose less money on a short sale versus a bank foreclosure, and 2nd lien holders get paid something. The property tends to remain maintained and require less fix up than an abandoned or vandalized property, which further upholds values in the neighborhood.
There is one other advantage few people think about to a quick process. Many short sales are priced too low and will never sell, but they subliminally drive values down in the market as some view the unsalable short sales as the new market value when in fact they’re artificial and won’t be approved. By speeding up the process, or issuing pre-approved pricing, this should help alleviate this phenomenon and improve the market almost immediately.
Stay tuned as these are lofty ideals, and we’ll report back on how well they actually work. Of course, this will depend on how many of the lenders and investors participate in the voluntary program. See our Future of Real Estate Show discussing new HAFA program on short sales.
This is the age old question everyone asks. How is the market doing? Have we bottomed? When will prices go back up? When will my home be worth what I owe? How long until we get back to 2005 prices? Should I sell or rent?
Actually we get more questions than this, like should I pay my mortgage, should I pay my homeowners association fees, etc. We’ll stick with the value questions for this article.
We’ve included a graph illustrating median prices since 2008. Median prices don’t tell the whole story, but they do tell a story. The definition of median price is half the sales are over and half under a certain price. As you can see, prices have fallen sharply since January 2008, and even more dating back to 2005. Ironically, home sales are up and setting records precisely because home prices have fallen. We’ve explained this in depth in past articles.
Average sales prices were approximately $365,000 back in January 2008 vs the median price of $225,000. We have been watching how the average and median price are related, and we have a chart in our annual State of the Market Report on Pg 4 that shows the relation over time between the two. This report can be found at www.Topagent.com
The average price gives us a little more depth to the market and helps us understand the overall breath of the market. As we’ve been saying for quite some time, we expect higher priced foreclosures and short sales to actually pull the median price up, and we believe this will occur. This past week official numbers were released, both statewide and nationwide. Prices actually fell 3.3% vs. last month, and were down 9.74% from last year.
Some might ask if we do all this research, when will our predictions come true. Our best estimates have been we could see year over year price increases as soon as March or April data. March data won’t be released until next month, but keep in mind these are only predictions about the future and nobody knows for certain. We are fairly confident this will occur; the question is more of when.
We have been looking at both median and mean average sales price data and it appears that prices for both dropped since December 2009 as official data would indicate, however were are seeing some price increases in March data that would indicate this trend has reversed, at least temporarily. Keep in mind we have many more closings that occur at the end of a month that could skew the data, but the trend looks good.
We would also expect sales this time of year to be higher as our Northern visitors are here and buying property as well, and many of these sales are in the higher than median price range. Many of these sales will occur past March into April and May, and many will come back and buy in the summer.
Ultimately prices will be determined by jobs and the economy. As more people get back to work, it should slow the foreclosures, and bring more people to the area. When will this occur? I think it’s so much easier to forecast prices in the short term than predict the overall economy. Congress has been focused on health care and the climate more than the economy, so it’s really hard to predict what’s coming out of Washington and how it will affect us and the economy, especially since we’ve largely been kept in the dark until something passes.
We would encourage our government to turn its attention to actually helping the economy, or get out of the way so small business can begin creating jobs and getting us back on our feet. Once the economy starts looking up, Main Street can begin to recover and prices can begin to rise. Our prices are artificially low, and they won’t stay that way forever. Prices are well below replacement cost, so builders are on the sidelines now as they don’t wish to build at a loss. Our market will increase in value perhaps 40-50% before this occurs, and this is why buyers today have a chance at building substantial equity quickly.
Once the dust settles and our market reaches price equilibrium, builders will be building again, bringing more jobs to the area and sustainable price appreciation. Good times await those who buy now and ride the coaster on up to equilibrium.
A few weeks ago we wrote about attending a recent bank foreclosure and short sale conference. We told you that banks and the US Treasury department have learned that home retention and loan modifications are not working, and that 2010 will be a year of “The Transaction” either by short sale or foreclosure. More banks are actually pursuing both simultaneously.
We’ve been illustrating graphs showing the percent of distressed sale activity in Fort Myers, Cape Coral, and Lehigh Acres for months now, and this week we decided to update Short Sale activity. While analyzing MLS data this week we noticed foreclosure sales have dropped in January and February to about 579 per month, down from approximately 700 or so the previous 5 months. This can be attributed to a backlog of foreclosures in process and a moratorium in place early in 2009.
We also noticed a stabilization and recent up tick in short sales, reversing a decline in December 2009. Will these trends continue? Let’s start with the foreclosures. We believe foreclosure sales will increase in 2010 as the backlog comes to the market. In fact, we’ve received a large volume of foreclosure listings we’re working to bring to market. It typically takes time to secure the property, assess the condition, the value, workup a Broker Price Opinion, compare that against the bank’s new appraisal, and meet with the investor to develop a marketing strategy on each property. All of this is done through the use of a bank asset manager, either an employee of the bank or 3rd part asset manager. Either way, asset managers specialize in disposing of REO (Real Estate Owned) bank foreclosures.
Once the value and strategy is determined, the property goes from a pre-listing to an actual listing complete with instructions. The agent then lists the property in MLS and solicits offers. Many times the property elicits multiple offers, and the agent presents all offers that match the bank’s criteria. For instance, we are not allowed to present any offers where we have not personally verified cash funds to close on all cash deals, nor are we allowed to present any subject to financing offers without pre-qualification from that bank’s in-house loan officers. Banks do not want to take properties off the market simply because a buyer presents a pre-qualification letter from an unknown or out of town bank or mortgage broker. Speaking from experience, banks and agents have had bad experience with pre-qualification letters. They are easy to get, and are rarely worth the paper they’re written on, so it is quite natural the bank wants their own people to look at the qualifications of the buyer if they are getting a mortgage. The borrower doesn’t have to use that bank, but the bank will not look at the offer unless they are offered their pre-qualification letter with the offer.
So we know 2010 will offer more foreclosure properties that have been initiated in 2009. What about short sales? Banks are not offering loan modifications as much as they have proven that they do not work long term. Politicians still promote the idea as it sounds politically correct, but it further exacerbates the problem. We are seeing large banks making a push to go online. Bank of America for example now negotiates their short sales online through a system called Equator. We have been using Equator to handle Bank of America foreclosures for years. We hear that banks such as Wells Fargo and perhaps others are in the process of adding their short sales to Equator.
This online venue will allow greater efficiency and allow more people to touch the file, reducing the time it takes to approve a short sale. The short sale is still a complex transaction and homeowners should not attempt it alone. In fact, your bank will refer you to use an agent who is familiar with the process. Short sales are not for every agent and should only be tackled by agents who are committed to learning and operating in a very rigid and complex process. Buyer agents regularly interview listing agents to make sure the listing agent knows what they’re doing, because if they don’t, the process will fail.
Look for 2010 to see rising foreclosure sales throughout the year, and perhaps rising short sale numbers as well. The banks are committing resources to it. We’ll keep reporting the numbers we track, so check back often.
This is the time of year agents are busy selling properties. If you look at the last two years, historically you will see that sales begin to build each month heading into summer. The last two years are fairly typical as to how our local market works. April and May closed sales are results of deals put together in March. There is typically about a one month lag from contract to closing. Some closings occur in the same month, and some take longer, especially short sales.
We think everyone who possibly can buy is attempting to right now for several reasons. Interest rates are headed higher. The Treasury Department’s phase-out of buying mortgage backed securities on FNMA and Freddie Mac expires this month. The last time this happened rates shot up about ¾% in a week or so, so we’re keeping our eye on rates in April and what if anything the government does when they shoot back up.
We also have the Home Buyer tax credit in place for sales through April 30. Buyers have a few months after that to actually close these sales, but essentially it allows first time home buyers a credit of up to $8,000 and repeat home buyers a credit up to $6,500. This is real money, and buyers are acting to receive this money.
Additionally, inventory in certain price ranges is drying up, and prices are low. Buyers from near and far and reaching to scoop up these bargains. Because these homes are so far below replacement cost, these prices won’t last once the economy improves and builders start building again. Many of these homes are 40-50% below cost, so there’s a built-in profit for buyers willing to buy now and hold until market improves.
We know why the market is Hot, but let’s go behind the scenes and explain some things that are affecting the market many people might not know about. The first major obstacle is appraisals. Appraisals have been coming up short up to 30% of the time as appraisers not familiar with the neighborhoods are using comparables that are not the best for the subject property. They are not taking the time to discern if the two neighborhoods are similar, or if the comparables condition is similar. We’ve seen appraisers use comparables from other neighborhoods that just don’t measure up while ignoring a good comp 2 doors down that closed last week. We’ve also seen appraisers only use the foreclosures, but they don’t tell the whole picture. The foreclosures can need lots of work and be in poor condition, and if the appraiser wants to use them as a comp, they need to research its actual condition when property sold.
The next big issue is we often have multiple offers on each property, and buyers are bidding against each other. Cash is king, and buyers wishing to finance have a hard time competing with cash buyers. The seller doesn’t have to worry whether the buyer will get financing when a cash buyer is involved, nor worry about a bad appraisal. Many of these properties are selling well over asking price, and many buyers are frustrated no matter what they do they can’t land a property.
We also have out of town buyers who believe they can bargain down these homes, and wonder why they lose home after home when the sellers accept someone else’s offer. Many buyers have said they don’t pay full sticker price, and yet they’re downright frustrated when the seller accepts another buyer’s offer. Agents I speak with say they are educating buyers right upfront about our market, but buyers often times have to try for themselves. A buyer can find out the hard way and miss out on their first 6 choices or take their agent’s advice and have a chance at getting choices 1-3. Even if you offer $10,000 over asking price all cash, there’s no guarantee you’ll get the home, but at least your chances are better. It pays to study each submarket and determine how each home fits in that puzzle.
Lastly, title can be an issue. If you’re buying a foreclosed home, it’s not uncommon for a title issue to creep up and extend the closing out. Banks don’t always complete the full title process until a contract is secured, and that’s when it could be discovered some outstanding liens, or homeowner associations trying to collect more than the law allows to issue an estoppel letter. We’ve even experienced a home that needed to be re-foreclosed as it wasn’t done properly the first time.
If our market wasn’t so challenging, we’d see even higher sales reported. This market is more complex than ever, but at least it keeps people on their toes and moving. That’s often little solace to those caught up in a deal when things are going wrong, but I guess it beats having a dead market. There’s nothing dead about the SW Florida real estate market.
Recently we attended a class with the Five Star Institute which is the premiere resource for educating bank asset managers and real estate agents on effectively handling bank foreclosure transactions. The class we attended was the REO/Short Sale Summit which focused on bank foreclosures and the short sale process. The Five Star Institute brought in asset managers for us to talk to, appraisers, banks, and 3rd party asset management companies so we could gain a thorough understanding on how to best deal with foreclosures and short sales, and insight into the back-end servicing agreements that control what the banks can and cannot do on behalf of the investor when approving a short sale or placing a foreclosure.
We learned that the Treasury Dept has agreed that mortgage modifications are not working, and most loan modifications and workouts still end in default. It was further agreed that 2009 was a year of home retention intended to keep people in their properties, and 2010 will be a year banks collect money, either through a short sale or a foreclosure and re-sale.
Nationwide it is estimated there is 33 months of foreclosed inventory that has not been released. Dave Liniger, founder of RE/MAX International told a group of banks a few weeks ago to release the inventory as holding it back is only harming the markets. In the most distressed markets like Las Vegas, Phoenix, and SW Florida, there is actually a shortage of properties and holding back inventory only prolongs the recovery time of the market.
A lawyer who handles nationwide short sales and REO properties addressed the audience and said that in many markets such as Florida, it takes over 1 year to get them through the foreclosure process, and 2010 will see many begin this process if short sales don’t succeed. All agreed that politicians’ running for office like to tell voters they’ll keep them in their homes, but this is actually harming the system instead of helping. Most blamed president Obama’s initiatives as short sided and designed to score points with voters, but largely ineffective contributing to the problem. The entire panel feared that politicians running for office this year may further try to prolong the inevitable in hopes of scoring points with voters, but that would further exacerbate the problems today.
In the last few months we’ve been able to help sellers sell through the short sale process, and from what we’ve heard we may see more of that in 2010 as banks pursue a simultaneous sale; short sale and foreclosure process. Banks are stepping up their efforts by hiring more people, and moving their platforms online so agents, appraisers, banks, investors, attorneys, etc. can all work on the file together and streamline the process.
We expect to see more short sales in 2010, and more foreclosures in 2011, depending on how successful the 2010 short sales are. Agents increasingly are becoming better trained, either from getting their CDPE (Certified Distressed Property Expert) designation or their Five Star designation to handle foreclosures for the banks. The process has become very complicated. Even an agent that never wants to list a short sale or do all the required work an REO agent does to sell a property would benefit by taking these courses as it educates agents on what is truly involved in the sale, and it will help them represent their buyers better by helping their buyers structure their offer better so the bank is more likely to accept. Of course, sellers should select someone strong in this arena, as success with the bank is determined by the seller meeting certain criteria, and the agent properly presenting that criterion.
Only about 25% of all short sales actually sell, and yet this number can be increased substantially with education. We are all for the industry getting better educated and increasing this closing ratio, which will help more sellers, help more buyers, and relieve frustrations by all. The short sale process isn’t for everyone, but for those willing to be patient and properly work the system, the rewards are there. And we’re for the banks improving their processes to make communication better. We would actually be for loan modifications and home retention if they actually worked, but unless the banks and government will consider loan reductions instead of short term rate and term modification, we think this is a waste of time and is further harming everyone involved.
We’ve been compiling our annual State of the Market Report which will be released soon and this year more than any other some interesting trends are developing. Full time agents tend to get caught up in the deals they’re working on and could miss some of the major trends developing in the overall market. It is always so interesting to analyze the overall Lee County real estate market, and then dissect down to the smaller sub-markets and see what story the data conveys.
This past week I asked several full time agents who work with a lot of buyers if they could tell me what they’re seeing on a day to day basis. I then compared what they said with the data we’re compiling to see what they story is.
A few themes developed from their stories. The first theme is many buyers have heard Florida is on sale, so they come down here with unrealistic expectations about what they can buy. Agents are receiving unrealistic requests for things like gulf front homes or condominiums 1 block from the beach with a garage, built in the 2000’s for $100,000 or less, or waterfront gulf access homes, 3 bedrooms, 2 baths, built in the 2000’s for $150,000 or less. The stories go on and on.
Many buyers want to look at bank foreclosures, but they don’t want to do any work if it needs repair. They expect all homes should sell at the bank foreclosure prices regardless of whether they need work or not. Many buyers feel the foreclosures set the prices in the neighborhood even though they may be missing a kitchen and needs tens of thousands in work. Buyers are quite often dissatisfied with the condition of the distressed properties, but they don’t want to look at a regular home that is all fixed up because it is not a perceived bargain.
You could take two identical homes next door to each other, one being a foreclosure and needing $15,000 in repairs and another being a normal sale and in excellent condition. The bank foreclosure might be priced $15,000 below the normal home, but when the buyer sees it they’re turned off. They’re also turned off by the price of the normal home because they feel it should be priced $15,000 lower. Many times there is a reason a foreclosure is less money. It takes money to fix them up, not to mention time and effort. Not everybody wants to do that.
Another theme is buyers have no idea homes are selling as quickly as they are. Many buyers are looking around and because there is some inventory believe they have time. Many are not motivated to pull the trigger because they believe that home, or one just like it will be on the market in 6 months or next year. Buyers do not believe these homes are receiving multiple offers and being scooped up by investors who can actually cash flow them at these low prices.
The emotional buyers are seeing fault with the homes and are afraid to buy. The studious investor is beating the regular buyers to the punch because they know these homes will be selling for more in the future, and they can actually rent them out and make more return on their money than other investment vehicles. These homes make financial sense to investors on both ends of the spectrum.
The regular buyer is operating out of fear and lack of knowledge about the local market. After they miss out on several properties to higher bidders it becomes apparent to them this market is much more active than they actually thought.
The SW Florida real estate market is on sale, but it’s the old herd mentality buyers follow. Buyers tend to be most motivated when everyone else is buying, usually at the height of the market. It’s true in the stock market, and real estate market. Back in 2004 and 2005 people couldn’t buy fast enough, sometimes buying groups of homes. Would you say buying a home back in 2005 was a better investment than buying one in 2010? And yet the motivations were higher back in 2005 because people weren’t afraid, when they should have been. 2010 is a far greater opportunity, and the people who study the market realize it.
Later this week we hope to release our State of the Market Report at www.Topagent.com so you can analyze what properties are selling the best right now, analyze where the inventory is, and what prices are doing on a monthly basis. Being informed will help you make a better buying or selling decision. It makes no sense to miss out on opportunities because of lack of local market knowledge just as it makes little sense to overpay, or list at the wrong price either. If you list too high your property won’t sell, and if you list too low you’ll be giving equity away to someone else who is more informed than you.
We have all questioned what happened to the stimulus funds only to find that there are monies available from the package in Lee County here and now. The word needs to get out. It is imperative that those who qualify and have a desire to own a home apply for the assistance. Getting people in homes as a result of this funding will inadvertently benefit the market in all price ranges and all sectors. We will cover that aspect later.
There are currently two programs with funds available:
HOME DOWN PAYMENT ASSISTANCE Qualified persons or families can receive up to 20% (not to exceed $20,000) of the purchase price for a single family home. The single family home must be located in unincorporated Lee County and could be a condo or PUD (Planned Unit Development) or even a double wide mobile home 1976 or newer provided the land is owned underneath the mobile home. The home cannot be a duplex, have an attached or detached mother in law quarters or have a swimming pool. If all of the funds are not utilized as either down payment or closing costs the balance of the funds will pay down the principal balance. The funds cannot pay debts or collections, home inspection fees or home repairs.
The homebuyers household income must meet HUD guidelines. The income for all members of the household will be considered. Non occupying coborrowers will be considered on a case by case basis. The home must be affordable for the occupants so the income of the non occupying coborrower will not change the mortgage amount or sales price. The coborrower may enhance the credit worthiness. All assets (including interest income) will be considered when calculating annual income such as checking/savings accounts, IRA’s, CD’s, cash value of life insurance, etc..
A ten year second mortgage will be placed on the property. No interest will be charged and there are no monthly payments. At the end of the ten years and if the property has been occupied and homesteaded each year a satisfaction of mortgage will be given and the second mortgage will not have to be repaid. However if the property is sold or leased during the ten year term or not owner occupied or homesteaded, then the prorated balance of the second mortgage will be due and payable. The second mortgage is self amortizing and will reduce 10% per year. Does anybody check? We are told this criteria will be verified.
The property must pass Lee County’s minimum housing quality standards inspection. The inspection will be performed by the Department of Human Services inspector. The house must not exceed HUD guidelines for the number of persons allowed per bedroom. The property must be existing and have had a certificate of occupancy for at least one year. It cannot be occupied by tenants that are not purchasing the home.
There are other rules and regulations all of which make sense and are easy to work with. Funds are available on a first come first ready basis. It would make sense to this writer that you get yourself in position to receive the assistance if at all possible.
The lender applies for the assistance from Lee County on the borrowers behalf. The lender completes the lender referral form and several required documents including a fully accepted purchase contract. There is a $50 charge which can be paid by cashier’s check or money order from the purchaser. Make this non refundable application fee payable to Lee County BoCC.
NEIGHBORHOOD STABILIZATION PROGRAM
Lee County is now in the business of buying and rehabilitating foreclosed homes in targeted areas and then selling them to buyers at prices less than what was paid for them. This is all possible due to the $18 million infusion of stimulus funds. First of all, the county purchases properties below the appraised value. Professional contractors go to work on them making the properties very good buys in price and condition. The county will not raise the price of the homes as the economy improves. These homes will stay affordable. Some of the target areas include Lehigh Acres, San Carlos Park, East Ft Myers, North Ft Myers, South ft Myers, Pine Manor and Page Park. Go to nsp.leegov.com to view maps of the target areas.
The incredible part is that the county will provide a silent second to the home buyer which means that the county may have purchased a home for $60,000 and then spend $$$ fixing it up and sell it for $30,000. The buyer is paying on the $30,000 mortgage. If the buyer stays in the home 15 years the silent second is forgiven. If the buyer decided to sell, rent or refinance before the 15 years have passed the buyer may be obligated to repay the subsidy partially or in full.
This program is not for investors or second home buyers and only for the buyer’s primary homesteaded residence. The NSP program is not restricted to first time home buyers but the buyer cannot currently own a home and must be a resident of the United States. Buyers accepted into the program must complete an 8 hour homebuyer education class.
Take a look at the income guidelines for a pleasant surprise.
The NSP program looks at the income of the buyer from a low, moderate or middle range. The low income buyer can get up to 50% of the sales price as a silent second subsidy. The moderate income buyer will qualify up to 40% of the price of the home and the middle income buyer at 30%.