New Guidelines for Short Sales

As of November 1st, 2012, new guideline for short sale without additional approval from Fannie Mae/Freddie Mac will include death of a borrower, divorce, disability or relocation for a job. According to FHFA Acting Director Edward J De Marco, “these new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities.”

What should a Buyer consider when making an offer to purchase real estate in today’s market?

Today buyers are faced with many obstacles when making an offer for a property. Due to the recent low in inventory levels, buyers are confronted with multiple offers for the same property. This dilemma is worsened when one of those offers is cash – cash is king. Finding he right financing is also  becoming more difficult, particularly for first time home buyers.

Here are a few things to consider. First, a buyer should be well aware of what price home he or she or couple qualify for. Your local bank or mortgage broker will be able to help with this. You will not have to use the lender who prequalified you. You can later find the Lender of your choice to make  the actual loan.

Make your offer as strong as you possibly can.  To do so, the Buyer needs to do the following.

Line up all the resources you will need in order to comply with the terms and conditions of contract.  You will need a lender, property inspector and title attorney for the closing (if purchasing a distress property (short sale, foreclosure, REO, etc), the title attorney or company will most likely be chosen by the Seller). It is important that you discuss the timeline with these professionals. The less time you ask for in your offer to fulfill the contract contingencies the stronger your offer will look to the Seller.

Simultaneously with the above, you should be searching for property within your budget, never exceeding more than 3-5% over the amount you qualified for (3-5% may be negotiated off the listing price-hard to say in today’s market). A real estate agent can help you with your search and the offer amount. Today Buyers need to be really careful when negotiating on the purchase price. Being too aggressive could steer the Seller towards another offer. In fact, today many offers are being made for full asking price and sometimes for more. If offering more, on needs to understand that this could be a problem if the property doesn’t appraise for the amount offered. If the property doesn’t appraise, the Buyer has to either pull out money from his or her own pocket to cover the difference or cancel the contract. Remember, although price isn’t always what determines the strength of an offer, for many Sellers it is at the top of the list.

When making an offer, the Buyer should consider the following.

·         The size of the loan that they qualify for before they begin to look for property.

·         Can they afford to offer more than the asking price?

·         Terms and conditions of the offer - Buyers should carefully consider how much time they should ask for in order to cure the financing and inspection contingencies, and how soon they can close. Consult with the professionals you will be working with before you make your offer. Remember that the time set in the contract for the mentioned items above will have to be met or you will be in default of contract.

·         If possible, present your offer with a loan commitment letter from your lender (this shows that you have a committed lender for the purchase). By doing this, the timeline can be shortened, making your offer stronger, particularly against a cash offer. It is important to know, once the commitment letter is issued to the Seller, the Buyer waives the right to cancel due to financing (every transaction is unique and a professional should be consulted before submitting an offer).

·         Inspection period should be as short as possible. Typically, an offer allows between 10 and 15 days, however, with the technology available to property inspectors, inspectors can usually perform the inspections and issue a report in 48 hours (must discuss the timeline for the physical inspection and report with the inspector in advance of the offer). Note, with the bounce back of the RE market, many inspectors are very busy and may need more time. Also, the number of inspections will affect the amount of time needed.

Record low interest rates!

Record low interest rates! According to Freddie Mac, the 30 year fixed rate is at 3.78, the lowest since mortgage rate tracking began back in the 1950s. According to the Feds, they will keep interest low through 2013; however, the 30 year rate will likely hit 4.5% in 2012 and 5.4% for 2013.

Time to buy!!!!

The Ever-Changing Miami Skyline

For over five years, Miami’s skyline has remained pretty much the same, however, that is about to change in a big way. For quite a while now, the skyscraping cranes which laced the horizon back in the real estate boom have been dismantled and put away not to be seen until now. In fact very little construction has been going on at all throughout the Greater-Miami area since. Mostly due to the over abundance of condos built during the boom years, the real estate market has struggled, yet effectively consuming the massive condo inventory.

Developers, who have always considered Greater Miami as an ever-growing and very popular venue, have slated 6 new developments for the Miami-Brickell and Downtown areas. Due to this, the towering crane will shortly become part of our skyline again.

Florida condo resales were up 65% in 2011. Out of the 23,000 downtown condos constructed during the boom years less than 2,000 remain unsold. A lot of this is due largely to the foreign buyers who see South Florida real estate as a good buy. These are mostly cash buyers from Central and South America, Canada, Europe and American from the northeast.

According the Miami Association of Realtor, International buyers account for 90% of all condo sales. According to the Miami Herald, which published the article ‘Condo-Mania 2.0 back in October 2011, “Builders believe that surging international demand is strong enough to support new condo towers.” 

The 6 new towers will add a total of 3,882 to our local real estate inventory, a small amount considering the boom numbers. The Genting Resort World Miami will be the largest project contributing 1,000 units to the supply. Next, Brickell CitiCentre with 755 units, followed by Brickell House and Sky Palace at Mary Brickell Village, each with over 300 units and last My Brickell with 192 units.

As previously mentioned, the current inventory is at the lowest it’s been since the boom. Although, the current dwindling condo inventory in the area has move prices considerably higher since last year, prices are still below what they are expected to be moving forward. New condos are being reserved and will soon be sold at pre-construction prices at about $300 to $350 a square foot. If all goes as planned we can expect these prices to go up, particularly when the investors begin resale. These prices will make the current average square foot of about $250 look like a fire sale to most foreign buyers.

For those of you who may be confused about what this means, I have this say; get moving and buy. There are still good buys out there, however, the current inventory will not last forever and the new coming online will be priced higher as price trend upward.

Smaller is Bigger!

Due to the aging population in the USA, home buyers over 55 are looking to down size to smaller but more efficient homes. According to Stephen Melman, spokesman for the National Association of Home Builders in Washington, D.C., “Retirees want smaller homes, but they also want houses to be smarter, in terms of energy efficiency and the usage of space.”

In Florida, real estate professional have been very successful in dealing with these needs for many years. Florida has always been a preferred destination for retirees and vacationers. Today, many local builders continue to head the trend towards smaller and greener homes. Builders are incorporating many energy and space efficient amenities into their new designs. Where open floor plan have been the norm for condos for the past decade in Florida, these designs have now crossed over to smaller single family homes. Open kitchens and great rooms are preferred by most buyer who are looking to buy smaller homes. This design makes smaller spaces look larger and works best when entertaining. Other important features are a main floor master bedroom and larger bathroom. Ample closet space is paramount and an attached car garages is usually on the list.

Due to mostly sunny and pleasant weather all year round, outdoor living is a big part of the Florida life style. Florida residents have enjoyed this life style by incorporating outdoor amenities such as open patios and summer kitchens to larger homes. These amenities are now becoming very popular for smaller homes as well.