Sarasota Real Estate Market News

Investors see bigger profits from rising rents

NEW YORK – Oct. 27, 2011 – Rental demand and prices continue to soar, and investors are cashing in. Rents are rising at a 5.17 percent annual rate – up from last year’s 4.72 percent rate. If rents continue to grow at their current pace, they won’t be too far behind the record-high reached in 2000 of 6.18 percent, according to Axiometrics Inc.

The rental market has added about 1.4 million new renters this year, some of whom were former homeowners who faced foreclosure or a short sale. Renters are increasingly showing an appetite for single-family homes owned by investors.

As such, the number of investors in the market is growing. Investors make up anywhere between 20 and 40 percent of monthly existing home sales, according to home-sale data. With home prices and interest rates low, more aspiring investors are jumping in. Nearly 60 percent of investors in a recent survey by considered themselves newcomers to real estate investing.

“This is a long-term investment,” says Greg Rand, CEO of OwnAmerica. “Rents are a steady return on your investment through the years, leaving you with an attractive asset when prices improve. And they will. The best profits in real estate accrue to long-term investors who take a long-term view.”

Source: “Rising Rents Improve Investors’ Return,” RISMedia (Oct. 20, 2011)

October 27, 2011 Posted by | News related to Buyers, News related to Investors, News related to the Market | Leave a comment

Latest HARP program could help more Floridians

MIAMI – Oct. 27, 2011 – Despite renewed efforts to shore up the housing industry with mass refinances and federal aid, South Florida’s real estate market has a long road to recovery ahead of it, industry leaders said Wednesday during a conference hosted by the University of Miami Law School.

About 200 real estate professionals gathered at the Institute on Real Property Law, a forum to discuss the direction of a housing market bogged down by shadow inventory and a growing backlog of foreclosures.

Fort Lauderdale attorney Shari Olefson, who spoke at the event, talked extensively about the long list of government initiatives aimed at fixing the housing market, highlighting their strengths and weaknesses.

The Home Affordable Modification Program, for example, has had a limited impact in South Florida, with only about 33,000 permanent loan modifications for struggling homeowners. By comparison, there have been more than 200,000 foreclosure filings since 2007.

“Instead of getting a modification, what most people got under HAMP was a really bad experience with their banks,” said Olefson, author of Foreclosure Nation: Mortgaging the American Dream.

New initiatives, like the recently revamped Home Affordable Refinance Program, or HARP, aim to address some of the shortcomings of past efforts. The new HARP program, announced this week by President Obama, will open up the government’s refinancing initiative to people who owe significantly more on their mortgages than their properties are worth.

That could have a relatively large impact in South Florida, where about 45 percent of homeowners are underwater, and most of those are paying above-market interest rates, Olefson said.

Mortgage lenders are also changing gears. Some are offering “relocation assistance” of up to $20,000 for homeowners who opt to sell their homes at a discounted price instead of going through the lengthy foreclosure process. (See “Bank of America: $20,000 short sale incentive to struggling homeowners”)

But even with renewed efforts to prop up the real estate industry, a normalized housing market remains years away, said Bill Sklar, director of the Institute on Real Property Law at UM’s Law School.

‘Shadow inventory’

Part of the reason is the region’s massive inventory of homes not yet on the market, due to delays in the foreclosure process. Investors are buying up many of the distressed properties, but it will take time for the “shadow inventory” to be fully absorbed, Sklar said.

“There’s some recovery because there’s capital investment – foreign investors are seeking to preserve their capital” with U.S. real estate, he said. “That will help fuel some recovery in certain sectors, but until we get past the current foreclosure crisis, we cannot get back to a healthy, thriving economy.”

Condo associations

Real estate lawyer Mike Chesser, who came from Destin to the conference, echoed that sentiment. His firm works with several condominium associations that are struggling financially due to the foreclosure crisis, and said relief has been scarce.

“More needs to be done to help the associations,” he said. “The associations are finding themselves in line behind the mortgage companies and the mortgage companies are slow to act. The associations are looking to do anything they can to shore up their finances.”

The conference continues Thursday and Friday at the Biltmore Hotel in Coral Gables, with sessions dedicated to issues facing condominium communities.

Copyright © 2011 The Miami Herald, Toluse Olorunnipa. Distributed by MCT Information Services.

October 27, 2011 Posted by | News related to Sellers, News related to Short Sales and Foreclosures | Leave a comment

Renters spend 5% more than homeowners

NEW YORK – Oct. 27, 2011 – Rising rents are forcing renters to outspend homeowners on housing costs, according to a new study.

Since 2005, homeowners’ housing expenses have climbed from 31.9 percent of their household budget to 33.2 percent. In that same time period, renters’ expenses have jumped from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing and Mortgage Trends.

In the last 26 years, homeowners have increased the amount they spend on household expenses by 12 percent while renters have increased it by 22 percent, according to the study.

Earlier this month, Capital Economics economists noted that for the first time in 30 years the median monthly mortgage payment is about the same – or less – than the median rental payment.

Yet, with the bleak job market, homeownership rates continue to fall in many parts of the country, particularly among younger generations. CoreLogic found in its report that the homeownership rate for the 25-to-34 age group dropped from 51.6 percent in 1980 to 42 percent in 2010. For the 35-to-44 age group, homeownership rates fell from 71.2 percent to 62.3 percent over that period.

Source: “Renters Outspend Owners on Housing,” RISMedia (Oct. 25, 2011) and Capital Economics

October 27, 2011 Posted by | News related to Buyers, News related to Investors, News related to the Market | Leave a comment

A guide to administration’s new mortgage-refi plan

WASHINGTON – Oct. 25, 2011 – Two big questions loom over the Obama administration’s latest bid to help troubled homeowners: Will it work? And who would benefit?

By easing eligibility rules, the administration hopes 1 million more homeowners will qualify for its refinancing program and lower their mortgage payments – twice the number who have already. The program has helped only a fraction of the number the administration had envisioned.

In part, that’s because many homeowners who would like to refinance can’t, because they owe more on their mortgage than their home is worth. But it’s also because banks are under no obligation to refinance a mortgage they hold – a limitation that won’t change under the new plan.

Here are some of the major questions and answers about the administration’s initiative:

Q: What is the program?

A. The Home Affordable Refinance Program, or HARP, was started in 2009. It lets homeowners refinance their mortgages at lower rates. Borrowers can bypass the usual requirement of having at least 20 percent equity in their home. But few people have signed up. Many “underwater” borrowers – those who owe more than their homes are worth – couldn’t qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, fewer than 900,000 homeowners, and just 72,000 underwater homeowners, have refinanced through the administration’s program. The administration had estimated that the program would help 4 million to 5 million homeowners.

Q. Why did so few benefit?

A. Mainly because those who’d lost the most in their homes weren’t eligible. Participation was limited to those whose home values were no more than 25 percent below what they owed their lender. That excluded roughly 10 percent of borrowers, CoreLogic says. In some hard-hit areas, borrowers have lost nearly 50 percent of their home’s value. Another problem: Homeowners must pay thousands in closing costs and appraisal fees to refinance. Typically, that adds up to 1 percent of the loan’s value – $2,000 in fees on a $200,000 loan. Sinking home prices also left many fearful that prices had yet to bottom. They didn’t want to throw good money after a depreciating asset. Or their credit scores were too low. Housing Secretary Shaun Donovan acknowledged that the program has “not reached the scale we had hoped.”

Q: What changes is the administration making?

A. Homeowners’ eligibility won’t be affected by how far their home’s value has fallen. And some fees for closing, title insurance and lien processing will be eliminated. So refinancing will be cheaper. The number of homeowners who need an appraisal will be reduced, saving more money. Some fees for those who refinance into a shorter-term mortgage will also be waived. Banks won’t have to buy back the mortgages from Fannie or Freddie, as they previously had to when dealing with some risky loans. That change will free many lenders to offer refinance loans. The program will also be extended 18 months, through 2013.

Q: Who’s eligible?

A. Those whose loans are owned or backed by Fannie Mae or Freddie Mac, which the government took control of three years ago. Fannie and Freddie own or guarantee about half of all U.S. mortgages – nearly 31 million loans. They buy loans from lenders, package them into bonds with a guarantee against default and sell them to investors. To qualify for refinancing, a loan must have been sold to Fannie and Freddie before June 2009. Homeowners can determine whether Fannie or Freddie owns their mortgage by going online: Freddie’s loan tool is at; Fannie’s is at Mortgages that were refinanced over the past 2 1/2 years aren’t eligible. Homeowners must also be current on their mortgage. One late payment within six months, or more than one in the past year, would mean disqualification. Perhaps the biggest limitation on the program: It’s voluntary for lenders. A bank remains free to reject a refinancing even if a homeowner meets all requirements.

Q: Will it work?

A. For those who can qualify, the savings could be significant. If, for example, a homeowner with a $200,000 mortgage at 6 percent can refinance down to 4.5 percent, the savings would be $3,000 a year. But the benefit to the economy will likely be limited. Even homeowners who are eligible and who choose to refinance through the government program could opt to sock away their savings or pay down debt rather than spend it.

Q: How many homeowners will be eligible or will choose to participate?

A: Not entirely clear. The government estimates that up to 1 million more people could qualify. Moody’s Analytics says the figure could be as high as 1.6 million. Both figures are a fraction of the 11 million or more homeowners who are underwater, according to CoreLogic, a real estate data research firm.

Q: Who will benefit most?

A: Underwater homeowners in the hard-hit states of Arizona, California, Florida and Nevada could be greatly helped. Many are stuck with high mortgage rates after they were approved for mortgages with little or no money as a downpayment and few requirements. The average annual savings for a U.S. household would be $2,500, officials say.

Q: When will it start?

A: Fannie and Freddie will issue the full details of the plan lenders and servicers on Nov. 15, officials say. The revamped program could be in place for some lenders as early as Dec. 1.
AP LogoCopyright © 2011 The Associated Press, Derek Kravitz, AP real estate writer. All rights reserved.

October 27, 2011 Posted by | News related to Short Sales and Foreclosures | Leave a comment

More are renting in South Florida as international investors snap up distressed homes

By choice or by force, more people in South Florida’s foreclosure-ridden housing market are renting, rather than owning, their homes.

In an ironic twist on economics, that dynamic is actually helping the resale market. According to sales reports released this week, South Florida is on track to set a new sales record this year.

The reason: investors.

The majority of today’s homebuyers are not first-time owners or growing families, but opportunistic investors. International buyers and locals with cash are making money in the region’s distressed market by buying up foreclosed homes and turning them into rentals.

Read more HERE

October 27, 2011 Posted by | News related to Investors, News related to the Market | Leave a comment

Incentives grow to get struggling homebuyers moving

WASHINGTON – Oct. 24, 2011 – With distressed properties accounting for 30 percent of existing-home sales, more real estate professionals are finding a growing part of their job is offering struggling homeowners “cash for keys.”

In the “Cash for Keys” program, homeowners who are facing foreclosure are typically offered $500 to $2,500 if they agree to move out within 30 days (and leave the place clean, too). The program frees homeowners from their obligations while getting a little extra money for moving expenses and avoiding a ruined credit profile from a foreclosure. It also allows the lender to not incur the extra costs of an eviction.

The “Cash for Keys” program is expected to become more mainstream for handling short sales too, not just foreclosures. For example, Bank of America is piloting a program in Florida that pays up to $20,000 to short sellers as well as forgive their loan deficiency.

Banks are looking at offering more incentives to short sales since their losses tend to be far less than a foreclosure. For example, foreclosure properties tend to sell for 40 percent below non-comparable non-distressed properties while short sales tend to sell for 20 percent less.

“The more the inventory builds up, the more generous the cash for keys from clients,” Benjamin Barber, a senior sales specialist Green River Capital LC in West Valley, Utah, told

Real estate professionals often deliver the “cash for keys” offer to homeowners. And as more real estate professionals continue to find foreclosures and short sales an increasing part of their job description, they’re seeking extra training in how to handle such situations with homeowners and navigate the often-complex transactions.

About 21 percent of National Association of Realtors® members hold special certifications that help agents better handle distressed property – that’s up from 12 percent last year. For example, in one such designation, the Short Sale & Foreclosure Resource (SFR), real estate professionals learn how to aid buyers and sellers through the short sale and foreclosure process.

Source: “Real Estate Agents Learning Fine Art of ‘Cash for Keys,’” (Oct. 21, 2011)

October 27, 2011 Posted by | News related to Buyers, News related to Sellers, News related to Short Sales and Foreclosures | Leave a comment

And for condo officials, FHA headaches, too

WASHINGTON – Oct. 24, 2011 – Condominium managers and boards of directors have a dilemma when it comes to the Federal Housing Administration (FHA). On the one hand, they know their unit owners want FHA financing to either refinance their existing mortgage or to help potential buyers secure loans. On the other hand, they recognize that recent FHA guidelines have put unreasonable requirements on condominium associations, including requiring them to certify certain facts, which, if wrong, could result in fines of up to $1 million and up to 30 years in prison.

In the past few years, the FHA has literally become the “main game in town” for condominium loans. The reason is because an FHA-insured loan generally requires a lower downpayment than traditional loans in order to go to settlement. The Community Association Institute (CAI) – a national trade association representing condominium issues and communities – estimates that in 2010, between 30 and 40 percent of all condominium mortgages were FHA-insured.

But the FHA – as well as other organizations such as Fannie Mae and Freddie Mac – is mindful of the massive condominium foreclosures in some states, including California, Florida and Nevada. As a result, all agencies – especially the FHA – have tightened their rules to limit their own exposure to mortgages that fall into default.

On June 30, the FHA issued a policy guidance to mortgage lenders as to what requirements must be met in order to allow a loan to be insured by the agency. According to its Web site, the FHA “provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. … FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner’s default. Loans must meet certain requirements established by FHA to qualify for insurance.”

For example, for existing condos more than one year old:

• No more than 50 percent of the total units can have FHA insurance. Under certain circumstances, this percentage can be higher.

• No more than 25 percent of the total floor area in the project (or in a unit) can be used for commercial purposes; however, exceptions can be requested on a case-by-case basis for another 10 percent increase in floor area.

• At least half of the total condo units must be owner-occupied or sold to owners who intend to occupy.

• No more than 15 percent of the total units can be more than 30 days past due on paying their condominium assessments.

Perhaps many associations can meet these requirements. But this is all new. Up until 2009, mortgage lenders were permitted to get “spot approvals.” A spot approval would allow a lender to determine whether the specific condo unit meets the FHA requirement. But since too many associations were having financial trouble – often caused by only a few delinquent owners – spot approvals were discontinued. Now, the entire condominium project must qualify and be approved before any FHA loan can be made to a potential buyer or to a unit owner looking to refinance.

A new FHA requirement ensures that a condominium association must be certified, and must be recertified every two years, in order for its owners to qualify for an FHA-backed loan. Typically, this can be done by a member of the association board of directors, the property manager, the association’s attorney, or a specialist who has experience and for a fee will handle the filing.

What must be certified? According to the FHA, the person signing the approval application certifies that (1) he or she has reviewed the project and it meets all state and local condominium laws and all FHA condominium approval requirements; (2) to the best of his/her knowledge, the application is true and correct; (3) he/she has no knowledge of circumstances that might have an adverse effect on the project, and – more significantly – (4) they are under a continuing obligation to inform the U.S. Department of Housing and Urban Development (HUD) if any material information is no longer true and correct.

What should condo boards and managers do about the certification? According to Stephen Marcus, a Massachusetts community association attorney, “non-lawyers should not provide the legal opinions required by FHA.”

Marcus suggests that the certification process be divided up. Association attorneys should certify compliance with state and local laws; lenders, or the lenders’ attorneys, should certify that the community complies with the FHA regulations.

Furthermore, how can anyone promise under oath to advise HUD immediately of any material information that is no longer factual? Board members do not often remain on the board indefinitely. And property managers also are not permanent fixtures. For example, if one unit member loses his job and falls behind on paying the assessment, and the number of delinquencies exceeds 15 percent, will the certifier suddenly face 30 years in prison if this information is not immediately reported?

Bottom line: Consult with your association’s legal counsel before signing any certificates or affidavits for the FHA.

It’s hard enough serving on the board; serving time in a federal penitentiary is probably worse.

Copyright © 2011, Benny L. Kass. Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining your own legal counsel.

October 27, 2011 Posted by | News related to Buyers, News related to Financing, News related to Sellers, News related to the Market | Leave a comment

Florida foreclosure mediation not working, needs changes

TALLAHASSEE, Fla. – Oct. 24, 2011 – A statewide program established in 2009 requires mediation in residential foreclosure cases, but it doesn’t work and should be significantly changed, a Florida Supreme Court panel said Friday. The report also warns of another deluge of foreclosure cases.

Following a series of conference calls and based on a review of public comments, a work group led by Second District Court of Appeal Judge William Palmer called on the state high court to eliminate the foreclosure mediation requirement. Chief Justice Charles Canady had asked the work group to conduct the study.

The work group also said the chief justices in Florida’s 19 judicial circuits should be given more flexibility to modify the proceedings to meet their particular needs.

The report says that the mediation process, established by 2009 Chief Justice Peggy Quince in response to a backlog of foreclosures, is not well known and apparently doesn’t provide the proper incentives to push borrowers and troubled mortgage holders to settle. As a result, it doesn’t solve the foreclosure backlog problem it was created to address.

“There are now approximately 350,000 backlogged foreclosure cases in the circuit courts,” Palmer wrote. “… These cases will continue to languish if additional resources are not provided to the courts.”

The work group said that the foreclosure process is working in some judicial circuits, and they should be allowed to continue their efforts. The work group urged the high court to make the process more attractive to the parties involved and remove a requirement that all cases must go through mediation.

The group said improvements need to be made quickly because the problem is not going away.

Florida had one of every nine U.S. foreclosure filings in third quarter 2011, according to RealtyTrac. The quarterly increase was prompted by a 24 percent increase in new default notices.

“Circuit courts likely will face a new surge of cases in 2012, which will further exacerbate the backlog and further delay finality,” Palmer concluded in the report.

The group said it did not have enough time to come up with specific remedies to the existing mediation program. Instead, it mapped out a series of issues that should be addressed by another group that has more time to review data from the fledgling program.

“Florida’s economy will continue to be depressed as long as there are massive numbers of mortgages in default that have not been resolved by foreclosure,” Palmer said.

Source: News Service of Florida, Michael Peltier

October 27, 2011 Posted by | News related to Short Sales and Foreclosures | Leave a comment

Fed HARP program expanded, help more owners

WASHINGTON – Oct. 24, 2011 – The Federal Housing Finance Agency (FHFA), with Fannie Mae and Freddie Mac, announced a series of changes to the Home Affordable Refinance Program (HARP). FHFA hopes to help more borrowers benefit from a program that refinances home mortgages.

“We know that there are many homeowners who are eligible to refinance under HARP, and those are the borrowers we want to reach,” said FHFA Acting Director Edward J. DeMarco. “Building on the industry’s experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by (Fannie Mae and Freddie Mac). Our goal … is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets.”

HARP is the only refinance program that enables borrowers who owe more than their home is worth to take advantage of low interest rates and other refinancing benefits. The program is offered to borrowers whose loans were sold to Fannie Mae and Freddie Mac on or before May 31, 2009, with current loan-to-value (LTV) ratios above 80 percent.

New program enhancements change several aspects of HARP including:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages, and lowering fees for other borrowers.

• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac.

• Waiving certain representations and warranties for lenders that make loans backed by Fannie Mae and Freddie Mac.

• Eliminating a new property appraisal if there is a reliable AVM (automated valuation model) estimate provided by Fannie Mae or Freddie Mac.

• Extending the end date for HARP until Dec. 31, 2013, for loans originally sold on or before May 31, 2009.

Mortgage lenders should have more information about the HARP program changes by Nov. 15, 2011. Since participation isn’t mandatory, implementation schedules will vary.

The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

© 2011 Florida Realtors®

October 27, 2011 Posted by | News related to Sellers, News related to Short Sales and Foreclosures | 1 Comment

Senate votes to extend higher loan limits

WASHINGTON – Oct. 21, 2011 – The Senate has voted to extend higher limits on federally backed mortgage loans for two more years.

The 60-38 vote late Thursday meant that through 2013, the government would continue to insure mortgages worth as much as $729,750 in high-priced housing markets. Those limits expired on Oct. 1, dropping that ceiling to $625,000.

The House has not acted on the issue.

Supporters of the higher limits say their expiration makes it harder for purchasers to buy homes, weakening the ailing housing market.

The Obama administration has proposed letting the higher limits lapse, saying this was a way to begin pulling federal mortgage giants Fannie Mae and Freddie Mac out of their dominant roles in the home loan market and creating room for private lenders to expand their business.

© Copyright 2011 INFORMATION, INC. Bethesda, MD (301) 215-4688

October 27, 2011 Posted by | News related to Buyers, News related to Financing, News related to Sellers | Leave a comment