As a tropical paradise, South Florida’s real estate market is counter-cyclical.

For most of the country, real estate sales wind down in the fall while people are busy getting ready for back to school.  As the season progresses, the number of listed homes and real estate sales slow to a trickle into the winter and into the new year only to gradually increase in the spring and summer months – the high season for home sales across the US.

The opposite is true for South Florida. Our season begins to ramp up in September/October. By Thanksgiving, the real estate market is flooded with buyers from all over the world eager for their own slice of paradise. As the new year approaches, the number of home sales build into a crescendo which lasts well into the spring, subsiding around Passover.

We are experiencing a number of factors, which paired together with our normal real estate market cycle, creates a unique opportunity for both buyers and sellers.

Sales are up, prices are down, money is plentiful, and foreign currencies are strong.

The volume of South Florida home sales continued its historic upward trend in June while prices showed a mix of results driven by investors’ appetite for all-cash deals on distressed properties.

For real estate agents and investors, times are good, as both cash in on the rapid sales pace and international appetite for low-priced properties.

According an article published in The Miami Herald last week, real estate agents sold 1,274 single-family homes in Broward County in June – a 6 percent increase from the year before. Month-over-month, the sales increase was 11.6 percent. In the condo market, Broward saw year-over-year sales increase 7 percent to 1,511. Compared to May, sales slipped 1.7 percent. Agents say they have not been this busy since 2006, when speculators and flippers flooded the market and real estate commissions hit record highs.

If the current sales pace continues through December, 2011 will set a record for the number of homes trading hands in a year. There have been 12,369 home and condo sales through the first six months of 2011, up 79.3 percent from last year and the highest January-to-June total on record.
Mike Pappas, who owns South Florida-based Keyes Realty, said he sees no sign of a slowdown after the busy spring selling season. June was the strongest month for the company in as long as he can remember, and the interest from international investors has kept his offices buzzing.
“We’ve been running hard since March,” he said. “We haven’t had four months like that since 2006.”

Inventory levels have declined rapidly since last year, and the number of homes for sale stands at about 30,000, down from 45,000 last June.
“I’m confident that we’re out of the bust and on our way to a recovery,” Pappas said.

Real estate investors are enjoying this market just about as much as local agents. Both individual investors, mostly foreign, and multibillion dollar investment firms have swarmed to South Florida’s distressed housing scene looking for steals. In many cases, they’ve found them in the booming foreclosure market.

Miami-based investor group BH III scooped up 175 units at the $355 million Trump Hollywood condo tower in a $160 million bank note sale last year. After buying the note in November, the investors relaunched sales with an over-the-top condo party in January.
BH III said sales so far in 2011 have already topped $100 million, and the investors are well on their way to realizing their costs and making a profit.

“The summer has been very strong,” said Greg Freedman, a partner at BH III, predicting the project could sell out much earlier than the expected 2014 closeout target. “We did not think that the market would have the appetite that it has, and we were certainly surprised by the volume of sales.”

For individual investors with cash, the 2011 South Florida housing market has been a free-for-all fire sale, with prices down 55 percent from their peak, back to 2002 levels.

International buyers have the luxury of slashing additional percentage points off already discounted prices, thanks to the strength of some foreign currencies against the dollar. The Brazilian real, for example, has gained nearly 40 percent against the dollar since 2008. The Canadian dollar has been consistently above parity for nearly a year.

For buyers, the opportunity is to get a home or investment property at an incredible price. For sellers, the opportunity is to provide inventory to a market short on listed properties for sale – especially move-in ready homes. The number of properties listed which are ready for move-in and are desirable is surprisingly quite low.

As the high season approaches, there is an opportunity for South Florida sellers to get a foothold in what has been a buyer’s market for nearly three years.

Lecavalier serves as Fund Manager for SISCO Limited Partners, a private equity fund that rehabilitates foreclosed properties and rents them via affordable housing programs in Broward County, is a licensed Real Estate Agent, an Accredited Residential Manager (IREM, ARM) and a Certified Investor Agent Specialist (CIAS).

Most residents of Hollywood are very aware of the housing market correction (or crash, depending upon whom you ask) and are watching housing prices closely. We have received many questions about “the bottom” and when our mega buyer’s market will again allow a seller to collect gains on a sale around here. Oddly, what we are not hearing much about is the current debate in congress about QRM and MID, both of which will certainly affect recovery of the housing market.

Ah! More acronyms?

The Mortgage Interest Deduction (MID) has been a part of our national tax code in varying forms since 1913, facilitating home ownership by reducing the carrying costs of owning a home. Simply stated, a homeowner can deduct mortgage interest paid. This tax incentive is one of the deductions that a deficit-focused Congress is considering scaling back or eliminating completely for certain tax brackets.

The Obama administration wants to reduce the MID for households making more than $250,000, estimating a $318 billion gain from such a change over the next 10 years. But Congress is not so sure, and it’s now a hotly debated topic in Washington.

The more hotly debated, and perhaps higher-stakes issue, is a proposed change related to QRMs, Qualified Residential Mortgages. A banking reform rule proposed by the FDIC and Federal Reserve in April of this year would require a 20 percent minimum down payment on residential mortgage loans  in addition to other criteria. Regulators maintain that higher down payment loans perform better than lower ones. It stands to reason. But some mortgage industry studies also show a minimal difference in exchange for a potentially big loss of sales.

The main issue for dissenters is the timing and end-costs of such a change. Raising a 20 percent down payment is a challenge for even many highly qualified buyers in today’s economy. Since much lower down payments are available to qualified buyers and the housing market remains sluggish, the concern is that higher down payments would prompt more home-sales slowdown in an economy whose own recovery hinges significantly on housing’s recovery.

Other QRM rules, from credit worthiness to income requirements, have widespread support as common-sense lending practices that align with the original intent of the Dodd-Frank Act for bank reform. But when the FDIC and Federal Reserve came out with this add-on, conflict arose.

According to the proposed definition, QRM borrowers would have to:

• Put at least 20 percent down to buy a home, have at least 25 percent in equity to refinance, have at least 30 percent in equity for a cash-out refinance.

• Have house payments that don’t exceed 28 percent of before-tax income, and total monthly debt payments (house, credit cards, auto, student loans) couldn’t exceed 36 percent of before-tax income.

• Not have been 60 days delinquent on any debt payments in the last two years.

John Campbell R-Calif., along with U.S. Rep. Brad Sherman, D-Calif., drafted a heavily supported letter that says the current version of the QRM would price creditworthy first-time and minority buyers out of the market.

According to the National Association of Realtors (NAR), 60 percent of recent home buyers made less than a 20 percent down payment. CoreLogic (the contractor that performed statistical analysis for Congress on the issue) says 39 percent of home buyers in 2010 made a down payment of less than 20 percent. Other studies put the number somewhere in between. In any event, many of those loans would not have passed muster under QRM rules.
The Center for Responsible Lending says, based on average home prices, it would take 14 years for the typical American family to save enough money for a 20 percent down payment, longer for high-cost areas like California. But even if the QRM down payment was lowered to 10 percent, as some suggest, one in four homebuyers could still be priced out of the market based on the nearly 25 percent of home buyers in 2010 who paid less than 10 percent down, according to CoreLogic.

It may be all moot.

Credit rating agency DBRS said underwriting standards today already simulate QRMs. According to DBRS, today’s prime borrowers often must have an 80 percent loan-to-value ratio, a credit score of 680 to 720, two years’ worth of W-2 forms and re-verification of employment within 10 days of closing the loan.

No matter which side of the debate you find yourself on, we can definitely all agree that the days of no credit check, no money down, interest-only mortgage loans are long gone. Good riddance. Qualified buyers will take good care of their homes and make better neighbors for all of us.

LeCavalier serves as Fund Manager for SISCO Limited Partners, a private equity fund that rehabilitates foreclosed properties and rents them via affordable housing programs in Broward County, is a licensed Real Estate Agent, an Accredited Residential Manager (IREM, ARM) and a Certified Investor Agent Specialist (CIAS).

The big question is, “Should I short sale, let the property foreclose or maybe file bankruptcy?” If you are pondering whether to apply for a loan modification, agree to a short sale or just let the property go into foreclosure, PLEASE READ THIS.

Remember, you are not alone. Hundreds of thousands of people were victims of the Real Estate bubble. Some have already resolved their problem, but others were either paralyzed by the fear of losing their home, tried options that did not work or just did not want to deal with it. As this crisis has “matured,” there is more assistance than when it first erupted. First, speak with your attorney and accountant. They can give you the advice you need for your particular situation. This is an important decision and one that needs to be made for peace of mind, if for no other reason.

As a Certified Distressed Property Expert, I can tell you from experience that there is no precedence for the upheaval the market has seen. Having experienced working with properties in foreclosure, I have found that the best solution by far is a short sale. If you know of ANYONE who has been successful with a loan modification that had favorable terms in the long run for the owner, call me. It would be a first. If you or someone you know has paid hundreds of dollars to find out that a loan modification was either not feasible or was rejected, do not call me. Sadly, I already know too many people who have been taken for the loan mod ride. The lack of results is shameful.

For most owners, a short sale is preferable to a foreclosure. Although both can negatively impact your credit score, in a short sale, the owner made the effort to do the right thing. Future loans may depend on this effort. Banks are unwilling to negotiate deficiency judgments with the homeowner after a foreclosure. A foreclosure does not indicate “best effort” to better the situation for homeowner and lender.

Walking away from a property does not instill trust in a future lender. Foreclosures can not only hurt the future loan worthiness of the defaulting homeowner but also is bad for the neighborhood. If embarrassment enters into your decision, you can short sale your home without broadcasting it with yard signs and lockboxes. It can be a completely confidential transaction.

Once you have made the decision to short sale your home, condo or investment property, I recommend you call a Realtor who is a Certified Distressed Property Expert trained to handle the sale. We have the special skills to work with the seller through the complicated steps of the process.  

With the thought in mind that many homeowners will become renters, I have this to say: LANDLORDS – LISTEN UP!  The wisest property manager I know has filled her buildings with families who lost their homes in short sales. She has found that people who had short sales had an impeccable credit history until their credit score was hit because of the inability to pay the mortgage. These folks have pride of ownership and a history of meeting their financial obligations. Short-sighted landlords only look at the credit number and never take the time to find out the true credit history.
This is a great time for landlords – especially if your tenants are responsible people who went through the short sale process and did not just walk away from their homes. Don’t tell them they can never go home again! Let them click their heels three times and say: “There’s no place like home.”
 
For more information, Call Cindy Abraham at 954-895-1617.

The South Florida real estate market is stabilizing. As a result, we are receiving an increasing number of calls from homeowners revisiting the idea of selling their home for the first time in years. Many of these people have been anxiously watching the market for an opportunity to make a move. While it is true that homes have been selling at a break-neck pace since early 2011, it is also the case that competition is fierce. Distressed property transactions currently dominate South Florida real estate sales. Short sales and foreclosures are selling in historically unprecedented numbers, meaning that average prices are low and will remain low for some time. However, the same market has also provided a great opportunity for homeowners with non-distressed homes for sale.

Most of our non-investor buyers are seeking homes in move-in condition. South Florida has long been the second-home capital of North and South America. Now, with the Canadian dollar above parity and political conditions worldwide deteriorating, we are seeing an influx of buyers who want a home that does not have problems, requires no repairs and has a fair price. These buyers are not looking for the absolute cheapest thing available – they know that a house or condo selling for dramatically less than market value comes with issues that will cost time and money to repair. The buyers who want a home in move-in condition are willing and able to pay substantially more than foreclosure and short sale average prices. However, the home must be appealing. Long gone are the days of a homeowner throwing a sign in the yard and selling it by him or herself with five offers (all at more than asking price). Like it or not, we are in a buyer’s market, and buyers expect a lot.

Interestingly, most homeowners believe that their home is in move-in condition, when in-fact, this is rarely the case. Let’s assume that you have lived in your home for five to 10 years. Even if the house is structurally sound, the roof is less than five years old, there are no problems with plumbing or electrical, all of the appliances are in good condition, etc., there are a few key things you can do to dramatically increase the desirability of your home to a potential buyer.

First and most importantly: De-clutter.

Think of your home as a product you are selling because if you don’t, then you won’t. Begin with de-personalizing the space. You are moving, so best to start packing before you even list your house for sale. Buyers can’t see past personal artifacts, and you don’t want them to be distracted. You want buyers to imagine their own photos on the walls, and they can’t do that if yours are there.
Over a short period, people collect an amazing quantity of junk. If you haven’t used it in more than a year, you probably don’t need it. Start with clearing out all non-essential items; remove them from the house entirely.

• Remove all books from bookcases.
• Remove anything hanging
  on the refrigerator.
• Remove excess toys
  and collectibles.
• Pack up all knickknacks,    
  keepsakes and family photos.
• Clean off everything on
  kitchen counters.
• Put essential items used daily
  in a small box that can be stored
  in a closet when not in use.
• Rearrange bedroom closets and
   kitchen cabinets.
• Neatly stack dishes.
• Turn coffee cup handles facing
  the same way.
• Hang shirts together, buttoned
  and facing the same direction.
• Line up shoes.
• Remove pieces of furniture that
  block or hamper paths and
  walkways and put them in storage.
• Remove extra leaves from your
  dining room table to make the
  room appear larger.
• If you want to take window coverings, built-in appliances or fixtures with you, remove them now. If the chandelier in the dining room once belonged to your great grandmother, take it down. If a buyer never sees it, he or she won’t want it. Pack those items and replace them, if necessary.

Get a Head Start: Make Minor Repairs.
• Replace cracked floor or counter tiles.
• Patch holes in walls.
• Fix leaky faucets.
• Fix doors that don’t close properly
   and kitchen drawers that jam.
• Consider painting your walls
   neutral colors.  
• Replace burned-out light bulbs.
• If you’ve considered replacing a
   worn bedspread, do so now!

Clean, Clean, Clean: Make the House Sparkle.
• Wash windows inside and out.
• Clean out cobwebs.
• Re-caulk tubs, showers and sinks.
• Polish chrome faucets and mirrors.
• Clean out the refrigerator.
• Vacuum daily.
• Wax floors.
• Dust furniture, ceiling fan blades and light fixtures.
• Bleach dingy grout.
• Replace worn rugs.
• Hang up fresh towels. (Bathroom towels look great fastened with ribbon and bows.)
• Clean and air out any musty smelling areas. Odors are a no-no.

Give them a Reason to Stop: Check Curb Appeal.
• Rent a pressure washer and spray
  down sidewalks and exterior.
• Keep the sidewalks clear.
• Mow the lawn.
• Paint faded window trim.
• Plant yellow flowers or group flower pots together. Yellow evokes a buying emotion and marigolds are inexpensive.
• Trim your bushes, shrubs and trees.
• Make sure visitors can clearly read your house number.

LeCavalier serves as Fund Manager for SISCO Limited Partners, a private equity fund that rehabilitates foreclosed properties and rents them via affordable housing programs in Broward County, is a licensed Real Estate Agent, an Accredited Residential Manager (IREM, ARM) and a Certified Investor Agent Specialist (CIAS).