Palm Beach County housing showing ‘green shoots’?

It’s all over the news…The housing crisis is over! In todays Palm Beach Post is this headline: Florida home prices bottomed earlier than previously thought, according to one study…and the article goes on to state that they just realized that the bottom was in 2009!

The bottom has been reached and it’s all up from here…Green shoots are everywhere!

Not so fast…There’s a good chance those green shoots will get swamped by the coming wave of distressed home sales!

I have been following (and charting…see below) the number of Lis Pendens filed with the Palm Beach County Clerk since 2010.

Here’s another tidbit from a recent Sun Sentinel article: It takes an average of 861 days for a lender to repossess a property in Florida, says RealtyTrac Inc., a California foreclosure listing firm.

Lenders are whole heartedly resuming foreclosures following the “robosigning” scandal in which bank employees admitted using faulty paperwork and fake signatures to take back homes.

Prices have rebounded in South Florida and across the state in recent months. But those gains could easily reverse when the coming wave of foreclosures hits the market.

As we all know by now, bank-owned homes and short sales typically sell for less than a similar home would sell for if not a distressed sale, thereby hurting the values of nearby properties…and specifically creating potential for nightmare scenarios with the  appraisals of non-distress-sale homes.

All the recent news stories are reporting that prices are on the upswing and have benefited from a change in the mix of homes sold with distressed properties – bank-owned homes and short sales -- accounting for only 22% of total sales, down from 31% last August.

Below is a graph of the median home price index charting back to January 2008. You’ll see, even with all of the excitement in the media the past few months, that we’re still below summer of 2009 prices. And all the the bumps in prices…they are ALL the summer buying season.

In Quarter one of 2013, when they are charting median sales prices for Oct-Nov-Dec 2012, what do you think the graph will look like?

So, to wrap up this cheery post…my take on all of the recent reports by the experts. They are wrong, period.

If  there have been over 10,000 foreclosure actions started so far in 2012, and a total of over 22,000 in the past 20 months and it takes, on average, over 800 days from start to finish, it looks like we are clearly in for a very large number of distressed sales…either as short sales or bank-owned sales.

As of today, there are 11,910 properties listed for sale in Palm Beach County in our MLS system…single family/townhomes and condos. Almost exactly TWICE AS MANY properties have had a foreclosure action initiated since 1/11 than are currently for sale!

Just for fun, lets say that 50% of those in foreclosure somehow resolve the foreclosure. That still leaves over 11,000 short sales or bank-owned homes going to hit the market in the not-to-distant future…and that is just the stats if they stop filing foreclosures today! (which is not going to happen)

The short sales may hit the market sooner, unless the owners are trying to stay as long as possible. But there is no doubt that there will be new downward pressure coming.

For about 6 months now I have been counseling my customers and clients that we are in a ‘mini-bubble’ that may last a few months longer. If you have equity…now may be your best chance for a while to sell.

As always, thank for reading…Steve Jackson…561.602.1258

If you have any comments on this post, or would like to suggest a post topic…send me a text or an email.

If we don’t sell it…we’ll buy it!

Once again, I have started to see this being promoted recently by mail, in the Neighborhood News and on the radio.

"If we don't sell your house in___days...WE'LL BUY IT!"

Sounds great...especially in this market. Worth checking out? That's what the agent is hoping you'll think. Get the agents phone to ring...but they'll never discuss the details over the phone..."much to complicated and need to see your home to see if it qualifies"...get the foot in the door. But there is NEVER a free lunch; there is always a cost associated.

But, particularly in this type of market, it would be "good business" if the agent NEVER bought any homes, or if they did, that they were purchased at such a drastic discount that the could quickly ‘flip’ the home and make some money. 

I have gone to several seminars where they promoted this (tactic/gimmick) and the dialog you will hear starts out something like this: " Mr./Mrs. homeowner, a big dilemma when making your move is deciding whether to buy 1st or sell 1st. Either way is risky as you could end up with 2 homes (or no home). Our unique/innovative/etc Guaranteed Sale Program solves this dilemma...you get our personal guarantee that if we don't sell your home in BLANK (30/60/90/120) days, we will buy it at a price acceptable to you. Now, WE take all the risk from you and you can immediately place a confident offer on another home". The Devil? it’s in the details:The hidden details usually follow some or all of these general guidelines:

• Must purchase one of the agents listings...or at least buy a 'full commission' home with them
• Seller must still pay a full commission on the 'guaranteed' sale
• Quite often an 'upfront' fee or guaranteed sale program fee of anywhere from $295 to fees in the thousands
• "Agreed upon" price well below appraisal/market value...could be as low as the 80% range, then subtract commissions, fees, closing costs etc.
• Original list price 5% below  sale prices of comparable homes
• May be a an additional fee involved
• Seller may be required to continually lower the asking price during the guarantee period...for example: 100%  for 1st 30 days, 95% day 30-60, 90% day 60-90, and so on until the “buy-out price is reached.
• Sign the listing agreement first...then the guaranteed purchase details come later
• There may be a maximum allowable program price
• Restrictions on home condition
• Use the language "I'll buy it for 'list' price", but fail to say that the 'list' price is the 80% ENDING list price

Now if they'll come right in and buy it for the price that they agree to list it for...

then that's putting their money where their dog and pony show is!

Think about these few points:

• With as difficult as it is to get a mortgage now, COULD your agent actually perform on their guarantee? And what will happen if they CAN’T perform? Ask to speak with their mortgage lender...do your due diligence as with any other buyer.
• If they don't need a mortgage and have a few million sitting around to buy homes that don't sell in 90 days, why are they a real estate agent?
• Are they "flipping" the purchase option to an investor? Are they going to list the home for the investor once they buy it?
• Can they assign the guaranteed sale price (as in a wholesaler)?

Good, solid, cutting-edge marketing, a detailed understanding of the local and national economic factors affecting home values, subdivision level market knowledge, ability to analyze trends...trust and mutual respect...THIS is what is needed today. Not MORE GIMMICKS!

Thanks for reading…Steve Jackson

561.602.1258

 

9/11/01

 

Palm Beach County Property Tax notices are out…was your home valued too high?

A few weeks ago the Palm Beach County Property Appraiser sent out the estimated property tax notices to every property owner which contained assessed and market values of the property.

This notice is not a tax bill. The Tax Collector’s Office will mail tax bills on Nov. 1. The Notice of Proposed Taxes is intended to give you an idea of what to expect when the taxing authorities work up their budgets for the 2013 fiscal year (Oct. 1, 2012-Sept. 30, 2013).

The value information shows your property’s market value for 2011 and 2012. Market value is based on the most probable sale price a willing buyer would pay in a competitive market. The 2012 tax roll is based on sales transactions that occurred in 2011.

If you believe the market value (and resulting property taxes) of your property is too high you have the right to appeal...BUT YOUR TIME IS RUNNING OUT! September 17th is the appeal deadline.

The procedure for a valuation appeal is as follows:

1. You can all the PB County Property Appraisers office and speak with a deputy appraiser. The main contact # is 561-355-3230, the # listed under Residential Appraisals is 561-355-2883. If still dissatisfied, you can then appeal to the Value Adjustment Board, an independent body consisting of two County Commissioners, one School Board member and two members at large, appointed by the County Commission and School Board.
2. The Value Adjust Board appeal: The VAB is set up to settle disputes between taxpayers and the Property Appraisers office. You can file your petition online HERE…but you only have until SEPTEMBER 17th…so don’t delay! Filing a petition will cost you a non-refundable $15 fee. HERE is what the actual petition form looks like.You can also file in person at the Clerk Governmental Center 1st floor office or any branch location. You can call the VAB at (561) 355-6289.

In hearings before the VAB you may represent yourself, seek assistance from a family member or a friend, or have an attorney or agent represent you.

It is recommended that you have evidence to support your petition. You can review the Florida Department of Revenue Web site for examples of evidence listed in Florida Statute 193. I am of the opinion that recent arms length transaction sales of similar properties can be the best evidence of value a homeowner can have. The county appraiser might compare your property with similar, recently sold properties to determine its market value, then multiply that by a set fraction, known as the assessment ratio. So if a property's market value is determined to be $100,000 and the assessment ratio is 80%, the assessed value for property tax purposes should be $80,000.

The next step is to check for errors in your assessment. Your local assessor's office can provide your property's record card which has information used to assess your property, such as dimensions and number of rooms; you can check that out HERE. Check that the square footage listed is correct for both the house and the land. If you find an outright error -- for example, the card says your home is 2500 sq. feet but in reality it is only 2000 sq. feet -- you may be able to show the assessor your blueprints or floor plan to get a reduction and skip the formal appeal.

Next, investigate the assessed value of similar properties in your neighborhood to see how yours compares. Look at property cards for homes of similar age and square footage with the same number of bedrooms and bathrooms. If you find that your assessed value is considerably higher than that of at least five homes (the more you can document, the better), you may have a solid case for appeal. Try to find comparable properties that are as close as possible to your own -- nearly the same square footage, in the same neighborhood, and with similar grades of construction materials.

Another option is hiring a professional real estate appraiser who will take a thorough look at your property provides the strongest evidence of its worth, but check whether your community allows outside appraisals in an appeal before you get one. If you go this route, find someone with national certification, such as through the Appraisal Institute or the National Association of Independent Fee Appraisers. Several factors contribute to the cost of an appraisal, but expect to pay about $250 to $500.

Also, if you’re friendly with a ‘competent’ real estate agent who is an expert in your area, they can provide you with a great deal of valuable information regarding the value of your home.

Lastly, there may be attorneys or other private companies that assist homeowners in challenging their tax assessment…I , however, have no experience with either and can provide no recommendations. I googled for tax assessment challenge companies and came across this one (no endorsement) And I found this book published by The National Taxpayers Union that may be of some help…(I’ve not read it and it costs $9.95)

There are specific evidence submission requirements plus you must bring all of your evidence to the hearing and be prepared to present it. When sending your evidence to the Property Appraiser, please provide two (2) copies. Do not submit evidence to the VAB clerk.

Here is a link where you can download the 2 page VAB guideline brochure.

Evidence sent before the hearing as part of the pre-hearing evidence exchange with the property appraiser should be sent to:

Property Appraiser
Governmental Center
301 North Olive Avenue
5th Floor
West Palm Beach, FL 33401

Good luck in your appeal!

Thanks for reading…Steve Jackson

561.602.1258

 

Home prices to drop another 20%?

 

There is a consensus forming that the U.S. housing market may finally be on the rebound. Home prices are up 4-straight months, according to the latest S&P Case-Shiller index and Zillow's U.S. home value index increased for the first time since 2007 in the second quarter.

But Gary Shilling of A. Gary Shilling is not convinced home prices have turned to the upside for good.

"The fundamental reason is there is a huge excess of inventory out there," he tells The Daily Ticker's Henry Blodget. "Some of it is listed but a lot of it is a so-called shadow inventory."

Shadow inventory refers to homes in foreclosure and waiting to be sold or properties that homeowners have delayed selling, likely to get a better price.

In his latest Insights investment note, Shilling writes "excess housing inventories, the mortal enemy of prices, measure about 2 million over and above normal working levels. That's huge considering that housing completions averaged about 1.5 million in earlier balmy years."

He also cites the backlog of delinquencies and foreclosures that were put on hold during the robo-signing investigation and settlement process.

A CoreLogic report in June showed shadow inventory fell almost 15 percent from 2011 levels to 1.5 million properties. More than half of those 2.8 million homes were "seriously delinquent, in foreclosure or REO."

"Since peaking at 2.1 million units in January 2010, the shadow inventory has fallen by 28 percent. The decline in the shadow inventory is a positive development because it removes some of the downward pressure on house prices," said CoreLogic chief economist Mark Fleming. "This is one of the reasons why some markets that were formerly identified as deeply distressed, like Arizona, California and Nevada, are now experiencing price increases."

As Shilling sees it, the banks have three options to get the bad mortgages off their books:

1. Flood them onto the market
2. Institute a mortgage modification plan
3. Try to convert the properties into rentals

He says the second and third options are a lot less likely because mortgage modifications rarely work and rental properties are very difficult to maintain on a large scale, which may detract institutional inventors.

As a result, he believes the more likely scenario could very well end up being option number one, which would have a negative impact on home prices. The latest National Association of Realtors survey shows foreclosed properties tend to sell at a 19 percent discount to the market.

Too many foreclosures flooding the market at the same time could drive down prices of the surrounding homes.

"It would take a 22% house price drop to return to the long-run trend going back to 1890," he writes in his research note. "Since corrections of bubbles often overshoot on the downside, our forecast of a further 20% decline may be conservative."

Thanks for reading…Steve Jackson

Call me on my direct line at: 561.602.1258

Loan modification? Short Sale? Deed-in-lieu?

Underwater? Thinking you should pursue a loan modification?

You may know of someone who tried to modify their mortgage only to end up frustrated because your bank gave you a modification that made sense for them,NOT you. You've even probably heard where the bank actually offered someone a loan modification that actually increased their monthly payment. This typically happens because they add the missed mortgage payments to the backend of the loan, then they try and recast the loan over many more years to try and keep the payment down. But the end result is a mortgage with a higher balance on a home that's probably worth much less then what is owed.

Now, not every loan modification is done this way. In fact, certain mortgage servicers have recently come out with very aggressive loan modification programs that will reduce the principal of the mortgage balance. One of the reasons behind this is the changing of servicing rights; most mortgage holders have probably received a letter at some point telling them that their mortgage was transferred to a new company. Essentially this means that your current mortgage company sold the servicing rights to another company.

Why is the advantageous to you? Because delinquent underwater mortgages have a lesser value than performing mortgages at market value. This means that if the servicer modified your mortgage and you become a paying customer again, you just helped them increase the value of their asset (your mortgage), amazing how that works.

Start by calling your mortgage company and asking them if they have any new mortgage modification programs. And don't be fooled by a company that may want to charge you for this service. They will make the same phone call as you. It all starts with a phone call that you are perfectly capable of making.

So what are the alternatives?

Foreclosure, Deed in lieu, and Short sale.

At the end of the day it seems as if everyone would love to avoid foreclosure. And if you haven't qualified for a loan modification you're only left with a couple of choices. "Deed in Lieu" or "short sale".

Deed in Lieu is where you cooperate with the bank to essentially hand back the keys, transfer title back to the bank. Sounds easy enough but some banks may require you to attempt a short sale first...At this point, the banks don’t want any more homes in their inventory. A deed-in-lieu is basically is a foreclosure that you agree to with the bank, relieving them of the trouble and expense of going through the actual foreclosure

What is a short sale? A short sale is a property that sells for less than the balance owed on the mortgage. The lender accepts a discount on the mortgage to avoid a possible foreclosure auction or bankruptcy. The property would be purchased from a seller with the banks permission.

As you are probably aware short sales have become very common over the past few years and have played a major role in our housing recovery. The main reason is it offers many benefits to both the homeowner and the bank. Foreclosing on a home is timely and costly, so no bank prefers to foreclose, most times, they would much rather use an alternative measure like a short sale. In fact some banks are offering big short sale cash incentives to entice homeowner to list and short sale their property.

Even our Government has stepped in and created a short sale program that if you qualify, it waives any deficiency and also pays relocation assistance money to you at closing to help you get started at a new property. They have also created temporary tax policy until the end of 2012 (which we hope they extend) that again if you qualify, you will not owe any tax on the forgiven mortgage balance.

Given the great current short sale programs that are in place, If have you think that you may be a candidate for a short sale, now may be the time.

Palm Beach Million Dollar Short Sales!

When someone mentions short sales, the image that comes to mind is this:

But what would you think if I said “short sale” and this was the image that went along with it?

Well…right now, in Palm Beach County, there are 37 homes listed as short sales with asking prices ranging from $1,000,000 up to $13,000,000 !

There are also 6 bank owned Palm Beach homes with asking prices from $1,025,000 up to $3,500,000.

The downturn in the real estate market and the economy was not limited to just the working Joe like us…even the top tier of income earners/net worth have suffered the effects of the bottom dropping out of home values.

But, if you’re fortunate enough to still have a six-figure income or a lot of cash sitting idle…now is probably a great time to grab a seven-figure property.

• Five of them are listed as “oceanfront”
• Nine are listed as being on the intracoastal
• Four are over 5000 square feet of interior space
• Seven have private boat docks
• One is on exclusive Jupiter Island with 200’ of ocean and intracoastal!

Even if you're not in the seven-figure market, there are some great delas on the larger, upper-tier properties right now.

Give me a call on my direct line at 561.602.1258

And as always…thanks for reading…Steve Jackson

What do our clients think?

We can preach to you all day about how good we are, but it becomes real when you can hear it directly from a client.

This was just received by my partner, John Durante from one of his recent clients…

 

What do our clients say?

203 days

203 days…that is the number of days until our politicians let the Mortgage Debt Relief Act expire!

And for upside-down homeowners who have yet to move forward on a short sale…this could spell disaster.

In a short sale, homeowners, and their agents, work with the bank to sell their home for an amount less than their mortgage balance, which allows them to avoid foreclosure. The difference between what they owe and what the bank ‘nets’ on the short sale is commonly referred to as the ‘deficiency’. While the Mortgage Debt Relief Act is in place (until the end of this year), qualifying homeowners can avoid taxes on the forgiven debt (deficiency related to the short sale. This is a huge benefit.

Forgiven debt may be considered income by the IRS and be subject to income tax. For example, if you are upside-down $100,000, the bank may end up with a forgiven deficiency close to $120,000 . If you are in the 20% tax bracket, without the Mortgage Debt Relief Act being in place, you could have a tax liability of $24,000 in the year the deficiency is forgiven!

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.”

The act has set a deadline of Jan. 31, 2013, for the completions of short sales in order to qualify for the tax relief. Since many short sales take an average of four to eight months to complete, you are quickly are running out of time to initiate and complete your short sale.

Don’t leave this potential huge liability in the hands of the politicians!

Call us today to see how we can help you get out from under. All calls and emails are strictly confidential.

Thanks for reading…Steve Jackson

561-.602.1258 (direct)

The story behind the story within the story

Recent housing data reports have been touting the “bottom” in the housing market and have been generally encouraging. However, the large number of residential properties that are "underwater"—meaning the borrower owes more on the mortgage than the property is worth—casts a long, dark shadow on the sustainability of the housing “recovery”….especially here in Palm Beach County.

Data from the most recent CoreLogic report estimates that there are somewhere in the neighborhood of 11 million homes nationwide that are under water; and, an additional 2.5 million homes have mortgages within 5% of the underwater mark. According to the most recent Zillow report, in Palm Beach County, approximately 43% of all homes with a mortgage are underwater and another 5% are within shouting distance of being underwater.

Consider this sobering as well as sad fact: out of the 4.3 million mortgages in the state of Florida, the AVERAGE equity position is 12.8%!

Now, if one were to read only the recent articles in the local papers, it would lead to the opinion that the storm has passed, the worst is over and the home price recovery is underway! Not so fast!

Consider the following: Since the 50-state Robo-signing settlement was ratified, bank have dramatically increased the rate of foreclosure filings here in Palm Beach County…March filings were up 65% over 2011, April filings were up 60% over 2011, and although May figures have not yet been released, that are expected to follow suit.

Florida is what is know as a Judicial foreclosure state…the aspect of that with importance to this story is the fact that foreclosures, from start to finish, average over 2 years here locally. So the foreclosure filings of March and April of this year may well not hit the market until mid 2014! Now some do move along more quickly…and some end up as short sales ( and a miniscule portion make up the missed payments or get a permanent modification). BUT, the continuing and steady flow of distressed properties into the market here will  have the effect of continued downward pressure on values for the foreseeable future.

A secondary factor important to any sustained home value recovery is job creation/retention. But, the weaker-than expected jobs report for May doesn’t bode well for the overall economy, but for housing it is far more foreboding…the numbers are going in the wrong direction. The May 2012 jobs report was a step backward for housing.

“The recent trend is reminiscent of the monthly patterns of the spring slowdown witnessed over the last two years that continued through the summer months. If this pattern recurs, we expect that hopes for a meaningful housing recovery will be delayed once again,” says Fannie Mae’s chief economist Doug Duncan, who also notes that signs of improving consumer sentiment in housing is unsupported by today’s data.

If you are thinking of buying OR selling…lets talk first and I’ll give you the insight and analysis necessary for you to make the best decision.

Thanks for reading…Steve Jackson

561.602.1258 (direct)