Real Estate Information

I hear the question a lot.  I see the same question quite a bit when I'm browsing around forums on the internet.  We definitely see it in the offers that come in on our Jacksonville listings.  I'm not sure why buyers are so convinced that they are supposed to offer a certain percentage off of asking price when trying to buy Jacksonville real estate.  The reality is that is the way the majority of buyers look at the process.  This is faulty reasoning and can hurt you in your real estate transaction.

Here is a simple example:

House A and House B are identical floor plans, same Jacksonville neighborhood, etc.

House A is priced at $400,000 and is the highest price in the neighborhood. 

House B is priced at $325,000 and is the best price in the neighborhood.

The owner of House A is willing to agree to 10% off of their $400,000 asking price while the owners of House B are standing firm at $350,000.  Which one is a better deal?

Does the fact that you got $40,000 off of the asking price make House A a better deal?  Well of course not.  However, many buyers will feel better about that house at the end of the day instead of the one that they couldn't get the sellers to reduce.  Looking at this example the error in this rationale is probably obvious to you.  But we see it happen every day.

If you are a Jacksonville real estate buyer, please understand that the percentage off of asking price you get is not indicative of a good deal.  Many homes today are fabulous deals even if you were to pay above asking price for them.  You have to somewhat "ignore" the asking price when analyzing the deal and look at the whole picture.

You need to see all of the comparable properties and analyze the situation.  You need to look at sales for the past 3 months (anything beyond that is likely to be overpriced right now due to the fourth quarter of 2008 seeing more substantial price drops).  But don't stop there.  You need to see (if not physically, on paper) every home that is comparable that is currently on the market.  This data is how you measure your deal.

Do not fall for the average percentage off of the asking price that Jacksonville real estate is selling for.  Do not take the word of someone else who tells you it is a good deal.  This is one of the largest financial decisions you will make in your life.  Ask for the facts and focus on the details that matter.  We help homebuyers every day and believe that you must be completely educated before making an offer in this market.  Let us know if we can help you!  904.371.9654.

January closings so far are extremely sluggish.  While we usually have a lot of closings in the last week of the month we have only had half of the closings so far in January as we had month to date last year.  So far this month there have only been 156 real estate closings in Jacksonville.  To give you some perspective, last year from January 1st-18th we had 309.  In 2007 this number was 413, 2006 had 487 and 2005 saw 471 closings in the same period.

The very interesting thing is that out of the 156 real estate closings, only 42% have been straight resale while over 46% have been distress sales consisting of foreclosures and short sales.

Of active listings currently on the market, 64% are straight resale while only 32% of pendings are straight resale.  As of today only 25% of actives are short sales and foreclosures but a remarkable 52% of pendings are fall into the distressed property category.  As the prices have dropped in recent months, straight resales are having a harder time competing as these numbers show.

We've seen 9,749 single family homes and townhomes (non-condo sales) sold in the past 12 months in the greater Jacksonville area.  This remains in line with what we've seen for the past 5 or 6 months.  For condo sales the number is 1,327 which has also remained fairly steady for the past half year.  We will continue to monitor this number closely as it seems we could be at or near a bottom in the number of transactions.

The Jacksonville real estate market (single family and townhomes) is sitting on a 13 month inventory level currently.  For condos we have an 18 month inventory.  In March of 2006 we were below 4 months for non-condo sales.

With interest rates at a ridiculously low level, high inventories and incredible values out there this is the best real estate market for buyers that I've ever seen.

Let us know if you would like to get started.

The changes to the HUD rules for FHA mortgage short sales supersede the prior rules of the Pre-Foreclosure Sale Program.

The ratio of sales price to fair market value has gone up!  Previously the sales price had to net 82% (after closing costs) of fair market value of the home.  Now the ratios have gone up to 88%, 86% and 84% of fair market value.  (This is okay if the appraisal is realistic, but since many come in high, the extra 2% was helpful)  The ratio used depends on the amount of time the home has been on the market.  Here is the way the tiered system works:

They have defined what allowable closing costs are that go against the proceeds to arrive at a net proceed amount.  

Closing costs items specifically NOT allowed to be charged to the seller's side are:

• Repair Reimbursements or Allowances
• Home Warranty Fees
• Lender's Title Insurance Fee 

• Discount points or loan fees for non-FHA financing  (They WILL now allow up to 1% of the buyer's loan amount in closing costs to the seller's side ONLY IF the buyer is buying the home with a new FHA-insured mortgage)

For agents that are familiar with FHA short sales, they have eliminated the 63% for fair market value to outstanding mortgage balance (including unpaid principal and accrued interest).  With the declining market, this change is a very favorable change because previously this 63% requirement could create problems.

The new guidelines specifically state that if the Pre-Foreclosure sale is unsuccessful, after a homeowner participates in good faith, and the home ultimately forecloses, neither HUD nor the lender will be pursued for deficiency judgments.  It also states that a pre-foreclosure sale has to be reported to the national credit bureaus as a "Short Sale."

There are many other guidelines that are outlined in this 18 page lender letter, but these are the important changes that relate to how a short sale offer must be written by the buyer's agent (or negotiated to this point by the knowledgeable seller's agent) to qualify.  It is pointless to submit an offer on a short sale property when it is a FHA loan if the offer does not meet this basic criteria.  Another reason to make sure your agent completely understands the short sale process.  Whether you are buying or selling a short sale property, you should make sure your agent is a trained specialist and thoroughly understands the process to save yourself months of frustration and the increased likelihood that the short sale will be unsuccessful.

CNBC just ran a small story about how Fannie Mae is testing short sales of homes.  They were reporting that this keeps lenders from having to take the home back and finds a new buyer for the home.  They reported that the average short sale results in losses of around 19% to the lender while an average foreclosure results in a loss of around 40%.

This is what we have been tellng our Jacksonville Short Sale buyers and Jacksonville Short Sale sellers.  Jacksonville Short sales are truly a win-win for every party involved, the buyer, seller and the lender.  So with this being the case, the question is why are some lenders still so slow to process and approve short sales?  Many lenders are doing much better at this.  The ones that aren't really need to streamline their process to allow for faster approval and closings since waiting for approval is what turns off many buyers currently.  Why not get the process down to under a month from start to finish?  Let buyers and sellers close with a timeframe that closely mimics a traditional or a foreclosure sale.  Rumors about the impossibility of short sales are rampant.  While short sales are not at all impossible...the actions and performance, or lack therof, of banks are why these rumors got started in the first place.

Banks need to sharpen it up.  Why aren't they being held accountable for increasing profits and reducing losses?  The fact is that if a home is sold in a short sale it never has to go on the banks books and the bank mitigated their loss.  It escapes me why the investors who sometimes hold these loans in pieces do not pressure the banks to move FAST on these things.

Why are the investors and stockholders standing by and allowing banks to sit on short sales, lose buyers who are willing to pay around fair market value, then foreclose on the house later...which adds significantly to the loss?  They then end up selling it later for lower than the short sale price multiplying losses! This is what is happening when banks don't approve good fair short sale deals.  You don't fix bad decisions with more bad decisions.  They need to be held accountable for knowingly making decisions that increase the losses to the bank.

Even if the buyer is patient, if you have an especially slow bank who sits on the file and does not accept it for 2-3 months, in a declining market, many times the market value of the home has fallen enough to make the deal ABOVE market forcing buyers to walk away rather than closing on a home that already has a built in loss of equity.

Worse is the second mortgage holder.  Sometimes this is a straight second mortgage, sometimes a HELOC.  In this market many of these loanholders will never see a penny if the home is foreclosed on.  Yet some of these banks either refuse to accept the short sale, demand a large payoff that is out of the realm of possibility in the deal (and the seller obviously doesn't have it or they would be making their payment), or insert crazy terms or conditions that wreck or threaten to wreck the deal.   This type of behavior by certain banks is what gives the short sale a bad reputation.

Jacksonville short sales are great deals!  While not all Jacksonville Short Sale transactions will be successful, most Jacksonville short sales will be successful when done correctly.  Following the correct procedure is a crucial component.  We can help whether you are a Jacksonville short sale buyer or are a Jacksonville homeowner who is upside down on your home but need to sell.

Today Jacksonville distressed properties (Jacksonville Short Sales and Jacksonville Foreclosures) represent almost 55% of all Jacksonville homes for sale that are under contract.  Only 45% of pending homes are straight resales.

Over 25% of homes on the Jacksonville real estate market are short sales or foreclosures.  This number continues to rise weekly, sometimes daily.  Between 32-33% of the homes sold in the past 30 days have been Jacksonville short sales or Jacksonville foreclosures.  Of this number 37% were short sales. 

Jacksonville short sales can be successful  (no matter what you hear!) and can be a great deal for buyers!  Hire an agent who knows and understands how to successfully complete a Jacksonville short sale.

Jacksonville short sales are much, much harder for the agent.  It is a lot more work for what is usually less pay.  A multitude of obstacles can and will come up in a Jacksonville short sale transaction.  Every day is a new challenge.  Agents have to be on top of things, sharp and able to think outside the box to increase the closing rate of Jacksonville short sales.  Agents who are able to maneuver the challenges are very successful in closing Jacksonville short sale transactions. 

If you are a buyer, you have to consider Jacksonville short sales these days if you don't want to overpay for your home.  We can help you with a Jacksonville short sale transaction.  We think they are great...and such a win-win...for both the buyer or the seller.  Are they all successful?  Of course not.  But no transaction is bulletproof in these volatile times.  Let us get started helping you today!

The overall Jacksonville real estate market has a pending to active ratio of only 13.82%.  Jacksonville distressed properties have a pending to active ratio of just under 30%!  This is proof that this is generally where the deals are for buyers.  What are you waiting for?  Contact us today to see the Jacksonville Short Sale and Jacksonville Foreclosure opportunities that are waiting for you.

Today a buyer for one of our Jacksonville short sale properties just "changed their mind."  There was no contractual reason, so the buyer will lose their binder deposit that was put down at the time of the contract.  But that doesn't make up for the fact that the sellers have lost a month of marketing time and are a month closer to foreclosure.

Jacksonville short sales are serious business.  A Jacksonville short sale buyer needs to understand the importance of being serious when they put down a short sale offer.  I've heard some agents joke that since short sales take so long, they just get their buyers into several contracts.  Kind of like throwing darts and seeing if one sticks.  This is entirely unacceptable and this practice needs to stop.

When you put down an offer on a short sale and it is accepted, the status in the MLS has to be changed to "Contingent" or "Pending."  This turns away other buyers.  Why would you want to see a home already under contract when there is plenty of inventory to chose from, right?

Once the home goes under contract, buyers quit coming.  You have effectively taken the home off of the market.  The short sale package is submitted and the listing agent begins to work with the bank to negotiate the short sale.  This is very detailed and time consuming work, and a great deal of effort, and number of hours,  is put into this by the listing agent.  Depending on the bank the answer can come back in a week, or it could be a couple of months.  This can not be controlled by the listing agent, but the wait can be minimized by a knowledgeable listing agent correctly and completely putting the Jacksonville short sale package together and submitting it promptly to the bank.

In the mean time the home moves closer to foreclosure.  The payments are usually still not being made.  Every day is another day that the seller is late.

So when the buyer "changes their mind" the seller does not get any of this time back.  They are unquestionably harmed by this behavior.  This is especially true if the educated and knowledgeable listing agent made sure the offer was at a price that would be acceptable by the bank and the package was correctly submitted.  These Jacksonville short sales are usually approved.  So what has happened is that the buyer walks away from an offer that would have been accepted by the bank.  When the contract falls through the bank usually continues the foreclosure process, if you were lucky enough to have it halted due to the short sale.

While the home was not on the market due to the slippery buyer, a sincere buyer who might have purchased the home didn't even have an opportunity to see the home.  The seller lost serious buyers because of a buyer who doesn't take it seriously and has no respect for the seller who is experiencing a hardship and trying desperately to avoid foreclosure.

Do NOT be this buyer.  If you don't fully intend on following through with a contract...DO NOT put in an offer in the first place.  The ramifications to the seller are so much more severe than to a straight resale property where the seller is not behind on payments.  Please be respectful of this fact.

We have gotten calls from agents who told us that they were putting in several offers on several short sales with the intention of getting them all under contract.  They just want to see what closes first.  We explain to them why this is not an acceptable option.  Generally they understand.  Just this week we found out that a buyer that we have under contract on one of our other short sale homes closed on a different property.  We had been in constant contact with the buyer's agent.  We are STILL technically under contract because a release has never been signed.  This agent could have gotten the buyer into a lot of trouble.  They had binding contracts on multiple properties and were obligated to buy both.  This is a dangerous game.

The purchase contract states that "In the performance of the terms and conditions of this Agreement each party will deal fairly and in good faith with the other."  This is not dealing in good faith.

If you are contemplating buying a Jacksonville short sale, please be sure you chose an agent who is experienced in short sales and knows how to handle the transaction.  This is even more important if you owe more on your home than it is worth and need to sell.  Successfully closing a Jacksonville short sale transaction requires dedication, education and experience.  Please make sure your agent qualifies.

If we can help you buy a Jacksonville Short Sale, let us know.  We would be happy to help you purchase a Jacksonville distressed property for a bargain price.  If you are no longer able to afford your home and have to sell your Jacksonville Real Estate and suspect that you owe more than your home is worth, please let us know.  We can explain the process and begin trying to find your buyer.