Jacksonville Florida Short Sales, Pre-Foreclosures and Foreclosures

New FHA Short Sale Guidelines issued by HUD in December 2008...a blessing or a curse? Can this wreck your Jacksonville short sale?

In the name of progress and improving the system, HUD issued new short sale guidelines on December 24, 2008 outlining a brand new set of rules regarding how short sales are to work when the seller has an FHA loan.  These new rules apply to Jacksonville short sales and short sales around the country.

Here are a couple of quotes from HUD regarding why they are making the changes:

"High foreclosure rates continue to have devastating effects on families and neighborhoods. The Federal Housing Administration (FHA) remains committed to taking actions to help families avoid foreclosure. "

"FHA has consolidated in this ML the requirements of the PFS Program that have been issued over the years, and has updated and clarified those requirements where needed, to better address the problems faced by mortgagors today and provide greater flexibility in considering a mortgagor’s candidacy for participation in this program. "

We think that the new requirements are a step backwards.  What they had already wasn't bad.  The net to the lender, after all closing costs were paid, had to be 82% of the fair market value of your Jacksonville short sale. 

Out of the blue they changed the reasonable ratio of 82% to a sliding ratio of 88% (first 30 days of marketing), to 86% (for the next 30 days of marketing), down to a minimum acceptable ratio of 84% if the home has been on the market over 60 days.  They raised the amounts that the lender has to net on the deal.  In a buyer's market heavily saturated with distressed sales, we are not sure why they thought that this will provide "greater flexibility."

Sure, they got rid of the pesky ratio that required the market value be a certain percentage of the total loan amount which was definitely a good thing.  Raising the ratio was definitely a giant step backwards that will make it harder to purchase an FHA home in a short sale and ultimately force more families into foreclosure.

HUD requires an appraisal, rather than a BPO, to determine fair market value.  The guidelines instruct the appraiser to determine fair market value using comps that are not distressed properties.  Wouldn't a true "comparable" be a distressed property by definition?  This is while the national average shows around half of all homes being sold now are distressed properties.  Our Jacksonville real estate market shows a similar ratio.  So now you have to obtain an offer of 88% (or 86% or 84%), of an inflated fair market value determination, to have a successful FHA short sale.

Here is another interesting tidbit.   The letter outlining the new requirements state, "Regardless of the property's sale price, a mortgagee may not approve a PFS contract if the net sales proceeds fall below the minimum allowable thresholds stated herein.  HUD has established guidelines for varying  minimum net sales proceeds based on the length of time a property has been competitively marketed for sale."  (Emphasis ours) While the letter says it's based on the length of time a property has been competitively marketed for sale, we are being told by a major lender that the "marketing period" according to HUD doesn't start when the home is actually put on the market.  Instead the marketing period for the purpose of determining the applicable ratio doesn't start until the lender has issued an approval to participate in the program.  This approval to participate is not issued until after a file review is completed and an appraisal determines the "fair market value" for the property which, as we've seen, can take months. 

The lender does not have a timeframe, that we can find, that they have to respond to the application to participate.  It just took over two months to get an approval to participate with complete package submission on Day One for one of our sellers.  Nothing was missing from the package and they did not have to request additional documentation.  They just sat on the file for two months, even with regular calls and communication.  This timeline will vary from bank to bank, and even negotiator to negotiator within the bank.  In the end you will have a preapproved price that you must obtain to successfully sell your Jacksonville short sale, even if the market demands a lower price.

So is the seller supposed to delay putting their home on the market waiting to be told the price they are allowed to sell the home for?  This wait is for an unpredictable amount of time.  In a declining market they will be waiting while market values crash around them and will likely be given an inflated, and unattainable,  price in the end.  And what if an approval to participate is not issued until a long period of time after the appraisal (which is likely to be inflated to start with)  is completed?  Does a seller go ahead and put their home on the market before the approval is issued knowing they have to get 88% of some value they aren't aware of yet?  Why should a seller waste valuable marketing time when values are headed lower?  This defies reason.

This is just one example of why you need an experienced short sale specialist when selling your home.  All short sales will not be successful.  At the same time, if you are working with a Jacksonville short sale specialist who understands the system and the challenges, and how to work around them, you will greatly increase your odds.  If you have a Jacksonville short sale, or are thinking about purchasing one, make sure you have knowledge and experience on your side. 

Jacksonville Short Sale Buyers-The Truth About Buying a Short Sale in Jacksonville

Jacksonville short sales...everyone has heard of short sales today.  Even though everyone is talking about Jacksonville short sales there is an abundant amount of misinformation out there.  You can research the issue online and within minutes will be filled with just as many untruths about the process as facts.

The most important thing, whether you are buying or selling a Jacksonville short sale property is to use an agent who is a Jacksonville short sale specialist.  Here are a few things you need to know if you are considering buying a Jacksonville short sale:

• A Jacksonville short sale contract is binding just like a regular real estate contract.  There is a myth in our area that a short sale contract is not really a contract until it has been approved by the bank.  Not true.

• A Jacksonville short sale will take more time than a regular transaction.  Even banks that have their act together can take a long time to approve Jacksonville short sales.  DO NOT SUBMIT AN OFFER ON A JACKSONVILLE SHORT SALE IF YOU CAN NOT WAIT AT LEAST 60 DAYS FOR BANK APPROVAL.  Will it take sixty days?  Quite possibly not.  Maybe so.  There is no way to know for sure in advance.  Even short sales within the same bank can take drastically different timeframes for an answer.  A lot of it comes down to the negotiator at the bank you are assigned to and the current workload of the loss mitigation department.  Do not put in an offer and start calling and threatening to "walk" two weeks later.  While the seller will care, the bank really doesn't care if you walk or not.  A sad, but true, fact.  Your expectations have to be reasonable or don't bother.

• If you are buying a Jacksonville short sale, you need to realize that the bank is not the seller.  The homeowner is the seller.  The homeowner is the one who negotiates with you and decides whether to accept your offer and submit it to the bank.  Do not submit a silly offer and demand that the bank make the decision, not the seller.

• You need to structure your offer based on the current fair market value of the Jacksonville short sale property.  The bank will order an appraisal or a BPO (Broker's Price Opinion) and will make a decision whether to release the lien and allow the Jacksonville short sale to go forward based on the indicated value of the appraisal.  If there is a VA or FHA loan on the property there are specific guidelines for where the minimum contract price can be, based on fair market value based on an appraisal ordered by the lender.  If it is conventional, it is determined by the internal and investor guidelines and may be determined by a BPO or appraisal depending on their guidelines.

• The seller is in a Jacksonville short sale position for a reason.  They usually do not have money to make any repairs.  This needs to be established upfront in the negotiations. 

• If the utilities are already turned off, you may have to pay to have the utilities to be turned on for your inspections and appraisal, if required. These details should be established upfront in the negotiations.  Do not try to renegotiate this later. 

• Once the Jacksonville short sale is approved, the bank will demand that a closing take place in a certain period of time.  You need to be ready. 

• If the Jacksonville short sale property has a second mortgage on it it will take more time, especially if it is a different lender.  The second lender is usually asked to take a very small amount and may even come in and set additional parameters for the deal that the first lienholder did not ask for.

• All Jacksonville short sales will not be successful.  No matter how perfect the package, no matter how good the offer is, it is always possible the short sale could be ultimately denied based on some obscure "investor guidelines."  Even HUD allows a FHA short sale to be denied  (even if it meets all of the guidelines)  if the lender feels that the home can continue to be marketed and net a higher amount.  It is possible you will have put forth money on inspections or loan charges and will not get the house ultimately.  That is the risk you take for getting a good deal.  Even on straight resales some will fall out after you have put out money on inspections and appraisals.  Nothing is definite, understand this upfront.

If you are not up for the challenge, you should consider buying a straight resale not a Jacksonville short sale.  You will usually pay a little more depending on the seller's equity position but you will have a lot less hassle and be able to close faster, in general.  Attempting a Jacksonville short sale without a Jacksonville short sale specialist is like finding Seattle, Washington without a map.  You may get there eventually, but it will take a lot more time and aggravation.

Jacksonville Short Sale Seller? Get your binder deposit UPFRONT and tighten up that sales contract!

A disturbing trend seems to be emerging in the area of Jacksonville short sales.  We are hoping that it is not prevalent, but fear that it may be more widespread than we realize.

It has come to our attention that there are buyers that are going around and getting into contracts on several homes, usually other Jacksonville short sales or Jacksonville foreclosures.  They are under the mistaken impression that Jacksonville short sale contracts are not contracts although we are not sure why they believe that.  They are putting in "wiggle" clauses that enable them to get out for any reason. 

This is a newer trend and as a seller of a Jacksonville short sale property you need to tighten up your contract at the time the offer is being negotiated.  You need to have a Jacksonville short sale specialist representing you that understands the potential pitfalls and can help get the contract as clean as possible and tighten up the contract terms.

These same buyers are usually failing to put in binder deposits until the bank accepts the contract.  Then if they change their mind, what do you have?  You are weeks closer to foreclosure and have missed out on all of the real buyers who might have liked your home.

This has been made worse by a recent change to our area short sale addendum that states that all timeframes begin after acceptance by the bank.  The state contract short sale addendum gives you a check box option where you have to select whether timeframes begin immediately or when the banks acceptance.  As a seller you always want timeframes to begin immediately. 

Jacksonville short sales are very complex.  Please do not undertake one without having a Jacksonville short sale specialist representing you.  If you do not already have one, we can help you with your Jacksonville short sale.

Once we have a contract on your Jacksonville short sale, according to the local MLS rules, it has to show in the system that there is a contract on it.  We have no way of knowing how many buyers have contracts out on multiple short sales, but we know this is not a good thing for the future of Jacksonville short sales.  This type of activity gives short sales a bad name and is greatly damaging to sellers. 

When you are a seller moving towards foreclosure, every day is crucial.  As a seller of a Jacksonville short sale it has to be done correctly or the odds of success are much lower.  You do not want to get your bank approval only to find out that your buyer is already living in their new home down the street.  This is happening in our market.

January 2009 Jacksonville Florida Real Estate Market-A Huge Leap Occurred in Jacksonville Distressed Property Closings as Straight Resales Continue to Sink Making The Two Essentially Equal.

 January 2009 shaped up to reveal big changes to the Jacksonville real estate market.  Jacksonville Short Sales and Foreclosures sold in January are essential equal to straight resales sold.  This is a big jump from 2007 where distressed properties were just slightly above an average year and were only sitting at 8.56% of total real estate sales.

The Jacksonville metro area saw surprisingly few real estate closings in January.  The number of closings was down dramatically from  January 2008, roughly 28% lower, and experienced a large 38% drop from the prior month, December of 2008.

Distressed property sales (Jacksonville short sales and Jacksonville foreclosures) account for 41.76% of all sales in January while straight resales only account for 42.23%.  In December while these two numbers were trending closer than ever before 26% separated Jacksonville Short Sales and Foreclosures from straight resales.  As of this morning for sales that have been recorded timely, the gap is only FOUR CLOSINGS separating the two.

For those who think Jacksonville distressed properties are not a reflection of the market...Jacksonville foreclosures and Jacksonville Short Sales are MAKING the market.

This is reality.  If you are looking for a good deal on a home, you can not avoid Jacksonville short sales and foreclosures.  Find a great short sale specialist and find your new home.