Orlando Florida Real Estate Blog

I currently have 10 properties Listed for sale and 6 of them are short sales. I am finding that nearly 25% of the market right now in the Orlando, Windermere, Winter Garden Florida area is either a short sale property, a foreclosure property or Bank owned property. Buyers in Orlando can find a good home and purchase it at a discount, IF they work with a Realtor that know how to deal with short sales, Like Myself. Feel free to contact me at any time with questions about short sales and how to purchase a short sale at jerry@JerryLaRose.com or visit my Website at http://JerrySellsOrlando.com

Everyone involved in a short sale transaction needs to know what to expect. Orlando buyers of short sale properties need to understand what they are getting into. Some buyer's believe that they are going to be able to "steal" a property and make a killing by reselling it. The days of Flipping homes is long gone. They have heard the stories that investors tell and think it's a piece of cake to buy a property at 50% of the value.

While that may be the case on rare occasions, it is not the norm and should NOT be expected. Remember, the lender wants to sell the property as close to market value as possible. In fact, most lenders have pretty rigid guidelines as to how far below market value they will sell for. I have heard that some banks no matter what will not go below 15%-20% of market value. Beyond that point, they will take the house back in foreclosure. So let's do the math, a $200,000 valued property may go for $160,000 - $170,000. Now, this same property was probably valued at over $300,000 just 3 years ago.

So, the bottom line is that if you have patience and are looking for a home in Orange county or the Orlando area you may end up saving 15%-20% of market value on a home. However, I am also finding that there are now plenty of homes that are Not Short Sales but the Homeowner needs to get out for some reason, (such as relocating) and has priced their home as low as a short sale. This is probably the ideal situation because typically the home is in great shape.

What buyers need to know?

1. Patience, Patience, Patience. It may take 3-4 months to complete the transaction once you've written a contract on the property.
2. Buyers must be be pre-approved before submitting an offer. The borrower's lender is going to require proof of funds if it's a cash deal or a commitment letter if there is financing involved. A buyer offering to close quickly with a substantial down payment is more attractive than one seeking 90% financing.
3. Buyers may not want to spend money on a home inspection or appraisal until after the short sale is approved, otherwise you're wasting your money. Why spend hundreds on a inspection and have the bank not approve the deal.
4. Buyers should expect to buy the home in it's "AS-IS" condition. The seller doesn't have any money to make repairs and the lender is going to require an as-is offer. Therefore, your realtor should be using an "AS-IS" contract.
5. I recommend to all of my short sale buyers that we do NOT put up a deposit in escrow until acceptance of the offer by the bank. We'll give a promissory note in lieu of.
6. I recommend the buyer work with a short sale expert, like myself. Working with Realtors that don't know the short sale process and the pitfalls to look out for could kill a potential deal.

Feel free to contact me at any time with questions about short sales and how to purchase a short sale at jerry@JerryLaRose.com or visit my Website at http://JerrySellsOrlando.com

1. The bank is going to what to see your entire financial picture.  This means you will need to provide copy of back taxes, paycheck stubs, bank statements, personal financial statement, etc.  They will want to know what all your assets are.
2. The bank may want you to sign a promissory note for the difference, now it will most probably be at a hugely reduced amount and may include monthly payments.
3. When the bank gives the final approval of the short sale, they may request that the escrow close in as little as 30 days, sometimes sooner.
4. As the seller, you can not receive any proceeds from the sale.  Period.
5. Your Real Estate agents, and Title company, may have to work for reduced fees.
6. The banks are incredibly overwhelmed with short sales and many times a decision can take upwards of 90 days; however, recently the approval process has been streamlined at many lenders.
7. Your property may be foreclosed on during the short sale process because the bank can not process the short sale in time; however, if you have a strong agent they should be able to get the foreclosure postponed give me a call to help postpone any foreclosure dates.
8. Do not expect to receive any information on a regular basis.  There may be weeks that go by with no news from the lender.  This is perfectly normal.
9. The bank will want to get a BPO (broker price opinion) and/or an appraisal of your house.
10. Be patient.  This is the best policy.  Try to avoid being stressed out over something that you can not control.  If you have a well trained agent, you are in good hands.

If you have any questions, please don't hesitate to contact me.

President enacts controversial measure that aims to help borrowers, bolster the housing market and provide a fail-safe for Fannie and Freddie.

President Bush on Wednesday signed into law a sweeping housing bill that aims to boost the struggling housing market and bolster mortgage finance giants Fannie Mae and Freddie Mac.

The Senate voted 72-13 in favor of the bill on Saturday, after the House passed it three days earlier.

"We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

The new law, one of the most far-reaching on housing in decades, marks the centerpiece of Washington's efforts to address the nation's housing meltdown.

The legislation has two principal objectives: to offer affordable government-backed mortgages to homeowners at risk of foreclosure, and to bolster Fannie and Freddie with a temporary rescue plan and a new, more stringent regulator.

The White House last week reversed its long-standing threat to veto the bill. In fact, the administration still objects to parts of the legislation, including aid to states to buy foreclosed properties.

But the president decided to sign it since "oversight of the housing government sponsored enterprises (GSEs) and the new temporary authorities requested by [Treasury] Secretary [Henry] Paulson are urgently needed now, and they'll contribute to confidence and stability in housing and financial markets," Fratto said last week.

Provisions that will most directly affect consumers and communities include:

A larger role for the Federal Housing Administration. The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

The cost of the new FHA program - which would begin on Oct. 1 and be in place for just a few years - will be funded by fees from Fannie and Freddie, along with fees paid by both lenders and borrowers.

While the law authorizes the FHA to insure up to $300 billion in loans, the CBO estimates that the agency is only likely to insure up to $68 billion and help keep roughly 325,000 people in their homes. Those estimates were based on the CBO's assessment of who is likely to qualify under the program and accounts for a certain number likely to default anyway.

(Here are more details on this provision.)

A stronger regulator for the GSEs. The new regulator will have a greater say over how well funded the two government sponsored enterprises (GSEs) are - a major concern in the markets that has sent stocks in both companies plunging in the past two months.

A permanent increase in "conforming loan" limits. The law will permanently increase the cap on the size of mortgages guaranteed by Fannie and Freddie to a maximum of $625,500 from $417,000.

The FHA maximum loan limits for high-cost areas would also increase to a maximum of $625,500. Higher loan limits will make it easier for borrowers to get mortgages, because those mortgages are more likely to be traded if they are considered conforming.

A new home-buyer credit. The new law includes a tax refund for first-time home buyers worth up to 10% of a home's purchase price but no more than $7,500.

The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.

A ban on down-payment assistance from sellers. The new law eliminates a program that has allowed sellers to provide down payment assistance for FHA loans.

The law would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.

A new affordable housing trust fund. The law establishes a permanent fund to promote affordable housing. The fund will be paid for by fees from Fannie and Freddie.

Grants to states to buy foreclosed properties. The law grants $4 billion to states to buy up and rehabilitate foreclosed properties. The White House has opposed such funding, contending that it will benefit lenders and not homeowners.

A late and controversial addition to the new housing law provides temporary authority for the Treasury to lend a financial hand to Fannie Mae and Freddie Mac if the Treasury deems it necessary to help stabilize markets.

Concerns over whether Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) will have enough money to weather future losses in the housing market has sent shares plummeting in recent weeks. Since the beginning of June, Fannie's stock price has dropped 57% and Freddie's plummeted 66%. For the past year, they're both down roughly 85% as of the end of trade on Friday.

Fannie and Freddie guarantee the purchase and trade of mortgages and own or back $5.2 trillion in mortgages.

The law includes provisions that let Treasury offer Fannie and Freddie an unlimited line of credit and buy stock in the companies. The provisions expire in 18 months.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the companies could leave taxpayers with a fat bill to pay.

Treasury Secretary Paulson has said that merely having the powers in place may boost confidence in the two companies enough to preclude the need for Treasury to step in.

The Congressional Budget Office last week estimated the potential cost of a rescue could be $25 billion. CBO said there is probably a better than 50% chance that Treasury would not need to step in. It also said there is a 5% chance that Freddie's and Fannie's losses could cost the government $100 billion.

In the Orlando Metro area last month there was a total of 1,641 homes sold in June compared to 1,595 homes a year ago for a 3 percent increase. The existing home median sales price was $219,500; a year ago, it was $258,100 for a 15 percent decrease. A total of 172 existing condos sold in Orlando last month compared to 188 condos the previous June for a decrease of 9 percent. The market’s existing condo median price was $132,900; a year ago, it was $156,900 for a 15 percent decrease.

The statewide existing-home median price in June was $205,500, up 1 percent from May’s median price of $203,300. The median price of an existing condo last month was $183,700, also up 1 percent from May’s figure of $181,800. Last month, interest rates for a 30-year fixed-rate mortgage averaged 6.32 percent, down from the average rate of 6.66 percent in June 2007, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

When you go through the short sale process your lender will require certain documentation. Remember, the lender does not want to take the home back through foreclosure. That is a last resort for both the homeowner and the lender. The lender would rather accept a short sale as long as the borrower can show an inability to pay the mortgage.

Each lender has their list of required documentation. Therefore, the first step is to give your Realtor signed authorization to speak with the lender about your account.

Your Realtor will then request a "short sale package" from the lender. Most lenders require the following documentation.

• Exclusive right of Sale Listing Agreement
• A copy of the executed “AS-IS” Sale and Purchase contract
• Letter of Authorization to the bank to release Information.
• HUD-1, which is the estimated net sheet from a title company. The settlement statement will show all of the expenses related to the sale with the seller receiving zero.
• Hardship letter. A handwritten letter may be better to explain the borrower's situation and requesting a short sale. It should describe why the borrower cannot make their mortgage payments and their fear of possible foreclosure. It should be a plea for the lender to consider a short sale. Document to support Hardship (termination of employment, substantial medical bills, disability letter, etc.
• Personal Financial Statement form 1126, which includes current debt, payments and a household budget.
• Two years of tax returns and W-2's. Remember to provide signed copies of tax returns.
• Two most recent bank statements and retirement account statements. Be sure to copy both side of double-sided statements.
• Two most recent pay stubs
• A current Comparative Market Analysis (CMA) from a real estate broker or appraiser
• Buyers proof of Funds or Loan Approval letter
• Lastly note on the submission package that they need to order the BPO immediately and a negotiator needs to be assigned.

Make sure that when you submit the package it is COMPLETE. Some times it may be better to wait a day and ensure that it’s complete than to submit an incomplete package. Remember the Loss Mitigator is deal with possibly hundreds of files at a time.

Lastly Note: With a short sale your Realtor should negotiate for the lender to waive their right to file a deficiency judgment. **IMPORTANT**

For first-time buyers, often the first thought that comes to mind is, "I need a down payment." This is often followed by the question, "Now, where do I get that down payment?"

Depending upon the loan type, a home mortgage typically requires 3 to 5 percent down. If you have the money, then you're set. But what if you don't? What if you're renting? You can afford a mortgage within your means, but coming up with the down payment money needed to begin the transaction can be challenging. So, where can you turn?

One of the most overlooked sources of down payment funds is likely right under your nose-in the form of government bonds and local grant programs.

These programs either provide outright monetary grants for down payment or money to buyers in the form of a forgivable loan. In essence, the government will help you buy your home and you typically only have to pay back the money if and when you sell that same property.

In the past it was challenging to find these special programs, but now all you need is your agent, a computer, an Internet connection, and a search portal such as Google or Yahoo. Enter the search terms "down payment assistance (followed by your city, state or province)" and see what pops up! It might just be the answer to helping you buy your first home.

The national economy keeps plodding along, but even that slow pace is better than what the experts predicted last year -- that we'd be knee-deep into a serious recession by now.

But there's also an ominous development taking shape that could spoil that scenario: Interest rates are beginning to spiral upwards on fears of rising inflation.

Core inflation is running at about three percent year over year -- the highest rate we've seen in more than a decade.

Rising prices in turn, are worrying not only the Federal Reserve, but investors in the global bond markets whose decisions govern home mortgage rates.

Last week, thirty-year fixed rates hit 6.60 percent -- up from 6.25 percent the week before. A month ago, you could easily find thirty year money in the mid-five percent range. Not a chance of that this week.

Last week's were some of the highest rates we've seen in nearly nine months -- and they're definitely not helpful in getting the real estate recovery rolling.

So we're in a bit of a delicate situation: On the one hand, a new University of Michigan poll finds "record numbers of consumers now think there are very attractive prices on homes for sale," according to survey director Richard Curtin.

Pent up demand is out there. Consumers recognize that prices are down, supply is up, and that for people who need to move or buy a house, the timing looks pretty good.

On the other hand, mortgage costs are changing the affordability equation. At some point, those higher financing expenses start squeezing potential buyers out of the market, despite enticingly low prices.

Maybe that process has already begun: The Mortgage Bankers Association reports that new loan applications to buy houses using conventional loans dropped last week by seven point two percent.

Home purchase applications involving FHA -- by far the hottest segment of the market -- jumped by just four percent. The week before FHA applications were up by double digits.

The upshot of all this for anyone who's thinking about buying or selling any time soon: Get off your duff. Rates are moving up, and nobody can guarantee where they'll stop.

If you see the house you want at the right price, make your offer sooner rather than later, and lock that rate.