Is Your Luxury Condo at Risk? Tampa Foreclosures Pushing Rates Higher

picture of high rice condoJust a few short years ago waterfront condos in South Tampa were some of the hottest properties in the nation; now even luxury beachfront condos have experienced dramatic downturns as borderline buyers default.

Rising foreclosure rates impact more than just those the original owners; it impacts the entire community. Before purchasing a Tampa condo or other luxury real estate take time to perform a bit of investigative work to make sure you are buying into a reputable area able to withstand the current downturn. Here are the most common pitfalls to avoid and what to do to protect your investment:

1. Rising Association Fees. South Tampa condos with large numbers of foreclosures are forced to increase association fees charged to the remaining owners. General maintenance, upkeep of community areas and other costs must be paid by a dwindling number of owners. Understand the current fee structure and be actively involved in the decision-making process to understand where the money is going.

2. Reduced Resale Rates. Condo’s with excessively high rates of foreclosures may find the value of the remaining property valued less than expected. Remember, comp rates are heavily impacted by the most recent sales data for the area so always insist upon an up-to-date sales data from your real estate agent or broker.

3. Restrictions. Fewer association fees and lowered property values are pushing some condo associations to enact more stringent restrictions designed to curb the number of rental units, resale restrictions and other measures. These proactive measures are often for the benefit of all involved so actively participate.

4. Reality. Sometimes it seems everyone has money but how much is real wealth versus borrowed debt? The answer might surprise you! According to the U.S. Census Bureau,  the nationwide distribution of  households with annual incomes Over $250,000 includes:

• African-American 43,000 households with an average household income of $556,965

• White 1,194,000 households with an average household income of $465,786

• Hispanic 46,000 households with an average household income of $378,087

• TOTAL 1,305,000 households with an overall household income of $464,536

Superficially the numbers may seem impressive but closer examination reveals a few unsettling facts; the numbers are nationwide but the ratio’s indicate that very few household’s can actually afford luxury condos or other real estate. Before purchasing a luxury condo take time to investigate the household income for the area; make sure your neighbors can afford the homes they are buying. It will protect your investment and make sure you are obtaining the best possible price.

Tampa Foreclosures & Liens – Buyers Beware

image of a foreclosure signAlthough Tampa foreclosures present a very real buying opportunity there is risk involved especially for those unfamiliar with the local market. Learn how to avoid potential pitfalls with these timely Tampa foreclosure facts and tips.

1. Title Troubles. The Internet is filled with methods on how to delay foreclosure due to title problems; while that may not interest you as a buyer, the basic fact remains – many mortgage companies failed to properly document transfers and other essential information when packing/reselling loans. The resulting delay is used as a tactic to delay foreclosure for those in financial trouble but Tampa home buyers and others in the market for foreclosures should take note; foreclosed real estate could potentially contain title problems.

Tip: When purchasing foreclosed Tampa real estate, be sure to obtain both forms of title insurance. One protects the mortgage company and the other protects you as the buyer. Insist upon a reputable title insurance company. It may save you time and trouble in the long run.

2. Tax Troubles. Here is a little known fact of interest to those in the Tampa foreclosure market; some state and federal tax liens may impact your property purchase – specifically Federal income tax liens. Federal tax liens take precedent over all other forms of debt. Should the current home owner have a tax lien then it will attach itself to the property. Often it is only found during the title search and may impinge or negate the purchase of the property for the following reasons:

• The mortgage holder takes second position to the Federal tax lien and no longer wishes to complete the transaction.

• The foreclosed real estate is used to secure the lien and therefore could encumber the property – obviously negating the final transaction.

• The tax lien attaches to all future real estate purchased or acquired by the taxpayer effectively rendering them a credit pariah until the debt is repaid in full.

3. Timing Troubles. Tampa Bay foreclosures / short salescan take time to purchase; everything from clearing the title to ridding the current occupants of the home can slow things down to a crawl. Worse, extended delays can create financing problems including loss of rate locks and other provisions. It is imperative to have an experienced real estate agent who has actually worked with local foreclosures to make sure the process stays on track.

The Coming Credit Crunch – Last Call to Action for Tampa Real Estate

picture of a B of A signHome buyers and investors interested in purchasing Tampa real estate should carefully examine the most recent “Senior Loan Officer Opinion Survey” released by the Federal Reserve last week.

While the title of most Federal Reserve reports remain as elusive as their speeches, one thing is certain – credit is positioned to undergo major restrictions….soon. As the saying goes; the devil is in the details. No truer words have been spoken. If you have been sitting on the sidelines waiting for the real estate market to recover before buying then now is the time to act – here is why…

1. Obtaining a mortgage, home equity loan or other credit is going to become much more difficult in the near future. According to the survey;

• Nearly 75 percent of banks have already tightened lending standards for prime mortgages.

• Nearly 85 percent of banks have tightened lending standards for non-traditional mortgages.

• Over 85 percent of banks have either tightened lending standards – or stopped writing – subprime mortgage loans.

• Over 80 percent of banks have tightened lending standards for HELOC’s or Home Equity Lines of Credit. HELOC’s are a favored way to secure down payments on the purchase price of a new home, home renovation or investment property.

2. Lending standards on loans are going to be more restrictive, require larger down payments and cost more. In a nutshell…

• Expect to encounter higher interest rates – higher interest rates will offset any savings on the purchase price of a condo or other Tampa real estate homes for years to come.

• Expect to put more money down. Zero down payment loans are quickly becoming a thing of the past as banks demand 5, 10 or even 20 percent down payment.

• Expect to have better credit to qualify for favorable rates. Lenders are requiring better credit than ever to qualify for the best terms and rates – otherwise, expect to pay higher rates and closing costs.

3. Commercial Credit Not Excluded. Those interested in purchasing larger Tampa investment property or income generating real estate are also likely to be severely impacted by the coming credit crunch. According to the same study:

• 80 percent of banks have started to tighten commercial lending standards.

• 70 percent of remaining banks expect to significantly tighten or restrict commercial lending standards and loans in the coming year.

4. Consumer Credit is also drying up. Don’t expect to use credit cards, personal lines of credit or other consumer credit for down payments, renovations or other expenses; banks expect to significantly reduce consumer credit limits and increase interest rates on everything from car loans to credit cards.

Hyde Park: Tampa’s Historic Treasure

image of hyde park in tampa, floridaHomes in Hyde Park combine old world charm with modern day convenience in style all within a relatively unknown zip code of 33606. Located within the Tampa city limits, Hyde Park is one of the oldest communities in the area; dating back to the 1870’s.  The beautiful Bayshore Boulevard and Hyde Park Village shopping district are popular favorites with the locals but there is more to Hyde Park than what meets the eye including a strong sense of community and history. Find out if Hyde Park is the right area for your family to call home by comparing the predominant trends and character of current Hyde Park homeowners.

Uptown, Upscale and Urban is likely to describe the greatest number of homeowners in the Hyde Park area.  Predominately from upper-middle class incomes with higher than average income producing assets, this young group is highly educated and enjoy the finer things in life…albeit in a contemporary and relaxed manner. Microbrew beer and Banana Republic are likely to be on their mail order list while they drive the latest Range Rover SUV to and from casual restaurants and the fitness club.

Hip, Trendy and Moving Up the Corporate Ladder.  Another commonly encountered homeowner in the area would include college educated, upwardly mobile, hip and trendy couples with a tendency to speak more than one language and drive a VW GTI over a Ford.

Bohemian best describes another less affluent but fun portion of the Hyde Park population. Funky, fun and full of diversity, this crowd keeps things lively and the conversation moving whether the topic is the latest movie, political debate or nightclub.

Hyde Park has something for everyone; from old style charm to the beautiful bay and quick access to anywhere you would want to be in the greater Tampa area it is a not to be missed destination.

How to Locate Under-Priced Tampa Real Estate

the price is right imageEvery buyer and investor wants to learn how to locate under-priced real estate in Tampa, Florida but you don’t need to buy expensive programs or software if you simply know where to look. Finding below market value condo’s, homes and even raw land is as easy as 1, 2, 3.

Find a good agent.  Not just any agent will do…find one you can work with and who takes the time to listen and understand your needs. You do NOT want an agent that will compete with you for the best deals nor someone that is simply after a quick commission. Locating below market value homes takes time, patience and a lot of negotiation so find an agent that will work with you to find and negotiate the right properties for your portfolio.

Track key motivators. Key motivators are those reasons people are most likely to sell or let go of a property for below market value. They include:

Health or Medical Issues. Family members may need to move closer to loved ones or go into a nursing home.

Unwanted or Inherited Property. Not everyone appreciates a gift of real estate – especially if it comes with hefty taxes or insurance and they don’t live in the same state.

Legal Problems or Lawsuits. Although some legal problems may be better left for others to deal with, sometimes they can create the need to sell in order to satisfy debts or other common problems.

Retirement. Many homeowners decide to downsize when the children leave home or buy that perfect beachfront condo in Tampa rather than stay close to jobs or schools. As priorities change so do housing needs.

Foreclosure. foreclosures in Tampa Bay are gaining popularity among many buyers but it is still advisable to work with a reputable agent – you might be able to pay even less than you think!

Relocation and Divorce. Changes in lifestyle, marital status or other life events often require a quick sale in order to allow seller to purchase a new home in the next destination.

Learn how to read the legal notices for the Tampa zip codes you are interested in purchasing. Newspapers and online classified ads typically run legal notification daily with larger notices taking place weekly.

Take the Confusion Out of Common Contract Clauses

writing-contractWhen it comes to buying or selling a condominium in Tampa or other real estate then dealing with contract clauses is part of the equation. While a reputable and experienced real estate agent can help navigate the often complex – and always uncertain – waters of legal language, the sad fact is – not all real estate agents are equal.  Learn how to use and recognize common real estate clauses with these quick tips:

Work with an experienced Realtor. Insist upon a proven track record of buying and selling the type of real estate you are interested in. For example, if you want to purchase a beach-front condominium then don’t settle for an agent that works with farm-land simply because s/he attends the same church.  Many types of real estate involve specific clauses, covenants or other considerations specific to the type of property.

Price related clauses. A reputable and experienced real estate agent does far more than merely making sure the price is acceptable to both parties; the ability to obtain financing and insurance at a competitive rate is also important.  Buyers should stipulate the maximum rate they are willing to pay in order to avoid forfeiture of escrow funds. Sellers should recognize the need for financing and act accordingly; marginal buyers should be given a specified time to obtain financing then put the home back on the market so avoid missing a more qualified buyer.

Appraisals and inspection related clauses. Both buyers and sellers benefit from appropriate inspections and appraisals; it helps assure the bank will release funds, provides enough cash reserves for buyers to take care of business after the closing and can even help negotiate price for both parties. Sellers who are able to demonstrate solid construction and minimal maintenance can garner higher prices than comparable homes in need of deferred maintenance and repairs. Likewise, buyers seeking bargains have hard-numbers to present to sellers in order to continue the negotiation process.

Closing date clauses. This could very well be the one area where an experienced real estate agent in Tampa makes the most difference; the closing date.  Inspections, appraisals, paper work and other related routine tasks required to close will make or break any transaction. Few people have the time (or patience) needed to handle these issues on their own even if they knew how. A missed deadline can result in the loss of an entire deal. Stay in close contact with your agent to assure all dates and deadlines are met. Experienced agents can often anticipate problems that will either require an addendum or other intervention in order to make sure the deal goes through. Remember, a real estate agent becomes most valuable when things go wrong – not when it all goes right!

Buying for Appreciation or Cash-Flow?

image of a house on a stack of moneyTampa Florida real estate exploded from 2001 to 2005 as homeowners and investors bought every flocked to beach front condos, popular areas like New Tampa or even outlying areas like Lutz to enjoy the fun and sun.

In the urgency to beat the ever rising prices, buyers used creative financing techniques that allowed little to no money down in exchange for future appreciation. In fact, some markets were rising so rapidly that buyers were willing to carry a negative cash flow in anticipation of reaping major profits when the home or condo sold.

In the past year, the question has become even more relevant given the declining real estate market. Is it a buying opportunity or risk? Should investors and those seeking to preserve their wealth invest for cash-flow or future appreciation? The answer to these and related issues depends upon your concept of investing.

Most investors take a long term approach to building wealth; just look at the interest rate of savings bonds, 401-K and other retirement accounts. Each is designed to build wealth gradually over time. On the other hand, speculators and day-traders try to make a quick profit. There isn’t anything inherently wrong with that method of making a bit of extra money but it should only include funds you can afford to do without…never a retirement account or the roof over your family’s head.

When analyzing the current real estate market in Tampa, home owners and investors would do well to take a long term outlook of the situation while still keeping the fundamentals in mind. Historically, real estate has generated significant wealth –over a period of time.  Cash-flow is certainly an important consideration but as long as the property is able to generate a profit above the PITI plus cost of repairs and maintenance then long term appreciations is likely to be more important than any temporary downturn.

Use these simple tips to make money in any market:

Buy for long term appreciation when inflation begins to rise but before interest rates increase.

Factor in a small buffer for increased taxes and insurance.

Take advantage of favorable taxes related to real estate.

Please check out this Dallas real estate website.

Tampa Condo & Home Buyers Facing Further Declines: Fact or Fiction?

picture of a question markAccording to media reports released on August 12, 2008, one third of new home owners owe more than their home is worth with markets in California and Florida leading the pack. Should homeowners of  Tampa, Fla condos be concerned?  Yes and No. Take time to analyze the facts behind the headlines then make an informed decision about buying or selling real estate in Tampa Bay.

Fact:  The much touted report was released by Zillow.com, a popular Internet home valuation site. (Although Zillow widely proclaims to be a home valuation site, the fine copy clearly states they are merely a home estimation site…a much more accurate representation of reality as we will soon discover).  Despite its popularity, Zillow home valuations have drawn well deserved criticism from industry experts who point to the method Zillow uses to provide home values.  Zillow historically based home value estimates upon the use of tax assessment data as well as listing prices of nearby homes…both of which are extremely inaccurate measures of actual home values. Tax assessed values can be significantly lower than actual home values especially in mature neighborhoods with little to no re-sales. Likewise, the asking or listing price of a home has little real value other than “wishful thinking” among many sellers who asked outrageous sums in the hope of finding someone to “make them sell”.  Although Zillow has taken steps to correct some of these problems, basing the current declines against the formerly problematic calculations provides baseless comparisons since the original data wasn’t trustworthy to begin with.

Fact:  Second quarter prices for home sales continued to fall for a nationwide average of 9.9 percent from the same period in 2007; however, as we already reported here at Tampa2Enjoy, roughly 40 percent of major markets tracked by the Case-Schiller Index have stopped declining and show signs of stabilizing.

Fact:  According to the same report, nearly 15 percent of home sales nationwide were foreclosures…however, media reports fail to mention that in any given year there are always a significant number of home sales comprised of foreclosures. Foreclosures have always been – and remain – one method of purchasing under-valued real estate in any market.  What makes this statistic seem worse than normal is the difficulty of those seeking to obtain top-dollar when selling their house in Tampa. The fact of the matter is you do NOT want to compete with foreclosed real estate when selling – find an agent that can help differentiate your property on something more than price.

Fact:  Home sale prices have continued to decline in 140 major markets throughout the nation. While that is true the media often leaves out the second portion of that report – home prices actually continued to increase in 25 major markets across the nation.

While there is no doubt the real estate market is experiencing a correction, take time to carefully analyze the data to discover the truth behind the headlines.

Tampa Real Estate: Top Reasons Your House Hasn’t Sold

Many home sellers look at what they bought the house for and then add the cost of upgrades and repairs plus commission and closing cost to determine an asking price. Unfortunately that isn’t always a good place to begin. Work with a reputable Realtor in Tampa to determine comparable values of recently sold homes in the area. Make sure the data is up to date since prices have fallen in some areas.

Your home is too expensive for most people to purchase. Tampa Bay homes at the upper end of the spectrum face special challenges when it comes to finding qualified buyers. If your property is in the upper 25 percent of the cost of homes in the area then you will encounter fewer qualified buyers. Consider expanding the market by advertising to out-of-state and International buyers interested in purchasing luxury real estate in a sub-tropical setting.

Your home has deferred maintenance. Few things are worse than trying to sell a home that needs extensive repairs especially in a buyer’s market. Deferred maintenance lowers the appraisal value of the home, increases the cost of insurance and places a large question-mark in the mind of prospective buyers and banks who question how much it will cost to bring the property back to proper condition. Take time to perform as much maintenance as you are able in order to make the property look its best.

Your home is located in a high crime area. Today more than ever, home buyers are concerned with the local crime rate especially since they are planning to remain in their homes longer. If crime is a problem then prevention is the cure; you may not be able to eliminate crime in the area but adding security camera’s, fencing, locks and speaking to the neighbors about starting a Neighborhood Watch are solid steps in the right direction.

Your home hasn’t been shown. If you are trying to sell your Tampa condo or home “By Owner” or have it listed with an agent that isn’t obtaining qualified leads then it could cost you more than just a little time and money. The choice of agent is one of the most important decisions you will make when deciding to list your Tampa real estate; make sure you know what is included in the marketing plan for your home, obtain comparable sales data in order to price right and ask about the qualifications of the expert who will be working with you in advance.

Tampa Home Owners and the Housing Bill

image of houseTampa home owners will likely welcome most of the provision contained in the newly passed Housing and Economic Recovery Act of 2008. The Title IV – HOPE for Homeowners provision of the act provides continued support designed to address the needs of existing homeowners in need of financial assistance to avoid foreclosures. Unfortunately, the bill is unlikely to help those currently in the midst of foreclosure on their homes and does nothing to alleviate the financial risk to investors or those who purchased non-owner occupied properties.

About the HOPE for Homeowners Program

The purpose of the HOPE or Homeowners Program is to create a FHA program that will allow homeowners to avoid foreclosures by reducing the principle balance, reducing the interest rate charged on the mortgage and/or assist in refinancing the loan to more favorable terms that allow the homeowner to manage payments more effectively.

Qualification Requirements

To qualify you must conform to one or more of the following requirements:

Be unable to pay your existing mortgage on your home.

The property must be your primary residence. Investors, second homes, vacation homes and other Tampa, Florida real estate not considered your primary residence is ineligible.

Not intentionally in default on the mortgage or other debts.

Have a debt-to-income ratio of mortgage debt to income in excess of 31 percent.

Be able to repay the new monthly mortgage amount.

The home must not exceed 90 percent of the appraised value based upon a current appraisal of the property.

All subordinate lien holders must agree to waive rights. Additionally, all late fees, prepayment penalties and other fees will be eliminated upon successful refinancing.

No second liens can be placed on the property for a period of five years.

Agree to equity sharing. Although most home owners facing imminent foreclosure are unlikely to worry about future equity, borderline cases may want to consider all their options first. Depending upon the length of time you hold the home after refinancing and other factors, FHA may end up with more equity than you do at a later date…essentially wiping out future gains for years to come.

It is estimated that nearly 400,000 households will benefit from the Housing and Economic Recovery Act of 2008 but critics point out the bill does little to relieve the financial woes of those currently in the midst of foreclosure. For those households facing the prospect of foreclosure, it is a good idea to consult a financial consultant to determine if you will benefit or not. Many homeowners facing dramatically reduced housing appraisals combined with a loss of earning capacity may find little relief and even less HOPE from the housing bill. On the other hands, those that qualify are likely to dramatically benefit from the ability to refinance at competitive fixed rate terms while eliminating second mortgages, late fees and penalties while gaining a fresh start.