Last week we gave tips on how to sell a home in today’s market from the non-distressed home seller’s perspective.  This week we thought we’d revisit tips on how to buy a foreclosure property since so many try, but very few are the winning buyer.  As a listing agent for many banks, we know what the banks are looking for. We speak to the asset managers.  If you follow these tips your chances will increase as not every buyer knows what the bank considers when looking at multiple offers, which many foreclosures receive.

The first thing buyers must understand is there is a lot of competition for these homes.  Typically bank foreclosures go fast, and for over asking price.  Everybody seems to want them.  So structuring your offer and submitting it correctly will increase your chances.

Tips on buying bank foreclosures in Cape Coral, Fort Myers, Lehigh Acres, and all of SW Florida
Tips on Buying Bank Foreclosures in SW Florida

Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it.  Listing agents don’t have time to track your agent down for this info.  We attach a document to each MLS listing specifying what is required with the offer.  Make sure your agent completes every single field.  We submit offers into an online system, and if information is missing, the offer cannot be submitted.

The bank never sees your offer until one is accepted.  The listing agent must enter information into and online submission, and it must conform to what the bank asks for, and all fields must be filled out.  If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information they required upfront.  Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.

Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc.  Providing the required information is the first step.

Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price.  So how do you compete?  Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period.  Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.

Banks are on the lookout for buyers tying up properties then using contingencies to escape later.  Banks want solid deals, so you want to dress up your offer to make you look like the best buyer in the batch.  The price will be close to asking price or above because it’s a deal anyway, so you have to compete in other ways.

In many cases banks will counter multiple offers with highest and best.  Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it.  If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.

Be careful that your offer is written well and clearly states all fees and costs.  It is difficult to impossible to make changes later, and it could cost you the home.  Any change to contract later on opens up possibility the home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time.  Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.

If you’re purchasing as an LLC, make sure you provide documents upfront that you’re authorized to sign for the LLC.  The bank will ask.

These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well.  Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays.  Be sure to work with an agent who has experience writing clear and concise contracts and understands financing in and out.

Following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer.  Good luck and happy house hunting.

Search SW Florida bank foreclosures single family homes

Search SW Florida bank foreclosures condominiums

In past articles we’ve given tips on what to be aware of when buying a short sale or foreclosure as these sales are relatively new to SW Florida in the past few years. We’ve also given tips on how to select an agent to properly handle a complex short sale when selling, but we haven’t yet offered tips on how to sell a normal non-distressed property in today’s distressed environment.

Tips on How to Sell a Property in Today’s Market

Selling Your Home is a Balancing Act

Selling a “Normal” sale can be much different than selling a distressed property.  A normal seller has some distinct advantages over distressed sellers, and a few disadvantages as well.

A short seller may have limited time to sell if they haven’t been making mortgage or HOA payments.  Either the bank or HOA can foreclose, so time is not always on the seller’s side.  A short seller needs to price the home competitively, but not too high or too low.  If they price too low the bank will reject the short sale and if they price too high buyers won’t be interested.

A normal seller should also price correctly.  If the property is priced too high, buyers will either not buy, or will buy something that offers better value.  If the home is priced too low, the seller is just giving equity away to the new buyer.

A normal seller typically doesn’t “Have To” sell because of a bank foreclosure.  They may want to sell to trade up, trade down, take a job relocation, move closer to schools, family, etc.  The “Wish To” sell is very different than the “Have To” sell.  Buyers are often more interested in a “Normal” sale because there is just one decision maker.  The buyer doesn’t have to wait weeks or months for a decision and there is less stress on the “Normal” seller about deficiency judgments and tax implications, all making for a smoother transaction even if bank accepts the short sale.

When pricing the subject property, we often have to look at the condition of the short sale and foreclosed homes.  Many times these homes need appliances, flooring, fixtures, landscaping, air conditioners, and much more.  Condition plays such a big part in comparing homes.  Normal sellers are competing with short sales and foreclosures, but they’re not always apples to apples and adjustments need to be made.

Agents also look favorably on normal sales because they are rarely affected by last minute title, judgment, and lien issues.  I can’t tell you how many times HOA, utility, code enforcement, and other liens delay a closing on foreclosed and short sale homes.

Financing a normal home is much easier for a buyer because they can reasonably lock-in they’re interest rate.  It’s almost impossible to lock-in a rate on a short sale as you never know when you can actually close, and also true on a foreclosure if any of those last minute title surprises creep up we mentioned earlier.

Normal sellers need to keep their eye on the “Current” of the market.  Even though the normal seller has many advantages, the distressed sales aren’t emotionally tied to the home, so many times they’re more willing to look at what is actually going on in the market versus what they “Feel” they need out of home.  A bank or the investor may just want out and can afford to dump a property versus a normal seller who has worked hard for their money and need it for the next venture.

In a declining market you never want to get caught chasing the market down, and this is true for distressed and normal sales.  You really need to study the “Current” of the market and see what it’s doing, not only for the overall market, but also competing homes like yours.  Traditionally, sold comparables mean more than Active listings as anybody can ask anything for a property, but the proof is what others are willing to pay.

The market doesn’t rise or fall in unison for all properties.  It’s possible the market has bottomed and even started going up in certain segments of the market and still declining in others.  Recognizing where your home stands in the various sub-markets will be critical to pricing it effectively, and will offer you the greatest chance of selling, even in today’s market.

It doesn’t matter if the market is up, down, or sideways, pricing based on analysis is critical.  Marketing is especially important when buyers have many homes to choose from, so make sure you’ve discussed with your agent and have a clear plan based upon your property’s needs.  Marketing, pricing, negotiating, and solving the transaction puzzle are the keys to being successful in any market, and today we hope we’ve offered tips in two of those areas.

Good luck in successfully selling your property.

This month is particularly interesting to study the latest real estate statistics as we really wanted to see what effects if any the foreclosure moratoriums would have on the market, and already we’re seeing some interesting data.  Watching these stats move feels similar to watching a heart monitor and patient’s vital signs.  I guess these statistics are the vital signs of our local market, so let’s dig in and see what the signs are telling us.

October Distressed Sales Chart Lee County Florida Real Estate
October 2010 Distressed Sales Chart- SW Florida

Some of these statistics interact with each other in a cause and effect way.  For instance, some foreclosure listings were pulled in October and distressed sales were down in October.  Distressed sales were up in Cape Coral, partly because foreclosure closings rose by 34 sales, and partly because short sale closings rose by 14.  Everywhere else short sales and foreclosure sales were down.

Inventory levels rose in Fort Myers 3.12%, but fell in Cape Coral and Lehigh.  Countywide inventory levels are up less than 1% from the previous month.

Closings were down about 8.45% in October from September levels.  Fort Myers sales were down 16.49%, Lehigh down 20.21%, but Cape Coral was up 6.88% over the previous month.  Cape Coral can be explained by the increase in foreclosure sales and short sales, and this may account for why the rest of the county’s sales were down as well, because the rest of the county’s distressed sales dropped.  So there seems to be that cause and effect in play we mentioned earlier.

Going forward pending sales are up county wide, and Lehigh Acres leads the way with pending sales up 5.44% over pending sales last month.  Cape Coral is up 1.92%, and Fort Myers is flat.  We track pending sales as pendings lead to closings, however not all pending sales close, so it’s just a vital sign we track.

We have noticed an up tick in buyer call activity and Internet traffic, so there is definitely buying interest in our market.  Banks have begun to release the foreclosure moratorium, so inventory levels may stabilize which will help transactions move forward.

Total distressed sales have fallen 4 straight months, but this could change as inventory levels have been driving sales numbers.  Demand is in the market and this is a case whereby supply is dictating certain aspects of the market.  Any disruptions to supply will temporarily affect sales numbers, and this should not be misinterpreted as decreased demand.  This past month’s results were supply driven.

Keep in mind these are internal tracking we compile and not official sales numbers which won’t be released until next week.

Where will the market head from here?  We believe supply will even out as banks get on top of some of the affidavit issues which plagued some of their foreclosures, and it may force some banks to work a little harder at completing short sales, which would be a good thing.

We are heading into season, and if this year is anything like last year, there was serious demand from our northern friends last season which could bode well again for this season.  This season “Feels” a lot like last season, as traffic has picked up on our roadways, as has real estate traffic, phone calls, and Internet traffic.  This season could be a chance to work down even more inventory, and it would be nice if that excess distressed inventory is available while the visitors are here rather than gracing our presence after they leave.  We’d just as soon sell and dispose of it now than have it come back and haunt us later when the demand might be less.

When it comes to supply, I say “Bring it on”.  We don’t feel holding it back shadow inventory serves any greater good and only prolongs agony later.  Others may disagree and argue that saturating the market further drives down prices, but so does an expanded process.

Ask anyone in the job market if they’d rather have a very deep recession lasting 3 years or a deep recession lasting 6 years.  I think most would rather take their medicine and get it over with so the healing can begin sooner rather than later.  Here in SW Florida we’ve been dealing with a declining market for 5 years now, and many would like to just get it over and begin that healing process.  We don’t want banks or government deciding to prolong the agony SW Florida has suffered for 5 years, as jobs and our local economy takes its cue from real estate.  The sooner we heal this market, the sooner construction jobs and the economy bounces back, and who wouldn’t be in favor of that in SW Florida bout now, or anywhere for that matter?

Visitors are here, pending sales are rising, and inventory is stabilizing, so let’s hope for a great season and a good 2011.

Like anything else, buying at auction can be a good deal, or a rotten deal depending on what you buy and what the terms are.  While there can be upside at an auction sale, the downside is much more frightening and should never be attempted without proper advice and education.

Is Buying at Auction a Good Deal
Is Buying a Home at Auction Always a Good Deal?

Each month we see big auctions advertised on billboards, newspapers and such touting bargains.  I’ve attended several auctions and I’ve learned many things.  In this article I’ll attempt to educate you on some of the things to watch out for that you might not know about.

Is Buying at Auction a Good Deal?

At one auction I noticed a group of people in front and another group in back.  One group kept bidding up the property to prices higher than market value and I wondered why.  Later on I discovered that when they won the bid for some reason they didn’t finalize a contract and the property went back out for re-bid.  This happened as many as 2-3 times per property.  At the end of the night when the crowd had thinned the property was purchased for much less by an investor who really wanted the property.  Essentially it was off the market all night tied up in contract sessions.

Another thing to look out for is reserve versus absolute auction.  An absolute auction means the property will be sold to highest bidder no matter what.  If it’s reserve, you never really know what the reserve is and they try and negotiate with you after you’re awarded the winning bid, so be prepared.

If you’re buying a condominium, or even in a homeowners association for that matter, I would look not only at the property, but also the association.  You may purchase and be the only one paying condo or HOA dues.  This may also make it impossible to sell your property to anyone but a cash buyer as lenders will not lend if the association doesn’t meet certain requirements.

Many are surprised to learn that the title work isn’t sufficient to actually sell the property.  Some have learned they may need to file suit to Quiet Title after they receive what they thought was good title to property.  There is a difference between insurable title and marketable title, and title policies today can exempt many things leaving you the purchaser holding the bag.

The property may also have many defects that aren’t known or get lost in the shuffle, and the buyer inherits them.  At one particular auction I’ve attended, once you put down your non-refundable deposit, you lose it regardless of whether you cannot get the mortgage (even if they promised to give you one at the auction) or if the property has major defects.  You simply MUST inspect the property beforehand or you will most likely be surprised afterwards.  I saw one home when the back half of the home was missing, and the buyer lost their deposit of 10%.  Additionally, if the air conditioner gets stolen prior to closing or damage occurs to property between auction and closing, it’s the buyer’s responsibility, so you are taking All the risks.

You also want to research code enforcement liens, fines for improper permitting, etc.  I had a house listed in Cape Coral with about $70,000 in fines, and a lot in Cape Coral with over $90,000 in fines by code enforcement.  We recently sold a $20,000 lot in Ft Myers with over $200,000 in fines.  In each case we rectified the problems before closing or didn’t close at all in the latter case, but this would not be true at an auction as the buyer would be stuck assuming those fees.

I attended one auction whereby the winning bidder put down their 10% and agreed to finance the unit through the bank at the auction.  They were approved on the spot for financing.  The problem is the property did not qualify because too many people weren’t paying their dues, and the loan was denied on that basis.  The new lender was the same lender selling the property at this foreclosure auction.  The lender obviously knew the property did not meet FNMA guidelines but they sold it to a buyer obtaining financing anyway, and in fact approved their loan.  The buyer was astonished to learn that after being approved, they were later denied, and their escrow deposit was being retained by the seller (the bank) for non-performance of the contract.

Like we said in the first paragraph, sometimes a good deal isn’t a good deal when it’s rotten.  You must thoroughly investigate the property, the association, the contract, the market, the financing, and the title work before you bid or you run the risk of being let down later.

If everything checks out to your satisfaction upfront, we would also encourage you to set limits on what you’re willing to offer so you don’t get caught up in the moment and overpay, only to find out later it doesn’t appraise and your loan is denied and deposit forfeited, unless of course you’re a cash buyer and don’t mind paying too much.

Like anything, an auction is just another way to buy and sell, and no matter which vehicle you use, please be sure to work with professionals and do your homework upfront.  You’ll be glad you did later.  Happy house hunting!

Last week we reported that distressed sales accounted for 63.27% of all single family home sales in August, and that a big shake-up was about to ensue as banks declared they were halting foreclosure sales at auction until they had time to investigate whether they’ve followed proper procedures.

Since that time Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) have all stated they were halting foreclosures, but that doesn’t seem to be the case. Last week there were in fact several foreclosure sales to the astonishment of the banks who have instructed their local counsel to halt proceedings of final judgments until they study each case.

SW Florida Real Estate Foreclosure Market
Stop- Go- Caution

We at the Ellis Team handle foreclosure sales for one of the large banks and FNMA. FNMA says they have not been affected because they didn’t employ the robo signers the big banks did. The large bank we work with gave us orders on 10 new properties in the past 2 weeks, and we had a closing this past week.

To date title companies are still issuing policies and the banks are still closing sales, although we’ve heard reports of some cancelled sales by agents. Banks may be halting summary judgments, but in many cases they are moving forward with new foreclosures to get the process started, but holding off on the final judgment or auction sale until they know they are on solid legal ground with their paperwork. This is not necessarily stopping them from disposing and selling properties they previously foreclosed on.

So one has to wonder if the bank’s announcement was all a farce for publicity. The answer is probably not. These banks are large and decisions take awhile to matriculate down to all the branches. The implications are huge though.

What’s at stake is the bank’s legal authority to foreclose. Typically the bank makes a loan then services the loan after they sell the loan to an investor, often times as a group package in what is called a security. These loans are typically bundled together with many loans, and many investors may join together and invest in the security package. Other times an investor will buy individual packages of loans.

Because these original loans get bought and sold, there must be a paper trail as to who actually owns the security, and the right to foreclose against the borrower. Defense attorneys have long asked for the lender to produce the note, often called “Produce the note defense.”

Usually the lawyers would sign affidavits that they, or the bank does indeed have the note, and the judge would accept that. The reality is, the note and other paperwork may be missing and perhaps never found. Because of all this, some judges may no longer accept those affidavits, and many of these sales may be in question.
Some speculate this could happen in as many as 30-40% of the cases out there, and the answer is nobody really knows, not even the banks or attorneys right now. This is why banks and states have opened investigations. If this is wide-spread, it could have deep financial implications to the banks and investors, and we wouldn’t be surprised to see damage suits against the banks by those foreclosed upon where the paperwork was insufficient.

This very well could stall the process and tie up the courts for awhile, which could affect the real estate market. It would make sense for the banks to emphasize short-sales now that foreclosures could be delayed, but the banks don’t always make sense.

Inventory could dry up, and transaction volume could decline. Some speculate prices would be driven up fast and furious, but we’re not so sure. We’ve had high sales because prices have been at bargain prices. Unemployment is high, and the economy is hurting. Will prices rise just because supply goes down? In a balanced economy, we’d say yes. In this economy, we may just be prolonging the foreclosures further out and delaying our recovery. We hope this situation gets resolved quickly as nothing good results from a foreclosure moratorium. In the end, the property will still be foreclosed or sold, so no sense delaying it and letting neighborhoods decay and the market falter. Let’s hope this gets fixed and we all get back to business soon.

Watch SW Florida Real Estate Update-Foreclosures-October 2010 on video

Last month distressed sales in Lee County accounted for 63.27% of all single family home sales.  This trend has been fairly constant for the past few years as Lee County has been hit hard by a sagging economy and a fallout from the real estate industry.

We have reported in past articles how the government’s loan modification plan was ill conceived and would not help struggling homeowners and in fact would prolong the housing crisis, and this has born out.  While there is plenty of blame to go around, there is a new threat on the horizon that may shake-up the SW Florida real estate market and change the landscape of transactions.

SW Florida Real Estate Distressed Sales Chart
Percent of Distressed Sales in Lee County Florida June-August 2010

Because of the volume of foreclosures nationwide, banks have hired outside firms sometimes regarded as foreclosure factories to handle and process the foreclosure.  The problem is that these firms must certify and investigate certain facts before presenting to the court a notarized package that the person investigating has read all the documents and certified the package is true and correct.

Through recent testimony, it has been revealed that a few of the large banks have one person signing thousands of documents, making it unlikely this person has personally reviewed each case.  In another case the vice president of one bank is also the vice president of another large bank, and is the person notarizing the attorney-in-fact’s signature. This is suspect and unlikely true, which gives further credence that this person is rubber stamping notary signings for various banks, which could invalidate all those foreclosures.

Three major lenders (J.P. Morgan Chase, Allied Financial Inc. (GMAC,) and Bank of America have halted foreclosures in 23 states because of this. There is a potential to postpone many foreclosures both here and nationwide, which could stall a real estate recovery.  The talk of the industry is, would this make banks more likely to consider short sales?  The answer is that would make too much sense, but it would speed things up and limit bank’s liability in this foreclosure document crisis.

FNMA has not been affected, and this document crisis will not halt all foreclosures, but it will shake things up for awhile.  What’s going to be interesting is how the failure of the banks to properly certify their properties for foreclosure will affect title.  A few title companies have already suspended issuing title policies on foreclosures of certain banks until they can determine the foreclosure was in fact legal.  The interesting question would be what happens to previously sold properties that could come into question?

This all sounds like a legal mess, and it probably is.  It is uncertain what all this means, but we do know it could have a profound impact on available inventory, and possible further effects on past sold bank foreclosure properties.  The implications are far reaching and beyond the scope of anyone’s expertise I know of to accurately predict how this will play out.  Our guess is it will just delay foreclosures in our area, which will prolong the market recovery.  Sales transaction could decline further unless banks step up and approve more short sales.

This is one of those wild card events that can affect the market.  Past wild cards were terrorism, oil prices, and the previous financial liquidity crisis.  Stay tuned.

Watch October Bank foreclosure video update-SWFL

One of the biggest frustrations buyers have is offering on a bank owned foreclosure and not getting it.  As a listing agent for many of the banks, sometimes buyers call me wondering why their offer wasn’t accepted, so I decided to write a 20 best tips on how to get your offer accepted.

The first thing buyers must understand is there is a lot of competition for these homes.  Typically bank foreclosures go fast, and for over asking price.  Everybody seems to want them.  So structuring your offer and submitting it correctly will increase your chances.

Keep in mind, listing agents must have all the required information, so if they ask for something upfront, they mean it.  Listing agents don’t have time to track your agent down for this info.  We attach a document to each MLS listing specifying what is required with the offer.

Tips on Buying a Bank Foreclosure Chart
How to Buy a Bank Foreclosure Chart

The reason is, the bank never sees your offer until one is accepted.  The listing agent must enter information into and online submission, and it must conform to what the bank asks for, and all fields must be filled out.  If a foreclosure has 20 offers, the listing agent doesn’t have time to call 15 agents and beg for information they required upfront.  Keep in mind, it takes awhile to upload 20 offers, and the listing agent may be dealing with 20 properties.

Listing bank foreclosures is very time intensive, and the listing agent coordinates everything from repairs to working out HOA fees, title issues, code violations, etc.  Providing the required information is the first step.

Secondly, consider that you’re probably competing against other buyers, and that many will be above asking price.  So how do you compete?  Consider a higher escrow money deposit, shorter closing time, and definitely a shorter inspection period.  Bank asset managers are also gauging the strength of each buyer, so you want to put your best foot forward in hopes of getting the property.

In many cases banks will counter multiple offers with highest and best.  Buyers are shocked when the bank doesn’t and just accepts one offer, so it always pays to pony up early on and go for it.  If you do get a highest and best form, assume the other buyer wants it as bad as you do, and act accordingly, because if you don’t, chances are you won’t end up with the home.

Be careful that your offer is written well and clearly states all fees and costs.  It is difficult to impossible to make changes later, and it could cost you the home.  Any change to contract later on opens up possibility home goes back out for rebid and you could lose it, so it pays to write offer correctly the first time.  Same applies with names; make sure everyone who wishes to take title is on contract from beginning. You may not be able to add names until after closing, which could require new title insurance and additional fees.

These are some very useful tips by an experienced foreclosure agent. Each bank has their own rules, so be sure to follow directions well.  Make sure you’re working with an agent who understands contract language. Many times we see financing contracts that don’t match up or specify some costs buyer is not allowed to pay under the buyer’s financing program, and the offer cannot be presented to bank until language is cleaned up which could cost the buyer the sale because of delays.  Be sure to work with an agent who has experience writing clear and concise contracts and understand financing in and out.

Bank foreclosures are prevalent in Fort Myers, Cape Coral, Bonita Springs, Estero, and Lehigh Acres, so following these tips will increase your chances, and ignoring them will most assuredly have you scratching your head wondering why the bank selected another offer.  Good luck and happy house hunting.

Search all Lee County Florida single family home foreclosures on MLS.

Search all Lee County Florida condominium foreclosures in MLS

We recently experimented with shooting our TV show in High Def.  Previously we’ve used a mixing board much like a TV studio whereby we can mix camera shots, video graphics, etc, but it was standard definition TV.  Because we have a high definition TV we use anyway, and we shoot the show with High Def cameras, we though it would be nice to make everything more clear and understandable.

Future of Real Estate Video Show SW Florida Goes High Defintion
SW Florida Real Estate Market Update Video September 2010

Future of Real Estate Video Show SW Florida Goes High Defintion

Instead of having one track mixed in from a mixing board along with audio, we’ve gone to mixing each camera track and audio track and syncronizing them.  The reason I spell all this out is because agents all over the country have asked how we produce our show, and now that we’re making the change I thought I’d spell it out.  We then mix all the tracks together and produce one output and export.

Next week we’ll work on shooting the video so everything is in screen properly, or we’ll add another camera.  Let us know if you like the new changes.  View the latest show SW Florida Real Estate Market Update This week’s show covers pending home sales in Cape Coral Florida, Fort Myers, Bonita Springs, Estero, and Lehigh Acres.  We also cover inventory levels in Cape Coral, Fort Myers, and all of Lee County as we’ve seen varying reports of inventory levels reported lately.

Official numbers were released last week, and as expected single family home sales dropped.  As you can see from the attached chart, there is some seasonality to this, but there are more reasons as well. 

Fort Myers Cape Coral Real Estate Closed Single Family Homes
SW Florida Real Estate Single Family Home Closed Sales

Sales are still well above 2006-2008 levels, but they are down against 2009 levels which was a record setting year.  Last year the market was filled with bank owned bargain inventory, and the trend this year has been less foreclosures coming to the market so we’ve been steadily selling off that bargain inventory. Actually the market never filled, but as foreclosure properties entered the market they were scooped up just as fast.  The pipeline has slowed this year. 

Combined with the expiration of homebuyer tax credits and high unemployment it’s quite predictable our market would slow.  Median home prices even began rising as less bargain sales were occurring.  In the last 3 months we’ve seen median prices decline from $101,500 in April down to $93,500 in July. 

So if less bargain homes are selling, it must be true that less regular sales are selling as well, or else the median wouldn’t drop.  This is also true, as distressed sales percentages in Lee County reached 64.18% in July vs. 54.66% in April.  Now that season is no longer here, it seems mainly the bargain homes are selling, and there are less bargains, so home sales are down, and non-distressed homes aren’t picking up the slack. 

Last year we predicted we’d see a No-Mans Land market when the foreclosure bargains dried up, and we’re seeing the beginning of this phenomenon now.  There is no major upward pricing pressure due to the economic times. 

Without rising prices, we won’t see increased builder activity, which means less tax dollars to the county government.  With fewer sales, we’ll see less doc stamps revenue to the state.  It’s a vicious cycle, so government better be prepared to make cuts because property tax values are also down which also cuts into county budgets. 

Real estate agents are out interviewing now because they’ve noticed their leads are down and they’re looking to go where there are some leads.  When the deals are gone, so is the investor interest, and we’re left with fewer residents looking to purchase.  We’re not seeing move-up buyers because people are uneasy about the economy and many can’t afford to sell because they owe more than their home is worth, so they can’t take advantage of moving up even if they do have solid employment.  The same goes with buyers looking to move-down.  You cannot move down to save money if you can’t afford to sell at today’s prices. 

This is Labor Day weekend and our market may be laboring, but it will be fine in the end. There are still good buys entering the market, and while we don’t see a lot of immediate upside pressure, we don’t see downward pressure either.  Even with slowing sales, we’re still the 2nd highest year on record.  Buyers looking to take advantage will have to be both quick and patient.  The early bird gets the worm when it comes to fewer foreclosure bargains, and the patient buyer gets the short sale, which can be a bargain if the buyer is prepared to wait.  And because 64.18% of current sales are distressed in some fashion, it pays to be both quick and patient.  The educated buyer with resolve is the real winner in this market.  The fearful buyer is missing opportunities and will kick themselves later.  

Perhaps when the government gets its act together and figures out which way is the road to recovery, we’ll see increased sales and prices.  Look for another homebuyer tax credit soon, or some other vehicle to spur the market, because real estate is traditionally 32% of GDP, and if we can kick start real estate, the economy may follow.

View our newly revamped website Topagent.com

A few years ago we reported that listing agents were listing homes at ridiculously low prices to create buying interest simply because the home was being sold as a short sale.  This is a bad practice for several reasons, and yet we’re seeing it continue today. 

Misleading Short Sales Distort Actual Values
Misleading Values in SW Florida Real Estate

This past week I noticed two different homes, each located in a different subdivision, listed at far below actual values.  This can cause many problems we’ll outline now. 

The bank is not likely to accept a short sale on either of these homes.  The bank will learn the actual value by ordering a BPO (Broker Price Opinion) or a bank appraisal.  Once they determine the home is worth much more, typically they just kill the sale.  Many owners and agents mistakenly believe that banks typically counter, but this isn’t normally true, especially when the offer is far below value.  There also can be more than one lien holder involved, and both look into value, and either one can kill the sale. 

If the banks were to accept such a deal, it creates a potential tax event or larger deficiency judgment against the seller.  The bank could also ask for a promissory note against the seller, and that note would be significantly larger due to the under valued sale. 

Even though the deal is not likely to be accepted, it also hurts the market in two other ways.  Buyers mistakenly believe that artificial number is the new market, because they saw a home for sale for X amount of dollars, even though it has no chance of selling.  Some buyers act quickly to tie it up, then wait months to find out the answer is No.  All the while, some good bargains have come and passed and they’ve missed out.  They may not have been the Steal they thought they were getting, but they were good bargains and suited their needs. 

In addition to the misperception buyers have, banks must also make decisions on how to price foreclosure inventory.  They do look at sold comparables, but they also look at what is on the market.  If they’re not careful, they’ll notice a particularly low priced sale and price theirs too low, which has a domino effect on future foreclosure properties, and it snowballs from there. 

The artificially low listing can influence future sales if people aren’t paying attention.  The foreclosure process is far from perfect, and people from other states typically make decisions about local property, so there is no need to give them false ammunition for fear they may shoot themselves in the foot with it.  When they do this, it hurts the entire market. 

The market will go up and down as conditions dictate, but it need not move in a direction due to false hopes and misinformation.  Sellers need to do a better job interviewing agents, and agents need to insure they know the local market, understand the short sale process, offer advice commensurate with what market conditions dictate.  This can be challenging I know in a changing market, but we see False Listings everyday and it doesn’t help anyone. 

The seller is let down when the bank rejects and it goes to foreclosure, the bank wastes time investigating a False Listing, and the buyer mistakenly believes they’ll end up the proud owner of a steal; all the while great bargains pass them by in the process.  And the market is let down by false and misleading listings that really shouldn’t be on the market.

If you missed last week’s Future of Real Estate Show, you can tune in now.  We interview Lee County Sheriff Mike Scott and ask him tough questions about Florida’s and Arizona’s immigration law and how that affect what he does.  Additionally we ask him his views on controversial red light cameras, the upcoming tight budget process, school resource officers, the jail, traffic stops, and much more.