MARKET AND CREDIT NEWS
EB-5 Spells Opportunity
Visa Program Luring Foreign Investors, Buyers
By Kevin Brass, International Property Journal
After languishing in obscurity for 20 years, the EB-5 visa program is suddenly a hot commodity in the U.S. real estate business.
“There’s massive interest compared to a few years ago,” said Stephen Parnell of WhichEB5, a consultancy that started as a relocation service and now focuses almost exclusively on EB-5 visas.
While the name suggests the sequel to a bad sci-fi film, EB-5, in concept, is relatively simple. Foreign investors and their families are offered a fast track to permanent green cards if they invest in projects that create jobs.
The number of immigration visas issued under the so-called “investor’s green card” more than tripled in 2009--from about 1,400 in 2008 to 4,200--in large part due to the unique attributes the program presents the property business.
To developers, EB-5 offers a new track to raise money, appealing to foreign investors who see residency status as an extra bonus for stashing money in U.S. property. At the same time, agents and service companies view the program as a new source for wealthy international clients already committed to moving their families to the U.S.
Outside Seattle, Steve Smith of Twin Development LLC is using EB-5 to raise $235 million to fund construction of the Sky Hotel and Residences, a 45-story mixed-use tower, including 400 condominiums. With little “conventional” funding available, he says EB-5 is a way to “broaden access to foreign capital sources while providing a lucrative opportunity for international investors.”
No bank financing will be involved in the project, Smith says. Twin Development is working with partners in Korea, where he expects to raise the bulk of the money from investors eager to jump the long waiting list for U.S. visas. About 70 percent of the EB-5 visas issued in 2009 went to investors from China and Korea, according to State department statistics.
Although EB-5 originally required a $1 million investment, the program now allows a $500,000 minimum, as long as the project is located in a designated “regional center,” typically an area hard hit by the economic crisis.
The number of “regional centers” has more than doubled in the last year, often focusing on real estate projects, anything from office buildings to ski resorts in Vermont.
“It’s very cheap money,” said Chaim Katzap, chief executive of Lion’s Property Development, which has offices in New York and China. “I think it is the best way today to raise equity.
Using the EB-5 program, Katzap helped raise $60 million from 100 foreign investors for the Brooklyn Navy Yards redevelopment in New York, which is a designated regional center.
EB-5 is particularly appealing to wealthy Chinese, who may already have family members working or living in the United States, Katzap says.
“EB-5 does not require language skills, does not require that you work here or that you live here full time,” he said.
Despite the recent activity, EB-5 is still dramatically under utilized. The program allows for 10,000 visas a year, more than twice the number issued in 2009.
Part of the hang-ups is purely bureaucratic. Garnering regional center status requires a lengthy process, with a variety of hurdles to overcome.
Smith said his company spent more than a year lobbying for regional center status for Federal Way, the site of his project. The efforts included a letter of recommendation from Washington Gov. Christine Gregoire and a campaign to demonstrate the area was worthy of the special designation.
“To be a regional center, you have to show it’s an area that needs incentives for development,” Smith said.
The program is also not ideal for all investors. There is no guarantee the investment will be successful, nor is there any assurance that a green card will be issued. The investor’s immigration application will still need to be reviewed and approved, just like any other application.
The investor also takes on the risks of the project, many of which may or may not be a great investment. Construction projects may take years to generate income, which may not suit investors looking for a quick return.
“This is not an easy route to money,” Parnell said. “Some [investors] look at this as the Holy Grail. If they do they are in for a shock, because it’s not easy.”
But chance for a green card is a big enticement for many investors who may not need instant yield on $500,000.
“It’s the predictability of the program,” Parnell said. “If you choose a regional center carefully, it’s the most predictable route to permanent residency.”
While some have criticized the program as a “pay for play” visa program, the program has managed to avoid the emotional and partisan debate over U.S. immigration policy. Due to expire last year, the program was instead extended until 2012, receiving an unusual amount of bipartisan support, thanks to the focus on jobs.
Earlier this year Sen. John Kerry and Sen. Richard Lugar proposed a variation on the EB-5, an EB-6, which would offer a citizenship track for immigrants who start companies in the U.S.
Real estate executives say awareness of the program is at an all time high, especially in areas with high numbers of foreign home buyers.
“Before we would talk about EB-5 once a month,” said Alfredo Vizcarrondo, president of the AV Group, a Florida-based real estate company dealing extensively with buyers from Latin America. “Now we talk about it once a week.”
In Florida, many of the regional centers involve real estate, which fits with investor interest in U.S. property, Vicarrondo says. His company primarily deals with clients from Venezuela and South America, who are eager to live in the United States.
“Everybody is looking for a visa,” Vizcarrondo said.
Immigrant Investor Regional Centers
The following is a list of current EB-5 (Immigrant Investor) Regional Centers in Florida. The list will be periodically updated.
Geographic Scope: Florida High Tech Corridor
Industries: Traveler accomodation; Food services and drinking places; Retail trade; Real estate; Manufacturing; Performing Arts; Museums, historical sites & similar institutions; Professional, scientific, and technical services
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Geographic Scope: Palm Beach County, FL
Industries: Intermodal traffic and cargo distribution center; Manufacturing and research facilities; Commercial and office space, Film and TV production
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Geographic Scope: Counties of St. Johns, Flagler, Brevard, Volusia, Orange and Seminole
Industries: Shopping & Retail Centers, Light Industrial Centers, Hospitals, Hotels, Medical Offices and Nursing Homes
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Geographic Scope: Counties of Miami-Dade, Broward, Palm Beach and Monroe in Florida
Industries: Infrastructure, Real estate, Agriculture, Clean energy, Aviation and Aerospace, Tourism, Hospitality and Entertainment, Information Technology, Healthcare, Life sciences, Maritime, Manufacturing, Education, Homeland security and defense, and Financial and professional services
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Geographic Scope: Miami-Dade and Monroe counties, FL
Industries: Construction of a hotel complex (includes spa, restaurants, and retail space
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Geographic Scope: Florida counties of: Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington, Bay, Jackson, Calhoun, Gulf, Liberty, Franklin, Gadsden, Leon, Wakulla, Jefferson, Madison, Taylor, Hamilton, Suwannee, Lafayette, Dixie, Gilchrist, Levy, Columbia, Baker, Lincoln, Bradford, Alachua, Marion, Nassau, Duval, Clay, St. Johns, Putnam, Flagler, Volusia, Seminole and Alachua
Industries: Agriculture, Construction, Cruise line support services, Health care facilities, Heavy manufacturing, Hospitality industry, Light manufacturing, Resort industry, Schools, Service industry, Technology
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Geographic Scope: All 67 Counties in Florida
Industries: Commercial & Industrial Real Estate
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Geographic Scope: Orlando-Kissimmee Standard Metropolitan Statistical Area
Industries: Development and expansion of Lake Buena Vista Resort Village and Spa
Luxury home sales on the rise again in South Florida
MIAMI – Aug. 4, 2009 – Jose Garcia looks over the contract for his Gables Estates home with Realtor Audrey Ross, who deals with the ultra-luxury housing market. The price of Garcia’s home: Just under $20 million.
Elite Realty. “Now, we’re getting five, six, 10 families coming through. I’m really praying and keeping my fingers crossed this is a permanent thing.”
Confidence seems to be returning, as well as a rising tide of money from outside the country, positive signs for both the high-end housing market, and the real estate market in general. Demand fed by foreign money has always been a critical piece of the real estate puzzle in South Florida.
“We’re on our way out of the worst (of the economic downturn)” said Manny Mesa, a Doral-based trial lawyer who is hunting for a bigger home for his wife and four children.
On Thursday, he toured the digs of former Miami Heat point guard Tim Hardaway. Hardaway is asking $3.9 million for the five-bedroom, five-bath home on almost two acres in the Pinecrest area. It boasts a six-foot coral rock wall for privacy and a closet the size of a very large bedroom.
“People are confident that the world is not ending,” said Adam Greenberg, a managing director for BayBridge, a Miami-based brokerage and mortgage banking firm. “They were so concerned it was ending and that our financial system could falter.”
When the global economy took a dive last year, real estate prices plummeted, including prices for South Florida’s toniest properties, priced at $1 million or more.
And then things got worse. As the calendar year turned, fear that the global financial system was heading off a cliff brought South Florida’s luxury home market – largely dependent on foreign wealth – to a standstill. In January, just nine houses priced over $1 million sold in Miami-Dade and seven in Broward.
But now brokers and some analysts are sensing a collective, if tentative, sigh of relief among the very wealthy, as evidenced by the recent uptick in luxury home sales. In June, the last full month of available data, 25 were sold in Broward and 41 in Miami-Dade.
The figures are still significantly off from the market’s peak, when about twice as many were selling on a monthly basis. And prices are still droopy.
Nonetheless, real estate brokers say it is evident that foreign buyers are returning to South Florida as news spreads globally that many of the region’s tropical, waterfront palaces are on sale. Among the bargains: Shaquille O’Neal’s 2.45 acre estate on Star Island, which sold recently for $16 million, about $2 million less than he paid for it in 2004.
Marketing a really ritzy home can involve having a robust website devoted just to that one property, color spreads in the Robb Report (billed as “The Global Luxury Source”) and advertising spots on shows like Extra and Power Lunch on CNBC. But in other ways it’s not that different from selling a two-bedroom CBS in South Miami. Delinois recommends having scented candles burning and a loaf of bread baking in the oven.
“Smell is very, very important,” said Delinois, who must know something, having sold Hulk Hogan’s home on North Bay Road in Miami Beach for a whopping $17.9 million.
Alas, despite Delinois’ recommendation, Hardaway didn’t have any candles burning or bread baking when Mesa stopped by. He didn’t get the sale either.
Mesa said he was going to keep on looking.
Brokers and analysts say the renewed activity in high-end real estate is at least partly because of a revived interest among lenders in making very large loans, called jumbo loans.
Banks’ appetite for jumbo loans – defined as more than $423,750 in South Florida – had all but evaporated as lenders hunkered down to weather the storm.
“They are marketing, inviting us to their offices to meet with them to tell us what they can do,” said Tere Bernace, a broker specializing in waterfront properties in Coral Gables and a former banker with Barclays Capital. “They say they are trying to increase their profile again in our market.”
Added Delinois: “I have never had a bank calling before to say they were lending.” BayBridge’s Greenberg said banks are interested in the rich and famous because they are looking for safety.
“They see values as very depressed and borrowers in the super luxury home market as a very unlikely default candidates,” he said.
In the past 30 days, BayBridge has closed three loans that were over $5 million.
“I’ve never had a client that has defaulted on a loan over $5 million in the nine years I’ve been doing this,” Greenberg said.
Spokesmen for Ocean Bank and BBU Bank in Coral Gables acknowledged they are actively seeking the business of luxury home buyers.
That doesn’t mean the loans are easy to get. Large loans require much heftier down payments – up to 50 percent of the purchase price – and stringent verification of income and assets.
Those who buy in the ultra-luxury category (homes priced at $5 million or more) often aren’t looking for loans.
“Most of the people who buy at this price point don’t finance, and if they do, it’s a matter of convenience,” said Audrey Ross, a senior vice president of Esslinger Wooten Maxwell.
In the past three months, Ross brokered three sales in Gables Estates – each for more than $5 million, she said. Two were all-cash transactions.
Ross, who has specialized in high-end real estate for 25 years, said typically the ultra-luxury sector takes less of a hit in real estate downturns and is usually the first to recover.
Luxury prices have held up significantly better in the current slump than the market as a whole, according to Coral Gables-based real estate analyst David Dabby.
For homes selling for more than $1 million, the price per square foot has fallen about 14 percent in Miami-Dade and 20 percent in Broward from the 2006 peak.
That compares to a 50 percent decline in the market as a whole, Dabby said.
Jill Hertzberg, a broker with Coldwell Banker, who along with her partner Jill Eber was ranked eighth nationwide in sales volume last year by The Wall Street Journal and LORE Magazine, said unheard of deals on luxury properties are driving interest.
Hertzberg cooed over a fully renovated home in Miami Beach with a stunning wide-water vista of Miami’s skyline that “ ‘screamed out to anyone wanting a downtown view and a beautiful home.”
Originally listed for $4.1 million, the property was dropped to $3.2 million and quickly drew multiple offers. It is now under contract and a closing date has been set.
“These are great properties,” Hertzberg said. “They aren’t second-rate properties. They are adjusting down to prices that are incredible, that no one has see before and people are buying them.”
Copyright © 2009 The Miami Herald, Monica Hatcher. Distributed by McClatchy-Tribune Information Services.
Shift in Global Investors in Florida
The Florida market, one of the hardest hit by the recession, is reporting an increase in sales for existing properties for the 8th consecutive month. The Florida Association of REALTORS® (FAR) reported that existing home sales increased by 18% compared to a year ago, and existing condo sales rose by 21%. While promising, the value of new properties has fallen as much as two-thirds from the 2007 price peak, making a quick recovery of the previously hot development market unlikely. Low prices and the large number of bank-owned distressed properties are attracting investors, including overseas buyers. While Florida has long attracted international buyers, FAR reports a shift of the source of those buyers with Canadians overtaking the British as the largest source of buyers.
Miami Home Sales Continue Dramatic Increase in May NAR Chief Economist Says
Florida Market May Have Bottomed
Miami, FL – In Miami, there was a 76 percent increase of existing single-family home sales in May 2009 compared to May 2008. Miami was the strongest single-family market in Florida showing a substantial increase compared to only 16 percent statewide. The sales of existing condominiums in Miami-Dade increased by 36 percent compared to the same period last year – and to the 21 percent statewide increase. The Miami real estate market has experienced a surge in sales each of the last 10 months.
According to National Association of Realtors® (NAR) Chief Economist Lawrence Yun, the South Florida real estate market may have hit bottom. “We’re certainly near the bottom if not at the bottom already,” said Yun at the recent International Real Estate Congress and Expo in Miami.
According to Yun, the current conditions will allow buyers priced out during the real estate boom to return to the desirable South Florida market. “Affordability is the highest it’s been since 1970,” said Yun. “More people qualify to buy, but some are still sitting on the fence. More people are financially capable.”
Yun said, “The Miami real estate market is undervalued . . . but buyers recognizing the opportunity will help the market reach equilibrium. We’ve seen a boom and a bust, but the bust is too low.”
“Long term Miami will outperform the rest of the country,” said Yun. “In 10, 20, 30 years, prices will be rising faster in Miami than in the rest of the country.”
Yun believes the short term prognosis is also positive, as it is likely that those buying in June 2009 will look back in June 2010 and see appreciation.
Yun emphasized the importance of South Florida as the top market for international buyers, baby boomers, and U.S. migration – and said foreign and U.S. buyers will prefer South Florida over other affordable markets such as Nashville, Atlanta, and Birmingham.
“Baby boomers like warm weather states and no state income tax states. . . South Florida will primarily see migration from the Northeast region,” said Yun.
Referring to the impact of international buyers in South Florida, Yun said, “Miami is globally recognized. Compared to other world-recognized markets, Miami will be the most affordable.”
The number of days a property stays on the market and inventory levels continue to decrease substantially, other indicators that point to the local market bottoming. The inventory of listings in the Southeast Florida Multiple Listing Service has dropped more than 40 percent in less than a year – from 43,095 to 30,631 – and May 2009 brought a 3.4 percent decrease in just one month.
According to Yun, “Foreclosures will continue to increase from last year, but there are buyers to purchase foreclosures, so there is a healing process.” The median sales price for single-family homes reported in Miami-Dade in May 2009 was $194,700, a 39 percent drop from the previous year. The median sales price for condominiums was $140,300, a 50 percent decrease from May 2008. Statewide, sales prices dropped 29 percent for single-family and 38 percent for condominiums. While down from a year ago, median sales prices increased in May 2009 compared to April 2009, from $177,000 to $194,700 for single-family and from $133,500 to $140,300 for condominiums.
Miami’s Supply of Condos For Sale Continues to Drop!
June 2009
Miami’s supply of Condos for sale continues to drop as indicated by statistics published by “Facts & Trends” Trendgraphics.com
CONDO INVENTORY
At of the end of May 2009, Miami-Dade County had 19,923 Condos listed for sale. This represents the lowest number of Condos for sale since the inventory peaked at 24,905 in May 2008. The May number of 19,923 also represents a drop of 5.5% from April 2009.
Lower inventory levels is good news for Sellers and Developers and a strong warning to undecided Buyers who seem to be waiting for X price before they decide to buy.
CONDO SALES
As of the end of May 2009, Miami-Dade County recorded 757 sales of Condos which represents a 99.7% increase in sales from the lowest monthly sales number recorded which was December 2007.
This is another welcome sign for Sellers and Developers who are unloading inventory at fire-sale prices.
AVERAGE PRICE PER SQ FT
Average Price per square foot (SF) is a better indicator of the state of Miami’s real estate market.As of the end of May 2009, Miami-Dade County recorded an average price of $205/SF. Although this number is 15.8% higher than the April 2009 number, it is still 44.7% lower than the highest number recorded on May 2007.
SUMMARY
The above Inventory and Sales figures, combined with the attractive average price/sf numbers - certainly an improved picture from several months ago - continues to attract buyers to the unique deals available today.
And although some argue that an increased number of foreclosures could temporarily derailed this recovery - a possibility more evident in properties valued under $500,000.00 - the real estate sales outlook for the remainder of 2009 and into 2010 still favors a Buyers market.Finally, smart money continues to chase investment opportunities with Developers, its Lenders and their respective unsold Condo inventory.
Don’t miss out on 2009 buying opportunities!
THE MIAMI HERALD
June 2009
First-time credit can serve as down payment
By Tom Kelly
The primary reasons first-time home buyers have been driven to considering a home purchase during the past few months are the attractive loan programs targeting first-timers and the generous $8,000 tax credit offered by the federal government.
Recently, the tax credit has been loaded with new angles allowing first-time buyers all or part of the often-needed down payment, a stumbling block for approximately 50 percent of all first-time buyers. As of May 29, 2009, the $8,000 federal tax credit can be used as “the down payment or closing costs” for buyers who apply for mortgages insured by the Federal Housing Administration before December 1, 2009.
A first-time buyer, as defined by the Internal Revenue Service, is anyone who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests, the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first time home buyer.
In addition, first-time buyers must purchase the property from a source unrelated to them. For example, they cannot purchase the house from a spouse, parent, grandparent, child, or acquire the property by gift or inheritance and obtain the tax credit.
Lenders are sorting out how all the details will work but that the impact of the news and the implementation of the program will be a huge boost to the regional housing picture.
According to Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development, the idea to “monetize” the tax credits allows them to be immediately turned into cash, rather than waiting several months after the closing date of the transaction for the credits to be processed. The credit amount from the IRS is the lesser of 10 percent of the purchase price of the dwelling or $8,000.
There are income limits attached to the $8,000 first-time credit. A phase-out of the credit begins when the taxpayer’s modified adjusted gross income exceeds $75,000 or $150,000 if married filing jointly. The credit is eliminated completely when the taxpayer’s income reaches $95,000 or $170,000 if married filing jointly.
Taxes owed by or refunds due to the taxpayer are factored into the calculation.
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”). AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
Donovan said that some mortgage companies, which do not have banking deposits to tap, will need a few weeks to prepare documentation for what will essentially be secured personal loans. Plus they’ll need to locate a source of funds for their advances. Donovan advised that first-timers need not curtail their shopping because by the time they’re ready to get a mortgage and go to closing, more local FHA-approved lenders will be actively in the market.
“The biggest obstacle for first-time buyers is coming up with a down payment,” said Joe Robson, chairman of the National Association of Home Builders. “Enabling buyers to access the tax credit at the time of closing will help to stimulate home sales, stabilize housing and get the economy back on track.”
THE MIAMI HERALD
June 2009
Condo glut fading fast, report says
The city of Miami wants you to know there are, in fact, plenty of humans living in new condos. And there are more each day.
By Monica Hatcher
With dark windows dulling Miami’s twinkling skyline, newly look ghostly. But that’s changing as the downtown area quickly fills up with flesh-and-blood residents.
Although condo sales remain sluggish, renters are marching in to help lighten things up. Sales are picking up, too.
An occupancy report released Wednesday, commissioned by the Miami Downtown Development Authority, found that 62 percent of the new condos built since 2003 are, in fact, inhabited by humans.
What’s selling: good deals. In the past two weeks at Brickell on the River South, 40 new sales contracts have been signed, thanks to aggressively reduced pricing by the developer.
“Come into the sales offices and see the movement on a daily basis of people trying to find out what is available to buy or to rent” said Andres Asion, principal broker for the Miami Real Estate Group. “People are tired of commuting into the heart of the city.”
Renters are driving the change.
Although the rental-to-sales ratio is now 50-50, an average of 280 new leases were drawn up per month on new units, compared with an average 50 monthly sales in the last year, according to the report.
Thanks to downwardly spiraling prices, sales numbers have improved recently to an average of 70 per month, though financing hurdles are still tamping down otherwise robust demand, the report noted.
While some may point to the rental trend as evidence developers overshot their estimates of demand and put up far too many buildings, Alyce Robertson, executive director of the development authority, said it makes little difference from an economic development standpoint.
Whether peoples rent or own, they need and demand more shops, banks, bars and restaurants in the area.
Robertson said the Downtown Development Authority, a quasi-governmental agency that promotes the area, will soon sell the area to prospective retailers based on the results of the occupancy report.
“The people who haven’t been to downtown recently, you really have to come and see because it’s really a different place.”
In the midst of one of the worst housing blowouts in state history, the occupancy report sheds some positive light on what otherwise is still a fairly grim situation in the condo market.
Prices continue to drop and rising foreclosures are financially disabling many condo associations. Also the sector is dealing with a vast oversupply of inventory – units for sale from developers, owners and banks.
As of May, developers still held 38 percent of completed units – or about 8,300 of 21,616 completed. They are being forced to rent or sell at steep discounts to fend off lenders seeking construction loan payoffs. An additional 1,333 units will be delivered to market later this year.
Competition from other parts of town also looms large. In Miami-Dade County, 56 percent of all properties for sale are either condos or townhomes, according to the Multiple Listing Service.
The bulk of those units are in Aventura, North Miami Beach and Sunny Isles Beach, with downtown Miami ranking second by a fraction. Developers typically do not list unsold units in the MLS.
What’s more, condos and townhomes represent 71 percent of all rental listings.
Craig Werley, president of Focus Real Estate Advisors in Coral Gables, who authored the study with Miami-based Goodkin Consulting, said that even though people are moving in, that doesn’t mean the market is healthy. But it does point to a recovery that may come sooner than what many people think.
Based on the current absorption rate and the likelihood of further price declines, Werley said healthy occupancy rates of 95 to 98 percent could be seen in as little as three years.
“There is an inflow, and while there will be some further discounting of prices that will undoubtedly take place with the existing inventory,” Werley said, “there is a demand for this affordable product.”
THE NEW YORK TIME
June 2009
First-time Credit can serve as down payment
By Marcelle S. Fischler
Two years ago, when Donna Santoro first noticed the listing for the two-bedroom carriage house in Center Moriches, L.I., on a canal with a view of Moriches Bay, the price was above $600.000.
“That was a dream,” said Ms. Santoro, a Teamster official. She couldn’t afford it, and eventually the house was taken off the market.
But last October, she noticed that it was back. At $429,900, it was extremely tempting.
It was now a short sale – which ended up meaning that the deal took a very long time, a fact that Ms. Santoro described as “the epitome of an oxymoron.” Yet that is the tendency, when houses are worth less than what their owners owe the bank.
She was able to put more than 20 percent down, was prequalified for a mortgage and had a good credit score. But she still had to wait for the seller’s two and let her close, a process that took until April.
“I hung in there,” she said, drawn by an “absolute great buy” and unnerved by the idea that if the deal didn’t go through, the home could be boarded up and go into foreclosure.
“It’s a great opportunity to afford something that you otherwise may not have ventured into,” was her summation. Beyond getting a house she loved, she was “taking it off the seller’s hands and giving them the opportunity to repair their credit more quickly and giving something to the bank other than zero.”
Across Long Island, short sales are up. Brokers say that banks are increasingly amenable to approving them, though expediting the paperwork is not always a cinch.
From January to April, there were 2,520 lis pendens – or notifications of foreclosure – in Suffolk County and 1,888 in Nassau, according to propertyshark.com. Some carry mortgages as high as $2.8 million, in Old Westbury.
Nationwide last month, 45 percent of transactions were distress sales – whether short sales or foreclosures, according to the National Association of Realtors.
Michael Morris, owner of Coldwell Banker M&D Goodlife, whose Moriches-based firm handled Ms. Santoro’s purchase, says short sales represent 11 percent of its transactions. Among its 343 listings, 36 are short sales. Of 120 transactions in contract, 17 are short sales.
Phil Tesoriero, owner of Dynamic Real Estate Services in Garden City, primarily deals with distress sales on properties ranging from $180,000 to $750,000; he sees tremendous growth in the short-sale market.
“A lot of people are over their head and underwater,” Mr. Tesoriero said.
It used to be that short sales became possible only after a mortgage payment had been missed and after the bank had filed a lis pendens. Lately, however, the bar has lowered: homeowners need only prove hardship, or a looming deficit, to proceed with a short sale, Mr. Tesoriero said.
Mr. Morris said hardships include divorce, job loss and family illness. In such situations, he said, owners “have to sell it and they are talking to the bank to try to work it out.” He added: “Nobody wants to foreclose. Foreclosure hits your credit score pretty hard.”
Rick Simon, a spokesman for Bank of America Home Loans, said that even though the bank’s first priority was to help owners keep their homes through loan modifications, short sales had soared in the last year and a half. The bank is now looking to speed up the approval process, which can take up to 90 days, he added.
One pilot program, to be rolled out nationwide in a few months, would preap-prove a short-sale price at the start of the process rather than at the time an offer is made. This would knock 30 days off the wait.
The bank assesses whether “the loss to the investor in mitigated by doing the short sale more than it would be mitigated” by foreclosure.
Then he home must be appraised, as a basis for ascertaining that any offers reflect market value. “Low-ball offers are not being accepted,” Mr. Simon said.
Short sales face competition in a market glutted with regular sales and foreclosed homes owned by banks, Mr. Morris said. Yet they tend to find takers more quickly, because their sellers “are more apt to price it at market value and not be in denial.” The difficulty comes later – with the heightened risk that the bank may not approve the sale and the buyer will have lost time.
Wendy Funk, a real estate lawyer based in Merrick, says banks “are so inundated with foreclosures they are agreeing to settle for less money” to avoid the full foreclosure process, which in New York can take years.
But, she said, “the bank may not make a deal if a homeowner was totally irresponsible.”
In March, after a year spent looking at homes in upstate New York, in New Jersey and in Levittown on Long Island, Sandy Acosta, a bank comptroller, found a short sale in East Meadow, a three-bedroom for $488,000 through Janie Davis, an associate broker with Re/Max Hearthstone in Bellmore.
“I vas looking for the house that I liked, not a short sale,” Mr. Acosta said. Still, he figured that the home’s status would ensure a good price, and decided that it was worth the three-month wait for bank approval to close the deal. Besides, his wife, Clara Canio, loved the house.
“If this is the style of the house that you want,” Mr. Acosta said, “you can wait.”
CORAL GABLES GAZETTE
June 2009
Utilizing home buyer credit to assist at closing
The Florida Housing Finance Corporation has released details on the new Florida Housing Opportunity Program (FLHOP), while Housing and Urban Development (HUD) has announced the details for the Monetization of the First-Time Buyer Tax Credit.
“These two programs are going to help numerous buyers obtain homes in an expedited manner and help move the foreclosure inventory in South Florida,” said Rick Burch, 2009 Chairman of the Board, REALTOR Association of Greater Miami and the Beaches (RAMB).
On Feb. 17, President Obama signed the American Recovery and Reinvestment Act of 2009 expanded the First-Time Homebuyer Tax Credit to as much as $8,000; extended the purchase deadline from before July 1 to before Dec. 1; and removed the repayment portion for qualified homebuyers who resided in the property for at least 36 months. In order to fully utilize the benefit, buyers need this assistance in advance. Therefore, the State of Florida and HUD have announced two programs to assist.
Eligible homebuyers for both programs in accordance with federal restrictions and Internal Revenue Service (IRS) Form 5405 are those who have had no ownership interest in a principal residence for the previous 3 years and earn no more than $75,000 adjusted gross income for single tax-payers or $150,000 for joint filers (adjusted reductions for earners up to $95,000 [single] and $170,000 [joint]).
On May 27, Governor Charlie Crist signed the state budget for fiscal year 2009-2010, which included a $30.1 million appropriation to the Florida Housing Finance Corporation to develop the Florida Homebuyer Opportunity Program (FLHOP).
FLHOP is scheduled to begin July 1, and provides subordinate downpayment assistance loans to homebuyers in an amount equal to the anticipated federal tax credit. Loans are to be obtained through the local State Housing Initiatives Partnership (SHIP) offices. Once the buyer receives their tax credit from IRS, the loan is to be repaid. If repayment is received within 18 months of the closing date, all interest charges will be waived; otherwise, repayment terms will be established.
On May 29, HUD published the First-Time Homebuyer Tax Credit (FTHBTC) Mortgagee Letter 2009-15, which provides guidance on how Federal Housing Administration (FHA)-approved mortgagees, nonprofit organizations and government agencies may assist homebuyers who are eligible for the tax credit and applying for FHA mortgages. The two approved methods for advanced assistance for homebuyers are secondary financing and the advance purchase of the tax credit.
Secondary financing may be soft (silent) or require a monthly repayment. If payments are required, they must be included within the qualifying ratios or payments must be deferred for at least 36 months in order not to be included in the qualifying ratios. The advance cannot result in cash back to borrower or exceed the amount for downpayment, closing cost and prepaid expenses.
If purchasing the tax credit is the preferred option, the proceeds of the sale cannot exceed the anticipated tax credit and a copy of IRS 5405 form must be attached to the FHA case binder. The borrower must sign a certification that the tax credit is not being used to pay off other debt. Any costs for covering expenses of the transaction shouldn’t exceed 2.5% of the anticipated credit. Finally, these funds cannot be used to satisfy FHA’s required minimum downpayment of 3.5%, but can be used as additional downpayment, buying down the interest rate.
Broward Existing Home Sales Surge 47 Percent
By Paul Owers
Home buyers are seizing the opportunities in South Florida’s housing market as deeply discounted prices and historically low mortgage rates drive sales.
Many sellers, however, are reeling, unable to unload their homes for close to what they paid. Until the sharp price declines ease – and that may take a while – the region’s housing market won’t begin to recover from a slump that’s nearing 40 months.
Sales of existing homes rose 47 percent in Broward County in March, to 680 from 463 a year ago, the Florida Association of Realtors said Thursday. The median price plunged 30 percent, to $219,500 from $311,400 last year.
Broward has seen nine consecutive months of year-over-year sales increases as cash buyers and investors return to the market. And first-time buyers are taking advantage of the bargains, seller concessions, mortgage rates of below 5 percent and an $8,000 tax credit that expires Dec. 1.
“The combination of much lower home prices and record low interest rates represents affordability that home buyers haven’t seen in a long, long time,” said Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach. “Even in a lousy economy, that will add a boost to home sales for the balance of 2009.”
Still, the supply of available homes in South Florida, while decreasing, remains at a high level, weighed down by a steady stream of foreclosures and short sales.
Broward County has 28,898 homes, townhouses and condos for sale, down 19 percent from the end of November, according to Condo Vultures, a Bal Harbour-based real estate consulting firm.
When banks slash prices on distressed properties, it reduces the values of other homes nearby. That, in turn, feeds the foreclosure cycle. The price declines lead to homeowners walking away, frustrated that they owe more than their properties are worth.
Moody’s Economy.com of West Chester, Pa., says Broward’s median home price might not bottom out until falling below $130,000 – which would mean a decline approaching 70 percent from the November 2005 peak of $391,100.
“We don’t think house prices will rise in a meaningful way until the end of 2011 or toward the beginning of 2012,” said Chris Lafakis of Economy.com.
Meanwhile, the sales and price trends held true for Broward’s existing condominium market in March. Sale rose 28 percent, while the median price plummeted 40 percent $82,100.
Rising unemployment is expected to affect housing, particularly people who already live here and want to move into larger homes. But for now, at the height of the spring home-selling season, real estate agents across South Florida report increased showings and more interest from buyers as prices fall.
Agent Randy Bianchi said he had four showings on a waterfront home Thursday. “I haven’t had four showings on it in three years,” he said.
Lewis Lopater recently bought a three-bedroom house in Palm Beach Gardens. He paid $174,000 for a home that was listed last summer for $229,900.
Lopater and his wife, Dawn, have a monthly mortgage payment of about $1,400 only $200 more that they paid in rent.
“It’s well worth it to have a fenced-in back yard and a piece of the pie, so to speak,” said Lopater, 48, a father of two and a food service employee at Boca Raton Community Hospital. “I really lucked out”.
Palm Beach County sales rose 20 percent in March, while the median price fell 29 percent to $228,100.
Nationally, home sales fell 3 percent from February. The median sales price plunged to $175,200, from $200,100 a year earlier. In Florida, sales rose 30 percent, while the median dropped 30 percent to $141,300. The median means half sold for more, half for less.
“The general public is starting to get it, that it’s a good time to buy,” said Michele Bellisari, an agent in Broward and Palm Beach counties. “Buyers are starting to have more confidence”.
Who is eligible for tax credit?
Can people who received last year's first-time homebuyer credit apply for the new one this year?
Q: If someone already received $7,500 for the first-time homebuyer credit, can also receive the $8,000 credit that is part of the new stimulus plan?
R: No. The first program, which in practice was more of an interest-free loan, is for people who bought homes between April 9, 2008 through the end 2008.
The new $ 8,000 tax credit, which does not have to be repaid, is for people who bought or buy homes between Jan. 1 through the end of November this year. "The more generous program this year reflects that the housing market has not yet stabilized", said Robert Dietz, an economist with the National Association of Homes Builders.
Both programs are for first-time buyers, wich is defined as anyone who didn't own their principal home in three years leading up to the home purchase, Dietz said.
There are income limits to be eligible for either credit. The cap is $75,000 for individuals and $150,000 for married couples.
Individuals who earn between $75,000 and $90,000 and couples who earn between $150,000 and $170,000 can apply for a partial credit.
The credits are for 10 percent of the home price, with a maximum of $7,500 or $8,000 depending on which program applies to you.
For this year's credit, you also need to own the home for three years after you buy it. If you sell it before then, you have to repay the money. APRIL 2009
HOMESEEKER
March 2008
LIFE IN HOMEOWNERS ASSOCIATION DEMANDS COOPERATION
By Vicky Katzwhitaker
No lawn to mow, a golf course in your back yard and a guard at the gate may be enough to entice you to buy a condo, even a single-family home in a community governed by a homeowners association.
It could be the best decision you’ve ever made – or the worst.
“It’s a matter of compromise”, says professor Gail Satler, a sociologist and expert in social policy and urban studies at Hofstra University, New York. “If you purchase a condo, apply to a co-op board or move somewhere where important decisions affecting your lifestyle are made by others, you have to be willing to trade your independence and sense of self for convenience, stability and permanence”.
Not everyone is capable of what Satler terms a “staying in the box” temperament and that’s where conflicts arise. Association boards are magnets for people who want power, who want to set the guidelines, she says, and that can run afoul of those who have a strong sense of individuality and who bristle at rules that spell out the color of window curtains, what can be places on the front lawn or the size and number of pets.
In his book, “Condo Living: A Survival Guide to Buying, Owning and Selling a Condominium”, Robert M. Meisner, a lawyer and nationally recognized expert on community association law, underscores the need for would-be buyers of association-governed housing to grasp the constraints of what he terms “careful living”.
“If you wish to live in a condominium, you must be prepared to give up a portion of the liberties and the flexibility of lifestyle which you might enjoy in a single-family detached dwelling”, Meisner says.
It’s not the only thing to fret about, he adds. Prospective purchasers should carefully review the association board’s track record. And if they buy in, he says, they need to constantly monitor board actions.
“If the board is ineffectual, unreasonably dictatorial, myopic, vindictive, ignorant, inflexible, naïve or unenlightened, self-serving and/or unwilling or unable to adhere to the condominium documents and general corporate law, the association is in for a heap of trouble”.
Across the nation, courts are littered with lawsuits over decisions and post-purchase rules imposed on individuals by some of the nearly 300,000 homeowner associations that the Community Associations Institute says exist in the United States. And while some disputes are over quality of life issues, many involve additional levies to pay for under-funded or unforeseen common-area repairs or improvements. In many states, if you fail to fork over the additional money or pay fines for flaunting your association’s rules, you can lose your home if the association board decides to foreclose your property.
The National Association of Realtors suggests that before you buy, ask the governing board to provide details on reserves it keeps and its investments. Since you’ll be paying a monthly assessment, you’ll also want to know exactly how that money will be spent.
The board also should produce a list of special assessments mandated in the past five years and how much each owner had to ante up.
“Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board’s fiscal policy”, the NAR warns.
If you discover the complex or its association is in litigation, watch out. “This is never a good sign”, the NAR says. “If the builders or homeowners are involved in a lawsuit, reserves can be depleted quickly”.
Refi madness !
Falling interest rates are leading to a rush to get cheaper mortgages.
Should you join in?
NEW YORK (CNNMoney.com) -- Falling interest rates are fueling a mortgage refinance frenzy as homeowners rush to reduce their housing payments.
The average rate for a 30-year, fixed mortgage dropped to 5.08% last week, according to the Mortgage Bankers Association, more than a full point lower than just a month ago.
Mortgage applications were up a whopping 48% last week, according to the MBA and more than 80% were from homeowners looking to lower housing costs.
"It's snowing loans," said Steve Habetz, a Connecticut mortgage broker, "and they're all refis."
Among those were Elizabeth Mayer and Michael Keohane, who bought their Manhattan condo just a little over a year ago, financing $220,000 of the purchase price with a 30-year, fixed rate loan of 6.5%. That was affordable, with monthly payments of less than $1,400. But their new 5.25% loan will lower their payment to about $1,215, saving about $175 a month.
"It was a nice holiday gift," said Mayer.
With savings like that, it's no wonder that homeowners are coming out of the woodwork. And mortgage brokers are beating the drums too, advising their clients to let the good times roll.
Mayer said her mortgage broker had kept her informed of interest rate declines ever since she originally purchased her home. "He's been encouraging whenever opportunities arose," she said. "We missed one opportunity last spring when we just weren't able to act on it."
The broker made sure they didn't miss this chance. "He e-mailed me [about it] from South Africa and called when he got back," said Mayer.
Who should refi...
Anyone with high adjustable-rate loans. Folks in this group should try to get into a low fixed rate if they can. Not only will they lower their payments immediately but it would also eliminate the possibility of future increases.
Those who would lower their rate by a percentage point or more. Borrowers who already have a reasonable fixed rate shouldn't jump into a new loan every time rates inch down, according to Orawin Velz, an economist for the Mortgage Bankers Association.
"You should have at least a percentage point difference before you even think about it," Velz said. "If you have a 6.5% loan right now, it would be a great time to refi."
Waiting for a substantial rate decrease makes sense because getting a new mortgage incurs some expenses. There are the costs of a new appraisal and origination and application fees. Plus, a title search and title insurance are usually required.
All those costs, which can add up to $2,000 or $3,000 or more for a typical $200,000 loan, are often rolled back into the mortgage, increasing the principal upon which the interest rates are applied. If that goes up so much that it offsets the interest rate drop, it doesn't make sense to refi.
Those who are planning to stay in their homes for a while. The increased balances usually take a year or two to be wiped out by lower monthly payments, so anyone planning to sell the home during the next few years probably should not refinance, unless the difference in interest rates is very substantial.
The actual rate borrowers get depends, just as with purchase mortgages, on credit scores, income and assets and the value of the home.
"If you have a high credit score and your equity is good, it's like a vanilla cream puff," said Velz. "You're going to get a great rate."
Home prices in record plunge ¡
National Association of Realtors reports that home prices dropped a record 12.4% in 2008 - the biggest fall in 30 years ¡ By Les Christie, CNNMoney.com 2/12/2009
Initial construction of U.S. homes fell to the lowest level on record in January, according to a government report released Wednesday.
Starts fell to a seasonally adjusted annual rate of 466,000 in January, according to the Commerce Department. That's the lowest level since the government started keeping records in 1959.
From CNNMoney.com February 18, 2008
"Great opportunities in Florida for cash buyers"
Borrowers with significant equity in their homes. Many homeowners have had much of their home values erased in the post-bubble bust, eliminating much or all of their home equity - the difference between the value of the home and the amount owed on the mortgage.
If a refi borrower's home equity has fallen below 20% of the total appraised home value, the borrower will likely have to purchase private mortgage insurance. The insurance adds a point or two to the monthly mortgage costs, which turns a 5% loan into a 6% or 7% loan, erasing any advantage of refinancing.
"That's the biggest hurdle for refinancing right now," said Velz.
Borrowers who don't think rates will decline much further. Everyone considering refis has to decide whether to wait for interest rates to go even lower, which the Mortgage Bankers Association has been forecasting.
That's only a prediction, though, not a certainty. Rates could turn higher instead.
Borrowers must weigh the advantages of gambling on rates turning around or locking in savings at the present very low rates.
Published in CNN.com
By Les Christie, CNNMoney.com staff writer
First Published: December 24, 2008: 1:42 PM ET
