South Florida Resale Inventory Plummets 35% In Year

"The South Florida real estate market is showing signs of potentially bottoming out," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. "Resale inventory is down 35 percent across the region, all of the construction cranes developing condos in Greater Downtown Miami have been down for at least a year, and 19 bulk deals - four in November alone - have closed since July 2008.

"The looming question that remains is whether the South Florida market is at a plateau or a bottom given that foreclosure filings are still rising."

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Shortsale Foreclosure REO Miami South Florida Las Vegas San Diego - South Florida Resale Inventory Plummets 35% In Year

The new flipping: short sales | HeraldTribune.com | Sarasota Florida | Southwest Florida's Information Leader

 

The new flipping: short sales

STAFF PHOTO / MICHAEL BRAGA

Buy photo

This house in Nokomis was bought on June 30 for $205,000 and then sold the same day for $230,000.

By Michael Braga & Chris Davis
Staff Writers

Published: Sunday, November 15, 2009 at 1:00 a.m.
Last Modified: Saturday, November 14, 2009 at 11:36 p.m.

External Links:

• Investigation: Florida "flipping" real estate

Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper.

These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say.

No one knows how widespread the scheme has become. But a national glut of short sales -- pre-foreclosure sales in which the lender agrees to let the house sell for less than the mortgage owed -- has spawned a small industry of short-sale flippers, some of whom use these questionable tactics, experts say.

The Herald-Tribune examined nearly 18,000 property sales that occurred in Sarasota and Manatee counties in 2009. The review showed that:

• At least 250 properties have been sold multiple times at escalating prices so far this year. Nearly 50 of those properties were bought then resold within 24 hours, suggesting that banks were underpaid for properties that already had a buyer willing to pay more.

• Just the most suspicious sales, where properties flipped within a day, have cost banks $1.7 million in Sarasota and Manatee counties so far this year. On houses bought and resold within a month, the bank short sales were $3.2 million less than the houses fetched just a few days or weeks later.

• Real estate professionals are a key part of short sale flipping. Of about 120 short sale properties that sold twice within a month in the Sarasota area, more than half of the buyers or sellers were real estate agents, real estate attorneys or mortgage brokers.

• Questionable short sales accounted for 1.4 percent of all property sales in Sarasota and Manatee counties this year.

At the peak of the housing bubble, 2 percent of all sales statewide raised suspicions, based on criteria used by fraud investigators.

• Bankers and some organizations that regulate the real estate industry have taken steps to curb the latest form of flipping. But the measures, including restrictions on writing mortgages for flipped properties, have not halted questionable transactions. Experts warn the number of short sale flips is likely to continue growing nationwide.

Short sales are viewed as a crucial part of a real estate market recovery. They allow distressed homeowners to escape huge debts and let banks avoid foreclosure costs and still recoup some of the money they are owed.

And flips involving short sale properties can be legitimate if repairs are made to a property, or the original buyer pays one price in good faith and later finds another buyer willing to pay more.

In fact, some professional flippers are outspoken in defending flipping as aiding both homeowners and banks.

"Who cares if someone is making a spread on flipped properties," said Marc Pelletz, a real estate investor and agent with Hook & Ladder Realty in Sarasota. "Banks are getting money. Someone gets a deal. As long as everything is disclosed to everyone, what's wrong?"

But fraud experts warn that some of the real estate flipping they see today involves the same kind of insider deals and manipulated sale prices that plagued the housing bubble.

The FBI recently added short sale flipping, dubbed "flopping" by some mortgage fraud experts, to its list of recognized real estate fraud.

In a June 2009 report on mortgage fraud, FBI officials described various forms of short sale flipping fraud. Each type involves misrepresenting the value of a house to a lender.

Banking experts point out that those losses trickle down to taxpayers, who have bailed out the banking industry.

"These middle men are making a huge profit at the expense of banks, which means they are often making huge profits at the expense of taxpayers," said Anne Weintraub, a real estate attorney with the Syprett Meshad law firm in Sarasota.

LUCRATIVE BUSINESS

The evidence that short sale flippers are finding ways to benefit from bank losses can be found in deed records filed along Florida's Gulf Coast.

Some individual investors and small groups of flippers have bought dozens of properties at discount prices and resold them within days, each time for thousands of dollars in profit.

Since September 2008, Tampa real estate agent Joe Wright and accountant Kevin Byrne have worked together to buy more than 30 pre-foreclosure houses and condos, with Wright's brokerage as the listing agent and Byrne's company as the buyer.

In each case, the men arranged a short sale and quickly resold the property at a higher price. Of their 33 deals, 22 properties resold within 24 hours of purchase. The median one-day price increase was $25,000.

Byrne and Wright did not return repeated calls seeking comment.

Their purchases, including nine in Sarasota and Manatee counties, involved properties that ranged in value from $50,000 to $800,000. They also included four properties owned by Wright.

Court filings show that all four were on the brink of foreclosure when Byrne bought them from Wright at reduced prices and resold them for a profit.

In one deal last year, BB&T filed a foreclosure action against Wright and moved to seize a three-bedroom house he had built on Fielder Street in Tampa.

Mortgage documents show Wright had a $545,000 mortgage, but BB&T agreed to sell the house to Byrne's company for Click here to see the rest of this interesting story

The new flipping: short sales | HeraldTribune.com | Sarasota Florida | Southwest Florida's Information Leader

Market Conditions continue to RISE

Market Conditions by Realty Times

Most states continued to experience rising existing-home sales in the third quarter, with prices moderating in many metro areas, according to the latest survey by the National Association of Realtors®.

Sales increased from the second quarter in 45 states and the District of Columbia; 28states and D.C. saw double-digit gains. Year-over-year sales were higher in 32 states and D.C.

Lawrence Yun, NAR chief economist, said the tax credit is a significant factor. "We can't underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector," he said. "It's given buyers the confidence they needed to get off the fence and take advantage of extremely affordable housing conditions. The buying conditions this year are the most favorable on record dating back to 1970, but the tax credit is allowing buyers to set aside any reservations about waiting for a better deal."

The national median existing single-family price was $177,900, which is 11.2 percent below the third quarter of 2008; the median is where half sold for more and half sold for less. Distressed sales – foreclosures and short sales – accounted for 30 percent of transactions in the third quarter, which continued to weigh down median home prices because they sell at a discount relative to traditional homes.

"The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market," Yun said. "Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures."

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said he is encouraged by recent actions in Congress. "Extending and expanding the tax credit to more buyers through the middle of next year is the right medicine," he said. "Congress understands the impact of housing on the economy, so consumers who aren't able to complete a transaction before the end of this month now have a second chance but must have a contract in place by April 30."

Regionally, existing-home sales in the Northeast surged 16.7 percent in the third quarter to a pace of 930,000 units and are 6.9 percent higher than a year ago.

In the Midwest, existing-home sales jumped 13.2 percent in the third quarter to a pace of 1.20 million and are 5.2 percent above a year ago.

In the South, existing-home sales rose 11.3 percent in the third quarter to an annual rate of 1.97 million and are 5.9 percent higher than the third quarter of 2008.

Existing-home sales in the West increased 5.6 percent in the third quarter to an annual rate of 1.19 million and are 4.6 percent above a year ago.

For more information on your local market, visit Local Market Conditions.

Published: November 11, 2009

Real Estate Outlook: Pending Sales Rise

Real Estate Outlook: Pending Sales Rise
by Kenneth R. Harney/Reaty Times

A record jump in pending home sales -- pointing to higher numbers of closed transactions in the next two to three months -- tops the housing economic news this week.

Pending sales rose by 6.1 percent nationwide during the month of September, pushed in part by consumer concerns that the $8,000 tax credit might expire at the end of the month - and we now know that won't happen.

The pending home sale index, compiled monthly by the National Association of Realtors, was up 21 percent higher this September compared with September of 2008. That's the biggest year-over-year increase in the history of the index, dating back to 2001.

Plus the September gain in pending sales was the eighth straight month of higher numbers -- and that's also a record for the index. Pending sales were up by 10.2 percent in the Western states, 8.1 percent in the Midwest, 5 percent in the South.

Only the Northeast saw a decline, and that was by 2 percent.

Those numbers are pretty robust, but some economists caution that the index is likely to see a tapering off during the winter and holiday months, when fewer people are shopping.

David Semmens, an economist with Standard Chartered Bank in New York, said "we expect a far slower growth rate going forward."

But other economists question whether that seasonal pattern might be overridden by the short term extension, and expansion, of the tax credit through next June.

That extension not only continues the $8,000 credit for first time buyers, but allows people who've owned their homes for the past five years to qualify for a $6,500 credit if they sign a contract by April 30th 2010 and go to closing by June 30.

In other key economic developments affecting real estate this week, the Commerce Department reported that spending on construction, both residential and commercial, was up by eight tenths of a percent during September. That's a further welcome indication the recession is over.

Also, the Clear Capital "HDI" home price index rose by 3.7 percent on a national average basis between September 26th and October 28th.

Meanwhile, mortgage rates got even a little better last week, according to the Mortgage Bankers Association. Average 30-year fixed rates slipped just below 5 percent, while 15-year fixed rate loans dropped significantly -- and now average just 4.3 percent.

Not surprisingly, given all these positive indicators, new applications for mortgages to buy homes were up again last week -- this time by 3 percent.

The recovery looks like it's well on track.

Published: November 10, 2009

Flipping Properties

Flipping Properties Require Margin and Fixed Expenses
by M. Anthony Carr/Realty Times

Ah, yes. The flipping of houses. What better way can a common man build his millions? Well, not many. It really can be a quick way to create wealth as long as the flipper doesn't let the flippee house take over his life and bank account.

The number one equation to take into account on this project is the margin. What is your cost to get into the house and the average sales price of a house in the selected neighborhood on a remodeled home? Obviously, you want this margin to be as high as possible. The challenge in today's market, when looking at it nationally, is that many of the diamonds in the rough are located in areas where prices are still declining, so the investor must be sure to purchase the house, gut out the old, insert the new, and get out of the house before the declining price catches up with him and his profit.

Successful flipping is all about your margin. I would love to give you a set equation with fixed expenses, but every house is different. One house may need a kitchen, another, the kitchen and two baths. Here's a pretty cool calculator online that can help determine your cost at www.RemodelingMySpace.com. With the flipping I've seen done in our market, it seems to be pretty accurate on its estimation of replacement costs.

Understanding that all homes are different, the sample below works for our hypothetical house only. Not for every potential flipper on the market. So here's your calculation.

Let's say the asking price is $199,000 for the house in its current condition. You see that it needs a new kitchen, 2 new baths, a new furnace, carpeting, painting inside and out and finally, some landscaping.

After your bids from your work crew come in, your fix up expenses come up to $47,000. Add the $47,000 to the $199,000 for your net expense: $246,000. Now you have the Realtor of choice calculate the price homes are selling for in the community that are remodeled or in excellent condition (because by the time you get done, yours should be in excellent condition). Let's say it's $285,000. Wow, it looks like you just picked up a cool $39,000. Well, not exactly.

First, you have to determine how long it will take to sell the house and calculate your carrying costs (monthly payment, construction loans, etc.) If you're in the same situation as most foreclosure markets, you need to figure about 4 – 6 months carrying costs of preparation and marketing time. If your costs is about $1200 per month (for the mortgage plus utilities), you're now out $4800 (and your take has dropped to $34,200).

And don't forget your 7 percent selling costs for commission and closing expenses, which is roughly $19,950. So now your margin of profit is about $14,000 give or take a $1,000.

As you can see, this is how a lot of people get into trouble thinking that if they pick up a house for $85,000 under market price they'll be rolling in the dough quickly. Most experienced investors are looking for a margin of 50 percent of the value or $100,000 on a higher priced home.

The challenge of a profit margin of $14,000 is that it can be quickly removed in a declining market or the negotiation process in a buyers market.

Published: November 9, 2009

Have We Finally Hit Bottom?????

Investor Report: Have We Finally Hit Bottom?
by Kenneth R. Harney/Realty Times
It's a question that's relevant to investors in just about any once-hot market that's gone from boom to bust: Have prices finally bottomed out? Or could they be poised for still further declines?

In the Miami-South Dade area of Florida -- ground zero for the worst boom and bust cycle -- prices have actually increased for the third straight month, according to the Case-Shiller Home Price Index.

Pending sales contracts are up, according to the Florida Association of Realtors, and the entire South Florida listed inventory has dropped from 108,000 unsold units in November of 2008 to 70,000 condos, townhouses and single family houses as the end of October 2009, according to realty consulting firm CondoVultures.

Looking at these numbers, you might say: Conditions in one of the most overbuilt local real estate markets in the U.S. are on the upswing.

And some investors agree. One bulk condo buyer reportedly has marked up prices by $300 a square foot more than he paid for his units just months ago. Sounds like the bottom is over.

But there's an alternative view taking shape among some investors: The supposed "bottom" may be nothing more than a temporary plateau, they say, with more declines ahead.

Why? For the same reason that Dr. Laurie Goodman, economist and senior managing director of research for Wall Street's Amherst Securities thinks lots of boot-to-bust metropolitan areas will see price declines in the months ahead: There is a massive 7 million unit "shadow inventory" of delinquent and distressed properties in banks' foreclosure pipelines that haven't been put on the market and haven't yet affected prices.

For instance, in South Florida, lenders expect to take a total of 29,000 units into REO by the end of the year, up 9 percent over 2008, and almost triple the repossessions in 2007, according to Condo Vultures.

When these are finally listed, they're going to be a wet blanket, and depress prices. Goodman forecasts price declines of another 8 to 10 percent in the coming months, just when the conventional wisdom is that we've already seen the worst.

However, Peter Zalewski, head of CondoVultures, says the key to South Florida pricing in the coming year will be location. Condos near or on the water are selling well to investors and second home buyers from the U.S. and abroad.

Demand is likely to keep their prices stable at least.

But in the inland suburban submarkets, which are less attractive to investors and second home buyers, Zalewski sees definite problems -- and vulnerability to further price declines in 2010.

Published: November 6, 2009

Homebuyer Tax Credit Extension May Pass this Week

RISMEDIA, November 5, 2009—After two weeks of delay, the Senate cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers. By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week.

The homebuyer tax credit, due to expire at the end of November would be extended through April 30 of next year. First-time buyers who are in the process of making a purchase would not need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline.

For the first time, the legislation that was recently cleared makes move-up buyers as well as first-time buyers eligible for a credit. The $8,000 maximum first-timer credit will continue and will now be available to couples with income up to $225,000, a nearly $55,000 increase above the level in existing law. A new $6,500 maximum credit would also be available to move-up homeowners who have lived in their current residence for five of the prior eight years.

For homebuyers across the country, the expanded tax credit would allow more people to qualify for the credit. While two-thirds of American families own their own home, and most earn less than the income limits that have been established within the extension, more buyers may be eligible. Move-up buyers don’t have to sell their current home to qualify for the new credit, but the money cannot be used to buy a vacation home. “It’s only for a primary residence,” said Regan Lachapelle, a spokeswoman for Sen. Harry Redi (D-Nev.), who helped engineer the deal. “In expanding the tax credit, we are helping first-time home buyers, as well as homeowners looking to move up to a new home, but we would exclude from the credit speculators who may have recently purchased a home intending to flip it for a fast profit,” said Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee.

The tax credit has fired-up the housing market, driving existing home sales to the highest level in over two years. The National Association Realtors reported sales jumped 9.4% to a seasonally adjusted annual rate of 5.57 million units in September and are 9.2% higher than the 5.10 million-unit pace in September 2008.

The legislation included provisions added to address complaints of fraud as well. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.

For more information, visit www.realestateeconomywatch.com

- RISMedia - http://rismedia.com -


Posted By susanne On November 4, 2009 @ 5:36 pm In Home Buying 101, Homeowner's Toolkit, Real Estate, Today's Marketplace, Today's Top Story, Today's Top Story - Consumer |