Short sales: Playing by the new rules

WASHINGTON – Dec. 8, 2009 – The U.S. Treasury hopes to speed transactions under its new short sale rules, but details count, and Realtors should understand the process if they hope to avoid delays. While the new rules become effective no later than April 5, 2010, lenders have been encouraged to make them official as soon as possible.

The new rules, released Nov. 30, 2009, as the Home Affordable Foreclosure Alternatives Program (HAFA), provide financial incentives to spark short sale or deed-in-lieu (DIL) closings. The change was made to grease the wheels of a short sale transaction, giving potential buyers a shorter wait time from contract signing to lender approval of the contract. It also should make a short sale more attractive to buyers by reducing the number of problems.

The rules do not necessarily simplify the amount or complexity of short sale paperwork, however. The oversight doc, Supplemental Directive 09-09, devotes four pages out of 43 to the new short sale requirements. Real estate professionals working with short sales should review the Short Sale section of the Supplemental Directive (pages 5-9) and review the forms and letters in Exhibits A and B.

Supplemental Direction 09-09: https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf
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Reprinted by Permission: © 2009 Florida Realtors®

The Passing of a Legend

I received the following email from the Jim Rohn organization. Unfortunately, we’ve lost one of the greatest we’ve had…

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The Passing of a Legend

With great sadness we share that Jim Rohn, our mentor and friend, left us December 5, 2009 for a better place.

Over the past 18 months, in his battle with Pulmonary Fibrosis, Jim assured us with a smile that all is good, that he would fight until the last breath, yet he had no fear as to what would be next. Jim’s faith was as much a part of his life as his desire to inspire and challenge us all to be the best we could be and to live our dreams.

Jim’s courage in his final months and days were a testament to his message that we should all fight the good fight. He never gave up and never gave in.

Jim Rohn touched millions of lives over the past 46 years through his seminars, books, articles and CDs. He always stayed long after an event t o shake hands, take pictures and sign autographs. He loved making a difference in people’s lives, that was his passion and inspiration. Yet he was also a private man who kept a small, loyal and caring inner circle. He was a tremendous friend to those who knew him.

Harold Dyke, long time close friend of Jim’s for over 55 years said it best, “As Jim is ending one life he is simultaneously being birthed into a new life. One that he has talked about over the years and anticipated with great joy in his last remaining days.”

Kyle Wilson, long time colleague and friend of Jim had this to say about his mentor, “Jim Rohn was a great human being. Jim had the rare ability to take any concept or idea and then frame it in such a way that the rest of us could see it more clearly. His wisdom and insights positively affected everyone he touched on some level and to so many of us it was in an extraordinary way. But even more impressive was Jim Rohn the man. He possessed style and charisma, yet was humble, kind and understated to all who knew him. I find myself every day reflecting, benefiting and passing on the wisdom and ideas that are rooted in Jim’s message and wisdom. Jim is irreplaceable on every level. I will miss him beyond words, but am comforted as I know he was, that his message and legacy will live on and positively change millions of lives over the years to come!”

Someone once said “when you are born you enter the world crying while everyone else is rejoicing and when you die hopefully you have lived such a life that everyone will be crying while you are rejoicing”. Jim Rohn lived such a life.

Jim’s family asked us to thank all of you for your concern, prayers and love toward their father and grandfather, which has been so evident during the past 18 months.

Darren Hardy, dedicated student and Jim Rohn protégé for more than 15 years, said of Jim, “He was the most influential man in my life, second only to my father. Jim cemented my philosophical foundation and nourished my mind with ideas and ambitions never before imagined. He chiseled my character seminar by seminar, tape by tape, book by book, then CD by CD, hour by hour. Jim emboldened my belief, in me and in my most daring dreams. When I fell and was bloodied, he was there with encouraging words to help me get back up. When I didn’t think I could go on, Jim convinced me I was stronger than I imagined. When I wanted a shortcut, he reminded me there aren’t any. Even when I got too caught up in trying to achieve and succeed, Jim compelled me to leave room to live, to laugh and to love.”

Stuart Johnson, business associate and long-time admirer, said, “I was first introduced to the philosophies and teachings of Jim Rohn almost 25 years ago. And he made an immediate impression on me. I was amazed by how this modest and unassuming man could communicate such an extraordinarily powerful message in simple and straightforward terms. In person, one-on-one, he was as humble and down-to-earth as he was in front of an audience of thousands. I will treasure my personal memories of Jim and know that I will forever benefit from the wisdom of this remarkable man.”

There will be a private funeral held in the coming days. Plans and details are also being arranged for a Public Memorial Service to be held in the Los Angeles area in the coming weeks. Details will be announced upon final confirmation at the Jim Rohn Tribute Site.

We know Mr. Rohn is looking down on us at this very moment with a smile saying I did it, I gave it my all, I went for it, now it’s your turn. Go for it. Make your life a life worth living well!

View a special tribute to Jim at the Jim Rohn Tribute Site produced earlier this year and debuted at the March 2009 SUCCESS Symposium. You are also encouraged to post your thoughts and remembrances of Jim on the Memorial Wall.

Jim fondly closed his programs with the following sentiments: “I go with you in all the experience that we’ve had. But I promise you this as we leave here: I will not leave you behind. I’ll take you with me in my thoughts and in my heart.”

This email was sent by:
Jim Rohn International
200 Swisher Road
Lake Dallas, TX 75065 USA

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May you RIP, Jim Rohn….

Fla. 2009 Profile of Homebuyers and Sellers

ORLANDO, Fla. – Dec. 4, 2009 – The real estate market constantly evolves, and Realtors must continually have a clear picture of today’s homebuyers and sellers. The “2009 Profile of Homebuyers and Sellers, Florida Report” describes the characteristics and motivations of the state’s recent homebuyers and sellers.

The complete 211-page report, compiled by the National Association of Realtors, is available on the research page of floridarealtors.org at: http://www.floridarealtors.org/Research/Index.cfm

Highlights:

Characteristics of homebuyers

• Forty-one percent of recent homebuyers were first-timers, compared to 47 percent nationwide.
• The typical first-time homebuyer was 31 years old, while the typical repeat buyer was 54 years old. Nationwide, first-time buyers were typically 30 and repeat buyers were typically 48 years old.
• The 2008 median household income of buyers was $71,100 – lower than the median income of buyers nationwide at $73,100.
• The median income was $59,300 for first-time buyers and $83,300 for repeat buyers.
• Single females made up 18 percent of recent homebuyers, and single males made up 11 percent. Nationwide, 21 percent were single females, and 10 percent were single males.
• For 29 percent of buyers, a desire to own a home was the primary reason for the home purchase.

Characteristics of homes purchased

• New home purchases dropped to their lowest level in eight years nationwide –18 percent of all recent home purchases. But in Florida, new homes made up 26 percent of purchases.
• The typical home purchased was 1,850 square feet in size and built in 2000.
• Seventy-eight percent of homebuyers purchased a detached single-family home.
• The median price of a Florida home purchased was $176,500, compared to $185,000 nationwide.
• Three in four buyers (77 percent) considered commuting costs as “very” or “somewhat” important.

The home search process

• More than one-third of homebuyers started their home search process by looking online for listings.
• Seventy-five percent of buyers used the Internet to search for homes.
• Buyers had a high opinion of real estate agents, with 81 percent of those who used an agent saying they received very useful information.
• The typical homebuyer searched for 12 weeks and viewed 15 homes, compared to 12 weeks and 12 homes nationwide.

Homebuying and real estate professionals

• Sixty-seven percent of buyers purchased their home through a real estate agent or broker.
• Sixteen percent of buyers purchased a home in foreclosure. Nationally, 10 percent of buyers purchased a home in foreclosure.
• Thirty-nine percent of buyers found their agent through a referral from a friend or family member.
• Sixty-four percent of buyers would definitely use their real estate again or recommend the same agent to others.

Financing the home purchase

• Florida had more cash sales, with 81 percent of buyers financing their recent home purchase. Nationwide, 92 percent financed their recent home purchase.
• The typical buyer financed 93 percent of the home purchase price.
• Nearly half (45 percent) of homebuyers reported they made some sacrifices to buy the home, such as reducing spending on luxury items, entertainment or clothing.
• Thirty-one percent of first-time buyers reported their mortgage application and approval process was “somewhat” more difficult than they expected, and about one-in-ten reported it was “much more” difficult than expected.

Home sellers and their selling experience

• Real estate agents assisted 85 percent of sellers in Florida, the same percentage nationally.
• Recent sellers typically sold their homes for 93 percent of the listing price, and 65 percent reported they reduced the asking price at least once. Among all sellers nationally, sellers typically sold their homes for 95 percent of the listing price, and 60 percent reported they reduced the asking price at least once.
• Forty-two percent of sellers offered incentives to attract buyers, most often assistance with home warranty policies and closing costs.

Home selling and real estate professionals

• Thirty-four percent of sellers who used a real estate agent found their agents through a referral by friends or family, and 24 percent used the agent they worked with previously to buy or sell a home.
• Eighty-six percent of sellers reported that their home was listed or advertised on the Internet.
• Among recent sellers who used an agent, 84 percent reported they would definitely (57 percent) or probably (27 percent) use that real estate agent again or recommend that person to others.

For-Sale-by-Owner (FSBO) sellers

• FSBOs made up 10 percent of Florida sales, which is slightly less than the national rate of 11 percent.
• Almost half of the FSBO sellers (40 percent) knew the buyer prior to the home sale.
• If a seller wasn’t dealing with a buyer he already knew, the primary reason (62 percent) for going FSBO is that the seller did not want to pay a fee or commission.
• Over half of FSBO sellers took no action to market their home, and 58 percent did not offer any incentives to attract buyers.
• Fifteen percent of FSBO sellers reported that completing a transaction within their planned timeframe was the hardest part of selling their home.
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Reprinted with permission | © 2009 Florida Realtors®

US Treasury Announces Details of Short Sale Plan

The U.S. Treasury has finally set the guidelines for their “short sale” plan.  We are expecting the details to be released shortly at www.financialstability.gov.

US Treasury sets guidance to simplify ’short sales’     Article By Al Yoon, Reuters NEW YORK, Nov 30 (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures. The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website. Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders. The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started. See: http://www.financialstability.gov/latest/tg_11302009b.htm “While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” or offer a modification, the Treasury said in its announcement. Financial incentives for completing short sales or similar deed-in-lieu transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses. Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower’s credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure. But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future. Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.  It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.  In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000. Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said. The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc. Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October. “If there was a short sale program that didn’t recognize the second lien holder position, it could have pretty damaging consequences for the industry,” Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week. # # # (Editing by Leslie Adler) ((albert.yoon@thomsonreuters.com; +1 646-223-6347; Reuters Messaging: albert.yoon.reuters.com@reuters.net))

Pets can be a peeve to potential buyers-even transaction killers

Pets can be a peeve to potential buyers and can be transaction killers

Have you ever walked into someone’s home and caught that peculiar odor that makes it “their” home? Well, this time, is like that time.

Odors are by many accounts, one of the biggest turn-offs that shu buyers the most. Driving to a property that has past the first test (the price seems right), the second test (it’s situated in an area of the buyer’s liking), then the third test (they like the street, neighboring homes and at least generally – the curb appeal of the home they drove to see), then taking that first step on to the front door and noticing – even from that point, peculiar odors, may be reason enough for them to not want to pursue a deal.

Scents are among the most basic, bare-bones,  emotion-grabbers there are. In the animal kingdom, it is used to mark territory, to lure pray or partner and even to avoid becoming prey.

When the scents in someone’s home are complicated by the sweat (from those who are outdoors or sports type), dirty laundry or dippers, ethnic foods or fish topped with pet odors (be it birds, felines, dogs or any other), strangers walking into that environment will likely be received in shock.

Of course, we don’t notice it – at least not as much. It’s our family’s scent. Others however, will not be able to leave the house fast enough.

So, what to do if you are looking to sell and are a family of smokers (yes – even if you don’t smoke inside), sportsmen, campers, bikers, climbers and critter collectors (birds, turtles, fish, cats, dogs, etc), with babies or toddlers in dippers? Simple. Realize that, no matter whether you can tell or not – your home smells different to most other’s homes, and strangers visiting WILL notice. Acceptance is usually the first step in healing any relationship and will go a long way if potential buyers can walk through the house without holding their breath.

Next, deep clean, change the A/C filter, wash all sheets, carpets, clothes, etc. Open all windows for a day as you scrub away in order to air all vents of the A/C system. By all means, make sure all pet areas are super clean. If possible, let friends or family take care of your pets while the property is on the market.

If you have small children in dippers, make sure the dirty dippers are promptly removed from any interior trash cans, and if your family does a lot of outdoor activities, make sure laundry is frequently caught up.

Why all the panic?! you ask? Well…are you looking to sell your house or just have it for sale? If you are looking to sell, keeping the house in the best shape possible will ensure it is “show ready” at all times. Your Realtor may be showing the home while you’re at work or on vacation for the weekend and with all the choices available to buyers today, if that buyer leaves your home with a bad impression, your home will end up in the “forget it” pile and hop on out of there and into the next house faster than you can say ‘rabbit’.

So, eliminating odors goes a long way to ensure your home sells. Even if in tip-top shape – if your home’s scent is offensive to others, it will not sell. Imagine walking into any expensive store, showcasing top of the line “anything” and from the moment you walk in, it smells awful to you. How long would you be inside the store checking out the beautiful, expensive merchandise before you bolt out? Well, that’s exactly what buyers not familiar or adamantly against and even allergic to pet odors, cigarette smells when they open closet doors, and stuffy air conditioning vents will feel like.

Keeping your home “showcase ready” at all times is like preparing an automobile for sale. Most, will give it the best cleaning job, inside and out – even the engine. They’ll change the filter, make sure the brakes and tires are in good condition and that it shines. It is no different with your house. If you want to sell it, take the steps to make sure it appeals to buyers.

If you just want to have a “for sale” sign in front and make believe it will sell for top dollar while you neglect it, just forget everything you just read.

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Your comments welcomed

Inventory in Miami-Dade Down for 14th Consecutive Month

As the market continues to bounce off a rough bottom, inventory in Miami-Dade continues to drop.

For the fourteenth consecutive month, inventory of real estate available for sale in our county dropped to 25,622 units in October, 2009 from the high of 41,230 back at the peak in September, 2008 (when the bottom fell off all markets – real estate and financials). This is almost a 38% drop in inventory levels from less than a year and a half ago.

Market Activity for past 15 months - All property types

By the same token, Closed Sales county wide grew by just above 34% in the same period while Pending Sales (under contract), grew by a whopping 102% from the peak in inventory in September of 2008.

The result of this activity has been to substantially reduce the Months of Inventory available for sale (the time it takes to move the existing inventory) and rapidly increase the Absorption Rate of the existing inventory (the rate at which properties are selling every month) throughout the county.

Based on Closed Sales, we have come from 36.6 Months of Inventory with an Absorption Rate of 2.7 units in September of 2008 to 17 Months of Inventory and 5.9 units in October, 2009. This represents a major improvement county-wide.

However, it must be noted that a great majority of the inventory reduction helping all numbers are (among other things), the following facts:

1) Canceled and Expired listings.

2) New Foreclosures not yet hitting the market (though thousands are expected to hit us during the third quarters of 2010 and 2011 due to reseting of ARMs, Option ARMs and other products, creating a new wave).

3) New inventory built during the boom still being offered for rent or being sold on lease-option deals by developers struggling to make ends meet.

Of course, when FNMA (Fannie Mae) begins to rent out to delinquent borrowers who lose their homes to foreclosure the foreclosed properties back to these homeowners rather than evict them, the glut of already available inventory will be greatly noticed. Right now, these once-homeowners are being forced out of their homes and into vacant rentals. When these homeowners become tenants in their own homes, this will leave the thousands of vacant units completely stranded.

But, I digress.  I want to focus my attention in this issue on the numbers affecting the condominiums in the areas of Miami Beach (33139 & 33140), and Downtown-Brickell (33131). We can notice a very jagged Q3′08 followed by an even worse January, 2009. However, notice in the chart below that our inventory levels in this particular area,  peaked in February, 2009 at 4069 units as compared to 3394 units available for sale in October, 2009. Nearly a 17% drop in the level of available condominiums for sale in just 9 months.

Miami Beach and Brickell/Downtown areas - Condo/Townhomes

This obviously also helped create marked improvements in the Months of Inventory and Turnover Ratios. With a 10% improvement in Closed Sales between February, 2009 and October, 2009, it is the Pending Sales numbers that continues to mark the pace with a 47.7% increase between the 151 Pending units found in February and the 223 units Under Contract in October.

This has improved the area’s Months of Inventory Based on Pending Sales from almost 27 months just 9 months ago to just over 15 months in October or a 44% decrease in the time it takes to get the inventory sold. This is supported by the more than doubling of the Absorption Rate in the same 9-month period from 3.7 units to 6.6 units.

Date	2/09	3/09	4/09	5/09	6/09	7/09	8/09	9/09	10/09
For Sale	4069	4062	3891	3853	3724	3672	3556	3479	3394
New Listing	571	596	528	576	476	445	478	499	488
Sold	120	127	131	160	183	142	153	153	132
Pended	151	201	223	224	211	197	236	245	223
Months of Inventory based on Closed Sales	33.9	32.0	29.7	24.1	20.3	25.9	23.2	22.7	25.7
Months of Inventory based on Pended Sales	26.9	20.2	17.4	17.2	17.6	18.6	15.1	14.2	15.2
Absorption Rate based on Closed Sales	2.9	3.1	3.4	4.2	4.9	3.9	4.3	4.4	3.9
Absorption Rate based on Pended Sales	3.7	4.9	5.7	5.8	5.7	5.4	6.6	7.0	6.6
Avg. Active Price	748	745	741	727	724	711	710	710	709
Avg. Sld Price	373	429	357	549	401	416	433	477	385
Avg. Sq. Ft. Price	309	361	344	432	363	373	334	389	339
Sold/List Diff. %	90	89	91	85	88	91	88	89	90
Days on Market	131	128	101	151	117	135	122	138	148
Median Price	254	280	248	275	252	242	250	290	283
*All reports are published Nov. 2009, based on data available at the end of Oct. 2009. This representation is based in whole or in part on data supplied by Realtor Association of Greater Miami and the Beaches, Reltor Association of Miami-Dade County, Realtor Association of Greater Fort Lauderdale and Northwestern Dade Association of Realtors. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market.

Here is where it gets interesting. Did you notice the Median Price of condominiums during the same period? Can you see what is happening to prices? Yes. That’s right.  They’re starting to edge up from $254,000 in February bouncing off the bottom to show four consecutive months of price increases to the current high of $283,000 in October, 2009.

Although the Fed has continued to support the current interest rates at the expense of a weak dollar, foreign nationals are finally noticing Miami, Miami Beach, Downtown and Brickel once more.

Remember though that, a 1% increase in interest rates will roughly eat up about $10,000 in purchasing power from buyers. This means that buyers on the fence looking for prices to bottom out…may be shooting themselves in the foot if they get caught waiting for that ever-illusive bottom while suddenly finding that the Fed, will no longer support low interest rates but begin to raise it once more in order to avoid inflationary or other pressures.

Sellers should also note that, Days on Market continues to be erratic at best, bouncing between 131 days in February to 148 days today.  Sellers must remember that each 30-day period their property does not sell represents another mortgage, property tax, insurance, maintenance and utility payment, eating away at their bottom line.

Pricing today is more important than ever. Pricing in today’s market accounts for about 80% of the marketing effort your professional agent is able to apply in your favor. Buyers know that today’s market is muddied with difficult Short Sale and REO negotiations, multiple-offer situations, legal issues encountered in many properties, difficult lenders and even when buying cash, city issues that can stop a sale.

Smart buyers today waste no time in hiring a qualified professional to help them navigate these turbulent waters. The professionals representing them know the market (as many buyers do because of the amount of information available online today), and these professionals show buyers ‘bargains’ (or in the case of many – steals), before they show any overpriced listing.

If you are a seller looking to get what you paid for your property, you may be in this for the long haul. In fact, you may soon join the ranks of the frustrated sellers that ended up in the Canceled or Expired properties list.

Another risk to sellers is that the rosy picture of improved Median Prices, greater Absorption Rates and shorter Months of Inventory and Days on Market may turn really ugly, real quick if (or when, rather), the number of foreclosures begins to materialize again (as many experts predict for 2010/2011), distressed homeowners become tenants of their own homes leaving other properties vacant and interest rates begin to rise, further eroding the ability for new buyers to obtain financing or force the few that can, to buy cash.

Cash buyers however, are not likely to pay top-dollar for your property. They expect a discount for the added assurance that the transaction will close on their end (barring other issues), and your property condition.

Remember as well, we are at a Price War and Beauty Contest never seen before. Sellers best listen to the advise of experts on staging, Feng Shui, and even home programming on cable if they want to ensure a sale in this market.

Buyers, whether foreign or domestic, must understand that a shift in Fed policy could gravely affect your ability to buy, making it imperative to decide to buy today and even have some frosting with the cake when tax time comes along and you are also able to receive your credit.

How quickly is inventory moving? What does it mean for me?

These are awesome questions asked more and more by the most sophisticated buyers and sellers.

Typically, when buyers and sellers want to know, how quickly is inventory moving, they are typically questioning what the “absorption rate” is and how many months of inventory is there at a particular time and within a particular price range or even property type.

In other words, how fast is the current inventory being absorbed by buyers and how long would it take to clear that inventory if the same pace is kept and no other new property came to market?

Notice the caveat of no new inventory coming to market being an assumption. An impossible assumption since inventory is in constant movement. This however, is akin to looking at a Balance Sheet for a corporation, knowing full well that money continues to flow in and out of their books throughout the day. It is simply, a market “snapshot” of where we are and where might we be if we keep the pace, or like a single frame from a movie film.

In short, Months of Inventory is the number of months it would take for all active listings to sell, if no new properties came on the market and considering the current absorption rate or selling pace, based on the number of closed sales in the prior month (we can do this per week or per month – I’ll be looking at monthly figures).

Through a fairly simple formula, one can determine absorption rate. But, before you pull your calculator, you must keep in mind that this rate is as typical to a city, county or state as there are cities, counties and states. In other words, it is a very local number. So local in fact that, if you live in a heavy condo market area (such as South Beach or Manhattan), this number can be as different for each building as there are buildings in the area.

In short, the absorption rate for Miami-Dade county can then be broken down by city, building and even by property types and/or price ranges, giving us a wide array of possible numbers specific to the needs of the person seeking the information.

The other caveat is that, this number can be very different if calculated based on “closed” transactions as it is based on “pending” sales. Some believe that looking at pending sales provides a better indication of market activity because it lets us know where and which properties are being actively pursued by buyers since pending sales reflect contract offers made on available properties and hints on buyer preferences and tendencies.

Closed sales however, provide a solid indication of which areas and which properties are actually changing hands. The problem with closed sales is the amount of time they may be taking to go from offer tendered and accepted to keys exchanged, specially when a short sale is involved.

Both are equally important since in combination, they indicate past performance and possible trends.

Therefore, I’m only going to generalize on this number based on a few generic criteria for our County (Miami-Dade), in order to give you an indication of where we are as far as moving the inventory is concerned.

Therefore, I will provide the numbers for pending and for closed sales and will consider condo and detached single family homes in order to drive the point further.

Please remember that these statistics ( absorption rate and months of inventory) are  flawed by their very nature since they only take into consideration recent past performance at a given point in time and they mostly look backwards (past-dependent). Based on these numbers, we can only guesstimate future performance. Therefore, use this statistic carefully when evaluating your real estate opportunities since they only provide guidance for you to form an educated guess.

These number however, do have significant meaning for buyers, investors and sellers.

For buyers/investors – higher months of inventory number means inventory is rising and that your chances of getting a “deal” increases.

For sellers – a higher number typically means more competition from other sellers and that you better make sure your marketing strategy (which includes pricing among other things), is in line with market conditions (specially if you are in a ‘buyer’s market’), or else, you may be helping your neighbor sell first!

So now, to the nuts & bolts. The chart below reflects the numbers for September/08, which we will compare with September/09, as well as August/09 to compare with last month’s numbers (09/09).

Note below the one month and year-over-year changes in active, sold and pending transactions.

1 month                                                            1 year

Aug 09             Sep 09            % Change        Sep 08             Sep 09             % Change

For Sale                27083              26296              -2.9%            41230              26296              -36.2%

Sold                          1702                1535                -9.8%            1126                1535                  36.3%

Pended                   2762                2949                  6.8%           1458                2949                102.3%

Now, let’s drill down a bit more and notice the absorption rate and the months of inventory changes for the same time periods in Miami-Dade County.

	9/08	8/09	9/09
or Sale	41230	27083	26296
New Listing	6053	4466	4659
Sold	1126	1702	1535
Pended	1458	2762	2949
Months of Inventory based on Closed Sales	36.6	15.9	17.1
Months of Inventory based on Pended Sales	28.3	9.8	8.9
Absorption Rate based on Closed Sales	2.7	6.3	5.8
Absorption Rate based on Pended Sales	3.5	10.2	11.2
Days on Market	119	113	111
Median Price	230	155	160

Notice as well that county-wide, Median Prices have dropped almost 44% from a year ago, even though we can see a 3% increase from August, 2009 to September 2009.

This significant drop in price year-over-year is certainly stimulating (albeit any tax incentives our government is throwing into the mix), buyers to come out, causing the rate of absorption to increase from 3.5 properties per month in September/08 to 11.2 per month in September/09 or over 300% faster pace of absorption.

This in turn, has caused our months of inventory for our county to drop from 28.3 a year ago to 8.9 months in September/09 or an almost equally impressive 300% decrease in the amount of time it takes to clear the inventory.

If we drill down a bit more and look at single family detached homes, the months of inventory based on pending sales for these types of homes was 22.6 a year ago versus 6.8 for September/09 representing about a 323% drop while the absorption rate improved by about 330% or from 4.4 properties sold/month a year ago up to 14.8 properties per month in September/09.

Our attached single family residences (which includes condos and townhomes), reflect a 126% improvement in Pending Transactions year-over-year, in a great part caused by a drop in Median Prices from $200k down to $135k for September/09. This causes a higher level of affordability for first-time buyers since the median price for a detached single family home is $182k (down from $256k a year ago).

Therefore, the absorption rate for condos & townhomes based on Pending Transactions has gone form 2.9 units per month to 9.4 units per month, bringing the months of inventory based on pending sales down to 10.7 from 34.3 in September/08.

Although the numbers for condo/townhomes may seem less impressive than that for detached homes, this may also reflect a preference among buyers to stretch their finances a little more in order to own a detached home before selecting a condo or townhouse. A smart move by some account.

Another factor affecting condo sales is that many buildings are no longer financeable because they no longer meet FNMA or FHA lending guidelines. Buyers of these units must seek to pay cash (which many are), or seek portfolio lenders (which typically cost more).

First time buyers should do their best to get into a home if it makes financial sense to them (remember to consult a tax professional and a reputable real estate and mortgage professional when making these decisions), specially when faced with the reality that, for the next several years, rather than continuing to pay rent (to pay off someone else’s mortgage), they should think about paying themselves and take the tax deductions homeownership afford you (even if not able to close by the tax credit deadline of November 30th and depending on your tax profesional’s advise).

A last remark about Median Prices is to remember that, about 60+% of Pending and Closed transactions are distressed properties (Short Sales and REO), which keep driving prices down as buyers take advantage of these opportunities and buy real estate “on sale” (just the way we like to shop, ain’t it?). The rest are being sold by developers with unsold inventory and folks not interested in dealing with the nuances of distressed sale purchases.

Even though the above may seem like the worst is behind us, we must still keep in mind that many experts still foresee an increase in foreclosure inventory coming for 2010 and 2011 following resets associated with ARM (Adjustable Rate Mortgages), and Option ARMs sold 3-5 years ago.

For buyers, this means additional opportunities. For sellers, this may mean that the time it would take to get that price they seek (at 2005, 2006 or 2007 numbers), may be much longer away than they might think. Not working with the right professionals could cost these sellers thousands if they choose to wait.

If you wish to know what the absorption rate or months of inventory is for your specific area and how to use this date to fit your specific needs and goals, contact me and I will gladly help you.

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Your comments welcomed!

Date	7/08	8/08	9/08	10/08	11/08	12/08	1/09	2/09	3/09	4/09	5/09	6/09	7/09	8/09	9/09
For Sale	41794	41101	41230	39965	39240	37625	36418	35744	34123	32280	31159	29408	28059	27083	26296
New Listing	6509	5914	6053	5683	4757	4761	5561	4875	5303	4738	4550	4529	4331	4466	4659
Sold	1171	1122	1126	1277	1069	1449	1199	1251	1625	1671	1722	1981	1870	1702	1535
Pended	1473	1547	1458	1663	1360	1595	1781	1923	2480	2533	2491	2658	2635	2762	2949
Months of Inventory based on Closed Sales	35.7	36.6	36.6	31.3	36.7	26.0	30.4	28.6	21.0	19.3	18.1	14.8	15.0	15.9	17.1
Months of Inventory based on Pended Sales	28.4	26.6	28.3	24.0	28.9	23.6	20.4	18.6	13.8	12.7	12.5	11.1	10.6	9.8	8.9
Absorption Rate based on Closed Sales	2.8	2.7	2.7	3.2	2.7	3.9	3.3	3.5	4.8	5.2	5.5	6.7	6.7	6.3	5.8
Absorption Rate based on Pended Sales	3.5	3.8	3.5	4.2	3.5	4.2	4.9	5.4	7.3	7.8	8.0	9.0	9.4	10.2	11.2
Avg. Active Price	510	505	505	504	512	515	519	525	533	543	548	547	545	549	552
Avg. Sld Price	454	391	341	323	292	301	264	240	265	229	269	281	253	258	293
Avg. Sq. Ft. Price	250	229	213	192	176	185	168	152	162	150	164	171	158	159	179
Sold/List Diff. %	91	91	91	90	89	89	89	90	90	89	89	89	90	90	88
Days on Market	127	122	119	113	101	108	106	114	114	107	113	117	114	113	111
Median Price	272	235	230	210	190	188	164	161	165	145	154	160	155	155	160

Sellers miss out, as buyers find opportunities

Yep! The market has changed! Actually, it is still changing as I type!

First, there were complaints about buyers being on the fence and not committing to making an offer.  Any offer!

Now, we find that buyers are searching through limited inventory -”Limited inventory?! Are you kidding?!” you say?

Well, when one considers the properly priced and properly handled inventory available…one may argue buyers are in fact, searching among a very limited inventory since the rest, is not even being considered!

Where are the discrepancies these days? It seems, everyone is a bit to blame.

Lenders: slow to approve short sales. Some argue they may even be looking forward to a foreclosure. I’ve heard that some lenders are looking to get what they can, write off the shortage or pursue the borrowers in court, all the while seeking to collect from insurance companies, re-collateralizing to a new borrower post-foreclosure in the hopes of recovering most of their original investment or losses over the life of the new loan, and even by selling the deficiency judgment or new note to investors. Those who feel there is an underground conspiracy by lenders to hold back since they know they have these and maybe other options, feel this is a peculiar aspect of our market today. Then again…pure speculation – until proven otherwise true.

Realtors: Professional Realtors (members of the National Association of Realtors who adhere to a strict Code of Ethics), who are also additionally trained in handling distressed property sales like CDPEs, who are able to handle the process for sellers, buyers and investors continue to be punished by the perception stemming from those who are not able to properly service buyers/investors or sellers of distressed properties. Too may of today’s agents are still in “avoidance mode”, still wondering why their offers on short sales or REOs are not being accepted. The same can be said for those who attempt to help the seller and submit improperly completed packages to the lenders for approval and wonder “what’s taking so long?!”

Attorneys: Often, even attorneys get caught up in the moment and attempt to chew more than they can swallow. By heavily promoting themselves looking for volume, they just find ways to stretch the inevitable for sellers who later face a madder than mad lender. After all that time, legal hoops and all the expenses, when they end up taking the property back, they often end up costing these home owners more than they bargained for. Attorneys who are fair will typically work to help their client, and make a nice living along the way. These attorneys will actually seek to mediate the case, seek a modification (voluntary/friendly or otherwise, depending on the result of a forensic review of the borrower’s documents to see if there were any violations by the lender), and even have a few good Realtors in their team who can help sell the property (via short sale). All this while seeking to avoid foreclosure, bankruptcy and even a deficiency judgment against the borrower whenever possible. If the latter three cannot be avoided, the ultimate goal of foreclosure avoidance should be sought, allowing the borrower to move on with the least amount of damage and scars possible, while still generating fees or even billable hours, depending on the complexity of the case.

CPA: Sellers often fail to also consult a good tax magician. Not one who is going to get them in further trouble, but one who understands the different ways available to a home seller who cannot avoid receiving a 1099C for the “phantom income” they must report as a result from the forgiveness of the balance due on the original debt. Having a tax professional who understands how the sale of the property and the resulting 1099 will impact you and how to massage your income and expenses so that you can avoid paying taxes (notice I said “avoid” NOT “evade”), is paramount in the process.

Sellers: Ah! The sellers. Herein lies one of the ultimate culprits in today’s market. 70% of those who end up in foreclosure often do so because they failed to consult with the proper professionals or even with any professional at all. A good attorney and CPA are of utmost importance in a seller’s team if he/she wants to avoid further problems after the sale. Listening to their qualified Realtor is also important. Handling a short sale can be complex even for the trained professional, an unsurmountable task for the untrained agent. Listening to a Realtor who has the training and tools to get your property sold and help you minimize the damage is most certainly worth his/her weight in gold. Typically, all costs associated with the sale of the property, are also picked up by the seller’s lender. This means that these sellers have nothing more to loose when they seek a consultation and hiring of the right professional for the job of selling their home. So, why are so many avoiding this critical affiliation? Beats me!

There are however, those sellers who may not qualify for a modification or short sale or that, because of their line of work, getting out from under this headache could cost them their career if their credit is affected or marked in any way. These sellers are in a tighter bind and more than any other, must actively seek field professionals who can help them through.

Mark Twain said that: Luck, Is When Preparation Meets Opportunity. There are plenty of buyers seeking opportunities and plenty of sellers missing out. Don’t let the lack of information or preparation cause you to miss out.

Remember how people who require a delicate surgery or face an uncommon illness seek the advice of doctor after doctor until they find just the right one. The same may be true of a specific electro-mechanic when faced with that difficult fix (electrical repairs being among the most difficult for most regular mechanics to detect).

Similarly, you must seek the right attorney, the right CPA and the right Realtor that can help you with your special situation.

If however, you own a property free and clear and yet, insist in selling at 2005 prices and will not listen to reason, you will only frustrate yourself out of the market. Buyers today will not find you when searching online or while working with a Realtor who has pre-qualified them and knows how much home they can afford (and yours is not it). Even if they happen to find your home while driving around, one phone call to get some basic information (including your price), and you’re crossed off the list for sure!

To avoid missing out on the opportunity to sell now however, get a second opinion, and even a third or more if you must. Whatever you do, do something! Above all, listen to the advise of professionals and make an informed decision.

Lastly, for those sellers who are hanging on, waiting for the market to recover…I have ‘not so good news’. According to an article recently published by the Miami Herald, you may not see that price you want (what you may now owe on your home), for as many as 10 years or more. Actually, many believe that, because of interest rates and resetting loans, ARMs and Option ARMs will increase the number of foreclosures for 2010-2011 beyond today’s numbers.

Then of course, one must wait for the employment situation turns positive (as in better than not loosing as many jobs or even neutral), inflation to remain tame so that buyers can continue to afford homes and interest rates also allow homeownership or refinancing and help generate a stronger consumer confidence.

All this, a balanced budget, a lower trade deficit, a stronger (or at least, not an even weaker), dollar, conflict resolution with Iran, Korea, Afghanistan, hec…even Venezuela, and we may actually enjoy a steady recovery that will allow sellers to finally brake even from their 2005-2006 high loan balances a few (10+?), years from now.

In short, I’ll say it again…missing out on today’s buyer’s market (notice it is no longer a seller’s market), may prove costlier than you think. Seek and you shall find, they say. The truth will set you free they say.

If that is the case, the sooner you seek the truth about how to help you through your situation, the sooner you will begin your own recovery, and in turn, maybe even help our national recovery.

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Your pithy comments welcomed!

If I may, let me suggest sellers also call the Real Estate Information Hot line I have created, where you can listen to a special recording on ‘Costly Home Seller Mistakes’ at 866-520-SAYL (7295) and dial extension 9009 (calls from within the USA or Canada only).

Poll: Who’s best equiped to guide me out of foreclosure?

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Mandatory mediation has a high success rate

Mandatory mediation has a high success rate

A program being tested in a few Florida counties (including Miami-Dade), has a better than 70% success rate and may become statewide standard to mediate foreclosures between borrowers looking to save their homestead property and their lenders.

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