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

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

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!

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

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?

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

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

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.”