Palm Beach Real Estate and Loans

I'd like to apologize to my regular readers for the recent slowdown in my writing-

Just as I've been talking about for quite some time, things have been getting busier and busier in the Palm Beach Gardens real estate market.  And as Mary McKnight is so fond of saying 'Real estate FIRST, blogging second!".

It's a combination of several factors:

• the general public is finally starting to realize that things are turning around...
• while we still have a Buyers' Market here, prices are starting to go back up slowly in some areas, so those 'great deals' aren't going to be around forever
• the local newspaper even printed positive real estate news yesterday (yes, really)
• another big thing is the # of potential buyers that are showing up from Canada and Europe  - their money is particularly strong against the US Dollar right now so it's a perfect time for them to move and/or invest

All of the activity, combined with the opening of Knightlines Mortgage Services new Palm Beach Gardens home loanbranch hasn't left me with much time to write.

So, I just wanted to check back in and assure everyone that I'm not gone - I'm just THAT busy.

And the phone is ringing again-

It's great to report that activity is really starting to pick up for Palm Beach real estate.

The best part is that I'm actually experiencing it.

Between the 'overly positive' reports from within the industry and the hyper-negativity from the press there is an area where the common person is able to figure out things for themselves.

When those people start to call me from different areas of the country - all with basically the same thought - that they've been following the real estate market for a while and they think that NOW is finally the right time to buy real estate in Palm Beach...... Well, that's good news.

Just this week I've dealt with people from New Jersey, Connecticut, California and Canada.  They all had the same feeling, while last season was still a bit too pricey, they feel that the current prices are in line and if they want a good value, the time is now.

While I'm certainly not psychic (I still haven't hit the lottery..) I think that the great Florida price decline has ended.  I deal mainly with luxury property and while the owners have been amenable to price adjustments through the year, most people that I know have no intention of going any further.

It's the classic Have to vs. Want to Sell that I keep bringing up.  So many Sellers would certainly LIKE to sell - for a fair price.  They aren't desperate and they won't jump at just any offer.  They have no intention of dropping their prices any lower.

So as the general outlook continues to improve, more and more real estate transactions will close.  The number of homes available will drop and the word will get out that if you haven't bought yet, you're running out of time. Perceived value will increase and prices will start to go back up.

Business 101 - it can't get much simpler.

A Client of mine brought up the subject of Hard Money loans.  He practically cringed when he said the words -

He, like so many other people, just didn't know what they are.  You really don't hear about them too much, but they fill an important niche in the mortgage world.  Hard Money is available for both residential and commercial deals.

I'm going to give you the basics of this type of loan today -it could be the solution you're looking for in financing your Palm Beach real estate.

In a nutshell, we're talking about private money that is NOT backed by the Government as opposed to the typical conventional mortgage product.

So knowing that, why would you use it?

• Since you're looking at a private money source, qualifying requirements are much less strict than with conventional mortgages.  
• If credit scores are even considered, they can be lower then the typical range. This is probably the biggest positive factor.
• Due to the lower requirements, the whole process is usually much faster.

So if there is a credit history / score problem, a very unique situation or time is very short, hard money might be the way to go.

On the other hand you have to look at the terms of the loan.

• The maximum loan-to-value (LTV) is typically low, around 75%.
• Rates are typically very high - I know of one company that will charge between 9.99 and 13.99%.
• The up front charge for the loan will also be higher then what most people would expect, ex 5+ points

While the costs may seem extreme (especially the rate) these are typically only used for short periods of time.

If you can qualify for another type of financing, that is certainly a better way to go.

BUT if you need the money and conventional won't work, there ARE alternatives.

Please call me at (561)-282-7406 if you have any questions about this or any other kind of financing.

Yesterday I started to talk about foreclosures and short sales - there is way too much confusion about them, so I'd like to simplify things a bit.

I finished up by mentioning the case of owing more on your real estate then it's actually worth or "Being Upside-down".  How could that happen?

Several ways:

• Regardless of your loan type, if you live in an area with extreme depreciation, the value of your home could be going down faster then you can pay down the loan.
• If you have an interest-only mortgage, ANY amount of depreciation would make the home worth less then the loan balance since the principle never gets paid off.
• If you have been using the minimum payment on an option-ARM you would be experiencing negative-amortization - you're making monthly payments, but they don't cover the amount of intrest owed each month.  This increases the outstanding balance.  So even if your home's value didn't go down, the amount owed would be increasing.  If you're one of the many that has that type of loan, I hope your Broker / Lender made that perfectly clear.

Of course, the lower the initial Loan-to-Value (LTV) the safer you would be, regardless of the loan type.

So what is FORECLOSURE?

Let's start with PRE-FORECLOSURE - you've stopped making your monthly mortgage payment, now you are in DEFAULT on the loan.  A red flag goes up at the bank and they let you know that you had better get back on track, quickly.  At this point, get in touch with the bank DO NOT just ignore the problem!  The bank isn't going to say "You seem like a good person -  don't worry about it!" - but you could possibly work something out with them before the worst happens.

You could go the route of the SHORT SALE - it's called that because by taking less then what they are actually owed, the bank is taking 'a short'.  Here's where it gets a little complicated.  You can't sell the house for what's owed so you list the property and any offers that come up go straight to the bank to approve or disapprove - you as the owner have no say in the matter. 

The banks really don't want to take your property from you, they already have more than enough and then they have to pay their lawyers for their work, re-list the property and try to sell it themselves (and pay more agents).  So, yes, they will take less then what is owed in many cases - but how much less?

You might as well roll the dice and take a guess because if there really is a hard and fast rule they're never going to tell you & me!

As an example, let's say that the loan balance is $500,000.

    Case 1:  An offer comes in for $480,000 - will the bank take it?  There is a reasonable chance, because they really aren't losing too much.

    Case 2:  An offer comes in at $350,000 - if the bank took that offer, they would have a considerable loss - but instead of just saying no, they won't say ANYTHING - for several weeks, while they wait for a better offer to come in.  The usual turn around time for offers/counteroffers does not apply here.  After all, it IS their money.

Currently, if the short-sale works, you will have to pay tax on the difference between what was owed and what the bank finally accepted.

Lastly there is Foreclosure - the bank takes your house. It is then referred to as 'Real Estate Owned' (REO) and they will they try to sell it -

You can always contact me at 561-282-7406, but if you think you're headed for any of the negative situations I've described it's very important that you contact your Accountant and/or Lawyer ASAP so that you find out as much as possible.

I would like to talk a little about foreclosures and short sales today.

First of all - contrary to what the newspapers seem to want to you to believe, not every homeowner is in a financial crisis and not every home that is listed is being sold out of desperation!

Take a look at HAVE to Sell vs. WANT to Sell.

Are there foreclosures and short sales in Palm Beach Gardens?  Certainly - but its not the free-for-all that way too many people seem to expect.

Now that Im done with that, Ill cover the basics.

• You might own your real estate free and clear -GREAT!
• You could have a mortgage on the property - youre making the scheduled payments without a hitch.  Again, good for you.

The majority of people fall into those 2 categories.

Unfortunately, some homeowners arent (or are about to stop) making their mortgage payments.  The reason why does not matter - all the banks care about is: Are you or are you not making your scheduled payments?

This breaks down one of two ways:

1. Your house is worth more then what you actually owe on the home loan.  Youre not so bad off if thats the case because you can list it for sale and price it properly so that it actually DOES sell before you start missing payments.
2. You owe more on the mortgage loan then what the home can sell for.  Of course, this is the worst case.
   

Ill discuss how that could happen and what the next steps are tomorrow morning.