Jacksonville Real Estate Market Information

We lost a buyer this week.  We truly hate it when this happens, unfortunately, sometimes it's unavoidable.  They were GREAT people and we got along fine.  The sole problem was that we couldn't tell them what they wanted to hear.

They did exactly what they needed to do.  They got prequalified for a loan before starting their search.  We started sending them listings that met their criteria in the Jacksonville real estate market.  Unfortunately, everything we looked at with them simply would not have passed inspection by an FHA appraiser.  They did not have a lot of cash, so a FHA loan was their only way into a home.

When you are purchasing with a FHA loan, it is a little bit more complicated than with other types.  First, the utilities must be turned on.  This is because the appraiser has to verify that everything is working.  If the A/C unit is missing, you have a problem.  If the water pressure is low, you have a problem.  If the electrical wiring is messed up, you have a problem...and on and on.  With other types of loans these things would probably be okay, but not when you are financing your Jacksonville real estate purchase using an FHA loan.

As we went through the Jacksonville foreclosure and short sale homes with these nice buyers, we had to alert them when there were obvious issues that would cause problems with their appraisal and ultimately their financing.  Unfortunately, this applied to almost every home they looked at.  We could observe the initial disappointment start to fade into disbelief.  But we had no choice but to continue to be honest.

They called later in the week and said that they were going to switch to someone else.  We really hoped they would get into a nice home that meets their needs.  We still want only the best for them, even though we won't be helping them anymore.  Hopefully they have selected a new agent who will also be honest about the situation.  It is terrible for a buyer to develop an emotional attachment to a house, and feel the excitement and anticipation, only to lose it later due to the inability to finance.  We really do wish them great success! 

Be aware of this when you are looking at homes if you are financing through FHA.  We had a problem just this week with a purchase on a Jacksonville short sale because when the appraiser went out, the water pressure was very low.  Turns out that the valve had been shut off, but it held up the appraisal, and the loan, until the issue was cleared up. 

The seller's lender has to order either a BPO (Broker Price Opinion) or an Appraisal to determine the value of your Jacksonville short sale property and whether your short sale deal should be approved.  When an FHA loan is involved (seller's loan) then the appraisal is done up front and you are given the value that the bank must have to approve the deal.

In a short sale a valuation is required by both the seller's lender and the buyer's lender.  This used to be relatively simple part of the process.  Recently, BPO and Appraisal values have become quite problematic in the Jacksonville Real Estate market for short sales.

We used to love having the lender order BPOs instead of appraisals on our Jacksonville short sales because agents who are actively selling in the Jacksonville real estate market usually have a good handle on fair market value.  We used to see BPOs coming in at or below the contract price.  Appraisals, on the other hand, often came in too high.

This has all changed.  There is no predictability anymore when it comes to the valuation of the property by an appraiser or BPO agent hired by the lienholder.

Here are a few of recent examples of valuation problems with our Jacksonville short sales:

• Seller's lienholder appraisal comes in 20% higher than the Buyer's Bank's appraisal.  Buyer's bank won't lend on the property at the price the lienholder mandated.
• BPO agent values a property $75,000 higher than the contract price.  Property could not even be sold at $20,000 higher, which was the starting price.  Comparable sales support contract price.  Marketing history proves that the BPO is highly inaccurate.
• BPO agent values a home $30,000 too high.  The marketing history on the home supports that the home could not be sold for the BPO price.  

We are, of course, fighting the BPO and appraisal determinations in all of these cases.  When you have a good bank negotiator you can usually get a new appraisal or BPO ordered or at least file a challenge.  When you have a bad negotiator at the bank your challenge might not go anywhere.

Jacksonville short sales continue to be a challenging, ever-changing area of real estate.  Make sure you hire someone who understands the process and how to overcome the challenges involved in Jacksonville short sales if you will be buying or selling a home that is underwater on the mortgage.

Doing Jacksonville short sales we have come to realize that most homeowners have no idea who they actually owe money to.  So you took out your loan with Bank of America or Suntrust or Wachovia or some other bank and you think that means that they are the entity that owns your loan?  This is often not so.  In the past the law has only required notification to the homeowner if the servicer, that is the person collecting and processing your loan on behalf of the investor, has changed.

Your loan may have been sold to Investor A who sold it to Investor B who then turned it over to Investor C.  Or your loan may have been sold to Investor A who packaged it and sold off pieces to Investor B through Investor Q.  Sometimes your original lender will sell it to the investor after you go late (not sure if this is with disclosure or not).  If you are one of the lucky ones, your loan is just owned by Fannie or Freddie.  This uncertainty and selling off of loans  is something that can often lead to trouble if you are facing a Jacksonville Short Sale or are in Pre-Foreclosure. 

Depending on who the investor on your loan is, your Jacksonville short sale can be either easy or very hard.  Many times it's impossible for the homeowner to figure out who owns their loan.  The servicers are usually very elusive when it comes to the topic, simply referring to the party who owns your loan as "The Investor."  Most of the talking heads in the customer service department have no clue what is going on.  Many times this means that the deal will just take longer to get approval.  Other times it means that your deal will be wrecked and you will go spiraling into foreclosure.

The Truth in Lending Act was modified at the end of May and will now require notification when the owner of your loan changes (instead of just the previous requirement of notification of a servicer change).  In theory this is a great development, it remains to be seen how this is going to change everything.  So far we are seeing that the servicers are still being elusive and many homeowners are still in the dark about who owns their loan.

Jacksonville distressed properties are here to stay.  Jacksonville short sales and Jacksonville foreclosures are usually priced so well in the Jacksonville real estate market that it is pretty hard for many homeowners, who hope to accomplish a straight resale, to compete.

Around 56% of the pending contracts in the Jacksonville Real Estate market are on distressed properties.  Straight resales account for only 31% of the pending contracts. 

The simple reason is price.  Most sellers who purchased their home in the past several years can not compete with the short sales and foreclosures on price.  This leaves them forced to become a Jacksonville short sale themselves if they are in a situation in which they have to sell their home.

In a short sale the seller owes more than their home is worth.  We get a contract on the property for what the home is worth now that is subject to the lienholder's approval.  That gets submitted to the lender who evaluates the complete situation and decides whether to release the lien and allow the sale to take place.  If the lender agrees, the closing takes place and the seller no longer owns the home.  Depending on the lender, the circumstances and the type of loan they may do a lien release only or possibly forgive the remainder of the debt.  

We work with Jacksonville short sales every day.  Jacksonville short sales are not a science, they are more of an art.  If anyone promises you success or specific results, be cautious.  There are no guarantees in the short sale process.  While there are some absolutes, such as the basic information that has to be included in a short sale package, there are many more factors that vary.  The process varies from bank to bank...and your experience is even different from negotiator to negotiator in the same bank.

One thing that we have found to be pretty consistent is that the short sales and loan modification attempts do not stop the foreclosure process.  When we are dealing with short sales, we have to constantly stay on top of what the lender is doing.

The foreclosure departments at banks always seem to be much more efficient and on top of things than the loss mitigation departments. 

We ask all of our sellers who we have Jacksonville short sales with to notify us immediately when they get correspondence from their bank or their bank's attorneys.  What the proverbial "other hand" is doing can not be ignored when you are attempting to short sale your property.  Staying on top of this can make the difference between a successful short sale and a short sale that is never completed because a foreclosure sale occurs.

We have to constantly request foreclosure sales be postponed.  As an example, we have one particular short sale currently with Indymac that has been particularly troublesome.  The sellers had attempted a loan modification.  They found out a week before the scheduled foreclosure sale that the loan modification attempt would not stop the foreclosure sale.  They were told by Indymac that only a short sale contract could stop the foreclosure sale.  We were able to get them a buyer just in time and got the foreclosure sale cancelled the day before. 

You would assume that they would give their own loss mitigation department time to process the file.  Not so.  Indymac's attorneys petitioned the court to reschedule the sale stating that it was cancelled to try to work out something with the homeowner but they have not been able to.  Their negotiator is in possession of a complete short sale package at a price that is likely above market value at this point.  She has had it for at least 45 days and has been working on it because we have been communicating with her.  Yet their attorneys represent that their "attempts" have not worked.  They will not cancel the new sale date yet.  This is the type of thing that a Jacksonville short sale specialist has to stay on top of or risk having the home sold out from under them while the short sale is in the final stages of approval.

Make sure you, and those you hire, are paying attention if you are trying to get a loan modification or short sale your Jacksonville home.

Why Even (Especially) Short Sales Need Multiple Pictures On MLS. Jacksonville Florida Short Sale Advice.

The appraisal.  Sounds so simple, however, this is one of the biggest killers of Jacksonville Short Sales.

Short sales are unique in that you have two valuations from two different sources that need to match up, or at least come close.  If they do, the chances of a successful short sale goes up dramatically.  If they don't...then it becomes a big hurdle that may or may not be insurmountable. 

Imagine my surprise when I got an e-mail yesterday saying the appraisal on a Jacksonville short sale for one of my buyers came in short.  And not just short...but 20% short.  We were supposed to close on this short sale late next week, everything was complete, just a few last minute items on the loan...then news that the appraisal came in short.

This is an FHA short sale.  HUD guidelines require the lienholder to have a FHA appraisal of the property to determine the sales price under the HUD Preforeclosure Sale guidelines that apply to all short sales that involve an FHA loan on the selling side.  The seller's lienholder has an appraisal showing this northwest St Johns County townhouse is worth $100,000.  Our contract price is several thousand below that.  The buyer's appraisal came in at only $80,000.  How did this happen?  Lack of consistency in the appraisal industry.  Theoretically two separate appraisers, both following FHA guidelines, should have come up with a value that was the virtually identical.  So how did they come up a full 20% different?  Does the fact that the buyer's lender  OWNS the company who was responsible for the buyer's appraisal come into play?  Is that why this appraisal came in ridiculously low?  Why is this practice still being allowed?

Two appraisals by FHA approved appraisers should not have come in so different.  So who is right?  The buyer's lender will not consider that their appraiser could be off.  The only solution is for the buyer to come up with more money down.  Not a possibility with most cash-poor FHA borrowers.  So the best hope in this type of situation is that the seller's lienholder will listen to reason and take the buyer's FHA appraisal into account (which is allowed under FHA guidelines, but at the discretion of the negotiator and lender) and allow the buyer to buy at a lower price.  But 20% lower?  If the seller's lienholder says "forget it" then the seller's only option is to put the house back on the market and try to find another buyer.  Then the likelihood is that the new buyer's appraisal could be too low as well since the margin between the two appraisals is so large.  Even a 5-10% disparity will likely kill the deal in the future.

The buyer can go on to find another property and soon forget this one.  The seller will be the REAL loser in this.  They will end up having a foreclosure on their record when they made every attempt to help the lender sale the property and mitigate their losses.  Their credit will be ruined for years.  All because two appraisers,FOLLOWING THE SAME GUIDELINES,  have said two drastically different things about the value of a Jacksonville short sale property. 

Buyers and Sellers of Jacksonville short sales beware.  There is an emerging phenomenon we're encountering working Jacksonville Short Sales.  We've seen several  Jacksonville area title companies who have been struggling for business that have decided to stick a label of "Short Sale Specialists" on their operation to get more business.  These title companies we're seeing do this are seriously hiking their fees up, "processing" the short sale transaction, and advertising themselves as experts.  Based on our experience, these people and companies are not in any way experts.  The ones we've encountered that are doing this are far from expert in the short sale arena.  (Just like with anything else, I'm sure there are some really good ones...we just haven't encountered them yet.)

If you need to sell your Jacksonville home and you owe more than your home is worth, do not hire someone who is going to turn your transaction over to a title company to process. You want to hire an agent who has an understanding of short sales and the different guidelines and issues involved.  You want to make sure your Jacksonville short sale specialist agent will be involved in the processing of your short sale after contract as well.

The latest title company "short sale specialist" experience we have had involves a "short sale specialist" who literally doesn't know the difference between FHA and Fannie Mae.  This "short sale specialist" submitted a preliminary HUD to the seller's lender that indicated a higher payoff than was possible if she had properly accounted for all seller closing costs on the preliminary HUD.  Then they came back to our buyer insisting that the buyer had to pay some of the sellers costs because the lender wouldn't.  Not true, these costs were never properly accounted for and submitted to the lender...a step in the short sale process that is extremely important. 

It is very important that the preliminary HUD have all possible costs accounted for, as well as extra time built in for the process to be completed.  This "short sale specialist" apparently did not know this.  This fact by itself can wreck a short sale deal up until the time of closing.  The HUD they submitted to the lender also does not properly account for prorations, so we are expecting them to come back later and tell us that the buyer has to pay some of the seller's taxes.  All of this could have been prevented with a knowledgeable person preparing the HUD correctly to submit to the lienholder.  When we tried to explain the relevant guidelines to her (in this particular transaction the seller has a FHA loan, which is governed by the HUD PFS program guidelines)  she kept calling this transaction a "Fannie Mae"  (not the same thing!!!) and told us that Fannie Mae required 88% net (not true either, but Fannie Mae has nothing at all to do with this transaction.)  Even if she had said "FHA requires an 88% net" it would not be accurate.  FHA only requires the 88% net of fair market value for the first 30 days during the marketing period which begins when the PFS Approval to Participate has been issued.  And this is an advertised "short sale specialist"

We've heard horror stories from other agents as well about these so called "short sale specialist" title companies and we've also experienced them.  Be careful when dealing with them.  IF you are a short sale seller, make sure your agent is a short sale specialist.  If you are in the market to purchase a short sale property, this is a good idea as well.  Deals that are put together correctly by knowledgeable short sale specialist agents usually go through.