Sunday, March 18, 2012

Foreclosure Myths - 2012

Distressed sales (foreclosures and short sales)
are 60% of the Palm Coast, FL market!

   "We meet so many people with mis-guided perceptions about today's market.  Just because it's a foreclosure or short sale, is by no means a guarantee of a great deal.  It's all about "seller motivation and local market knowledge" - and the seller may be Joe and Mary down the street... not a bank or hardship situation.  Make sure you do your homework!  (Frank Zedar, Broker Associate/Sales, Parkside Realty Group,Palm Coast, FL)

1. There is going to be a flood of new foreclosures to the market.

This rumor has appeared every year since 2008 and has been routinely debunked. However, recent announcements that the Feds reached a settlement over the robo-signing scandal have reignited speculation. The idea is simple: Since the cork is now out of the foreclosure bottle, we’ll soon see another flood of REOs inundating the marketplace.  This makes no sense to me at all.  To do so would be a form of the banks "shooting themselves in the foot."  Banks have learned that if they control inventory, they can affect local prices. By releasing homes in measured amounts, they realize higher prices than if they released a glut of homes. In addition, they’ve learned that if they can mitigate their losses by agreeing to a short sale, everyone wins.

2. You can go directly to a bank to buy a foreclosure.

Every few weeks I’m asked how to buy foreclosures direct from a bank. Someone knows a friend being foreclosed on and they want to step in and grab the house before it hits the market. Don’t we all? In reality, banks have a simple system – they first offer properties on the courthouse steps. The rest they assign to asset mangers who then hire local real estate agents to put them on the market along with all the other homes. Want an REO? Pay cash at the courthouse steps or get in line witheveryone else when they hit the local MLS (Multiple Listing Service).  And if you think hiring a lawyer will help - forget it. The banks have a system to release these homes in a reasonable sequence, which satisfies stock holder's interests.
This seems funny on the surface,
yet this is reality for many!

3. You can get a killer deal by submitting lowball offers on foreclosures.

You would think this myth would be dead by now. Unfortunately, like Elvis sightings, it just won’t go away. Here’s the truth: Banks want REOs sold in 30 days or less, so they typically appear on the market priced slightly under comparable properties. If the property doesn’t sell quickly, the bank will lower the price after about 30 days. Lowball offers are ignored and are, quite frankly, a waste of everyone’s time and effort. You might get a deal by offering a lower price on a foreclosure that’s been sitting on the market for more than 90 days, but remember that there are good reasons it’s gone unsold for so long. And even if you have cash, your lowball offer won’t be accepted —seriously.  People think their cash is somehow better than the cash provided by a mortgage company for a well qualified buyer?

4. You can’t use foreclosures when doing an appraisal.

Or short sales, for that matter. That is no longer true. In fact, in many neighborhoods, that’s all that’s there. Therefore, foreclosed or distressed sales represent the actual value of homes in the area and HAVE to be used to appraise other properties.  You may not like it, but it is the new reality. Times have changed and the ways neighborhoods are valued have changed as well.  (In Palm Coast, FL and all of Flagler County, these distressed sales comprise 60% of the market.  Of course they "count!")

5. Foreclosures are only affecting the bottom end of the market.

This used to be true. However, while foreclosure rates on the lower end of the market have actually decreased,they’re actually increasing on the upper end. According to Daren Blomquist, vice president of RealtyTrac, the market share of foreclosed homes under $1 million is shrinking, but those among properties valued over $1 million are rising – up 115% since 2007. And foreclosures on properties valued upwards of $2 million have increased by 273%. While some well-known jet-setters have melted down and lost everything, others are choosing to strategically default. They see it like liquidating a poorly performing portfolio – they have enough resources to cut their losses and move on. Historically, banks have been reticent to foreclose high-end homes and absorb a large loss, but defaulters are now forcing their hands and mansion foreclosure rates are moving on up.  (In Palm Coast, FL and Flagler County, 25% of residential home and condo sales, over $300,000 in the past 15 months, have been distressed.)
Myths control behavior, and this has never been truer than in the housing market in 2012!  If you are in the market in Palm Coast or Flagler County, FL - and you need to buy or sell real estate in this chaotic and confusing market - you will need knowledgeable, experienced help.  I've been at this - in good markets and bad - for over 25 years.  Families and investors alike appreciate my professional approach to this business.  Let's meet and talk about your situation!  Thank you!  Frank Zedar, Parkside Realty Group.  Cell/Text:  386-931-1987.  email:          (This is extracted from Carl Medford's Trulia Pro blog.  Carl is a Realtor with Prudential in California.  California, like Florida, is among the hardest hit states in this real estate mess.)

Tuesday, March 6, 2012

"Housing Affordability Update - March, 2012"

Real Estate
 is moving again!

   I liked it better when the prime topic at all social gatherings was "how awesome real estate is!"  Everyone was such a wise investor!  Buy a house and secure your retirement!  $250,000 today would mean $500,000 in a year or two, right?  It was so... easy!
Now, we are ecstatic if we are one of the lucky ones who are not upside down (upside down = you owe more than it's worth).  It's bad all over, but it's brutal in Florida.  And here in Palm Coast, Flagler County, FL... well, we have a "special" situation.  You see, in 2003-2005, we were the "Fastest Growing County in the USA!"  Now we are the "County with the Highest Unemployment in Florida!"  And for those of you old enough to remember "The Honeymooners," you can almost hear Norton say to Ralph, "Well, what a revoltin' development this is!"  We didn't know it yet, but we were in the eye of the storm from late 2005, through the end of 2007.  And we've been in a Category 5 ever since!
But... but... but,
it used to be worth $350,000!
Ah, yet is that a flicker of light I see at the end of yon tunnel?  Yes, the mortgage banks have been keeping the distressed inventory low, by withholding shadow listings from the market, yet we are methodically clearing the bottom.  As they release the next surge of REO/foreclosure properties, I think we'll be ready for them.  Why?  Because people with money are paying cash, because it's not doing them any good in a 2% yield CD... and that trumps even a crazy low 5% mortgage every time.  The Fed insists on keeping these rates "crazy low," yet in the back of my mind I see past recovery periods preceded by modest increases in the mortgage interest rate!
When we compare the numbers (*) in Palm Coast, FL, from the 4Q2010 to the 4Q2011, we see 30% more sales, with a 10% decrease in price.  And that matches perfectly with market trends that say, "Cash purchases can usually net you a 10% discount, when competing against a buyer with a financing contingency."  From the perspective of simple Supply and Demand analysis, this is a trend towards market equilibrium... and that's good news!
Other good news comes from those nasty old banks, themselves!  According to Krista Franks Brock, of, "Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.  Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”  In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV." 
Here's some great information from the Flagler County Association of Realtors MLS database:
  • We currently have 1,050 single family, detached homes "For Sale" in our MLS.  This is way down from the worst of it, meaning things are moving!
  • 70% are normal listings, 21% are short sale attempts, and 9% are bank owned.
  • AND the better news is that we have 622 single, detached homes currently in "Pending or Contingent" status... waiting to actually close.
  • And even better, is that 26% of them are normal sales, 58% are short sales, and 16% are bank owned sales.
  • That means we are clearing out the bottom at a rate of 3 to 1!  This is a trend with enormously positive implications!
If we are good... and eat our liver and spinach.. we should be nearer to a "new normal" by 2014!
(*) These statistics are "approximate" and rounded off, for ease of discussion.  They include all areas served by our MLS, to include Palm Coast, Flagler Beach, Bunnell, all of Flagler County, and some small numbers of listings out of our immediate area.

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