Mortgage Debt Relief Act Expires December 31, 2012

If you, or anyone you know, are considering doing a short sale you will need to make a swift decision. Many short sales are taking anywhere from 4 to 8 months to complete, so time is running out to qualify under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation. If you do not complete your short sale before January 1, 2013 you may be held responsible for the difference as taxable income. At this moment in time there is no clear understanding as to whether Congress will extend this deadline or not.

Example: If you owe $400,000 on your property and it sells for $300,000, at a 28% tax rate, the settlement difference of $100,000 is $28,000 in taxes you may owe! But, if you complete your short sale prior to the expiration date you may not have to claim that $100,000 as taxable income. Call us at 727-787-6995 or email gary@gnteam.com

A short sale is a tool which enables you to avoid foreclosure and lessen potential long-term damage to your credit-rating, as well as the negative tax implications you may experience on a foreclosure. Short sales are not easy, nor are they fun, but they can save sellers from having a foreclosure on their credit record for 10 years, and in many cases, allow them to obtain a new loan in as little as 2 years. Time is of the essence, so please contact us as soon as possible and let us use our considerable experience and CDPE certification to help guide you through this challenging process. There is no obligation! Visit our web site at StopTampaBayAreaForeclosures.com and get free information which explains short sales in more detail, or call us at 727-787-6995

Perhaps you should consider a no-cost short sale*.

*in most cases the lienholders will pay all sellers’ costs of sale including commissions

Web link to IRS: http://www.irs.gov/individuals/article/0,,id=179414,00.html

There are many who believe that mortgage delinquencies in their region are  concentrated in the middle-to-lower income neighborhoods. Actually, the research shows the number of delinquencies in the higher priced sections are currently exceeding the percentages in less affluent areas.

The most recent Mortgage Monitor issued by LPS reports that the largest increase in both delinquencies and foreclosures, as compared to 2008 levels, are in ‘jumbo’ mortgages. A jumbo mortgage, according to Wikipedia, is:

“a mortgage loan in an amount above conventional conforming loan
limits…the limit is $417,000 for most of the US.”

In some parts of the country, that limit can be over $625,000. This type of loan finances the higher priced properties in a marketplace.

According to LPS, the percentage increase in jumbo mortgages is as follows:

• Delinquencies: increased 281%
• Foreclosures: increased 589%

Again, these numbers are greater than any other type of loan including Option ARMs and Sub-prime loans.

Strategic Defaults

That doesn’t necessarily mean that the more affluent don’t have the money to meet their mortgage obligations. In some cases, they see their home as a depreciating asset and determine that continuing to put money into it makes little sense. The Washington Post recently reported on this. In the article, they explained:

“The ratings agency Moody’s said that based on its analysis of mortgage-backed bond portfolios, homeowners with jumbos now constitute “greater strategic default risk” than any other type of borrowers, including subprime. That’s because an exceptionally high number of jumbo owners — many in high-cost markets hit by real estate deflation over the past several years — are stuck with persistent negative equity.”

Bottom Line

We often explain that the number of distressed properties in a neighborhood adversely impacts values of other homes in that area. It now appears that even the most affluent areas will be dealing with a supply of discounted properties entering the market as foreclosures.

On October 31, CNN Money reported: “Home prices headed for triple dip”.  Reporting on information provided by Fiserv (a financial analytics company), a 3.6% fall in prices on a national basis is expected by next summer.  This will result in the Case-Shiller Home Price Index falling to 35% below its peak in 2006 and marking a triple dip in U.S. housing markets.[1]

Say it ain’t so!  Is housing set for a third dip in five years?  This depends on factors being in place to lessen the impact from market anxiety brought on by worries over a pending wave of foreclosures and the U.S. debt crisis, which we will start to hear more about shortly.

So, what are these factors and what do they tell us?  These factors are really fundamental drivers that encourage individuals to buy versus rent their personal residences.  They are sometimes referred to as housing affordability measures.  The price to income, mortgage payment to income, and a buy versus rent analysis for various markets provide strong evidence that factors are in place to encourage home ownership or favor renting depending on the resulting measurements.  In ongoing research being performed by Beracha and Johnson, these measures are at record levels in favor of buying.[2]  In fact, the price to income ratios in 23 of the 50 states are at 30-year record lows.  The payment to income ratios are at 30-year record low in all 50 states.  A buy versus rent analysis performed in 23 of the nation’s largest metropolitan areas also indicates that hurdle rates (the rates at which potential buyers are indifferent between buying and renting) in all 23 cities are below 25-year average appreciation rates.  All of these results strongly favor purchasing.

What about per capita income and present day prices (relative to past prices)?  Presently, U.S. per capita income is on the rise again and has regained to the level of 2007 (roughly $40,000 per person), while prices of homes on the other hand rest at 2002 levels according to the Case-Shiller Home Price Index.  What about mortgages rates?  Presently, 30-year fixed rates are at near record low levels.

So, let’s put this all together.  Housing is presently more affordable than at any time in the last 30 years.  While income is only at 2007 levels, home prices are even lower coming in at 2002 levels.  All of these factors set the stage for many individuals to favor purchasing over renting.  Thus, while there are grave concerns over the overall health of the economy, fundamental drivers now appear in place to staunch any further significant plunges in home prices.

The ship appears to be turning.[3]

Endnote

——————————————————————————–

[1] See http://money.cnn.com/2011/10/31/real_estate/home_prices/

[2] Beracha and Johnson (2011) on going research.

[3] This conclusion obviously assumes nothing unprecedented and catastrophic occurs such as the removal of the home interest deduction to combat the national debt or the often predicted foreclosure tsunami actually finally occurs.

]]> http://garyandnikkiteam.com/2011/tampa-bay-news/the-ship-appears-to-be-turning/feed/ 0 http://garyandnikkiteam.com/2011/tampa-bay-news/short-sale-vs-foreclosure-a-short-sale-always-wins/ http://garyandnikkiteam.com/2011/tampa-bay-news/short-sale-vs-foreclosure-a-short-sale-always-wins/#comments Tue, 11 Oct 2011 13:24:35 +0000 admin http://garyandnikkiteam.com/?p=695

Today’s ever changing real estate industry has brought upon some very challenging questions from our clients. We as counselors, want to put forth the best, non-emotional advice that we can, in hopes that we can help our clients and their families navigate the rough waters of the short sale process.

The most prevalent question and one that continues to permeate the industry is:

“Why should a seller go through the short sale process rather than letting their house be foreclosed upon?” 

While we cannot speak to every client circumstance, we can say one thing with complete conviction.  In almost all instances in which a potential seller is contemplating whether they should short sell their house or let it go through the foreclosure process, a short sale is the better option. The following are examples to consider:

Example A- Short Sale

Mr. Smith owns a home in which he has a mortgage balance of $220,000 and a current market value of $150,000. Mr. Smith has elected to short sell his property. His Realtor successfully obtains a buyer who puts forth an offer price of $120,000 (80% current market value according to Realty Trac Foreclosure Report 5/26/2011). After reviewing the buyers offer and the financial hardship information from Mr. Smith, Mr Smith’s bank agrees to accept the short payoff of $120,000 which would leave a deficiency balance of $100,000.

The transaction closes and is final.  Mr. Smith then pulls his credit report 30 days after the transaction takes place. On the report he notices that the mortgage trade line states “Mortgage debt was settled for less than full” and the balance on the mortgage is $0.  Mr. Smith is now on the road to financial recovery.

Example B- Foreclosure

For the ease of illustration we will use the same value and mortgage debt amounts as in Example A. However, Mr. Smith has elected to forgo the short sale process and let the bank foreclose on the property.  The bank holding his mortgage facilitates the proper legal procedures to foreclose on the property, all of which are costly.  Mr. Smith is notified and his property foreclosed upon of which is taken back by the bank to sell as an REO.

Six months later, the bank finally sells Mr. Smith’s home only they sell it for $90,000 (60% of current market value according to Realty Trac Foreclosure report dated 5/26/2011). Remember, as a short sale, the home would have sold for $120,000 keeping the deficiency to $100,000. In addition to the deficiency now being $130,000, the bank has elected to add on legal costs of $15,000 and asset preservation costs of another $5000 for a total deficiency liability of $150,000. Mr. Smith pulls his credit report 30 days after being notified that the bank has sold his property and of his liability.

On the report he notices that the mortgage trade line states “Foreclosure” and the balance is $150,000. Because of Mr Smith’s choice to choose foreclosure vs. short sale his road to financial recovery has taken a major detour. He not only has a foreclosure on his credit report but now has a much larger deficiency balance in which the bank, in most cases, will report on his credit report as a balance owed.

The Best Option is Clear

While the financial and credit advantages are clear when choosing a short sale over a foreclosure, other advantages are sometimes overlooked. The most important of all of them is maintaining the seller’s dignity and peace of mind. We have heard too many stories of families having to leave their homes because of a Sheriff’s order or some other type of legal action. The short sale process alleviates this negative social impact. The process puts the control back in the seller’s hands so that they can get back on the road to financial recovery and start providing for their families. In the battle of the two evils, a short sale always wins!!!

If you or someone you know would like to explore the possibilities of a short sale vs. foreclosure visit http://www.stoptampabayareaforeclosures.com/ and get a free information packet on the different options available.

It has been a trying time for most segments of the real estate industry. However, two areas that are showing improvement are the luxury home and vacation home markets. It seems that people in these segments are again beginning to purchase.

Vacation Homes

Last week Market Watch published an article discussing the vacation home market. Dan White, president of Daniel A. White & Associates, a wealth-management firm in the Philadelphia area, was quoted in the article.

“A lot of people are worried about the [stock] market today because of the volatility and the fact we could be going into a double-dip recession. They’re looking for other avenues. Real estate, if we’re not at the bottom [in prices], people think we’re pretty darn close.”

The article also explained some purchasers are seeing this as an opportunity to buy a vacation/retirement home:

“Some baby boomers are seizing an opportunity to get a deal on a vacation home they can enjoy now but that’s also a home that eventually will become their primary residence when they retire.”

Luxury Homes

Along with the vacation home market, the luxury market has also made a comeback. HousingWire reported on the luxury market last month:

“In the nation’s top 20 markets, million-dollar property sales rose 18% in 2010 with a 21% increase in California, said Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing, a Dallas-based firm…

In Miami, 517 properties sold for $2 million or more during the first seven months of 2011, up nearly 16% from a year earlier.”

Bottom Line

If you are in a position to move-up to the home of your dreams or have been thinking about a vacation home for the family, now might be the time to make the move.

Several pricing indices have reported that, on a month-over-month basis, home values have ticked up slightly over the last quarter. This has caused some to call the bottom to the housing market – at least from a price standpoint. We must realize that prices are determined by supply and demand.

Demand has indeed shown improvement in many parts of the country. However, the supply side of the formula is being impacted by legal issues. The number of foreclosures coming to market has been slowed dramatically by the courts as the banks still struggle with improperly filed paperwork. This inventory will eventually find its way to the market and aagain put downward pressure on values.

Here is a chart showing the challenge:

Bottom Line

If you are selling, there currently is a window of opportunity to get your best price before the distressed properties are released.

Russian Billionaire Buys Silicon Valley Home

Luxury housing market showing signs of recovery.

We believe that things are usually as they seem. We are not the type of organization that believes in conspiracies. However, there is something interesting in some of the housing price studies we are seeing in our research. It seems that some of the groups making the predictions are the same ones that have the greatest power to affect the prices they are projecting.

Most housing analysts warn that the heaviest downward pressure on prices will be created by distressed properties and the speed at which they will be released to the market. Research shows that ‘short sales’ sell at a 20% discount and foreclosures sell at a whopping 40% discount. Obviously, when and how much discounted real estate enters the market will have a major impact on prices of surrounding properties.

Back to our research

We are now seeing that a certain segment of those projecting future pricing have two things in common:

1. They believe prices will fall rather dramatically in the first half of 2011
2. They have control of the flow of discounted properties to the market

Predictions for the first half of 2011 by firms that fall in the above category:

• Bank of America projects that prices will fall 3.7%
• Fannie Mae predicts that median prices will drop $12,500
• Wells Fargo reported that they feel home prices will drop 8%

Not a coincidence

We are beginning to realize this is not a coincidence. The organizations which should best know when the surge of foreclosures will be released are saying house prices will be hit the hardest in the first half of the year. We are not asserting that there is anything devious in what we have found. We are just reporting that those who have control over the flow of distressed properties must think/know that inventory is about to be released. Why else would so many of them be predicting a sharp decline in home values in the next 120 days?

Bottom Line

If you currently have your house on the market and are hoping that you will see a better price after the snow melts or the temperature warms up (aka Spring), BE CAREFUL! Those in the know are warning you the best price might be attained TODAY!

Real Estate Agents Wanted!

Have you ever asked yourself these questions?

• How successful would I be if I had plenty of leads every month?
• How many homes could I sell if I didn’t have to take care of all these details?
• How much more money would I make if I spent more of my time
  working with clients?
• How much better would I become if I had someone to help keep me
  focused on what matters most?
• How much more confidence would I have if I had the support and systems
  of one of the top producing real estate teams in the country?
• How much more money would I net if I didn’t have to spend
  so much money on my business?

Our Systems Might Be Your Solution

Work a Proven system with the High Performing Gary and Nikki Ubaldini Real Estate Team
Licensed REALTORS® ONLY please – Contact Gary Ubaldini at gary@gnteam.com 
The Gary and Nikki Team at Keller Williams Realty

There are many extraordinary homes throughout the Tampa Bay area. The Gary & Nikki Team specializes in these waterfront and luxury homes – here is some recent Luxury Home Market data pulled from The Pinellas Suncoast Association of REALTORS MLS.

There are currently 193 active listings in North Pinellas County listed from $1 million up to $14.4 million.

• Since the beginning of the year, 48 properties listed above $1 million sold and closed.
• Those 48 properties closed at an average of 86% of the listed price at the time of the sale in an average of 151 days on the market.
• Of those 48 sales, 39 achieved a selling price of $1 million or more. 
• Only 6 properties have sold at $2 million or above so far in 2010.

With approximately 4 properties selling per month and 193 active listings, we have over a 48 month supply of inventory. Competition is fierce for luxury buyers. We are still in a price war and a beauty contest. Proper price positioning and professional staging are a must to position your property among the most compelling properties on the market and to win the battle against all this competition.

The highest sales price recorded so far in 2010 was $2,150,000 for 2 different properties:
818 Snug Island and 1006 Eldorado Ave.

Of the 48 luxury homes sold in 2010, 40 were either in Belleair, Clearwater, Clearwater Beach or Belleair Beach.

It’s very interesting to study the Luxury Market SOLD activity below as graphed year to year in North Pinellas County since 2001.

As shown in the graph, it makes sense that the most active year for million dollar plus sales was the peak of the market in 2005 with 222 properties sold. 2008 continued the downturn in number of sales with 85. It is notable that so far the highest resale recorded in this decade (according to our MLS) was a property in Belleair that sold at $10.25 million also in 2008.

It’s obvious the luxury home market is becoming more and more competitive. As a luxury homeowner you need every advantage available in this market.

The Gary & Nikki Team are – Certified Luxury Home Marketing Specialists (CLHMS) – a designation that recognizes education and achievement in the upper tier residential market. Contact us today to schedule a private consultation and a customized market evaluation for your property.  If you would like to sell or buy a luxury home in the Tampa Bay area call us at 727-787-6995.