PALM BEACH, Fla. – July 28, 2010 – With today’s reduced property values and increased unemployment, it’s tempting for some homeowners to just throw their hands up in defeat, allow the bank to take their home in foreclosure and rid themselves of the monthly mortgage burden.

Even suffering through the paperwork and stress of a short sale may seem too much for an overwhelmed borrower to handle.

But Florida homeowners should be aware of unique rules in the state that make the benefits of a short sale typically outweigh the ease of walking away in a foreclosure.

“I want to be very clear on this, short sales are a better solution than a foreclosure, even when all the options in a situation where you lose your house are not great,” said Mark Greene, owner and president of Short Sale Operations LLC in North Palm Beach.

The biggest difference between Florida and many other states when it comes to losing a home is the deficiency judgment.

While some states ban lenders from collecting the remainder owed on a loan after a foreclosure or short sale is completed, Florida law allows banks to go after borrowers for up to 20 years. That can lead to a garnishment of wages long after the home is gone.

In a short sale, where the bank agrees to take a lesser amount for the home than what is owed on a loan, lenders sometimes are willing to write off the deficiency on the front end.

Greene said in 90 percent of the cases he handles, the bank has waived its right to seek a deficiency.

That was the case with Jupiter resident Kathryn Lorello, who in 2008 found herself in a home she couldn’t afford.

Following a divorce, and with three children, Lorello bought a $408,000 home that she lived in comfortably for a year. But then she lost her job as a manager of a real estate company.

She remembers the day the bank served the notice of foreclosure.

“I cried my eyes out,” Lorello said. “That’s when I panicked because I really didn’t want it to happen.”

Lorello got advice from Greene on doing a short sale.

Her bank, Wells Fargo, waived its right to seek a deficiency even though it ended up taking $200,000 less than what was owed on the loan.

Also, if a bank refuses to waive the deficiency in a short sale, it still would have to go back to court to seek a judgment.

In a foreclosure, at the end of the proceeding, a deficiency judgment is automatically awarded by the courts and the bank is free to seek a claim.

“In the past, people just wanted to move from the property and get on with their lives and didn’t understand what the lenders’ rights were in terms of pursuing a deficiency claim,” said Paul Baltrun, director of loss mitigation at the LaBovick & La-Bovick law firm.

“I think people are more aware now about what can happen after the fact and that their nightmare can continue.”

Another consideration is the effect of a foreclosure or short sale on credit.

According to the Fair Isaac Corp., which developed the widely used measurement of credit risk called a FICO score, the negative effect of a foreclosure is only marginally worse than a short sale.

But in Florida, a deficiency judgment from a foreclosure is likely to have a much larger impact that will prohibit your ability to buy another home for many years.

Daniel Poulos, a mortgage broker with Elite Lending in North Palm Beach who has studied the effect of foreclosures and short sales on credit, said unless a borrower pays off the deficiency, it may be 20 years before someone is eligible for another mortgage.

“That’s the kind of information that’s not getting out in Florida,” Poulos said.

There are a few situations where some experts believe it is better for someone to go to foreclosure rather than do a short sale.

To do a short sale, a borrower must give all of his or her financial information to the bank before it will decide whether to allow the short sale. The idea is that if a person can afford to pay the mortgage, the short sale may be denied.

“Now the lender knows everything about your finances and they can better decide whether they will go after you or not,” said Jon Maddux, CEO of YouWalkAway.com, a company that advises people on strategic defaults.

If a lender doesn’t know your finances, Maddux argues, it reduces the chances it will go after you following a foreclosure.

“You might fly under the radar,” he said. “With the millions of people going through this, they are probably going to go after the low-hanging fruit.”

John Fenech’s
Lending Reminders:

FHA Financing
• FHA maximum loan in Tampa Bay $292,500
• FHA down payment needed from borrower 3.5%. All of this can come from a family gift.
• FHA seller concessions currently at 6% of purchase price
• FHA processing time for SLS is approximately 30 days.
• Owner occupied only

VA Financing
• Maximum loan amount in Tampa Bay $417,000
• 00000 money down required
• Closing costs and prepaids can be paid by seller to 4%
• Limit borrowers escrow money because normally no money allowed back.
• Owner occupied only

Conventional
• Maximum loan amount is $417,000.
• Minimum down payment is 95% loan to value
• Borrower MUST have their own 5% into the transaction prior to gifts being used unless the gift is 20% of the purchase price or more.
• Rate adjustments for loan to value and credit scores
• Owner occupied, second homes, investor loans.

For more info on lending requirements call John at 727-827-1818

So how about that news from the Pinellas County Property Appraiser’s office this week? Well before you head out to jump off the Sunshine Skyway read this to get a better understanding of just what that the real estate tax assessment means for you.

Many Pinellas County residents will open that little purple and white envelope this September and suffer from the shock of just how low the Property Appraiser thinks their home is worth. Take heed though, it’s not as bad as you think. You see the Property Appraiser isn’t valuing the home based on interior finishes, which do affect the value and what a buyer is willing to pay, rather they are appraising the exterior condition, square footage of the home and property sales in the area. They are including short sales and foreclosures as comparables to come up with a value. With the recent spike in foreclosed properties selling well below fair market value, because banks don’t want to hold a property over 30 days and the number of short sales that have been sold, would make it appear that the surrounding property values have plummeted. Not true though.

You have to take this “Assessed Value” with a grain of salt because there are many other factors that determine a property’s value. For instance, your property’s interior condition, features and layout play a huge part in determining how appealing a home will be to a buyer, recent sales of comparable properties within a 1 mile radius, sold in the past 6 months or less, plus or minus 15% in Square Footage. If there are enough arms length sales an appraiser will not use short sales or REO’s (bank owned properties) in consideration of valuing the property.

On another note, be aware that there are companies and investors out there that will call or send you a letter if they drive by and see that the property may be distressed and state that your property’s assessed value is X and that they are willing to buy it from you for that value minus repairs. DON’T agree to this as your property may be worth considerably more than the assessed value.

In order to ease your mind and get an accurate picture of your property’s current value speak to an experienced, knowledgeable and trustworthy realtor who works in the area the property is located in. Be sure that you ask that they show you the comparables and ask them why they chose those properties. You want to know the value of your home, not a number that they think you want to hear to get the listing. Also visit open houses in your area and check the newspaper for recent sales.

And yes, of course you can call us for a free consultation and market analysis of your property anytime. 727-851-6189

June 2010 Real estate MLS stats, there are some very good signs here.. Download the PDF file below.

MLS Stats for June 2010 “Click to download”

If you are considering buying or selling a home and would like additional info or a market study done on your property please call us, we are happy to help.

On July 2, Pres. Obama signed into law HR 5623, the Homebuyers Assistance and Improvement Act of 2010, which extends the homebuyer tax credit closing date to Sept. 30, 2010, for qualified buyers with a purchase contract that was signed by April 30, 2010. He also signed HR 5569, which retroactively reauthorizes the Federal Emergency Management Agency (FEMA) to enter into new contracts for flood insurance under the National Flood Insurance Program through Sept. 30, 2010.

The U.S. Senate passed two bills last evening previously passed by the House. Both bills still need President Obama’s signature to become law, but that’s expected to happen quickly.

Homebuyer tax credit
The Senate passed HR 5623, which extends the mandatory closing date to qualify for the homebuyer tax credit. The contract deadline does not change – homebuyers must have a contract signed by April 30, 2010 (an exception for active duty military) – but the previous closing deadline of June 30, 2010, has been extended to Sept. 30, 2010. The National Association of Realtors estimates that the approved bill will benefit more than 14,000 deals in Florida.

National Flood Insurance Program
Congress once again reauthorized a short-term extension for the National Flood Insurance Program to Sept. 30, 2010. The bill, HR 5569, makes the program retroactive to May 31, 2010, the date the program went on hiatus.

This is great news for many of my clients in the Tampa Bay area, we are going to have some very happy people today..