Full 3rd Quarter Tallahassee Residential Real Estate Market Report

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 Multiple Listing Service 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 third quarter of 2011 to the third quarter of 2012.. To make my data as meaningful as possible, I divided properties by both price range and location. I divided the properties up into 5 different price ranges and 4 different areas of Leon County. In my research I looked up the number of homes listed for sale 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 percentage of what a home sold for compared to what it was listed for sale at). I also looked at what I call the "distressed sales/total sales ratio" This ratio is the number of distressed sales (foreclosures and short sales) divided by the total number of  total sales. This figure is important because the higher this ratio is the more downward pressure on home prices there will be. Below is a summary of the data that I found. I have categorized the data by price range and location as well as for Tallahassee as a whole.

Year over Year Market Statistics for Tallahassee As A Whole

• 3.6 % increase in the number of properties listed for sale (1008)
• 4.4% increase in the number of properties sold (684)
• 3.1% decrease in the average sales price ( average home price in 3rd qtr 2012 was $172,629)
• 1.53% increase in the average sale price/list price ratio ( 96.04%)
• 8.7% decrease in the number of days it took a property to sell for on average (126 days)
• 4.9% increase in the distressed sales/total sales ratio (23.1% of all sales were distressed sales in 3rd Qtr. of 2012).

Summary of Tallahassee Real Estate Market as a Whole

Overall the fundamental health of the real estate market in Tallahassee is good.  The Tallahassee real estate market for single family residential property showed signs of improvement by most measures.  Both the number of properties sold as well as the number of properties listed for sale increased.  Also, the average sale price/list price ratio went up slightly which means that single family residential properties sold for an amount closer to their listing price than compared to the same time a year earlier.  In addition to this, the average number of days it took to sell a property that sold in the third quarter of 2012 decreased by 8.7% from the same time a year ago which is a sign of improvement in our real estate market.  To sum up all of the improvements that we saw in the third quarter of 2012, we basically saw both listings and sales increase, the average amount of time it took for a home to sell went down, and homes are now selling closer to their list prices.

While Tallahassee's real estate market seems to be improving, it appears that distressed sales (foreclosures and short sales) are still holding prices down in Tallahassee.  During the third quarter of 2012, 23.1% of total sales were distressed sales. That's up for 18.2% during the same time period a year earlier.  Distressed sales typically sell at a discount compared to non-distressed sales so this means that they bring down the value of nearby properties.  With distressed sales increasing to nearly a quarter of sales in the third quarter of 2012, it's no surprise that the average sales price of homes in Tallahassee decreased in the the 3rd quarter of 2012 down from the same time period a year earlier.

It is worth noting that price declines took place mostly in homes in the $250,000 and below price ranges.  Homes in the $250,001 and up price ranges actually saw increases in their average prices.  The reason that Tallahassee's market as a whole saw a year over year decrease in average sale price in the third quarter is because the vast majority of properties that sell in Tallahassee are $250,000 and below.  

The fact that price declines have taken place in the lower price ranges and not in the higher price ranges makes perfect sense though.  Distressed sales make up a much larger proportion of the total sales in the properties that sold for $250,000 and below.  This means that distressed sales are keeping prices suppressed in these lower price ranges.  Once you get into the $250,001 and up price ranges though, distressed sales start to account for a much smaller percentage of total sales.  This means that distressed sales are not suppressing home prices for homes priced $250,001 and up to nearly the extent that they are in the $250,000 price ranges.  This is most likely why selling prices of homes n the upper price ranges are going up.

Looking forward, it appears that distressed sales are going to continue to account for a large percentage of home sales in Tallahassee.  The long and drawn out judicial process we have for foreclosures here in Florida has slowed down, and continues to slow down, the rate at which these foreclosure properties are released onto the market.  This means that getting rid of all of the foreclosure properties that banks own in Tallahassee is going to be a long and drawn out process.  Unfortunately our local real estate market will not be able to fully recover until most of these distressed sales are sold.  

If we continue on the same rate we are going now, I expect that distressed sales will probably shrink down to an amount that is small enough to where our real estate market will start to see price increases across the board in all of the price ranges.  Of course, if congress fails to resolve the fiscal cliff issue or if taxes are raised on people who make $250,000 and up ($200.000 and up for single individuals) as some in congress are proposing, our economy as a whole could get worse.  This would also slow the recovery of our real estate market and keep prices down.  This is because many of the people who are buying these distressed sales are wealthy investors who make more than $250,000 ($200,000 if single) a year.  If their taxes are increased they will be less likely to purchase distressed properties because they will have less money to do so.  This means distressed properties will linger on the market longer which will prolong the real estate recovery.  

Year Over Year Market Statistics for the $0-$125,000 price range.  

Northeast Tallahassee

• 4.4% increase in the number of properties listed for sale (65)
• 4.1% decrease in the number of properties sold (46)
• 5.1% increase in the average sales price ($94,883)
• 3.38% increase in the average sales price/list price ratio. (93.61%)
• 13.6% increase in the average number of days it took to sell a home (142 days)
• 24.5% increase in the distressed sales/total sales ratio.  (37% of the homes sold were distressed sales)

Northwest Tallahassee

• 1.1% decrease in the number of properties listed for sale (179)
• 16% increase in the number of properties sold (130)
• 1.8% decrease in the average sales price ($77,071)
• 1.57% decrease in the average sales price/list price ratio (93.69%)
• 1.96% decrease in the average number of days it took to sell a home (150 days)
• 0.9% decrease in the distressed sales/total sales ratio (27.7% of total sales were distressed sales)

Southeast Tallahassee

• 14% decrease in the number of properties listed for sale.( 74)  
• 32.4% decrease in the number of properties sold (46)
• 9.7% increase in the average sales price ($79,522)
• 5.05% increase in the average sales price/list price ratio (95.81%)
• 21.5% decrease in the average number of days that it took to sell a property (139 days)
• 8.6% decrease in the distressed sales/total sales ratio (32.6% of total sales were distressed sales)

Southwest Tallahassee

• No change in the number of properties listed for sale (59)
• 24% increase in the number of properties sold (41)
• 27.4 % decrease in the average sales price ($44,316)
• 1.46% increase in the sales price/list price ratio (92.4%)
• 35.3% decrease in the number of days that it took to sell a house. (99 days)  
• 0.6% increase in the distressed sales/total sales ratio (36.6% of total sales were distressed sales)

Summary of the market for the $0-$125,000 price range

Overall it seems that the market for homes in the Tallahassee that are under $125,000 is improving.  This price range seems to be the price range that is most driven, thus most impacted, by foreclosures and short sales (distressed sales).  33.6% of total sales in this price range were distressed sales.  This is about 10% more than the average for Tallahassee as a whole. In this price range, the distressed sales/total sales ratio went up in the 3rd quarter of 2012 about 3.7% from the same time period a year earlier.  The number of properties listed for sale in this price range has come down in the third quarter of 2012.  At the same time the number of properties sold in this price range in the third quarter of 2012 inched up.  With listings down and sales up, supply and demand is headed in a healthy direction, that if it continues on the same direction, will lead us back to price gains in this particular price range. A couple other positive signs for the $125,000 and below market is that the average sales price/list price ratio edged up a little bit and the average number of days it took to sell a property has come down some.  This means that properties are selling for closer to their listing price and it's talking less time on average to sell properties in this price range.  

One negative sign that we saw in this price range during the third quarter of 2012 is that the average sales price is slightly down.  With the distressed sales/total sales ratio going up though, this is not that much of a surprise.  The increase in the proportion of distressed sales compared to total sales is holding the prices of homes in this price range down.  This is because distressed sales typically sell at a discount compared to non-distressed sales which brings the value of surrounding properties down.  The proportion of distressed sales compared to total sales will most likely continue to increase in the near future.  This will probably keep the prices of properties in this price range suppressed.  However, due to the laws of supply and demand, the trend that we are seeing of the shrinking amount of housing inventory will eventually lead us to price gains again in this price range.  How soon is the big question.  Inventory has been shrinking in this price range for a couple years now, and we still have not seen prices increase yet.

Year Over Year Market Statistics for the $125,001-$250,000 Price Range

Northeast Tallahassee

• 6.5% increase in the number of listings (263)
• 10.4% increase in the number of properties sold (201)
• 0.6% decrease in the average sales price ($186,623)
•  0.22% decrease in the average sales price/list price ratio (96.41%)
• 3.5% increase in the average number of days it took to sell a property (119 days)
• 4.6% increase in the distressed sales/total sales ratio (18.9% of total sales were distressed sales)

Northwest Tallahassee

• 17.4% increase in the number of properties listed for sale (74)
• 14% decrease in the number of properties sold (43)
• 6.1% decrease in the average sales price ($155,188)
• 1.25% decrease in the average sales price/list price ratio (97.74%)
• 17.1% decrease in the average number of days it took to sell a property (126 days)
• 11% increase in the distressed sales/total sales ratio (21% of total sales were distressed sales)

Southeast Tallahassee

• 36% increase in the number of properties listed for sale (53)
• 5.9% increase in the number of properties sold.(36)
• 4.82% decrease in the average sales price ($165,455)
• 1.25% increase in the average sales price/list price ratio (97.48%)
• 11.4% decrease in the average number of days it took to sell a property( 117 days)
• 16% increase in the distressed sales/total sales ratio( 27.8% of total sales were distressed sales)

Southwest Tallahassee

• 50% decrease in the number of properties listed for sale (7)
• No change in the number of properties sold (6)
• 6.71% increase in the average sale price ($160,445)
• 1.4% decrease in the average sales price/list price ratio (93.02%)
• 11.7% increase in the average number of days it took to sell a property
• 33.3% increase in distressed sales/total sales ratio.( 33.3% of total sales were distressed sales)

Summary of the $125,001-$250,000 price range

Much like the properties in the $0-$125,000 price range, the average price of properties in the $125,001-$250,000 price range have come down slightly in the third quarter of 2012 compared to the same time period a year earlier.  The distressed sales/total sales ratio increased in this price range by 7.7%.  The increase in the distressed sales/total sales ratio is again the most likely reason for the decrease in the average sales price for homes in the price range.  The number of properties listed for sale in this price range did go up slightly though, so this might also have something to do with the decrease in prices.  Per the laws of supply and demand, if you increase the supply then prices will come down.

The total number of properties that sold in this price range did increase.  Also, the average sales price/list price ratio went up slightly as well which means that in the third quarter of 2012 properties in this price range sold for an amount closer to what they were listed for sale at compared to the same time period in 2011.  Finally, there was a slight decrease overall in the number of days on average that it took to sell a property.  

In certain areas of Tallahassee there were some deviations to the market averages in this price range that are worth noting.  First off, northwest Tallahassee saw a 14% drop in the number of properties that sold in this price range.  In southwest Tallahassee there was a 50% decrease in the number of properties listed for sale.  There was also a 6.7% increase in the average sale price for homes in southwest Tallahassee.  

Overall there was more activity in the 3rd quarter of 2012 compared to the third quarter of 2011 for homes in this price range.  Both sales and listings increased year over year.  The market for homes in this price range seems to be improving overall.  The increase in the proportion of distressed sales compared to total sales seems in be holding prices down for homes in this price range though.  This trend will most likely continue into the next year.

Year Over Year Market Statistics for the $250,001-$450,000 Price Range

Northeast Tallahassee

• 26% increase in the number of properties listed for sale (150)
• 11.9% increase in the number of properties that sold (94)
• 1.8% increase in the average sale price($327,327)
• 1.2% increase in the average sale price/list price ratio (96.37%)
• 16.1% decrease in the average number of days it took to sell a property.(99 days)
• 5% increase in the distressed sales/total sales ratio (7.4% of total sales were distressed sales)

Northwest Tallahassee

• 33.3% increase in the number of properties listed for sale (16)
• 166% increase in the number of properties sold (8)
• 10.7% decrease in the average sales price ($314,000)
• 2.12% increase in the average sale price/list price ratio(94.73%)
• 49.2% increase in the average number of days that it took to sell a home (182 days)
• 12.5% increase in the distressed sales/total sales ratio (12.5% of total sales were distressed sales)

Southeast Tallahassee

• 19% decrease in the number of properties listed for sale (17)
• 64% increase in the number of properties sold (18)
• 0.6% increase in the average sales price ($308,755)
• 20.4% increase in the average number of days that it took to sell a property (130 days)
• 1.48% increase in the average sale price/list price ratio (98.02%)
• 12.6% decrease in the distressed sales/total sales ratio (5.6% of total sales were distressed sales

Southwest Tallahassee

• 25% decrease in the number of properties listed for sale
• Sales increased from 0 sales in 3rd quarter 2011 to 2 sales in the 3rd quarter of 2012
• Average sales price in 3rd quarter of 2012 was $349,000
• The average sales price/list price ratio in 3rd quarter 2012 was 96.68%
• In the 3rd quarter of 2012 it took an average of 40 days to sell a property
• There were no distressed sales either year

Summary of the $250,001-$450,000 price range

The vast majority of sales in this price range (about 93%) took place in the northeast and southeast parts of Tallahassee.  Distressed sales accounted for a higher proportion of sales in the third quarter of 2012 compared to the same time period in 2011. Other than that though, all other market indicators for properties in this price range improved in the 3rd quarter of 2012 compared to the third quarter of 2011.  

Both the number of properties listed for sale and the total number of properties sold increased year over year in the third quarter of 2012.  The average sale price/list price ratio for properties in this price range also slightly went up, indicating that homes are selling for an amount that is closer to what he properties are listed for sale at.  The average number of days that it took to sell a property in this price range in the third quarter of 2012 decreased by 9 days on average.  Finally the average sale price for homes in this price range actually increased in the third quarter of 2012 from the same time period a year earlier.  This differs from the trend of Tallahassee's market as a whole which is good news for people who own homes n this price range.  

The increase in prices for homes in this price range actually makes perfect sense though.  The proportion of distressed sales compared to total sales for homes in this price range is much lower than Tallahassee as a whole.  23.1% of total sales were distressed sales for Tallahassee as a whole.  In the $250,001-$450,000 price range though, distressed sales only accounted for 7.4% of total sales.  This means that the number of distressed sales in this price range was not large enough to drive prices down like it was for homes in the lower price ranges.  Again this is good news for people who own homes in this price range.  

In certain areas of Tallahassee we did see some deviations from the overall trend of this price range as a whole.  In northeast Tallahassee homes in this price range decreased while the average number of days it took to sell a home in this price range actually increased.  In the southeast part of Tallahassee, we saw a decrease in the number of properties listed for sale while at the same time we saw an increase in the number of days on average that it took to sell a home.  In southwest Tallahassee, we saw a decrease in the number of properties listed for sale.  

Year Over Year Market Statistics For The $450,001-$750,000 price range.

Northeast Tallahassee

• 26.7% decrease in properties listed for sale (22)
• Total sales stayed the same(11)
• 1.86% increase in the average sale price ($579,545)
• 1.35% increase in the average sales price/list price ratio (94.96%)
• 1.9% increase in the number of days on average that it took to sell a home (109 days)
• 9.1% decrease in the distressed sales/total sales ratio (0% of sales were distressed sales)

Northwest Tallahassee

• Decrease in the number of properties listed for sale from 1 to 0
• Increase in the number of properties sold from 0 to 1
• The home that sold sold for $750,000.
• The home that sold took 401 days to sell
• The home sold for 98.04% of what it was listed for
• There were no distressed sales in the 3rd quarter of either 2011 or 2012.

Southeast Tallahassee

• 16.7 % increase in the number of properties listed for sale (7)
• Sales decreased from 5 sales to 1 sale(1)
• 19.9% decrease in the average sales price ($455,000)
• 1.14% decrease in the average sales price/list price ratio (94.79%)
• 61% increase in the average number of days it took to sell a property (122)
• Distressed sales increase from 0 to 1 (100% of sales were distressed sales)

Southwest Tallahassee

• No Sales or listing activity in either year

Summary of the $450,001-$750,000 price range

The sales and listing activity for homes in this price range was fairly limited overall during the third quarter of 2012.  There were only a total of 28 new properties listed for sale in this price range in all of the third quarter of 2012.  There were also only 13 properties that sold in this price range during the third quarter of 2012.  11 out of 13 properties that sold were in the northeast part of Tallahassee, and 22 out of 28 properties listed for sale were in the northeast part of Tallahassee.  Total sales decreased from 16 to 13 sales from third quarter 2011 to third quarter 2012.  The year over year decrease in sales came from the southeast part of Tallahassee.  The number of properties listed for sale also decreased in this price range in the third quarter of 2012.  Listings decreased in all areas of Tallahassee except in the southwest where there was no listing activity in the third quarter of 2011 or the third quarter of 2012.  

The average sales price for homes in this price range went up by about 2.5% which is a good sign.  However, this is not a big surprise since distressed sales only accounted for 7.7% of total sales in this price range during the third quarter of 2012.  The average number of days it took to sell a homes for homes in this price range in the third quarter of 2012 went up quite a bit from the same time period a year earlier which is not a good sign.  

Overall it seems like the market for homes in this price range is getting better.  While the number of listings and sales are down, prices are up.  Again this is most likely because prices are not being held down by a high number of distressed sales like homes in the lower price ranges are.  As long as the distressed sales/total sales ratio does not go up, the market for homes in this price range should continue to improve.

Year Over Year Market Statistics for the $750,001+ Price Range

Northeast Tallahassee

• 25% increase in the number of properties listed for sale (15)
• Decrease in the number of properties listed for sale from 6 to 0

Northwest Tallahassee

• Listings decreased from 3 listings to 0 listings
• Sales decreased from 1 sold property to 0

Southeast Tallahassee

• Listings decreased from 3 listings to 0 listings
• Sales decreased from 1 sale to 0 sales.

Southwest Tallahassee

• No Sales or Listing activity in either 2011 or 2012 during the 3rd quarter

Summary of The $750,001+ Price Range

Activity in this price range during the 3rd quarter of both 2011 and 2012 was very limited.  There were actually no sales at all in this price range reported during the third quarter of 2012.  This is down from 8 sales during the third quarter of 2011.  There were actually 16 properties listed for sale in this price range during the third quarter of 2012 which was down from 18 properties listed for sale during the same time period a year earlier.  The lack of activity for homes selling in this price range during the third quarter of 2012 most likely has to do with overall price declines in the market as well as the overall trend of people scaling down in home size which the bad economy has forced people to do.  

      

3rd quarter year over year Market statistics for Leon County in a Nutshell.

Year over year 3rd Quarter Tallahassee Residential Real Estate Market Statistics in a nut shell.

-There was a  3.6% increase in the number of properties listed for sale in Leon County in the 3rd quarter of compared to the same time period in 2011

-There was a 4.4% increase in the number of homes sold in Leon County in the 3rd quarter of 2012 compared to the same time period in 2011.

-Home prices were down by 3.1% in the 3rd quarter of 2012 compared to the same time period in 2011.

-The average sale price/listing price ratio (what a home actually sells for compared to what it is listed for sale at) increased from 94.51% in 2011 to 96.04% in 2012.

-The average number of days it took to sell a home in the 3rd quarter of 2012 decreased 8.7% from 138 days in the 3rd quarter of 2011 to 126 days in the 3rd quarter of 2012

-In the 3rd quarter of 2012 distressed sales (foreclosures and short sales) made up 23.1% of total residential property sales. That is an increase from the 3rd quarter of 2011 when distressed sales only made up 18.1% of residential property sales.

Distressed property sales usually sell at a discount compared to non distressed property sales.  This increase in the proportion of distressed sales most likely explains why year over year prices are down in Tallahassee in the 3rd quarter of 2012.  With banks increasing the number of foreclosure properties they are releasing on to the market Leon County, we can expect this trend to continue into at least the near future.   The year over year increase in the number of properties sold in Leon County in the 3rd quarter of 2012 along with the decrease in the average number of days it takes to sell a property in Leon County and the increase in the average sale price/list price ratio all indicate that our real estate market is headed in the right direction.  However, the negative impact that the increasing amount of distressed sales is having on home prices is currently outweighing the positive affect that the increasing demand has on home prices giving us an overall price decline.  

Changes in Condo Financing Requirements May Increase Demand For and Increase Value of Condos.

Purchasing a condo in Florida is a great investment, but I believe that the road to recovery for condos in Florida is beginning to happen and the window of opportunity you have to pick up one of these properties for a bargain is getting smaller.

If you remember correctly, I wrote an article a while back talking about why purchasing a condo in Florida might be a very smart investment.  If you did not happen to read that article, I will give you a summary of what I talked about.

A few years ago, Fannie Mae, Freddie Mac and The Federal Housing Administration (who own or back the majority of mortgages in the United States) made sweeping changes to the financing requirements for condominiums in the state of Florida.  They made the financing requirements for condominiums in Florida extremely strict to the point that financing for the majority of condominiums in Florida is flat out unattainable.  These changes that were made to the financing requirements that I am talking about do not apply to town houses, detached single family homes, mobile homes or any other residential property.  These changes that were made only apply to condominiums in the state of Florida.

Some of the changes that were made to the financing requirements for condos in Florida by FHA include requiring that at least 50% of the units in a condominium complex must be owner occupied,  a single owner can't own more than 10% of the units in a condominium complex, and no more than 15% of the owners in the condominium complex can be delinquent on their condo dues.  Freddie Mac's and Fannie Mae's loan requirements for condos in Florida were made even more strict than FHA's loan underwriting standards for condos in Florida.  For instance, Fannie Mae requires that at least 60% of the condos in a condominium complex must be owner occupied.  I can tell you from experience that the vast majority of condominium complexes in Florida don't have 60% of it's units occupied by the owners of the units.

The reason that these changes to the loan underwriting standards for condos in Florida were changed was because when the real estate market took a turn for the worst, condo owners were defaulting on their condo association dues in Florida by the droves.  When this happened, condo associations could not maintain the condominium complexes anymore because they could not collect enough condo dues from owners to do so.  When this happened, the value of the condos (which served as collateral for the banks who made the loans on the condos) started to decrease.  When Fannie Mae, Freddie Mac and FHA realized what was happening, they issued these new underwriting standards in Florida to stop the bleeding which pretty much brought condo financing in Florida to a halt.

You are probably asking yourself "well why can't I go down to my local bank and get a loan on a condo?"  The reason for this is that when your local bank makes a home loan, they sell that loan to a lender in the secondary mortgage market (such as Fannie Mae or Freddie Mac).  They don't keep the loans.  Because of this, they have to underwrite loans in accordance with standards set by companies in the secondary mortgage market so they can sell your loan after they initiate it.  If a bank can't sell a loan to a company in the secondary mortgage market, they usually won't make the loan to you.  In this case, it meant that almost no lenders would make loans on condos in Florida.

Since these sweeping changes to the loan requirements for condos in Florida were made a few years ago, both the demand and the prices of condos in Florida dropped like a rock!  The plummet of the prices and demand for condos in Florida was much worse than the rest of the real estate market as a whole.  For instance, in Tallahassee the average price of a condo decreased by 54% from the second and third quarter of 2006  to the second and third quarter of 2012.  The value of houses, townhouses, and mobile homes in Tallahassee only decreased by 23% from the second and third quarter of 2006 to the second and third quarter of 2012.  So this means that in Tallahassee condos decreased 31% more in price compared to other residential properties in Tallahassee.  This trend also holds true in the rest of Florida as well.  This is because financing for houses, townhouses and mobile homes continued to be attainable while condo financing was largely unattainable.

My point in my last article was that this huge drop in the prices of condos created a tremendous buying and investment opportunity for buyers who could come up with the cash to buy these condos.  Condos are a smart investment not only because you can now pick them up cheap, rent them out and earn a high return from the rental income, but also because there is a good chance that these condos will regain a lot of their value when the financing requirements begin to ease up.  When the financing requirements for condos in Florida ease up, demand for condos will come back and prices will go up.  As I said before, the financing for condos in Florida will come back.  The only question is when.  Well, it appears that is starting to happen now.

FHA just announced changes that it has made to the financing requirements for condos in Florida.  While these changes are small, they are also huge because it's the first sign of the easing of financing requirements for condos in Florida that we have seen since the real estate bust began.  Some of the changes made are as follows.

• Under previous FHA rules A condominium complex can't be FHA loan eligible if more than 15% of the condominiums in that complex are delinquent on their condo dues. This still holds true,  however, FHA has changed the definition of delinquent from being 30 days late on payment to being 60 days late on payment.
• Under previous FHA rules, in order for a condominium complex to be FHA eligible no single investor could own more than 10% of the condos in a condominium complex.  Now a single investor is allowed to own up to 50% of the units in a condominium complex 
• Finally, FHA now allows up to 35% of the space in a condominium development to be used for commercial purposes, where as before they would allow up to only 25% of the space in a condominium complex to be used for commercial purposes.  

As I said, these changes are not mind blowing changes.  However, they are the first sign of financing for condos in Florida becoming easier to come by.  I will put my money on the fact that I strongly believe we will see the secondary mortgage market begin to ease up on it's financing requirements for condos in Florida which will continue to increase the demand and the prices of condos. When this does happen, all of those people who snagged up condos for dirt cheap in the last couple of years will see the values of their properties increase, and they will look back upon their decision to buy their condo(s) and they will smile, because they know they made a solid decision.  

At the moment though, condo prices in Florida are still suppressed, and their are still opportunities to pick up really great deals on condos here in Tallahassee and the rest of the state.  Banks are starting to release more foreclosures onto the market again, so their are some deals to be had.  For instance, I know of a condo here in Tallahassee that was built in 2003 that is in great shape that can rent out for $1050 a month, and it's only $67,000! If you are in the market to buy a good investment property, I would suggest thinking about buying a condominium in Florida.  If you have any questions about condos or buying investment property, please feel free to contact me.

Short Sell Your Home Before December 31st 2012 To Avoid Tax Liability.

When you are behind on and can't keep up with your mortgage payments, a short sale is an option that a homeowner has to avoid foreclosure.   Most people choose to do a short sale instead of being foreclosed on  because a short sale looks better on your credit report compared to a foreclosure.  Also, if you wanted to obtain a home loan again in the future, lenders will usually view having a short sale on your record more favorably as opposed to having a foreclosure on your record.  So what exactly is a short sale?

A short sale occurs when your lender agrees to release the lien on your property for an amount of money that's less than what you owe them on the loan they originally gave you.  For example, let's say you bought your home 6 years ago for $400,000 and you took out a $350,000 mortgage on your home when you bought it. Currently your home is only worth $275,000.  You list  your home for sale and you get an offer on it for $275,000.  Your lender agrees to release the lien from your home for $275,000 so that you can sell your home.  This would be an example of a short sale.  However,  just because your lender agrees to release the lien from the home so you can sell the home does not necessarily  mean you would be off the hook for that $75,000 difference of what the lender received from the short sale and what you owed on your home loan..  The reason for this is that when you get a mortgage not only is your mortgage secured by the property, but you also sign a promissory note in which holds you personally responsible for paying back the loan.  When a lender agrees to release the lien from a property so you can sell it, that just means that they can't hold the property as collateral for your debt any more, but they still can hold you personally responsible for that debt because you signed a promissory note personally agreeing to pay back the loan.  The only time a person would not be liable to pay their lender for the deficient amount owed to the lender after the short sale is if the lender chooses to forgive the homeowner for that debt.  From my experience, lenders usually do forgive the homeowners for the deficient  amount of money still owed after the short sale.  This is probably because the lenders can write this off as a loss and get a tax break for doing so.  This is not always the case though, so if you are thinking about doing a short sale, it would be a good idea to ask your lender if they would forgive you for the entire amount of debt if you do a short sale.

So that's good news if you can do a short sale and your lender will just forgive you for your mortgage debt right?  I mean, in the example above that would mean you got off the hook for $75,000.  Right?  The answer to this is yes and no.  Yes, it's true in the case above that the homeowner would be off the hook from paying their lender $75,000.  However, while you don't have to pay your lender that $75,000, there is another party that you will have to pay out a large amount of money to if you are forgiven by your lender for this $75,000 debt.  Who is this other party that is spoiling your excitement from having just been forgiven for your $75,000 debt?  None other  than the beloved Internal Revenue Service.  Yes, it's the tax man who's going to want some money if you are forgiven for mortgage debt that you did not pay.

So why do I have to pay the I.R.S. money if my lender forgives me for my debt?  I will tell you why.  When you are forgiven the debt for a home loan you received, that forgiven debt is treated as income.  Using the example above, let's say you were forgiven for $75,000 of debt on a short sale that you completed.  That same year you earned $50,000 from your job. Now instead of paying taxes on $50,000, you will be paying taxes on $125,000!  While paying taxes on $75,000 is still better than paying the whole $75,000, it's still a bummer that you are going to be left with a hefty tax bill if you do a short sale.  What if I told you though that there is a way to get out of having to pay the I.R.S. on the forgiven amount of debt from a short sale?  Would you be excited?  Well, you should be excited because there is a way to get out of paying the I.R.S. on the forgiven debt from a short sale.

According to the Mortgage Forgiveness Debt Relief Act of 2007, if you do sell your home via a short sale agreement with your lender, you will be forgiven for the deficient amount of debt owed to the lender.  The property has to be your primary residence and you have to close on the property before December 31st 2012.  The exact reading from I.R.S. Publication 4681 states that "You can exclude cancelled debt from income if it is any mortgage you took out to buy, build, or substantially improve your main home.".  This means that any first mortgages you took out to purchase or build your home as well as any subsequent home loans that you received where you used the loan proceeds to improve your home can be forgiven.

You are probably asking yourself, "Well this is all good information, but what does this all mean?"   What it means is that if you have been thinking about doing a short sale, you better start the process very, very soon.  We have less than 5 months now before the Mortgage Forgiveness Debt Relief Act of 2007 expires.  Once you put your property on the market it's going to take some time to find a buyer even if you price the property aggressively.  Once you do find a buyer and they make an offer on your property, it could take months before you close on the property.  This is because the short sale process adds to the length of time it takes to close on a home.  Doing a short sale is a good option to choose if you are struggling to keep up with your mortgage payments and you want to avoid foreclosure.  If you know you want to do short sale and you want to avoid owing taxes to the I.R.S. on the forgiven debt arising from a short sale on your primary residence, you need to act soon.  Of course, before proceeding with a short sale I always advise to seek the council of an experienced real estate attorney, tax attorney and/or C.P.A. to be certain of the consequences of proceeding with a short sale.

I have plenty of experience with handling short sales, so if you have any questions about short sales, please feel free to contact me.  I would be glad to help you in anyway I can or answer any questions that you have.

3 Steps To A Smooth and Successful Homebuying Experience. Part 3

So today I will dive into the 3rd step in the 3 step process to having a smooth and successful home buying experience. Last week we talked about the importance of learning ahead of time as much as you can about the real estate market and the housing inventory in the area where you are looking to buy. The week before that we talked about the importance of meeting with a lender 3-6 months before you are planning to buy a home if you are planning to purchase your home using a home loan. Today we will be talking about the importance of learning about the actual homebuying process before you are ready to buy. When I say the homebuying process, I am talking about what happens between the time you find the property that is right for you all the way to the day you close on and take ownership of the property.

Meeting with the lender to find out about your financing options and learning about the real estate market where you are looking to buy is only the beginning. Once you find the right home, there is still a lot of ground to cover before you make it to the closing table. Before you are ready to make an offer on a property, you need to be educated about the homebuying process. You need to know what to expect between the time period you make an offer on the property all the way up to the closing. The better educated you are about this process, the more likely you will successfully making it to closing.

There are many things that happen during this time period that you need know about. Some of these things are as follows. Negotiating your offer is the first step. To successfully negotiate the terms of your offer, you need to have the right information. You need to know what similar properties have sold for recently as well as what similar properties are currently selling for. If possible, you need to have an idea of what the seller's motivation for selling is. You also need to know what is customary in your area with regards to who pays for certain closing expenses and make sure you are not paying for expenses you don't have to. For instance, in Tallahassee it is customary for the buyer to pay for owner's title insurance. However, in other areas in Florida it is customary for the seller to pay for this. If you are coming from a different area, you might be paying for something because it is customary in your area, but you should not be paying for it now because it's customary for the other party to pay for it in the current area you are in. Finally, you need to be educated on the dynamics of the real estate market where you are buying. Is this a buyer's market that is flooded with properties or are you in more of a seller's market where demand is high and supply is low? This will make a difference in how much negotiating power you have.

After you successfully negotiate the offer and you put the property under contract, now you have do your due diligence. You will need to order a home inspection, a wood destroying organisms inspection, and whatever other inspections you might think are needed. Other inspections might include a radon inspection, a lead based paint inspection, a mold inspection, a septic tank inspection, a well inspection, a structural engineering inspection if you have concern about possible foundation issues, ect...

In addition to ordering inspections, you will probably need to order a survey and appraisal as well. A survey is important because it tells you where the property's boundries are and may uncover easements or encroachments on the property that you did not know about. An appraisal is something the lender will make you order if are getting a home loan to buy a property. The appraisal will determine whether or not the value of the property is in line with what you are offering. In this day and age, it is common for appraisals to come up lower than what you offered on the property. This will leave you unable to get a home loan at the price you offered on the property unless the seller reduces the price or you come up with the cash to make up the difference between the contract price and the appraisal price. It's a good idea to prepare for this situation ahead of time, and consult with your REALTOR and have a game plan ahead of time in the event that the appraisal comes back low.

Finding a good attorney or title company to handle the closing of the property as well as to issue title insurance and perform a title search is also another important step to take when you are buying a property. The title search will uncover any liens, breaks in the chain of title or any other title issue which could cloud the title to the property you are buying. This is important because you don't want to buy a property and later find out that there is a $10,000 lien or some other title issue on the property that you are now stuck with. The title search should uncover any of these issues. However if title search happens to miss something, title insurance will fix the issue if something comes up later on that the title search did not catch. So that is why you need to have title insurance too.

In addition to title insurance you will need to find out about homeowner's insurance and flood insurance (if you are in a flood zone). As soon as you put the property under contract you need to find a reputable insurance agent and inquire about getting homeowner's insurance and flood insurance if it applies, and find out if the property you are buying is insurable and if so, how much your insurance will cost. Sometimes you might discover that your insurance costs for a certain home are going to be well above what you expected. The sooner you know this information the better.

In addition to the steps mentioned above, you will need to stay in close communication with your lender to make sure your loan is moving smoothly along in the underwriting process. Sometimes lenders will need additional documents from you in order to keep the file moving along in the underwriting process. Lenders sometimes have a lot of loans they are processing, so it could be days before they let you know they need something. For this reason, it would be a good idea for you to call your lender at least once a week once the property is under contract to make sure they have everything they need from you to keep the loan process moving foward.

Before closing, the last thing you need to do is a final walk through. The purpose of the final walk through is to make sure the property is in the same condition that it was when you made the offer. What would happen if the house was vacant and a tree fell on the house or if the toilet sprung a leak and flooded the house the day before closing( this really happened to a house a client of mine was buying). If the house was vacant, no one might know until after the closing at which time you will now be stuck with the issue. A walk though the day before closing can help you discover any possible issues like this if one arises thus allowing you time to let the seller know so he/she can fix the issue before closing.

These are the main things you need to do during the time period from when you find the right property up until you close. Each property is different though, so there might be other steps you need to take as well. For this reason, it's important to consult with your REALTOR ahead of time and find out as much as you can about the buying process before you make an offer on a property. This is especially true if you are buying a short sale or foreclosure property, as these properties present another complete set of unique potential issues and problems .

If your REALTOR has a homebuying packet or has any literature he/she can give you about the homebuying process, this would be good for you to have as well. If you want to learn more about the homebuying process, you can view my homebuyers packet that I give to my clients at http://www.bobbynahoom.com/106/--Home-Buyers-Packet

I hope you have enjoyed reading about my 3 step process to having a smooth and successful homebuying experience. If you have any questions or comments, please contact me at nahoom1171@yahoo.com or call me at (850) 567-0037.

3 Steps to a Smooth and Successful Homebuying Experience: Part 2

So last week we began talking about the three steps you can take to be on your way to a smooth and successful homebuying experience. We discussed step 1 which was about the importance of meeting with a lender at least 3-6 months before you plan on buying. This week we will be talking about step 2.

Step 2: Take the time to learn about the real estate market in the area where you are looking to buy before you are ready to buy.

Real estate is very local in nature. Different cities and towns have different characteristics in populations, jobs, topography, local economics, ect... that cause each city or town to have a unique real estate market. Because of this, it is very important that before you buy a home you learn as much as you can about the real estate market where you are buying a property.

The first thing you should do is to find and team up with a reputable REALTOR who is actively selling real estate in the area where you are looking to buy. Let the REALTOR know what your housing needs are, and ask the REALTOR to educate you about the real estate market where you are looking to buy. A good REALTOR should be able to help you get a grasp of what the housing inventory is like in the area where you are looking to buy as well as educate you about specific areas and neighborhoods in the city or town where you are looking to buy. This is crucial because the more you know about the real estate market where you are looking to buy, the better you will understand how much house you can get for your money. This will also help you to be able to tell the diffrence between what is a good deal versus what is not a good deal in the area where you are looking to buy.

Since at this point you should have already spoken to a lender about a home loan, you and the REALTOR that you are working with should be focusing on learning about homes that are in the price range that you can afford. Once you have an idea of your local real estate market, ask your REALTOR if he/she can set you up on an automatic email notification that will send you information on homes in your price range and that fit your housing needs. These automatic emails are going to further help you to get a good understanding of the real estate market in the area that you are looking to buy, and it will help to keep you in the loop as to what potential homes for you are on the market. This means that when you are ready to get serious about finding and making an offer on a property, you will have a good idea of where and what homes you should be looking at.

One tip I would suggest is to write down and keep track of the homes you really like in the automatic email notifications that you receive. That way when you are ready to buy, you can go back and look at those homes you took note of to see if they are still available, and if they are, you can go look at those homes. This little trick will save you time, because once you are ready to buy, you will spend less time figuring out which homes you want to go look at.

All in all, being educated about the local real estate market where you are looking to buy a home and getting set up on an automatic email notification that sends you information on newly available homes that fit your housing needs and that are in your price range, is going to enable you to more quickly find the right home. Once you are ready to buy a home, you will spend less time looking at homes because you will have a better idea of where and what homes you should be looking at. Also, when you find the right home, you will be more confident about your decision because you will know you are getting a good deal.

Stay tuned until next week, when I will be discussing step 3 in the "3 Step Process To a Smooth and Successful Home Buying Experience." Next week I will be discussing the importance of learning about the actual steps in the homebuying process ahead of time.

3 Steps To a Smooth and Successful Homebuying Experience: Part 1

Buying a home is usually a very exciting event that most people look forward to. Whether you are looking to buy a home for you to live in, a vacation home or an investment property, most people think positive thoughts when they think about buying a property. However, as many homeowners will tell you, the homebuying process can sometimes become a quite stressful experience filled with many bumps and hiccups along the way. This is because it can be quite an involved process with many moving parts. To those who have never been through the process before ( and even to some that have) the homebuying experience can be a little overwhelming. Indeed, if you begin moving foward with purchasing a home when you are not sufficiently prepared to do so, you will most likely become one of those people who looks back and categorizes their homebuying experience right up there with the time they had to go to the dentist to get their tooth pulled. On the otherhand, if you are prepared and know a little about the homebuying process when you begin moving foward on your journey to purchase a home, your experience could be quite an enjoyable one.

Today I am going to be giving you some advice on how you can help ensure that your homebuying experience ends up being a good one. Specifically, I will be laying out the what I call the "Three Step Approach to Prepare You for Purchasing a Home." I know...the name is very creative. If you adhere to these steps though, your homebuying experience will most likely be a much better one. So without further delay, let's begin.

Step 1: If you are obtaining financing to purchase your home, meet with a lender to discuss your home purchase 3-6 months before you plan to purchase a home.

If you are obtaining financing to purchase a home it is a very good idea to meet with a reputable lender or mortgage broker well before you are actually planning to purchase a property. The reasons for this are many. First off, it will give your lender the opportunity to check your credit and analyze your finances which will help them determine how much of a loan that you can qualify for. This information is very important to know before you begin looking for a home, because it will set a price range for you to stay within when you are searching for a property. What if you have been looking at properties in the $200,000 range for a month, and then you find out you can only afford to purchase a home up to $165,000? Well, you have just wasted a whole lot of time, gas and energy that could have been better spent looking at homes that you are actually able to purchase. This can lead to frustration but can easily be avoided by finding out a head of time how much of a loan you can qualify for.

In addition to this, if while meeting with your lender you discover that there is something that might be holding you back being able to obtain a home loan to purchase a property, the lender can tell you what is holding you back and may be able offer you some advice on how to fix the issue so you can qualify for a home loan. If you find out this information early on, you probably have a good chance to fix the issue by the time you are ready to purchase a home. For example, a lot of the time people discover that their credit score is lower than they expected which renders them unable to get a home loan. Your lender can review your credit score and report with you and offer you helpful tips on how you can build your credit up quickly to where it needs to be in order to get a home loan by the time you are planning to buy. On the other hand

Also, when the lender meets with you to determine how much of a home loan you can qualify for, he is going to evaluate your income and expenses. By the lender knowing this information ahead of time, he can give you advice on things you should and should not do to help ensure that you are approved for a home loan. If you are approved for a loan, he may be able to tell you how much you might have to increase your income or how much you have to reduce your current expenses so that you will be able to qualify for a certain amount of money. For instance, let's say you knew that you wanted to buy a home in the $150,000 range, but you currently only qualified to buy a home up to $135,000. The lender could tell you how much you would have to reduce your expenses so that you could qualify for a home loan up for a home up to $150,000. If you knew this information ahead of time you could begin making strides to reduce your expenses so you could get the loan to purchase a $150,000 home by the time you are planning to buy. Also, if you found out that you had to save more money than you thought for a down payment, you would have time to save up if you found out that information well before you were planning to buy.

Finally, it is important to meet with a lender well before you purchase a home because it will allow your lender to educate you about all of the different loan programs available and match you up with the best loan program to fit your needs. For example, are you looking to purchase a home that is in a rural area or that is on the outskirts of town? If so you might be eligible for the USDA Rural Development Loan which would enable you to get 100% financing without having to pay any monthly mortgage insurance premiums. Or, are you are a first time homebuyer? If so, you might be eligible for one of several downpayment/closing costs assistance programs.

Finding out about all of the different loan programs ahead of time is also useful, because there might be certain steps you have to take (which might take some time to complete) in order to be eligible for certain loan or downpayment assistance programs. For example, if you are a first time homebuyer and want to qualify for a first time homebuyer downpayment assistance program through The Tallahassee Lender's Consortium, you have to take a class on homeownership before you can qualify for the downpayment assistance.

Having a lender match you up with the best loan program to fit your needs is important because it could save you lots of money over the long haul.

That's it for today, tune in next week for Step 2 in the "Three Step Approach to Prepare You for Purchasing a Home" which has to do with the importance of learning about the local real estate market where you are planning to purchase a home before you buy a home.