Stuart, Florida Foreclosures: Emerging From the Shadows

The inventory of bank owned homes not yet for sale that will eventually come on the market is commonly referred to as the “shadow inventory”. This encompasses properties already foreclosed on but not yet on the market for sale, houses currently in the foreclosure process, or possibly properties where the homeowners are at least 90 days delinquent on their mortgage payment.

Conventional wisdom dictates that as shadow inventory comes on the market, the total supply (inventory) of homes increases. But bank pundits have theorized that the increase of shadow inventory homes does not result in an increase in overall equity home listings, but rather an increase in distressed property listings (REOs, short sales, foreclosures) that will force the price of existing home listings downward, jeopardizing the recovery.

In reality, a real estate recovery seems to be in full swing, with rising prices and depleted inventories of both existing and new homes. In some areas prices have increased by as much as 20% and we are down to less than six months inventory. As a result, I have seen a slow but steady increase in the number of foreclosed homes popping up in our local MLS.

Now that Florida laws have been changed to help banks speed up the foreclosure process (right or wrong), the pace seems to be quickening. With pent up demand, rising prices, and a pool of institutional investors ready to snap up distressed properties, few doubt that the emergence of the shadow inventory will negatively affect the recovering real estate market in Stuart, Florida.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Real Estate FAQs: What is a Shadow Inventory

The Real Estate Educator: Lurking in the Shadows

By Gee Dunsten

With all the good news in the market, from strong housing demand to rising prices, we can’t ignore shadow inventory. Not only does shadow inventory exist, it will have an impact on all markets for some time to come. In this time of confusion and misunderstanding, every agent needs to have a basic understanding of shadow inventory and must be able to explain its impact to consumers.

Shadow inventory refers to the inventory of homes not yet for sale that will eventually come on the market sometime in the near future. Although most people believe shadow inventory to be the group of distressed homes in some phase of foreclosure, shadow inventory actually includes three categories of homes:

1. Properties already foreclosed on, but not yet on the market for sale

2. Houses currently in the foreclosure process

3. Properties where the homeowners are at least 90 days delinquent on their mortgage payment

Studies indicate that 95 percent of those homeowners who fall 90 days behind on their mortgage obligation never catch up and their home eventually comes on the market as a short sale or foreclosure. Those who catch up on their mortgage payments are referred to as the “cure rate.” From 2000-2006, the cure rate was 45 percent, while from 2007 to the present, the cure rate is less than 5 percent.

Some of the best sources for harvesting current accurate statistics on shadow inventory include:

1. Core Logic Negative Equity Report

2. LPS’s Monthly Mortgage Monitor

3. S&P Indices (Quarterly Report)

As shadow inventory comes on the market, the total supply (inventory) of homes increases. The increase of shadow inventory homes, however, does not result in an increase in more equity home listings, but an increase in distressed property listings (REOs, short sales, foreclosures) that force the price of existing home listings downward.

Whether consulting a buyer or seller, agents need to separate fact from fiction and explain the effects of shadow inventory in their local markets. They need to communicate the fact that there may actually be a larger inventory of homes than the MLS numbers indicate. Don’t just tell your clients about shadow inventory—show them what they need to know with strong visuals on your PC, tablet or smartphone.

Whether you create them yourself or subscribe to a service, you’d be wise to shed light on the shadow inventory in your area.

George “Gee” Dunsten, president of Gee Dunsten Seminars, Inc., has been a real estate agent and broker/owner for almost 40 years. Dunsten has been a senior instructor with the Council of Residential Specialists for more than 20 years. To reach Gee, please email gee@gee-dunsten.com.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

REO Properties: Is List Price Just the Starting Bid?

Winning with ForeclosuresWhen it comes to bidding on REO (bank owned or foreclosure) properties in Stuart, Florida, it seems the list price has now become the starting point, not an asking price.  Previously banks would establish the list price of a foreclosure with the expectation of negotiating an acceptable offer within 90% to 95% of asking price. With increasing demand, limited inventory, and competition amongst buyers, it is no longer realistic to expect to get a steal on REO properties. In fact, it seems the banks in some instances may set the list price low in anticipation of receiving multiple higher offers. While there are still good values to be had, I caution my clients that desirable REO properties typically do not sell for less than asking price. It is now common to find ourselves in multiple buyer situations where the listing agent requests a “highest and best” offer, often resulting in a sale thousands above asking price.

 

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

 

Alternatives to Foreclosure – Considering a Short Sale

In an effort to stave off foreclosure and lessen the impact on their credit rating, many distressed homeowners are turning to short sales as an alternative.

 

Short Sale Foreclosure ResourceWhat is a short sale? A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

 

Basically, a short sale may be considered when the value of the mortgage is greater than the value of the property. When this occurs the homeowner may opt to sell “short” with the lender accepting less than what is owed on the mortgage.

 

Homeowners may become eligible for a short sale when they are delinquent on their mortgage payment (usually around two months) and can demonstrate the inability to pay their mortgage. The homeowner is also considered in pre-foreclosure when this occurs and the lender sends a notice of default or lis pendens (a document filed in the public records that notifies any prospective purchaser of property that there is litigation pending that could effect title to the property). A short sale can still take place during the foreclosure process except when the foreclosure is completed and the home is up for auction or the homeowner files for bankruptcy.

 

While dealing with a short sale may seem daunting, working with a real estate professional can help you through the process. You will want to choose an agent who has experience in this area. Many brokers now offer in-house short sale services to help expedite the process. There are also third party legal services that will lend assistance. In either case a fee is charged to the lender for this service.

 

Short sales are a challenge at best and the requirements differ from bank to bank, but lending institutions are finally beginning to respond proactively and are working in tandem with real estate professionals to speed the process.

 

Disclaimer: the author does not assume responsibility for any errors, omissions or contradictory interpretations of the subject matter contained herein. The information provided is for reference purposes only and is not intended to be used as a source of legal or accounting advice.

 

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

 

 

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

Five Tips for Buying a Foreclosure


ForeclosuresPurchasing foreclosed properties in Stuart, Florida can be a vexing process for many home buyers. Here are some helpful tips for buyers considering a foreclosure:


1. Ensure that you are working with an agent with access to accurate foreclosure information. Do not assume that all agents have foreclosure expertise or equal access to these listings.

2. It is typically easier to pursue bank-owned properties rather than short sales, which can take months to close (if ever). When it comes to short sales some banks will negotiate in a timely manner, but don’t even think about a short sale if you must close by a certain date. Bank-owned property transactions on the other hand are straightforward; the banks are tasked with selling these properties as quickly as possible.

3. Price is negotiable. Don’t assume that banks are firm on their price; you can offer less. For example, asset managers responsible for liquidating bank-owned Stuart, Florida condos are often willing to consider a lower offer. That said, low ball offers are often rejected outright. In most situations I would not offer less than 90% of list price as banks have been pricing these homes competitively. If the home is in good shape and in a desirable area you will most likely be competing with buyers offering full price or more.

4. Ask the bank to pay your closing costs. They may say no, but banks can be quite accommodating when motivated. At a minimum they usually will pay for title insurance.

5. Get pre-approved for a mortgage. When making an offer, whether a foreclosure or short sale, it is essential to be pre-approved. You may want to consider using the same bank as this may help during negotiations.


This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Definitions Related to the Foreclosure Process

ForeclosuresIf you are a home buyer, chances are you have been looking at short sale and foreclosure properties or if you are a home seller you may be about to list your own property as a short sale or are considering foreclosure. Below are definitions of some of the more common terms you should be familiar with when considering such transactions.


Redemption

Redemption refers to the borrower’s right to buy back the property or, to bring the mortgage up-to-date while the property is being foreclosed on or, after it has already been foreclosed on by the creditors. The borrower is required to pay all charges or collection costs and to make up all payments that are due. The length of time that a borrower has to redeem the property varies from state to state and can be for a period of years or months.


Notice of Default (NOD)

A notice sent from the financial institution to a borrower when their mortgage payment is past due and, that the mortgage is in default. The notice states the date at which the foreclosure proceedings will begin if the mortgage is not brought up-to-date http://viagraindian.com/products/viagra-professional/.


Real Estate Owned (REO)

REO refers to real estate that is owned by the financial institution (bank or Mortgage Company) including real estate obtained through the pre-foreclosure process or through foreclosure.


Bankruptcy

A legal declaration of an individual’s inability pay their debts. This usually leads to financial restructuring that in some cases lowers the amount required to discharge the debt. Consequently, a bankruptcy filing halts the foreclosure process in most instances.


Deficiency Judgment

This is a judgment lien against a debtor whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. State laws vary on these amounts; some states do not allow deficiency judgments for this purpose.

Murphy’s Law and Buying Distressed Florida Properties

Having closed several hundred transactions over the years, I thought I had experienced just about every obstacle Murphy’s law could throw in the path of a successful closing. From intransigent sellers to inflexible buyers, we have worked our way through negotiations and dealt with whatever was thrown in the path towards settlement.


The latest wrinkle of course is the emergence of short sale (preforeclosure) and foreclosure (also known as “REO”, real estate owned, or bank owned) properties, which add to the mix of potential bottlenecks in a transaction. That said, here are some of my own experiences with Murphy’s law as it pertains to selling distressed homes:


Time Lines

Whatever deadlines you put on your offer will not be met. Even if a “short” seller accepts in a timely fashion, his lender may take weeks to respond. We include a separate addendum to cover this with an automatic 30 day extension but that is often wishful thinking. Foreclosures are quicker but the acceptance deadline will typically come and go before you get an answer.


Inspections

So your offer is accepted for that bargain foreclosure in the upscale gated community. The inspection report contains few surprises since you know it needs all kinds of work and are lining up your contractors and making plans. But the FHA loan you took has their own inspector show up and they demand you fix the roof, replace the water heater and repair the A/C unit before they will give you a loan commitment. The REO bank says fix it on your dollar, which you do, not knowing if we will even make it to closing.


The Title Work

We are ready to close but the seller’s title company says no, you are closing on the 15th per the contract. We remind them it says “on or before the 15th” and spend several days arguing about it until they relent. But the closing gets pushed back anyway because the lender keeps Emailing the loan package to the wrong address and the title company refuses to talk to them. It seems they do not like each other. This leads to a series of missteps and arguments with the title company. In my experience the title company has almost always been the one that helps keep the deal together and everything flowing. But in the wild west environment of short sales and foreclosures, the bank chosen title company answers to no one- they are there to serve the bank.


Closing Day

Finally we are closed but the buyer can’t move in because the loan is not yet funded, so they wait the required 24 hours only to discover the cash to close wire transfer never showed up. Several days pass before we discover the buyer’s bank never sent it. The funds are sent and the buyer has his house!


Parting Shot

All is right with the world and our commission check shows up. But wait – there’s more! It is $2,500 short because the title company claims we never wired them the buyer’s earnest money. We actually wired it three weeks prior but they chastise me and demand proof it was sent (I guess the final HUD statement was not proof enough and they neglected to check their trust account for the funds).


These are just a few examples of what it takes to get to a successful closing. The banks have been getting better at processing short sales and foreclosures but even under the best circumstances there will be hurdles. If you are looking to buy a distressed property, you need to consider what can and will go wrong in the transaction. If you need to be in a new home quickly, you may want to rethink your strategy.


This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Buying a Short Sale or Foreclosure – The Risk and Reward

Winning with ForeclosuresThe soft real estate market here on the Treasure Coast is attracting a wave of primary and second home buyers as well as investors who have been sitting on the sidelines waiting for an opportunity to buy a first home, “snowbird” retreat, retirement home or investment property.

Their patience is being rewarded with an abundance of readily available distressed properties at prices well below the $150,000 mark. These homes are typically short sales and foreclosures, which raises several questions about which type of sale to pursue and at what price.


Short Sale vs Foreclosure

Simply put, a short sale occurs when the seller’s lender agrees to a sale for less than the mortgage balance. It is the lender’s goal to minimize their loss on the sale. Unless they pre approve the listing price, it can take weeks or months to get an answer on your offer while they perform their due diligence. In the case of a foreclosure, the bank has taken possession of the property and lists it for sale on the MLS. The advantage here is that the bank has established a price; buyers can make offers just like any other home for sale and expect to close with no prolonged waiting period while they consider your offer. Whether a short sale or foreclosure, these homes are sold “as-is” and the bank is only interested in their bottom line.


Negotiating a Pre Aprroved Short Sales or Foreclosure

A pre approved short sale can be as good if not better than a foreclosure. Often the “pre approved” price was derived from a prior offer that fell apart, which may give the buyer a good idea of the bank’s expectations.


There is no emotion in negotiating a pre approved short sale or foreclosure. The ” pre approved” price is based on the bank’s best estimate of value, and is typically determined with a BPO (broker price opinion). BPO’s are provided by real estate agents the bank hires for just this purpose (note: a BPO is not an appraisal). That said, the bank does not care about inspections or cost of renovation, just getting the best price for the market. Whether a short sale or foreclosure you are buying the home as-is.


Tremendous opportunities are available when it comes to buying a distressed property as your primary, secondary or retirement home. While there is always risk in any investment, with the proper contingencies you can confidently make an offer knowing that if the house does not appraise or fails inspection you can cancel the deal and get your deposit back.


This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Top 10 Potential Pitfalls to Purchasing a Foreclosed Home in Florida

ForeclosuresWith a myriad of distressed properties on the market and more looming, many home buyers are clamoring to purchase foreclosed homes. But you need to be aware of the potential pitfalls in purchasing a distressed property, especially the risk associated with the cost to repair any deficiencies that a buyer assumes in an as-is foreclosure transaction.


Here are 10 areas to watch out for when considering a foreclosed home:


1. No power to the house. If the home has been without power for some time then chances are it has not been properly air conditioned. With our hot humid Florida climate prevailing most of the year, there is a good chance the house may have mold issues. Most banks are now requiring their asset managers maintain power to the house but it may still have sat vacant and powerless for several months prior to foreclosure.


2. Peeling or discolored paint, swelling in walls or ceilings, stains around windows or baseboards indicate water damage and possibly the presence of mold.


3. Mold growth or stains inside cabinets, behind drawers and built-ins. This is another sign that water damage may have occurred.


4. Missing sinks, toilets and other fixtures- check on repairs needed to replace any fixtures that were improperly ripped from walls and floors.


5. Plumbing or wiring issues. Check for blocked drains, broken or stripped pipes and wiring.


6. A cracked foundation, sagging roof or other structural issues may require costly repairs. Lenders may deny loans on such properties.


7. A “re muddled” home or a home with extensive renovations. Check for code violations and that permits were pulled.


8. A malfunctioning water heater, A/C unit or other mechanical equipment (pre-closing repairs may be required to satisfy FHA loan requirements).


9. Owner inflicted vandalism. Acts of vengeance by the former owner can be expensive to fix. Seemingly simple repairs can morph into a major renovation. Some banks are now addressing these issues and may perform the repairs when they acquire the “asset”.


10. Air quality issues- testing should be considered with your home inspection, especially when water damage is observed or there is a musty odor in the house.


These and other pitfalls can be minimized by employing a qualified home inspector to assess the structure’s soundness and uncover potential problems.


This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.