The following question was posed by a buyer:

I’ve found a nice, well built home on 10 acres that the wife and I really like.  It was built a few years ago by the Realtor/Owner/Full Time Resident.  The quandry is this: She is the Realtor AND the Owner.  Theoretically, because I’m dealing directly with her (without a Buyer’s Agent), she will not be losing the typical commission on the sale.  I feel the commission should be sacrificed by her, to be additional to the low-ball offer that I would have made in the usual circumstances.  Combined together, that is a substantial reduction in the asking price.  Am I logical to pursue this tack?

Ultimately that will depend on your motivation.  I would say that the first thing you need to decide for yourself is whether you are looking for “the house” or “the deal” because very very rarely will you ever get both (even in this market).

If you are looking for “the deal” then absolutely, offer away!  A home is only worth what you are willing to pay for it, regardless of what a seller will accept - and after all…the worst they can say is “no”…and if that’s the case you just move on to the next one without a second thought.

However - if you truly love the home, and it would bother you if you weren’t able to have it for your own - that could very well change your direction.  In that case, I would offer what you feel the property is worth to you and not try quite so hard to “play the game”.

Keep in mind - when you write low-ball offers, you will get maybe 1 in 20 to work with you amicably.  If you only have 1 house (THE house) - do you really want a 95% chance of not getting it?

I would suggest that you contact a local Realtor to put some comparables together for you and help you to get a grasp of what the home might actually be worth in today’s market (which is very often not what it’s listed for, and also not very often what a buyer would like to initially offer).  Then again - at that point the agent should be compensated for their efforts.  Keep in mind, the listing agent/owner certainly isn’t looking out for your interests.

Ultimately - it’s not a decision that I can make for you - but hopefully my comments have helped to give some clarity to the decision you truly need to make, which is not “should I low-ball this house?” but rather “how much do I like this house when compared to the others that are available to me?”  The answer to that question should help to dictate your actions moving forward.

I hope this was helpful, and If there’s anything else I can do for you, please don’t hesitate to contact me on my cell phone at 352-397-5182 or email me at Josh@HernandoLuxuryHomes.com.

I get asked all the time about Short Sales and as a result they’ve become the focus of several Q&A Forum articles (here, here, here, and here).

Most real estate agents tend to discourage their buyers from making offers on short sales (myself included), but there are ways to have a very positive experience, stay in control, and get a great deal by going after short-sale properties.

The biggest challenge to this particular game lies within yourself.  You need three things to be successful in purchasing a short sale property.

1. Money
   You need to be pre-approved for a loan (and provide your Realtor with a Pre-Approval Letter from your lender) or you need to have Cash (and provide your Realtor with Proof of Funds (a bank statement with your private information blacked out showing that you have the funds to make the purchase))
2. Infinite Patience
   Keep in mind, there are three parties involved in a short sale situation…the buyer, the seller, and the seller’s lender (who is being asked to take a loss on the loan amount owed by the seller.  When you write an offer on a short sale property, it will usually take the seller’s lender 3 weeks to 6 months to respond.  You need to be OK with being in limbo during this period, as the lender usually won’t even acknowledge receipt of your offer until they’re good and ready.
3. The Ability to “Not Fall In Love” and Walk Away from a house
   Understand that 80% of short sales never make it to the closing table.  That’s 8 out of 10 homes that you will never be able to purchase.  Be OK with that.  Don’t fall in love with a house…understand the process outlined below and never put all your eggs in one basket.

Now…you’ve got an understanding of the three qualities necessary in order to purchase a Short Sale and not drive yourself nutty…Keep reading and we’ll explain how we can go about getting you a great deal.

Remember what I said about not putting all your eggs in one basket?  That means “don’t write one offer on one short sale and sit back and wait for a response”.

With a short sale, you don’t have to put any earnest money into an escrow account until the lender accepts the deal.  This means you could theoretically write 50 offers on 50 different homes and have spent nothing more than the time it takes to sign the offers…no money necessary until you get acceptance from the seller’s lender.

Let’s follow this further down the line, because doing this begs the question “what happens if more than one lender accepts my offer?”

*disclaimer: I am not a lawyer, I am a Realtor and not allowed to interpret legal contracts, as such this should not be construed as legal advice, and I advise you seek the counsel of a real estate attorney prior to proceeding.

Here’s my suggestion:

When you write an offer on a short sale (or a foreclosure), you write it on an as-is contract.  This is a standard Florida Association of Realtors contract that states the seller isn’t obligated to make any repairs of any nature on the home, regardless of what you might find during your inspections.  That’s not to say you can’t ask and try to renegotiate…just that the seller isn’t “obligated” like they would be in a standard purchase & sale agreement.  Now, what happens when you write your as-is contract and then during your inspection period you find out about a $10,000 roof issue that the seller isn’t obligated to repair?  Are you still obligated to go through with the contract even though you found out about this costly expense?

Here’s the wording out of the FAR/BAR As-Is Contract as it relates to your inspection period (email me and I’ll send you a full sample contract for your review):

INSPECTION PERIOD AND RIGHT TO CANCEL: (a) Buyer shall have ____ days from the Effective Date (”Inspection Period”) within which to have such inspections of the Property performed as Buyer shall desire…if Buyer determines in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may cancel this contract…prior to the expiration of the Inspection Period.

The blank in the first sentence says how many days you have for your “Inspection Period” which begins on the Effective Date (the day everyone agrees and signs off on the finalized terms of the contract).  If at any point within that Inspection Period you as a buyer decide that the property is not acceptable to you (in your sole discretion), you may cancel the contract.

*disclaimer: I am not a lawyer, I am a Realtor and not allowed to interpret legal contracts, as such this should not be construed as legal advice, and I advise you seek the counsel of a real estate attorney prior to proceeding.

That means that if you have 5 different sellers all agreeing to your offer as you’ve written it (which doesn’t generally happen - you will almost always receive a counter-offer rather than an acceptance) you can back out of any of them at any point within the inspection period and nobody can hold you to anything.

No Earnest Money Required
No Obligation to Purchase Even Upon Acceptance

I would suggest that your best strategy to purchase a short sale property is to write up as many offers on as many homes as you’d like at whatever price you’d like to pay for them and see which ones come back to you with counter-offers/acceptances.  At that point you have from the date of acceptance until the end of the inspection period (the length of which you can set when you write the offer) to pick whichever one you like best, deliver cancelation notices to the others, and be happy that you found a great deal.

*disclaimer: I am not a lawyer, I am a Realtor and not allowed to interpret legal contracts, as such this should not be construed as legal advice, and I advise you seek the counsel of a real estate attorney prior to proceeding.

Again - you need time/patience, the ability to not fall in love, and proof of funds…but you can get a great deal on a short sale property here in Hernando County, Florida.

As of this writing there are 3158 Residential Properties for Sale in Hernando County.  Of those 3158 properties, 226 are Foreclosures and 508 are Short Sales.  Let’s write some offers!

The following question was recently posed by the Realtor.com blogging team…

“How will the stimulus package affect the Real Estate market, and the economy as a whole?“

In my opinion, the stimulus package will only serve to delay the inevitable and prolong the pain.  There is a basic concept that is being grossly ignored and it is as strong as the law of gravity.

Supply vs. Demand.

There are simply too many homes priced too high to spur interest from the pool of ready, willing, and able buyers.  The only thing that will fix this economy is time.  It took several years of fantastic appreciation to get to the point where the decline began - and the appreciation was astoundingly quick and strong.  Life is about balance - in all things.  Including real estate.  Just as we have had several strong years of appreciation, so must we now have several strong years of depreciation.  This is not a surprise, folks.  Real estate is cyclical and always has been.  It goes up, then down, then up, then down.  We just had such a strong “up-swing” that the down-slide is significantly more potent and is affecting many other facets of our lives as well.

The $8,000 tax credit to those who purchase a home is a nice benefit…but I don’t think it’s going to spur anyone to buy a home who wasn’t already planning on doing so in the near future anyway.

I’m scared out of my mind that it will help to spur more new construction.  I hope my builder friends don’t get upset, but the last thing we need to turn this market around is more inventory for sale.

The stimulous plan is a struggle to fight the laws of nature.  It goes against the natural balance and order of Supply vs. Demand economics and it’s trying to force an outcome that isn’t supported by my metaphorical gravity.  Again - it will not turn this market around - it will only prolong the journey and hurt more people than it helps.

I still maintain that the best way for this market to turn around is for us to speed up the process, not slow it down.  The faster home prices drop, the more properties will be purchased by first-time homeowners and investors, and the more the inventory levels will shrink.  As inventory levels will shrink, relative demand will increase and prices will stabilize and over time increase as well.

Sticking a band-aid on a broken leg will not help it to heal.  It needs time.

The realtor.com blogging team recently posed the following question…

“What are the 10 things every consumer should know about foreclosure sales?”

1. A Pre-Approval Letter from a lender (if you’ll be getting a loan) or proof of funds (if you’re paying cash) are absolutely necessary to have in writing and before you write your offer.  The listing agents have instructions to not even submit offers to the bank unless they have a pre-approval or proof of funds submitted with them.
2. Be fully committed to making a purchase before you start looking in earnest.  The best deals tend to last only a few days on the market before getting snatched up - and there’s nothing more frustrating than finding “the” house and missing out on it because you were still debating your game plan.
3. Banks expect you to be able to close within 30 days.  If you need more than 30 days before you can complete your purchase, the bank will tell you to come back and re-submit your offer when you’re truly ready (if the home is still available by then)
4. Banks have their own set of rules that you must agree to if you’re going to play the foreclosure game.  Once they accept your offer, they will send over a bunch of addendums to the contract - these are not negotiable.  If you want the house at that price, you sign their forms and play by their rules.
5. Banks don’t tend to pay much attention to timelines (unless it’s in their best interest to do so (see #10 below).  You can write in your offer that they have 2 days to get back to you with a counter offer or acceptance…they’ll get back to you when they’re ready.  This relates to #4 above - if you want to play the game to get the house at that price, you play by their rules.  The good news is that generally the bank will get back to you within 4-5 business days, so you won’t have to wait 6 months like you might if it were a short sale.
6. The basic pricing process for banks with foreclosure properties is as follows: regular price reductions until it sells.  Keep in mind, you can absolutely wait and the price will absolutely get lower over time - until it’s gone…Don’t miss out on a house because you’re waiting for the price to drop - make your offer and see what happens!
7. Don’t ask for the bank to make repairs in your initial offer.  Get your deal “accepted” first, then make your inspections and try and negotiate a bit more depending on what you find (and can substantiate through your inspection reports).  Some banks will renegotiate with you (to a point), and others won’t - but you don’t know unless you ask…just do it AFTER they’ve already committed to accepting your initial offer.  And remember the age-old adage:  Hope for the best but plan for the worst.  i.e. hope that they will renegotiate a bit, but plan on them sticking to their guns on their pricing.
8. Many banks will look more favorably on your offer if you build in fewer days for inspections.  Time has value to a bank (every day the home is unsold costs them money) - the sooner your inspection period is over, the faster you’re either “in or out” on the deal.  If you’re in, great.  If you’re out, the sooner they get it back on market for another buyer, the better it is for them.
9. Do your homework!  Know your values and be able to justify your offer.  Have your Realtor pull some recent comparable sales for you.  Just because it’s a foreclosure doesn’t mean it’s a great deal.
10. Contrary to #5, time is of the essence.  Once all matters have been negotiated, the bank will expect you to close on the closing date or sooner.  They will also usually charge you a per-diem fee (usually $50-$100/day) if they’re ready to close on time and you’re not.  Keep in mind, it’s their ball, it’s their court, and if you want to play it’s by their rules (fyi - if it’s their fault that the deal can’t close on time, you don’t get to charge them a per-diem).

Hopefully you found this list to be helpful and informative.  If you have any specific questions, please don’t hesitate to call me on my cell phone at 352-397-5182 or email me at Josh@HernandoLuxuryHomes.com.

This question comes up at least a couple of times/month, so I thought it would be good to post here.

I’d like to find a lease/purchase or a lease/option in Spring Hill, but I’m having a hard time finding any sellers who will work with me - what should I do?

Ideally, you should forget about the lease/purchase or lease/option idea and rent until you’re ready to buy something outright.  First off, it’s important to understand the difference between a lease/option and a lease/purchase.  Once those are defined, I’ll explain the positives & negatives of each and conclude by reiterating my first statement that “you should forget about the lease/purchase or lease/option idea and rent until you’re ready to buy something outright.”

Lease/Purchase

A lease combined with a purchase agreement that obligates the lessee (tenant) to purchase the property under specified conditions.

Lease/Option

A lease combined with an option agreement that gives the lessee (tenant) the right to purchase the property under specified conditions.

As a general rule, a seller who would entertain a lease purchase or lease option agreement is going to expect above-market value for their home as well as a sizeable deposit in consideration for their not selling it outright to someone else.  That deposit will either

1. get deposited into an escrow account to be put towards the purchase of the property or
2. be given to the seller to do whatever they wish in consideration for the option to purchase the property.

The benefit of a lease/purchase or lease/option for someone looking to buy Spring Hill Real Estate comes into play when the buyer has a lower credit score or little to no down payment which prevents them from purchasing the home outright.  The downside is that the buyer will pay more for the property, and in a declining market the home may very well be worth less at the end of your lease period than you agreed to pay at the beginning.  At that point you either continue to try and consumate the purchase or you walk away and lose your deposit.

Spring Hill Investors tend to love buyers with lease options because they get a sizeable down payment (the option money) which they can use freely, and most of the time it seems to work out that the buyer isn’t able to get a loan at the end of the option period (either because they haven’t increased their credit standing enough, or because the home has gone down in value and will no longer appraise at the purchase price.  This results in the landlord/seller taking the property back, keeping the option money, keeping the rent money, having a really great year or two with that property, and then doing it again if possible.

A Lease Purchase is usually more in the buyers favor - with the down payment funds being held in an escrow account and usually some extra contingencies on the purchase (home appraisal, etc) - however getting a seller to agree to this in a declining market is all but impossible as it’s almost guaranteed that the home will be worth less than the purchase price by the time you’re ready to make your purchase and the deal will fall through - and the seller won’t get to keep any of that extra cash for their efforts & time in helping you to own a home.
In conclusion, my best advice is to avoid a lease/option or lease/purchase scenario and rent until you are truly ready purchase a Home in Spring Hill.

The realtor.com blogging team recently posed the following question…

“What are the 10 things every consumer should know about short sales?”

1. Buyers - If the short sale has not been approved by the bank (95% fall into this category), the process can take up to 6 months and still end up going nowhere.  To understand why it takes so long, take a look at The Short Sale Process From The Buyers Perspective.
2. Buyers - Bank-Approved short sales are great, but you need to be prepared to pay at or above asking price.  Otherwise, the price you’re willing to pay is no longer approved and the deal reverts back to #1 above.
3. Buyers -The asking price listed is usually below what a bank will normally accept.  Before a bank will approve a price for the property, the listing agent needs to bring them an offer…best way to get an offer is to under-price the property (this is the catalyst that gets the bank negotiations started).
4. Buyers - No earnest money deposit is required when submitting offers on short sales, so if you’ve got the time and patience for it you can throw out many offers and just see who gets back to you with no money out-of-pocket and no risk.
5. Sellers - You may have additional taxes to pay on the amount of forgiven debt (there’s no free lunch).  Contact your CPA for more information.
6. Sellers - A short sale will be a negative strike on your credit, but not nearly as bad as a foreclosure.
7. Sellers - If you have a second mortgage or line of credit on your home, the liklihood of a short sale is greatly reduced.  Both the first and 2nd leinholders need to sign off on the deal, and chances are the second leinholder will be asked to walk away with nothing…where’s their incentive to agree to that?  (note: There are ways around this, but they go beyond the scope of this article.)
8. Sellers - Banks would rather short sale your home than put it into foreclosure -foreclosures are extremely costly and banks don’t like to own property - they want their funds to be liquid and useable.
9. Statistically, 80% of short sales never close and end up going into foreclosure (this relates strongly to #10)
10. Many real estate agents don’t know how to properly negotiate a short sale with the bank…and classes are not required in order to try.

Hopefully you found this list to be helpful and informative.  If you have any specific questions, please don’t hesitate to call me on my cell phone at 352-397-5182 or email me at Josh@HernandoLuxuryHomes.com.

This question was recently posed by the Realtor.com Blogging Team:

What are your market predictions for 2009?

I read many blogs and websites about the real estate market on a regular basis and I have to say I think many people are over-thinking things when talking about their predictions for the coming months…While I do concede that there are MANY factors that go into determining what happens with the housing market, I don’t think you have to look at all of them to get a clear picture when there is one glaringly obvious issue that supercedes all of those factors and makes them seem insignificant.  The basic princple we all learned in high school economics….Supply vs Demand.  Ultimately every other factor (come January, Once the election is over, Once the president takes office, blah blah blah) pales in comparison to the concept of Supply vs Demand.

When the market was “hot” towards the end of 2005 and it seemed like everything that was listed got sold (I say “seemed” because even then, a listing that was overpriced didn’t sell), Hernando County had approximately 700 homes on the market at any given time.  700.  We now have approximately 3,200 available for sale.  That’s over 4.5 times the amount of inventory.  What this means is that instead of a buyer finding 2-4 homes that they really like and would be happy to write an offer on, they now have 10-18 homes from which to choose.  With that many good choices, they don’t care as much about whether house #1, 2, or 3 accepts their offer….they’ve still got homes 4 through 18 to try for - so go ahead, lowball away!  After all…someone will take it.

And then someone does…and that sale becomes the next comparable for all the others who didn’t.  And the market continues downward.

It is now, and will continue to be an absolutely fantastic time to be a buyer / investor in Real Estate.  I’ll touch on both buyers and investors as we go, but let’s start with what I call “regular buyers” - those who are buying a home for their family and while they obviously want to make money with it in the long-run, their primary objective is to find a home for their family that suits their needs.

As we move into 2009 our inventory levels are still astronomically high which creates an abundance of choices from which you can choose your new (or new-to-you) home.  Especially if you are a buyer who is looking for a home first and an investment second (you don’t need it to “pencil” and incoming rent to cover your costs) and are willing to put in a bit of sweat equity (cosmetics/paint/carpet/tile/etc) you can find some absolutely stunnning deals that are out of reach for investors (they’re too much money for what the rental market would bear) but they’re perfect for a family to own as a long-term investment.  For example, take a look at these last couple of homes that we’ve put under contract.

• 2223 SF Living, 4/2/2 with pool in Golf Community for $139,900 asking price
• 2009 SF Living, 3/2/2 + Office & Pool, New Construction w/ Granite Counters & Lots of Upgrades in a Gated Community Sold for $155,000

Not to mention these that we’ve just listed - absolutely fantastic deals!

• 1419 SF Living, 3/2/2 in great condition with a large fenced yard close to highway & shopping - $100,000 Not a Short Sale
• 2296 SF Living, 4/3/1 on 300′ wide canal just seconds from open waters of the Gulf of Mexico, private boat lift & tiki over the water, immaculate - $350,000 Not a Short Sale
• 1924 SF Living, 3/2/5 3-story home on cul-de-sac double lot with canal on 2 sides and incredible gulf views from almost every room - $321,000 Approved Short Sale

These deals are absolutely fantastic and serve to give you a great idea of where the market’s at….and it’s only getting better until our inventory levels drop (my prediciton is that inventory will have to drop to 1,200 homes on market before it will level out - and then over time start to go up again).  Take advantage!  The deals are selling within a matter of days and you don’t have time to think about it for days.  Come prepared, and ready and we’ll find you an absolutely fantastic deal.  I wouldn’t plan on selling any time soon, though….not unless you absolutley have to.

True investors know that money is made in both a buyers and sellers market…they also know that you make your money when you buy, not when you sell.  Now is a fantastic time to pick up rental properties for $40,000 - $70,000.  I’ve purchased 4 rental properties myself in the past 7 months.  Will they be worth less next month?  Absolutely…but if I didn’t buy’em someone else would have, and they’re renting cash-flow positive.  Also take note, rents aren’t decreasing like home prices are… Many of the folks losing their homes to foreclosure still need a place to live and it’s not that they can’t afford it or are irresponsible people who don’t pay their bills…many just couldn’t afford their mortgage after their rate adjusted and their payment went from $1,200 to $1,800 per month…

Hypothetically, you could purchase a home in foreclosure, turn around and rent it to the people who lost it for less than their original monthly payment, and still be cash-flow positive.  That’s how much the market has dropped so far.  I see the market getting better over time for investors as well for the next few years.  Does that mean you should wait?  Absolutely not - you should take advantage of the market conditions CONTINUOUSLY.  As long as it’s a good deal, you should buy.  Could it be better tomorrow? Yup…but with these deals, if you don’t buy it, someone else will and they’ll reap the benefits while you wait it out.  Keep in mind, by the time anyone realizes the market has changed, it will already be back on the up-swing and you’ll have missed it.  Look for the deals constantly - be vigilant and patient, and when you find it, snag it.  A deal is a deal is a deal, whether the market is still dropping or not.  My last purchase was for $50,000 for a 1,250 SF 3 bed 2 bath home that needed less than $10,000 to bring it into perfect condition.  It now rents for $700/month all day long.

The market will continue to be difficult for sellers throughout 2009 and prices will most likely continue to drop.  Take advantage if you can - find money and invest it while things are on sale…invest for the long term and hold it because while you can’t predict the exact timing, you can predict what the market will do…it always moves in waves…it goes up, then down, then up, then down.  All you have to do to make money in real estate is be patient and not over-extend so that you can afford to buy low, and then wait until you can sell high.

If you have any questions, we’re here 24/7 - call or email any time!

Thanks, and good luck!

-Josh

This question was recently posed by a homeowner at over at talk.realtor.com:

I purchased a property at the peak of the market in 2005. With my home value down now, how can I get a reassessment on my property taxes? Is it worth doing?

I’m going to preface the answer by saying that this is a question that will vary depending on your location and your local government. In general, to request a re-assessment of your taxes, you would contact your local property appraiser’s office.  Try typing ‘your county property appraiser’ (if you’re not sure what county you’re in, use your city and you’ll probably have similar results) into google and you should have pretty good results with getting some contact information.  Here in Hernando County the website is http://www.hernandocounty.us/pa/. The benefits will be determined by two factors:

Read the rest of this entry »

This is a question that was posed as part of the answer to a previous question about having your property re-assessed in a down market to save on your taxes.

How can my taxes go ^up when the market value of my home has gone _down?

Read the rest of this entry »

This time I have a question…

8 schools in Pinellas County are being closed down due to budget cuts.

Failing Auto-Makers are given billions of dollars to continue doing bad business.

Does this make sense to you?

How about a bailout for the school system?