Saturday, April 28, 2012

Robins and Moving Vans--Winter is Over !

Being a Realtor can be a pretty hard job, there are long hours and disappointments, punctuated by the occasional sale—which these days is a “drop everything emergency” and “get the deal to close moment”.  But the business has its quiet times too.  And so it happened that I was fishing in Lemon Bay this week with a couple of potential clients, and they asked about the “market”.  I was happy to share the news, the housing market’s long, cold winter may finally be in a springtime thaw.

New data show that the price declines we've all seen are easing in big cities, and sales of new homes improving.  Many economists see the easing of foreclosures as key, since the glut of these properties being sold at a discount has been a significant drag on both existing and new home prices.

The Sarasota local daily paper had a front-page story on how the “pending” sales were way up.  Let me say that I personally have had two homes under agreement (pending) for nearly 6 months.  The offers came in the “owners” agreed to the price, but the banks (who need to approve the deals) have been sitting on their hands for weeks and weeks.  So “pending” is not the leading indicator it once was in better times, back then a pending deal took about 1 month between the accepted offer and the close of escrow and occupancy of the home.  This is like saying the number of "engagements" is way up, so the weddings will follow--but maybe not...

“The foreclosure market is drying up.  Banks may be shy to load the market with their inventory, or they are waiting for the Administration to require them to allow the former owners to rent the houses back.  In any case, if it continues, it will likely mean that we’ve either seen a bottom—or have passed a bottom—in prices because of limited supply and still strong demand.”

The US economy overall has been improving, with unemployment, retail sales, corporate profits and other measures showing steady if unspectacular gains. Housing has been one of the last holdouts, but analysts note that prices have stabilized and sales volume has been gaining.
Notices of default, which are the first step in the foreclosure process, fell in the first three months of the year, a 17.6 percent drop from the same period last year.  Banks still retain many foreclosed properties on their books, and some analysts have predicted that housing prices could weaken again if lenders dump these properties into the recovering market. But any long-feared “second wave” seems to be increasingly unlikely.

Low interest rates and the availability of bargain-priced properties are drawing more buyers into the market.  Although don’t think that the low price mortgages are all that easy to get.  You still have to pretty much prove to the lender that you don’t need the money, in order to get them to consider you as a borrower.

Several factors continue to hold back a major turnaround in housing, including a weak job market, tight mortgage lending standards and the huge number of homeowners who can't sell the home they no longer want to live in--these are the folks who would like to retire to Florida or elsewhere but they owe more on their mortgages than their homes are worth, leaving them essentially stuck in their properties. And until we get a major housing recovery,  the broader economy, and the Florida market, will suffer.

New-home sales nationally fell 7.1 percent in March from the previous month, the Commerce Department said Tuesday, but don't worry about that too much, it was partly because Commerce revised February sales figures up significantly. Even though the figure for March was the lowest since November, overall sales of new homes are up about 16 percent for the first three months of the year compared with 2011, the department said. The report helped boost the Dow Jones industrial average 74.39 points to 13,001.56. That improvement means that new-home sales in April and May will probably be stronger than last year, which were the worst on record.

But just as the Robins portend the coming of Spring, and the Crocus tells a gardener that it’s time to get the seeds in the ground, moving vans tell more about the health of a real estate market than any of the “cooked books” the industry tries to sell you.  And there are moving vans on the highways now.  My opinion: it looks like this Nuclear Winter is about over.

Dane Hahn is a real estate professional in Englewood and the SW coast of Florida.  You can reach him at dane.hahn@gmail.com or by phone at 941-681-0312. On the web see him at http://www.danesellsflorida.com/

Saturday, April 21, 2012

Flipping Real Estate, Legal or Illegal?

A couple of weeks ago I had several readers ask about flipping and why it was illegal.  I told them "Flipping is legal unless there is fraud", but promised I would try to make some sense of what’s going on with the “flipping trials” that have been on the front pages of the local papers. As the testimony unwinds, the local press has painted legal and illegal flipping with the same brush, and cast a shadow across the concept of buying and reselling homes for profit, implying that it was illegal.

Any time you buy and sell a house (usually without intending to live there)—that’s called a flip. It’s either a fast flip or a slow flip, but it’s still a flip no matter how you look at it.  The media in cases where an investor bought a property and sold it a short time later uses the term “flipping”.  That’s just doing business.  It’s legal.  And it happens every week, even in depressed markets.

But an illegal flip is just like a legal flip except it includes some mis-statments of fact (the fraudulent step) in one of the many documents that buyers and sellers have to sign.  The guys who are on trial right now made a practice of moving properties (often with a little fraud) and got away with it, over and over.  What they were doing at the time might have seemed like everyday business, but once they got caught their illegal short-cuts became a news story.

Again, flipping houses is not illegal. Fraud is illegal. So what kind of fraud did these guys get in trouble over? Here are a few possibilities:

1. Getting appraisers to raise the appraised value of a property, often double or triple the value, resulting in the lender (being duped into) making larger loans for the flipper or their buyers.  This step allows the buyer to overpay for property (and maybe pocket the difference).

2. Arranging down payments for a buyer, often from a third party—sometimes from a loan company or maybe even from the seller—resulting in an unqualified buyer buying a house that they couldn’t afford and shouldn’t be approved for.  This works best when the value of real estate is escalating rapidly.  The buyer can live there, or sell the house and the seller and flipper (might fraudulently) split the profits.

3. Falsifying loan documents required by banks to get a buyer approved, documents such as pay stubs, social security numbers, verification of employment, personal tax returns, verification of funds on deposit, etc. Resulting in a fraudulent application.  This may even include stolen identification numbers buying homes, and dumping them to a “flipper”.  When the stolen ID numbers are those of a dead person, the county discovers the default when the taxes come due, and the flipper has resold the home long before any of this is discovered.

4. Using straw men (people who appear to be buyers, but are standing in for the buyer) is legal and often done in real estate, especially if the actual buyer is a celebrity or high profile sports star, who might have to overpay if his identity were known to the seller.  But flippers occasionally use “straw men” who are paid to use their ID's, and sign the documents; but once the sale is made to the straw man, he immediately resells the property to the “flipper” for a profit.  The flipper pays off the straw man and keeps the profit.  This “launders the chain of title, and is a frequently abused type of fraud; which once discovered leads to an FBI investigation.  A straw man can be a stranger, an illegal alien (with phony papers) or even a relative of the flipper.  Flippers may also be illegal aliens, and probably will use fraudulent tax and social security numbers.

5. Back dating lease agreements to prove a track record of the tenant making payments on time and a year or more occupancy, even though that tenant just moved in. This is very common. Closing companies and banks/mortgage companies want the loan to go through and the sale to happen.  They used to say, “We do it all the time” but they don’t say that anymore.

A few years ago the FBI was following several (bald faced fraudulent) deals on broken-down commercial buildings in which the flipper makes a fair offer to purchase, and the seller accepts; then the flipper gets a fraudulent high appraisal on the property and a high dollar loan for the appraised price, at closing the flipper pays the seller the agreed amount and keeps the excess of the money from the bank (this can be millions). This requires the closing company to aid and abet the swindle.  Sometimes really bold flippers will do a second deal on that same property, with new very high appraisals.  Once they have the money, these guys usually leave the area, with the loan in default.  Some of the more brazen might burn the building for the insurance and to eliminate the evidence.

Illegal flipping occurs anytime the deal is different than what is represented on the contract presented to the lender. Each loan is based on the stated facts, so if even one fact is misrepresented, it’s fraud.  Regardless of how many people participate in the process.  If you are thinking all this makes sense, just remember, fraud against a bank or lending company is investigated and enforced by the FBI.

Legal flipping occurs when you buy a house, and either fix it up or simply choose to resell it.  If you’re buying and rehabbing houses, document all the work you do.  Keep a file on what you’ve done and spent to make a case on how you raised the value so quickly. You should also document your work using before and after photos.  Good records will help with everyone you deal with from other contractors to bankers to the IRS.

Dane Hahn is a real estate professional practicing in the Englewood, Florida Area.  Reach him at 941-681-0312, or by email at dane.hahn@gmail.com.  See him on the web at http://www.danesellsflorida.com/

Sunday, April 15, 2012

Real Estate Edge: The Magical Mortgage Market is Open For Business

Real Estate Edge: The Magical Mortgage Market is Open For Business: What can I say about the market this week?   How about this, things are picking up.   People are really thinking about buying again, and the...

The Magical Mortgage Market is Open For Business

What can I say about the market this week?  How about this, things are picking up.  People are really thinking about buying again, and the data supports these assertions.  The down side is the banks and mortgage companies are still shell shocked from the last time they made mortgage money available to all comers.

Oh, we’ll see easy money again, there will come a time when the mortgage guys will once again check your pulse and if there is a slight heart beat, you’ll be approved for a loan, maybe bigger than you even thought possible—just not in this decade.  As they say, “Once burned, twice shy…”

No, in this decade you’ll have to over-qualify for any money you want to borrow.  Mainly you’ll have to prove that you really don’t need a loan, and after you do that, the doors of the magical mortgage market will open wide to you.  But first you have to show you have strong income and plenty of tenure on your job, and very few recurring expenses (like student loans and the like).  You’ll need to show your credit is solid, and if you do that—you’ll most likely qualify.  Yes, there are lots of "ifs," but it's one of the best times in America to buy a home. And it won't last forever.

In Englewood foreclosures and short sales are still selling at deep discounts – they accounted for 34 percent of February sales.  The Multiple Listing Service here in town is like a Goodwill bargain basement of homes, and I can tell you, today we are open for business.

But the buyers are not just families, investors who normally don’t need a loan to make purchase-- snatched up 64.5 percent more homes in 2011 than in 2010 and now account for nearly one in every four homes sold, according the National Association of Realtors.

Fortunately, as buyers we have Canadians and Europeans who are thrilled that their money is growing against the rapidly inflating dollar.  So our second home market is coming back too. Vacation and retirement buyers are jumping on the second home bandwagon. They pushed vacation/second home sales up 7.0 percent in 2011.

But based on my own personal memory, this market is still pretty quiet.  In fact owner-occupied purchases fell 15.5 percent last year.

Forecasts for a housing recovery are all about when we’ll see the market recovery, not if. You may have seen the stock market prices of the largest home builders all go up after they announced that they had a strong January and February, and go back down in March and April when they announced that there were more contract cancellations than they had ever seen before.

Remember that today the available mortgage rates are near record lows (as long as you qualify) and home prices may finally be within reach of many consumers who want to buy now. If you feel renting has merit and you want to rent for the next few years, I have bad news, industry wisdom says that rental rates will be escalating as demand has increased, even in the face of more units coming on the market. Plus, if you qualify for a mortgage, your monthly payment may well be less than renting.

One last caveat, if you are thinking of buying, be sure to check your credit score before you apply for a loan.  You can access your own credit report from the only federally approved source of free reports, AnnualCreditReport.com, to make sure your credit is mortgage-worthy. Don't get taken by sound-alike websites that offer you "free" credit reports that are only "free" after you buy a credit monitoring service.
And remember too, homeownership comes not only with a mortgage but also with insurance, taxes, utilities, and maintenance. Include them in your budget to determine what is truly affordable.  We call the base figure PITI (Principle, Interest, Taxes and Insurance), but maintenance, HOA fees and lawn and pool fees also add in there.

If you feel some pressure to get in the market at today's affordable prices and low interest rates, remember if you move too quickly that too could be a mistake. Take the time to obtain a home inspection, learn the neighborhood, investigate the school district and buy only what you need.  Remember, most of the homes that were lost in the market collapse were bought with the largest amount of money the lender would lend. Make your next purchase affordable.

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from Englewood.  You can reach him at dane.hahn@gmail.com or 941-681-0312.  See him on the web at www.danesellsflorida.com

Thursday, April 5, 2012

Back to the Big Box House

Let’s face it; a house is just a big box that holds you and all your stuff.  Outside the box you want it to be watertight, wind resistant and look nice on it’s lot.  Inside the box you want the conveniences necessary to your family, enough room for the family and your stuff, and to be able to control the temperature, operate the plumbing, lighting and kitchen--but really all the rest is design and the special needs of the owner.
So when people ask me if a house is move-in ready—I almost always tell them, “it depends”.  I think a house is move in ready if you only have to paint the walls and change out the carpets.  But some people feel a house is not move in ready until every nick or scratch is polished away and all utilities have been upgraded with “green” products.
Today I’m writing about new homes, and here’s what I’m seeing right now: the new design trends out there incorporate a creative use of construction materials; layouts and features that provide maximum utility and beauty while being energy efficient and cost-conscious at the same time.  You know the house is “tight” when you slam the front door and your ears “pop”.
April is New Homes Month, and in keeping with the builder’s celebration, the following top trends were highlighted by leading homebuilders and architects during the International Builders’ Show in Orlando, last month.

Today’s new homes are being redesigned to allow plenty of space for family interaction in high-traffic areas such as the kitchen, and to eliminate rooms such as formal dens, dining rooms and home offices that aren’t as frequently used.  Small spaces devoted to home management, also known as “pocket offices,” are being included in large pantries or spaces nearby the kitchen or family great room.

I am seeing “Murphy beds” being used again to make a 3rd bedroom into both a “day office” and an additional guest room when needed.  Window seats and alcoves are being used to provide areas for private time, without taking up a lot of space. A popular and efficient location for laundry facilities is now added onto the master bedroom’s walk-in closet.  One caveat, if the master bedroom closet has carpeting, be careful with the bleach.  It’ll make a mess of the carpets.

Larger developers are increasing the number of resident amenities in order to compensate for smaller unit sizes.  Gyms and media rooms have been common for years, but facilities such as libraries and business lounges with individual workspaces are now being offered as well.  So look for the larger “public” spaces, if you are thinking of downsizing.  If this trend continues, one day you’ll own a master bedroom with an attached bathroom—everything else will be part of the common areas—hope I don’t live that long…

Many families are keeping the kids home longer (now that they can stay on the parent’s health plans) or inviting elder parents to move back in with their grown children—and now they are all living under one roof.  This is a result of the state of the economy during the past few years.  New single-family home designs reflect this with “shadow” units (call them “attached mother-in-law apartments” or private guest suites) that are built alongside a home, they are really separate living units that access the main floor plan of the home—often through a door into the kitchen, or via a shared garage.  Then there are homes with at least two master suites—with one or both located on the ground floor to be more accessible for elderly occupants.

Rectangular home designs (the big box) are more cost effective to build, so new homes no longer have the formerly-popular feature of multiple roof lines or the resulting unnecessary hard to heat and cool high ceilings and the useless interior volumes they created.  But home designs now include innovative modifications that are still visually stimulating, such as using two windows in a corner with mitered glass to allow unobstructed views and maximum light to come in. Another example is using a mix of materials in the home’s fa├žade such as metal, wood and stone to give the home a modern look.  Just ask the builder to certify the metal won’t rust.

The latest new home design trends that support modern lifestyles provide thoughtful and useful spaces in your newly constructed big box home. Safety, energy efficiency and near record-low interest rates coupled with competitive prices make today’s new home market an attractive opportunity for many families coming to Florida.

Dane Hahn is a real estate professional practicing in the Englewood area.  He can be reached at dane.hahn@gmail.com or by phone at 941-681-0312.  See him on the web at http://www.danesellsflorida.com/.


Sunday, April 1, 2012

Short Sales (Should be Called Long Sales)

Trying to get a home to close in a short sale is no picnic.  You would think that a bank or lender would be pretty happy to evaluate a bona fide offer—especially one that met their minimum price requirement—but week after week we call and plead for the bank to accept the offer so we can go forward, and week after week they don’t reply.
These processing delays have taken their toll on first-time home buyer interest in short sales, which now account for more than one of every six house sales.  In a nutshell, I listed a house last spring—about a year ago.  It is a fixer-upper, no doubt.  But the county had it assessed at $119,000.  We listed it at $99,000 with the idea it would sell fairly quickly.
Buyers came and went and finally one with vision and a belief in the neighborhood came forward and has made an offer that should be acceptable to all.  And now the bank is not returning the calls.  To be fair, there is a newly hired individual at the other end of the phone charged with selling many many homes.  I’m hoping we’ll hear something this week.

But it’s not just me, first-time homebuyer purchases of short sales dropped to 39.7 percent of short sale transactions. That represented a three-month slide and was the lowest level for first-time homebuyers ever recorded by those who keep track of this stuff.

The first-time homebuyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally scheduled expiration of the federal homebuyer tax credit.
Short sale transactions have long been problematic for buyers and sellers alike, with typical approval times of several months after a homebuyer first submits an offer. Factors slowing down short sale approvals include lost paperwork, coordination with multiple investors, slow appraisals, and mortgage servicer understaffing.

But there is a silver lining to this whole debacle, for many first-time home buyers, average short sale prices of 27 percent lower than non-distressed properties compensated for the wait time. But with average time-on-market for short sales stalled at 16.6 weeks—with the majority of that time spent waiting for bank approval—short sale transactions are becoming less popular with first-time homebuyers.

Short sales are just one type of distressed property.  Homes that have been foreclosed on become the property of the lending institution, and are called “REO’s” (for Real Estate Owned) with damaged REO’s and move-in ready REO’s also being significant components of today’s housing market.  Last summer, short sales accounted for 17.1 percent of the home purchase market, with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent, respectively.

Most real estate agents indicate that home buyers frustrated with short sale delays are resorting to placing offers on multiple properties, with the intention on closing on the first one that is approved. This practice can bog down the short sale approval process at mortgage servicers.

To review the listings, sales and “days on market” data, you can take a deeper look here: To View .
Dane Hahn is a real estate professional practicing in the Englewood area.  He can be reached at dane.hahn@gmail.com; or on the web at http://www.danesellsflorida.com/.

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