Tallahassee Foreclosures Continue To Feed Shadow Inventory

There are still way too many Tallahassee foreclosures, and they are fueling the shadow inventory of homes at an alarming rate.

Increased activity among homebuyers has many people thinking the market has recovered, but I am still trying to find out why more of the distressed homes for sale in Tallahassee have not formally entered the housing market.

I shudder to think what would happen if all of the Tallahassee foreclosures from the recent past showed up as active listings in the Tallahassee MLS.

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These Big 5 Banks Control Foreclosures In Tallahassee

There are a lot of people tracking foreclosures in Tallahassee, as the fate of the Tallahassee real estate market appears to be in the hands of the largest banks.

People who are trying to sell a home are finding the market is full of distressed properties for sale, and they are not going away anytime soon.

In fact, if you saw the report on foreclosures in Tallahassee yesterday, then you know their numbers are on the rise.

It makes me wonder, who are the banks that control most of the foreclosures in Tallahassee?

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Homeowner, You’re Doing A Short Sale And You Don’t Even Know It!

The clock is ticking for home sellers, and many of you are going to be doing a short sale even though “that thought” is the furthest thing from your mind right now.

You’re hoping you can sell your home for enough money to cover the debt, or you’re hoping that “one special buyer” will come along and save the day.

You continue to sit idly by as the housing market moves further from your asking price, serving in the role of set-up house for the properly priced home sellers down the street.

I see it all the time, and I hope that this article can be a wake-up call for people who plan on moving in the next few years.

Home values are dropping in Tallahassee, and we know that the imbalance between real estate supply and demand will force values lower for the foreseeable future.

Additionally, the recent news of of rising foreclosures and the fact that nearly 40% of all sales are from distressed properties means that only sellers with significant equity will be able to sell their homes without bringing money to closing (or doing a short sale).

This means that most (more than half) of all sellers over the next year or two will be upside down on their mortgage. And the smartest move for many of them will be doing a short sale. But did you know there is an even smarter move?

Upside Down Homeowners Need To Be Doing A Short Sale Now

Smart homeowners who plan to move in the next few years are doing a short sale today. Why? Because of the tax consequences, that’s why.

According to the IRS, “the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

That means for most home sellers, the IRS will not make you pay taxes on the debt forgiveness if you close on your short sale before December 31, 2012. So do you think you have plenty of time for doing a short sale? Think again!

Time Is Running Out To Be Doing A Short Sale

Should I Short Sale My Home E Book 300x430 Homeowner, Youre Doing A Short Sale And You Dont Even Know It!, Tallahassee Real EstateDespite claims by the banks that they are speeding up the process for doing a short sale, we are seeing bank response rates just as slow as any time in the past few years. They are swamped and the amount of files they are processing is growing.

If you were to list your home today, and get a contract tomorrow (end of June 2012), you would hope to get a response from the lender sometime in August. But September would not be out of the question. Nor would October.

And the buyer will need time to close on the home once the lender has accepted the contract (if the lender accepts the contract).

Add all the twists and turns that could occur, you have (at best) 30 to 45 days of buffer before you are in the panic mode.

And if you do not have the world’s best short sale agent, you probably are already past the deadline for doing a short sale.

Final Advice On Doing A Short Sale

Whether you think you need to be doing a short sale or not, download my FREE 86 Page SHORT SALE RESOURCE by clicking on the book above. Read the chapters that are relevant to your situation, and quickly gain some understanding of the benefits of doing a short sale now versus waiting to do one in two or three years (your equity situation will not improve by then).

If you think you can hold on to your home for five or more years, then perhaps you might not need to consider doing a short sale. But what’s the harm in getting better informed? Read the resource, and then let me know if you have any questions about doing a short sale in order to save you a ton of money.

Time Running Low To Move Before The New School Year

People move for many reasons, but every year for the past 21 years I have heard many families remind me that they wanted to move before the new school year started.

I guess that people feel that their child will adjust better by being in a new school on the first day of classes, thus selling a home and then buying a new home becomes the major task for the summer months.

But things are going to be different this summer.

If you want to move before the new school year starts, then you most likely need to have your home sold and the new home under contract soon.

Why It’s Time To Move Before The New School Year Starts

According to the 2012-2013 School Year Calendar (published by the Leon County School Board), public school students report on August 20, 2012 for classes.

Assuming you want at least a week to settle in and move before the new school year, that means you have 69 days to move before the new school year. That might sound like a lot of time, but did you consider the following time constraints?

  • Average number of days to close on a home loan: 50
  • Average number of days to get a contract on your home: 17

So, if you do not have to sell a home, you are only constrained by the time it will take you to find and close on a home. Currently, for people financing a home, it takes roughly 50 days from the date of contract to closing. Are you prepared to be under contract in the next three weeks?

But if you do have to sell a home so that you can move before the new year starts, you need to remember it must be on the market and under contract in the next three weeks if you want the buyer to be able to close on your time frame.

Now Is Time To Move Before The New School Year Starts

HBFSP thin eCover Time Running Low To Move Before The New School Year, Tallahassee Real EstateSo now is the time. Why is this so different than my previous 21 years as a real estate agent in Tallahassee?

Because interest rates are crazy low, and the people who take advantage of these rates to move before the new school year starts will one day look back and realize that it was the smartest financial move they made during their entire lives.

More young families will create wealth through the acquisition of their family home now than during any previous period of time on record. Homes are selling far below the cost to create them, and when the market corrects, these young families will be sitting on mountains of equity.

If you think you want to take advantage of mortgage interest rates far below 4%, now is the time to act. You can get started right away, simply drop me a note and tell me that you want to move before the new school year starts.

How To Decide Whether To Buy A Home Or Wait?

Buy a home or wait for lower price How To Decide Whether To Buy A Home Or Wait?, Tallahassee Real EstateA question on many people’s minds these days is whether you buy a home or wait until home values fall even further.

We know that home values will continue to decline over the next several years.

And we also expect that these historic interest rates will not last forever.

In an attempt to bring clarity to the “buy a home or wait” debate, I have set up a real estate model that will help most people understand that the answer is fairly simple, but it varies for each person’s unique situation.

Do You Buy A Home Or Wait – The Model

Buy a home or wait How To Decide Whether To Buy A Home Or Wait?, Tallahassee Real EstateIn order to create the real estate model on the left, I had to start with some basic assumptions.

First of all, I assumed that the average homeowner would be able to borrow money at today’s low interest rates. Were this not true, the homebuyer should be more inclined to wait, as home values are still depreciating.

Secondly, I assumed that the average homeowner would live in the home for ten years before selling. This allowed me to calculate a total interest expense to use in the comparison.

Finally, our model compares the cost of waiting (should interest rates rise) to the cost of not waiting (the real estate depreciation that will occur).

The graph shows the amount of “additional money” spent (in green) as interest rates go up. At 4% (today’s interest rate), the amount is zero.

The red portion of the graph shows the equivalent real estate depreciation that would need to occur to equate to the same cash difference that rising interest rates would cost.

For example, if you are worried that property values will drop 10% between now and ten years from now, that would equate to a mortgage interest rate increase to 5.1%.

Using The Buy A Home Or Wait Model

Everybody has their own beliefs on what is going to happen to our economy, to mortgage interest rates, and future property values. This model can work for anybody.

Simply plug your strongest concern into the model, and compare it with “the other side of the coin.”

If you are more concerned about rising interest rates, then start on the horizontal axis. Choose a rate you think makes sense, then look straight down and determine the “red” value. That will be the equivalent rate of depreciation needed to be the same as your anticipated mortgage interest rate.

My Thoughts On Mortgage Interest Rates Versus Depreciation

I am confident home values will continue to fall. The imbalance between supply and demand will take time to consume, and during that time, pricing pressures will drive values lower.

But I am also concerned that mortgage interest rates could rise. When they do, history tells us they will be moving swiftly, and low interest rates will be gone for good.

Based upon the economic impact for most families, it would seem that the risks of waiting are higher than the risk of buying now

Home values have dropped over 35%, thus the rate of depreciation from this point in should slow. All models that we use show values rising inside of the ten-year span that we have used for the model.

Historically low interest rates, coupled with the ability to cherry-pick a below-market value, make the “buy a home or wait” answer lean in the direction of buying now for a family that will live in the home for ten or more years.

Have You Heard The Great News About Tallahassee FHA Streamline Refinance?

Tallahassee FHA Streamline Refinance Have You Heard The Great News About Tallahassee FHA Streamline Refinance?, Tallahassee Real EstateChanges have been made by the Federal Housing Administration (FHA) that are going to have an immediately wonderful impact on people who want to do a Tallahassee FHA streamline refinance.

You see, the FHA has found itself in a bad position, and perhaps it feels that best way to protect itself is to to do a little more of “what got us here in the first place.”

So what the heck is this all about and who could need or want a Tallahassee FHA streamline refinance?

Defining Tallahassee FHA Streamline Refinance

A Tallahassee FHA streamline refinance is simply a way for people who have FHA loans to lower their interest rate and payment amounts.

The “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:

  • The mortgage to be refinanced must already be FHA insured.
  • The mortgage to be refinanced should be current (no late payments going back 12 months).
  • The refinance is to result in a lowering of the borrower’s monthly principal and interest payments.
  • No cash may be taken out on mortgages refinanced using the streamline refinance process.

And the good news only gets better!

There are no credit checks, no property appraisals, no income verifications, etc. If you have a house with an FHA loan, you qualify!

So, in a nutshell, you should contact a Tallahassee FHA streamline refinance mortgage lender to see how much they can lower your payments on your home because ….

You Already Qualify!

Why FHA Wants You To Do A Tallahassee FHA Streamline Refinance

FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. So if you already have an FHA loan …

The the FHA has already guaranteed a lender that you will repay the loan.

It’s in their best interest to make it easier for you to do so!

So even if you own 100% more on the home than it is worth (with an FHA loan), and you’ve  lost your job, and your credit score is 500, … you still qualify. Why?

Because the FHA has already guaranteed your loan amount, that’s why. They can reduce their risk if they can make it easier for you to repay the loan

How To Start A Tallahassee FHA Streamline Refinance

With today’s historic low interest rates, the time is right for FHA financed homeowners to consider this as a long-term option for owning the home.

That means you should immediately talk to a trusted Tallahassee mortgage broker to do a Tallahassee FHA streamline refinance and see how much savings you can gain.

What Are We Going To Do When Fannie Mae And Freddie Mac Finally Crash?

As our federal government continues to flail and waste time disputing who caused the housing market collapse, I just sit here wondering what we’re going to do when Fannie Mae And Freddie Mac finally crash.

Century 21 Super Bowl XLVI Commercial What Are We Going To Do When Fannie Mae And Freddie Mac Finally Crash?, Tallahassee Real EstateDid you happen to catch the Super Bowl this past Sunday? Even if you didn’t, have you participated in our one-question survey about the impact of Super Bowl advertising? Please give us your quick answer by visiting our Super Bowl Advertising Survey (by clicking the link).

A long time buddy of mine send me a link to an article that really summarizes this concern for me.  Christopher Whalen wrote a commentary on HousingWire titled On GSE reform: Be Careful What You Wish For that should make all tax-paying US citizens scratch their collective heads. I want to share a few quotes from Mr. Whalen about Fannie Mae And Freddie Mac.

Who Really Controls Fannie Mae And Freddie Mac?

Think about it. These are organizations that are funded by the government, so their accountability for profitability (think survivability if they are private businesses) is very loose. Who needs to profit when the government is backing you. So what motivates the GSEs (Government Sponsored Enterprises) if not sound financial decision making? Mr. Whalen points out:

… the close operational integration of the top four banks and the GSEs, including Fannie Mae And Freddie Mac and the Federal Home Loan Banks, which are the largest GSEs of all. You cannot separate the GSEs from JPMorgan Chase, Citigroup, Wells Fargo and Bank of America — the four horsemen of the financial apocalypse that exercise illegal cartel control over the secondary market for residential mortgages. The big four zombie banks run the GSEs in the same way that they exercise control over special purposes entities and the private mortgage insurers.

Fannie Mae And Freddie Mac Only Exist On Public Funding

The road to hell is said to be paved with good intentions, and Fannie Mae And Freddie Mac were established with good intentions in mind. But they have evolved to a cancer that is killing housing, and I believe is holding back the economy. Mark Calabria of the CATO Institute notes:

“By focusing on ‘the role of government’ in housing, [Nocera] moves the debate away from the reckless immoral behavior of Fannie Mae And Freddie Mac. He can claim this is about social policy and paint himself as a caring progressive, despite the massive regressive theft that Fannie Mae And Freddie Mac have actually been.”

Fannie Mae And Freddie Mac Performance: Far Worse Than The Catastrophe Reported

Everybody knows that Fannie Mae and Freddie Mac have been hammered. Nobody argues that they are a viable, economic entity. But did you know that the reality of their financial situations is far worse than what most are reporting? On this, Mr. Whalen observes:

In the case of the GSEs, the loss on a bad loan is not recognized until the underlying collateral is sold — meaning that there are tens if not hundreds of billions of losses embedded on the balance sheets of Fannie Mae and Freddie Mac in the form of bad loans

Fannie Mae And Freddie Mac Reality Awaits

What is going to happen when the proverbial s#*t hits the fan? If hundreds of billions of loans go bad, will our banking system survive? Or will the next administration (we know Obama is going to continue to ignore this through elections) decide to bail out the banks by printing another trillion dollars?

I know there are “way smarter” people out there who pay attention to this, I’ll be looking for their thoughts and ideas. I can promise you this, the lack of leadership in Washington today might be causing a problem that could collapse our economy. It has happened elsewhere. Are we just a “Super-sized” Greece?

If we do not put some bright, non-politically charged minds, on the task of reforming and dissolving Fannie Mae And Freddie Mac, then what we know of the housing market collapse will pale in comparison to what is ahead.

Mortgage Relief Plan Is Redistribution Of Wealth Plan

Mortgage Relief Plan Mortgage Relief Plan Is Redistribution Of Wealth Plan, Tallahassee Real EstateThere was an article in yesterday’s New York Times that explained the new mortgage relief plan, which is due to be signed today, is very close to completion.

Like so many articles that have been written about the housing market crisis, this one liberally showed how all the victims will receive assistance.

In case you do not remember, the victims of this are the homeowners who have or will lose their homes to foreclosure due to their failure to make the payments on the loan.

They are victims because the banks wrongfully forged documents to make the foreclosures happen.

Now I certainly understand why the Feds want to go after and punish the banks for forgery, but I’m having a problem labeling the homeowners as “victims” of this crime.

Have their been any cases reported where banks forged documents to foreclose on anybody who was “current” on their loan?

Everybody is lining up to take shots at these banks as if they were attacking performing loans. These are loans that are in default!

You are not going to fix the housing market by handing out money to people who are not making their mortgage payments. But apparently, the Obama Administration sees otherwise:

“This will be one of the most significant steps in the recovery of homeowners, neighborhoods and the broader housing market from the worst collapse since the Depression.” – Shaun Donovan, the Secretary of Housing and Urban Development

This makes me sick.

Mortgage Relief Plan Is Counter Productive

Let’s not confuse two very separate issues that are really at play here.

  1. Many lenders forged documents (they broke the law) and they should be punished
  2. What harm has there been to homeowners, and why are we taking billions of dollars from banks and just giving them out to people who defaulted on their loans?

Maybe I’m reading this wrong, but I have yet to hear stories from the “robo-signing” scandal where people were wrongfully foreclosed upon.

These lenders (or their legal representatives) created documents to show they owned the loans (meaning so they could have the legal right to foreclose). Again, have the FBI throw the wrong-doers into jail for loan fraud.

But why take money from the shareholders of these banks and give it to people who were in default of their loans? Is this really justice for anybody, or just a re-distribution of wealth?

Mortgage Relief Plan Is Fraud

Unless I completely missed the boat on this, I would think that this mortgage relief plan is as fraudulent as the methods the banks used to foreclose on the loans in question.

The comment from the Secretary of Hud is an insult to the intelligence of the American people. The US mortgage market exposure far exceeds a trillion dollars, giving handouts of $18B to $25B to a small fraction of the market is not going to have an impact.

Think I’m wrong? I said the same thing about the Homebuyer Tax Credit when it was first envisioned several years ago. The Tallahassee housing market (as well as the US housing market) has since returned to pre-tax credit levels, and the US government is going to receive less revenues from taxes for the coming few years.

Keep the government out of the housing market recovery. The mortgage relief plan is a terrible mistake that is a clear re-distribution of wealth (which I guess is Obama delivering on his campaign promises).

Homeowner Alert: The New “Refinance A Home” Scam To Avoid

FHA Refinance of Borrowers With Upside Down Houses Homeowner Alert: The New Refinance A Home Scam To Avoid, Tallahassee Real EstateI am concerned that the next wave of “putting a finger in the dike of the housing crisis” cures will be built around risky loans created solely to help you refinance a home.

In response to yesterday’s Weekly Special Report “The Great Falling Home Supply Mirage,” several readers were quick to comment on thoughts they have concerning the next ignorant solution being thrown at the housing crisis.

One reader noted that many of the large lenders plan on unveiling a program in March that will allow homeowners to refinance a home for up to 125% of its value.

Time Determines If You Should Refinance A Home

Unfortunately, the numbers say that we are too far down the road for a solution to refinance a home to help most homeowners. At face value, it sounds like a smart compromise from the banks.

However, I believe this is another poorly contemplated solution that will only slow down recovery time in the housing market.

A wise brother of mine once warned “Joe, you cannot refinance your way out of debt.” I will now pass his sage advice on to our readers.

Refinance A Home Homeowner Alert: The New Refinance A Home Scam To Avoid, Tallahassee Real Estate

If home values proceed as we have anticipated in our Housing Market Recovery Analysis, then a homeowner who refinances a home today at 125% of its current value will most likely be able to sell in 2024 without having to bring money to closing.

Yep, 12 more years. This is assuming that they can get the loan today. So many homeowners in Tallahassee already owe more than 125% of what their home is worth, so this solution would not work well for them.

So think about it. If you want to be in your home for 12 or more years, this might be smart for you. But if you know you want to sell your home much sooner than that, then I don’t think this is a solution. I think it is a band aid, another proverbial finger in the dike that is designed to keep bank leadership in their current jobs.

False hope only slows the inevitable, just as we saw with the Homebuyer Tax Credit. It pulled some “future buyers” into the market, but now that it is behind us, the market has returned to where it was. How much did the government invest in a program we all knew would fail?

A solution that involves refinancing homes at values greater than the market will bear stinks.

This traps people in their homes even longer, and it will slow down the recovery of the housing market.

The majority of people who own homes move far more often than every 12 years, let alone the average 20 years that this program would require (bulk of upside-down homeowners purchased their home 7 to 10 years ago, thus a 12 year solution leaves them in their homes for more than 20 years).

Want To Refinance A Home?

If you really think that you are in your home for the long-run, then I would contact Robert Barnette at Hancock Bank and get his opinion about whether or not you will qualify to refinance a home.

  • This is a HIGH QUALITY Pre-Approval application for your Purchase or Refinance. This process is very easy and if filled out correctly can result in a pre-approval very quickly. Please take a moment and read the info needed below in order to expedite your pre-approval. While this form might seem somewhat long, there is no way to get an accurate pre-approval without providing the information requested below. To get started, please provide a complete 2 year residence history including whether you currently own or pay rent.
  • Please include all addresses, business names, and phone numbers for verification of employment history.
  • 1) The application needs accurate GROSS (before taxes) monthly income. If you get salary take the gross yearly amount guaranteed divided by 12 for your entry. 2) If you are paid hourly, please multiply guaranteed hours per week worked X's the regular hourly pay. That will give you weekly income. Then take the weekly figure and multiply by the number of weeks you work in a year. Then divide by 12 and enter that number. 3) If you work overtime we can only use this pay if you have a 2 year history currently and the likelihood of the overtime continuing is very likely. 4) If you work two jobs the second job unless worked for last 2 years may or may not be able to be used as qualifying income. We do need to know if you work 2 jobs so enter it with zero pay. 5) If you get retirement income, We need the GROSS (before taxes) amount please for all sources of retirement or disability income.
  • The application needs enough assets (checking, savings, gift funds etc.) entered on it that will cover any down payment needed as well as the closing cost for the loan. In some cases (VA loans) no down payment is needed and on all loans the seller may cover the closing costs. If you have a retirement account, please enter that info as well. Please don't enter any cars unless they are paid off or if you are using them for assets to purchase the home through their sale. Same with the life insurance. If you are not going to cash in for down payment please don't enter life insurance information.
  • If you have other income like retirement or child support or something like that please enter it here. If you owe-child support or some kind of mandatory deduction from your pay check please make sure you enter that as well.
  • If you own other properties and will be keeping them, you will need to include the total mortgage payments including all Taxes and Insurance and HOA or CONDO fees. You also need current estimated value if possible. If the property is rented, please provide current rental income (monthly) received
  • Is there anything else you think we should know about? Have you been through a short sale, foreclosure, bankruptcy, divorce, or significant financial event? If so, please list it here. Don't be tempted to hide information, because nobody is going to fund a loan without complete research being done. Getting a pre-qualification based on incomplete information will only frustrate you later when no loan can be funded due to undisclosed circumstances.

Simply put the information in the form above, and Robert will be notified immediately about your desire to refinance a home.

Cash For Real Estate

With all the problems that we read about obtaining financing for real estate these days, it has raised some discussion about just paying cash for real estate. Tallahassee has never been a town filled with people with a lot of excess cash, so I really don’t see a new trend towards cash buyers starting any time soon.

Of course, if home prices continue to fall as we expect, there will be more cash-laden investors who come to claim real estate investments in Tallahassee.

Yesterday, I received some feedback and conversation about the article on Foreclosures that I wrote from Sarasota real estate agent Keith Kropp, who shared this interesting statistic:

I’m also concerned about the high level of cash sales. In both the Orlando and Sarasota markets, cash sales are accounting for 60% of all sales. This is unbelievably high, and I don’t know how long this trend can continue.

Whoa, 60% of all buyers are paying cash for real estate in the Orlando and Sarasota markets? That is very hard to believe. So what’s the story in Tallahassee?

Cash For Real Estate In Tallahassee

In order to determine how many people were paying cash for real estate in Tallahassee, I studied all recorded arms length sales of single family detached homes, condominiums, and townhouses in Leon County, Florida. What I found was not surprising.

Source Of Funds For Home Sales In Tallahassee Cash For Real Estate, Tallahassee Real Estate

As we can see in the real estate graph above, the percentage of buyers who are paying cash these days has doubled from our traditional rate of about 15%, to a whopping 33% in 2011. So is paying cash for real estate a new rising trend, or is there a simple explanation for what we are seeing?

Cash Buyers In Tallahassee Real Estate Cash For Real Estate, Tallahassee Real Estate

This graph shows that the number of people who pay cash for real estate in Tallahassee has remained fairly consistent. The reason that we see the percentage doubling is because the market is performing at only half the rate of home sales that we normally see. So I believe this is fair evidence to support that cash buyers have not left the market, rather it is those buyers who are borrowing money that have been most effected.

So which loan product out there has caused the most chaos in the Tallahassee housing market?

Conventional Loans Tallahassee Cash For Real Estate, Tallahassee Real Estate

This graph shows that convention loan products are the real story here. Tallahassee was recording nearly 2,500 conventional loans for purchase by the end of the 1990s, yet this year we will only see about 1/3rd of that amount. This is just a normal corrective phase that was needed due to the crazy lending practices from 2004 through 2006. This too shall pass.

If you are interested in buying a home and want to take advantage of our free mortgage counseling services, just drop me a note (<- By clicking that link) and we’ll schedule you to meet with an expert to help you determine your best home purchasing solution. Whether or not you plan to pay cash for real estate in Tallahassee, you should understand all of your options and opportunities in order to get the absolute best deal in today’s housing market.