REAL ESTATE NEWS, COMMENTARY & OPINION
According to Google Insights, the number one state with the most Google searches for key words "buy real estate" during the past year is FLORIDA (data October 2007 through September 2008). This data indicates that people are investigating Florida real estate more than any other U.S. state on Google, the top search engine on the internet. Is this possibly an early positive indicator for Florida's housing market ? It may be that improved affordability in Florida, with housing price declines, is luring prospective buyers to start doing their homework, researching homes online.
For some, it now makes economic sense to buy Florida real estate. For example, international buyers are taking notice of Florida bargains. Foreign buyers are attracted to Florida because the state is viewed "as a desirable location," for its climate, beaches, and golf. It's a top destination for buyers seeking a second home or investment property. Think of "Florida" as a brand name. It likely is one of the most recognized on the planet. (I guess Disney deserves some credit for that...)
Softer Florida home prices and a weaker dollar have made the Florida market more alluring to foreign buyers. Florida has more international buyers than many other states. According to Florida Realtors, as surveyed in the "Profile of International Home Buying in Florida, 2008", real estate buyers from Canada and the United Kingdom are the two top foreign buyers of Florida residential real estate. The survey indicates international purchases were 30% of Florida sales from August 2007 to August 2008. The majority of foreign buyers (55% according to the report) bought a Florida property for a vacation home exclusively.
BUYING REAL ESTATE: FLORIDA FORECLOSURES
A rising Google search term recently (up 120%) is "Florida foreclosure." Since this is a growing topic of interest in the current real estate environment, this article provides some information that potential Florida home buyers should know. First realize that a high concentration of the state's foreclosures (as of August 2008) are located in five counties of the state's 67 counties (half of Florida's foreclosure filings were in these five counties). More details on these 5 counties follows later in this article...).
One in every 194 Florida properties statewide received a foreclosure filing in August 2008, the nation’s fourth highest state foreclosure rate, according to RealtyTrac. The foreclosure filing rate here in Nassau County, Florida with 52 foreclosure filings (or 1 in 610 households, as of August 2008) is relatively low compared to other areas in the state, according to Realty Trac data. Realty Trac is the leading foreclosure data provider for residential properties in the United States. FLORIDA FORECLOSURES SUMMARY:
Naturally, Florida home buyers are seeking the best deals in the marketplace. There's a big sale going on in Florida, so cash buyers (and the most credit-worthy) can take advantage of buying opportunities at discounted prices. However, most folks, realistically, are not able to purchase a foreclosure or “short sale.” But these days, buyers do not have to purchase distressed sales to get a “good deal” buying Florida real estate in the current market environment. There are other good deals out there without the added stringent conditions of sale and higher risk associated with distressed properties.
NASSAU COUNTY, FLORIDA FORECLOSURE DATA
This year, the Amelia Island, Florida market, similar to most real estate markets across the nation, is seeing some “distressed” properties in the marketplace, i.e. – “short sales” and foreclosures. As of October 1, 2008, there were 696 residential properties located on Amelia Island (area 1-6) in the residential category (single-family, condo, duplex, townhome) listed for sale in the Nassau County/Amelia Island MLS. Only eight of these properties were entered in the MLS as a “short sale”, or just 1.15% of the listings. (Note MLS data may contain errors and is not guaranteed.) For those unfamiliar with the term “short-sale,” it is a property for sale by a property owner who has a mortgage. The property owner has made an arrangement with their lender through the lender's loss mitigation department, to be able to sell the property for less than the outstanding loan balance (because of financial hardship). When the property is sold for less than the outstanding loan, the seller turns all proceeds over to the lender in full satisfaction of the debt. The lender has authority to approve or nix the sale and also can dictate the real estate commission. Note that there are tax implications for the seller, so a CPA should also be consulted. According to foreclosure tracking firm, Realty Trac, in a report dated September 26, 2008, the leading foreclosure rate states for the month of August 2008 were: Nevada, California, and Arizona, and ranking fourth in foreclosure rate, Florida. The total number of foreclosures in Florida was less than half the amount of California. In fact, California accounted for one-third of all foreclosure activity in the United States in August 2008. Realty Trac's data tabulates various types of filings of distressed properties such as notices of default, lis pendens, REOs, notice of trustee sale and notice of foreclosure sale. They break the data down by state and by county. As noted above, here in Nassau County, Florida (includes Amelia Island area), the foreclosure rate per household was 1 in 610 households for August 2008 (52 foreclosure filings here in Nassau County in August 2008 according to Realty Trac). By comparison, nearby neighboring Duval County (home to Jacksonville) had a much higher foreclosure rate of 1 in every 299 households, double Nassau's foreclosure rate. Interestingly, Duval County is going to be first county in the nation to actually hold foreclosure sales on the internet. FLORIDA'S FORECLOSURES CONCENTRATED IN FIVE COUNTIES
Florida's foreclosure activity was down 4% in August 2008 compared to the prior month. Statewide, according to Realty Trac, 1 in every 194 Florida households had a foreclosure filing in August 2008, but five Florida counties (of 67 counties in the state) had half of the state's foreclosure filings. The five leading Florida counties in foreclosures in August 2008 were: Broward County highest foreclosure rate in Florida, followed by Lee County, Miami-Dade, Orange County, and fifth was Pinellas county.
No doubt prospective buyers hope they can scoop up a distressed property at a great deal, but realistically, it's a pipe dream for most. Anyone requiring financing is going to have a very hard time trying to buy distressed properties. The average person will not “pass muster” and qualify to buy distressed properties. Foreclosures are for the more experienced, well capitalized buyer and not “newbies.” Realistically, those able to buy foreclosure deals are typically “investors” with cash.
Online sources such as RealtyTrac make it easier than ever to find foreclosure properties. But while the savings possible buying foreclosure properties are real—and attractive—there are sometimes hidden costs involved. One of these hidden costs is the expense of repairs. Also investigate what your property taxes will be before you buy a home.
PROPERTY TAX BILLS MAY BE HIGHER THAN ASSUMED
Buyers of Florida distressed properties need to contact the property appraiser's office in their target market, as there are tax ramifications for buyers of short-sales and foreclosures. Don't assume the property tax bill will be based on the lower sales price of a distressed property in Florida. Property taxes for the new buyer of a distressed property may be based on a "regular" sale of a similar home in the neighborhood, not based on the discounted price of a distressed Florida property.
DISTRESSED HOME BUYERS – EXPECT TO SPEND MONEY ON REPAIRS AFTER CLOSING
Foreclosure properties come in all shapes and sizes—from run-down mobile homes to palatial estates overlooking the ocean. But they all have at least one thing in common: their owner was in some state of financial difficulty. Generally, this means that a property in foreclosure may not have been kept up as well as a home buyer might like. Distressed properties likely have been abandoned awhile, from months to years. A home that has been neglected is going to have more maintenance issues.
Prospective buyers should verify, if they can, possibly through the utility company, whether the electricity has been consistently turned on. If the electricity has been turned off (i.e. no air conditioning during the summer months especially), conditions may have possibly been ripe for mold and mildew, with Florida's heat and humidity. If there's any opportunity for a prospective buyer of a foreclosure to get access to the property, it would be wise to hire a professional inspector to get a mold and indoor air quality inspection.
A foreclosure could require a new landscaping package as well. Here in Florida, a lawn that's been abandoned and not regularly watered, sprayed with pesticides, and fertilized will probably need re-sodding, not to mention the condition of shrubs and trees that have been unattended.
A home that has not been serviced for pests (namely bug services) is more likely to have critters inside. Also, in a state with a lot of swimming pools, if a Florida foreclosure pool home has been abandoned, expect the task of draining and cleaning a green, slimey pool, a dirty job that one might rather hire professionals to handle. Neglected pools can also be a breeding ground for mosquitos.
Some foreclosure contracts may possibly contain a "per diem penalty" if the closing/settlement is delayed beyond the closing date on the contract. The buyer is fined a fee per day, for each day beyond the contract date that the closing is delayed (these fees reportedly can be $100 to $200 per day).
SOME DISGRUNTLED PROPERTY OWNERS STRIP HOMES BEFORE LEAVING
It's been in the national news that some homeowners who have entered foreclosure have “stripped” the homes before they vacated – i.e. – taken out anything of value like kitchen appliances, cabinetry, even the HVAC systems. This has, indeed, happened locally to one foreclosure I know of in a new home community -- so buyers beware.
In summary, make sure the savings on the sales price is enough to merit the higher risk of a foreclosure purchase, accepting a property "as is", the repair dollars required after closing on the property, the value of your time if you will be doing the work yourself, and your stress threshold.
Determining the degree of disrepair of a foreclosure prior to closing can be something of a challenge. Early in the foreclosure process, when an owner is in Notice of Default (NOD), he or she may not be interested in discussing the sale of the home, making it impossible to do a thorough inspection. At the auction, or Notice of Trustee Sale (NTS) phase, bidders are generally required to buy the property "as is," at the courthouse. And once the home has been foreclosed on by the bank, becoming a Real Estate Owned (REO) property, arrangements to inspect the property often need to be made with the lender.
“Foreclosure properties certainly present an attractive bargain, and often the amount of money needed to repair a foreclosure home is inconsequential compared to the possible savings. In fact, many successful investors have made a career buying, rehabbing and then selling these types of properties at a significant profit,” says Jim Saccacio, chief executive officer for RealtyTrac. “But buyers do need to be diligent about determining the repair costs that will be incurred after the purchase. A property isn’t really a bargain if the cost of repairs equals or outweighs the savings on the purchase."
SEARCH FORECLOSURES IN FLORIDA, AROUND THE NATION
Web-based services such as Realty Trac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, homebuyers can use online services to identify and research potential home purchases. Realty Trac provides all the foreclosure data for MSN and Yahoo! Real Estate. For those willing and able to pursue a foreclosure property, Realty Trac's CEO, Jim Saccacio, offers five tips to help buyers close a deal on a foreclosure property:
1. Learn about the different types of properties and the foreclosure process.
2. Secure financing early. It's important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate.
3. Engage a real estate agent as a buyer's representative. Ideally, select an agent who specializes in the foreclosures market and has specific experience in REO properties.
4. Do your homework. Purchasing foreclosure properties is more risky than buying traditional real estate properties. It makes sense to give any property under consideration a thorough examination, including determining its condition and value, finding out the amount in default and the remaining loan balance, and running a legal investing report to make sure the property is free of any financial liabilities.
5. Make a realistic offer. If you want to be taken seriously as a buyer, you must be realistic when preparing an offer.
FIRST ONLINE FORECLOSURE SALE BY A COUNTY IN THE U.S. -- DUVAL CLERK SHOWS TECH SAVVY
Duval County Clerk of the Courts (home to Jacksonville, Florida) is putting Duval County foreclosures on the internet for sale via an online auction. Changes in Florida statutes reportedly now enable clerks of courts to hold home foreclosure sales online in Florida. Duval County, Florida is the first county in the U.S. to start auctioning foreclosures online. Local governments putting foreclosure auctions online (rather than selling foreclosures on the courthouse steps) opens localized foreclosure sales to a global marketplace. Buyers no longer have to be physically present at the courthouse.
POTENTIAL BUYERS OF FLORIDA REAL ESTATE A REMINDER FOR THOSE CONSIDERING FLORIDA REAL ESTATE – HOMESTEAD EXEMPTION For those currently thinking of buying a primary residence in Florida, remember that in order to get the Florida Homestead Exemption (a tax break for primary residents only), for the property tax year 2009, you have until Dec. 31, 2008 to close on a homestead property to qualify for the homestead exemption toward a 2009 property tax bill. You must reside at the Florida property prior to January 1, 2009. This is not an exemption you automatically receive in Florida -- you must apply for this special tax break. You have from January 1, 2009 until March 1, 2009 to actually visit the property appraiser's office in person for a new homestead exemption application, provide proof of property ownership and residency, and file for the exemption. Contact the property appraiser's office in the county of the residence for further clarification of the Florida Homestead Exemption rules. _________ SOURCE: FLORIDA FORECLOSURE DATA for AUGUST 2008 FROM REALTY TRAC. If you are a Florida homeowner and need help to prevent foreclosure of your Florida home, visit www.Floridahousing.org. ________
About the author -- W. B. Lawson has lived on Amelia Island fourteen years and writes tourism, lifestyle, and real estate articles.