Update on current market trends in Fernandina Beach

Buyer traffic is definitely up in the last 90 days. Whether the market has bottomed out is anybody guess. The old adage is: the only way we will know we are at the bottom is when it is passed us. Many buyers are seeing the advantages of first time buyer tax credits, mortgage rates of under 5%, an abundance of home inventory, and prices down 20 to 25% below 2006 level as a sign it is a great time to buy.

Here is a link to Current Real Estate Market Trends in Fernandina Beach
http://www.trulia.com/real_estate/Fernandina_Beach-Florida/

Explaining short sales

What is a short sale?

When the sellers owe more on their mortgage(s) than the value of their home, the sellers are in a shortage situation if they decide to sell. There will not be enough money to pay off the loan(s). The seller would need to come to the table with proceeds to satisfy the lien(s). That is not the same as being able to justify a short sale where the bank determines that the seller is worthy to be allowed to sell the home at less than the outstanding lien(s), and the bank will accept as their loss the shortage. In order to be considered for short-sale eligibility one would have to have a hardship such as divorce, medical expenses, job loss, death of family member or some similar life catastrophic situation. In addition, the sellers’ expenses must exceed his/her/their assets/income, they are behind on their payments and have no way to repay the bank. Simply owing more than the home is worth yet wanting to sell regardless of a lack of hardship is not a reason to apply for a short sale.

Let’s assume there is a hardship as stated above. What is the process for the agent/seller to follow?

“List the property at a price based on a detailed market analysis. The agent needs to be sure that they make other agents in the MLS aware that it is a possible short sale and that ‘all transactions including the amount of compensation, are subject to bank’s approval.’ The fact is that even if a home is listed at market value and a buyer comes along and makes an offer commensurate with that value, the bank may not accept the sale. There are cases where the bank’s price opinion may be higher than the offer on the table, and the bank may counter or refuse the offer if it does not conform to what they believe is accurate. I often suggest that the agent take a video of the home to truly document condition as some appraisals are done without a full walk through. Without documentation it may be difficult to make the case to the bank about why the home is not worth what the bank’s appraiser determined. Agents should always meet the bank’s appraiser at the property and provide them with comps. They may not use the agent’s comps, but the documentation could come in very handy if a conflict ensues. This is not to be taken as gospel that any bank will debate with either an agent or an attorney. Some will, others will not.

What are the banks looking for relative to a buyer’s qualifications?

In the vast majority of the time, the bank does not want to negotiate contingencies. Buyers who have another sale pending and need the proceeds from that sale in order to close on the next purchase are not likely to be considered. Banks take a dim view of buyers requesting concessions. Sales are always as is with no repair credits, except under very, very rare instances. While buyers can have inspections done, it is for their consideration only and not for negotiating any issues that may surface. I had an incidence where during the processing of the short sale, the house suffered a freeze-up. I went back to the bank and renegotiated for the purchasers. We had to document the problems and estimate the cost of repair. That is the kind of rare occurrence I would consider presenting to the bank.

Should you sell first or buy first opinions

In a buyers market like we have now, people who are looking to sell their current home and purchase another have a tough choice to make. Should they sell their current home, or purchase their next home first? There is no one-size-fits-all answer, but here are a couple of scenarios to consider:

A. Sell Home 1, Then Buy Home 2:

In this market, you have a lot of control over the purchase of your home. If you sell Home 1 you will know exactly what you have to work with financially as you approach the purchase of Home 2. You will also get a better price on both homes. That is because you will not be under any pressure to sell Home 1, therefore you will not be tempted to jump at a low offer. You will get a better price on Home 2 because you will be working with a definite timetable, and will not need to make your offer contingent on the sale of your home. A seller who has to deal with a sale-of-home contingency will, almost by definition, expect more money for the sale of their home. Sellers look for two things when they are selling their home: top dollar and security in the sale. Which would you rather give them?

B. Buy Home 2, Then Sell Home 1:

This option is often the most comfortable one for people who want to move up. There is something that is difficult about selling the home you live in when you don't know where you are going to go. Finding your new home first gives you the motivation to sell your current home. The whole process falls together better in your mind when you go out and purchase a home first. The risk of this option is that you will lose out on Home 2 because you are not able to sell Home 1. This is a significant risk in a market where there is a 7-month supply of homes on the market. Also, as I noted above, you will have to give the seller more money if you use a sale-of-home contingency, and you will feel significant pressure to sell Home 1 as quickly as possible, putting you in a position to take less money for it. This pressure will come from the knowledge that you could lose Home 2 at any time because of the "kick out" clause in the contingency. This allows the seller to kick you out of the sale if a non-contingent offer comes along and you are not able to remove the contingency because your Home 1 has not yet sold. This possibility is heavy on people's mind after they spend significant time, money, and mental energy to work out the purchase of Home 2 (ie. negotiations, home inspection, and planning for the future in Home 2).

C. Buying Home 1 First Without a Sale-of-Home Contingency:

This is only an option for people who can afford to carry mortgages on both homes. For a seller to accept a contract under these circumstances, they will require proof that you are able to carry both mortgages. In a sellers market, a move-up buyer could prove their ability to do this--sometimes only with a high-interest loan they could qualify for, but would not actually want to take. This strategy worked for people in a sellers market because they would turn around and sell Home 1 the following weekend, then be able to qualify for a more favorable loan on Home 2. The worst case scenario of not selling Home 1 was extremely unlikely. In the current buyer's market, someone using this strategy is very likely to end up with an unfavorable loan or at best paying two mortgages for a while. Of course, those who have the financial means to carry two loans, and to qualify for two loans that are of a reasonable interest rate may choose to buy first and hold onto both home as long as they need to. Another option is to get a bridge loan to hold both houses until you can sell House 1. If finances are tight for you this will put a lot of stress on you, and may put you in a desperate position when you are negotiating with a person wanting to buy your home. For most people, I recommend getting Home 1 sold before you put a contract on Home 2. You should go out and see what is available for you to purchase before you put your home on the market. This will give you an idea of the types of homes available to you. It will also give you the motivation you need to get your current home sold.

Thanks to Jeff Royce, Realtor in Fairfax, Va for this blog.
Blog Reference: http://www.ourfairfax.com/2009/01/22/whenmoving-up-should-you-sell-first-or-buy-first

IS IT THE BOTTOM?

Economists at the National Association of Home Builders semi-annual forecast conference predict home prices will hit bottom in the middle of 2009. As evidence, builders point to increasingly affordable prices, new home incentives, fewer housing starts, declining interest rates and pent-up demand. "I'm hopeful that the markets will come to their senses soon," said Michael Moran, chief economist for Daiwa Securities America.Source: The Wall Street Journal, June Fletcher (10/29/2008)

FHA loans are becoming more attractive

FHA loans are becoming more attractive from Florida Realtor Magazine, July/August 2008 page 24 FHA Loan Limits Open DoorsFHA loans are becoming more attractive. “This is great news for buyers,” says Cathy Alley, a sales associate at ERA American Realty in Niceville. She’s referring to the March announcement by the Department of Housing and Urban Development (HUD) that it increased the size of loans that the Federal Housing Administration (FHA) can insure for the remainder of 2008.“I think the raising of FHA limits is going to help not only buyers in our area, but it will also generate activity across the nation,” says Alley. “When the market was hot, first-time buyers really couldn’t buy property because they were being outbid by investors. This will bring the average American back to the homebuying market.”What the New Rules Mean“FHA loans,” as they’re called, are issued by traditional lenders but insured by the FHA. Because they allow down payments of as little as 3 percent, they’ve been valuable in helping lower-income buyers enter the housing market. But as home prices rapidly increased, FHA loan limits remained stagnant. That left lower-income buyers with fewer homes they could purchase through the FHA program.The new FHA rules are a result of the economic stimulus package Congress passed in February of this year. Through the package, Congress asked HUD to reconsider its median home prices in counties throughout the nation, which it uses to determine which loans it can insure. In most counties, including those in Florida, the FHA is permitted to insure only loans that don’t exceed 125 percent of the county’s median home price. In designated high-cost areas, the FHA can insure only loans that don’t exceed 175 percent of the median home price. By revising the median home prices upward, HUD is opening up the FHA program to more buyers.For instance, in Miami-Dade County, the new median price is $339,000, which has raised the FHA loan limit from $362,790 to $423,750. In Lee County, the median price has been reset to $285,000, which has raised the FHA loan limit from $270,750 to $356,250. In Manatee County, the median price has been adjusted to $354,000, increasing the FHA loan limit from $336,100 to $442,500. Check the limit in your county by visiting HUD’s Web site: https://entp.hud.gov/idapp/html/hicostlook.cfm.On the same day HUD increased FHA loan limits, the Office of Federal Housing Enterprise Oversight increased limits for loans guaranteed by Freddie Mac and Fannie Mae from $417,000 to $729,750. That means that buyers who needed financing greater than $417,000 in the past—and were required to pay higher interest rates for those jumbo loans—can now get loans up to $729,750 without paying the jumbo loan premium.Spread the WordAs soon as the new FHA limits were announced, sales associates throughout Florida sprang into action. “I take any opportunity to reconnect with buyers,” says Toni Campbell, a sales associate at Keller Williams Advantage II Realty in Orlando. “Buyers need to hear something positive, so I started going through my contact list and letting them know that the FHA loan limits had been raised and that the change would help them get more of a home than they could afford before.”Once Campbell gets buyers on the phone, her dialogue is simple. “I explain the difference with the new loan limit,” she says. “I say, ‘If you could normally afford a $350,000 home, this might allow you to get a home up to $375,000.’” Her pitch has worked. “I had two people who were looking at renting, and once I explained the FHA program, it piqued their interest in buying today rather than waiting two years.”Alley has sent a postcard to buyers in her market explaining the new limits. On the front, she asks, “Could a FHA home loan be right for you?” On the back, Alley explains the benefits of the FHA program, including the low down payment requirement, the provision that allows sellers to contribute to buyers’ closing costs and the provision that allows gift funds to be used.“I’m hopeful this will open doors to buyers who haven’t been able to buy,” says Alley. “And maybe the people I sent it to aren’t in the market themselves, but they may have a son or daughter who can afford to buy but who doesn’t have the cash for the down payment, and the parents can help out.”The worst-case scenario for Alley is that even if the postcard doesn’t bring buyers in the door to take advantage of FHA financing, she’s still showing consumers that she’s smart and diligent. “Anything going out to my database that helps people understand that I’m still in the marketplace and shows I’m working hard for them—that helps.”Glenn Stein, broker/owner of Realty Executives Ocala in Ocala, turned to the Internet to get the new FHA information out to his target audience. He posted news of the FHA changes on his Web site. Though he hasn’t had much response to his Web post, he’s also discussed the new FHA rules with buyers when he thinks the program might fit their needs. “Sometimes we can overcomplicate the jargon. Buyers are simply interested in, ‘Can I buy this house?’” he says. “So it’s a simple conversation with the sales associate and buyers in the car between showings. Most people think the FHA program is only for $100,000 houses, and when we’re showing houses right at the top of the FHA limits, we say, ‘Do you realize you have the option of 3 percent—not 5 or 10 percent—down on this house?’”John C. Davison, broker/owner of The Davison Real Estate Group in Longwood, recommends that you also broaden the discussion to include other housing assistance programs. “I’ve begun to target first-time buyers more frequently to take advantage of the possibility of putting clients into a house with very little money down,” he says. “I even take it a step further and tell them about no-money-down options through government down payment assistance programs. With some programs, like [the Nehemiah Program], the Dream Homeownership Program and Family Home Providers, sellers can contribute up to 3 percent of the purchase price.”Will the New Limits Work?Sales associates are cautiously optimistic that the new FHA loan limits will bring buyers back onto the homebuying playing field. Davison believes they’re an asset, but not for all buyers. “There are definitely people in our area that the new FHA limits will help,” he says. “But lenders still have standards that need to be met, and we all know how tight those standards have become. Also, the increased loan limits do nothing for people who are saddled with selling a house to be able to move into another house. It’s like the corner candy store in a small town. It may double its size, but how much candy can people in that area buy?”For Terry Dona, the new limits are already helping buyers beat tough down payment requirements. The sales manager at Metro Mortgage and Gulf Coast Associates in Bonita Springs, who’s also a mortgage underwriter and HUD lender, says that since the new FHA limits were introduced, she’s seen double the number of buyers using FHA loans to purchase homes. “Probably the biggest issue, especially for younger buyers, is the ability to get a down payment together,” she says. “With not-for-profit down payment assistance programs, buyers with a decent job and good credit can get into a house for as little as $500. That makes a huge difference, and it makes it possible for quite a few people to buy.” G.M. Filisko is a Chicago-based freelance writer.

November 21, 2007 2007 Property Tax Reform
Proposed Constitutional Amendment
SJR 2-D
Chapter 2007-339, Laws of Florida
Frequently Asked Questions
Note: These answers provide a general overview of some of the provisions of the proposed constitutional amendment and do not cover all provisions and exceptions contained in the amendment.
Background
Property taxes are levied by cities, counties, school districts, and independent special districts.
How much property tax you pay is determined by:
1) The property tax rate that local government charges, and
2) The taxable value of your property (the value you pay tax on, after assessment limitations and exemptions).
The property tax rate is called the "millage rate" and is expressed in "mills." A mill is $1 per $1000 of property value. So, for example, a millage rate of 15 mills would mean you would pay $1500 per $100,000 of the property’s taxable value.
For specific information on how property tax reform may affect you, please contact your property appraiser. You will find a list of Florida's property appraisers at
http://dor.myflorida.com/dor/property/appraisers.html
To view the property tax reform law on the Department of State's website, go to http://election.dos.state.fl.us/laws/07laws/index.shtml. Under "2007 Laws," select "Special Session Laws," then select "ch 2007-339."
Note: These answers provide a general overview of some of the provisions of the proposed property tax constitutional amendment and do not cover all provisions and exceptions.
1. How will "Save Our Homes" be changed? Will we lose our "Save Our Homes" protection?
No. The proposed amendment does not remove the annual limit on the increase in the assessed value of homestead property. The limit will continue to be applied, both to current homesteads and homesteads that are established in the future.
The amendment would revise the benefit provided to homestead owners by adding "portability." Once you have a Florida homestead exemption, you will be able to keep some or all of the difference between the assessed value and market value on your old home when you purchase a new home and establish your homestead there.
There will be no change in how the property of first-time homesteaders is assessed. Individuals who establish a Florida homestead for the first time will have their property assessed at market value for the first year. Then the "Save Our Homes" limit will be applied to that assessment in future years.
2. How would "portability" work?
Under "Save Our Homes," the assessed value of homestead property cannot increase more than 3% each year, unless you have construction or improvement occurring on the property. (The yearly limit varies based on the change in the Consumer Price Index, but it cannot be more than 3%.) For most homesteads, this limitation results in an assessed value that is lower than the market value of the home.
Currently, if you are a Florida homesteader and you buy a new home and make it your homestead, your new home will be assessed at market value the first year you own it.
If the amendment passes, some or all of the difference between your old homestead's assessed value and its market value can be applied to the assessment of your new home in the first year you own it. Then the "Save Our Homes" limit will apply each year after that.
How much of the difference between assessed and market value ("Save Our Homes difference") can be applied depends on how the value of your new home compares to the value of your old home.
If the new home's market value is the same or greater than the old home's market value:
the entire difference will be applied to your new home, so that the difference between the market and assessed values of your new home will be the same as the difference between the market and assessed values of your old home.
If the new home's market value is less than the old home's market value:
the entire amount of the difference will not be applied to the new home.
Instead, the new home's Save Our Homes difference will be the same percentage of its market value as the old home's difference is of the old home's market value. For example, if the old home's Save Our Homes difference is 40% of its market value, the new home's difference can be determined by multiplying 40% times the new home's market value. Then subtract that amount from the market value to arrive at the assessed value.
Property Tax Reform FAQ November 21, 2007 2Note: These answers provide a general overview of some of the provisions of the proposed property tax constitutional amendment and do not cover all provisions and exceptions.
Maximum deduction from market value:
The amendment sets $500,000 as the maximum amount that can be subtracted from the market value of a homesteader's new home to determine the assessed value. The maximum applies no matter what the relationship of the new home's market value is to the old home's.

Property Tax Reform FAQ November 21, 2007

3Note: These answers provide a general overview of some of the provisions of the proposed property tax constitutional amendment and do not cover all provisions and exceptions.
3. I have purchased a new home and will be making it my homestead by January 1, 2008. If the amendment is approved, will I be able to transfer my Save Our Homes assessment difference?
Yes. If the amendment passes, and:
• you had a homestead exemption on January 1, 2007;
• you qualify for the homestead exemption on your new home by January 1, 2008; and
• you apply to your property appraiser for the exemption and the transfer, by March 1, 2008;
you will be able to transfer some or all of the difference between the assessed and market values of your old home to your new home. (See question 2 for how the amount you can transfer is calculated.)
4. What will the requirements for portability be if I establish a new homestead for the year 2009 or later?
If the amendment passes, and:
• you qualify for the homestead exemption on a new home by January 1 of a particular year;
• you had a homestead exemption on your old home in either of the two immediately preceding years; and
• you apply to your property appraiser for the exemption and the transfer, by March 1 of the particular year;
you will be able to transfer some or all of the difference between the assessed and market values of your old home to your new home. (See question 2 for how the amount you can transfer is calculated.)
Example:
If the amendment passes, and:
• you qualify for the homestead exemption on a new home by January 1, 2009;
• you had a homestead exemption on your previous home as of January 1, 2007 or January 1, 2008;
• you apply to your property appraiser for the exemption and the transfer, by March 1, 2009;
you will be able to transfer some or all of the difference between the assessed and market values of your old home to your new home.
5. If the amendment passes, how would I apply to transfer my previous Save Our Homes assessment difference?
You would apply for the transfer at the same time you apply for the homestead exemption on your new home. The application deadline for a homestead exemption is March 1 of the year for which you are claiming homestead. For example, to receive the homestead exemption for 2008, you must qualify by January 1, 2008, and apply by March 1, 2008.
When you apply for the exemption on your new home, you will have to include a copy of your notice of proposed property taxes on your old home (or similar documentation) and sign a sworn statement that you are entitled to the assessment reduction. If you have already applied for your 2008 homestead exemption before the constitutional amendment is adopted, you will need to apply separately for the transfer of the assessment difference from your previous homestead.
For more information on how to apply, contact the property appraiser for the county where your new home is located.
Property Tax Reform FAQ November 21, 2007 4Note: These answers provide a general overview of some of the provisions of the proposed property tax constitutional amendment and do not cover all provisions and exceptions.
6. Is the amount of my homestead exemption affected by the proposed constitutional amendment?
Currently, the first $25,000 of the assessed value of homestead property is exempt from tax levies by all taxing authorities. If the proposed constitutional amendment is approved, an additional exemption of up to $25,000 will apply to all levies except those by school districts.
This additional exemption will apply only if the assessed value of the property exceeds $50,000, and it will apply to the amount by which the value exceeds $50,000, up to a total additional exemption of $25,000 (that is, exempting the assessed value between $50,000 and $75,000).
This additional homestead exemption, if approved, would first apply to the January 1, 2008, assessment. The exemption would be granted to all property owners qualifying for the homestead exemption. No further application would be necessary for those who are currently receiving the homestead exemption.
7. How does the proposed constitutional amendment affect non-homestead property?
The proposed constitutional amendment would make an exemption available to owners of real property who do not have a homestead exemption or agricultural use assessment on the property. This exemption would limit the increase in assessed value of the property to 10% per year for levies of all taxing authorities other than school districts. The property owner would have to apply to the property appraiser to receive this exemption, and would have to renew the application each year after that to keep the exemption. The property appraiser would mail a renewal application to each exemption holder annually. Changes, additions, or improvements to the property would be valued at just value as of the first January 1 after the changes, additions, or improvements are substantially complete.
For residential property containing nine or fewer dwelling units, this limitation would apply until the property changes ownership or control. For all other property to which the assessment increase limitation would be applicable, the limitation would apply until there is a change in ownership or control or until there is an improvement to the property that increases its just value (market value) by at least 25%.
Property would be reassessed at just value on the January 1 following the loss of the limitation. In subsequent years, the assessment limitation would again apply until another change in ownership or control or, if applicable, an improvement increasing just value by at least 25%.
8. What other changes would be made by the constitutional amendment?
If approved, the proposed constitutional amendment would provide a $25,000 exemption for tangible personal property. This provision would apply to the January 1, 2008, tax roll and every year after that. The exemption would apply to tax levies of all taxing authorities.
9. Why do we have to vote on this legislation?
Because the homestead exemption and other property tax provisions are established by Florida’s Constitution, the Legislature alone does not have the authority to change them. Constitutional amendments require the approval of 60 percent of the voters. The Legislature passed a law that established January 29, 2008, as the date for Floridians to vote on the amendment.