Orlando Real Estate Voice

News You Need to Know for 2009 – FHA Short Sales Easier than Ever!

As if increased minimum wage laws and ultra-low interest rates weren’t good enough, short sale investors will be downright delirious to learn about changes to FHA laws set to begin in 2009. On December 24th, 2008 the Department of Housing and Urban Development (HUD) released “Mortgage Letter 2008-43″… despite the inconspicuous title, this is a powerful boon to every short sale investor in the nation.

For those of you who somehow managed not to be engrossed by this less than climatic title, here are the major changes coming soon to a FHA/HUD foreclosure near you!

1. Elimination of the clause calling for 63 percent or greater property appraisal versus debt. Now properties can appraise at any value and still be eligible for the program.

2. Increased Net. Instead of the former 82 percent net based upon appraisal value the new limits will be 88 percent if sold with 30 days, 86 percent if sold within 60 days and 84 percent thereafter.

3. Increased Closing Costs on Short Sales. Although not a lot – FHA will now allow up to 1 percent of closing costs rather than the former zero.

4. Increased Seller Incentives. Again, although not a lot this will at least allow sellers a reasonable down payment toward a rental home by putting up to $1,000 in their pocket at closing.

5. Increased Lien Allocations. Junior liens up to $2,500 are now allowed – just one more tool that helps sweeten the pot for short sale investors interested in pursuing FHA/HUD homes.

6. Removal of Repair Limitations. This is one change that could potentially add up to thousands depending upon the required maintenance on the home. This opens the doors to many homes that would otherwise be ignored due to excessive damage.

7. Exceptions to Non-Owner Occupant Requirements. This is on a case by case basis but opens to the door to rental properties formerly excluded from the program.

To learn more or read the release for yourself visit:

http://www.brokencredit.com/wp-content/uploads/2008/12/fha-pre-foreclosure-short-sale-guidelines.pdf

***************************************************************************************

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

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

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

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

If you have been contemplating short sales chances are you are familiar with the favorable tax treatment afforded by  real estate; the ability to use Capital Gains rather than earned income for property held longer than 365 days, 1031 exchange options and depreciation are just a few of the perks short sale investors have come to know and love. However, there are a few terrific tax benefits that are easily overlooked including these five frequently forgotten options:  

 1. Tax Deductible Travel. Not just around town but in almost any location where short sales are to be found. Meals, lodging, fuel charges and other common costs may reduce your tax burden. Consult with your CPA for specifics related to your individual situation.  

 2. Computers, Equipment, Cable Internet, Phone and Other Home Office Deductions. If you are following the Short Sales action plan then you already know it is possible to run the entire business from the comfort of your home. Home office deductions can add up fast especially when you calculate the percent of mortgage, homeowner’s insurance premiums and other items used to conduct business. Everything from cell phones (and service) to equipment is often able to be pre-rated.  

 3. Books, Training, Software, Educational and Investment Programs. Staying up to date on the latest and greatest information is a legitimate business expense so start saving those receipts.  

 4. Interest Paid on HELOC’s or Home Equity Loans. Not only is the mortgage, interest and other costs associated with the purchase of a short sale property deductible but  it is often possible to obtain a line of credit, HELOC or other form of home equity loan on a short sale property then write-off the interest portion of the payments.  

 5. Home Improvement Costs. Tools, supplies, travel and other costs associated with repairing or improving the property are also valid methods of reducing your tax burden when selling the home. Just remember, the IRS rarely allows investors to deduct their own time or labor unless established under an independent LLC or other entity so it often makes more sense to hire someone to do the work for you rather than attempt to go it alone. Run the numbers to determine if doing the work yourself makes financial sense – in most cases it doesn’t.

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

1. Absolutely DO NOT ever deed your property to a third party without absolute confirmation your loan has been paid off!

Note: if you believe this option is best for you, please consult with an attorney – not the buyer’s attorney – before completing the transaction.

If you deed your property to a third party, that party then controls the property. The new owner can rent the property (and keep the rent), attempt to sell the property to make a profit, move into the property or use the property in other ways.

What the new owner might not do is make mortgage payments, and that could become a big problem for you.

Just because you no longer own the property does not mean you are no longer responsible for the mortgage loan obligations. The lender made the loan to you. And until it is paid off you will be primarily responsible for the mortgage obligation.

If you give up control of the property and the new owner does not pay on the loan, the damage to your credit could be catastrophic.

2. Do Not sell your home at a huge discount.

Unless the actual foreclosure sale is less than 45 days away, you have time to explore options. Take a day or two and make a few phone calls. As a general rule, if someone is pushing you hard to get you to sell your property to them, it’s probably because the deal they are proposing is very favorable – to them.

If you have equity in your Orlando home, it belongs to you. Let’s see if we can get it to you.

For a Free, no obligation assessment, just call or send an email.  

3. Do Not authorize a prospective buyer to deal directly with your lender.

The buyer has one goal and one goal only, and that is to negotiate a low, probably very low, price with your lender. The buyer will ask your lender to accept a discounted payoff.

The negotiations could go on over an extended period of time, and if the transaction does not work out the buyer may elect not to buy your property. It could leave you with very little time to resolve the situation and avoid foreclosure. Further, you have no control over the information that goes to your lender or the accuracy thereof. It is entirely possible that the buyer could handle the negotiation and presentation of information in a way that makes it very difficult for you to resolve your loan situation later.

If, however, you believe that your best option is to allow the buyer to work directly with your lender, make certain you consult with a real estate professional and/or an attorney before signing a contract. If you are going to do a Short Sale in Orlando get representation from a real professional. It costs you nothing – the lender pays the fees. Someone should be looking out for you.

We can help, and it costs you nothing. We have fought for homeowners like you many times – and won. The lender wins also. They do not want to take your property through foreclosure. That’s why they will negotiate to get the deal done.

4. Do Not do nothing.

A surprising number of people just accept what they see as the inevitable, and let foreclosure run its course. Don’t let it happen – the damage to your credit will follow you for years.

Take a little time to explore potential options. You do not want a foreclosure on your credit record. It will hamper your ability to get a consumer loan or a car loan for at least a few years, and it will be very difficult to obtain another mortgage for a very long time.

Also, in some cases, doing nothing and letting the property go to foreclosure leaves you open to the lender coming back to you AFTER the foreclosure in an attempt to collect.  When a lender agrees to and completes a short sale, they release their rights to this option.

*************************************************************************************** 

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs.  Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden,  or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

Members of the Orlando Regional Realtor® Association were involved in the sale of 37.63 percent more homes in September than during the same month last year: 1,335 compared to 970. Geographically, home sales in Osceola County jumped a whopping 72.02 percent and Orange County sales increased 54.05 percent.

Each of the four counties in the Orlando MSA area increased their sales numbers in comparison to September 2007 tallies. All except Lake County increased sales in comparison to the previous month (August 2008). Also turning in a big increase this month were sales of duplexes, town homes, and villas, with 53.13 percent more sales of these home types taking place in September 2008 compared to September 2007.

The median sales price of the homes sold in September rose by 5.00 percent to $210,000 from August’s $200,000. However, the median sales price is still 10.64 percent below what it was this time last year ($235,000).

Other market positives include month-over-month increases in the number of new contracts and in the number of pending sales. Those pending sales, considered by housing economists to be a reliable predictor of future sales activity, are expected to continue closing the current year-to-date sales deficit of 18.53 percent by year end as there are 61.82 percent more homes under contract this month (3,256) than in September of 2007 (2,012).

The increase in the median home price to $210,000 means that the area’s affordability index decreased slightly in September to 107.24 percent. (An affordability index of 99 percent means that buyers earning the state-reported median income are 1 percent short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.) Buyers who earn the reported median income of $51,848 can qualify to purchase one of 13,386 homes in Orange and Seminole counties currently listed in the local multiple listing service (MLS) for $225,204 or less.

The first time homebuyer affordability index decreased to 76.26 percent from August’s 76.75 percent.

The area’s average interest rate was 6.00 percent in September 2008, down from 6.39 percent in August.

Homes of all types spent an average of 113 days on the market before being sold in September 2008, and the average home sold for 94.33 percent of its listing price (an increase over August 2008′s 92.81 percent). In September 2007 those numbers were 111 and 93.41 percent, respectively.

The majority of single-family homes (188) that changed hands in September 2008 were sold in the $200,000 – $250,000 price range; another 128 homes sold in September for between $140,000 and $160,000. Five hundred eighty-six homes sold for less than $200,000 in September, and 229 sold for more than $300,000. On the far ends of the scale, 13 homes were sold for $1 million or more (again the least this year) while 26 homes sold for less than $50,000 (again the most this year).

Inventory

There are currently 24,690 homes available for purchase through the MLS. Inventory decreased by 144 homes from August to September, which means that 144 more homes left the market than entered the market. Compared to last year, the September 2008 inventory level is 6.16 percent lower than it was in September 2007 (26,310).

The current inventory level reflects an 18.49-month supply at the current pace of sales, which is down from the 19.40-month supply recorded in August. Altogether, inventory months-of-supply has declined 58.44 percent since January 2008.

There are 18,169 single-family homes currently listed in the MLS, a number that is more than 1,500 less than this time last year. As usual most (2,961) are listed in the $200,000 – $250,000 price range. Condos currently make up 4,393 offerings in the MLS, while duplexes/town homes/villas make up the remaining 2,128. Most condos (572) are priced at $100,000 – $120,000. The majority of duplexes/town homes/villas (378) are listed in the $200,000 – $250,000 price category.

Condos and Town Homes/Duplexes/Villas

The sales of condos in the Orlando area held perfectly steady in September: A total of 116 condos changed hands in both September of this year and September of last year. Year to date, condo sales are down 40.75 percent, with 1,057 condos sold so far in 2008 compared to 1,784 sold through the same time in 2007.

In September, the most (20) condos that changed hands were in the $100,000 – $120,000 price category, while an additional 11 sold condos fell in both the $80,000 – $90,000 range and the $140,000 – $160,000 range.

Orlando homebuyers purchased 98 duplexes, town homes, and villas in September 2008, which is a 53.13 percent increase from September 2007 when 64 of these alternative housing types were purchased. Year-to-date, duplex, town home, and villa sales are down 14.47 percent. The majority (17) of duplexes, town homes, and villas sold in September 2008 fell into the $140,000 – $160,000 price category, while another 13 sold in both the $120,000 – $140,000 range and the $160,000 – $180,000 range.

MSA Numbers

Sales of existing homes within the Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in September were also up by (coincidentally) 37.63 percent when compared to September of last year. Throughout the entire MSA, 1,624 homes were sold in September 2008 compared with 1,180 in September 2007. Year to date, sales in the MSA are down by 17.63 percent, with 13,344 homes sold far in 2008 compared to 16,201 sold through September 2007.

Seminole County’s September 2008 sales increased 7.35 percent over that of September 2007 (292 to 272), while Orange County jumped 54.05 percent (818 to 513). Lake County saw a 7.66 percent improvement in the number of sales in September 2008 compared to September 2007 (225 to 209), and Osceola County experienced a massive 72.02 percent increase (289 to 168).

Each county’s year-to-date sales comparisons are as follows:

Lake: 10.28 percent below 2007 (2,234 homes sold to date in 2008 compared to 2,490 in 2007);
Orange: 18.65 percent below 2007 (6,555 homes sold to date in 2008 compared to 8,058 in 2007);
Osceola: 9.15 percent below 2007 (1,966 homes sold to date in 2008 compared to 1,164 in 2007); and
Seminole: 25.80 percent below 2007 (2,589 sold to date in 2008 compared to 3,489 in 2007).

***************************************************************************************

Jerry LaRose is an Orlando Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area. Please visit www.JerrySellsOrlando.com for your real estate needs. Please give me a call if you have questions about the Orlando and Central Florida real estate market.

P.S. If you are listing your home as a short sale in Orange County Florida and Orlando, Windermere, Winter Garden, or Ocoee Florida make sure you hire an agent who knows how to do short sales and has the experience to get the job done. We are doing successful short sale packages. Call us at 407-580-7011 to find out more about Orange County Short Sales and Orlando Area Short Sales.

NOTE: Homeowners, contact your existing lender and/or a new lender to discuss how you may qualify for the H4H program.

The list of participating lenders is not available yet. We will publish it in the coming days.

The HOPE for Homeowners (H4H) program was created by Congress to help those at risk of default and foreclosure refinance into more affordable, sustainable loans. H4H is an additional mortgage option designed to keep borrowers in their homes.

The program is effective from October 1, 2008 to September 30, 2011.

As many as 400,000 homeowners could avoid foreclosure through this program over the next three years. If you are having trouble making your mortgage payments, HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30-year fixed rate loan with lower payments.

How the Program Works

There are four ways that a distressed homeowner could pursue participation in the HOPE for Homeowners program

Homeowners may contact their existing lender and/or a new lender to discuss how to qualify and their eligibility for this program.

Servicers working with troubled homeowners may determine that the best solution for avoiding foreclosure is to refinance the homeowner into a HOPE for Homeowners loan.

Originating lenders who are looking for ways to refinance potential customers out from under their high-cost loans and/or who are willing to work with servicers to assist distressed homeowners.

Counselors who are working with troubled homeowners and their lenders to reach a mutually agreeable solution for avoiding foreclosure.

It is envisioned that the primary way homeowners will initially participate in this program is through the servicing lender on their existing mortgage. Servicers that do not have an underwriting component to their mortgage operations will partner with an FHA-approved lender that does.

Step 1: Cost-Benefit Analysis

Lender considerations:

Given their fiduciary responsibilities and financial obligations, lenders will assess their portfolio and perform a cost-benefit analysis to determine the feasibility of offering this program to struggling homeowners.

Affordability versus value: lenders will take a loss on the difference between the existing obligations and the new loan, which is set at 90 percent of current appraised value. The lender may choose to provide homeowners with an affordable monthly mortgage payment through a loan modification rather than accepting the losses associated with declining property values.
Borrower eligibility: Lenders that determine the H4H program is a feasible and effective option for mitigating losses will assess the homeowner’s eligibility for the program:

The existing mortgage was originated on or before January 1, 2008;
Existing mortgage payment(s) as of March 1, 2008 exceeds 31 percent of the borrowers gross monthly income;
The homeowner did not intentionally default, does not have an ownership interest in other residential real estate and has not been convicted of fraud in the last 10 years under Federal and state law; and
The homeowner did not provide materially false information (e.g., lied about income) to obtain the mortgage that is being refinanced into the H4H mortgage.
Consumer considerations:

The lender will disclose to the homeowner the benefits of the program:

Home retention,
New affordable mortgage based on current appraised value,
10 percent equity
The lender will also disclose to the homeowner the costs of the program:

3 percent upfront mortgage insurance premium and a 1.5 percent annual premium,
Equity and appreciation sharing with the Federal government, and
Prohibition against new junior liens against the property unless they are directly related to property maintenance.
Step 2: Negotiations Between Borrowers and Lien Holders

If the lender refinancing the loan does not hold the senior mortgage lien, it will need to secure an agreement from the existing lien holder to waive all prepayment penalties and default fees on the existing loan and accept the loan proceeds from the H4H loan as payment in full. The loan amount (including the 3 percent UFMIP) for the new H4H loan cannot exceed 90 percent of the current appraised value of the property.

The lender will engage existing subordinate mortgage lien holders to extinguish all subordinate liens on the subject property. To entice subordinate lien holders to participate in the negotiation process and release their liens, FHA has the authority to share its future appreciation entitlement with them.

Step 3: Originating an H4H Mortgage

The lender will qualify the homeowner for the new H4H mortgage using the guidelines established under the terms of the program’s unique statutory requirements, ensuring the homeowner has the capacity to make the new payment on the H4H mortgage in a timely manner.

During underwriting of the loan, the lender will calculate the future appreciation interest amount for each subordinate lien holder in accordance with instructions provided by FHA.

At settlement, subordinate lien holders will receive a certificate that evidences their interest as an obligation backed by HUD, with payment conditional on the value of HUD’s appreciation share.

Following funding of the loan the lender will record – in addition to the typical security instrument and note for the first mortgage – a shared equity note and mortgage (SEM) and a shared appreciation note and mortgage (SAM). These mortgages will be serviced by FHA.

The lender will also submit the new mortgage for insurance to FHA, certifying that it has been originated, underwritten and closed in accordance with the H4H program guidelines.

Step 4: Fulfilling H4H Mortgage Obligations

Upon sale of the property, the homeowner will use their sale proceeds to pay off the H4H mortgage as well as the shared equity and shared appreciation mortgages.

FHA will provide instructions to the settlement agents regarding subordinate lien holders who are entitled to a portion of any appreciation. The lien holder that previously held the highest priority will receive payment up to the full dollar amount of its interest, not to exceed the amount of available appreciation, and so on, until all prior lien holders are satisfied or the amount of available appreciation is exhausted. All remaining appreciation is remitted to FHA.

In instances where the homeowner failed to make the first payment on their new H4H mortgage, the H4H statute prevents FHA from paying claim benefits to anyone holding the mortgage.