Category Archives: Fort Myers

Fort Myers Florida news and information.

SW Florida Real Estate Sales Rose in June

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Unofficial numbers show SW Florida real estate sales rose in June. Official numbers will be reported July 20, so as we are writing this article early in the week we have to go with internal numbers that show sales rose in June even as inventory numbers fell once again.  We lost another 230 units of single family home inventory as many have been questioning where are the foreclosures banks said were coming.

From the beginning we questioned how many foreclosures would hit SW Florida as the distressed inventory directly impacts our market.  Nobody seems to have a firm answer other than to say more are coming, and we don’t doubt that.  The question is to what degree.

SW Florida Real Estate Sales
SW Florida Single Family Real Estate Sales

While sales rose in June, pending sales are down as we simply don’t have as much inventory to sell. Foreclosure sales in Fort Myers rose by 16 homes while Cape Coral foreclosures fell by 19 homes.  Lehigh Acres foreclosure sales rose by 7.

This past week we were assigned 3 more foreclosure listings, so perhaps this is the beginning of the banks being able to release inventory.  Banks have been hamstrung as legal proceedings have shown many of the banks didn’t follow proper legal procedures to foreclose on certain mortgages in certain states, and it’s caused banks to go back and start many foreclosures over and cancel hearings on others until they sort out where the mistakes were made and correct them.

In light of this legal situation, banks have increasingly been more diligent at handling and agreeing to short sales as it may take much longer for the bank/investor to be paid back partial principal if the home is tied up for months or years in foreclosure.  We feel there is no advantage to holding back inventory and the sooner we sell all distressed inventory the sooner our market can recover.  Others feel by holding back you can prop up prices.  We believe in an attempt to prop up prices you ultimately prolong the recovery and keep prices down for longer than if you just take the medicine and deal with it.

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

Without naming names, we have seen some entities holding back, but this may also be that they can only show so many losses at a time on the balance sheet..  For the most part, most banks are bringing inventory to the market as quickly as they legally can.

As of today, foreclosure listing inventory is up over last month.  Fort Myers has 35 more units on the market, Cape Coral has 22 more units on the market, and Lehigh Acres has 15 more units.  This could be a sign that banks are releasing.  One month doesn’t make a trend, but it is a reversal in direction and July 2011 could be the beginning of that last wave to hit the market.

We’ve just added a new Cape Coral Real Estate Blog in German for our German readers. Be sure to check back for timely real estate information and videos in German. Sharyl Leifeld is a buyer specialist on the Ellis Team who speaks German and promotes education to German’s about the SW Florida real estate market.

 

 

Real Estate Agents Using Video to Connect With Clients

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Real estate agents today using video are turning to efficient ways to meet with clients and online video is fast becoming a favorite amongst clients to communicate with their agent.  Online video has been around for years, but it has come a long way recently and has become mainstream as industry giants have adopted the technology and incorporated it into their products.

Recently Facebook added video using the Skype service to its online chat, and Google, Yahoo, and Microsoft all have video chat and Instant Messaging.  Video chat is now available on smart phones as iPhone and Android have incorporated video into their handsets.

Real Estate Agents Using Video
Online Video Conference

The picture shown in this article is a video application called QIK that allows smart phones on the Sprint network to place video calls, record and share videos, upload videos to a library that can be shared, or just send a video mail message.  Skype has similar features, as do Google, Yahoo, Microsoft etc.  We use video conferencing over cell phones to host quick meetings amongst agents on our team when one of our agents is out in the field or can’t be face to face.

Similarly, clients love to video call as we can talk about contracts and even place items on the whiteboard for each of us to look at and talk about.  Sometimes clients have specific questions about a form or contract and it helps to have it on screen and talk about where to initial or how to sign a document.  Clients can also ask specific questions relating to a contract.

Photos can even be shared so we can talk about inspection items, details about what needs to be done with a repair, and bring all of the issues into proper context and perspective.

Agents can also use the technology to participate in webinars, and learn from other top agents from all around the country.  We’ve done video sessions where we discuss recent short sale trends regarding specific lenders, or shared foreclosure information to assist each agent’s clients obtain the foreclosure.  Agents can now share information regardless of which city they’re in and we find this useful in assisting clients. Clients are not only hiring one agent in a particular town, they’re now getting expertise from all around the country as agents have speedy access to talk to one another about particular issues.

In the old days agents would pick up the phone and call one another, or share information on groups and wait for other agents to respond.  Now agents who belong to powerful networks can video chat with one another instantly in many cases.

Agents can also post timely information up to YouTube.  Our YouTube channel is located at http://www.youtube.com/brettellisfl Many agents these days have YouTube channels in addition to websites and Blogs and are finding video is an important way to educate and communicate.  Today’s sophisticated webcams make joining a service relatively easy, and adds two way communication versus the standard way agents communicated via video on YouTube or websites.

We really believe video will replace much wasteful travel time in the future.  There is no replacement for seeing a home, but once the home is viewed an agent and client cannot always be in the same place at the same time.  For instance, a client make work odd hours, or have to go out of town for awhile and yet they may not want to wasted time waiting to return home.  Now that client can meet with their agent wherever they are in the world if the just have a webcam and an Internet connection, or simply even a smart phone.  Today’s technology is making video chat so easy and it’s free, and one day soon we’ll all look back and wonder how we lived without it for so long.

Don’t be surprised when we hear people say, “Remember the days when people used to call each other on the telephone?  Yeah, how crazy is that?”  I remember the days when fax machines were a novel idea, and people used to ask back in the mid 90’s “What’s the Internet?”  Thank goodness Al Gore invented it.  Young people today just don’t recall what life was like before the Internet, and in a few years people may have a hard time remembering life before video phone calls.

If you haven’t tried it before, the time may be now.  It’s not only a big time saver, but it’s free and fun.  We hope you have as much fun communicating with people online as we do.

 

Entering the Summer Real Estate Market in SW Florida

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Now that the 4th of July has passed, we’re entering the summer real estate market in SW Florida.  Aside from showing properties in the rain, traditionally the summer has been very good with many of the locals moving up, down, or sideways when they have more time after a busy tourist season.

Of course, the past few years the locals haven’t been making nearly as many moves as many are upside down on their current mortgage, or just flat out don’t like today’s prices.  There is no doubt today’s prices are too low, in fact artificially too low, but nonetheless in real estate today is all we have to work with.

Summer Real Estate Market in SW Florida
SW Florida Real Estate Sales Prices

Because foreclosures have dropped dramatically due to a number of legal reasons, there has been less pressure on the lower end of the market, thus raising median prices.  We’ve included another graph to put prices in perspective.

Many times we like to look at velocity of the market and measure the volume, much like Wall Street does with stocks.  Volume has been excellent, and would be much higher if we had more inventory to sell.  Lack of inventory will cut down on the number of transactions, and we’ve already felt it.

Agents are all too well aware that many properties receive multiple offers.  Buyers on the other hand are skeptical when their agent tells them they need to come in at or over asking price on many properties.  In all markets there will always be some properties that are over priced, and a buyer need not ask over asking price if the property is over priced as chances are another buyer isn’t going to come along and scoop it up, unless it’s a one of a kind property, and even then it may not sell.

All too often agents tell me their buyer isn’t listening to them.  This past week two agents lost out on two of our listings because we had multiple offers and one of the buyers didn’t realize what they needed to do until it was too late.  One of the properties had been on the market a little while so I’m sure the buyer figured their agent was just giving them a song and dance to try and get a sale, but as the listing agent I can assure this was not the case.

Even though this property had been on the market perhaps a few months, the property got hot when all other inventory like it had disappeared and this became the best thing on the market in its location and price range.

All real estate is local, and just because you hear nationally or a particular state is a little slow doesn’t mean everywhere is.  In fact, our market was getting crushed when the rest of the country was still prospering.  While our market isn’t fully healed, we are seeing price increases when much of the rest of the country has just been going into a slump, which is further evidence that all real estate is local.

Over the July 4th weekend we had several showings and several offers come in on our properties, which is encouraging for the balance of the summer.  Again, these past few years have been anything but traditional, but it’s nice to know that local temperatures aren’t the only thing that’s hot right now.  Buyers are here.  What’s lacking has been property to sell, and inventory will probably tell the story going forward for the balance of the year.  We’ll keep watching, and keep reporting.

 

Fort Myers Cape Coral Florida Real Estate Update Video May 2011

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The Ellis Team has just released it’s Fort Myers Cape Coral Florida Real Estate Update Video May 2011 covering the Fort Myers Florida and Cape Coral Florida areas. Prices are up over 15%, inventory is down, pending sales are up, and distressed sales are down. The video includes charts and analysis to bring you up to date on exactly what is happening today in the SW Florida real estate market.

 

Big Changes Coming in Mortgage Market

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On April 17 rates are going up. How do we know the date? We know because that’s the date fees change under guidelines designed to attract private money into the lending system and reduce or eliminate FNMA, GNMA, and Freddie Mac, the three quasi-governmental agencies that insure mortgages and bundle them for securitization. They’re not really governmental, but they might as well be as the government has funded them until now. They are private companies that pay investors profit, but tax payer funded when they lose money, so something had to change.

Big Changes Coming in Mortgage Market

Big Changes Coming in Mortgage Market
Interest Rates Will Rise in April

So what is changing? First off, rates are going up. This will increase yields, which will attract banks, hedge funds, and other large sources of capital into the market. Large companies will actually compete to make more of this money. A lot of money has been bottled up sitting on the sidelines and this may be the conduit to free up that money.

When rates go up, home prices usually go down. Not so fast! In this case, prices could eventually rise. Many ask how this could be. The answer is complicated, but noteworthy, so we’ll do our best to explain.

Under the new guidelines to get the best priced loans, borrowers will have to put more down. The old 20% down will now be 30% down. However, credit scores will also be lowered for qualifying. Imagine many of those people that sold via short sale being told they wouldn’t qualify by FNMA for 5 years. It turns out they may be eligible after just 12 months under certain conditions.

While rates may go from 4 7/8% today to possibly 6.5% in April, more people will qualify. We still have FHA for low down payment options. Some people are predicting another real estate boom coming sooner than later nationwide as pent-up demand for housing intensifies, and more borrowers being eligible to purchase.

Imagine having a 540 credit score and being able to purchase a home. Those days may be coming again, if you can scrape together a down payment. Home prices are artificially too low in SW Florida and are in fact below replacement cost. This has caused multiple bidding situations for prestigious properties in short supply even in the upper price ranges in certain parts. Naples and Bonita have experienced a resurgence in prices, and many feel this is bleeding north up into Estero and Fort Myers. We are currently being driven by 2nd home buyers looking for deals.

As prices get closer to replacement cost, building will begin to pickup, which will bring jobs. As the SW Florida economy grows, the real estate market could gain traction very quickly, especially with Snow Birds and existing residents qualifying sooner than expected for their next mortgage.

Keep in mind 7,000-10,000 people are retiring or entering the social security income stream everyday. Florida stands to gain from the Baby Boom generation relocating or buying 2nd homes.

Many on Wall Street are anxious to cash in on the looming change to the capital markets coming in April. In fact, Wall St is waiting like a tiger to pounce. Some are predicting a feeding frenzy for housing and rapid price gains.

Some people believe the change to FNMA and Freddie Mac will damage the markets by increasing borrowing costs and raising down payment requirements. Others believe borrowing was next to impossible anyway the last few years and banks only lent to those who really didn’t need it. I don’t know who is right, but I will say if we open the door for more people to buy, the market could recover quicker than most expect.

2011 could really be a year to watch and keep an eye on the financing markets. If Wall Street gets greedy like last time, it could be a boom for real estate. The difference is, FNMA and Freddie Mac, and the US taxpayer won’t bail out bad loans, only systemic losses due to financial meltdowns. Hopefully we’ll enjoy the next boom with no meltdown, and higher down payments will help with that. If our markets stabilize like we think they will, even low down payments won’t affect the market because the market won’t be in freefall, and we’ll be adding jobs to the economy versus losing 8 million like we’ve done the past 3 years.

Bottom line, keep an eye out for sunny days ahead in the real estate market and we just might see them sooner rather than later. And mark your calendars for April 17. This will be the beginning of something. Time will judge the ending.

It’s in the Bag

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No, we’re not talking about Santa’s bag here.  We thought this week we’d do a mailbag of topics, and invite questions for future articles.  If you have a question or topic you’d like covered, simply e-mail me at Brett@Topagent.com and we’ll do our best.

Interest Rates

Yes, they’ve been on the move, and the move has been upward.  Rates have risen about .625% in the past 1-2 weeks.  For every 1% rise in rates, it takes away about 9% of a purchasers buying power, so buyers have just lost about 5% buying power in the past 2 weeks.  This is why the media and Wall St. talk about rates so much and where they are today versus historically.  Now, they are still historically low, but they have been moving up.  With prices this low, and rates still fairly low, buying power is still great even though it may not be what it was 2 weeks ago.

SW Florida Real Estate Market Update
It's in the Bag

Foreclosure Listings

Foreclosure listings for single family homes active on the market in Lee County stood at 768 in November Versus 1,107 today.  That’s a 32.42% increase in just one month, and we can attribute this to banks placing properties on the market after the foreclosure moratorium because of the robo-signing issues.  Most banks feel confident going forward, especially for their non-occupied properties.  We see this as a good sign.  The quicker we get all inventory out and to the market the faster the market can heal and move forward.

Pending Sales

Pending sales rose again in November which indicates buyers are ready, willing, and able to buy and they’re making every attempt.  This is another reason we’d like to see all available inventory on the market as the buyers are definitely biting.  All areas of Lee County are seeing a rise in pending sales.  Cape Coral saw a rise of 60 pending sales over last month, Fort Myers saw a rise of 69 sales and Lehigh Acres experienced a rise of 32 pending sales.  Season is upon us and we’ve notice an uptick in buying activity from buyers up North sooner than we did last year, which could mean we’ll be in for another good season this year.

Current Market Index

Each month the Ellis Team produces a current market index which accurately predicts forward activity in the SW Florida real estate market.  This month the index dropped to 4.22, down from 4.62 last month.  The lower the number the hotter the real estate market is.  A higher number indicates a buyers market. We wouldn’t say it’s a buyers market.  We’d characterize it as a sellers market if the property is priced correctly.  Buyers are competing against each other with multiple offers on properties that are priced correctly, and bypassing over-priced listings.  The market speaks.  Sometimes it’s as easy as slowing down and listening to what it’s saying, and if a property isn’t receiving offers, then there’s a good chance it’s the price.  The market is hot, but it’s not forgiving.

Closed Sales Flat

November closed sales were relatively flat Versus October.  In fact, our research shows they’re down slightly, but official numbers won’t be released until next week.  Last November sales rose, so when official numbers come out we could see a transaction drop from last year.

This is the last article before Christmas believe it or not, so next week we’ll either answer your questions or provide updated analysis once official numbers are released.  We hope Santa is good to you and brings you good tides and good cheer, and no matter how big the bag is this year, always look for opportunities to lift somebody else’s spirits this Holiday season and into the new year.

Tips on Buying a Bank Foreclosure in SW Florida

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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

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

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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

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.

Correct Pricing

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.

Using the Correct Comparables

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.

Never Chase the Market Down

In a declining market you never want to get caught chasing the market down. 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. 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. We hope we’ve offered tips in two of those areas.

Good luck in successfully selling your property.

Market is on the Move

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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.

Is Buying at Auction a Good Deal?

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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!