Sarasota • Manatee, Florida / Investor News

Bank can go after other assets in Florida if you default on mortgage

2012-01-14T02:43:00.004-05:00

Worried that your bank might go after your other assets if you're late on the mortgage or lose your home to foreclosure?

It can happen in Florida, especially if a bank sells your foreclosed house and doesn't recoup the full loan amount and if you're a big-dollar borrower.

With nearly half of all mortgages under water in South Florida, plenty of residents may wonder if their home lender can garnish their wages or suddenly lock down their deposit accounts.

Rules on tapping assets vary by state and depend on the terms of specific loans and accounts.

Problems on typical home loans usually don't crop up before foreclosure. They tend to come after the bank sells the home and ends up short.

In Florida, banks can go to court for a "deficiency judgment" to collect the rest of the money owed on a mortgage after foreclosure, said Anthony di Marco, vice president of the Florida Bankers Association.

Banks can pursue other assets with that judgment. They can file a lien on your boat or car. But "they can't jump priority on a loan," so the lender for that boat or car has first dibs to collect, di Marco said.

Florida banks usually don't target other assets after foreclosure if they don't see much to tap. "Collecting on judgments is time-consuming and costly," said real estate attorney Shari Olefson, a partner at Fowler White Boggs in Fort Lauderdale and author of "Foreclosure Nation: Mortgaging the American Dream."

But banks pay more attention to borrowers with multimillion-dollar homes or businesses that default on big commercial properties. The lender can check if the customer has other accounts with the same bank. Depending on the terms of those savings or checking accounts, they may move to freeze, sweep, garnish or otherwise tap those accounts to collect money owed, Olefson said.

There's another risk for smaller borrowers later. Banks may sell their deficiency judgments to a collection agency. The judgments are valid for up to 20 years. That leaves an agency focused on collections ample time to come after you for the balance still due, she said.

"That's why it's so important for people to deal with these mortgage problems upfront," Olefson said. "So if you have the chance to do a short-sale through the bank, or if you have the chance to negotiate with the bank and clear up the loan — rather than have this financial time-bomb ticking over your head for years — you'll be so much better off working with the bank."

And be sure get any settlement reached with the bank in writing, mortgage specialists add.

No matter what, some types of assets are off the table when banks look to collect money due on homes.

Some federal payments cannot be garnisheed at any time to cover a mortgage. Those include Social Security checks, veterans benefits and some railroad retirement payments, among others, according to the American Bankers Association in Washington, D.C.

Some states don't let banks go after an individual's assets after a home is seized and sold, said Mark Tenhundfeld, the association's senior vice president of regulatory policy.

Even with a deficiency judgment, Florida law specifies 11 items that cannot be garnisheed to pay court orders in most cases, including unemployment benefits, disability checks and payments from Supplemental Security Income, a federal anti-poverty program.

Consumers in Florida have complained about what they see as improper garnishments by banks.

The Florida Office of Financial Regulation said concerns often center on Supplemental Security Income payments garnisheed to pay the mortgage loan.

But a consumer can reverse the practice by showing that the law exempts that income from garnishment or by going to court to resolve the issue, said Flora Beal, a spokeswoman for the regulators office.

Banks have sometimes garnisheed funds that are electronically deposited into a customer's account, not knowing that the money came from exempt sources, according to the Florida Bankers Association.

The borrower's recourse: Inform your bank that the money is exempt and seek to get it back, said the association's di Marco.

That's not always easy, according to South Florida building contractor James Clare III.

Clare said he fell off a roof during a job, was disabled and lost income. He ran late on mortgage payments and other bills. One day, he found that his bank would not allow him access to a disability award electronically deposited into his account at the same bank.

Clare engaged a lawyer, but he said it took weeks for the bank to give him access to the funds and then, only after he agreed to bring some payments up to date.

"I had no choice. It would have cost me more to go to court. My attorney said by the time I'd pay all the fees and all the bills over a year or two, the money's gone," said Clare. "It was the most frustrating time."

January 10, 2011 | By Doreen Hemlock, Sun Sentinel

Solar power beginning to go mainstream

2011-10-24T19:04:00.000-04:00

NEW YORK – Oct. 24, 2011 – Solar energy may finally get its day in the sun.

The high costs that for years made it impractical as a mainstream source of energy are plummeting. Real estate companies are racing to install solar panels on office buildings. Utilities are erecting large solar panel “farms” near big cities and in desolate deserts. And creative financing plans are making solar more realistic than ever for homes.

Solar power installations doubled in the United States last year and are expected to double again this year. More solar energy is being planned than any other power source, including nuclear, coal, natural gas and wind.

“We are at the beginning of a turning point,” says Andrew Beebe, who runs global sales for Suntech Power, a manufacturer of solar panels.

Solar’s share of the power business remains tiny. But its promise is great. The sun splashes more clean energy on the planet in one hour than humans use in a year, and daytime is when power is needed most. And solar panels can be installed near where people use power, reducing or eliminating the costs of moving power through a grid.

Solar power has been held back by costs. It’s still about three times more expensive than electricity produced by natural gas, according to estimates by the Energy Information Administration.

But the financial barriers are falling fast. Solar panel prices have plunged by two-thirds since 2008, making it easier for installers to market solar’s financial benefits, and not simply its environmental ones. Homeowners who want to go solar can do so for free and pay the same or less for their power.

Last month two of the nation’s biggest utilities, Exelon and NextEra Energy, each acquired a large California solar power farm in the early stages of development. Another utility, NRG Energy, has announced a plan with Bank of America and the real estate firm Prologis to spend $1.4 billion to install solar systems on 750 commercial rooftops.

Nationwide, solar power installations grew by 102 percent from 2009 to 2010, by far the fastest rate in the past five years.

“Every manufacturer globally is looking around for the next major growth market, and the U.S. is the first one everyone points to,” says Shayle Kann, managing director for solar research at GTM Research.

Making solar affordable still requires large tax breaks and other subsidies from federal and state governments. The main federal subsidy pays for 30 percent of the cost of a residential system. When state and other subsidies are added, as much as 75 percent of the cost can be covered.

But prices of solar panels, the squares of crystalline silicon or thin layers of metal films that turn the sun’s rays into electricity, are falling so fast that its advocates now credibly claim that solar will be able to compete with fossil fuels even when the federal solar subsidy shrinks by two-thirds in 2016.

“Over the past 10 years the industry has made the case that we needed to increase scale so we could reduce prices,” says Arno Harris, CEO of solar developer Recurrent Energy, a subsidiary of Sharp Corp. “We’re seeing it happen.”

The falling prices have made it easier for solar installers to raise the money needed to grow. And they’ve made solar power systems so affordable they can appeal to homeowners who want to save on their electric bill, not just reduce their environmental impact.

Tim Johnson, a high school math teacher in Philadelphia, had wanted to put solar panels on his roof for years. Like many people concerned about the environment, the thought of powering his home without burning fossil fuels had a strong appeal. But with two kids in college, he couldn’t justify spending $15,000, after subsidies, to do it.

But since March, he has generated 50 percent to 75 percent of his electricity with a set of solar panels on his roof, saving 20 percent on his electricity bills. His upfront cost for the system: $0.

Instead of buying and installing the panels himself, he signed up with SunRun, one of a handful of companies that build, own and maintain solar systems on homes. These companies earn money by charging customers for the power the panels produce.

Johnson pays SunRun $52 a month, and he pays his traditional utility for whatever extra power he needs from the grid. In all, he pays $60 to $100 a month for power; he used to pay $90 to $120.

SunRun can charge Johnson a competitive rate because federal and state subsidies pay for a portion of the installation. Also, the arrangement allows SunRun to take advantage of one of solar’s big advantages. Because it is generated near where it is needed, it doesn’t have to pass through hundreds of miles of wires, transformers and other equipment. The power price SunRun has to beat in order to entice customers like Johnson is an expensive retail rate, bloated with transmission and distribution charges that home solar doesn’t incur.

It would be cheaper over the long run for a homeowner to buy and install a solar system because he would not have to pay a company like SunRun for financing, service and maintenance. But these plans have growing appeal because they don’t require homeowners to lay out thousands of dollars up front.

In California, which leads the nation in solar power installations, 51 percent of the residential solar systems installed through the first three quarters of this year were sold with these plans, up from 12 percent in 2009.

SunRun and competitors such as SolarCity and Sungevity are expanding into more states, including Arizona, Colorado, Delaware, Maryland, Massachusetts, New Jersey and Pennsylvania. Last month, Google announced it would create a fund that local installers in every state can tap so they too can offer no-money-down plans.

Some installers are teaming up with big hardware chains Home Depot and Lowe’s in an effort to expose solar to customers who might not otherwise consider it.

“Awareness is still one of our biggest problems,” says Lynn Jurich, co-founder and president of SunRun, which has a partnership with Home Depot.

Solar panel prices have been declining for years because of lower costs for polycrystalline silicon, the main raw material for most solar panels, and larger-scale manufacturing, especially in Asia. In the last six months, demand has dropped sharply in Germany, the world’s biggest solar market, in response to shrinking subsidies. This has created a global glut of solar panels and accelerated the decline in prices.

Solar panels, which are priced based on the amount of power they can produce during full sunshine, sold for $1.34 per watt in mid-September, according to data from Bloomberg New Energy Finance. That’s down from $1.90 at the beginning of 2010. In 2008, they sold for $4 a watt.

The glut has been gut wrenching for companies that make solar panels. Many of them remain profitable and are growing. But three U.S. panel makers have filed for bankruptcy in two months, including Solyndra, a solar panel maker that received a $528 million federal loan.

Falling profit margins are scaring investors. The stock price of First Solar Inc. has fallen from $170 in April to $53.77. Suntech Power Holdings Co. Ltd. has fallen from $11 to $2.07 over the same period.

The market will not get any easier for small solar panel makers. General Electric Co., Samsung and other big companies are entering the market. This should increase supply and bring down costs even further. GE announced this month that it would build the largest panel factory in the U.S., near Denver.

But what has been treacherous for solar panel makers has been a boon for companies that market and install solar systems, for companies that make electronics and other parts for solar systems, and for solar customers.

To be sure, solar is growing from a very small base. All of the panels now installed across the nation produce enough electricity to power 600,000 homes, or about as much electricity as one large coal-fired power plant.

There are 30,000 megawatts’ worth of solar projects awaiting approval in the U.S., according to the American Public Power Association. Not all of them will be built, either because of regulatory or financial hurdles. But even if only half that is ultimately built, it would be five times what is already installed.

“We’re going in the direction the planet and the industry needs to go,” says Harris.

Copyright © 2011 The Associated Press, Jonathan Fahey, AP energy writer. All rights reserved.

Bank: ‘We’ll reduce your loan, you share future appreciation"

2011-07-28T16:24:00.001-04:00

NEW YORK – July 28, 2011 – Ocwen Financial Corp., a servicer of residential mortgages, launched a new loan modification program to reduce the principal on a mortgage for delinquent borrowers, but the borrowers must agree to let loan investors share in future appreciation of the home’s value when the market recovers.

Through the Shared Appreciation Modification program (SAMs), Ocwen will write down the principal of the loan to 95 percent of the home’s current market value. The amount written down will then be forgiven in one-third increments over a three-year timespan, as long as the homeowner remains current on the modified mortgage.

Then, “when the house is later sold or refinanced, the borrower must share 25 percent of the appreciation with the investors that own the loan; borrowers keep 75 percent of the gain,” the company notes.

Loan modifications will be available only to homeowners in negative equity.

“Like all modifications, SAMs help homeowners avoid foreclosure. But they also restore equity,” says Ocwen CEO Ronald Faris in a public statement about the program. “That’s a significant benefit to the customer and, we believe, the economy and housing market. Psychologically, it’s important too. Our analytics tell us that an underwater mortgage is one-and-a-half to two-times more likely to default than one with at least some positive equity.”

The program, which is expected to be rolled out into 33 states, is one of the first principal reduction programs started by a private company.

Source: “Ocwen Unveils New Principal Reduction Program,” HousingWire (July 26, 2011) and “Ocwen Offering Mortgage Modifications That Restore Equity for Underwater Borrowers,” GlobeNewswire (July 26, 2011)

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

Sarasota - Manatee Foreclosure 'rocket docket' grounded

2011-07-11T12:24:00.001-04:00

By TODD RUGER

Published: Sunday, July 10, 2011 at 5:05 p.m.

The foreclosure "rocket docket" came to Sarasota and Manatee counties two years ago in a flurry of controversy, with hundreds of people standing to lose their home in hearings scheduled to take less than two minutes.

Last month, those expedited court proceedings ended without any hubbub. State funding ran out to pay retired judges and other court workers needed to handle up to 250 foreclosure cases a day.

The loss leaves Sarasota's court system to choke on more than 15,000 pending foreclosures — so many cases that properties can languish in the court system for years before a foreclosure auction.

The end of expedited hearings mean that banks trying to seize homes quickly could see more delays. That may be good news for homeowners, who might have more time before they are forced to move out of their homes.

But experts say it is bad news for the housing recovery because the faster foreclosed properties can be resold to new owners, the faster housing values can recover.

And it will hurt those belonging to homeowner's associations, who have to make up the excess costs when nobody is paying assessments on a property caught in the legal system.

Judges in Sarasota and Manatee counties will still look at ways to whittle down the backlog, but only when they have extra time.

The rocket docket, Circuit Judge Lee Haworth said, will now be more like "a Vespa docket."

The effort to expedite foreclosures began as a way to to handle the huge increase in cases and to stop lenders from purposefully delaying their own cases.

Many lenders allowed cases to founder because when they legally retake the properties they become responsible for paying taxes, insurance and maintenance costs until homes are resold.

When attorneys representing banks do not push cases through the court system, it can leave houses sitting empty for years, putting downward pressure on home values in that neighborhood.

Without the rocket docket, which had court officials set hearings for older cases, judges will have to rely on attorneys for lenders to push the cases through to a foreclosure sale by scheduling hearings. But 30 to 40 percent of those lenders have instructed their attorneys not to hurry the cases for financial reasons, Haworth said.

"So if a party or an attorney has some reason not to move the case, then we don't have any way to move the cases forward on our own," said Haworth, the 12th Judicial Circuit's administrative judge over foreclosures.

Gulfcoast Legal Services in Sarasota, which represents those who cannot afford attorneys, went to most rocket docket sessions to catch homeowners who needed help but did not know the legal system.

"I think it's probably good news for the homeowners who are trying to work something out with their lender," Gulfcoast Managing Attorney Elizabeth Boyle said. "We may see lenders make more reasonable offers as the crisis lingers on."

Rocket dockets used around the state have been criticized in some cases for rushing foreclosures without giving homeowners a chance to fight the seizure of their home. Defense attorneys who saw repeated mistakes in paperwork from lenders contend the speed of the hearings could mean some homeowners slipped through the cracks or lost property they should have kept.

While some lenders are content with letting the cases sit, homeowners who pay assessments and their homeowner associations are frustrated because they wind up losing money while no one pays the fees on a foreclosed house.

Once a bank claims ownership, it can sell the house, or begin paying the fees itself.

"The association has to wait for the banks to get hearing time, which may be a couple months down the road," said Sarasota attorney Michelle A. Stellaci Rowe, who represents homeowner associations in foreclosures.

"As each month goes by, assessments are lost. It can add to thousands and thousands of dollars for the association," Stellaci Rowe said. "The people who are paying have to pay more, they have to carry the burden for those who don't pay."

As of this week, the soonest hearing time available for some types of foreclosure hearings was four months out, Haworth said.

At the last rocket docket hearing in Sarasota County, Senior Judge Harry Rapkin dismissed about 60 foreclosure cases caught up in legal issues because they were handled by a foreclosure firm that abandoned the cases.

New firms were not yet ready to handle the cases, which dated back to 2007. Now those cases will have to start over at the beginning of the foreclosure process.

Local markets heat up with investors

2011-06-01T10:50:00.003-04:00

May 31, 2011 – Real estate investors, by three to one, will be more active in their local markets compared to typical homebuyers in the next 24 months; and 69 percent of investors say it’ll be easier to find properties in the near future, according to a survey of real estate investors released by Move, Inc., the management company overseeing Realtor.com.

The Move Investor survey suggests that local markets will be heating up with renewed investor interest and activity. Compared to a year ago, 62 percent of investors are paying more attention to home values in their local markets – only 43.5 percent say it will be harder to find bargains and 41.5 percent expect it to be easier to sell their properties in the next six months.

Meanwhile, 22 percent of investors are bullish and expect prices to rise in the next six to 12 months, and 53.5 percent expect prices to remain relatively the same. Twenty-three percent expect prices to fall in the next six to 12 months.

The Move Investor survey also found that investors are prepared to compete vigorously with traditional first-time homebuyers for hot deals. Two-thirds of investors (65.5 percent) said they expect that first-time buyers’ problems getting a mortgage will make it easier for investors to compete for properties. One in five investors (18.5 percent) say they’ll be cash-only buyers, a strategy that’s out of reach for most first-time buyers. Eight out of 10 (80.5 percent) expect cash discounts from sellers.

Today’s investors – not stereotypical, deal-driven flippers

Contrary to the tactics used by “flippers,” 50 percent of today’s real estate investors plan to hold their properties for five-plus years. Only 11 percent expect to sell within 12 months of purchase. Two-thirds (67.5 percent) say they’re investing for the long term.

Fifty-nine percent (59 percent) told Move they’re new to real estate investing, with 33.5 percent considering their first investment purchase and 8.5 percent in the process of buying and selling their first investment property. Another 17 percent said they just completed their first transaction and plan to make more. Only 36.5 percent have experience in more than one property transaction.

When it comes to repairs and maintenance, 56.5 percent of investors say the repair and maintenance of investment property has not been difficult. Moving forward, 42 percent plan to invest their own time and energy to improve, repair and maintain their properties. The rest said they’d hire a contractor for repairs (29.5 percent) or purchase move-in-ready properties (28 percent). The majority (65.7 percent), don’t expect repair costs to exceed 20 percent of the property’s purchase price.

“This data suggests today’s climate is hot for investing and is attracting a lot of new people that don’t fit the stereotypical deal-driven flippers that buy and sell properties quickly,” said Move, Inc. Chief Executive Officer Steve Berkowitz.

Investors combine cash and credit to snap up properties

While cash is king in many circles, 75.5 percent plan to combine cash and credit to purchase properties as they build their real estate portfolio. In fact, 59.5 percent plan to put less than half down on their next property purchase and they’ll finance the rest. Those planning to use more than 50 percent cash and finance the remainder account for 16 percent of today’s investors. Investors told Move the second most difficult challenge has been finding financing (57 percent).

“The fact that most real estate investors plan on combing cash and credit for their purchases goes against the conventional wisdom that investor transactions today are mostly cash-only sales,” says Berkowitz. “We were surprised to learn that 75 percent of investors are financing portions of their purchases. This suggests they’re seeing tremendous or once in a lifetime opportunities and may be tapping into credit or taking out second trusts on existing properties. The data also shows they’re expecting high returns to match the level of investment they’re making in an arena that is new to many investors.”

High risk leads to high ROI expectations

Based on the investments they’re making in today’s environment, real estate investors clearly expect high yield returns. Nearly half (48 percent) expect a profit of 20 percent or more from their property investments, a 4 percent annual rate of return over five years. Another 40 percent expect a profit of 10 percent, and only 6.5 percent expect a 5 percent or less return on investment. Half (50 percent) of today’s real estate investors plan to hold their properties for five-plus years.

Property investments gateway to homeownership for many

While the survey shows investors will outnumber traditional homebuyers three to one, nearly half (49 percent) plan to live in their investment property until it’s sold or turned into a rental property. Slightly more than half (56.5 percent) will put their investments to work as rental properties, and 28 percent plan to purchase vacation property that they’ll eventually sell. The Move Investor survey also found 30 percent of real estate investors are interested in buying retirement property as an investment.

“The survey suggests some first-time buyers may be looking at investing as a strategy to becoming homeowners,” Berkowitz said. “While today’s market is tough for some, it’s also motivating millions to take an unconventional approach and creatively search for new ways of entering the housing market.”

© 2011 Florida Realtors®

Tax Exemptions May Leave Many More Not Paying Any Tax

2011-05-24T23:09:00.001-04:00

TAMPA, Fla. – May 24, 2011 – Florida’s turbulent housing market has had an unintended consequence: Thousands of homeowners don’t pay a dollar in property tax.

No, this isn’t a real estate scam. Blame higher homestead exemptions and falling home prices that essentially removed houses from the tax rolls.

“It’s a basic fundamental in American society and tax policy that everybody should pay something,” said Warren Weathers, chief deputy for the Hillsborough County property appraiser’s office. “Some of these (exemptions) were created for people who barely have anything, and that’s not bad. But there are people ... that have the ability to pay that don’t pay some of their fair share.”

It couldn’t have come at a worse time for budget-conscious municipalities. The exemptions cost the county millions in property tax revenue, and that’s on top of millions lost because of falling values. Hillsborough County saw property taxes owed go from $1.9 billion in 2008 to $1.7 billion in 2009 to $1.5 billion in 2010.

For many of those with tax bills of zero, their properties are valued less by county property appraisers than their qualified homestead exemption, usually $25,000. For properties worth more, a $50,000 exemption brings the tax bill down to almost nothing.

In Hillsborough, more than 7,000 homeowners didn’t pay property taxes last year, according to data from the property appraiser’s office. That’s up from 4,920 in 2008.

An additional 5,700 pay some tax, such as to the school board, but they don’t contribute anything toward the county’s general fund. And that’s where the money comes from to pay public services such as roads, sewer service and libraries. That number is up from 1,238 in 2007.

The homes range from modest to middle-class to extravagant. Most owners who don’t owe property taxes live in poor neighborhoods where home values have plummeted.

For example, a shotgun-style home at 2809 N. 10th St., in the Ybor City area north of Interstate 4, is valued at $23,569 by the county property appraiser. The owner has a $25,000 homestead exemption. Taxable value: zero.

Sybil Faulker, 86, has owned the 10th Street home for 50 years and has never paid property taxes. Faulker, who lives on Social Security, said the lower tax bill is critical for the poor, especially in a deep recession.

“It’s a huge help, and I live in a 91-year-old home,” Faulker said. “When people have a brand-new home worth $200,000 to $300,000, that’s different. They have the income to pay.”

Even the housing boom wasn’t enough to push up the value of Faulker’s home enough to cause her to owe property taxes, county records show. But for many, rising values caused property taxes to increase beyond what they could afford. Exemptions were provided to help alleviate the burden, but now that values have plummeted, the exemptions allow more people to pay little or no tax.

During the housing boom, the homestead exemption was raised from $25,000 to $50,000. The Legislature mandated that the second $25,000 could not bring the taxable value to zero. Instead, the property would have to be worth more than $75,000 to get the full $50,000 exemption.

Still, the extra savings is big for some.

Consider a home at 2810 N. 10th St., which sold in 2004 for $145,000. It’s now valued at $67,287 by the property appraiser. The owner has a homestead exemption of $42,287, bringing the taxable value to $25,000.

Few homes in this neighborhood sold, even during the housing boom. Many of the owners are elderly and have stayed put. So these homes weren’t affected by investors who flooded other neighborhoods, artificially driving up prices during the housing bubble.

Hillsborough has always had low-valued homes, especially in the inner city and some rural areas, Weathers said. But other changes to real estate, such as apartment-to-condominium conversions and toxic drywall made in China, have sent taxable values plummeting.

Consider this condo conversion at the Towers at Carrollwood Village. One condo unit sold for $90,000 in 2005 and is now valued at $19,657. The homestead exemption is $17,250, bringing the taxable value to zero.

The rest of the 114 condos in the complex have a similar tax situation, said Chris Weiss of the Hillsborough County property appraiser’s office.

A condominium complex in New Tampa is in the same boat. The Villas Condominiums has 282 units, Weiss said, and was also saturated with investor-owners. Both complexes have been hit hard by foreclosures, he said.

A condo at the New Tampa development sold for $106,900 in 2005 and is now worth just $16,230. The homestead exemption brings the taxable value to nothing.

Toxic drywall costs the county about $1 million in property taxes, Weathers said.

“That’s because Florida gives owners of houses with the tainted drywall a break on their taxes. As long as the drywall is in the house, it isn’t worth anything, say state legislators who passed the bill.

“No one wants to buy a home with this drywall problem,” Weathers said.

The owners of a million-dollar home on Davis Islands saw their tax bill go from $20,192 in 2009 to $6,310. The home’s toxic drywall has made it worthless, according to the county property appraiser. The taxes due for the property are on land only.

Judy Redmiller, a homeowner in South Tampa, says she pays hefty taxes now but didn’t when she lived in Ybor City because her home was valued lower. She says she supports some tax breaks for people who need it, but paying nothing is unreasonable.

“I think everyone should pay some amount because the money goes to schools, streets, services that benefit us all,” Redmiller said.

Private property appraiser David Teacher said he understands people wanting their neighbors to pay their fair share but, he said, there is an upside. Falling home prices and no – or low – property tax is a big incentive for investors to buy.

“There have been some people that say, ‘Oh, that doesn’t sound fair.’ But I have to say the good thing about this is all the cash purchases and investors who are coming and helping us stabilize this market.”

Teacher said he has seen homes in East Tampa selling for as low as $7,000. Sure, he said, they need work, but most still could be good deals.

“What better investment,” he said. “Look at the return on your money. Some homes are selling for less than the cost of a car.”

Copyright © 2011 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.

Sarasota Realtors Report Rebound in Sales and Prices

2011-04-18T23:35:00.001-04:00

by Harold Bubil

Both the number of sales, and, more importantly for homeowners, the average selling price of homes sold in March rebounded from February’s level, according to a just-released report from the Sarasota Association of Realtors.

SAR members sold 800 properties in March – which was the most since September 2005, when the real estate boom started to fade.

March’s selling prices rose by double digits for both houses and condos from the previous month, and pending sales were at the highest level since the real estate boom ended in 2005.

Inventory dropped to 5,501 – less than a third of the available properties on the market during the bad years following the boom.

“Sarasota is clearly a recovering market,” said SAR President Michael Bruno. “Agents are very busy showing properties and writing contracts, and people are excited about our strong market rebound. Obviously, we haven’t seen numbers like these in several years. There is a buzz in the local market that’s reaching out to buyers across the nation and even internationally.”

Highlights of the report:

– House sales, at 580, were up 23 percent from the previous month, and 5 percent from March 2010, when the home-buyer tax credit encouraged 555 purchases.

– Condo sales, at 220, were up 10 percent from February, and 11 percent from March 2010.

– Median sales prices for both houses and condominiums increased to $159,250 for houses and $173,000 for condos, representing a 16 percent and a 26 percent jump, respectively.

– Distressed property sales fell to 43 percent of the total. In February, 47 percent of all sales were foreclosures or short sales.

– The inventory of for-sale houses fell to 6.0 months, down from 8.0 months in February. This could represent “the cusp of a seller’s market,” said the report. For condos, the remaining months of inventory dropped to 9.2 months from 10.4 months in February. Realtors consider a 6-month supplyof for-sale homes to be a balanced market between buyers and sellers.

“Price appreciation normally follows a declining inventory and increased competition among buyers,” explained Bruno. “I’m still hopeful that this trend, which has been evident now for several months, continues into the summer months. Last year, we saw strong activity in April, May and June, probably connected to the federal tax credit. But there is evidence the trend will repeat this year after seeing the March sales and pending sales figures.”

FL House Flippers Seek Inner-City Profits

2011-04-18T22:55:00.001-04:00

WASHINGTON – April 18, 2011 – More investors are taking on the risk of flipping homes, despite falling home prices and sluggish real estate markets across the country. But investors say there are still profits to be made in the house flipping business.

Nearly 1 million homes were bought as investment properties in 2010, according to the National Association of Realtors®, and a record number of buyers purchasing properties with cash currently are flooding the market.

Flipping homes for profit is easier in rising markets, but not many markets are reporting increases in home prices, analysts say. In Washington, D.C., Justin Konz of RestorationCapital says his clients are going through four or five properties a month and are making gross profit margins of 35 percent or higher.

Where to find the deals

Flippers mostly are finding their homes through foreclosures auctions, REOs and short sales. They seek homes at rock-bottom prices that will have low fix-up costs, no more than about 5 percent or 10 percent of the purchase price.

In Florida, where investors are finding it more difficult to flip homes because of the drastic drop in prices and high inventories, flippers are targeting inner-city properties that are being sold at steep discounts. For example, some of houses are selling for $30,000 when they once sold for $200,000.

Perry Henderson, a real estate agent and investor in Austin, Texas, says the biggest opportunities in flipping are the “ugly” houses that have lingered on the market or “old houses that somebody’s grandma lived in for 40 years and didn’t do anything to. Now, she’s passed away and her family wants to sell quickly.”

Real estate investor Brian Fuller, who with partners buys and sells more than 200 properties a year in the San Diego area, says he’s drawn to the “biggest eyesore on the block.” He says they then “ turn it into the best-looking house there. We’re helping pull up values in the neighborhood.”

Source: “Vulture Investors Flipping Their Ways to Big Profits,” CNNMoney.com (April 13, 2011)

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

Buyers Ready to Snatch Bargains This Spring

2011-03-23T14:29:00.000-04:00

WASHINGTON – March 23, 2011 – Bargain prices on housing combined with low interest rates below 5 percent may bring the real estate market its busiest spring season in years, economists say.

Distressed sales continue to put downward pressure on home prices, which may lure more buyers off the fence and ready to snag a deal during the typical prime-time buying season.

Some builders are ramping up discounts on new homes as well as boosting commissions to brokers to try to spark more transactions.

Sellers of existing-homes also are getting more competitive in pricing their homes.

“After three years of the housing downturn, people are becoming much more realistic in terms of valuing their homes,” says Lawrence Yun, chief economist at the National Association of Realtors®.

An improved job market with better income potential may also motivate more people to buy, says David Berson of the PMI Group. “Household formations are also very important,” Berson says. “Kids may have moved back in with their parents, or two people may have moved in together because of job concerns. Now they can move into their own place.”

While interest rates are sitting comfortably below 5 percent for now (30-year fixed rates averaged 4.76 percent last week), economists warn the attractive low rates won’t last long.

“Few think mortgage rates are going lower,” says Mark Zandi, Moody’s Analytics chief economist. “It’s more likely they will be 6 percent than 4 percent next spring. This lights a fire under buyers.”

Source: “Discounts expected in spring housing market,” The Wall Street Journal (March 22, 2011)

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

Banks are Fixing Up Their Home Before Putting on Market

2011-03-17T19:23:00.002-04:00

More banks pay to fix up foreclosures for resale CHICAGO – March 17, 2011 – More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures.

But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.

They hope to extend the foreclosed homes’ appeal past traditional investors and professional rehabbers. For example, a homebuyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.

The banks interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price.

Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to owner-occupant, agents may recommend fixes such as paint to a $25,000 kitchen remodel.

Source: “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune (March 13, 2011)

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

What Does REO Stand for in Real Estate?

2011-02-28T23:02:00.001-05:00

by Tricia Chaves, Demand Media

Overview

REO stands for Real Estate Owned properties, which get reclaimed by the bank or government agency which financed their mortgage after failing to sell at a real estate auction. Generally, REO properties get sold on the open real estate market using a real estate agent or in bulk sales to investors. REO properties generally get sold at a discounted price when compared to comparable properties.

History

Foreclosures in the United States date back to the early 1930s. Following the stock market crash in the fall of 1929, unemployment rose and caused the housing and bank markets to fall. At the same time, a sandstorm- and drought-filled season caused farmers' businesses to fold. By 1933, almost 0.73 percent of the homes in the United States became bank REO properties with about a thousand occurring daily. The nation's first REO auctions, referred to as "penny auctions," forced profit-hungry banks to purge unsold properties, which became liabilities.

Features

An REO property can be any age or style, in virtually any neighborhood. The majority of REO foreclosed properties require work to rehabilitate or repair problems. Typical REO property issues include damaged walls, missing fixtures or appliances and faulty mechanical components. A former property owner's unwilling and unhappy departure coupled with a long period of vacancy is a recipe for property damage.

Benefits 

Eager banks may offer attractive financing programs to buyers to unload REO properties. Some REO loan incentives include zero percent or a reduced down payment when compared with conventional loans, lower interest rates, less stringent credit criteria, faster approval and financing for homes which other lenders may not approve.

Negotiation 

Vacant REO homes are a profit drain on bank owners, resulting in an urgency for sales. When a buyer makes an offer to purchase a REO home, it can seem less personal and less emotional than a transaction with a traditional homeowner-seller. In an REO home offer, the bank representative simply considers the bank's bottom line and generally makes a fast decision, which can result in a smooth and quick closing.

Warning

Banks typically sell REO properties "as-is." As a buyer, a professional property inspection allows you to make an educated offer for purchase considering the costs involved to repair any existing defects. A buyer may offer less or request the bank make a repair in the instance of major home systems such as electrical, plumbing and mechanics, and the bank may agree to facilitate a sale.

For-Sale-By-Owners Vanish, Sellers Turn to Real Estate Pros

2011-02-21T21:12:00.001-05:00

WASHINGTON – Feb. 21, 2011 – For-sale-by-owners are rare nowadays. In fact, the number of FSBOs dropped to record lows over the past year.

Unrepresented sellers make up just 11 percent of the market, down from 13 percent in 2009, according to the 2010 National Association of Realtors® Profile of Home Buyers and Sellers.

With today’s more complex transactions – such as with short sales and foreclosures and frequent changes in mortgage lending – more sellers are finding comfort in the help of real estate professionals to guide them through the process.

In the seller’s market, FSBO sellers tried to sell the home themselves because they thought they could save on commission fees, but today’s sellers realize that if they don’t use an agent, it’ll likely cost them more in the long run, experts say.

“Selling by owner does not guarantee the seller will put 5 [percent] to 6 percent more in his or her pocket in trade for doing all the work and taking on potentially costly liabilities,” Margaret Woda, associate broker with Long & Foster in Crofton, Md., told The Washington Times. “On the contrary, prospective FSBO buyers have their eyes on that 5 percent to 6 percent as well. It’s more likely the buyer will win this negotiation in a buyer’s market with a huge price reduction – probably even larger than the saved commission.”

Some FSBO sellers also often make the mistake of listing their home at a higher price than the market warrants. But even if they do find a buyer for that price, unless it’s a cash purchase, the home has to be appraised and many deals can then fall apart.

Source: “Fewer Sellers Going Do-it-Yourself Route,” The Washington Times (Feb. 11, 2011)

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

Shopping Tips For Buying a Home Warranty

2011-02-21T19:29:00.001-05:00

CHICAGO – Feb. 21, 2011 – Home warranties can be attractive to homeowners or buyers considering a purchase. These service contracts can cover all of a home’s major systems, such as the furnace or air conditioner, and needed repairs if the appliance breaks or gets damaged.

Some sellers offer a home warranty to lure buyers.

But not all home warranties are the same. Experts say you should carefully weigh costs, policy allowances, and customer feedback before making a decision to ensure you’re getting the best deal. Home warranties cost about $250 to $500 a year.

Here are some more home warranty tips from experts:

• Find customer reviews. Websites, such as homewarrantyreviews.com, review home warranty companies. You also might check how each company is rated with the local Better Business Bureau.

• Check for extra fees. Will you have to pay a set price for service calls?

• Check the coverage allowance. Are there any exclusions? Will the allowance cover the entire cost of a broken appliance or just part of it? For example, if you have older appliances and mechanicals, will the policy cover the full cost of replacing it or just the depreciated value? If the policy only covers the depreciated value when a 20-year-old furnace dies, for example, the reimbursement may not be enough to buy a new one.

• Verify which appliances are included in the coverage. Some companies will allow you to add coverage for swimming pools, while others won’t.

“The biggest thing is awareness of what the exclusions are,” Greg McBride, a senior financial analyst at Bankrate.com, told the Chicago Tribune. “The mere presence of a warranty, by nature, tends to have exclusions. Being aware of that can aid in the decision-making process.”

Source: “When home warranties are worth it,” Chicago Tribune (Feb. 8, 2011)

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

Fla.’s existing condo sales up in 4Q 2010

2011-02-15T01:16:00.001-05:00

ORLANDO, Fla. – Feb. 10, 2011 – Sales of existing condominiums in Florida rose 6 percent in fourth quarter 2010 compared to the same period a year earlier, according to the latest housing statistics from Florida Realtors®. A total of 17,231 existing condos sold statewide in 4Q 2010; during the same period the year before, a total of 16,229 units changed hands.

Thirteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing condo sales in the fourth quarter, according to Florida Realtors. The statewide existing-condo median sales price was $86,400 for the three-month period; in 4Q 2009, it was $105,600 for a decrease of 18 percent. The statewide existing-condo median price in the fourth quarter was nearly 2.9 percent higher than it was in 3Q 2010.

Looking at Florida’s housing sector in the fourth quarter, Dr. Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness, pointed out that the jobs outlook has a major impact. “Persistently high unemployment constrains demand and feeds into the ongoing foreclosure problem,” Snaith said. “Given the state of the labor market, a continuing decline of home and condo prices in the fourth quarter is not surprising or unexpected. However, it’s important to note the rate of price decline is decelerating.

“As the labor market recovery takes hold in 2011, it will help put a floor beneath price declines and ultimately will provide the basis of housing’s recovery.”

Meanwhile, in the year-to-year quarterly comparison for existing single-family home sales, 39,338 homes sold statewide for the quarter compared to 43,494 homes in 4Q 2009 for a 10 percent decrease. The statewide existing-home median sales price was $134,100 in 4Q 2010; a year earlier, it was $140,500 for a decrease of 5 percent. Sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes, according to the National Association of Realtors® (NAR). The median is a typical market price where half the homes sold for more, half for less.

Optimism has increased slowly but steadily in Florida real estate markets through the fourth quarter of 2010, according to the University of Florida’s Bergstrom Center for Real Estate Studies’ latest quarterly survey of real estate trends. The report surveys economists, industry executives, real estate scholars, researchers and other experts.

Center Director Timothy Becker noted improvement in several key categories, including the outlook for sales in new single-family homes and condominiums, office occupancy, retail occupancy, land investment and capital availability. Respondents’ expectations for occupancy and rent increased across every property type, while the investment outlook rose in a majority of the property types. The statewide outlook was the highest since the survey’s inception in 2006, he said.

“Overall, the market appears to be improving and will continue to improve at a slow pace over the next year,” Becker said.

Low mortgage rates continued to be available during the fourth quarter of the year. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 4.41 percent in 4Q 2010; one year earlier, it averaged 4.92 percent.

City of Bradenton to get $520,177 from HUD

2010-12-21T23:51:00.003-05:00

The City of Bradenton has received notification from the U.S. Department of Housing and Urban Development that $520,177 is available for this fiscal program year for the City's Community Development Block Grant Program.

The CDBG program works to ensure decent affordable housing, services to the most vulnerable in the City, and job creation through the expansion and retention of businesses. The CDBG program is an important tool that helps local government tackle the challenges facing their communities. This program makes a difference in the lives of thousands of people throughout the City of Bradenton - and millions across the nation.

“The program’s success is the result of strong partnerships among the elected officials at all levels of government, neighborhood based nonprofit organizations, private sector, and HUD,” said Lesa Livingston, Manager, City of Bradenton's Housing & Community Development Division.

HUD awards grant money to communities to carry out a wide range of local development activities directed toward revitalizing neighborhoods, economic development, and providing improved community facilities and services.

Typically, activities funded include construction of public facilities and improvements, such as water systems, streets, and community centers; rehabilitation of houses and landmark structures; assistance to private, for profit entities to carry out economic development activities and the provision of public services.

For more information, please contact Lesa Livingston at (941) 932-9481 or lesa.livingston@cityofbradenton.com.

As housing languishes, mortgage write-downs gain appeal for banks

2010-09-09T14:58:00.000-04:00

As housing languishes, mortgage write-downs gain appeal for banks RALEIGH, N.C. – Sept. 9, 2010 – Eager to avoid writing down the loans on their books, banks have been extending many of them with the hope that the market will improve. Even banks that foreclosed on properties have kept them on their books, reluctant to auction them in a market where investors offer as low as 10 cents on the dollar.

Now that appears to be changing, and it could have implications for property owners caught up in the sell-off.

“The proverbial logjam is beginning to break up,” said Jim Anthony, CEO of Anthony & Co., a Raleigh real estate services company.

As evidence, Anthony said BB&T plans to auction $1 billion of performing and nonperforming loans in the Southeast.

BB&T would neither confirm nor deny reports of the auction. “BB&T continues to evaluate opportunities to best execute our problem loan disposition strategy, which may or may not include bulk sales,” said spokeswoman Cynthia Williams.

BB&T has been more aggressive of late in writing down its troubled loans and moving to rid itself of some of them. The bank’s CEO, Kelly King, has indicated the strategy will continue as long as investor appetite for the loans remains at current levels.

Other regional banks, including Pittsburgh-based PNC Financial Services Group and Birmingham, Ala.-based Regions Financial, are pursuing similar strategies.

The move to deal with troubled real estate loans is driven partly by federal regulators who have increased pressure on banks whose capital ratios fall below a certain level.

“I think the banks are coming to terms with the fact that, particularly, commercial real estate is declining in value and it’s just not coming back in the next three months or six months,” said Tony Plath, a banking professor at the University of North Carolina-Charlotte. “It’s going to be a while before we’re out of the hole as far as real estate values are concerned.”

The auctions also are a sign that the gap between what the banks will take for the loans – and what investors will pay – is narrowing.

“I think all of the banks have reached the point where they realize they’re not going to get 80 cents on the dollar for the value of the loans they package,” Plath said. “They’re going to be looking at something like 35 or 40 cents on the dollar, which seems to be where these loan packages are selling.”

For property owners whose loans are included in these packages, the auctions could mean trouble.

If an investor buys a loan for 40 cents on the dollar, that means they can foreclose on the property, auction it off and still make a profit.

“The borrowers that are included in the package face much more rigorous collection efforts on behalf of the buyer,” Plath said. “(If you’re a borrower,) you really don’t want that loan sold.”

© 2010 The News & Observer (Raleigh, N.C.). Distributed by McClatchy-Tribune Information Services.

Fed governor: Turn REOs into rentals

2010-09-03T19:44:00.001-04:00

Fed governor: Turn REOs into rentals WASHINGTON – Sept. 3, 2010 – Federal Reserve Governor Elizabeth Duke, speaking at a conference on vacant housing, called for more alternatives for the disposal of REO properties besides traditional homeownership.

Duke advocated an increase in rental housing, lease-purchase deals and converting foreclosed owners to renters.

“Homeownership, long promoted by federal policy and facilitated by local housing organizations, cannot and should not be the only alternative to REO properties,” Duke said. “Even in the best of times, homeownership limits mobility in the labor market.”

Source: Reuters News (09/01/2010)

© Copyright 2010 INFORMATION, INC. Bethesda, MD (301) 215-4688

Have home prices hit bottom?

2010-03-28T15:56:00.001-04:00

By Michael Braga

Published: Sunday, March 28, 2010 at 1:00 a.m.

The long drop may be over.

The great home price decline that began on the Gulf Coast more than four years ago finally shows signs of ending.

In the Sarasota-Bradenton market, the median price for single-family homes hit a low of $144,000 in February 2009. Since then, it has bounced around, creeping as high as $167,400.

Some skeptics warn that more bad news lurks, thanks to an expected flood of foreclosures and a paucity of bank lending.

But a growing number of market watchers see signs the price decline has ended.

• The number of for-sale properties continues to push toward a more healthy level. In the Sarasota market, there was a 10.6-month inventory last month -- the amount of time it would take to sell every home on the market at the current rate of sales -- down from 11.5 months in January. Six months is considered equilibrium between buyers and sellers.

• The lower end of the market -- homes selling for $200,000 or less -- has stabilized. Thanks to strong investor demand, there have been bidding wars for homes in that range. For the 12 months ended Jan. 31, the median price for low-end homes in Sarasota has risen no higher than $110,000 and fallen no lower than $99,000.

• The top of the market -- homes that sell for $500,000 and above -- may still face turmoil. More people than realized bought luxury homes they could not afford, says Jack McCabe, the real estate consultant who correctly called the top of the market in 2005. Those houses will be sold at deep discounts during the next two years, he predicts.

Still, all those bargains at the high end will help raise median prices.

"The sheer fact that more transactions will take place in the upper range will have the net effect of dragging up the median," McCabe said.

At low end: stability

Jeff Twigg, who spends his days driving the region checking out properties for sale through courthouse auctions, says there is considerably more competition among bidders these days -- so much so that he and his partner are passing on opportunities because they think competitors are bidding too much.

Eric Greenstein, an agent at Tarpon Coast Realty, says similar activity is affecting the short sale market, made up of sellers who owe more to banks than their properties are now worth.

"Six months ago, the market was still dipping," Greenstein said. "When a buyer made an offer on a property and the bank would come back six months later to accept, the end user would say, 'Forget it,' because values would be lower at that point. Now the banks are countering with higher offers and buyers are accepting because the price pendulum is swinging in the opposite direction."

Others market watchers, including Matt Augustyniak, the president of Manatee County's Horizon Realty, say a new wave of foreclosures may be avoided because of new federal rules governing short sales and the expansion of the Obama administration's mortgage-aid plan announced last week.

"The new rules will force banks to respond to short sale offers within 10 days," Augustyniak said. "They don't have to accept, but they have to come back with a number they would be willing to accept, and that might speed short sales and eliminate some foreclosures."

Because bank foreclosures usually sell for 20 percent less than short sales, overall prices will trend higher if the pace of short sales accelerates, he said.

At high end: uncertainty

Sales at the upper end of the market haven't yet picked up. Sales in the $500,000-and-above range actually fell by 30 percent in Sarasota and Manatee counties during the 12 months ended Jan. 31, compared with the same period a year earlier, statistics generated by TrendGraphix show.

It is also taking longer for luxury homes to sell -- 194 days on average in Sarasota County during the 12 months ended Jan. 31 compared with 171 days during the same period a year earlier. In Manatee County, it took 205 days to sell a home in the $500,000 and above range, compared with 156 days the year before.

"Days on the market only increase if properties are listed too high," said Hannerle Moore, a luxury agent with Michael Saunders & Co. "Many high-end sellers are still hoping for a return to 2005 prices and that's many, many, many years away. As I tell my clients, you can either be like the lady across the street who has had her house on the market for 936 days or you can price your property to sell."

For McCabe's theory about the median price to play out, more luxury homes must come to market during the next two years at much lower prices, and buyers have to snap them up with the same gusto being displayed at the low end.

National statistics show that adjustable-rate jumbo mortgages that high-end buyers obtained during the boom years from 2004 through 2007 are starting to reset, which should lead to more foreclosures, said Gordon Hester, who runs a high-end mortgage brokerage on Siesta Key.

"Banks are going to have more of these problems. They are bigger problems and they will want to get out of them as soon as they can," Hester said. "That will mean a huge fall in prices."

That has already happened in a small way in Sarasota County, court records show. Eleven of 129 properties that sold for more than $1 million during the 12 months ended Feb. 28 were foreclosure sales of unimproved homes. During the same period a year earlier, just one of the 151 sales was a foreclosure.

Prices of the 11 unimproved homes that were seized and sold by banks were 27 percent lower than the owners originally paid. The previous 12 months, high-end foreclosed homes sold for only 13 percent less than the owners originally paid.

The big question among market watchers is whether there is enough demand for high-end properties, even at greatly reduced prices.

"Those homes will be sold at a range where credit is still tight and there would have to be a lot of cash buyers, and I'm not sure that will be the case," said Sean Snaith, a University of Central Florida economist.

"It is not as if we haven't had foreclosures at the high end yet. That end has had foreclosures as well and we haven't seen the median go up."

Northern buyers return?

Add in the fact that it is still difficult for home buyers to get bank loans, and you have a recipe for a weak market heavily dependent on cash buyers.

But McCabe -- who predicts that prices will gradually move higher for two years before rising at a more normal 4 percent to 6 percent a year -- thinks there is plenty of pent-up demand.

Northern buyers who were priced out of the market during the boom have been waiting to buy ever since, he said.

When prices drop by 50 percent or more, those buyers will act quickly.

"They will see incredible opportunities toward the end of the year to pick up $2 million properties for under $1 million," he said.

When It's Ok to Walk Away From Your Home

2010-03-10T13:51:00.001-05:00

Millions of Americans are now deeply underwater on their mortgage. If you're among them, you need to stop living in a dream world and give serious thought to walking away from the debt.

No, you shouldn't feel bad about it, and you shouldn't feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family's finances first.

How widespread is this? More than 11 million families are in "negative equity"—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That's a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That's true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so?

It's time for some tough talk.

Stop trying to chase your lost equity. That money is gone. Don't think like the gambler who blows more and more cash trying to win back his losses. That's how a lot of people turn a small loss into a big one.

And do the math. Even if you hope the real estate market is near the bottom—it's possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even.

Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.

Bloomberg News

A real-estate agent moves a torn "Lender Foreclosure" sign outside a foreclosed home in Reno, Nev., last Monday.

If you are reluctant to give up on "your" home, realize that it isn't "yours." If you are in negative equity, it's the bank's home. You're just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow.

Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think.

In "non-recourse" states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in "recourse" states, lenders may have limited ability to come after you. Often they'd have to jump a lot of legal hurdles, and it's just not worth it for them. They're swamped with cases anyway.

"In my experience, right now they're not really going after anyone," says Richard Nemeth, a bankruptcy attorney in Cleveland. "They just don't have the resources."

If you've taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors.

Sure, a strategic foreclosure may hurt your credit score. But if you're in financial difficulties, it's probably already suffered. And your credit score is not the only thing in life that matters.

Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it's wrong to abandon their obligations. They don't want to be a deadbeat.

Your instincts, while honorable, are leading you astray.

The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven't worked this out yet. They're operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns.

Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?

They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they've gotten away with it. And if they thought your loan was "risk free," how come they were charging you so much more than the interest on Treasury bonds?

If you're only a small amount underwater on your mortgage, it's probably the case that you're going to be better off staying put. But if you are deeply underwater, it's a different matter.

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn't have to give back one cent of that money when the companies went into bankruptcy.

Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They're not shy about protecting themselves if things go wrong. You shouldn't be either.

For Landlords, the Numbers are Starting to Look Better

2010-03-10T13:47:00.002-05:00

By MP McQueen

Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?

Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.

If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.

In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.

But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That's up from roughly a 5% yield several years ago when prices were higher, he says.

Being a landlord now isn't easy. You need good credit and plenty of cash—as much as 50% of the purchase price—because banks are still skittish about lending. You need extra cash for handling repairs and vacancies, and you must have the patience to deal with difficult renters.

If you buy an investment property, you should expect to hold it for three to five years or more. Much of the big money from quickly flipping properties already has been made, and conditions now favor long-term owners who want an investment that will throw off income and slowly gain value over time.

"It's a great time for someone who is focused on increasing his net worth, rather than doubling his money in a short period of time," says John Burns, a real estate consultant in Irvine, Calif.

Geoffrey Koblick, 55, who has been investing in residential and commercial real estate for many years, recently scooped up two apartment buildings in Northern California. He didn't buy any properties from 2003 through 2007, when "prices were too high based on the income the properties were generating," he says.

Mr. Koblick says he and his partners paid $3.3 million in May 2009 for a 23-unit building in Berkeley that generates $199,500 in net operating income, for a 6% return. They are upgrading the property, and Mr. Koblick expects its value to increase dramatically over the next seven to 10 years, when he hopes to sell it. Since they bought the building with a 33% down payment, he projects the partners will end up with an annualized return of 15%.

Of course, things often don't go as planned in real estate. J.P. Botha, 33, bought a new one-bedroom condo in Manhattan for $775,000 in 2007. Property values were rising, and he figured he'd sell it for a profit. Instead, its value on completion fell more than 25%. So he rented it out. His first tenant bailed after five months when she lost her job. He had to make a price concession to find and keep a second tenant.

"I'm hemorrhaging over a grand a month," said Mr. Botha, who took out a 30-year mortgage to finance his investment. Still, he says he is taking the long view on his investment: "Once I pay off the loan I will have an income-generating property for the rest of my life."

Clearing up confusion regarding tax credits

2010-01-27T01:10:00.002-05:00

Tax credit resources

To read more about the tax credit and find other materials, visit floridarealtors.org here.

TAMPA, Fla. – Jan. 26, 2010 – Federal tax credits for homebuyers have certainly boosted the Tampa Bay area real estate market.

The incentives have prompted nervous buyers to get off the fence, and that has helped the area shed thousands of homes from the region’s inventory of unsold properties.

But as these buyers prepare to cash in on their purchases by filing their tax returns, many are finding they may not qualify after all or don’t know how to file.

“There’s a lot of confusion,” said Greg Armstrong, a Coldwell Banker broker in Pasco County. “It’s so complex that if you’re not living it every day, like a CPA, you’re not in a position to direct someone.”

Even if the case seems straightforward, Armstrong encourages clients to seek guidance from an accountant.

There have been so many changes to the credit that IRS spokesman Michael Dobzinski had to consult his notes often to answer questions. Here are some helpful things the IRS wants you to know about the credits.

• The credits are available only to buyers purchasing primary residences. The IRS defines this has the residence where you spend most of your time.

• There are two credits available. One is for first-time buyers, or those who have not owned a home in the past three years. The maximum for this credit is $8,000 and, unlike a previous credit, this one does not have to be paid back. It applies to purchases made this year between Jan. 1 and April 30.

• The government broadened the credit in November to include some buyers who already own houses. Those buyers are eligible for a credit worth up to $6,500 for purchases made between Nov. 7 and April 30. In order to qualify, the buyer must have owned a primary residence for at least five consecutive years out of the past eight years. This credit also does not need to be paid back.

• There are income and price requirements. If the home was purchased after Nov. 6, it can cost no more than $800,000. Also, if purchased after that date, individuals cannot earn more than $125,000 and married couples filing jointly cannot earn more than $225,000.

• You don’t have to wait until 2010 to claim your credit, even if you buy this year. Purchase a home before the April 30 deadline and the credit can be claimed on this year’s taxes.

• If you’re claiming the credit, a paper filing is necessary. Only taxpayers not claiming the credit can file electronically. Dobzinski said buyers can still use electronic forms, but must print them out and mail them in, along with form 5405.

• Unlike last year, buyers claiming the credit must prove they are eligible. This is because some people filed for the credit last year, even though they had not purchased a home. You’ll need to send the HUD settlement statement along with the tax form. If you’re claiming the longtime owner credit, also include proof, such as copies of mortgage interest statements, property tax records or homeowner’s insurance records.

• Keep in mind that the credit is for your primary home. If you decide to rent or sell the home within three years, the credit must be repaid.

• Buyers claiming the credit will have to wait longer than usual to get the credit because of the need to file by paper. Expect to wait four to eight weeks, instead of the typical two weeks when filing electronically.

Copyright © 2010 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.

FHA Seasoning Rules Lifted! Great News For Investors!

2010-01-17T12:26:00.001-05:00

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

Fannie, Freddie Suspend Foreclosures

2009-12-19T03:27:00.002-05:00

WASHINGTON (AP) – Dec. 18, 2009 – Mortgage finance companies Fannie Mae and Freddie Mac are suspending foreclosures and evictions for about two weeks in a temporary break for borrowers during the holiday season.

The suspension, announced Thursday by the government-controlled companies, runs from Saturday through Jan. 3. “No family should have to face the prospect of being evicted during the holiday season,” Michael Williams, Fannie Mae's chief executive, said in a statement.

Earlier Thursday, Citigroup Inc. announced a 30-day suspension of foreclosures and evictions, affecting about 4,000 borrowers. Fannie and Freddie did not estimate how many homeowners would get this grace period.

Last winter, most major lenders suspended foreclosures while the Obama administration developed its $75 billion loan modification program. But foreclosures picked up again after those suspensions lifted.

RESPA 2010 Rules, Changes to HUD-1 & GFE

2009-11-22T19:54:00.004-05:00

This week I attended a training seminar held by SAR to learn the changes on the new HUD-1 (Settlement Statement) and GFE (Good Faith Estimate) RESPA 2010 Rules. This new form will go into effect January 1, 2010.

This is the most far reaching change that RESPA has initiated in many years. It's purpose is to protect consumers (borrowers) from surprises at the closing table, lower consumer costs, and making shopping for a loan easier. The 2 forms will have to match and must be no more than 10% above the final aggregate amount of certain sections.

The new HUD-1 is a three pages and have new rules about what goes where. The best one I see is no longer seeing various line items for title charges including wire fees, document storage and other "junk fees". Title companies will have to charge you one flat fee that will include everything.

I am so glad to have attended this presentation to better serve my clients in the confusing times ahead. Here is a link to the new form if you are interested in seeing it. This is far reaching and will change the way different service providers work together.

• New HUD-1
• New GFE
• Frequently Asked Questions

If you are confused about all this, rest assured I got you covered. Call me.

Dill

The Drawbacks to Buying Foreclosures

2009-10-22T22:44:00.004-04:00

Price-conscious home buyers are lured by the low prices advertised for properties in foreclosure. They hope to show up at the auction and win the lowest bid. However, many of these homes are not available for inspection prior to purchase. Is it smart to buy a home that you cannot inspect? Could be if the price was low enough to compensate you for the amount of work that might be required to bring the condition of the home to market standards.

Before you rush forward to buy a foreclosure, stop to think about some of the drawbacks and repercussions if you can't get in the house to inspect the interior.

Who Is Living at the Property?

If the property is occupied, the successful bidder is typically responsible for removing the occupants, who may not be the previous owners. They could be relatives or friends of the owners, renters or squatters. You might have to evict them.

If you are unfamiliar with eviction processes, you should hire a lawyer to handle it for you.

Be aware that tenants who are sued for eviction sometimes retaliate.

A better solution might be to pay or bribe the occupants to leave.
(In the business we call this "Cash For Keys")

Non-Owner Occupied Homes

Here's an example, a house, was rented to a dubious couple: a former convict recently released on parole and his partner with sketchy credit, who flinched at loud noises like a domestic abuse victim.

The seller, unaware that his deed of trust contained an "assignment of rents" -- meaning the lender had a right to collect the rent if the owner did not make his payments -- stopped paying on his piggyback loans and didn't much care who he rented to as long as they paid him. Fully intending to pocket the rents and forget about his mortgage loans, the seller listed the rental for sale. His agent made an initial attempt to gain access to the home. The ex-con, a neo-Nazi with a shaved head, massive tattoos and holding back a barking pit bull, peeked through the door and then slammed it in the agent's face.

Soon as the For Sale sign was planted in the lawn, the tenants stopped paying rent. Neither the lender nor the seller could collect any money from the tenants. The agent could not show the property. This was an ugly situation. The lender (who held both the first and the second loan) filed for foreclosure and vowed to file a deficiency judgment against the seller, which junior lenders can do in California if the loans were not purchase money.

Condition of Foreclosed Homes

Because these homes are purchased "as is" from the lender or HUD, there is no guarantee of condition. Sometimes it is possible to inspect these homes prior to making an offer but sometimes, as in the above example of the home, access is not granted.

When sellers realize they are about to lose their homes through foreclosure, it's not uncommon for them to stop caring about the home.

If something breaks or malfunctions, they aren't going to fix it.

If they are angry or desperate enough, it's possible they might actually destroy the house. An effective way to flood the home is to turn on all the water faucets, plug the drains and leave. Others smash out walls, then pull out the copper pipes and wiring to sell as scrap metal. Owners will also sell the appliances and kitchen cabinets.

Some horrible-excuse-for-human beings even leave animals behind, locked inside without food or water.

Buying foreclosures is not for the faint of heart. It's best handled by the pros and is not recommended for first-time home buyers. I don't care what seminar you attended -- if it's not giving you this information, it's not preparing you for reality.

Leaving Home Loans Behind - To Pay or Not To Pay?

2009-10-13T22:14:00.004-04:00

SAN DIEGO – Oct. 13, 2009 – Scott Conroy pays the mortgage every month on his one-bedroom condo in San Diego, even though it’s worth 33 percent less than what he owes, and it may take more than a decade to break even.

Homeowners like Mr. Conroy who can afford their monthly payments are weighing whether to sell and pay the difference, stick it out until housing prices recover, or walk away.

In the United States, 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for New York-based Deutsche Bank Securities Inc. In parts of California, Florida and Nevada, it’s as high as 75 percent.

So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC, a Dublin-based credit-checking company, and Oliver Wyman, a New York-based consulting firm. Two-thirds of those who walked away defaulted on their primary residences.

“You’re looking at an extremely long horizon in order to see a return of home values to where they were at their peak,” said Stan Humphries, chief economist for Zillow.com, the Seattle-based real estate data service. “It could be 15 to 20 years in some markets.”

Strategic defaulters represent about 4 percent of all homeowners underwater. That trickle could become a flood as the likelihood recedes that home prices will soon return to their peak values, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac Inc., an online seller of real estate data.

In San Diego, where Mr. Conroy lives, home values are down about 40 percent since March 2006 when he bought his place, according to the S&P/Case-Shiller Index of 20 U.S. metropolitan areas. Prices have rebounded for three consecutive months, returning to the October 2002 level, before the start of the housing boom. Nationwide, home values are what they were in September 2003, according to the Case-Shiller index as of July.

“You have to ask yourself: Are you just renting the home from the bank?” said Michael Joe, a foreclosure expert at the Legal Aid Center of Southern Nevada. “Would it be cheaper to walk away and rent across the street?”

Mr. Conroy, 32, and his wife purchased their home for $385,000 in March 2006, a month before marrying. The property was reassessed this summer for $250,000. The couple is trying to save, he said, knowing they may have to move to a bigger place within 18 months to start a family.

“We’ve given up on this dream of having equity in our home,” Mr. Conroy said. “We don’t expect to walk away with cash in hand, we expect to pay.”

State laws

More homeowners may opt to take a hit to their credit score rather than come up with cash to cover the loss, especially in California and the nine other U.S. states where the legal repercussions of foreclosures are less than other parts of the country, said Mr. Sharga.

Ten states are so-called nonrecourse, prohibiting deficiency judgments after most home foreclosures: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon and Washington, according to the National Consumer Law Center, based in Boston. The bank can repossess your home in those states, not other assets, to settle the debt.

In California, a second-mortgage holder may try to pursue a delinquent borrower to repay through litigation, said Rick Brooks, a financial adviser with the San Diego-based wealth advisory firm Blankinship & Foster LLC. Banks generally prefer not to sue because it can easily cost $60,000 or more, said Debra Guzov, co-founder of the law firm Guzov Ofsink LLC, based in New York.

Banks may be more willing to accept foreclosure alternatives, such as a short sale or deed-in-lieu of foreclosure, in states where a lender can’t sue for personal assets, said Brad Geisen, chief executive officer of Foreclosure.com, based in Boca Raton, Fla.

In a short sale, the borrower finds a buyer for the home at an acceptable price and the bank agrees to forgive the difference, said Greg McBride, senior financial analyst with North Palm Beach, Fla.-based Bankrate.com. In a deed-in-lieu of foreclosure, the bank sells the home after a similar debt negotiation.

Tax break

A 2007 law exempts from tax up to $2 million of debt forgiven in a foreclosure or similar proceeding for a primary residence, according to Internal Revenue Service spokesman Eric Smith. The tax break extends to 2012.

The lender’s willingness to negotiate varies and depends on the loan balance, condition of the property, location and resale opportunities, said Alberta Hultman, chief executive officer of USFN, an association of U.S. mortgage banking attorneys based in Tustin, Calif.

Short sales or deeds-in-lieu of foreclosures are considered the same as a foreclosure on your credit score, said Craig Watts, spokesman for Minneapolis-based FICO Corp., owner of the credit-scoring formula most widely used by U.S. lenders.

A foreclosure remains on a credit report for seven years. Credit scores can begin to rebound in as little as 2 years if bills are paid on time, according to FICO.

“You really want to think through the inability to borrow and higher rates that you’ll pay,” Christopher Van Slyke, a partner at Trovena LLC, a wealth management firm based in La Jolla, Calif., said of walking away.

“If you don’t have the gun to your head, then stay right where you are,” said Cheryl Morhauser, a financial adviser based in Nevada City, Calif., whose clients’ average net worth is $1.5 million to $3 million.

Jennifer Albaugh, 34, plans to keep her Las Vegas home, where prices have dropped 49 percent since she bought it in December 2004, according to the S&P/Case-Shiller index.

Ms. Albaugh, who owns a fabric store, might have sold her 3,000-square-foot house for as much as $550,000 four years ago, she said. Today she owes more than $300,000 on her mortgage and says her house isn’t worth even close to that. She and her husband are still looking to buy a bigger home for their two kids, especially while rates are low, and might turn their current home into a vacation rental, she said.

“Walking out of your house to get a better deal down the street is just not the right thing to do,” she said. “It hurts everybody.”

Social Stigma

Morality and social stigmas play an important role in whether someone who can afford the payments will walk away, said Paola Sapienza, professor of finance at Northwestern University’s business school, in a July study on strategic defaults. Eighty-one percent of 1,646 homeowners interviewed think it is morally wrong, the study found.

“If you know someone who’s done it, you’re way more likely to do it,” Ms. Sapienza said. “That’s the scariest part, is that there might be some contagion part of this.”

Ms. Albaugh and Mr. Conroy, the San Diego homeowner, said they’re frustrated by the lack of help for homeowners like them who keep paying.

“It seems like the banks are more willing to work with people who aren’t making their payments rather than people who are,” Mr. Conroy said.

Copyright © 2009 The Washington Times; Margaret Collins, Bloomberg News. Distributed by McClatchy-Tribune Information Services.

Real estate flippers back in South Florida, but this time they could help

2009-10-08T17:37:00.003-04:00

MIAMI – Oct. 8, 2009 – The flippers are back.

Bolstered by swelling foreclosures and bottomed-out prices, investors are returning to the South Florida real estate market, snapping up distressed homes with cash payments for either a quick turnaround or a short-term rent-then-sell investment.

Unlike the speculative flippers during the boom – scourges who unnaturally jacked up prices, spawned reality TV shows and led to the economic crumble – today’s flippers are erudite capitalists who could usher in positive change by buying dilapidated and abandoned homes, patching them up and selling them for a market-bearable price, experts say.

The downside: These cash-in-hand guys are competing with regular folks looking for deals and struggling to find loans.

But Realtors say this whole foreclosure flip phenomenon is not for the faint of heart.

It takes legwork. Homes may carry large HOA or tax liens. Many are stripped of appliances, toilets, countertops – everything but the drywall, and sometimes even that has been plundered.

“Without a doubt, people with opportunistic profit motivations are reentering to purchase properties,” said market analyst Jack McCabe of McCabe Research and Consulting in Deerfield Beach. “But this isn’t the group of cocktail sippers who were bragging years ago about buying and flipping. These are real investors.”

Jupiter-based Pudlit Joint Venture incorporated as a limited liability partnership in mid-June and began paying cash for Costco-style home buys.

In August and September, Pudlit purchased 42 Palm Beach County homes, according to the property appraiser’s office. The group’s buys vary from Lake Worth’s D Street to Wellington’s opulent Olympia.

Realtor Robert Littman, who represents Pudlit, said the company is made up of a “couple” of investors who are willing to do the job that banks aren’t – cleaning, re-roofing and replacing air condensers that disappear into the night.

Littman has sold eight homes.

“This is a very difficult job,” Littman said. “You could go down to the courthouse and look at hundreds of properties and then only buy two.”

Foreclosures in Palm Beach County grew substantially in August, with 4,150 receiving a foreclosure filing, a 110 percent increase from the same time the previous year.

St. Lucie County had 1,649 filings in August, up 57 percent from a year ago. Martin County, with 248 foreclosures, was up 8 percent from August 2008.

Curtis Lowe, president of the Realtors Association of St. Lucie, said he’s also seen an increase in investment buys on the Treasure Coast. He had a client “more than happy” to pay the asking price on a flipped home because it was move-in ready.

Another wave of foreclosures is expected to hit Florida in 2010 as unemployed workers struggle with payments.

University of Florida economics Professor David Denslow said out-of-state investors will likely follow.

Actually, they’re already here.

Calabasas, Calif.-based group LE 1 LLC is an investment fund run by real estate investor Paul Elis, who is tiptoeing into the Palm Beach County market.

With a local partner, he paid $125,000 in cash for a four-bedroom home in West Palm Beach in May. Newly remodeled, it’s now on the market for $244,900.

But with few offers, Elis, who says he’s been flipping homes for profit for 40 years, is considering renting the home for a year or two before he sells.

“I know Palm Beach will be potentially rewarding,” Elis said. “This business is not about getting lucky with markets, it’s about skill and technical competence.”

Slowing down the flippers – and that’s not necessarily a bad thing – is the fact that buyers may have trouble getting Federal Housing Administration loans if the home has changed hands within the past 90 days.

To move the glut of houses on the market, the FHA has relaxed its 90-day rule for buyers using federal Neighborhood Stabilization Program Grants, but the policy still aims to prevent the predatory turnarounds and sky-high price increases that made “flip” a four-letter word.

Even today, Elis and his sort are called “vultures” for picking at the bones of the real estate market.

“Some people think of them that way,” said John Thomas, Palm Beach County director of residential appraisal services. “But someone has to clean up this mess.”

Copyright © 2009 The Palm Beach Post, Fla. Distributed by McClatchy-Tribune Information Services.

Today Show: Sarasota is Number 1 Place in USA to buy!

2009-10-06T16:18:00.004-04:00

This morning on the Today Show, Barbara Corcoran, Real Estate Correspondent, said Sarasota, Florida is the number one place in the NATION to buy a home today! Why not share this great news with your clients, potential clients and friends!

Visit msnbc.com for Breaking News, World News, and News about the Economy

Wanna see the whole interview? Here's the link
According to the interview, Sarasota prices have stabilized and are heading back up, and the community attributes (as we all know) - the beaches, the weather, the culture, the homes and the people - are too good to pass up!

Check it out! We're Number One!

Paperless Office: I Can Find Anything Quick

2009-09-23T01:40:00.012-04:00

Paperless Office: I Can Find Anything Quick
by: Dill Ward, Real Estate Investor / Agent

As a real estate professional I value organization. As a geek I appreciate the ease of doing so using technology. I shudder at the thought of standing in the driveway of my next deal without every document that's ever come across my desk at my fingertips. I love having the ability to quickly thumb through my thousands of contacts to find just the person I'm thinking of who can help me problem solve. In my business, buying distressed property means having to make decisions very quickly as competition for the best deals is fierce. I use my mountains of carefully sorted data to mine and my clients' benefit.

How do I do this?
First, every single paper object that becomes in my possession gets assessed to determine if it contains data to be captured. If it is approved it enters the system to an "inbox" where it waits for a scanning/paper reduction session. Every few days I sit down with the folder and work through piece by piece. I determine what information needs to be recorded and decide where to store it. I use my Fuji S300M portable document scanner exclusively to convert paper to pdfs. It's super fast, portable powered by my laptop and scans every size document.

Second, naming folders & files something detailed is the most important part of the process when archiving data. If you can't remember "how" to look for it, forget it. What I do is make separate folders named as detailed as possible, business cards, receipts, contracts, photos, research, bills, even concert tickets. Last say goodbye forever and send it through the shredder.

There is nothing I can't retrieve at a moments notice. Of course this takes constant discipline. Keep with the system. Just like working out, it's hard at first but soon it's easy breezy and you'll reap the rewards of your effort by being more organized, more efficient and most importantly reduce your stress.

FREE Credit Report - Thought About Yours Lately?

2009-09-23T01:04:00.004-04:00

If you haven't looked at it in awhile, now's the time! For one there are so many errors out there, you don't want to suffer when you decide you need your credit just because you weren't paying attention to who and what has been reported.

Don't hide under a rock, know what's on there and work on it piece by piece. Look at your credit report like you would a maintenance checklist on your car. Don't get emotional or take it personal just deal with it. The first step is reading it and checking for errors. Then decide a plan of attack for derogatory line items. Decide which ones you can set short term and long term goals to address.

It's FREE once a year and should be a part of your yearly goal planning. Pay the few extra bucks to get your FICO score.

www.AnnualCreditReport.com

Dill

Fed Survey Shows U.S. Recession May Be Over

2009-09-11T09:02:00.001-04:00

WASHINGTON (AP) – Sept. 10, 2009 – The recession is ending and the U.S. economy is finally growing again.

That’s the message implicit in the Federal Reserve’s latest survey of businesses around the country, which found economic activity stabilizing or improving in most regions.

Economists warn the expansion is fragile and will have staying power only if consumers start spending more money. Rising unemployment that keeps Americans cautious could make for a plodding recovery in the months ahead.

The Labor Department will report on Thursday the number of new jobless claims filed last week, which could indicate whether the incipient recovery is slowing the pace of layoffs.

Wall Street economists expect that first-time claims for unemployment insurance benefits fell to a seasonally adjusted 560,000 from 570,000 the previous week, according to a survey by Thomson Reuters.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies’ willingness to hire new workers.

While the figures are volatile, first-time claims have trended downward in recent months. Initial claims topped 600,000 for most of this year, until falling below that level in early July.

The total number of people receiving benefits, meanwhile, is expected to drop by about 30,000 to 6.2 million. The figures on so-called continuing claims lag initial claims by a week.

All but one of the Fed’s 12 regions, meanwhile, indicated economic activity either was “stable,” showed “signs of stabilization” or had “firmed,” according to the Fed’s survey. The one exception was the St. Louis region, which reported the economic decline is “moderating.”

Businesses in most Fed regions said they were “cautiously positive” about the economic road ahead. The survey, known as the Beige Book, does not include precise figures.

Analysts predict the economy is growing in the current quarter, which ends Sept. 30, at an annual rate of 3 percent to 4 percent. That’s mostly because businesses, which had slashed investments during the recession, are spending more.

Auto sales have been lifted by the government’s recently ended Cash for Clunkers program. Manufacturing and the battered housing market, which led the country into recession when it collapsed, have also shown signs of improvement.

The problem for the economy is that the expected growth this quarter comes mainly from the auto companies and other manufacturers, which are refilling their depleted stockpiles.

Those inventories had dwindled as factories and retailers sought to bring what they had more in line with reduced sales. Any robust growth in the economy might be short-lived if shoppers don’t step up their spending.

In the Fed survey, most regions of the country reported that the clunkers program had boosted sales. Other merchants struggled. And consumer spending remained soft in most places.

Still, the assessments of businesses on the front lines of the economy were brighter than those they provided for the last edition of the Fed survey in late July.

At that time, most regions of the country reflected only that the recession was easing its grip. “That’s a pretty significant change in tone from the previous Fed report,” said Brian Bethune, economist at IHS Global Insight.

The survey’s findings will figure into discussions when Fed Chairman Ben Bernanke and his colleagues meet Sept. 22-23. The Fed is expected to keep interest rates at record lows, probably for some time, to help nurture the recovery.

“There are presently some signs that the economy is stabilizing and even reviving in certain areas, despite mixed signals,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech in Texas.

The market for homes is still weak — though it flashed some signs of improvement. In most places, buyer demand was stronger for cheaper homes, and in and around Philadelphia, sales were up for more expensive homes, too.

Fed regions credited a tax incentive for first-time homebuyers with increasing sales. Home prices kept falling in most parts of the country, though in the Dallas and New York regions, the survey found prices “firming.”

In a sign that lenders’ efforts to help troubled mortgage holders may be helping, the number of U.S. households threatened with losing their homes held steady last month, RealtyTrac Inc. reported Thursday.

The number of foreclosure-related filings — including default notices, scheduled auctions and bank repossessions — remains 18 percent higher than a year ago.

There was plenty of bad news in the survey. In the commercial real estate market, demand stayed weak, and construction fell in all parts of the country. And the job market was still sickly all over the nation.

The nation’s unemployment rate, which stood at 9.7 percent in August, could top 10 percent this year. Fisher, of the Dallas Fed, called for “uncomfortably high unemployment” as businesses keep cutting costs.

Copyright © 2009 The Associated Press, Jeannine Aversa, AP economics writer. All rights reserved.

NY Times Reminds us People Vacation Where We Live & Invest

2009-09-04T09:36:00.006-04:00

I love to once again see Sarasota specifically Siesta Key getting good press. It is a beautiful natural resource and it helps fuel our local economy. Kudos NYT!

Dill

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If They Gave Awards for Sand ... Well, They Do
By ELIZABETH MAKER

SUMMER may seem an odd time to flee to Florida, but thanks to a happy accident of geology, there’s one small island there that may be better to visit the more the mercury rises.

“Do you really have to put this in your paper?” asked a frequent visitor, Linda Guckenberger of Columbus, Ind. “Siesta Key is a hidden treasure, especially in the summer. The heat in Indiana is oppressive in August, so when we tell people we’re going to Florida, they think we’re nuts. They say, ‘Why aren’t you going north?’ ”

Siesta Key, an eight-mile-long, crescent-shaped barrier island on the Gulf Coast south of Sarasota, is becoming more popular in hotter months as tourists discover its powdered-sugar white sand that seems always to stay cool, no matter how high the heat outside. Other enticements include cool gulf breezes; clear, temperate, turquoise water; and huge discounts on accommodations from July through September at luxury high-rises, cozy cottages and funky beachfront bungalows.

Summer seems to lure mainly Midwesterners and Europeans to Siesta Key, said Dale Nelson, a volunteer with the Siesta Key Chamber of Commerce, while winter is the province of Northeastern and Canadian snowbirds.

Ms. Guckenberger and 15 family members have been renting the same neighboring condos at Siesta Sands Beach Resort for two weeks every summer for the last eight years. “It really is ‘The World’s Finest, Whitest Sand,’ ” she said, mentioning the title the beach won in 1987 in the Great International White Sand Challenge, adjudicated by Florida International University.

This year Stephen Leatherman, known as Dr. Beach and director of the university’s Laboratory for Coastal Research, named Siesta Key’s beach as the second-best in the nation. (Hanalei Bay on Kauai, Hawaii, was first.)

“I use 50 criteria to rate every beach, and in terms of sand alone Siesta Key is definitely the best in the world,” Dr. Leatherman said. Science backs up the hyperbole: Siesta Key’s beach is 99 percent limestone quartz, which stays consistently cool and silky.

Why the other archipelagic islands nearby didn’t get the same sacred sand is harder to explain. Hop over to Lido Key to the north, or Casey Key to the south, and you’ll find the more typical crushed-shell beaches that are beautiful but make barefooting a painful proposition when the sun is searing. “Why is it like this on Siesta Key and nowhere else?” asked Mark Smith, president of the Siesta Key Village Association. “Because God loves us? Who knows?”

Actually, Dr. Leatherman said, quartz grains deposited from the southern Appalachians over millennia settled in a protected pocket around Siesta Key. “Other beaches have a mix of all kinds of minerals that make the texture coarser and the color darker, but Siesta Key is all refined quartz,” he said. “It’s cushy and squeaky and absolutely dazzling.”

Siesta Key was virtually uninhabited until the 1880’s (except by rattlesnakes, copperheads, wild boars and the like). First called Sarasota Key, it was connected to the mainland in 1917 when the first of two bridges was built and the island was discovered by an eclectic mix of artists, writers and business professionals. Residents changed the island’s name to Siesta Key in the 1920s.

The island has a population of 9,581, which almost doubles in winter, according to the 2000 census.

The village has just undergone a multimillion-dollar makeover. Utility wires have been buried; concrete sidewalks were replaced with wider brick walkways, 16 new brick crosswalks have been laid; elegant lamplights, benches and a gazebo have been installed; and flowering, fragrant landscaping and black olive shade trees were planted along its main street, Ocean Boulevard.

Graham and Beverley Easton of West Yorkshire, England, say summer on Siesta Key is more sublime than anywhere they’ve vacationed in Europe. “We’ve been to Spain, France, Portugal, but Siesta Key is our true paradise,” said Mr. Easton, whose family spent three weeks in August at the Sandbox on the Beach for the 10th consecutive year. “We’re taking two other families with us, and we can’t wait to see their reaction. You walk into the apartment and open the back door to the beach, and it’s the most amazing ‘Wow’ factor you’ve ever experienced. Everyone is completely blown away.”

The Eastons start their days at 5:30 a.m. with a cup of coffee and a long walk down the beach. Their two teenage daughters build elaborate sand sculptures, swim and watch dolphins play in the surf, almost close enough to touch.

“We walk into the village and shop at the great boutiques, grab a cold beer or a daiquiri, then go back and barbeque dinner out on the grill,” Mr. Easton said. “And everyone oohs and ahhs as the sun sets: a huge orange globe slipping into the water.”

There are several new luxury resorts, including the $100 million Hyatt Siesta Key Beach Residence Club, which opened in June, offering time-share units that cost from $140,000 to $695,000.

But there are also accommodations across the street from the beach that are available for a comparable song in summer. The Ringling Beach House, for example, a pink stucco building with Old Florida charm, has rooms starting at $120 a night, and all have fully-equipped kitchens, linens and towels, air conditioning, TV, and access to barbeque grills and three small pools.

Dining choices are varied, with an emphasis on flip-flop casual: there are tapas bars and tiki bars, raw bars and crab shacks. The Daiquiri Deck, which used to be a speakeasy, offers 18 daiquiri flavors. And though it’s far from New England, Captain Curt’s Crab & Oyster Bar won the annual Great Chowder Cook-Off in Newport, R.I., in 2007.

There is more sophisticated, waterfront dining at Ophelia’s on the Bay, a top pick in Zagat’s, with dishes like Norwegian salmon with mango-honey barbeque sauce and ginger-nectarine salsa, or yellowfin tuna with grilled watermelon and kimchee-spiced aoli.

The most hopping spot on the island is the public beach pavilion, famous for its Psychedelic Superman ice cream (vanilla with bright food-colored stripes). People of all ages walk around to reggae music, licking melting cones; some stop under the large straw-roofed pavilion to get temporary tattoos or their hair braided in Bo Derek cornrows.

“You get a lot more bang for your buck in the summer, and there are no crowds, no hustle bustle,” Ms. Guckenberger said from her home in Indiana. “We just got back, and we’re still laughing with all the memories of the little ones doing face plants in the sand, like they couldn’t get enough of it.”

Roth IRA's 2010 Tax Laws & How it Will Help Investors

2009-08-26T21:46:00.007-04:00

Thanks to Paul DaCosta, tonight I listened in on a conference call with Dave Owens, CEO of Entrust Freedom, one of the industry leaders in Self Directed IRA and 1031 Exchange accounts. If you aren't familiar with these and you invest in Real Estate, you better start getting your feet wet, especially if you plan to retire.

I found this starter's guide on their website: www.entrustfreedom.com/free-reports/thanks/

Dave highlighted two important changes to 2010 tax laws governing Roth IRAs

1) Starting in 2010, taxpayers with modified adjusted gross income of more than $100,000 will be allowed to convert a traditional IRA to a Roth IRA.

2) Income taxes due on the 2010 conversion can be spread over two years. So the 2010 conversion amount may be included as taxable income in 2011 and 2012 - helping to spread out the tax bite.

Taking Advantage of the 2010 Rule

Fortunately there is a way for all taxpayers - regardless of income - to take advantage of this change in the tax code:

Start Funding a Traditional IRA Right Now!

Even if you don't qualify to make Roth IRA contributions or traditional IRA contributions on a before-tax basis, you can still make after-tax contributions to a traditional IRA. If you invest in a non-deductible IRA in the tax years 2006 through 2010, then you can convert those IRAs to Roth IRAs in 2010.

Most investors shy away from making non-deductible contributions to an IRA because they are not tax deductible, the investment growth is fully taxable, and because they are subject to minimum distribution rules they offer only a minimal tax shelter. But by converting these non-deductible IRAs to Roth IRAs in 2010 many of those disadvantages disappear.

The bottom line is... and this has been on my mind a lot lately. If we are working so hard to live, what are we making all this money for? I think it's so we don't have to work so hard later when we aren't physically able. If you aren't thinking about how Real Estate can play into your retirement portfolio you should be!

Call me! I'll get you pumped up.

Dill

The Conference Board Consumer Confidence Index bounces back

2009-08-26T00:24:00.001-04:00

NEW YORK – Aug. 25, 2009 – The Conference Board Consumer Confidence Index®, which had retreated in July, rebounded in August. The Index now stands at 54.1 (1985=100), up from 47.4 in July. The Present Situation Index increased slightly to 24.9 from 23.3 last month. The Expectations Index improved to 73.5 from 63.4 in July.

“Consumer confidence, which had posted back-to-back monthly declines, appears to be back on the mend,” says Lynn Franco, director of The Conference Board Consumer Research Center. “The Present Situation Index increased slightly, mainly the result of an improvement in consumers’ assessment of the job market. The Expectations Index improved considerably and is now at its highest level since December 2007 (Index, 75.8). Consumers were more upbeat in their short-term outlook for both the economy and the job market in August, but only slightly more upbeat in their income expectations. And, as long as earnings continue to weigh heavily on consumers’ minds, spending is likely to remain constrained.”

Consumers’ assessment of current conditions improved slightly in August. Those claiming business conditions are “bad” decreased to 45.6 percent from 46.5 percent; however, those claiming conditions are “good” decreased to 8.6 percent from 8.9 percent. Consumers’ appraisal of the job market was more favorable this month. Those saying jobs are “hard to get” decreased to 45.1 percent from 48.5 percent, while those claiming jobs are “plentiful” increased to 4.2 percent from 3.7 percent.

Consumers’ short-term outlook was much improved from last month. Those expecting an improvement in business conditions over the next six months increased to 22.4 percent from 18.4 percent. Those anticipating conditions to worsen decreased to 15.8 percent from 19.0 percent.

The labor market outlook was also more upbeat. The percentage of consumers expecting more jobs in the months ahead increased to 18.4 percent from 15.5 percent, while those expecting fewer jobs decreased to 23.3 percent from 26.1 percent. The proportion of consumers expecting an increase in their incomes increased slightly to 10.6 percent from 10.1 percent.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS, one of the world’s largest custom research companies. The cutoff date for August’s preliminary results was Aug. 18.

© 2009 FLORIDA ASSOCIATION OF REALTORS

FOR SALE: Fully Rented Triplex, Bradenton

2009-08-24T20:08:00.003-04:00

New credit rating guidelines cut homeowners no slack

2009-08-21T02:21:00.003-04:00

WASHINGTON – Aug. 20, 2009 – Facing one of the worst housing markets in memory, struggling homeowners now have another incentive to walk away from an investment gone bad.

It’s hard enough to modify terms of a home mortgage, despite the federal government’s efforts to ease those procedures for individuals desperate to hold onto their houses. Unfortunately, the “Big Three” credit bureaus – Equifax, Experian and TransUnion – have issued new guidelines that allow lenders to report new mortgage loan modifications as “partial payment status,” a designation that could lower an individual’s credit score by more than 50 points.

A loan modification doesn’t reduce the principal, but makes it easier for homeowners to repay what’s owed by reducing the interest rate and stretching the length of the original loan. Credit agencies are paid to assess credit risks, and that includes people who can’t pay their mortgages. But these are extraordinary times. Penalizing a homeowner for successfully re-negotiating a loan could have the unwanted consequence of inducing more foreclosures.

First American CoreLogic, a real estate analysis firm, says more than 15 million mortgage holders, or 32.2 percent, are “upside down” on their mortgages, meaning they’re paying more than their houses are worth. In Florida, the negative-equity picture is worse at 49 percent, and the figures are even higher in South Florida, hovering around 51.5 percent in the Miami-Fort Lauderdale area.

Now, thanks to the credit-rating agencies and an indifferent government bureaucracy of financial regulators, there will be homeowners who will unnecessarily become credit risks. While a loan modification provides a better outcome than a short sale, foreclosure or bankruptcy, punishing homeowners who work with their lenders is counterproductive.

Copyright © 2009 Sun Sentinel, Fort Lauderdale, Fla. Distributed by McClatchy-Tribune Information Services.

HUD moves away from ‘ownership society’

2009-08-17T15:52:00.001-04:00

WASHINGTON – Aug. 17, 2009 – The Obama administration is moving away from encouraging low-income Americans to buy homes, instead spending $4.25 billion on new rental units, officials say.

The White House decision to pump the federal stimulus funds into the Department of Housing and Urban Development’s low-rise rental apartment program is a clear ideological break with the administration of former President George W. Bush, whose policies of making mortgages available to low-income home buyers fell victim to the mortgage crisis, The Boston Globe reported Sunday.

The collapse of the for-sale housing market has left many low-income people holding mortgages they can no longer afford, becoming victims of skyrocketing foreclosure rates, and has led HUD to reassess the Bush-era goals of an “ownership society,” the Globe said.

“We’re trying to have a balanced policy,” Carol Galante, HUD’s assistant secretary for multifamily housing, told the newspaper, adding that the agency will also be using the stimulus funds to buy foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Conservative critics, however, told the Globe that rent payments in some cases can be more expensive than mortgages for low-income residents.

Copyright © 2009 by United Press International.

Understanding the $8,000 Tax Credit

2009-08-15T04:01:00.002-04:00

First Time Home Buyer? If you haven't bought a house in 3 years you are considered FTB. Read everything you need to know here:
www.floridarealtors.org/AboutFar/homebuyercenter/upload/firsttimehomebuyer.pdf

Most importantly to qualify transaction MUST CLOSE by November 30, 2009 If you are getting a loan, plan for 45 days from contract to closing. Mortgage closings are taking longer and longer, don't wait till the last minute to find a house, you may miss the deadline!

Start looking!
Search the Database

Marketing 101: Is Social Media a Fad?

2009-08-15T01:52:00.006-04:00

The Social Media Revolution: Statistics From Socialnomics show Social Media isn’t a fad anymore, it's bigger than you think

Is Social Media the biggest shift since the Industrial Revolution? We are definitely in the Generation Now and you have to be oblivious to believe that Social Media is not the new precedent in marketing.

The powers of Social Media below…enjoy!

• By 2010 Gen Y will outnumber Baby Boomers….96% of them have joined a social network

• Social Media has overtaken porn as the #1 activity on the Web

• 1 out of 8 couples married in the U.S. last year met via social media

• Years to Reach 50 millions Users: Radio (38 Years), TV (13 Years), Internet (4 Years), iPod (3 Years)…Facebook added 100 million users in less than 9 months…iPhone applications hit 1 billion in 9 months.

• If Facebook were a country it would be the world’s 4th largest between the United States and Indonesia

• Yet, some sources say China’s QZone is larger with over 300 million using their services (Facebook’s ban in China plays into this)

• comScore indicates that Russia has the most engage social media audience with visitors spending 6.6 hours and viewing 1,307 pages per visitor per month – Vkontakte.ru is the #1 social network

• 2009 US Department of Education study revealed that on average, online students out performed those receiving face-to-face instruction

• 1 in 6 higher education students are enrolled in online curriculum

• % of companies using LinkedIn as a primary tool to find employees….80%

• The fastest growing segment on Facebook is 55-65 year-old females

• Ashton Kutcher and Ellen Degeneres have more Twitter followers than the entire populations of Ireland, Norway and Panama

• 80% of Twitter usage is on mobile devices…people update anywhere, anytime…imagine what that means for bad customer experiences?

• Generation Y and Z consider e-mail passé…In 2009 Boston College stopped distributing e-mail addresses to incoming freshmen

• What happens in Vegas stays on YouTube, Flickr, Twitter, Facebook…

• The #2 largest search engine in the world is YouTube

• Wikipedia has over 13 million articles…some studies show it’s more accurate than Encyclopedia Britannica…78% of these articles are non-English

• There are over 200,000,000 Blogs

• 54% = Number of bloggers who post content or tweet daily

• Because of the speed in which social media enables communication, word of mouth now becomes world of mouth

• If you were paid a $1 for every time an article was posted on Wikipedia you would earn $156.23 per hour

• Facebook USERS translated the site from English to Spanish via a Wiki in less than 4 weeks and cost Facebook $0

• 25% of search results for the World’s Top 20 largest brands are links to user-generated content

• 34% of bloggers post opinions about products & brands

• People care more about how their social graph ranks products and services more than how Google ranks them

• 78% of consumers trust peer recommendations

• Only 14% trust advertisements

• Only 18% of traditional TV campaigns generate a positive ROI

• 90% of people that can TiVo ads do

• Hulu has grown from 63 million total streams in April 2008 to 373 million in April 2009

• 25% of Americans in the past month said they watched a short video…on their phone

• According to Jeff Bezos 35% of book sales on Amazon are for the Kindle when available

• 24 of the 25 largest newspapers are experiencing record declines in circulation because we no longer search for the news, the news finds us.

• In the near future we will no longer search for products and services they will find us via social media

• More than 1.5 million pieces of content (web links, news stories, blog posts, notes, photos, etc.) are shared on Facebook…daily.

• Successful companies in social media act more like Dale Carnegie and less like David Ogilvy Listening first, selling second

• Successful companies in social media act more like party planners, aggregators, and content providers than traditional advertiser

Fla. Tax Collections Take Hit, But it Could be Worse

2009-07-31T16:49:00.001-04:00

TALLAHASSEE, Fla. – July 31, 2009 – Florida’s school districts could have a half-billion dollars less to spend in 2010 under gloomy new forecasts approved by state economists on Thursday.

While there are glimmers of hope in the national economy, the meltdown in the real estate market continues to drag down property values in Florida. Economists forecast that Florida’s total property values in 2010 will decline to $1.88 trillion compared to $2.52 trillion in 2007 when the market peaked.

The one piece of good news: In March, economists had predicted a much steeper decline this year and in 2010, saying property values subject to school taxes would decline by 12 percent this year and 6.6 percent next year. Instead, this year’s decline is now projected at 10.7 percent, and the decline next year will be roughly 5.5 percent.

“We’re slightly less pessimistic than we were,” says Amy Baker, coordinator of the Office of Economic and Demographic Research.

But economists warned that foreclosures and other problems in the real estate market could take a while to work themselves out before it results in an upswing in property values. The new estimates forecast that taxable values for schools won’t fully rebound until 2013.

“We’re still trying to figure out a very dynamic market,” said Bob McKee, staff director of the Senate Finance and Tax committee.

It also takes time for changes in the economy to be fully accounted for because annual tax rolls adopted in July are based on property values as of Jan. 1. The estimates adopted on Thursday could require budget cuts for school districts in 2010 unless tax rates are raised or state lawmakers pour in more state aid.

The drop in real estate values is also having another effect: A dramatic decline in the difference between what homes are worth and how much is counted toward property taxes.

Homeowners in Florida get a break on their property taxes because voters can shield some of the value of their home from taxes due to the Save Our Homes constitutional amendment passed in 1992. Annual assessment increases are capped at 3 percent or the increase in the consumer price index, whichever is lower.

Out-of-state residents and business owners in the past have complained that Save Our Homes has created an unfair taxing system that penalizes those who don’t have a homestead here.

But the gap between what homes were worth and how much is counted for tax purposes was $427 billion in 2007. Now it is just $168 billion and that gap is expected to drop to $115 billion in 2010. The gap is expected to creep back up once the economy begins to recover.

Source: News Service of Florida, Gary Fineout

Bulk Purchases Latest Condo Trend in Florida

2009-07-31T16:46:00.001-04:00

MIAMI – July 31, 2009 – They’re lurking, holding bags of cash and eyeing distressed condo markets.

Big-time cash investors are snapping up South Florida condo units in bulk. There have been at least seven purchases of 10 or more condos this year, including four since June, according to county records. Investors are re-selling the units or renting them until the market recovers.

Last month, Tom D. Sullivan and Jorge Arevalo shelled out $14.6 million for 51 oceanfront, condo-hotel units in the One Bal Harbour complex from developer WCI Communities, which is reorganizing under bankruptcy protection.

“It didn’t take 10 years of research to see it was a pretty good deal,” said Sullivan, founder of Lumber Liquidators Inc.

That’s because existing condo prices in Miami have fallen by half since the peak in December 2006, and investors think they see the bottom. There’s also plenty of selection. Miami has a two-year supply of condos for sale, at the current demand, according to the local Realtors associations.

Since 2003, nearly 23,000 units have been built or are still under construction in greater downtown Miami, said Peter Zalewski, a principal with Condo Vultures Realty. In June, developers were still holding about 9,400 units, he said. Banks own about 5,000 local homes and condos.

Desperate to get them off their books, banks and developers are auctioning off Miami condos by the dozen. That’s where investor Ed Pascoe, an antiques dealer, snapped up 56 units for $4 million in a 135-unit building in February.

This month, he started offering the units for rent at $1,000 a month, or for sale from $99,000 to $299,000, according to his broker Brian Carter. Pascoe declined to comment.

By paying monthly fees on time, these new owners can be a financial relief for homeowners associations struggling to cover the costs of maintenance and insurance in a building dotted with empty units. While lenders and developers are obligated by law to keep up with association fees, it doesn’t always happen.

The cash for some of these deals is coming from groups of private investors. One multibillion-dollar firm, Contrarian Capital Management LLC in Greenwich, Conn., is looking closely at bulk purchases in Florida, according to Gil Tenzer, the firm’s real estate portfolio manager.

He’s not the only one.

“We’re getting much closer on several deals,” said Jay Massirman, managing partner of Rivergate Residential, a Miami-based real estate investment firm. Massirman said he has researched dozens of bulk purchases for investors.

Unlike the condo investors of the boom years, who borrowed recklessly with the intention on flipping the units within months, more investors today are using cash and thinking strategically.

“They have the money and the knowledge and wherewithal to hold them until the market turns around,” said Jennifer Drake, a real estate attorney with Becker & Poliakoff.

Talk of bulk condo purchases has reached San Diego, where “there’s some scurrying about in the local market on the part of investment groups who have explored the idea,” said Gary London, president of The London Group Realty Advisors.

And, if values stay depressed in troubled condo markets like Phoenix or Las Vegas, developers and banks could make bulk deals with cash investors at a discount to unload their unsold units. So, for now, Florida is the testing ground, and investors with deep pockets are watching.

Your Credit Report - Helpful Tips for Home Buyers

2009-07-28T18:41:00.005-04:00

by Brandon Cornett

When was the last time you saw a copy of your credit report? Do you know your credit score? Do you even know if it's good or bad?

If you can't answer these questions, you have some homework to do -- especially if you're planning to apply for a mortgage loan in the near future.

Here are some step-by-step instructions to help you obtain your credit reports, review them for accuracy, and correct any errors you come across.

Step 1 - Understand how your credit affects you.
When you apply for a home mortgage loan (or some other major purchase), you can be sure your credit will go under the microscope. Mortgage lenders will analyze your credit to find out what risk category you fall into.

When your credit score is high, your risk factor is low. In this scenario, you'll have a good chance of qualifying for a loan. But when the opposite is true -- low credit score and high risk factor -- you could have trouble obtaining a loan.

Credit reports are maintained by three credit reporting companies (sometimes called credit bureaus or agencies): Experian, Equifax and TransUnion. Your credit score is based on the information contained in these credit reports. Three agencies, three reports, three credit scores ... all about you!

Step 2 - Request copies of your credit report.
According to the Fair Credit Reporting Act (FCRA), you are entitled to one free credit report per year from each of the credit reporting companies -- Equifax, Experian, and TransUnion. To request your credit reports from all three companies, visit www.AnnualCreditReport.com, or call 1-877-322-8228.

If you request your report online, you should have access to it immediately. If you request your credit report through the toll-free number, it will be processed and mailed to you within 15 days.

Your credit report will not come with a credit score, so you'll need to purchase this separately. You can obtain your credit score by visiting www.MyFICO.com. This website is owned by Fair Isaac's, the organization that converts your credit reports into credit scores. Here's a quote from Fair Isaac's:

"FICO scores are your credit rating. Most lenders base approval on them. You have three FICO scores, one for each credit bureau, and you can only get all three from myFICO."

Step 3 - Review your credit reports for errors.
Examine your credit reports closely for any errors or inaccuracies. Make sure your personal information is correct and up to date. Check for loans or lines of credit that aren't yours, as this could be an indication of credit fraud. Anything at all that seems out of place, write it down for further investigation.

Step 4 - Start the correction process immediately.
Under the Fair Credit Reporting Act (FCRA), credit reporting companies are responsible for correcting inaccurate or incomplete information in your credit report. So don't hesitate to exercise your rights under this law.

If you only find errors on one report (for example, the one provided by Experian), you only need to contact the company associated with that report. Visit the company's website to find instructions on how to begin the correction process. By law, each credit reporting company must publish their correction requirements.

You can find these instructions on each company's website:
www.experian.com
www.transunion.com
www.transunion.com

Tell the company in writing what information is inaccurate. File a copy of your initial request, as well as any subsequent communication (such as their response to you). Start a folder and label it with "credit report" to keep your documents together. Keep the folder secure, as it will obviously contain sensitive information.

Home Buying Steps - 10 Basic Steps to Buying a Home

2009-07-28T18:13:00.005-04:00

by Brandon Cornett

This tutorial is designed to teach you about the various steps to buying a home. Though the home buying process differs from one buyer to the next, there are certain home buying steps that most buyers go through.

So without further ado, here are the home buying steps you are likely to face during your home buying process. (This sequence may be slightly different for you, based on your own unique circumstances.)

Step 1. Examine Your Finances

One of the first home buying steps should always be a good review of one's financial situation. You can bet that a mortgage lender will put your finances under the microscope, so you should do the same. The articles below will teach you how to judge your buying power and review your credit situation -- two very important steps to buying a home.

Your Credit Report - Tips for Home Buyers

Are You Ready to Buy a Home?

Things to Consider Before Buying

Step 2. Choose a Type of Mortgage

Generally speaking, the next home buying step is choosing a type of mortgage loan. This part of the home buying process requires careful consideration on your part, because your mortgage will stay with you for some time (until you sell, refinance or pay the mortgage off). The articles below will help you negotiate the all-important home buying step of mortgage selection.

Top 9 Mortgages Explained

Understanding the Different Types of Mortgages

A-to-Z of Mortgage Loans: 42 Definitions

Step 3. Get Pre-Approved

There are actually two home buying steps rolled into one here, but there so closely related I've listed them together. Our next step to buying a home will be choosing a mortgage lender and getting pre-approved. Pre-approval will help you immensely during the home buying process. For one thing, it will show sellers that you are serious about buying their home (and financially capable). This can make a big difference in whether or not they accept your offer.

9 Hurdles to Pre-Approval

Buying a Home: Lender Letters

How to Apply for a Mortgage

Step 4. Find a Real Estate Agent

Continuing along in our steps to buying a home, we will need to find a qualified real estate agent to help us through the remaining home buying steps. The home buying process can move pretty fast, and there's a lot at stake financially. So having a skilled agent on your side can help you avoid making costly mistakes, especially if it's your first time buying a home.

Finding the Right Real Estate Agent

8 Steps to Finding a Real Estate Agent

Choose a Realtor You Can Trust

Step 5. Choose a Neighborhood

Some buyers will neglect this particular home buying step, rushing off to look at houses without doing the proper research on neighborhoods. Which neighborhood you choose is almost as important as which home you choose. Neighborhoods have a direct influence on quality of life, social and recreational satisfaction, property values, commute time, educational opportunities and more. So doing a little neighborhood research is a crucial step to buying a home.

Neighborhood Scout (off site)

Yahoo Neighborhood Reports (off site)

Step 6. Start House Hunting

Let's review our home buying steps up to this point. You've got your finances in order, been pre-approved for a certain type of mortgage, found a good agent, and narrowed your search to a few select neighborhoods. Excellent! You're ready for one of the most exciting steps to buying a home -- the house hunting process. Here are some tips to help make your experience a good one.

5 Tips for Smarter House Hunting

Create a House-Buying Wish List

Step 7. Make an Offer

Once you find a home you like, you'll need to make an offer on it. For this home buying step, work closely with your agent to determine a reasonable offer amount based on recent, comparable sales in the area (referred to as "comps"). The articles will below will give you a good base of knowledge and make you more comfortable with the offer process.

How to Make an Offer

How to Avoid Paying Too Much

Earnest Money - What You Need to Know

Step 8. Get a Home Appraisal

To be honest, there's not much you need to do for this next home buying step. Your lender will arrange for the appraisal, and you basically have to stand by and watch (while hoping that the home appraises for the price you've agreed to pay).

Facts About Real Estate Appraisals (off site)

Home Buying Terminology - The Appraisal (off site)

Step 9. Get a Home Inspection

The main home inspection is one of several inspections you should have done on the home. A home inspection is an important home buying step that should not be skipped. After all, it will give you the peace of mind of knowing what condition the home is truly in. Read the articles below for more information on this crucial step to buying a home.

7 Questions to Ask a Home Inspector

A Guide to Home Inspections

Buying a Home: Reports & Inspections

Step 10. Settlement / Closing
The period between offer acceptance and the final settlement is known as escrow. You've probably heard somebody say, "My house is in escrow." During this part of the home buying process, you might have additional inspections (for radon, pests, etc.), and you'll likely have some more paperwork to finalize as you move toward the closing / settlement date. The articles below will tell you what to expect leading up to and during the settlement process.

What to Expect at a Real Estate Closing

How to Prepare for Closing Costs

Pre-Settlement Checklist for Home Buyers

Is Sarasota Inventory Really Dropping? No.

2009-07-24T17:11:00.005-04:00

If you read the papers you see data that reflects the answer to this question is, yes. Data shows inventory level is down and there is a small squeak of an increase in price. What this does not reflect is the moratorium that was enacted in December 2008 restricting lenders ability to file for foreclosure.

Well that flood gate has been opened and we can expect a new wave of sweet deals coming to the market place. Yes, it's unfortunate that it is happening but more importantly if you are the kind of person who can see opportunity in chaos you can find yourself buying property at prices from nearly 2 decades ago.

- Dill
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Mortgage Defaults: Many Are Intentional, Study Finds

2009-07-13T19:23:00.001-04:00

Tuesday, Jul. 07, 2009 / By Barbara Kiviat

Up to 26% of U.S. homeowners who stop paying their mortgage may be doing so intentionally, not because they can't make the payments but because they don't want to put money into a house that's worth less than what they owe. That finding, from a paper by economists at the University of Chicago, Northwestern University and the European University Institute, raises some doubt about the approach the Obama Administration has taken toward stabilizing the housing market. The current approach focuses on whether or not homeowners can afford their monthly payments, and largely ignores the fact that some 20% of homeowners owe more than their house is worth — a situation known as negative equity, or being "underwater," which, according to the paper's findings, may itself trigger default.

The paper's authors caution that their statistics are not exact and should be taken primarily as an indication that there is a looming problem, one that needs to be addressed. The 26% figure comes from a series of consumer surveys that feed into the Booth Chicago/Kellogg School Financial Trust Index. In December 2008 and again in March 2009, 1,000 people were surveyed and asked, among other things, if they knew anyone who had defaulted on a mortgage, and if they knew anyone who had defaulted on a mortgage even if he or she could afford to make the monthly payment. By taking the ratio of the two answers, the economists calculated that more than a quarter of defaults are, as they put it, "strategic." (Read "Home Sales Perk Up, but Expensive Houses Languish.")

"They can still afford to pay but they decide not to," says Paola Sapienza, a finance professor at Northwestern University and one of the paper's authors. "It's very easy to do this in the U.S." Even though there are serious consequences to reneging on a home loan — including wrecked credit, not being able to buy another house for years to come, the cost of moving and the social stigma associated with being a person who does not honor one's commitments — lenders tend not to pursue former homeowners for the money they are owed because of the prohibitive cost of tracking down such people and suing them.

Notably, other survey data included in the paper suggest the percentage of intentional defaults may be much lower than 26%. The researchers also asked if respondents themselves would welsh on their mortgages if they were $50,000 underwater. Among the people for whom $50,000 represented less than 10% of their home's value, none would walk away. However, once $50,000 represented between 10% and 20% of the house's value, 5% said they would walk away, and when the shortfall reached 50% of home's value, a full 17% said they would. (See "Renting a Modernist House.")

When the shortfall amount in question was $100,000, the walk-away responses accelerated at a faster rate. Some 7% of people said they would intentionally default when a $100,000 shortfall represented less than 10% of their house's value. Once that shortfall represented between 50% and 60% of the home's value, an entire 25% of respondents said they would walk away. The hesitation to intentionally default when the theoretical amount of negative equity was $50,000, even when representing the same percentage of a home's value, may relate to the high fixed costs that come with walking away, such as moving.

What is not clear is how the survey results map onto what is actually happening in the U.S. today. It is true that in some areas of the country homes have lost half their value. It is also true, according to data aggregator First American CoreLogic, that there are five states where more than 30% of mortgage holders are underwater and another 15 states where at least 15% of homeowners are. However, this sort of data does not indicate how much homeowners are underwater — or their attitudes about future home prices. If a homeowner believes house prices will recover during the time he intends to live in his house — which could easily be 10 or 15 years — then the incentive to walk away stops making sense from an economic perspective.

Christopher Foote, a senior economist at the Federal Reserve Bank of Boston, who studied negative equity in Massachusetts during the late 1980s and early 1990s when home prices dropped 23%, argues that most walk-aways are likely driven by the combination of two things: both negative equity and an economic hardship, such as job loss. (See 10 ways your job will change.)

More recently, Foote and his colleagues have studied patterns of mortgage nonpayment, and found that in certain states there is a disproportionate number of people who suddenly stop making payments and never try to catch up. This, they surmise, might be an indication of walk-aways — as opposed to struggling borrowers desperately trying to stay in their homes, making payments when they can. The states with more sudden stops are California, Florida, Nevada and Arizona — places where property prices have plummeted and more than 30% of homeowners are underwater. "That's consistent with the idea that there should be more walk-aways in those states," says Foote. "But outside of those states, I would think that walk-aways are more rare than people think."

Data from the new paper also point to the likelihood of mass walk-aways being a highly localized event. Sapienza and her colleagues plotted data on late mortgage payments and home-price declines and found very little relationship between the two when house prices in a metropolitan area had dropped less than 20% from their peak. However, once prices had fallen more than 20%, a disproportionate number of people wound up behind on their mortgage payments, even when the unemployment rate (a measure of means to pay) was held constant.

The research also suggests that social cues can play a large role in deciding to walk away. The researchers found that even though 81% of people surveyed considered it immoral to intentionally default, those respondents who said they knew somebody who had were nearly twice as likely to say they themselves would. People who live in areas with high foreclosure rates were also more likely to say they'd be willing to walk away. "Once you see everyone else doing it, maybe the stigma goes down," says Sapienza. "It's also possible that there's a multiplication effect: if I know other people are walking away, the value of my house deteriorates." Which then would create the problem anew.

Real Estate Funnies: County Property Taxes

2009-07-11T11:17:00.005-04:00

This one cracked me up... scroll down... - Dill

YOUR HOUSE AS SEEN BY... YOURSELF:

YOUR BUYER:

YOUR LENDER:

YOUR APPRAISER:

YOUR COUNTY'S TAX ASSESSOR:

Home Again: After Two-and-a-Half Years, Teardown is Complete

2009-07-11T10:54:00.006-04:00

Advice for those brave enough to invest in home improvement.

By NANCY KEATES THE WALL STREET JOURNAL

It's a wrap. Thirty months after making the decision to tear down and rebuild, my husband and I have moved into a brand new house on the lot where we lived for 10 years. Moving into a new house is like coming home to a gift–though one we will pay dearly for every month.

The new house is 1,000 square feet bigger and 50% more expensive than we initially planned. And the housing crash and the recession have made the decision much riskier. But being intimately involved in the design and construction of our home is an unparalleled experience–and a challenge I would gladly take on again.

We now have a house big enough (five bedrooms, three bathrooms) for our two sons to run around in the winter when the rain in Portland makes playing outside difficult; and we have a guest bedroom where our parents and friends can stay.

For this final Teardown Diary column, I offer lessons learned and advice for future home builders and renovators still willing to invest in home improvement in this uncertain environment.

Assume the final bill will be at least 50% more expensive than the initial calculations. Even though most home-building books and Web sites warn this will happen, it can be hard for novices to believe that individual cunning or just plain frugality can't make an exception. It isn't just one aspect of the process that causes the bloat. It is everything from the design getting more ambitious, to the price of materials going up and dealing with miscalculations by a contractor or architect. Cost overruns also come from the little decisions adding up: When faced with an option of slightly more expensive but significantly better performing fill-in-the-blank (water heater, windows, alarm system, etc.) most people choose to upgrade.

Decide if you want an architect who is passionate about the project. Our architect, Dave Giulietti of Giulietti Schouten, is said by other architects to be one of Portland's best. He did an excellent job explaining the design steps, figuring out what we wanted through an extensive questionnaire and helping sort through our wants and needs. The house he designed for us is beautifully sited and exactly what we asked for (though we all could have worked harder to keep the size down). (See photos.) The rooms are proportioned so they aren't too big or too small, the ceilings are high enough (10 feet on the first floor) without feeling cathedral. Whenever the contractors had a question or some detail wasn't fully worked out, Mr. Giulietti stepped in to take care of it.

The new house (right) is on almost the exact same footprint as the old house (left). It is just two stories taller. The yard and landscaping did not change.

But we never felt Mr. Gulietti's heart was fully in our project. His firm handles all kinds of architecture, but its pride is its contemporary designs. Drawing a Colonial–what is essentially a "period piece" as one worker called it–isn't his dream. A week after our home was finished, a card came in the mail from his firm advertising its new and in-progress projects. They were all modern and there was no mention of our house. Mr. Giulietti's response: "I certainly enjoy designing modern houses more. But the mission that I built the firm on is to provide good design and architectural services to our clients, no matter the size, budget and type of project…" Passion in an architect can make the project more exciting. But it has a downside: Sometimes architects take over and don't listen to the client's needs, resulting in a design and a final price that is way off base.

Check the contractor's references. It is amazing how many people are told that the right contractor is the keystone for the building process–and they still don't check references carefully or ignore previous homeowners's complaints. All the self-help books on building and renovation say the most important decision is to find a good contractor. We asked everyone we could find who had used JDL Development and never heard a bad word about them. They came through for us 100%.

 Of course JDL isn't cheap–they charged us a 17.5% fee. It is possible to find contractors who charge a lower percentage or a fixed price. But in my opinion it is more cost effective to splurge on the security of knowing that someone is looking after every little detail to make sure it is done right than to scrimp on the contractor and spend more on materials or finishes. Our project managers, Dave Lyons and Ron Boersma, built our house as if it was their own. Now, four weeks after move-in, Ron has been available to help solve problems like the squeaking garage door and an incorrectly placed shower head.

Read the fine print of the loan agreement.Some readers gave me a hard time when I ("a financial journalist!") complained I didn't know when I signed our loan--which covered construction through to permanent financing, or home mortgage--that the bank could change its mind and not extend the loan amount it said it would. We didn't see the final contract until we were in the title office, faced with hundreds of pages of tiny type in unfamiliar language punctuated by dollar amounts that didn't always add up. It was confusing and frightening and I would never go into that again without the help of a real estate attorney.

When the housing market tanked and credit froze, banks started changing their lending guidelines. We worried the appraisal of our property at completion would show its value had declined from the initial appraisal because of the overall drop in housing prices.

Luckily the value of our home actually increased and Wells Fargo came through, extending a 30-year fixed Jumbo loan for 6.5%. It is higher than some Jumbo loans out there. One mortgage broker said if we could get that rate for a Jumbo we should take it; another said he could find us one for 6.25%. But we had started the process with Wells Fargo, formed good relationships with the loan officers and had already handed over reams of financial statements. Others haven't been as lucky, getting stuck with construction loans they cannot convert to permanent financing.

Ask anyone and everyone about their construction experiences. It was by accident one evening at a cocktail party that two women told me how bad window installations had caused leaking and structural problems in their new homes; they gave me a list of questions to ask my contractor. It turned out the subcontractor had cut some steps in installing our windows.

I quizzed neighbors and friends who had built or remodeled their homes about their mistakes and good decisions. One sat in on a meeting with me between the contractor and the heating and air company to determine the best system for our house. She also took a look at our initial design and suggested moving the first floor playroom to a part of the house where the mess they inevitably create wouldn't be visible from the front entry. Another friend pointed out that the color options the designer had chosen for our walls were not the kinds of colors I had really liked when I showed her magazine cuttings. She spent hours with me finding just the right hues–and also gave me all her favorite lighting catalogues.

This kind of sourcing can go beyond acquaintances. When I saw a new house built to look like an old Colonial in another newspaper, I called the architect to get the exterior paint color. Just one call to the owner of a pretty home on a design blog on the Internet opened up a new world of tiles. Confused by conflicting information from different types of insulation manufacturers prompted a query to the government agency in charge of testing insulation.

Don't be afraid to read and learn about subjects that seem intimidating. When we first started, as I wrote back then, I didn't know the difference between a Colonial and a Tudor. I certainly didn't know about the existence of on-demand water heaters or that most home insurances won't cover for earthquakes if you have a slate roof. I learned: For example, it is necessary to understand how different types of insulation work in order to make the cost benefit decisions that will work best for your budget and your house. Different roofing materials are appropriate for different climates and environments. An on-demand hot water heater might or might not make sense for the way your family uses water.

The same principle holds true for design decisions. There may be some innate talent in choosing how one color plays against another in the placement of living room furniture. But there's also a logic that is learnable; and the more you study it, the more you understand.

Read, study, ask, listen, watch–those are the golden rules of home building. The other truism is that the first time is just practice. Now we are really ready to build a new house.

Cracked Houses: What the Boom Built

2009-07-08T22:18:00.000-04:00

By M.P. McQueen THE WALL STREET JOURNAL JULY 8, 2009

Robert and Kay Lynn lay in bed shortly after closing on their new home in the Blue Oaks subdivision in Rancho Murieta, Calif., abutting an 18-hole golf course. They were listening to the “pop, pop, pop” of what they thought were acorns falling onto the roof.

The Lynns soon realized those were not acorns dropping on the roof.

“Little did we know it was the house cracking,” says Mrs. Lynn, 67 years old. Mr. Lynn, 68, says they bought the property in 2002 for $357,000 as a weekend home and an investment. The stucco house was moving and shifting, with part of it subtly pitching toward the golf course, resulting in cracks and fissures in the walls, ceiling and floors, the couple says.

Many of their neighbors say they had similar problems. In the Sacramento Valley subdivision of about 250 houses, more than half the residents have reported some type of flaw. The Lynns and dozens of their neighbors last year filed construction-defect lawsuits against the builders, and the lead case is expected to go to trial next week. They are seeking enough money to permanently repair the houses, a figure expected to total millions of dollars.

A spokeswoman for the builders, Reynen & Bardis Development LLC, said they would have no comment pending litigation, but a response the company’s attorneys filed with California Superior Court said time limits for some of the plaintiffs’ claims had run out.

Whatever the outcome of the case, hundreds of thousands of people from

California to Georgia say their almost-new homes need costly repairs because of construction defects. The furious pace of home building from the late 1990s through the first half of the 2000s contributed to a surge in defects, experts say. It caused shortages of both skilled construction workers and quality materials. Many municipalities also fell behind inspecting and certifying new homes.

At the height of the boom in 2005, more than two million houses were built in the U.S., according to the National Association of Home Builders, a trade group. Criterium Engineers, a national building-inspection firm, estimates that 17% of newly constructed houses built in 2006 had at least two significant defects, up from 15% in 2003.

Residential construction-defect claims filed with insurance companies in the current housing slump have been receding, “but the ones that are being filed are pretty severe in terms of the total damage alleged,” says Paul Amirata, vice president of claims for Axa Insurance Co. in New York, a unit of AXA SA.

James Wadhams, a Nevada lobbyist who represents builders and insurers, says homeowners are filing lawsuits mainly because home inspectors and attorneys are “prospecting” in new subdivisions. Like California, Texas and Florida, Nevada experienced a surge in construction-defect claims in recent years.

Because of tumbling real-estate values, those stuck with faulty houses say repairs often cost more than the homes are now worth. Many say they can’t refinance their mortgages or sell, and they have no equity to leverage for repairs.

Defects are also a concern for those shopping for a home. Owners generally are required to disclose housing defects to potential buyers. Buyers of new homes should scrutinize purchase and warranty contracts with a real-estate attorney, with special attention to arbitration clauses and liability releases.

One of the best defenses against buying a defective house is a thorough inspection by a state-licensed building-inspection engineer, experts say.

Charlene Croal, 34, a consultant, says it would cost $228,000 to fix her nearly nine-year-old house in North Branch, Minn., though the house would be valued at only $190,000 today if it were in good condition. Its interior is riddled with mold because of water seepage, partly caused by a faulty roof and poorly installed windows, she says. She and her husband relocated their family of seven because of health problems linked to the mold, says Ms. Croal, who did not name the builder.

Owners of defective properties say they’re finding it even harder to get repairs now because of rising builder bankruptcies. Some builders, especially smaller ones, also carried inadequate liability insurance, construction experts say. Other homeowners say they are hamstrung by mandatory binding arbitration clauses in purchase contracts and new-home warranties, as well as “right to cure” laws, which require homeowners to notify builders and give them a chance to remedy a defect before the homeowners can file a lawsuit. More than 30 states have some type of right-to-cure legislation, according to the home-builders group.

The NAHB says it “strongly supports” the option of using “alternative dispute resolution including mandatory, binding arbitration in consumer contracts,” saying litigation is an inefficient means to resolve construction-defect disputes.

In Rancho Murieta, residents say they just want to save their homes. It turned out that much of Blue Oaks Estates was built on clay soil that expands in the rainy season and contracts in the scorching summers, the builder, Reynen & Bardis, acknowledges. This is damaging the homes’ foundations and subtly twisting the frames, causing homes to slowly pull apart—as evidenced by cracking floors, walls and ceilings, separating gutters, and jammed windows and doors.

At first Reynen & Bardis made numerous attempts to address the problems, repurchasing about 50 houses, and installing new drainage systems and foundation underpinnings on scores of others, the company says. But it stopped making repairs on houses in the subdivision in November 2007, saying it could no longer afford them.

By law in California and many other states, builders are on the hook for certain new home defects for up to 10 years, depending on the circumstances and state laws.

In April 2008, John D. Reynen, co-owner of the firm, filed for personal bankruptcy protection, saying he owed creditors nearly $1 billion. Months later, his partner, Christo Bardis, also filed for personal bankruptcy. The partners had personally guaranteed hundreds of millions in bank loans to buy thousands of acres of land for development from Bakersfield, Calif., to Reno, Nev. None of the business entities of Reynen & Bardis is bankrupt, says a spokeswoman.

Even Rancho Murieta residents whose homes are OK say they are being affected. Michael Yager, 61, a retired real-estate agent and firefighter, says his bank would not refinance his mortgage unless he paid for a $7,000 engineering study certifying the house is structurally sound. Mr. Yager’s home was built later with a different type of foundation and hasn’t had problems.

“It’s given the whole community a bad name,” he says.

Mr. Lynn, a retired bank executive, says losing money on a defective house was worse than losing retirement money in the stock market.

“The one thing that won’t get better is this house, which will always have foundation problems,” he says. “It has driven me from retirement to doing part-time work at the golf course, and I thought I was financially stable for the rest of my life.”

Rip Out. Remodel. Repeat.

2009-07-08T22:00:00.001-04:00

By Teri Karush Rogers, New York Times

KELLY GIESEN is three months into her second New York renovation in five years — a 10th-floor one-bedroom across the street from the American Museum of Natural History — and she is already dreaming of taking on another, bigger project in the same building. This is on top of the three renovations she did in Baltimore over the previous 10 years. Ms. Giesen is well acquainted with the unpleasant side of home remodeling, like her recent two-day stint scouring blackened porcelain in the bathroom and vomiting in reaction to chemical fumes. And she admits that renovation “definitely disrupts your life a little,” preventing her, for example, from bringing home a potential boyfriend.

Still, she finds the process invigorating. “I would never buy a ‘done’ apartment,” she said. “This way I get everything I want. I like to do it from soup to nuts.” Each day of a renovation, she added, is like a treasure hunt. “Sometimes you’ll come home and the doors have been done or the floors are done or the ceiling has been chipped back,” said Ms. Giesen, 40, who works in marketing and sales at Pfizer in Manhattan. “It’s the hint of progress: I’m one step closer to getting into this bathroom.”

As torturous as home renovation is for most people — its pain is often likened to that of childbirth, and most of those who go through it avoid doing it again for years, until the worst memories have faded — there are some, like Ms. Giesen, who cannot get enough of it. Like the people who move from Botox injections to eyelifts to cheek implants, there are renovators who become more than a little compulsive about the work they are doing, and who pursue their ideals through a never-ending series of projects.

“When you’re in the middle of one you’ll swear you’ll never do another because every house has its problems,” said Greg Kristiansen, 41, an interior designer at the Hunt & Gather home furnishings and accessories store in Portland, Ore. Mr. Kristiansen has redone a half-dozen homes in the past decade. He and his partner, Jerry Hagerman, 41, a contractor, are almost finished with their second project in 10 months. Mr. Kristiansen said he loves hearing praise from neighborhood residents when a house is done. “And, of course, you sell it for three times what you paid,” he added.

“For me it’s always been this elusive concept of getting it right,” said Christopher P. Wilson, 47, a director of operations for the Manhattan real estate firm Stribling & Associates, who has been renovating every 18 to 36 months since he was 23. With each project “you think you’ve been cured of the bug and this is the one you’re going to get perfect,” said Mr. Wilson, who is finishing a house in East Hampton, N.Y., and a condo in Ft. Lauderdale, Fla. “But you move in and nothing is ever perfect. It’s almost like an addiction you can’t shake.”

“Almost” may be putting it mildly. Most of the decorators, architects and contractors interviewed for this article said that serial renovators are far outnumbered by serial decorators, for reasons having to do with budget and time constraints. But they also said that the numbers of both groups had multiplied in recent years along with the explosion of home-improvement magazines and TV shows, the real estate boom and the heightened nesting instinct that many attribute to the social anxieties since 9/11. And there was agreement among many that some serial renovators go too far for their own good.

“I’ve had a few clients over the last 20 years that basically, as soon as you’re done, they say, I’m going to live with this for six months and then change it,” said Lee J. Stahl, the president of the Renovated Home, a design and contracting firm in New York. The life expectancy of a high-end kitchen or bathroom is about 20 years, he said, but some clients are not interested in waiting even a fraction of that. He recalled one who asked him to “rip out” a bathroom that had been remodeled for $75,000 less than a year before. Like a plastic surgeon, he said, in cases like this he sometimes has “to say no, there’s nothing wrong with their nose,” even though “they might go somewhere else — they might go to someone more driven by the dollar than the reality.”

The serial renovator does not seem to fit any single profile, but Mr. Stahl said he has observed patterns among the renovators he encounters in his work. They are often creative industry types, he said, typically between their late 30’s and mid-50’s. Many have never had children or are empty-nesters, he added; the all-consuming needs of a child can impede the impulse to build.

Theories about the causes of serial renovation abound. Mr. Stahl cites the need of certain people to “make sure they have the latest and greatest thing all the time,” but also the social dimension of the habit: “They’re bored. They become attached to us; they don’t view us as contractors. They view us as their inner circle.”

Irene S. Azar, a Manhattan psychotherapist, sees a link between the serial renovator’s need to “do it over and over again” and the compulsive behavior of other groups — workaholics, say, who use work to avoid addressing festering issues in their lives. (And, as with other compulsive behaviors, the patterns may form early: many serial renovators, including Ms. Giesen and Mr. Wilson, said they moved frequently during childhood.)

Ms. Azar is echoed by Heidi Semler, an interior designer in Portland, Ore., who has observed that “there are a lot of people who may have other things in their lives that aren’t working who put a lot of energy into making their house perfect.” And Kevin Harris, an architect in Baton Rouge, La., who says he has worked on some 380 renovations in the last 25 years, has often noticed how seductive and addictive the cause and effect aspect of renovation can be for his clients. “You can get up in the morning, talk to the carpenters and say, ‘I’d like this to be done,’ and when you come back it’s framed up and you feel like it’s the pyramids — it’s that power, that rush,” he said.

MS. GIESEN, certainly, seems compelled by that daily one-step-closer feeling, and by the larger drama of transformation involved in renovation. “It’s taking something that’s awful and turning it into something beautiful,” she said.

When she visited her new apartment with a friend in April, just before the closing, they found towers of junk, a stomach-churning stench and “thousands of roaches” (in addition to the dead ones stacked six inches deep in the cupboards). “It looks like a crime scene,” the friend remarked about the dwelling in the otherwise pristine building.

But Ms. Giesen went ahead and paid $700,000 for the place, and set about transforming it into what she says will be a soothing taupe-and-cream throwback to old Hollywood glamour, with a mix of French-style antiques and contemporary details like the rippled linen curtains that will hang around her bed on a ceiling-mounted track. (Her last project, a studio down the hall, consumed $75,000 in renovation costs and months of her life, and was recently featured on HGTV’s “Small Space, Big Style.”)

Ms. Giesen strives to live as stylishly as possible during her renovations. On a recent Sunday the apartment was an orderly shell of primed drywall and masonite-protected wood floors, with a faint scent of Verbena home perfume by L’Occitane in the air.

Lining the walls of the living room and the dining area were nearly two dozen architectural salvage pieces, including a five-foot mirror with egg-and-dart molding rescued by a salvage store from the Plaza Hotel, arched French doors, four antique Venetian mirrors and a pair of tall wood and plaster pilasters, all collected in the months before the renovation began in April. Ms. Giesen took hold of a pilaster and demonstrated how she moves the objects around like gigantic chess pieces, rocking them back and forth on each corner, in a continuing effort to see where each belongs. Like many serial renovators, she describes renovation as an important creative outlet in her life.

So does Greg Matusky, a child of unhandy parents and the president of the financial communications firm Gregory FCA in Ardmore, Pa. “The whole act of creating is really liberating,” he said, adding that the renovation process also seems to have a rejuvenating effect on his marriage. “I read a book once that said there’s different ways to be a couple, and one strategy is to be a partnership,” said Mr. Matusky, 45, not elaborating on what the other strategies might be. “Home renovation is a real partnership between my wife and I. Our relationship is never as good as when we have a renovation project going on.”

Mr. Matusky, who said he was obsessed with the home remodeling show “This Old House” in his 20’s, bought his first house in 1987 and spent six years renovating it. He bought his second “utter disaster,” a five-bedroom English Tudor in Ardmore, a Philadelphia suburb, with his wife, Judy, a part-time dietician, in 1993; they spent more than a decade replacing all the wood floors and subfloors, putting in a new kitchen, redoing the basement, turning the side porch into a family room, building a backyard gazebo and a cedar tree house, and installing a stamped concrete patio.

This year the Matuskys completed another extensive renovation of the same house, this one for $200,000, which included a family room and another renovation of the kitchen that extended it into the old garage.

For three months they lived in the basement, along with their three teenage children and a large Crock-Pot.

His wife, who said she enjoys the teamwork of renovation and is happy to have him at home instead of on the golf course, nevertheless stopped short of his blithe assessment of all the work. “After a couple of weeks trying to eat in the basement, that gets old pretty quickly,” she said.

Indeed, while many couples view serial renovations as a way to become closer, said Mimi Maddock McMakin, the owner of Kemble Interiors in Palm Beach and Manhattan, others can wind up in therapy. And Ms. Azar, the psychotherapist, said she had seen apartments become power struggles, as renovations led to discussions of money and the “different ways they want to live.”

And even when spouses are in full agreement about the value of renovation, other family members may not be. Salita Armour, 48, a serial renovator and real estate flipper in Austin, Tex., says she has remodeled 26 houses in 26 years. Her husband supports her in her habit, she says, largely because of its profitability, but also because of his own hunger for novelty. (Ms. Armour said he switches cars every four months.)

But the couple’s 17-year-old son, Shane, said he finds the construction process, which his mother clearly enjoys, “kind of lame, because you know how slow it is.” He added that he and his sister “have grown up like this, so it’s not like any big deal, but it’s kind of a pain in the butt moving all that stuff again and again.”

Matt Tarlow, the 31-year-old son of Shannon Brown, an interior decorator in Portland, Ore., had a stronger reaction to his mother’s ceaseless renovating. By her account, Ms. Brown, 60, moves and renovates every 9 to 36 months; seven times in the last 10 years. When he was growing up, Mr. Tarlow said, “we’d stay at a place for maybe two years, three years if we were lucky.” Then, after he was in college and she divorced, “one lasted six months,” he said. “It got to be such a joke with everyone around Christmas and Thanksgiving that we’d take wagers” about how long Ms. Brown might stay in one place.

The chaos caused by one renovation led to a year of strained relations between mother and son, said Mr. Tarlow, who, although he sells real estate in Los Angeles, calls himself a stable renter.

Ms. Brown, for her part, is philosophical about the effects of her habit on her family. “The only regret I do have is I do think probably there were times this was hard on my kids,” she said, though she added that she moved 9 or 10 times as a child and always found it kind of exciting. “As a parent, you have your life,” Ms. Brown said. “It’s basically what I do. I’m a nomad. Once I get half done with something, it’s not that I lose interest, but once you know exactly what it’s going to look and feel like, you see something else and go, ‘Look what I can do with that!’ ”

McMansions Out of Favor, For Now

2009-07-08T16:04:00.000-04:00

Americans want smaller homes, but will the desire for less square footage outlast the recession?

By JUNE FLETCHER, Wall Street Journal

A new study out Monday by the American Institute of Architects shows that Americans have fallen out of love with McMansions. The 500 residential architects surveyed said that only 4% of their clients wanted more square footage in their homes this year, compared to 16% last year.

This desire isn't surprising, given both the recession and the fact that the most recent U.S. Census shows that there are 77 million people in the "empty-nester" phase of life, from ages 45 to 64, and 61 million in the first-time buyer category, from 20 to 34.

So at least for the near future, empty-nesters and young adults will dominate the housing market. The question is, will smaller, more affordable housing be there for them?

On the surface, at least, it looks like that might be the case. A survey released this month by the National Association of Home Builders shows that the average home started during the first quarter of 2009 was 2,335 square feet, down from 2,629 square feet during the second quarter of 2008. And 59% of builders surveyed in May by the trade association said that they are planning on building smaller homes in the coming year. Only 1% reported that they would be building bigger homes..

But don't write the obituary for McMansions just yet. Although mass-produced behemoths more than 3,000-square-feet in size have only been common (and commonly criticized), since the late '90s, home sizes have never been influenced by need alone. The builder association's report also points out that houses ballooned most—about 1,000 square feet—during the period between 1970 and 2008, when household size dropped from 3.11 to 2.57. Homes are getting smaller now because people feel poorer, but all that will change once the recession ends and consumer confidence is restored. Significantly, the builder association projects that home sizes will "stabilize" at around 2,500 square feet over the next five years—the same size homes were at the height of the boom in 2007.

While smaller homes may make more sense in terms of energy efficiency, labor costs and even how they look on today's small lots, they aren't an easy sell, especially in established suburban neighborhoods. Small houses on small lots—or condos and townhouses—require more dense zoning than is currently on the books in suburbia. Unless an area is already blighted and abandoned, the "threat" of higher density inevitably resurrects "not in my backyard" fears of more noise, traffic and overcrowded schools, which often results in considerable citizen pushback and bad publicity for the builder. That is, of course, why sprawl happened in the first place—builders almost always find it less of a hassle to build on undeveloped land than to create so-called "infill" housing.

Still, if the recession is forcing consumers to re-examine both their need for status space and their knee-jerk opposition to higher density, even temporarily, then builders will follow suit—at least temporarily. A story in this month's Urban Land, the magazine of the Urban Land Institute, notes that several big suburban builders, including K. Hovnanian, KB Homes and Toll Brothers, have started divisions for building urban housing, while other companies have started to convert failed suburban shopping malls, office parks, car dealerships and even golf courses into denser mixed-used buildings.

CITY OF SRQ CALL FOR SIDEWALK ART

2009-07-06T15:29:00.000-04:00

I love seeing the city making an effort to keep growing the collection of public art. We already have the finest beaches and cityscape but pretty art breaks up all the gray matter of buildings and cement in downtown. Initiatives like this help build community. Thanks City of Sarasota! -- Dill

Sarasota, FL: The City of Sarasota is issuing a Call to Artists for unique sidewalk inlays for the Downtown Sarasota Historic District. The inlays will replace dozens of 16 x 16 grey tiles along the Main Street sidewalk.

Selected local professional artists will be paid $250 to create a one of a kind 16 x 16 inlay. Preferred materials include but are not limited to: stoneware ceramic, granite, stainless steel, synthetics, or alternative materials with specifications proving adequate durability with no sharp edges or slick surfaces.

Applications and supporting documents for the Call to Artists are available on-line at: www.sarasotagov.com/PublicArt Proposals must include: two (2) jpeg files of the proposed design: 72dpi and 300 dpi drawings must be to scale; a detailed description of the materials to be used to produce the inlay; the dimensional thickness of the inlay when completed.

The deadline for submissions is July 28, 2009. Interested professional artists shall reside in Sarasota County or Manatee County.

This initial Call to Artists will replace 32 of the 97 grey tiles along Main Street. The Public Art Committee will announce future Call to Artists to swap out the remaining grey tiles, giving downtown Sarasota a unique sense of place. "We want people to know they are in a special area of downtown," said Ernie Ritz, downtown business owner who proposed the inlay project. "By seeing these wonderful creations, they will know they are in a special place." Last month, the U.S. Department of the Interior acknowledged the area is distinctive by placing the Downtown Sarasota Historic District on the National Register of Historic Places.

All submissions will be reviewed by the Public Art Committee during its regular meeting August 12th in the Commission Chambers at City Hall. It is anticipated the 32 designs selected will be installed on S. Main Street in September or October beginning at Sarasota News & Books and moving north.

PUBLIC INPUT SOUGHT ON PROPOSED BUDGET

2009-07-06T14:48:00.001-04:00

Sarasota, FL - City Commissioners would like to hear your comments about the proposed fiscal year 2009-10 budget prior to the budget workshops when the Commission will begin the decision making process to set the millage rate. A public comment session on the proposed budget will be held Wed., July 15, 2009 at 6 pm in the Commission Chambers at City Hall, 1565 First Street.

Citizens will be given three minutes to comment on the proposed budget. There will be no formal staff presentation.

The proposed budget, including an executive summary, will be posted on the City's website www.sarasotagov.com after 5pm on Thurs., July 9, 2009.

Tough Times for Town Fathers

2009-04-12T16:21:00.000-04:00

Leading Businesses Fall, and Life Gets Lean in Loganville
By GARY FIELDS

LOGANVILLE, Georgia -- Builder Tommy DeMilio and banker Stanley Kelley had planned to create a four-acre park for this city of 9,500 residents. It's a quarter finished and won't likely be completed. Mr. DeMilio's construction business has dried up. Mr. Kelley's bank failed in November.

Maxie Price, a Chevrolet dealer whose lot is two miles away from the scuttled park project, is cutting his local donations by at least a third. His car sales are down to about 30 a month -- well below the hundred or so he moved during better times.

Business leaders like Messrs. DeMilio, Kelley and Price have long been pillars of this once-thriving Georgia town. Each year, they contributed millions for parks, buildings, classroom books, even a gymnasium and a church. In the process, they acted as a safety net for everything from the local schools to the Chamber of Commerce.

Now, with the credit crisis causing the traditional support systems to crumble, life in Loganville is harder on just about everybody. "I've lost 80% of my net worth in this downturn and since I put it all back in my company, I'm not floating in cash," says Darrell McWaters, president of Meridian Homes USA Inc., a big homebuilder and another of the area's major donors. "We've had to cut out everything."

The situation in Loganville, located about 35 miles from Atlanta, mirrors what's happening in many small communities across the country. Stalwarts of these often-patriarchal areas are falling, changing the civic landscape while leaving financial and social commitments behind.

"Every small and medium-size town is going through this. Even in New York City there are certain people who help more than others and are involved in more civic giving and volunteer work than others," says Steven Dandaneau, sociology professor at the University of Tennessee and author of "A Town Abandoned: Flint, Michigan Confronts Deindustrialization." "The smaller the community, the bigger the effect," he says.

From Loganville to towns like Sanderson, Texas, and Loup City, Neb., local officials are grappling with the loss of revenue and civic participation from banks that have closed, as well as businesses ranging from car dealerships to local power companies that have either closed or are struggling.

Loganville, incorporated in 1887, has little industry to attract workers to the area. In recent years, building became the dominant field as the population grew by more than 60%. When home sales slowed in 2007, construction largely halted, hurting everyone from bankers to electricians and plumbers, says Angela Yarman, director of the United Way of Walton County. "It goes on and on when building is at the top of the food chain of an economy," says Ms. Yarman, whose group supports 11 county agencies and organizations such as the Girl Scouts.

Betty McCullers says the change can best be seen through declining membership at the city's chamber of commerce. The Chamber, which sits across from a shuttered real-estate brokerage, has had the number of its dues-paying members fall to 180 from 300 businesses a year ago. Many have closed their doors and others have simply stopped paying dues because they don't have the money. The situation is so dire that Ms. McCullers, the chamber's 76-year-old president, has not taken a salary this year. The combination of lost businesses, declining revenue from taxes and local patronage "all happening at the same time has been devastating," she says.

Thus far, the town has few visible markers of poverty or distress; there are no streets lined with vacant or boarded-up homes. But other, telltale signs of trouble abound.

Swaths of real-estate developments are in stand-still mode, their white plumbing pipes poking out of the barren earth like tombstones. More than than 100 pages of foreclosure notices fill The Walton Tribune and the Gwinnett Daily Post, the local newspapers named for the two counties that Loganville straddles. By January, unemployment in Walton hit the 10% mark. At one area elementary school, the proportion of free- and reduced- lunch students has risen to 43% over the past two years, up from 24%.

As longtime patrons of their community, Mr. DeMilio, 48, and Mr. Kelley, 68, had ambitious plans for their park. They envisioned walking trails, an outdoor basketball court as well as playground and exercise equipment. Driving by the site in his SUV recently, Mr. DeMilio looked dejected. Only a few climbing and jungle-gym sets are in place. The recreation center isn't likely to be finished this year, if ever, "unless something turns around," Mr. DeMilio says."I feel like we failed the community."

Owner of the Wayne Thomas Group, Mr. DeMilio is a transplanted New Yorker who made a name here as a builder and developer. Today, his problems are twofold. Few new homes are being sold, which has killed most revenue from that end of his business. At the same time, he can't collect on agreements he has made to sell land to other builders because their credit has been frozen. "I can't go after them, they don't have the money," he says.

At the height of the building boom, his company, which offered free lunch and gym memberships to employees, had 62 people on the payroll and about 450 subcontractors. He's now down to about 100 people. "I'm operating month to month now," he says.

Over the years, Stanley Kelley had become known for his education-related largesse. In 2007, when he still presided as owner of The Community Bank of Loganville, he wrote a $17,000 check to pay for teachers to work overtime at the high school in an attempt to curb dropout rates. After the child of a bank employee died from heart disease, Mr. Kelley's response was to buy defibrillators, costing $1,200 apiece, for 13 area schools. When the Loganville Elementary School principal started a reading program, Mr. Kelley -- who sat on the school's council -- bought books for all 600 students. Mr. Kelley's four-branch bank outfit also funded a $5,000 scholarship for a student to attend Georgia Tech, his father's alma mater.

A tall man with basset-hound eyes, Mr. Kelley, 68, is reluctant to take much credit for his charitable deeds. So others elaborate for him. When the Chamber needed money for postage and operating expenses, he paid them. When the Chamber needed computers, he bought those too. "I didn't worry," about budget shortfalls, says Chamber President Ms. McCullers. "He was there as a backstop."

Mr. Kelley's father had co-founded Community Bank in 1946. Mr. Kelley became chairman of the board in 1997. He did not live like a wealthy man. His home was $200,000 when he bought it 12 years ago and he drives his late mother's 11-year-old car. "We were heavily concentrated in lending to developers and builders. We were riding the tidal wave of development coming out of Atlanta," he says. "I was just walking on the wave."

He says he didn't realize business was so poor until bank examiners showed up late last year. That was shortly after the bank's third-quarter report to regulators showed that nearly 40% of its loans, most of which were for home construction, were delinquent or uncollectible. The big hit came when two big developers he was financing sought bankruptcy protection. "It was the first time it occurred to me we might not be able to recover," Mr. Kelley says.

The government's Federal Deposit Insurance Corp. took over the bank, which had total assets of $681 million and deposits of $611million. The FDIC sold the bank, along with some of its assets and deposits, to Community Bank to Bank of Essex, Tappahannock, Va.

Since then, Mr. Kelley's wife, who has never worked outside the home, has returned to school in hopes of earning a teaching certificate.

At the car dealership that Mr. Price co-owns with his brother, the parking lot seems empty behind him as he sits with his back to the window. The Prices have been in the car business in Loganville since the 1950s.

Vehicles are turned lengthwise along the highway so passersby can't tell that the lot behind them has little inventory. Recently, the car count was about 270. In good times there would have been three times that amount. "I'm trying to wrestle this thing," says Mr. Price, 49 years old, adding that a nearly 70% drop in average monthly new car sales is "a lot to wrestle."

In tough times past, his own safety net has been Corvettes, which sold regularly. "Usually the person who buys Corvettes and other high-end models, that person is okay, even in the last downturn," he says. "But not this time."

Mr. Price estimates the dealership donated about $50,000 a year to various local causes in the past. That won't happen this year. He's anticipating cutting charitable donations by at least a third.

Mr. Dandaneau, the sociology professor, says it's hard for communities who rely so heavily on a few well-off members to adjust to tough times. "The only way to avoid being impacted by the difficulties of those community leaders at a time like this is not to be dependent on them in the first place -- and that's not possible," he says.

The Walton County Recreation Department, is one of the many local outfits in town trying to fill the void, having received contributions from each of Messrs. Price, Kelley and DeMilio. Director Jody Johnson, says the department is holding yard sales and selling barbecue dinners -- going back to old-style fundraising rather than look to struggling businesses and individuals.

Others are stepping up, too. Last fall, the local school district nearly canceled its annual banquet honoring the teacher and support staffer of the year. Robert Boss, commander of the American Legion post, allowed the banquet to be held there. Another local, Jerry West, a retired Delta mechanic and owner of Wild West Bar B Q, donated the food.

On the desk of Mr. Boss is a six-inch stack of fresh requests for assistance. They cover everything from residents' unpaid electrical bills to pleas for help in securing rooms for the homeless at a local hotel. Mr. Boss, a 77 year old with a proud, weathered face, gives first dibs to families and the unemployed. "You do it because it's the right thing to do," he says.

As many residents are learning first-hand, even the smallest of gestures make a difference now. At Loganville High, Principal Nathan Franklin keeps donated snacks at the school's health clinic. Often his students eat lunch at 11:30 a.m. By 2:30 p.m. they are hungry and "they know they are not going home to anything" in terms of food, says the principal. "These are high-school kids and some of them don't have 40 cents for a bag of chips."

There's less to do about other problems. One recent afternoon, Mr. Franklin stopped to talk to a student and learned that the boy was preparing to walk home from soccer practice. It is a five-mile trek. "His mother is working extra hours at her job" to make ends meet and can't pick him up, Mr. Franklin says. "She told him if he wants to play he will have to walk."

Some charities are busy changing their solicitation strategies -- casting a wider net. At local branch of the United Way, for instance, the new mantra is to "go wider rather than deeper," says Ms. Yarman, the director. "Now instead of going to one person, you go to three people and get smaller donations."

Shepherd's Staff Ministries, one of the organizations United Way helps, has seen its individual and church donations inch up just enough to continue giving food boxes to impoverished residents. Essex, the new bank in town, also has picked up where Community Bank left off, contributing to various causes.

Outside the small parking area is full as a steady flow of cars come in, pick up small boxes of food and leave. "We've seen more and more people who have lost their jobs coming in," said the executive director Joe Johnson. "At the same time it's amazing. We've seen so many people contribute. We might be able to swing this."

When Rescue Means Eviction

2009-02-26T16:54:00.000-05:00

By PHILIP SHISHKIN - Wall Street Journal

In 2003, Daphne Webb, a 73-year-old mother of nine, had a heart attack, quit her cleaning job and was soon struggling with medical bills. She and her husband fell behind on the mortgage payments on their white clapboard house in Montclair, N.J.

"Everything came down all at once," says her husband, William, whose $45,000-a-year income as a bus driver wasn't enough to keep the family financially afloat. By 2006, the Webbs were facing foreclosure.

So when two real-estate investors offered to purchase their house, rent it to them and then help them buy it back -- using a long-established practice known as a sale-leaseback -- the Webbs say they jumped at the opportunity. In doing so, the elderly couple waded into the murky world of "foreclosure rescue," a business that targets the growing numbers of distressed homeowners seeking help.

In some cases, according to recent warnings by authorities, homeowners can dig themselves into an even deeper hole by dealing with purported rescuers, while doing little to ward off eviction. Instead of saving homes, federal officials have warned, distressed homeowners can sometimes lose them -- along with any savings they had.

"People are desperate and willing to consider things they were never willing to consider before," says Bradley Elbein, national coordinator of the Federal Trade Commission's Foreclosure Rescue Fraud Project. "It is a real problem." Many rescuers use sale-leaseback arrangements, while others charge homeowners a one-time fee to help them negotiate with creditors.

Sale-leasebacks are a common and legal practice in real estate. To raise cash for short-term needs or to secure tax benefits, a company can sell a building it owns, and then pay rent to the buyer to stay in it. The strategy was particularly attractive before the economic crisis, when credit was easy to obtain and investors believed real-estate prices would keep climbing.

Some leaseback agreements allow sellers the option to repurchase the property at a later date. In residential real estate, a sale-leaseback can allow homeowners in financial trouble to remain in their homes and pay off their debts. But investigators say the strategy is susceptible to fraud when investors don't give homeowners the promised money. Some investors pocket the mortgages they obtain from banks or strip equity from the homes they buy instead of helping former owners get back on their feet, investigators say.

Charges of Fraud
The Webbs allege in a civil lawsuit filed in New Jersey Superior Court that they were defrauded into giving up title to their home, and lost $400,000 in home equity and tens of thousands of dollars in fees paid to the two investors, Ronald Losner and Alyssa Azran. The home, now owned by Ms. Azran, is in danger of being foreclosed on, and the Webbs, who have been paying rent to her, could get thrown out by a new owner.

Through an attorney, Mr. Losner and Ms. Azran denied any wrongdoing and said they prevented the Webbs from being evicted when they were in trouble in 2006. The attorney declined to discuss specifics of the Webbs' allegations. The case is currently awaiting trial.

A number of cases of alleged sale-leaseback fraud have recently surfaced in Florida and California, affecting hundreds of homeowners in these hard-hit real-estate markets.

In October, federal prosecutors in Tampa, Fla., charged Mario Quiroz and Jose Oliveri with wire fraud and money laundering, stemming from sale-leasebacks to 290 homeowners facing foreclosure. Most of the homeowners ended up being evicted and lost any equity they held, investigators say. Messrs. Quiroz and Oliveri, who are accused of defrauding banks of $33 million in the alleged scheme, are believed to have fled to Peru, the Treasury Department says. An attorney for Mr. Oliveri says his client denies wrongdoing. An attorney for Mr. Quiroz couldn't be reached for comment.

On Feb. 2, a grand jury in San Diego indicted William Hutchings and nine others on charges of allegedly defrauding some 400 homeowners. According to the indictment, the homeowners, mostly Hispanic, were told their properties could be protected because they were part of a land grant Mexico made to the U.S. in the 1850s, and that somehow made them immune from foreclosure.

William and Daphne Webb, of Montclair, N.J., are suing investors who bought their house and leased it back to them.
The consultants falsely claimed the homeowners could take advantage of the immunity by turning over their property deeds to trusts controlled by the consultants that were connected to the grant, the indictment states. Most of the homeowners who turned over their deeds and paid fees to the consultants were later evicted, prosecutors say.

Gregory Turner, an attorney for Mr. Hutchings, says his client was going to help the property owners save their homes, but that prosecutors intervened. "There was never an opportunity to demonstrate the veracity of this program," Mr. Turner says.

Foreclosure Proceedings
According to the Webbs' lawsuit, Mr. Losner and Ms. Azram approached them after the couple had sought and failed to obtain federal bankruptcy protection, and the bank that held their mortgage began foreclosure proceedings. They offered the sale-leaseback arrangement for the house, which Mrs. Webb had owned since 1983, says the lawsuit. In a posting on Foreclosures.com, a Web site geared toward real-estate investors, Mr. Losner and Ms. Azran describe efforts by people to save their homes via bankruptcy filings and advise tapping into "this distressed source of people" by approaching them with an offer after they fail to get bankruptcy protection.

The Webbs sold their home to Ms. Azran for $820,000 in March 2006, but received no money in the sale, according to the lawsuit. They also signed a $2,600-a-month lease agreement that stated they could buy the house back if they paid a $45,000 option price after 18 months of paying rent, the lawsuit states.

Mr. Webb says he and his wife didn't fully understand what they were signing. Tom Farinella, an attorney who represents Mr. Losner and Ms. Azran, says the Webbs were told to consult an attorney about the paperwork, but they didn't. "For the Webbs to now claim they are victims of some large-scale scheme begs to differ with the fact that they were adequately advised to retain counsel," says Mr. Farinella.

He declined to make his clients available for comment. New York State court records show that Mr. Losner, a former attorney, was disbarred in 1995 for allegedly unethical conduct in representing clients in real-estate transactions.

According to the Webbs' lawsuit, Ms. Azran obtained a $533,000 mortgage from Credit Suisse through a mortgage broker in Brooklyn, N.Y. The lawsuit alleges Credit Suisse, which is named as a defendant, approved the mortgage even though Ms. Azran didn't list a job on her application and stated her liquid assets totaled just $100. She also listed 11 other heavily mortgaged rental properties, the lawsuit states.

A spokesman for Credit Suisse said "we are investigating the matter." He confirmed that some of the loans it sourced through the Brooklyn broker -- "less than 20%" -- required only a Social Security number, a good credit score and an appraised value of the property.

After obtaining the mortgage, Ms. Azran paid off the Webbs' delinquent mortgage, on which they owed about $400,000. Between April 2006 and June 2008, the Webbs paid about $36,000 in rent to Ms. Azran and Mr. Losner, according to the lawsuit.

The Webbs say they made several inquiries about buying their house back for $45,000 in 2007 and 2008. Their lawsuit says Mr. Losner sent appraisers to the house, which cost them at least $700. He also told them at some point they would need to pay $120,000 to buy their house back, according to the lawsuit.

Meanwhile, Ms. Azran fell behind in her mortgage payments and in December 2007, Wells Fargo, which serviced the mortgage, filed for foreclosure on the house. A New Jersey Superior Court judge has effectively stayed the foreclosure, and the Webbs remain in the house and are paying their rent to an escrow account.

The Hamptons Half-Price Sale

2009-02-20T18:39:00.001-05:00

Bridgehampton, N.Y. - Prices for opulent weekend homes are slashed, but still fail to attract bidders

By LUCETTE LAGNADO - Wall Street Journal

At first glance it's a gated mansion worthy of a Gilded Age: more than 14,000 square feet with eight bedrooms, 9½ bathrooms, five fireplaces, a pool, a pond, a tennis court and ocean views all nestled amid fields perfect for lavish summer parties.

Built on spec, this property was offered for sale in 2006 for $24.95 million. Today? Try $12.95 million -- and even that lower price hasn't yet lured a buyer. The mansion is now being sold at auction as part of a bankruptcy plan by the developer's firm. The manse stands unfinished, forlorn and uninhabited.

"Tragic," says Andrew Saunders, owner of real-estate agency Saunders & Associates, who adds the house would have sold in 2006 if it had been finished or priced less aggressively. "It was not overpriced. He got caught in economic times," counters A. Mitchell Greene, an attorney for the developer.

Welcome to the new Hamptons, where the boom's sunny days and Champagne nights have given way to foreclosure notices and sales at discounts of 25% to 30% and more. Some buyers are making offers of 50 cents on the dollar, and less. Brokers speak of the "Lehman houses" -- homes that used to belong to employees of the fallen Wall Street firm -- or "Madoff homes" -- those owned by clients of the Manhattan financier implicated in a Ponzi scheme. Summer rentals are languishing. "For rent" signs have begun to appear in the windows of some boutiques on Southhampton and East Hampton's tony shopping streets.

The price of this Bridgehampton, N.Y., mansion has been almost halved, to $12.95 million.
While Mr. Saunders remains a staunch optimist -- he opened his agency in Bridgehampton five months ago -- he is in the distinct minority. For many longtime residents, this is more than a recession. "Jay Gatsby is dead," says Dede Gotthelf, owner of the Southampton Inn, referring to F. Scott Fitzgerald's protagonist from another opulent time, also on New York's Long Island, that came to a sudden end. Ms. Gotthelf, many of whose guests spent $400 to $500 a night last summer, had the worst fourth quarter in her 11 years with the hotel, although she says business picked up recently.

Wealth Report: Falling Real-Estate Prices and Hamptons 4.0
A ghostly silence has settled on RVS Fine Arts, the Southampton gallery. Owner Roberta Von Schlossberg says in flush years she could easily sell large paintings in a price range of $5,000 and $25,000. Starting in mid-September as the financial crisis hit, she recalls, Jobs Lane became so quiet "you could roll a bowling ball down the sidewalk. Sales have greatly diminished." In Sag Harbor, Elisca Jeansonne, who owns the Gallery Merz, says business "has flatlined." At the entrance of her gallery stands a large painting of goldfish in a bag by Kevin Berlin. Priced at $35,000, it's on sale for $25,000.

Other famous resort towns are suffering. In Aspen, Colo., sales of single-family homes above $1 million fell 44% in the fourth quarter from a year earlier, according to Morris & Fyrwald Sotheby's International Realty. In the Hamptons, over the past eight years, property values soared to dizzying heights. Once a mecca for artists drawn by the light and natural beauty, the picturesque villages drew wealthy individuals from New York, Los Angeles and Europe. "There were properties that were overvalued more than in your wildest imagination, they were being built and sold for double the price in a couple of years," says Paul Brennan, regional manager for Prudential Douglas Elliman Real Estate. Then last summer, he says, sales stopped. Now, "it is blacker than anyone thought it was going to be." In Southampton, the number of fourth-quarter sales plunged 45%, according to The Real Estate Report Inc.

At Prudential's Bridgehampton office, Broker Lynda Ireland spends much of her time now dealing with offers from individuals she calls "investors." "They are putting $1 million to $1.5 million offers on homes that are $3 million to $4 million," the 25-year Hamptons resident says.

Ms. Ireland herself has been unable to sell a four-bedroom Southampton house she purchased unfinished from a builder in 2006 and put work into it. In 2007, Ms. Ireland put the home on the market for $925,000. The property languished. About four months ago, she rejected an offer of $680,000, sure she could get more. Now, faced with two mortgages and a plummeting market, Ms. Ireland emailed thousands of colleagues and potential customers. "Owner Is Ready to Make a Deal Before They Lose the House," the email read. The note gave a new price: $595,000, which "is still negotiable." She's now entertaining bids at $550,000 -- 41% below her original asking price.

Real-estate broker Enzo Morabito also remembers the good times, when he'd host Champagne parties at the Hamptons' annual polo tournament. He owned as many as three polo horses of his own. Now, Mr. Morabito is running full-page ads in the Southampton Press headlined: "Extraordinary Times Call for Extraordinary Measures." His plan: Hire an auctioneer to sell unwanted properties. He sold his last horse, a pony, last spring.

As for rentals, houses that rented for $350,000 in the summer of 2008 have to be reduced to the $250,000 range to find any takers this year, Prudential's Mr. Brennan says. "People have money. Nobody is spending it," he says, adding hopefully: "They have not canceled summer."

Meanwhile, locals are grappling with ways to survive the downturn. Steven Gaines, author and chronicler of the Hamptons high-life, says he's eating at home most nights. Broker Nelya Veselaya's strategy: get out of town for a while. She flew to Buenos Aires in December for 2½ weeks and danced the tango every night. "Honestly, I was getting really depressed," she says, "So I decided to go away and dance and be happy."

Bargain-Hunters Descend, Cash in Hand

2009-02-14T14:18:00.000-05:00

By NICK TIMIRAOS / Wall Street Journal

Falling home prices are spurring an increase in all-cash home sales in markets that have been hardest hit by the foreclosure crisis, an indication that bargain hunters have descended on the markets looking for deals.

Homes financed with cash comprised one-third of sales in Phoenix last month, up from 19% one year ago, according to a report by Raymond James & Associates Inc. In Sacramento, Calif., all-cash sales accounted for 24% of total home sales last month, up from 8% in January 2008 and 3% in January 2007, according to the Sacramento Association of Realtors. Sacramento and Phoenix have each seen home prices fall by one-third in the past year.
[Chart]

Cash sales are up even more in many Florida markets. In Miami, cash offers accounted for 30% of sales last month, according to a report by Thomas Lawler, a housing economist based in Leesburg, Va. That share more than doubled in Gulf Coast communities such as Punta Gorda and Englewood, Fla., where cash financing accounted for 65% and 60% of sales, respectively.

"It's sort of like, 'Good Lord, prices have fallen so low that even people who are willing to pay all cash are buying,'" says Mr. Lawler, adding that cash financing has increased sharply in every major market "where distressed sales have soared and prices have plunged," he says.

Cash sales are typically higher in Florida than in other markets, in part because the state attracts lots of foreign buyers and retirees who are more likely to plunk down their savings without taking out a mortgage. But a number of cash buyers these days, in Florida and elsewhere, are also investors scooping up distressed properties and affluent families seeking relatively inexpensive vacation homes. "Cash investors have come right out and said, 'We can't make a return on our money in stocks or bonds,'" says Heather Barr, a Realtor based in Gilbert, Ariz., a Phoenix suburb. "They think Phoenix has had such sharp price declines that we've got to be near the bottom and real estate will be a safe place to put their money."

In some cases, cash buyers are finding that they can get a deeper discount by making an all-cash offer. In markets with a glut of foreclosed homes, lenders are becoming more aggressive to sell "simply because there aren't enough first-time home buyers around to sop up the excess supply," Mr. Lawler says.

Brett Barry, a Phoenix Realtor, is selling a bank-owned home in Cave Creek, Ariz., to an Indianapolis couple that is retiring and buying a second home. The property will sell for about $190,000, down from an earlier listing price of $209,000.

"That price was a good deal, and the bank didn't even counter it," says Mr. Barry.

A separate bank-owned home in the same development sold for $133,000 to a cash investor, beating out a $179,000 offer from a first-time home buyer with financing from the Federal Housing Administration. "The bank just didn't want to take the chance with financing," Mr. Barry says. "The lenders I work with will take a substantially lower cash offer as long as they see proof of liquid funds."

In South Florida's condo market, "the all-cash buyer is basically the only one doing deals today because the financing just doesn't exist," said broker Peter Zalewski of Condo Vultures Realty LLC in Bal Harbour. "It's virtually impossible to get a loan."

A glut of condos that eroded home prices has triggered tighter lending standards, including 50% down payments even for individuals with spotless credit. Meanwhile, beginning in April, government-backed mortgage agency Freddie Mac will tack on a delivery fee to mortgages backed by condo units nationwide if the down payment is less than 25%. Fannie Mae is doing the same, a move that follows last month's tightened condo-lending guidelines, with requirements including a majority of units presold and reserve amounts. In Florida, Fannie must now review each new project for stability before it will guarantee financing.

—Dawn Wotapka contributed to this article.