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Just as the Home Buyer Tax Credit is about to expire (April 30, 2010) the Fed is jumping in with some new hope for the recovering real estate market.  The new Treasury Department rules are designed to help expedite Short Sales.  This relief cannot come soon enough!

In a short sale, a homeowner sells the property for its current market value, which is less than what's owed on the mortgage, and the lender agrees to accept the lower amount. The new rules that offer participating lenders cash incentives to get them to approve more short-sale deals also allow them only 10 days to approve or reject short-sale purchase offers.

To help speed up short sales, the program calls for lenders to use standardized paperwork and to establish an acceptable sale price before the home is put on the market. Sellers will be allowed at least 120 days to market the home and possibly as long as one year. During that time, the lender cannot foreclose. At closing, the government will give sellers up to $1,500 to cover relocation expenses.

So if you are thinking about buying or selling a short sale, things are about to get a whole lot easier! 

It's true what you've heard- it is a fantastic time to for home buyers in southern Florida.  Prices are unbeatable and the interest rates are at a historic low, which combines to make the perfect home that much more affordable.

Palm Beach County home prices have leveled off and even begun to rise slightly over the past 3 months.  Most home sellers have adjusted their prices accordingly to the point where the "low-ball offer" is not necessary. 

The proof is in the numbers.  The following statistics refer to the "months of inventory", which means how many months it would take in a normal market to sell all of the homes currently listed.  Since supply and demand dictate the market, this is a vital and often overlooked indicator of the strength of the housing market.

The following statistics refer only to Palm Beach County and were released by the Realtors Association of the Palm Beaches on June 12, 2009.

Single Family Homes    30.1 months of inventory in January 2008

                                  7.5 months of inventory in May of 2009

Condos / Townhomes   56.4 months of inventory in September 2007

                                          12.8 months of inventory in May of 2009

This drop in inventory demonstrates the profound recovery the housing Palm Beach County market has made over the past few months.  Since housing prices began to slide long before the national market began to feel the pinch, we in south Florida are also recovering before the rest of the nation. 

A normal market has about 3 or 4 months of inventory which comes as little surprise to Palm Beach county realators.   Indigo, as well as many other local offices, has been very busy since the 1st of this year.   The market is hot and homes are selling at exceptional prices.   It is important to keep in mind, however, that in many cases the price is the price.  That said, you do still have to be careful.  If a home is overpriced, it will not appraise.  Appraisal is another topic to be saved for later.

So why is it a tough time to buy?  It seems that the common misconception outside of the state that "Florida is for sale!"  Out of towners have heard about the great prices and hope to realize their dream of moving to sunny Florida.  Most buyers will need help in navigating the sea of adjusted prices, foreclosures, and short-sales.   

Lots of folks are drawn to the steals to be had in foreclosed upon or bank-owned home.  While the prices of these troubled homes can't be beat, prospective buyers need to remember that these homes are troubled.  Here is a great example. Let's say you are trying to sell your house for $350,000.  Your next door neighbor goes into foreclosure, and the bank takes it over.  By the time the bank gets the house and puts it on the market, the house has deteriorated and is listed for $250,000.  Now you have to compete with your neighbor's price.  His low price directly affects your price.  In order to sell, the chances are pretty good that you would have to lower your price to meet his, even though your house is in better condition. 

As a buyer, which house would you rather buy?  The healthy home at a great price, or the foreclosure at rock-bottom price and rock-bottom value?

Its a tricky market, but great deals are out there.  If you are ready to purchase a new home, you will need an experienced and knowledgeable real estate professional to help guide through today's rocky financial waters and towards your new tropical home.

Searching for a Foreclosure?

Many of our clients have said that they would like to buy a foreclosure because they are under the assumption that that is how you get a really good deal. This is true and there are plenty of them right now. Before you go shopping, here is a simplified explanation of how it works.

1. Upside Down or Underwater: When a Homeowner owes the bank more than their home is worth today.
2. Lis Pendens: Beginning of the Foreclosure process when the Homeowner is 30 days behind on their mortgage.
3. Short Sale: When the Seller is in the Foreclosure Process, proves hardship to the Bank and the Bank agrees to accept less than the mortgage amount owed in order for the Home to be sold to a qualified Buyer at, or slightly under, current market prices. This process can take anywhere from 1 to 6 months which requires great patience form the Buyer.
4. REO or Bank Owned: When a Home does not sell in Short Sale or is simply Foreclosed upon it goes to Auction where in most cases the home is purchased by the same Bank. The Bank then owns the home and lists it for sale at or slightly under current market value.
5. Motivate Sellers: While REO’s and Short Sales can be great values, homes that have solid mortgages or no mortgage are often competitively priced, simpler to purchase and in better condition. Right now price means everything and there are some very Motivate Sellers who know this and just want to sell!
6. Multiple Listing Service: Bank Owned Homes, Short Sale Homes and Homes with solid mortgages are all listed on the Multiple Listing Service together. There is no special list for any of them. We send you everything!
7. Pricing: There can be a huge disparity between what price a Seller lists a home for and what it is actually worth or sells for. Every situation is different and today more than ever, even the savviest Buyers benefit from the expertise of a real estate professional who has the ability to research a property and guide them through the process. The only way to determine true value is to know what properties have recently sold for.
8. NOW… This market is a Buyer’s paradise but it will not last forever. Citibank is placing a moratorium on Foreclosures and attempting to rewrite other mortgages in trouble. Many banks as well as Fannie Mae and Freddie Mac will follow suite. Short Sales and Bank Owned property will become a thing of the past and prices will stabilize.

Okay… So the Market has changed. The “bubble” has burst.

Two years later, there is no more wondering.

Recession? It sure looks like it! But it is definitely not the end of the world.

We need to put things in perspective. Most of Southeast Florida rallied to an unbelievable 200% appreciation of home values over the boom years. So if we drop 20% or 40% over a few years, we are still ahead of the game.

The real problem and the consequences of the real estate boom we all enjoyed are the homeowners and investors who were still banking on continued rapid appreciation. This was a gamble and many people lost. This “gamble” came on the heels of the “dot-com” collapse. Many who lost in the “dot-coms” found salvation in their homes or by investing in real estate. Now we are back to traditional real estate and this is a very good thing.

Since Fannie Mae began offering 100% financing to first time home buyers in depreciating areas, 2 months ago, my office has been able to place quite a few families who could have never afforded a home otherwise into lovely single family homes. These were all young couples and these homes are a slice of the “American Dream” for them. This is traditional real estate and this is a very good thing.

During the boom years, every other person you met either held a real estate license or a mortgage broker’s license. It seemed everyone wanted in on the action, but not everyone was committed to the long term. Serious Realtors and Bankers work diligently at developing a strong professional business. Those that remain after the dust settles will be a smaller group of more qualified professionals. We will experience traditional real estate and this is a very good thing.

Because of our rapid appreciation during the boom years, we are having a larger correction than most. For this reason we have been referred to as “Ground Zero” of real estate’s bursting bubble. This real estate market correction will end, probably sooner than later, and when it does, our area will be one of the first to rebound. AAAH, back to normal! Traditional Real Estate. This is a very very good thing!

Right now, prices are low, interest rates are low and it is a very good time to buy. Please remember to look for a sound long term real estate investment when you are buying a home.

Looking back over the real estate market before hurricane Wilma hit in October of 2005, it seems hard to believe what is going on in the real estate market today. A rapid swing as drastic as what we are now experiencing in Southeast Florida seems shocking, but in retrospect the handwriting was on the wall. Homeowners and investors happily experienced a new found wealth with tremendous appreciation in home values between 2000 and 2005. Florida’s booming market also lured many people into a new found career as mortgage brokers who only had to go to school for a weekend to become licensed.

Two years ago, if a property was still on the market after 30 days I would wonder what was wrong with the house. Buyers were everywhere and I would often find myself begging to have their full price offer accepted! Those were the days, but the pendulum has swung fully in the other direction. Today, I am ecstatic when I see any house sold because there are so few sales.

There is an upside to this market correction….for Buyers

Housing is becoming affordable again and it is an excellent time to buy!

Mortgage rates are low, home prices are low and there is a lot to choose from.

If you are a cash buyer or you have good credit and would like to buy a home you are king! Some great programs are in place now for first time home buyers.

There are lots of short sales are being offered for good prices and can be a great deal for buyers. The sale price is generally 20% below the homes current market values. However, all sales are “subject to bank approval” and the time to close on the property can range anywhere from 3 weeks to several months, depending on the bank’s ability to process the transaction. (The bank in this case is the lender who holds the seller’s loan) Many short sales do work out, but both the seller and the buyer (not to mention the real estate agents) are all at the mercy of the bank.

The flipside of this coin is that Sellers are taking a beating.

Homes are not worth what they were yesterday and sellers need to be aware of their current real estate market conditions. Homes that are correctly priced can and will sell. The key is in the price. Prices must be lower than the competition because buyers are smart and there is a lot to choose from. Unfortunately, much of the competition is in the form of short sales. This week alone in Palm Beach County alone there were 225 new foreclosure filings. Until 6 months ago, I had never even heard of short sales and I have been in this business for 15 years! Foreclosures, short sales, lease with option to buy and seller financing have gone from rare to common.

The saddest piece of this market correction is the hardship for people who owe the bank more than their house is now worth and cannot manage their inflated loan payments. Homeowners who find they are teetering on or in foreclosure may find a short sale their best plan. If a homeowner can prove hardship to the bank, the bank may allow the homeowner to sell their home for less than the value of their loan. The bank then forgives the balance of the loan to the homeowner. This is a simplified explanation of short sales, but is worth exploring for some because it far outweighs the option of foreclosure. A foreclosure stays on your credit for 10 years and it’s a judgment that can haunt you all the while. With a short sale, you can clean up your credit and become credit worthy again within 2 years.

I could speculate along with everyone else on how long the current market conditions will last… but I won’t. I don’t have a crystal ball. I’ve heard some excellent analysts say “after the election” and “beginning 2008”. The only thing I am sure of is that the market will change. It always does. During the market boom I was amazed by the low prices some homeowners had paid years prior. Years from now, people will brag about how little they paid when they purchased property during the market correction of 07!