Lots of news in the real estate world this week, and as usual it comes with lots of opinion as well. First of all, the major TV news outlets are reporting that “made good” resale house prices (main street homes that actually have sold) are up and this in the face of sales volume (total number of sales) being down. And new homebuilders were surprised this week that they have experienced extremely high cancellations of homes they thought they had sold back in January.
These new home and resale data are national numbers. My opinion is that here in SW Florida we are selling homes in an orderly fashion, the prices have not increased as yet, but there have been a good quantity of buyers who will buy something—so at the moment, a low price is still a key ingredient in the speed of a sale. i.e. If you're a seller, and want to sell ASAP, underprice the home by 2 to 5% and it will sell quickly. If you are in the camp which says,” I’m not going to give the house away”, then do us all a favor and take your house off the market for another 8-10 months. You won’t miss a buyer if you are asking too much, and in another 10-12 months, when you are finally negotiating with a buyer, the house will not have languished on the market all that time, you will be selling a “new listing”.
And what’s up with the banks? This always seems like a soap opera, but here’s the latest: The Bank of America said it would turn troubled homeowners into renters without ordering them to move. The bank said it would offer a pilot program in three states that would open the option of renting a home to borrowers who have defaulted on their mortgages.
The plan would allow the property to stay in use, which would lend itself to better maintenance and the prevention of vandalism. Banks could also use such a system to wait out the downturn in the housing market. Instead of auctioning off a house now, while home prices are depressed, banks could allow the home to be rented temporarily. It would be offered to homeowners when loan modifications fail to help the homeowner avoid foreclosure.
The Los Angeles Times reported Saturday the bank started the owner-to-renter program this week with 1,000 borrowers. As is typical of banks, however, BofA still shuns the idea of becoming a long-term landlord or homeowner. The plan involves selling the home to investors within three months, or just after the homeowner makes the first rent payment. The bank is then auctioning off a home that includes an immediate income for the buyer. The bank said there were many investors interested in the program, which will start with homes worth between $75,000 and $1 million. No information on when the program will be introduced in SW Florida. I say this is a good idea, and it will keep folks in the homes they know and like. The residents have basically been renting anyway, they wouldn't qualify for this program if they had any equity in the home.
And what’s going on with the “flipping trials” that have shared the front pages of the local papers this week? Well, as the testimony unwinds, I will try to boil down the facts as they are presented and give you an idea of how and why all this transpired.
But first, let me say the “Cliff’s Notes” version is pretty simple. It really depended on the following three axioms:
Real Estate values will always go up; banks and mortgage companies are so busy they are not even reading the applications and they will sell the loans anyway; and with a team of morally challenged players (specialists in lending, closing, and sales) the sky is the limit.
Remember when they explained in 9th grade; if you want to know why things happen, follow the money? (More to come on this topic).
Dane Hahn is a real estate professional in Englewood; you can reach him at 941-681-0312, or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com
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