Top 10 Tips for Buying a Home in Today’s Market

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Last week’s tips on selling a home was such a hit we decided to write an article on home buying tips to help buyers.

Top 10 Tips For Buying a Home in Today's SW Florida Real Estate Market

  1. Shop in Your Price Range– One of the more frustrating things a buyer can do is shop in the wrong price range.  If you shop in a higher range than you can afford, the homes in your range won’t seem as acceptable and will feel like a let-down
  2. Get Pre-Qualified– You’ll be competing with other buyers for the best homes on the market.  By being pre-qualified you appear more like a cash buyer than someone who has not even spoken with the bank yet
  3. Home Inspection– We recommend home inspections as the inspector may point out items that are covered under the purchase contract, as well as helpful hints on maintaining your home.  Home inspectors are very helpful in educating you on what you’re buying and best maintenance practices going forward
  4. Survey– Banks don’t always require one and title companies don’t always offer insurance in certain cases when a survey wasn’t done.  It’s best to provide that survey to the title company and let them insure the property with the full survey
  5. Competition With Other Buyers– Remember, the best properties go quickly in any market.  Rarely do we hear a buyer say they want to look at the worst homes on the market.  Because you’ll be competing with other buyers for the best properties, you’ll want to put your best foot forward with your offer. As a buyer, you don’t always hold all the cards.  For instance, you may be a finance buyer competing against cash buyers.  The seller may wonder if your bank will appraise the home at the contract price.  They may wonder if your bank will close on time, if at all
  6. Escrow Deposit– Putting a larger escrow deposit down shows you’re serious.  This is a helpful technique when competing against other buyers.  It usually amazes a seller when a cash buyer won’t put much in escrow.  If they won’t put it in escrow, will they ever come through at closing?
  7. Price– Research the market and determine if the property is priced correctly.  If it is, offer accordingly or you could wake up to see a Sold sign on the home and the seller didn’t take your offer.  Always ask yourself, “If I wake up tomorrow and see the property is sold to someone else, how will I feel?”
  8. Terms– Remember if you’re asking a seller to pay buyer closing costs, it essentially reduces your offer.  Another buyer may offer the same amount as you without asking seller to pay closing costs and you’ll lose out.  Many buyers increase their offer to cover seller paying buyers closing costs, if the property is priced correctly to begin with
  9. Out Clauses– Only use out clauses if you need to, and remember they do weaken your offer.  If a buyer can cancel a contract the seller will wonder why they should take the property off the market for you versus waiting for a more serious buyer
  10. Title– Be sure to look at title policy, especially if it is a foreclosure.  Ask the title company what policy covers and what it does not.  Look at the title exceptions page carefully.  Consider hiring a real estate attorney to review your policy if you have any questions whatsoever.  Eliminating mistakes now can save you lots of time and money later

There is no substitute for working with a good Realtor. Full time Realtors not only know the area, they also assist you with many of the pitfalls you may encounter.  If you need assistance, feel free to call our office at 239-489-4042 and ask for a buyer specialist.

 

 

Top 10 Tips on Selling Your Home in Today’s Market

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Top 10 Tips for Selling Your Home by a Real Estate Expert
Yesterday another agent called me wondering why his 3 listings in Lehigh Acres weren’t selling. After offering some tips to help out, I thought an article on the subject might help others as well.

  1. Curb Appeal– Buyers judge the quality of the home by what they can see.  You will never get to the home inspection stage if the buyer never offers.  Look at your yard, landscaping, outside paint, roof, gutters, etc.  If the outside looks bad, buyers judge the inside probably looks just as bad and they don’t schedule appointments to view.
  2. De-Clutter Inside– If a room has too many things in it, it make the room look smaller.  Additionally, buyers have a harder time envisioning their personals in your home when all they see is stuff.  Take out as much as you can.
  3. Be sure to remove Personal Photos– Buyers always stop and look at the pictures on the wall, and if there are too many the home feels like it’s someone else’s and they have a hard time picturing themselves in your home.  Knick knacks and photos subconsciously turn off buyers.  A few are OK, but too many can be a turn-off.
  4. If a Buyer Can Smell It, We Can’t Sell It– Cigarette odor and pet odors are the #1 turn offs for buyers today. We would suggest smoking outside and removing pets as best you can during the sales process, and hiring someone to remove any smells.  Some breeds emit more odor than others.
  5. Remove Pets For Showings– Buyers love pets, and the problem is many times they walk away remembering how cute your pet was, but they remember next to nothing about your home. Your home is in competition with other homes, and you want your home to be remembered and stand out against all others.  You don’t want your buyer’s time distracted by your pet.  Buyers will not buy your home because you have an adorable pet, but they may buy another if they don’t remember your home.
  6. Be Gone For Showings-We have a saying that every word a seller says to a buyer costs the seller $1,000.  Sellers think they know they’re home better than anybody and therefore they’re the most qualified to sell it.  Buyers typically feel uncomfortable talking with the seller, and usually give feedback the seller wants to hear.  The best and true feedback is a good offer, not meaningless words to appease the seller.  Some buyers like talking to sellers because they glean information they’ll use against the seller in negotiations.  Best advice is to be gone for showings.
  7. Price-Overpricing a home is a sure fire way to make it sit.  After your home is on the market awhile, buyers begin to wonder what’s wrong with it.  After awhile fear kicks in and buyers don’t want to offer too much on a home nobody else wants to buy either.  While the market is Hot today, it is a price sensitive market.  Overpricing is a good way to ward off potential offers.  Many buyers don’t want to insult the seller, so they just offer on another home that is priced where it should be.  Sellers usually think the buyer can always make an offer, and of course nobody ever offers full price anyway so we’ll build in some negotiating room.  This is a myth and statistically it’s proven that seller’s that overprice end up taking less later than sellers who price correctly upfront.  Many homes in the market today sell at or near full price, and some sell for over asking price.
  8. Marketing– Times have changed.  Some agents employ the 3 P’s.  Put a sign up in front yard, place it in MLS, and pray someone else sells it. Successful agents today rely on newspaper advertising, radio, TV, social media like Twitter, Linked In, Facebook Fan pages, YouTube, virtual tours, as well as mobile technology and much more.  Ask to see how your home will be marketed and which national sites it will be syndicated to when interviewing agents.
  9. If You Owe More Than Home is Worth, Select a CDPE-44% of homeowners in Florida are underwater on their mortgages.  It takes a certain expertise to work with the banks on short sales.  Buyers and sellers need lots of education attempting to close a short sale. A Certified Distressed Property Expert can help.
  10. Select the Right Offer-Don’t just take any offer. Many times it pays to wait for the right one.  Why waste time with a buyer that doesn’t qualify, or the loan program they’re pre-qualified for will present issues for your home or association.  Knowledge is power and can save you from many bad transactions.  If you don’t have time to do it right the first time, when in the world will you find the time to do it over?

Be sure to check out our 2012 State of the Market Report

 

The Bear Went Over the Mountain

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To see what he could see. We’ve all heard this particular children’s song and it’s probably playing in your head right now. I thought this headline was appropriate because our year end sales numbers graph looks like home prices went up the side of a mountain through 2005 then fell off a cliff until 2009 before rebounding the past few years.

SW Florida Real Estate Year End Prices
Year End Prices Fort Myers-Cape Coral Florida Metro Area

Official sales numbers were just released this past week for the state of Florida and the SW Florida real estate market. Year end sale prices were up 14.67% from $93,400 in 2010 to $107,100 in 2011 The year end graph isn’t where prices finished the year but rather an average of what they were all year long. For instance, November median single family home prices in Lee County was $106,300 and December’s was $123,400, a whopping 16.09% jump over the previous month and a 36.05% jump over year ago December figures.

2011 was the 3rd best year on record for numbers of sales. Inventory declined throughout the first 3 quarters of 2011 or we very well could have sold many more. To put things in perspective, 2011 outsold 2005 by almost 2,000 homes. Everyone speaks about 2005 being the height of the market, but it is the 4th best year on record in terms of units sold. 2009, 2010, 2011 respectively were 1-3.

Quarterly Home Sales for SW Florida 200-2012
Lee County Quarterly Single Family Home Sales

While prices rise it’s quite natural volume will go down. It’s simple supply and demand. If we had more inventory than our market could handle, our prices would be lower and not rising. It’s always difficult to predict a top or bottom, but hindsight always provides crystal clear clarity. The reason is you can have a false bottom whereby prices bounce back for a few months only to retreat again later. On Wall Street it’s termed a dead cat bounce when the market does that.

With several years in the books it appears we can safely say the market bottomed in 2009. If the market would go lower in the future it would be a new market, not a continuing drop. We don’t see the market going lower year over year going forward; although monthly price swings are not out of the question as closings are dependant on what inventory there is and what’s actually closing in a given month.

We have no problem listing and selling properties. The skill is really getting them closed today. The regulatory and operating environment has never been so tricky as there are so many new regulations pertaining to new mortgages. If the lenders initial disclosure is off by a little bit, it requires by law to re-disclose everything and a new waiting period goes into effect.

Combine new lending rules with negotiations with HOA’s and condo association over fees, title issues, appraisal issues, inspection issues, and challenges with short sales and you can quickly see nobody can guarantee closing dates, and scheduled closings in one month can easily pop over into subsequent months.

All these challenges affect the real estate market and can push high end or low end closings from one month to another, ultimately effecting month end numbers. In the end, these numbers all work out in the wash, so we like to look at year end numbers or a moving average throughout the year. So many people focus on one point in time when the market is always in flux and needs constant attention to understand what’s going on.

That’s what we’re here for, to keep you updated with unbiased information good or bad. We’re in the midst of season, and as predicted season started early and seems to be going well. I guess we’ll know in April or May for sure. In the meantime, stay tuned.

Watch our January 2012 Market Report

 

SW Florida Future of Real Estate Market Report January 2012-New Year\’s Resolutions

Inside the SW Florida Real Estate Numbers

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Again, we are writing this article before official sales numbers are scheduled to be released later in the week.

Because of that we’ll focus on some new information that won’t be in the release this week. Official stats in January track December sales and year-end stats which are always interesting. This tells an important, but partial story, because it only tells what has happened. Today we’ll focus on what is happening right now.

Fort Myers, Cape Coral, Lehigh Acres Listing Inventory
Fort Myers, Cape Coral, Lehigh Acres Listing Inventory

Listing inventory had risen slightly for the past 4 months, but it has dropped slightly in January. Pending sales had also been dropping slightly which is probably why inventory was rising. However, pending sales have increased this January which may help account for why inventory recently dropped.

While inventory has dropped everywhere, perhaps the most significant drop has been in Lehigh acres. Lehigh Acres has experienced a 61% drop in inventory since January 2010. Cape Coral has seen a 38.54% drop in inventory in the same period, and Fort Myers has seen a 32.52% drop. Lee County has seen a 35.42% overall drop in single family inventory, so Lehigh Acres 61% drop leads the way by a large margin.

Lehigh Acres was home to single family home sales in the $25,000-$40,000 range a few years ago and now it’s getting tough to find homes much below $70,000. Investors have swooped in and gobbled up everything they can. Homes at the lower prices were cash flowing as investors could purchase, fix them up a little bit and rent them for more return on their money than they could get at bank or other places.

Foreclosure Vs Short Sales SW Florida January 2012
SW Florida Foreclosures Vs Short Sales January 2012

Another trend we have noticed is short sale closing increased as banks have geared up to handle more short sales just as foreclosure sales decreased. We’ve included a graph that illustrates foreclosure versus short sale closings over time. Keep in mind that banks have had fewer foreclosures due to the robo signing issue and that has affected foreclosure inventory throughout 2011. We’ve been told to expect more foreclosures in 2012, however they will not process them as fast as they did back in 2009 which caused the whole robo signing legal fiasco in the first place.

Next week we’ll go inside the official numbers and give additional background as to what drove the numbers and how 2011 ended compared to previous years. Going forward we are seeing a robust selling season as many have realized our median prices have been on the rise and the bargains may be running out. If rising pending sales, rising median sale prices and decreased inventory are any indication heading into season, the next few months could be interesting to watch.

Setting realistic expectations is key for buyers and sellers in this market. Realistically, prices have room to rise especially as the economy improves. Nobody is predicting a return to 2005 prices anytime soon, so if you read prices are rising and you’re waiting 6 months to put your home on the market so you can get what you paid back in 2005, you might want to reset your expectations.

We are back to healthy growth, and if we somehow miraculously escalated back to 2005 prices, it would be as unhealthy now as it was back then. Slow and steady might just be what the doctor ordered, and who knows, that might just be what we’ll get.

 

 

Important Tax News Could Save You Thousands

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Prior to 2007 homeowners who had a short sale or foreclosure were subject to pay income taxes on any amount of forgiven debt. So let’s say a homeowner in 2006 had a mortgage of $400,000 and decided to sale as a short sale for $200,000, that homeowner would have had income of approximately $200,000 according to the IRS. Assuming this put that homeowner in the 25% tax bracket, this homeowner would owe an additional $50,000 taxes to the US government. Keep in mind, perhaps none of this money went into the pocket of the homeowner, it was simply forgiven debt. The same would be true for a bank foreclosure.

Important Tax News Could Save You Thousands
Important Tax News Could Save You Thousands

Back in 2007 the US government signed into law the Mortgage Relief Act which provided homeowners who used their home as a primary residence relief up to $2 million for married couples and $1 million for individuals from any shortage being treated as income by the IRS. In the previous example above, the $200,000 would be free from being treated as income as long as it was their primary residence. The lender must formally forgive the loan.

The US government is giving homeowners until December 31, 2012 to complete a short sale or foreclosure. Starting January 1, 2013 any debt forgiven, even on a primary residence, will be treated as income by the IRS and subject to taxes.

A homeowner doesn’t always control when the bank will take back a home or when the bank will complete the foreclosure transaction, so they cannot guarantee they’ll make the December 31 deadline.

A distressed homeowner does control to a greater extent the execution and timing of a short sale. While there is no guarantee the bank will agree to a short sale, or that the buyer will wait around long enough for the lender to agree, it is generally known the seller has more control over their fate in a short sale than a foreclosure.

Time is running out for many sellers as we have 11 ½ months to complete the short sale. Some short sales go smooth, and others are a bit trickier. Sometimes we have to sell it 2 or 3 times if buyers walk. The bank may respond right away, or it could take several months for the banks to complete their analysis depending on who the lender is, whether there is a 2nd mortgage or equity line involved, and especially if mortgage insurance is involved.

Most people just think the banks are slow, which is true. However, the process can be more complicated as the 1st lender may be due money back on certain losses by a private mortgage insurance company. This takes time for all to evaluate, and it must go in steps.

Some loans are guaranteed by FNMA or Freddie Mac, and there are governmental programs in place the lender must follow. A popular program you may have heard of is HAFA (Home Affordable Foreclsoures Alternative) Program. If the home falls under this program, certain procedures and timelines must be followed. Sometimes it takes time just to see if the loans qualify for this program. There are other programs as well.

This is why a seller should decide soon if they may need to sell their home due to hardship. The decision today could save thousands in taxes for years to come. Waiting too long could cost a seller big time.

A bankruptcy may be a solution to avoid such taxation after 2012, so we wouldn’t be surprised to see bankruptcies rise next year from sellers who miss this deadline.

The good news is lenders have beefed up their short sale department staffs the last few years and are equipped to handle more sales today than they were 5 years ago. We’ve had much success completing short sales, although the buyer must be educated that the bank will take some time, and they may counter the accepted price with the seller a bit higher.

No short sale is complete until the lender(s) sign off and everybody agrees to the terms. Short sales are a way to bring otherwise underwater overpriced property to the market at today’s lower prices. Education is the key for everyone involved. The agents involved, both buyer agent and seller agent must be competent in handling complex short sale transactions as both buyer and seller must be educated about the process.

Sales are already heating up this season, so 2012 could be an interesting ride. We’ll keep you posted on news affecting buyers and sellers in the SW Florida real estate market.

 

SW Florida New Years Resolutions

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Well, we’ve just concluded another year and it’s that time of year when people spell out their new years resolutions. You know, the typical things like the gym memberships, lose weight, quit smoking, reduce debt, go back to church, read more, travel more, eat out less, eat out more, spend more time with family, etc.

New Years Resolutions for SW Florida Real Estate Market
SW Florida New Years Resolutions

While most lay out their personal resolutions, each year we spell out resolutions we think would be great for our local SW Florida real estate market. Some may be a repeat of last year’s resolutions.

1. Agents and lenders become more familiar with FHA financing- As prices rise, less investors may be competing against first time buyers as flipping margins are reduced. Banks have stiffened up on lending so bad that FHA has become the predominate form of lending in recent years. It will pay for agents and lenders alike to become more familiar with FHA guidelines unless lending rules change dramatically

2. Lee County would attract outside business to relocate to SW Florida-We know the county and Chamber is working hard on this.

3. Parking garage at Fort Myers Beach becomes a reality-Fort Myers Beach is one of the staples of local tourism. We now have a great park and view to enjoy as visitors come over the bridge. Adding parking to the equation would serve as a hub for business and tourists to enjoy our area

4. Banks roll out plans to refinance homes under new guidelines allowing underwater borrowers to stay in their homes

5. Economy-Jobs are what ultimately will drive our real estate market and we’re not seeing growth in the job market other than seasonal jobs nationwide. A pro-growth government could help lift the business climate and the real estate market

6. Election-November can’t get here soon enough. Later this year we’ll know who our new president will be and what direction Congress will take. Voters sent a strong message last election, but Congress is still too evenly divided for politicians to get that people want real change.

7. US Government needs to spend less- We cannot end up like many countries in Europe. We must act now to reduce spending before it’s too late

8. Congress needs an English Lesson-Since when are tax cuts considered spending? Taxes are revenue, not spending. Congress and the President need to cut spending and stop treating taxes as spending. Tax cuts spur business to invest and hire. These 2 month extensions are too short term for businesses to decided what direction economy is going in

9. Red Sox stadium worth the Investment-Lee County paid a lot of money to build new stadium. Let’s hope new stadium brings new energy, new visitors, and lots of money back to local economy

10. Certainty in Oil Market-Uncertainty leads to rising oil prices which leads to loss of disposable income. I think all Americans could use a little more disposable income, and a better energy policy would help. A little luck with agitators like Iran would as well.

11. Places like banks, airlines, and cell phone companies will stop adding add-on fees simply to increase bottom line- We are in a price sensitive market. When will these companies learn? Someone in these companies marketing departments should warn the CEOs that these fees are unpopular and go over about as well as an occupy movement in the middle of a city.

12. Speaking of Occupy Movements-Maybe this will be the year they actually come up with a message, or decide to get back to work. There’s nothing worse than watching interviews with attendees who don’t know why they’re camping out all night or what they realistically would like, other than a free handout.

13. If It’s to Be, It’s Up to Me-America needs to get back to personal responsibility. It’s obvious we cannot give to everyone and pay our nation’s debts. One day the world will stop lending to us. What happened to “Ask not what your country can do for you, but rather what you can do for your country?”

They may not all come true, but wouldn’t it be nice. We’d love to hear your new years resolutions.

 

Top 10 Factors to Watch in 2012

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As we’ve been reporting in our weekly article, we expected sales to be down as pending sales have been declining.  We also expected prices to be higher and in fact official SW Florida single family home median sales prices released this past week were up 4.11% over October’s prices and up 20.11% over last November’s price.

Median Sale Prices 2011 SW Florida
SW Florida Median Single Family Sale Prices

Everyone wants to know what kind of year 2012 will be, and what kind of season it will be.  Nobody can predict the future with absolute certainty, so we have to look at clues as to what will drive the market going forward.

Homes Closed in SW Florida 2009-2011

There are opposing forces in play affecting our market, and each one can have an influence,  The question will always be how much influence will each force play and to what degree?

  1. Overall economy-It is weak and this is an election year.  In previous election years activity slowed as people weren’t sure of the outcome and its effect on tax strategies and the government’s effect on the economy.  The housing market likes a pro growth government.
  2. Employment-More jobs eventually equals more disposable income in our local economy, which spurs home sales.  Unemployment is still high in the area, so we’d like to see jobs.  One such employer might be a casino, or perhaps a company that may relocate to our area.
  3. World Markets-People wonder what the trickle effect would be to the US economy and value of money should Europe’s debt crisis spill over.  Europe is working on their debt crisis and the US is helping, but we can’t seem to get our own debt crisis in order, so I wonder what influence we have to help them when we can’t help ourselves.
  4. US Credit Ratings-Could we be in for more downgrades?  Some think so, and it could raise the cost of borrowing
  5. Interest Rates and Availability of Credit- For now they are low, so anyone that can afford to buy now should.  Prices are rising and rates are at all-time lows.  Banks have also tightened standards, perhaps too much, which affects sales in the mid and upper ranges.
  6. Inventory-Inventory has been rising the past 4 months but ever so slightly.  It’s been rumored the banks have more inventory to unload in 2012, so we’ll be watching to what degree and how this affects the market
  7. Volume- Sales have been falling as prices have risen.  We set all-time records in 2009 as prices were at rock bottom.  Our market has definitely moved off the bottom, especially at the first time home buyer end.  Many properties still make sense on a cash flow basis; however fewer investors are buying because the rock bottom deals are gone.
  8. Correctly Priced Inventory- We have less distressed sales on the market, which is good.  However, inventory is rising because not every home is priced where buyers are willing to buy, so they sit on the market.  This is nothing new.  It just illustrates we are still in a price sensitive market.  If you overprice a home, it will sit.  If you price it at market, it will sell.
  9. Season Begun Early- We saw our Northern friends start their search earlier this year.  The beaches and roads are packed.  The weather up North is cold.  Baby boomers aren’t getting younger.  Many like the deals they’re seeing and many are saying this is the year they’re going to pull the trigger and buy.  Florida has been on sale for a few years now and buyers see the rising prices, giving them confidence the worst is over.
  10. Greed-Greed isn’t always a bad thing.  It’s emotional feeling people use to guide them to buy or sell.  It’s the reason sellers overprice, and it’s also the reason buyers buy.  A transaction won’t happen if both buyer and seller are operating from the same emotion.  The answer to this emotion is facts, data, and logic.  If a seller prices appropriately, buyers will buy because they fear prices will be higher in the future, and they don’t want to miss the boat.  They will not overpay though unless they’re convinced prices for home will be higher.  Greed is one emotion fueling buyers to buy today.  If a property is priced at market, they are motivated to purchase.  If a property is overpriced, it forces the buyer right back on the fence.

 

All 10 factors are in play.  Only the future knows how each factor will affect the market.   There are probably a few wild cards we haven’t mentioned as well.  All we can do is watch together.  Enjoy 2012.  We think it could be a good year.

 

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SW Florida Market Trends

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Because we are writing this article this week before official numbers are released, we decided to go inside the numbers and focus on listing inventory and sales data.  According to preliminary numbers researched by the Ellis Team, listing inventory rose again for the 3rd consecutive month.

Single Family Home Listing Inventory in SW Florida
SW Florida December 2011 Listing Inventory

Lehigh Acres has been holding fairly steady while Cape Coral is seeing the largest gains in inventory.  Fort Myers is inching higher ever so slightly.

What’s interesting is the distressed sales market.  We track a variety of graphs.  One graph not shown here because it’s a little tangled and hard to read in newspaper format shows large drops in distressed sales in Lehigh Acres, Fort Myers, and Lee County overall.  Cape Coral has held steady at 50.45% of all single family sales being distressed.  Lee County stands at 48% distressed rate in November.

SW Florida Distressed Sales Chart December 2011
Foreclosures Vs Short Sales December 2011

We have included a Foreclosures Vs Short Sales graph that is a bit easier to read.  It fairly well shows the history of the foreclosure and short sale market in SW Florida.  As you can see, the height of foreclosure sales was in June 2009, while the height of the short sale market was March 2011.

 

Banks revved up their short sale departments to handle an increased load.  It can be said that potentially each of these successful short sales may have saved a corresponding amount of foreclosures, so it was in the banks and the markets best interests to sell these homes as short sales rather than as foreclosures.

Going into 2012 we’re going to continue to watch the listing inventory and the mix of inventory.  Traditional sales are on the rise as a percentage of all sales, although many homeowners are not selling at today’s bargain basement prices.

Speaking of bargain prices, many buyers are calling wanting to buy homes for investment and expecting 2009 prices.  It seems like sellers are always the last to recognize when prices are dropping and buyers are the last to recognize when prices are rising.  Why is that?  Could it be selective hearing or denial?

We can definitively say that investment homes in Cape Coral and Lehigh acres bottomed in 2009 and have risen since.  Buyers today can no longer pick up a home for $35,000 in Lehigh unless it has major problems.  $70,000 is more common place for the low end now, so essentially prices in the low end have doubled.

Sales are flat in December versus November; however we are expecting sales to pickup in season again.  We’ve had no trouble selling homes.  The biggest challenges we’ve faced are closing these homes.  Lately we’ve been encountering title issues, mortgage re-disclosure issues due to any delays, and buyers not waiting patiently for the short sale approval.  We’re getting short sales approved within 60 days in many cases, but buyers are impatient.  Going forward the industry will have to do a better job educating buyers as to what the realistic expectations are for approval and closing time frames on short sales.

We’ll also watch foreclosure inventory as we are expecting a few more in the 1st and 2nd quarters of 2012.

We’ll keep our eye on the SW Florida real estate market for you, and whether you’re a buyer or seller, we hope Santa is better to you this year than he was last year.  The market is looking up, and we hope your holiday spirits are too.

 

Time Shares in Florida

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From time to time we get calls asking about the best time share deals in Florida.  According to Wikipedia, “A timeshare is a form of ownership or right to the use of a property, or the term used to describe such properties. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week, and almost always the same time every year) in which they may use the property.”

Time Shares in Florida Cypress Pointe resort in Orlando Florida
Cypress Pointe Resort Time Share in Orlando Florida

The Ellis Team doesn’t handle time shares in Florida as they are kind of their own specialty, although there are a few timeshare places at Fort Myers Beach.  What we do see more of in SW Florida are rental companies that will assist a homeowner and rent out a condo or home by the week while the owner retains full ownership of all 52 weeks of the year.

We have several condo projects and cottages in SW Florida that rent very well by the week.  A Buyer can purchase a home or unit and place it in the rental pool and produce very good income while allowing someone else to manage the property and rent out the unit.  The owner can even use the property so many days per year per the IRS and still claim it as an investment property.  We encourage you to speak with your tax advisor on those regulations as they pertain to you.

Unlike a property owner who owns all 52 weeks, a timeshare owner is only concerned with one week.  One advantage of a timeshare is its ability to be traded for other like kind properties all over the world.  We’ve talked to several people who own a timeshare say in Orlando and love visiting there, but they also enjoy the ability to trade it for weeks in Hawaii, Bahamas, Cayman Islands, Costa Rica, and all over the world.

Once you own a timeshare you simply pay the weekly maintenance fee each year and then you’re free to use the unit on your selected week, exchange it for a different week within your association if permitted, rent it out, or join an exchange service like RCI or VRI to exchange it for nice place elsewhere.  While you pay a yearly maintenance fee on your timeshare, there can be significant cost savings when exchanging your unit. Perhaps you own a 3 bedroom unit.  You may be able to exchange for a week of a 2 bedroom unit and another week’s use of a 1 bedroom unit, or both during the same week.

You can even exchange credits on your time share towards use on a cruise.  Depending on how nice your unit is, where it is located, and which week you have will determine how much credit you get towards exchange to another timeshare or cruise.

Timeshares can be great for those that like to travel.  Years ago timeshares were selling upwards of $30,000 in the Orlando area.  With the economy being down it seems prices have come down and now you can own them for much less.

In fact, we’re aware of an owner of a 3 bedroom unit at Cypress Pointe Resort at Lake Buena Vista in Orlando willing to sell their unit for $2,000 plus closing costs.  It is a 3 bedroom unit week 43 rated as Emerald and is close to Disney.  It can be exchanged for a 2 bedroom + a 1 bedroom unit or used as a 3 bedroom unit.  Cypress Pointe Resort offers lots of amenities for kids.  While we do not list or sell timeshares, simply call our office 239-489-4042 if you’re interested and we’ll put you in touch with the owner and you can deal directly.

If you’re looking for a condo on Sanibel, Captiva, or Fort Myers Beach and would like info on investing and what it would take to purchase and how much income you could derive from it, we can help.  Simply give us a call.

 

A Home’s Value Might be Determined by its Income Potential

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Traditionally buyers and sellers tend to think of value for a home in a few ways.  Some think of replacement cost, which is the value of the land combined with the cost to rebuild the home including permits, ground preparation, etc.  Replacement cost is usually the upper limit of value, and certainly today there are some homes on the market priced far below what it would cost to build.

Captiva Florida Home
6 Bedroom 4 Bath Home on Captiva Island, Florida

Other methods include comparing what like kind homes are selling for and making adjustments for things such as lot value, location, size, age, desirability of the floor plan, and more.  Certain neighborhoods tend to sell for more than other nearby competing neighborhoods perhaps due to amenities, age, upkeep, etc.  Of course every home is different, even if it’s the same floor plan.  Each home sits on its own lot, has its own view, and has its own set of upgrades.  Some homes require some adjustments on the market analysis or appraisal, and some require very few if any adjustments.

There is another method used to value homes and it’s called the income approach. Duplexes are often valued this way as is certain commercial property.  In tourist areas where a home can be rented out on a regular basis, a home may have a different replacement value than it’s actual value because the home has income potential.  Envision a cottage on Ft Myers beach.  The cost to rebuild it might be minimal; however it provides excellent income, which in turn might affect its land value.  In this case, the highest and best value for the property might very well be its income potential.

Sanibel Island limits owners to renting homes out by the month or longer, but Captiva on the other hand allows weekly rentals.  This attracts more visitors, both from the US and abroad. It’s no wonder people from all over the world come to SW Florida to spend a week with their family in paradise.

The home pictured here is a home on Captiva and is a rare bank foreclosure.  It has a view of the bay and is a 3 story home.  2 of the floors have their own kitchen, living room, and bedrooms, so two families can easily share the home on vacation.  Quite often families travel together and look for a place to rent together.

This home is priced at $1,651,400 Other similar homes on the market now are priced $2.3 million to $2.995 million.  We studied the MLS sheets which showed these homes rental history for 2010 ranged from $120,000 to $150,000.  The home shown here features a pool, 6 bedrooms, 6 ½ baths and is walking distance to the beach, bay, shopping, restaurants, and gorgeous sunsets.  The previous owner did take most of the fixtures in the home, so new owner is free to pick out and furnish the home to their own tastes.  Former owner was a builder and built this home to his exacting standards.

If you’re looking for a vacation home with income potential, or strictly an investment property you might eventually retire to on Captiva, Sanibel Island, or Fort Myers Beach, give our office a call.  While the home featured here is our listing, we have access to all listed homes and can sit down with you and discuss your needs.

Good luck, and happy house hunting.

Be sure to watch our December 2011 SW Florida State of the Market Report