Notes from Charlotte County, Florida

Charlotte Sun Herald (reprint from 9/29/07)

The age-old adage that defines home prices equates to a $2.1 million difference between the nations most expensive and most affordable housing markets, this according to a recent Home Price Comparison Index conducted by a leading nation brokerage.

This annual “apples to apples” comparison of similar middle management homes in 317 US markets finds that Beverly Hills, California, repeats as the most expensive market in the nation. An average 2,200 square foot four bedroom, two and one half bath home in Beverly Hills would cost $2.21 million. Yet, more than 1,400 miles away from the glitz of Rodeo Drive, the Beverly Wilshire Hotel sits Killeen, Texas, the nation’s most affordable market where a home with similar characteristics would cost $136,725. Killeen residents rejoice in their fishing, hunting, boating and Friday Night Lights-type high school football passions while embracing their role as a support system for the family and troops based at Fort Hood.

Serving as a “snapshot” study, the comparison evaluates average home values for select 2,200 square foot single-family dwellings with four bedrooms, two and one-half baths, a family room, (or equivalent) and two-car garage in 394 markets across the United States, Puerto Rico, Canada and a sampling of countries/territories outside of North America where this firm has a presence.

The cumulative average sales price of the homes surveyed in the 317 U.S. markets (including one in Puerto Rico) covered in the survey is $422,343.

Similar homes in Charlotte County (Port Charlotte) average $239,100, making the area one of the most affordable markets in the nation and the most affordable market in the state of Florida!

Hollie Dustin, Broker HomeChoice Real Estate, Inc. Short Sale and  Loss Mitigation Specialist

Thousands of Southwest Florida homeowners are in default on their mortgages and facing foreclosure. What many do not realize is that there may be a way to prevent an actual foreclosure. This is called a short sale.

A short sale occurs when you can no longer afford to pay your monthly payments, and the lender allows you to be released from the loan, forgiving or cancelling the balance owed.

Why would a lender accept a short sale?

A short sale has a better return on investment to the lender than a foreclosure. The average savings a lender might see from a short sale vs. a foreclosure is $14,000. They are able to cash out of the loan faster than a foreclosure process. Plus they do not have the legal fees attached.

As a homeowner, why would I choose to attempt a short sale?

Let’s face it. Bad things happen to good people.

There are many reasons why homeowners find themselves in a position of default…change in mortgage payments, loss of job, health issues, etc. When you get behind on your mortgage payments, the lender will start the foreclosure process, no exceptions. If the foreclosure takes place, you have ruined your credit for a period of up to 10 years. You can expect your credit score to go down about 100 points, making it impossible to make any future purchases using credit. A foreclosure is usually a required disclosure you must make on any credit or job application.

The lender may also file a deficiency judgment against you. A deficiency judgment can arise if the lender sells your home at auction for less than the mortgage debt. The lender then holds you responsible for the unpaid portion of the loan. The lender may take legal action to pursue payment, such as garnishing your wages.

A short sale is listed as settled debt, and is much less harmful to your credit. You can expect a decrease in your credit score of approximately 30 points vs. 100 points. The loan is forgiven, and no deficiency judgment will be placed against you.

Is it true I will be given a 1099-C by the IRS, and will owe taxes on the unpaid loan amount?

This has been a major concern for homeowners who choose to do a short sale. Previously, the IRS had the ability to consider the forgiven loan amount as earned income, and you could be taxed on that income. However, recently the House Ways and Means Committee voted to remove the phantom income tax that previously haunted distressed homeowners. Contact your accountant or attorney for further information.

Who should handle our short sale?

The most important thing to consider when deciding to work out a short sale with your lender is to use a qualified professional to handle the process and negotiations. If the processor is not experienced in the short sale process, the deal can be over before it begins.

A professional real estate professional will need to list your home on the market as the first step. Be sure they are aware you are attempting a short sale, and that they have experience working with short sales or experience working with a loss mitigator. The best scenario is to let the real estate agent handle the marketing of your home, and allow the loss mitigator to handle the short sale. That is what they are trained in, when most agents are not.

Ask if the real estate company you are considering has their own loss mitigation division, before signing a listing agreement.

What is the short sale process?

The loss mitigation representative will meet with you, explain the process and prepare your hardship package. They know upfront exactly what the lender will require when submitting your offer, and will be prepared fully to negotiate on your behalf.

Your home is listed by an experienced short sale real estate agent, who prices the home according to the loss mitigation recommendations. Remember, the goal is to bring in a quick offer and to prevent you from going into foreclosure.

Once an offer is received, an entire package is presented to the lender, and the negotiations begin.

Will the lender always accept a short sale offer?

Unfortunately, no. Some lenders will opt to continue forward with foreclosure. However, our experience is showing that lenders are becoming more and more willing to accept the offers we present.

What does it cost me to do a short sale?

Nothing. In the event that the short sale is accepted, the lender will pay the real estate commission, and the loss mitigation fee.

DAILY BRIEFING  FROM (10/11/2007)

The National Assoications of Realtors

Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he says.

Yun says it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year – a lot of people are, in fact, buying homes,” he says. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”

He emphasizes all real estate is local with naturally large variations within a given area. “Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun says. “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.”

Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring.

“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun says. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006.

NAR President Pat V. Combs says, “Housing is still a good long-term investment, and we’ll be seeing a broad, modest improvement in home prices in 2008. With widely varying conditions, the best advice for consumers is to consult a Realtor in their area to learn about local market conditions because supply and demand can change from one neighborhood to the next.”

House Bill #3648 PASSES - this bill just passed and makes a huge difference on the liabilities of a homeowner who has sold through a short sale. We have found the biggest fear of these homeowners is that they may have huge tax liabilities and be given a 1099 by the IRS at the end of the year. No longer the case!

In a tax-Peter-to-pay-Paul move, the House Ways and Means Committee voted to remove the so-called phantom income tax that haunts financially distressed homeowners whose debt is partially forgiven by a lender after a foreclosure or a "short sale" to avoid foreclosure.

Under the law, when a creditor forgives or cancels all or part of a debt, the amount forgiven is treated as taxable income. That is particularly harsh on homeowners who can't pay their mortgage, then lose their house in a "short sale" or foreclosure. If the sale proceeds aren't sufficient to retire their principal debt, and the lender agrees to cancel the missing balance, the IRS treats the forgiveness or cancellation of debt as taxable income.

Picture this scenario: To avoid foreclosure, you agree to sell your house to an investor for less than the amount you owe the lender. Say the shortfall is $20,000. If the lender cancels that balance as part of your negotiations, the IRS will demand income taxes on the $20,000 -- even though you've never actually pocketed that cash. It's phantom income, but the IRS requires your lender to file a Form 1099-C reporting that it canceled your debt. Think of it as the tax code's version of kicking you while you're down.

The Ways and Means Committee bill (H.R. 3648) will exclude home mortgages from the current tax code's "discharge of indebtedness" rules retroactive to Jan. 1 of 2007.

UPDATE: The following Year-to-date statistics are from the Charlotte County area Multiple Listing Service (MLS) and reflect month-by-month data regarding listing counts, marketing time and pricing averages.  The Tables below are segregated into the following property types: HOMES, CONDOS, VACANT LAND.

Table codes defined

BOM = Back On Market (these are items posted active after having first been withdrawn or expired)

PEND = Listings now under contract (Pending) which have not yet closed

EXPR / WITH = These reflect listings which have either Expired or were Withdrawn from the market during the month

SOLD = Homes that were once Pending and have closed during the month

AVE SOLD$ = Reflect the average closed sales price during the month

DOM = Reflects that average Days On Market for the sold listings during the month. Re-posted listings of the same property (new MLS number) may skew / understate this data.

Median Sold$ =  is price which 50% of properties sold were above and 50% were below the price shown

 HOMES:

CONDOS:

VACANT LAND: