Tuesday, November 16, 2010

2010 Tallahassee Real Estate Market Update

Today I will be giving you an update on the current condition of Tallahassee's real estate market. Once again I have taken the liberty of doing some research, and using the Tallahassee Board of Realtors MLS statistics, I have pulled and analyzed some very useful data that I will be using here today to give you an idea of how Tallahassee's residential real estate market is doing.

In my research I made year to year comparisons covering and comparing the time periods of May 1st 2009-September 31st 2009 to May 1st 2010-September 31st 2010. To make my data as meaningful as possible, I divided propeties by both price range and location. I divided the properties up into 5 different price ranges and 4 different areas of town. In my research I looked up the number of homes listed during those time periods, the number of homes sold in those time periods, the average sale price of the homes that sold in those time periods, the average number of days it took for a home to sell in those time periods, and the sale price to list price ratio (this is the average % of what a home sold for compared to what it was listed for sale at). I pulled all this data for all properties in each price range and each area of town. Below is a summary of the data that I found categorized by price range and for Tallahassee as a whole.

Real Estate Summary For Tallahassee As a Whole

Overall real estate activity in Tallahassee has decreased from last year. The number of homes listed for sale has decreased by 7.7%. This means that not as many people are trying to sell their homes. Overall home sales in Tallahassee have decreased by 9% this year compared to last year. Home prices in Tallahassee have dropped by 5.25% compared to last year as well. The average time it takes a person to sell his/her house has stayed about the same. Finally the sale price to list price ratio has stayed about the same, which means that the spread between what people are selling their homes for compared to what they are listing their homes for has increased.

Overall Market conditions in Tallahassee have taken a slightly unfavorable turn since last year. The number of homes on the market for sale, the number of homes that have sold, and the average price of homes that have sold have all decreased. Overall this signals weaker demand for homes. This is likely caused from the overall unfavorable economic conditions, especially high unemployment.


$0-$125,000 Price Range

Overall this price range has seen a significant increase in activity since last year. However, prices of homes in this price range have dropped. The number of houses listed for sale this year has increased by an average of 17.2% since last year with the biggest increase occuring in NW Tallahassee. Also, sales of homes in this price range have increased on average by 20.2% with the largest increase in sales also occuring in NW Tallahassee. While sales and listings have increased, prices of of homes in this price range have decreased by an average of 12.2% since last year.

In NE and SW Tallahassee, the average number of days to sell a home went down compared to last year, and in NW and SE Tallahassee, the average number of days it took to sell a home went up.

The sharp rise in shortsales and foreclosure properties in this price range has caused an increase in the number of listings and the number of sales. The fact that more foreclosures and shortsales have come onto the market has also been responsible for prices decreasing. Distressed sales typically sell for less than market value. When these properties sell for below market value, it puts downward pressure on home prices across the board. Right now is a great time to buy a property in this price range because you can find some very good deals.

$125,001-$250,000 price range

Overall this price range has seen a decrease in listing and selling activity compared to last year, but prices have remained stable.

Since last year, the number of homes listed for sale in this price range has decreased by 17%. The number homes sold in this price range has decreased by 22%. The average price of a home sold in this price range has increased very slightly since last year by just 0.91%. The average number of days it took to sell a home in this price range has decreased in all areas except for in NW Tallahassee, where the average days it took to sell a home in this price range increased from 105 days to 114 days. Finally, the sale price to list price ratio stayed about the same for homes in this price range compared to last year.

There are not as many people looking to buy or sell homes in this price range this year compared to last year, but it appears home prices in this price range are leveling off and even slightly increasing. This is great news for people who own homes in this price range.


$250,001-$400,000 Price Range

In this price range, the number of homes sold and the number of homes listed for sale has decreased since last year, but homes in this price range have appreciated in value since last year.

Prices have remained stable in this price range with very slight increases in value coming in NE, SE, and SW Tallahassee. In the NW the average value of homes sold in this price range decreased by 7.4%. The number of homes listed for sale has decreased by 12% since last year. Home sales in this price range have decreased by 10% since last year. The average number of days it has taken to sell a house in this price range has decreased in all areas of town except for in the NW where it increased from 125 days to 194 days.

In this price range, real estate activity has decreased since last year, but prices have remained stable with slight increases. With the exception of NW Tallahassee, it is taking less time to sell a home in this price range than it did last year. This is good news for people with homes in this price range who are looking to sell their homes.


$400,001-$750,000 Price Range

In this price range, there is much less activity as opposed to homes in the lower price ranges. In the SW part of Tallahassee, there were no homes listed or sold in this price range in 2010. In 2009 there were no homes sold and only three listed for sale.

In NW and SE Tallahassee, the number of homes sold stayed the same while sales decreased in NE Tallahassee by 26%. In NW and SE Tallahassee, the number of homes listed for sale slightly decreased while the number of homes listed for sale in NE Tallahassee decreased sharply by 29%. On Average the value of homes in this price range actually increased by an average of 11.5% with bigger gains in value occuring in NE and NW Tallahassee.

$750,000 and up Price Range

In this price range, there was very little activity in both 2009 and in 2010. I will give you a break down of each area for this price range.

In the NE sales remained the same at 5 properties. Listings decreased from 29 to 27 listings. The average sale price decreased from $908,800 to $818,800. The average days on the market to sell a house in this price range increased from 189 days to 223 days. The average sale price to list price ratio decreased from 92.19% to 81.07%.

In NW Tallahassee, there were no homes that sold in this price range in 2010, and only 1 was newly listed during this time period.

In SE Tallahassee there was not any activity in 2009 in this price range. In 2010 there were two homes listed and two homes that sold. The average sale price of these two homes was $792,500 and it took an average of 206 days to sell these homes.

In SW Tallahassee there was not any activity for homes in this price range.

Overall, property values of homes in this price range have gone down and the average days on the market to sell a home in this price range has gone up. This leads me to believe that demand for homes in this price range has come down sharply.

Conclusion

Prices are down, sales are down, and the number of homes that went up for sale went down in 2010 compared to 2009. However, the decrease in home values from 2009 to 2010 was much smaller than the decrease we saw in the couple of preceeding years. This means that things appear to be getting better. Inventory of homes is down, which is good. Sales are down, which is probably due to the fact that the bad economy has decreased housing demand.

There are homes in some price ranges in which their values are leveling off. These are mainly homes priced between $125,000-$400,000. Home values under $125,000 have decreased because of the rising number of foreclosures and short sales in this price range. Home values in the more expensive price ranges are decreasing due to lack of demand for more expensive homes.

Most likely we will continue to see very slight declines in home prices in Tallahassee. It probably won't be long though before demand picks up and home prices start to slowly increase across the board.


If you have any questions about the Tallahasee Real Estate market, please feel free to contact me directly at (850) 567-0037 or email me at nahoom1171@yahoo.com.











Tuesday, October 12, 2010

The new foreclosure moratorium. Another blow to an already frail Real Estate Market.

At a time when our fragile real estate market looked like it was finally showing signs of a slow but certain recovery, major banks including Bank of America, J.P. Morgan Chase and GMAC announced that they are putting a halt on foreclosure sales and taking thousands of their foreclosure properties off of the market. Apparently these major banks have been accused of not properly foreclosing on homes. Employees of these major banks have testified to signing thousands of foreclosure documents every month without even reading the documents they were signing. This includes the employee for Bank of America dubbed "The Robo Signer" who said he signed as much as 10,000 foreclosure documents a month without reading any of them. Also, these banks are being accused of losing the deeds to properties, not verifying documentation throughout the foreclosure process and even foreclosing on properties that they had no business to foreclose on. Because of this, these banks are having to suspend the sale of thousands of foreclosure properties throughout the country so they can fix all of these problems. The banks in some cases are even having to re-foreclose on some of the properties.

Make no mistake about it, this is going to be bad for our economy. There are hundreds of thousands, if not millions, of foreclosure properties on the market for sale right now. In most cases, these properties are priced below market value, and they continue to suppress home values throughout the country. In order for our real estate market to recover, we are going to have to get these distressed properties sold so real estate values can continue to increase. This foreclosure moratorium being carried out by Bank of America, Chase and GMAC will delay the sale of foreclosure properties by as long as 6 months to a 1 year. Also, keep in mind that there will probably be more banks who will also join these three banks and also issue foreclosure moratoriums on their foreclosure properties. Citi Bank is one bank that is currently being investigated. They have not suspended their foreclosure sales yet, but don't be surprised if they do.

Another issue is arising that is directly tied to the problems these banks have had with their foreclosures. Some title companies are not writing title insurance policies on foreclosure properties that are owned by Bank of America, Chase and GMAC. Title insurance protects the buyer and the buyer's lender from issues pertaining to clouds on the title that are not discovered in the title search that is done before closing. Examples include claims of ownership by unknown previous owners and liens on the property that were unknown prior to the buyer purchasing the property. If title insurance companies won't issue title insurance on these foreclosure properties, that means that buyers will most likely not purchase these properties. This will also slow down the sale of foreclosure properties.

Foreclosure sales have been a big part of my real estate sales this year. This year I have seen a lot of investors, who have lots of cash, come out and start buying many of these foreclosure properties. Investors have been doing this because they can't earn a high return on their money in the banks right now, but with real estate prices being so low, they have been able to earn a good return on their money by investing in real estate. These real estate investors with lots of cash have accounted for a very large number of real estate sales this year thoughout the country. All of the issues with the banks improperly foreclosing on properties might scare many investors away from buying foreclosure properties. This could really dry up property sales.

In our last 7 recessions that we have had in this country, real estate has pulled us out of those recessions. Real Estate will probably be what pulls us out of the current recession as well. Now that this foreclosure moratorium has occured, the recession could drag out much longer than expected.

My advice to real estate investors who still want find good deals on properties and buy them is to start looking at short sales. A short sale is when the current owner has not had their property forclosed on yet, and the current owner's lender agrees to accept an offer on the property that is lower than what the current owner owes on the property so that the lender does not have to foreclose on the property. Lenders are motivated to agree to short sales for a couple reasons. First off, going through the foreclosure process actually costs the lender money. Second, since we are in a declining real estate market still in most areas of the country, the value of the property will probably be less after the bank forecloses on the property (which could take 6 months to a year since the courts are so back logged with foreclosures) and put the property up for sale at a later date.

Short sales may take longer to close than a foreclosure sale, but there are usually less unknowns with a shortsale. With a shortsale, the current owner usually knows much more about the property compared to a bank who has foreclosed on the property, so the buyer knows more about the property with shortsales before they put an offer on the property. Also, with a shortsale, the buyer usually is the one who picks the title company to handle the closing. With foreclosures, the bank who owns the property usually requires the buyer to use their title company. These title companies that banks use with to close on their foreclosure properties are usually located out of town, and from my experience they don't provide good service. Lots of times, these out of town title companies cause closings to get delayed due to not getting their work done before the closing date. If the buyer can pick the title company, that title company will usually provide good service because they want the buyer's repeat business. These out of town title companies that you have to deal with when buying a foreclosure property are not concerned with the buyer's repeat business since they are out of town.

If you have any questions about foreclosures or shortsales, please feel free to contact me.

Thursday, August 19, 2010

How foreclosure properties affect our real estate market, and why right now is a great time to buy a foreclosure property.

Buying an investment property is a great way to make money and help secure your financial future. Like any kind of investment though, such as with stocks or bonds, buying an investment property at the right time is very important. If you want proof of this, talk to someone (including myself) who bought a property between late 2004 and early 2007. If someone bought a home in that time period, it is safe to say that their property now is not worth nearly as much as it was when they bought it. Buying real estate in that time period is an example of bad timing. However, if you talk to someone who bought a property in the early 1980's during the recession back than, their property is probably worth a lot more today compared to when they purchased the property back when old Ronald Reagan had recently taken office.

Ideally you want to buy an investment when it is priced low and sell when it is priced high. You are probably asking yourself "Well how do I know when those times are?" Good question. Going through the finance program at Florida State's College of Business, I managed to learn a thing or two about investing in stocks. I know that in the crazy ever changing stock market, this task can be somewhat tough....well actually pretty much impossible. Stocks prices pretty much react to news which changes everyday, thus it is pretty much impossible to predict what a stock will do. However, real estate is a much slower changing market and generally operates based on basic economic fundamentals. So in real estate, how do you know when a good time to buy is? Let me provide you with a somewhat round about answer to this question.

First off, in real estate, prices are very dependant on supply and demand. The higher the demand is for homes, the higer the prices will be and visa versa. The higher the supply of homes the lower the prices of homes will be and visa versa. Many variables can drive demand and supply in real estate including interest rates, tax laws, unemployment rates, number of homes for sale, ect... When assessing supply and demand for homes in real estate, it is important to know what affects supply and demand in real estate, because if you do, this will help you be able to predict whether the value of your home is going to increase or decrease.

So let's look at today's real estate market here in Tallahassee. In today's real estate market in Tallahassee, the fundamental economics of our real estate market are stronger than most people probably think. I did some market research earlier this year, and what I found indicated that our market is on the upswing ( if you want to view my full market report that I did on Tallahassee's real estate market, view my blog from back on May 20th titled "Tallahassee's 2010 Housing Report") First of all, overall sales in the first part of 2010 were up 27% compared to the first half of 2009. Also, our inventory of homes for sale shrunk significantly as well. So sales up, housing inventory down...in my world that is a strong sign that the housing market is on the up and up. Sales went up because prices went down from 2009 to 2010. As you know though, when sales start increasing due to increased demand and the supply of homes begins to shrink, it is only a matter of time before home values begin to increase in value again. However, in today's real estate market we have something a little unusual going on which throws a wrench into the equation of determining how soon home values in Tallahassee (and everywhere else in the country for that matter) will start to rise again. This wrench is the foreclosure crisis we are going through.

When I finished my study on the market conditions in Tallahassee and I got done looking at and analyzing Tallahassee's real estate market statistics, my first thought was "there is something wrong with this picture." The market statistics showed that sales were way up, inventory had shrunk down quite a bit, yet the value of our homes here in Tallahassee are still decreasing. According to the laws of supply and demand, this should not be happening. Well what is causing our home prices to drop is the increasing number of foreclosed homes that are coming onto the market for sale.

You see, once a bank forecloses on a home, they are very motivated to get that home sold. Banks refer to these foreclosed homes as "non performing assets." This is because they are assets that are tying up the bank's money, but they are not making the banks any money in return. In fact, they are causing the banks to lose money. Every month, the bank has to pay the normal expenses of owning the home including taxes, insurance and homeowners associaion fees if there are any. Because of this, banks want to get these properties off their books as soon as possible. Often times banks will sell these properties for less than market value, and in some cases for dirt cheap. Well when that happens, guess what else happens? It brings the value of the sorrounding properties down. When a lot of these foreclosed properties pop up for sale and are sold for dirt cheap, the resulting devaluation of homes in that community can be quite severe. This is why prices have been dropping in our community and other communities across the state and country despite the increasing number of sales and the shrinking housing inventories. So what does all this mean?

Basically what all this means is that home values won't start increasing until all of these foreclosed properties get sold off. This could be a while. If I were to guess, I would say it will be another 2 years before we start to see home values increase in Tallahassee. There is some bad as well as some good news though. The bad news is that it is going to get worse before it gets better. Last month our country saw a record number of homes that were foreclosed on by banks...the most ever recorded. This means that over the next few months we are going to see lots of foreclosed homes hit the market for sale. The good news though is that the number of people who are delinquent on there mortgage payments is decreasing. This means that the pace of homes being foreclosed on is going to start slowing down.

If you are in the market to buy an investment property though, right now is the time to do so. We know that the basic economic fundamentals of our real estate market are strong. We also know that over the next few months more forclosed homes will hit the market for sale, but in the next year or so the number of foreclosed homes will start decreasing. When this happens, home prices in Talahassee will start rising. This means that anytime in the next year is a great time to buy an investment property...especially if you are paying in cash. Banks will sell you a home for less money if you pay in cash because they know the closing is fast and certain.

I have helped several investors this year purchase properties for great prices. For example, I sold one investor a 2 story condo with 2 bedrooms and 2 bathrooms, granite countertops, new appliances, tile floors and tiled showers for only $45,000. I also helped a client of mine purchase a 3bedroom/3bathroom condo in Savannah Crossing as an investment property for only $84,000. He paid cash for his, and he is earning about an 8% annual return on his investment (not counting appreciation) which is a much better return than he could get at the bank these days. There are other great deals out there right now like these, and there will be more to come in the near future. As I mentioned earlier, buying an investment is all about the right timing, and now is the right time to buy investment property in Tallahassee if you are thinking of doing so. If you wait around too long after all of these foreclosed and distressed properties have been bought up, you will miss the boat and a great chance to make money through buying an investment property at the right time.

If you have any questions about purchasing an investment property or if you have any real estate related questions, please don't hesitate to contact me at (850) 567-0037 or via email at nahoom1171@yahoo.com.

Thursday, August 5, 2010

Reverse Mortgages; A way to help fund retirement.

Hello,

Today i'll be talking about a mortgage program that has been around for many years, but you probably have not heard of or don't know much about. This mortgage program is very different from most mortgage plans you have heard of. With this type of mortgage, you actually will never have to make a mortgage payment in your entire life. Even better than that, you will actually be the one receiving payments from the bank!! You are probably asking yourself "what in the world is he talking about?" I am talking about reverse mortgages. Before I get into the nitty-gritty details of how they work, let me give you the general idea of how reverse mortgages work.

General Overview

Basically, reverse mortgages are for people who are 62 years or older and who have a home that is either paid off or they have a substantial amount of equity in their home. The homeowner can go to a lender that offers a reverse mortgage program, and they can take out a loan on their home which is based off of the value of the home and the age of the homeowner/borrower. If the homeowner still has a balance on his or her existing mortgage, the reverse mortgage will pay off the existing mortgage balance, and the rest of the proceeds from the reverse mortgage will go to the homeowner to spend on whatever his/her heart desires. If there is not an existing mortgage on the home, the homeowner will get to spend all of the proceeds from the reverse mortgage.

This kind of sounds like a rifinance doesn't it? Well it's not...so get over it. The proceeds from the reverse mortgage are for the homeowner to spend. The homeowner can receive the payments via monthly payments, a line of credit or receive a one time lump sum. The great thing about reverse mortgages though, is that you never have to repay the loan during your lifetime. If you use your loan proceeds up before you die, you will not have the house taken from you either. The loan does not have to be repaid until the homeowner passes away. The loan is usually repaid through the sale of the home, and if the sale of the home does not cover the entire loan amount, say due to decreasing property values, the bank get's paid back via an insurance policy they have on their loan. The loan does not have to be paid off by selling the home. If there are heirs of the deceased borrower who want to keep the home, they can pay the home off via cash or through getting another mortgage on the property.

On a side note, if during your lifetime the value of the property goes up, you can have your loan reviewed and possibly qualify for an increase in your loan limit!

How to determine your eligibility for getting a reverse mortgage and the loan amount you will receive

To be eligible for getting a reverse mortgage, you have to be at least 62 years of age. You also must occupy the home. The property also must be a single family or a one to four unit owner occupied dwelling. This would include condos, townhomes, single family homes and some manufactured homes. The propery must also meet the Department of Housing and Urban Development (HUD's) minimum property standards.

The loan amount you can receive from a reverse mortgage is determined first by the property value. The more the property is worth, the higher the loan amount will be. The second variable that determines your loan amount is the age of the borrower. The older the borrower, the higher the loan amount will be. In the case of their being two borrowers on the loan (I.E. husband and wife) they will use the age of the youngest borrower to determine the loan amount. Both borrowers must be 62 years of age or older to qualify. The third factor that will determine your loan amount is the current interest rate. The lower the interest rate, the higher your loan limit will be. Finally, your loan amount can not exceed the establised loan limit for your area set by The Department of Housing and Urban Development (HUD).

Requirements associated with reverse mortgages

Once you qualify for a reverse mortgage and receive the proceeds, there are certain requirements that you have to comply with in order to avoid having to repay the loan during your lifetime. First off, you have to pay and keep current on your homeowners insurance and your property taxes. Second, at least one of the borrowers has to continue to occupy the home. In other words, the home has to continue to be the primary residence for at least one of the borrowers. Third, you have to maintain the home according to Federal Housing Administration's (FHA) property standards. If the property owner gets sick and remains in the hospital, they are allowed to be in the hospital for up to 12 consecutive months before they will have to pay the loan back. If there is more than one borrower, this would not apply if one of the borrowers remained in the home.

As long as these requirements are met, the property owner will not have to pay back the loan during his/her lifetime.

Payment Options

You have a few different options as to how you can receive your reverse mortgage loan proceeds. To begin with, you can receive the loan proceeds in periodic payments (usually yearly or monthly payments). This is a great way to supplement your income if you are living off of social security, pension income or any other type of fixed income.

The second payment option is having an open line of credit that you draw upon at anytime. This is a great option if you want to use the loan proceeds for specific expenses that may not be frequent, or if you want to use the loan proceeds on unforeseen expenses that may arise.

The third payment option is receiving a lump sum of money.

The reverse mortgage process

If you decide to get a reverse mortgage, there is a process that you must go through. The steps in the process are as follows.

1) Education-The first step is getting educated about reverse mortgages. The best way to do this is to go and talk with a reverse mortgage specialist. He/she will be able to educate about reverse mortgages and answer any questions that you may have. They will also provide you with reading materials that contain information about reverse mortgages that you can take home and review. It would also be a good idea to talk to an accountant about reverse mortgages so you know what all the financial implications are.

2) Counseling- If you decide that a reverse mortgage is right for you, you must attend a counselor education session with a HUD approved counselor. They will further educate you about reverse mortgages, the reverse mortgage process, and they will explain to you the financial and legal obligations associated with reverse mortgages.

3) Application-Your reverse mortgage loan specialist who works for the lender making the reverse mortgage will meet with you and help you fill out the application for the reverse mortgage.

4) Processing- Once the application is filled out and submitted to your lender, it must go through several processes before it is approved.

  • First off, an appraisal will be ordered by the lender to determine the value of the home
  • Second, homeowners insurance will have to be ordered for the home.
  • Third, a title insurance policy for the lender will have to be ordered. A title insurance policy for the homeowner is highly recommended, but not required. Title insurance protects the lender and the homeowner from claims against ownership made by undisclosed spouses, heirs of previous owners, creditors holding liens against previous owners, and other parties.
  • The last stage of processing is underwriting. Once the appraisal is approved and value of the home is determined, the title search has been cleared, and homeowners insurance has been ordered, the property will go to the lender's underwriters for final approval.
  • It generally takes 6-8 Weeks from the time the application is submitted until the closing of the loan occurs.

Overall, reverse mortgages are a great way to help ensure one has enough money during his/her golden years and through retirement. To qualify for a reverse mortgage, you don't have to worry about credit score or your income as the loan is determined by the value of the home, the age of the borrower and the current interest rate. This is truly a great way to increase income for older people who own their home outright or have a lot of equity in their home. If you have any questions about reverse mortgages, please feel free to contact me at (850) 567-0037 or via email at nahoom1171@yahoo.com.

You can also contact your local reverse mortgage specialist, Michael Weltman with Wells Fargo at (850) 556-6694 or via email at michael.weltman@wellsfargo.com.

Have a great week!

Tuesday, July 20, 2010

The importance of pricing your home right.

Of course when you go to sell your home, you want to get the most money for your property that is possible. There are a lot of things you can do to sell your home quicker and get more money for the home. However, if you want to sell your home and do so in a timely matter, pricing the house right is the most important thing that you must do.

How do you know how much your home is worth? That is a good question. When you decide to sell your home, there are several things you must look at to determine the market value of your home. You need to look at the size of the home, the number of bedrooms and bathrooms, the age of the home, the size of the lot and the general condition of the home. You also need to look at what amenities your home has. Does your home have amenities that are currently popular and desirable with buyers in today's market? Examples of amenities include screened-in porches, swimming pools, decks, a guest house, ect... You also need to analyze your marketing plan that you will have in place to sell your home. The more exposure your home gets to potential home buyers, the more likely it will seller quicker and for more money. Finally, you have to look the location of the property. If the property is in a location that is popular and more desirable, it will command a higher price. It could be argued that location is the single most important factor that determines the price of a home.

After you evaluate all of these variables, you need to start searching for comparable properties. First, you need to look at 3-5 comparable properties in the same neighborhood or in a nearby neighborhood that have sold within the last 6 months. If the market is very volatile and prices are quickly declining or increasing, you might want to reduce this time frame to the last 3 months. Looking at comparable properties that have recently sold will give you a very good indication as to what your home is worth. Next, you need to look at 3-5 comparable properties in the same neighborhood or simalar neighborhoods that are currently listed for sale. This will give you a good indication of what your competition is. If you are thinking of pricing your home at $200,000, but there is a simalar property in your neighborhood that is in the same condition for $180,000, who's property do you think is going to sell first? This brings me to my next point.

In a normal market, looking at properties that have recently sold is the most important thing you can do to determine the value of your home. However, in today's market it is equally if not more important to look at the comparable properties that are currently listed for sale. This is because prices are declining so fast. Prices are declining quickly because of the incredible number of foreclosed properties that are coming onto the market. Banks are selling properties at a discount because they want to get rid of them quickly, and it seems that banks keep reducing the prices of their properties regardless of what properties have recently sold for. If this is the case in the area where you are looking to sell your home, a sold comp suggesting a price $20,000 above what a foreclosure home in your neighborhood is currently listed for can be deceiving. If you want to compete with these bank-owned properties, you usually have to drop the price of your home or offer incentives such as paying closing costs. In today's market, you have to pay attention to what you are competing against not just what properties have sold for in the past.

Finally, you have to also look at 3-5 comparable properties that have expired because they sat on the market too long and did not sell. Usually these properties don't sell because they are overpriced, so it is good to look at these properties so you can know what prices are too high for you to list your property for sale at. My advice to you is to seek the help of a qualified REALTOR who lives and works in your area. They will be able to help you pull up and analyze these comparable properties to help you determine an appropriate price to list your home at.

Some people think that they should list the house above the price that the comparable properties suggest so they can have some room to negotiate. Some people also have the attitude that "I'll price the property higher, and if it does not sell I will lower the price later." This kind of thinking is not correct, and it will lead you to getting less money for your home. The greatest number of people are looking at your home withen the first few weeks you put your property up for sale. The more time that goes by, less and less people will pay attention to your home. This is what REALTORS refer to as "letting the listing go stale." If you overprice the property upfront, all those people that are looking at your property when you first list the property are going to disregard the property because it is overpriced. Later on, when you finally drop the price, less people are going to be looking at the property, so you will most likely have to drop the price of the property to less than you would have if you had just listed the property for what it was worth to begin with. Study after study has proven that homeowners net more money from the sale of their home if they price the property correctly from the time they first put the property on the market as opposed to starting high and dropping the price later on.

People often have emotional ties to their home, and because of this people often insist on pricing their home for more than it is worth. As a homeowner, you have to try to not let your emotions cloud the picture of what your home is truly worth. You have to analyze what kind of market you are in. If you are in buyers market, you are going to have to price your property competitively in order to stand out above your competition. In order to find out what is a competive price, you have to analyze the numbers from the comparable properties. From my experience, it has always been true that the numbers don't lie. If you price the property according to what the comparable properties suggest, your property will sell. A competant REALTOR should be able to help you price your property correctly.

If you have any questions, please don't hesitate to contact me at nahoom1171@yahoo.com or at (850) 567-0037.

Friday, July 2, 2010

Pros and Cons of Buying Condos

When looking to purchase a home, it's always important to first evaluate your most important needs, and try to match your needs with a property that fits those needs. If you are looking for a place that is low maintenance and inexpensive to purchase, a condo might be a good fit for you. Before you make your decision to purchase a condo though, let's look at what exactly a condominium is as well as the pros and cons of condo living.

Some people think that a condo is defined by it's structure. When people here the word "condo" they imagine a small one story apartment type building. This definition of a condo is actually not correct. A condominium is actually not defined by a certain type of structure or building. A condominium is actually has to do with the ownership rights you have for the property. With a condo, you really only own the property on the inside of the unit. The exterior of the structure and the land that the condo sits on is owned by the condominium association. You can have two different structures that look exactly alike, but one is a condo and one is a townhome. With the townhouse, you own the entire structure you live in and the land it is on. With the condo, you only own the inside of the structure.

Pros of owning a condo

Maintenance- One of the most attractive features about owning a condo is that you do not have to worry about nearly as much home maintenance. When you own a condo, you usually pay a monthly condo fee to the condominium association that you live in. The fee covers things like lawn care, the roof of the building, a termite bond, pressure washing and maintaining the siding on the building, maintenance of all the common areas, and insurance on the exterior of the building. If you are a person with a busy lifestyle or you just don't want to deal with the hassel of mowing the lawn or trimming bushes...condos may be for you.

Amenities-Often times, condo communities have amenities such as swimming pools, basketball courts, tennis courts, club houses and fitness facilities. Some people enjoy being able to use these amenities. The condo fee that condo owners pay will cover the maintenance of these amenities.

Cost of Purchase-Typically condos sell for cheaper than single family homes. This makes them ideal for people who do not want to spend a lot of money on purchasing a home.

Social living- If you live in a condo community, you are surrounded by plenty of neighbors. This can be a great opportunity to meet and be around people.

Cons of owning a condo.

The monthly condo fee- While you do get something in return for the condo fee you pay, sometimes condo fees can be quite pricey. Condo fees can range based on the community anywhere from less than a hundred dollars a month to several hundred dollars a month. If the condo fee is high enough, it's almost like having a second mortgage. Also, if a condo association does not have enough money saved up to pay for a needed large expenditure such as repaving the parking lot and roads, the condo association can issue an additional special assessment on all the condo owners. This brings me to my next point.

It is important to evaluate the condo association's financial statements before you purchase a condo. If the condo lacks the amount of reserves that it needs to fund future expenditures, you can be sure that you will have to pay a special assessment at some point to make up for the lack of needed funds. Also, if you find out that a lot of condo owners are not paying their condo fees, there is a chance that condo fees will be increased for those who are paying their fees. Either that or the condo association will begin to neglect maintaining the properties and common areas.

Limited Outdoor Space-When you purchase a condo, you have no yard that is considered your own. All you have is the common areas. This means you usually can't have gardens, put up fences or anything like that.

Lack of Storage-If you own a house you usually have a garage, carport or outdoor storage facility where you can store things. With a condo, you usually don't have these places to store stuff. When you are purchasing a condo, it is a good idea to budget for a separate storage expense.

Less Privacy-If you live in a condo community there are people all around, so you have less privacy. Sometimes also you will have people living above or below you, so you have to take into consideration the noise factor when you are purchasing a condo.

Resale-When purchasing a property, many people don't plan on living in that property or owning that property forever. With this in mind, being able to re-sell the condo in the future is important. The fact is that there are less people looking to buy condos as opposed to people looking to buy single family homes and townhomes. Less buyers in the market to purchase your property will make it more difficult to sell your property in the future. Also, in our current real estate market, it is very hard to find a lender who is willing to finance the purchase of a condo in Florida. This means that the amount of people looking to buy condos will be lowered even further, which will make it even harder to sell your condo in the future.

Wednesday, June 16, 2010

Older homes vs. Newer Homes

When looking for a home to purchase, most people are faced with the choice of purchasing an older home or a recently built or a brand new home. Both options have their pros and cons, so when faced with the decision of whether to buy an older or newer home, you must really know your housing needs.

I personally am a fan of older homes. Often older homes in older neighborhoods have more character and charm as opposed new homes in newer neighborhoods. Older homes located in older neighborhoods usually have larger yards, more trees and seem much less cookie cutter than the newly built neighborhoods. Also, older neighborhoods located in the hearts of cities usually maintain their value very well and are more likely to appreciate in value compared to newly built homes and neighborhoods built in outlying parts of cities. This is especially true now days. Today there is a trend for people to move closer into the city. This trend to move inward is in large due to the rising cost of fuel. Nevertheless, this is causing homes located centrally in the city to rise in value.

Also, if you renovate an older home you now have the best of both worlds. You have many of the benefits that a newly built home has (i.e. updated electrical and plumbing system, the home is more energy efficient, ect..), with all of the charm and character that an older home offers. If you are buying an older home that has been renovated, it is important to pull permits, look at invoices for work that was done, make sure the people that did the work were licensed, and check to see if there were any warranties for the work that was done.

Although older homes offer the benefits mentioned above, older homes also have their disadvantages.

For homes built before 1967, there is high chance that there is lead based paint present in the home. Usually lead based paint is not a problem if it is painted over, but this may not always solve the problem. Exposure to lead based paint may cause a list of health related problems. For more information on the health risks of lead based paint, please visit http://www.epa.gov/lead/pubs/leadpdfe.pdf

Another disadvantage to older homes is that they are less energy efficient. Older homes usually come with older windows, older heating and air conditioning systems, and less insulation which may cause the home to be an energy hog. However, the city of Tallahassee has programs available that make it very affordable to make your older home more energy efficient. The city is offering rebates on energy star appliances. In fact, until September 30th 2010, city of Tallahassee is offering double rebates on energy star natural gas appliances. The city of Tallahassee also has financial incentives for installing new insulation and repairing air ducts. For more information on financial incentives for making your home more energy efficient, visit
http://www.talgov.com/you/energy/energy_programs.cfm

Another disadvantage that older homes have that might deter young families is the lack of children in the neighborhoods. A lot of time, older neighborhoods do not have a high level of turnover. Many people who live in the older neighborhoods have been there a long time and are empty nesters. The best way to find out if there are children in the neighborhood is to talk to the neighbors who live in the area.

Overall older and new homes have their advantages and disadvantages. When deciding on an older home or a newer home, it's important to look at your housing needs and make sure the home and the neighborhood fit your needs accordingly.

Thursday, May 20, 2010

Tallahassee's 2010 Housing Report

Hello all,

Today I will be providing you with a current update on Tallahassee's residential real estate market.

I took the liberty once again of doing some research using the market statistics for residential home sales here in Tallahassee. These statistics were provided to me from the Tallahassee Board of Realtors. Specifically I looked up the average sale price, the number of homes sold, the average number of days a house is listed for sale before it sells, the sale price to list price ratio ( what a home actually sells for compared to what it was listed for sale at), and the number of homes sold compared to the number of homes listed for sale. The time period I looked at is from January 1st 2010 through April 31st 2010. I not only looked up these statistics for Tallahassee as a whole, but I also looked at these numbers in each specific quadrant of Tallahassee (Northeast, Northwest, Southeast, Southwest).

After I looked up these statistics for 2010, I also looked up these same statistics for the time period of January 1st 2009 through April 31st 2009. I did this because comparing this years market statistics to last years market statistics helps us to see which direction our housing market is headed. The results of my research is below. Again we are comparing the statistics for the time period of January 1st 2010 through April 31st 2010 to the time period of January 1st 2009 to April 31st 2010.

TALLAHASSEE AS A WHOLE

  • Number of homes sold has increased by 24% in 2010 compared to 2009
  • Home prices have decreased on average by 7.2%
  • The number of days the average house is on the market before it sells has increased from 129 days to 142 days
  • The sale price/listprice ratio has increased by 1.68%.
  • The percentage of homes that sold compared to the average number of listings on the market for sale has increased from 25.33% in 2009 to 31.03% in 2010.
Overall we have had more sales and a decrease in home prices. Homes are now selling closer to what they are listed for, but they are staying on the market longer before they sell. We are now selling more homes compared to how many are up for sale which means the size of Tallahassee's housing inventory is decreasing.

NORTHEAST TALLAHASSEE

  • The number of homes sold has increased by 44% in 2010 compared to the same period in 2009
  • The average home price in the northeast has decreased by 17.15%
  • The average number of days a home in the northeast was listed for sale for before it sold increased from 125 days in 2009 to 138 days in 2010.
  • The average sale price/list price ratio went up by 1.64%
  • The percentage of homes that sold compared the average number of homes listed for sale increased from 25.75% in 2009 to 37.95% in 2010.

Overall northeast Tallahassee saw a whopping increase in sales activity (largely due to the liquidation sale of the condos at Barrington Park Condos), and a large decrease in home prices. It has taken longer on average to sell a house in the northeast this year, and homes in this area are now selling for closer to what they are listed for sale at. Finally, the inventory of homes has decreased in the northeast this year.

NORTHWEST TALLAHASSEE

  • The number of homes sold in 2010 has increased by 34.8% compared to the same time period in 2009.
  • The price of the average home in the northwest has decreased by 2.96%
  • The average number of days a home stays on the market for sale before it sells has increased from 139 days in 2009 to 141 days in 2010.
  • The average sale price/list price ratio has increased by .85% this year
  • The number of homes sold compared to the number of homes listed for sale has increased from 20% in 2009 to 25.55% in 2010.

Overall, we have seen a big increase in sales in the northwest part of Tallahassee, and prices have decreased by a small amount on average. Once again, housing inventory on this side of town has decreased, and it has taken just a couple more days on average to get a home sold this year compared to in 2009. With the exception of "number of homes sold." real estate in the northwest has remained pretty stable in 2010 compared to the year prior.

SOUTHEAST TALLAHASSEE

  • The number of homes sold on the southeast has decreased by 4.7% compared to the same time period last year
  • Prices have come down this year by 14.7% on average compared to last year.
  • The number of days on average it has taken to sell a home in 2010 has decreased from 133 days in 2009 to only 116 days in 2010.
  • The average sale price of a home compared to the average price a home is listed for sale at has decreased by 1.55%
  • The percentage of homes sold compared to homes listed for sale has decreased from 30.88% in 2009 to 29.33% in 2010

Overall the real estate in southeast Tallahassee has gone in a different direction than real estate in Tallahassee as a whole. Sales have decreased, inventory of homes has increased, and it has taken less days on average to sell a home this year compared to last. Prices have decreased which is the only statistic that is the same as the rest of Tallahassee.

Southwest Tallahassee

  • The number of sales is exactly the same in 2010 as it was in 2009 on the southeast side of Tallahassee
  • The average price of a home has decreased by 11.3% on this side of town this year.
  • The average number of days it took to sell a house was 95 in 2010 compared to 99 in 2009.
  • Average sale price/list price ratio decreased by .25%
  • The number of homes sold compared to the average number of homes listed for sale decreased from 30.88% in 2009 to 29.33% in 2010

Southwest Tallahassee has the least amount of sales activity of any of the other quadrants of Tallahassee. Sales stayed the same, prices decreased, and housing inventory has increased.

CONCLUSION AND FORWARD OUTLOOK

Overall the fundamentals of the real estate market in Tallahassee are looking strong. Sales are up and housing inventory is down in 2010. This has been caused by an increase in demand for housing, which has been caused by several factors including an increase in consumer confidence, decreasing home prices and new loan programs designed to get buyers financed to purchase a home.

Prices have declined, but this is not due to the fundamental principals of demand and supply. In fact, demand has increased and supply has decreased which would lead one to think that prices should have increased this year. This is not the case though. Prices have dropped because of the rising number of distressed sales (short sales and foreclosures) that we have seen this past year. Distressed sales usually sell for below market value which decreases the value of surrounding properties. Once all of the distressed sale properties get sold, our housing market's fundamentals are in place to lead us back to rising real estate values. That could be a while though...possibly a couple years.

If you have any questions about our local real estate market, please feel free to call me at (850) 567-0037 or email me at nahoom1171@yahoo.com

Have a great week!

Tuesday, May 11, 2010

How to evaluate and find a good investment/rental property.

There is no doubt that the current economic condition our country is in is far from what many people picture as a healthy and vibrant economy. With high unemployment, rising fuel costs, the limping housing market, and the multitude of banks and other businesses that are failing...our country is struggling to nurse our economy back to a healthy state. However, one thought to ponder is this... and I quote "during an economic recession, money does not disappear, it simply changes hands."

What this means is that even though an economic recession causes a lot of people financial problems, it also creates great opportunities for some others to make money. One great opportunity to make money right now is that of purchasing investment property for the purpose of generating rental income. Home prices are reaching lows that we have not seen for almost 10 years. Many reasons have contributed to the decline that we have seen in home prices. It is harder to get a loan to purchase a home now days, which has caused demand for homes to come down, thus decreasing home prices. Also, many banks that have foreclosed on properties are selling these foreclosed homes for much below market value because they want to get these "non-performing assets" off their books as quickly as possible. When banks do this, it also contributes to depressing the values of the homes around the homes they sell.

While home prices have come down, demand for rental properties has remained very stable. With less people able to buy homes now days due to stringent lending standards, there are now more people looking to rent. Also, there are millions of people who are losing their homes to foreclosure in our country, and these people are also now looking for places to rent. With that being said, demand for homes to rent is still strong.

With prices for homes being very low and rental rates still high, it is now easier than it has been in a long time to purchase a property, rent it out and have the rental income exceed the mortgage payment and other expenses of owning the home. There is now a tremendous opportunity for people who have a lot of idle cash and good credit. These people have the ability to buy property for very cheap, rent the property out and make a strong return on their investment. I have had the opportunity to help several investors purchase properties for great prices. These investors were able to rent out their properties and earn return on investments of around 9% or 10% a year. This is a way better return than can be earned by keeping your money in a bank. Also, keep in mind that the return of 9% or 10% does not even take into account the increase of the value of the property itself over time. I know it is hard to believe right now, but yes, property values will begin to increase again.

So if you are one of those people that has some money to invest and you have good credit, what do you need to do to begin finding great investment property that you can earn a high return off of? First off, you need to figure out how expensive of a property you can buy. If you plan on purchasing a property with all cash, it is very simple. You just decide how much cash you are willing to spend on a property. If you are going to take out a loan to purchase a good investment property, you can go to a local lender and after evaluating your income, expenses, assets and credit score, he/she can tell you what you can afford to spend on a property.

The second thing you need to do is get familiar with rental rates in your area. You can do this by talking to a competant real estate agent or property manager in your area. You can also get a good idea of rental rates by searching online at properties that are for rent.

Once you have figured out how much you can afford to spend on your investment property and you have become familiar with rental rates in your area, it is time to locate some potential properties. When you are searching for the right property, you have to take several things into consideration. The first thing is location, location, location. In my book, this is the number one thing to look at. A good location is going command a higher rental rate, it will make it easier to sell the property in the future and it will make it much more likely that the value of the property will appreciate over time. The third thing to look at is the condition of the property. If the property is very cheap, but you have to sink a lot of money into it, it might not be a good deal. However, there are times where you can get a very good deal on properties that need fixing up, so you just have to evaluate the property on a case by case basis and make a good business decision. Getting educated on property values in different areas of your town can help you with making this business decision. A competant REALTOR should be able to help educate you on property values in different areas in your city.

Once you have figured out what you can afford to spend on a property, you have become familiar with rental rates in your area, and you have located a few good canidates for investment properties, it's time to figure out your projected rental incomes and projected expenses for each property. Figuring out the the projected rental income for the properties you are interested in is fairly easy. Just find out how much the rental rates are for simalar properties in the same neighborhood. You can do this by knocking on doors and asking residents what they pay for rent, or you can search online or call the "for rent" signs in the neighborhood and inquire about how much people are asking for rent.

Figuring out expenses is a little bit more involved. Here are the following expenses you are going to have to account for and how you can figure them out.

  1. Principal and interest expense (if you get a loan to buy the property)- You can figure this out by plugging the numbers into a financial calculator. You just need to know how much money you will be borrowing, what your interest rate is for the loan, and how long of a period the loan is amortized over (i.e. 30 years, 15 years) If you don't want to figure this out on your own, call your lender and they can tell you what this expense will be.
  2. Taxes-You can get a very good estimate of your tax expense by calling your local property appraiser's office. Taxes are figured out by multiplying the sale price of the property by the millage rate in the area the property is located. So if you know these figures, it is easy to figure out on your own.
  3. Insurance-You can figure this out by calling your insurance agent. It is sometimes good to get a few different quotes from different companies.
  4. Homeowners association or condo association fees-Some properties are located in communities that charge association fees. Usually for the fees, the association will take care of things like road maintenance and lawn care in the neighborhood. Condo associations usually have the highest fees, but you also get more for the high fees you pay for. To find out what the association fees are in a given neighborhood and what the fees cover, you should contact the homeowners or condo association that the property is located in directly.
  5. Misc Maintenance expenses-A good rule of thumb is that yearly maintenance expenses will be about 1-2% of what you purchase the property for. This expense can vary depending on how old the property is, what the condition of the property is like and how much maintenance (if any) your homeowners or condo association takes care of. For instance, most condo associations are responsible for the roof. So if this is the case, you do not have to budget for replacing your roof.

Once you have figured out the property's projected rental income, and you have figured out it's projected expenses, you can figure out what the property's annual return on investment will be. You subtract your yearly property expenses from your yearly rental income to give you your yearly net cash flow (hopefully it's positive). You next divide this yearly net cash flow by the purchase price to give you your annual return on investment. If your projected return on investment is acceptable to you and you like the property, you can next proceed to making an offer on the property.

I have successfully helped several investors locate and purchase lucrative investment properties. If you have any questions about buying rental properties please feel free to give me a call at (850) 567-0037 or email me at nahoom1171@yahoo.com

Thursday, March 18, 2010

Look out for rising Mortgage Rates After March 31st.

After March 31, The Fed has announced that it will stop buying mortgage backed securities from both Fannie Mae and Freddie Mac, which will in turn possibly cause interest rates on home loans to rise.

Last year, as a result of the of the mortgage crisis and as a result of the Government takeover of two of the largest companies in the secondary mortgage market, The Federal Reserve began purchasing mortgage backed securities from Fannie Mae and Freddie Mac in order to keep the secondary mortgage market liquid so that lenders could continue to issue loans. The Fed purchasing these mortgage backed securities was a way to keep interest rates low so that demand for purchasing houses would increase and continue to remain high. However, as of March 31st, the Fed will no longer continue to purchase these mortgage backed securities from Fannie Mae and Freddie Mac, which means it will make it harder for lenders to issue loans and sell them into the secondary mortgage market. There is a good possibility that this will drive interest rates on home loans up. To better understand this, it might be helpful for me to briefly explain how the secondary mortgage market works, and how it affects interest rates. I will also explain what mortgage backed securities are. Once you get an understanding of these concepts, you will better understand the Dramatic effect that could take place once the fed stops purchasing mortgage backed securties from Fannie Mae and Freddie Mac on March 31st.

When a lender makes a home loan to a customer, it is rare that the lender keeps that loan in their own portfolio. Usually what happens is first the local lender makes a loan to Suzie Homeowner. This lender is part of what is called the primary mortgage market. After this lender who is involved in the primary mortgage market, issues the loan to Suzie Homeowner, that lender sells the loan off to another company who is involved in the secondary mortgage market, such as Fannie Mae. This system is good for lenders in the primary mortgage market, because they make the fees off of initiating the loans, and then they sell the loan to a company in the secondary mortgage market, and the bank who initially made the loan gets their cash back so that it can make more loans to other customers and in turn make more money on loan fees. So you see, the banks in the primary mortgage market make a lot of their money on the fees from initiating the loan, and then they sell the loans to companies in the secondary mortgage market.

The companies in the secondary mortgage market buy hundreds, thousands and even millions of these home loans from lenders who initiate these loans. The companies in the secondary mortgage market can either hold these loans on their books and earn money on the interest received from the loans, or they can package these loans up and sell them to investors as mortgage backed securities. You are probably asking "what the heck is a mortgage backed security?"

A mortgage backed security is a lot like a share of stock. It is a trading security that is actively traded in the open market in the same way that stock is traded. A share of stock is backed by the value of a company. A mortgage backed security is backed by the value of many mortgages that have been pooled together. Mortgage backed securities are created when companies in the secondary market pool together many mortgages that they own and create securities (called mortgage backed securities) that are backed by the value of these pooled loans. They in turn sell these securities to private investors much like companies sell stock to private investors.

This whole process that starts off with the local lender making a loan to Suzie Homeowner, and that ends with investors buying mortgage backed securities, is what enables banks to continue making loans at affordable interest rates.

However, in 2008, Fannie Mae and Freddie Mac ( the two biggest companies in the secondary mortgage market) began having bad problems because many of the loans that they purchased from lenders in the primary mortgage market, began to default. These bad loans made it so investors stopped buying mortgage backed securities from Fannie Mae and Freddie Mac. This eventually led to Fannie Mae and Freddie Mac ending up on the brink of failure, which led to the government taking them over.

The government believed that Fannie Mae and Freddie Mac needed to continue. This was because these companies played such a large role in the secondary mortgage market industry. If Fannie Mae and Freddie Mac failed, it would make it much harder for local lenders to make loans and sell them off into the secondary mortgage market. This would mean that local lenders would have to start holding more loans in their own portfolios. This means lenders making loans would have to take more risk, which means they would charge borrowers higher interest rates. These higher interest rates would reduce demand for purchasing houses, which would be bad for the economy. At the time this was going on, this could have sent our country into a depression.

To prevent all of this from happening. The government got The Federal Reserve to start buying up Mortgage backed securties from Fannie Mae and Freddie Mac. This in turn enabled Fannie Mae and Freddie Mac to continue to buy mortgages from lenders in the primary mortgage market, which enabled lenders to freely make loans at low interest rates. However, after March 31st, the Fed will not continue to buy mortgage backed securities from Fannie Mae and Freddie Mac.

After March 31st, we will be relying on private investors once again to start purchasing mortgage backed securities from Fannie Mae and Freddie Mac. Some think the private investors will start buying mortgage backed securities again from these companies because lending standards are much higher now, which would make the loans that Fannie and Freddie have in their portfolios, good loans. However, would you buy stock from a company that just emerged from bankruptcy? I would not. It's the same concept.

It is very likely that private investors will be very weary about buying mortgage backed securities from Fannie and Freddie. Again, this will make it harder for lenders who make loans, to sell the loans into the secondary mortgage market. This will drive up interest rates on home loans. Higher interest rates will mean less demand for housing and will possibly lead to a further decrease in home values.

If you are thinking about buying a home. I would find a home as soon as possible and lock in a low interest rate before they go up after March 31st. If you have any questions on this subject, please feel free to email me at nahoom1171@yahoo.com or give me a call at 850 567-0037

Thursday, February 25, 2010

Foreclosures and Shortsales. What you should know

Today I will be talking about foreclosure sales and short sales. In today's real estate market, our housing inventory is loaded with distressed properties. Both short sales and bank foreclosed homes are sitting on the market waiting for buyers to come along and move in. While you can get a great when you buy one of these properties, you also must understand that buying one of these properties entails more risk.

Before I get into talking about short sales and foreclosure, I think it would be a good idea to define what a short sale and a foreclosure property are. A foreclosure property is when a bank has already seized the property from the last owner of the property because the previous owner was not making his/her mortgage payments. The property is now owned by the bank.

With a short sale, the current owner has a mortgage on his/her property, but the fair market value of the property is less than what they owe on their loan to the bank. Also, property owners are also usually behind on their mortgage payments when they want to do a short sale. When a property owner is in this situation, and wants to sell his/her home, they negotiate with the bank to accept an amount of payment from the sale of the property that is less the the amount of money they owe the bank for their home loan. Banks have incentive to take less money than the property owner owes to them because they do not want to foreclose on and repossess the home. It costs the banks a lot of money to foreclose on a home, so by working a short sale, the bank avoids the foreclosure expenses.

As I mentioned, you can get a great deal when you buy a short sale or a foreclosure property.

FORCLOSURES
With foreclosed properties, banks own the properties and are paying taxes and insurance on these properties every month. In addition to that, these properties have a high opportunity costs to the banks. Instead of having these "non performing assets" as banks call them, on their books, they would rather sell them and have cash to make more loans with. All these things I have just mentioned make banks motivated to sell these properties. If you have cash to purchase a property, and you can close on the deal quickly, there is a good chance you can get a great deal on a foreclosure property. Banks like it when buyers purchase properties with cash because they do not have to worry about the deal falling through because the buyer's home loan financing falls through. Banks also like quick closings because the faster they sell the property, the less money they have to pay on taxes and insurance related to the property.

However, just because you can find a great deal on a forclosure property, it does not mean the bank is going to give the property away. Banks do their due diligence in order to find out the value of the property that they own so that they can get fair market value or at least close to fair market value when they sell the property. Banks usually have a real estate agent, in the town where the property is located, go ahead and list the property for sale. The listing agent will use his/her knowledge of the local real estate market to list the property at fair market value. Also, banks will sometimes have an appraisal performed on the property by a liscensed property appraiser, to find out what the value of the property is. I have had clients who have gotten great deals on forclosed home, and I have had clients, who have put offers on foreclosed homes, have their offers rejected by banks.

When you are buying a foreclosed property, you are taking a larger risk than when you buy other property. Banks own these homes. However, the banks usually do not know anything about these properties, and they almost always make buyers purchase the homes in "as is" condition. This means that it is up to the buyer to verify everything that is wrong with the property before purchasing it. When purchasing a foreclosure property there are a few things you can do to minimize risk. First off, work with a competant real estate agent who has worked with foreclosure properties before. Second, make sure that you have the property inspected by professionals before purchasing the property. The inspections I would recommend include include a general home inspection performed by competant home inspection company, and a wood destroying organisms inspection. If you need any other inspections done, the general home inspector should let you know. You can visit http://www.bobbynahoom.com/ to find home inspection companies that I suggest using. In addition to inspections, you need to have a survey performed on the property to make sure there are no encroachments on the property. You also need to have a title search done on the property to make sure that you are buying the property with clear title. You should purchase a title insurance policy as well which will protect you from title defects if any pop up that are not found in the title search.

Going through a foreclosure is much like buying a normal property, but instead of dealing with a seller that has lived in the property or at least seen the property, you are dealing with a bank who has never seen the property. The time frame to close for a foreclosure is the same as a normal sale. When you are buying a foreclosed property you must prove to the seller bank that you either have the funds to purchase the property or that you have been approved for a loan to purchase the property.

SHORT SALES
While foreclosures are a little more risky than normal sales, they are a lot less complicated and time consuming than short sales are. When you are purchasing a short sale, you are dealing with two parties. You are dealing with the actual owner of the property, and you are dealing with the bank that the property owner has their home loan through (remember this is because in a shortsale the bank has not repossessed the owner's home yet, so they are not officially the owners). You have to get both the bank and the property owner to agree to the offer you make. In short sales, banks usually take a while to approve the offer. This approval process usually makes the short sales take a longer time. When you go to purchase a short sale, expect about 60-90 days before you can close and move in to your home.

There are usually less unknowns with a short sale as opposed to a foreclosure home because you are dealing with a property owner who usually knows about the property. However, you still need to perform your due diligence to make sure you know as much as possible about the property before you purchase it. Again you should work with a REALTOR who has experience with short sales, get inspections done, a survey done, a title search done and get title insurance. Short sales are usually sold "as is" but sometimes the seller's will perform repairs.

In summary, there are a lot of short sales and foreclosed properties for sale right now. You can find great deals when buying these properties, but you need to understand that you must do your homework before you purchase one of these properties.

If you have any other questions about short sales or foreclosure properties, please feel free to call me at (850) 567-0037 or email me at nahoom1171@yahoo.com

Thursday, January 21, 2010

Tallahassee Real Estate Market Update-things are looking good!

Despite the doom and gloom that everyone is hearing about in the news these days about real estate, there are some areas throughout the country where real estate markets are improving. By nature, real estate markets are unique from city to city and from town to town. With that in mind, you must realize that the doom and gloom you hear in the media about the real estate cannot be true for everywhere. In fact a perfect example is Tallahassee's Real Estate market. The real estate market in Tallahassee seems to be doing pretty well.

As a REALTOR, I have access to market statistics for Real Estate here in Tallahassee that are provided to me through the Tallahassee Board of Realtors. This past week I have taken the liberty of doing some research to find out which direction our local real estate market is headed in. In my research, I divided up houses both by area and by price range. I divided up Tallahassee into 4 quadrants, Northeast, Southeast, Northwest and Southwest. The price ranges I used were from $0-$125K, $125K-$250K, $250K-$375K, $375K-$550K and $550+. I compared market statistics on houses in each of these price ranges and in each area for the last quarter of 2008 to the houses in each price range and in each area for the last quarter of 2009.

As a whole, the number of houses on the market in Tallahassee has decreased from last year, and the number of homes sold has increased from last year. With housing inventory down and sales up, this is a strong indicator that demand for homes in Tallahassee is increasing, and our real estate market is on it's way back to being healthy. Here are a few examples to illustrate my point. On the northeast side of town for properties under $125,000, the ratio of homes sold over number of homes listed for sale on the market increased 29% in the fourth quarter of 2009 compared to the fourth quarter of 2008. Another example can be seen for homes priced between $125,000 and $250,000 located on the southeast side of Tallahassee where there was a 45% increase in the ratio of homes sold over the number of homes listed for sale on the market. The increase in this ratio of homes sold compared to homes listed for sale has taken place all throughout Tallahassee. For houses above $550,000 the increase in this ratio for 2009 is smaller compared to the increase in this ratio for homes in the lower price ranges. Again the increase in the ratio of homes sold over homes on the market for sale means that more homes are selling and inventory of homes is decreasing. This is a good sign of increasing demand which is what ultimately leads to home values increasing.

As a whole, Tallahassee has seen a small reduction in the value of homes in the last year, but the losses in value are small and it appears that prices are bottoming out. In some areas of Tallahassee though and in certain price ranges, home values are actually increasing! Yes, you read that right, increasing. For instance,  for homes priced between $250,000 and $375,000 located on the northeast side of town, home prices were 1.3% higher on average in the last quarter of 2009 compared to the last quarter of 2008. Another example are homes located in northwest Tallahassee that are in the price range of $125,000 to $250,000. In the last year, these homes have seen an increase in value of 1.5%. There are also a couple other examples of homes in certain price ranges and in certain areas where small gains in value have occured in the last year. In all of the other areas and price ranges, prices have either remained flat or have experienced small decreases in value. This is a far cry from what the media is telling us though.

The last value that I looked at when doing my market research was the average days on the market for homes before they sold. This is another number you can look at to assess what demand is like.  When this number is high, usually it means demand is weak, and when this number is low it usually means demand is high. Overall the numbers show that about half of the subsets ( homes in certain areas and certain price ranges) of homes throughout Tallahassee have seen decreases in the number of days in takes to sell a home, and other half of the subsets have seen increases in the number of days that it has taken to sell a home.  Here are a few examples.  On the Southwest side of town for homes priced from $125,000-$250,000 the average number of days on the market before a home sold decreased by 74days in the 4th quarter of 2009 compared to the 4th quarter of 2008.    For homes priced between $375,000-$500,000 on the northeast side of town this number increased by 39 days in 2009, and for homes priced between $0 and $125,000 on the northwest side of town this number increased by 39 days as well. 

While Tallahassee's Real Estate market is still not as good as we would like it to be, it is headed towards recovery.  Although home prices overall are slightly down, and the number of days it takes to sell a home is about the same as last year, the number of homes sold has increased and the amount of homes listed for sale has decreased.  This shows that demand for homes is picking up and the supply of homes is going down which means it should not be too long before we see home prices starting to increase overall throughout Tallahassee.  As mentioned before there are homes in some areas in certain price ranges that are already increasing in value.  With the tax credit deadline for first time and repeat homebuyers coming up at the end of April, we can expect to see a surge of demand for homes in the next couple of months.   Because of this, right now might be a great time to list your home in Tallahassee for sale if you are thinking about doing so.