Orlando real estate is once again a good investment for retirees
After the huge real estate bubble, we experienced between 2000 thru 2006, we all learned a painful lesson in 2007 when the market tanked. It’s just not normal for Orlando real estate prices to double over the course f only seven years. When the market crashed, Orlando’s real estate prices dropped to 50% of where they were and in some areas of Orlando, it was even more than that.
What I have been seeing more of recently, however, is that people are considering Orlando realty as a good investment for retirement once again. Here in Orlando, the bottoming process has already happened and prices have been on a steady rise. There is still a long way to go before we see a normal housing market, however, historically low mortgage rates are helping the market by making the cost of ownership more affordable, assuming that the potential buyer can qualify.
Sensing this opportunity, many are jumping into the rental market to boost retirement savings and income. There are however several important factors to consider when buying an Orlando property for the purpose of receiving a steady stream of income.
5 Tips for potential Orlando Landlords
1- Make sure that you buy at the right price- This is where working with an experiencedOrlando realtor will pay off big. Make sure your agent shows you the recent comparables in the area. Chances are that you won’t find anything at 30% market value unless it needs work done, but you should be able to buy something at fair market value, which is OK if you’re thinking long term.
2- Forget about flipping- The days of flipping houses for a huge profit are gone for the most part and you shouldn’t go into this thinking that you will be able to sell your investment property for twice what you paid for it in six months, it’s just not going to happen.
3- Take advantage of Historically low mortgage rates- Even if a potential home buyer is able to purchase an Orlando Investment property, I always suggest to them that they should consider getting a mortgage. With historically low rates right now, it’s a great opportunity for potential investors if they can qualify.
4-Consider hiring a property management company- Being a landlord can be a great source of income if you’re up to the task. However, I must warn you that it’s not for everyone. Landlords have to deal with not only the maintaining of the property, but they have to be available to tenants at a moment’s notice in case of emergencies. This is why you should consider hiring a property management company right from the start. You should work this expense into your budget before even buying your investment property so that you will know if the numbers make sense.
5-Get familiar with Orange county eviction laws- If you become a landlord for any amount of time you can expect to have a deal with an eviction or two [at least]. It’s very important that your rental agreements are solid and that you do background checks on ALL of your tenants no matter how nice you think they are. It may cost you a few extra bucks to get a quality tenant into your house but I can tell you from experience that paying a bit more upfront to do things correctly will save you time, money, and headaches in the long run.
It’s important for people considering Orlando real estate as retirement income to remember what the goal is. The goal is for the owner to be mortgage-free and to collect a steady stream of income on a house that’s free and clear.
Finding the right Orlando Short Sale Realtor for you
Regular listings and short sale listings are 2 completely different beasts, which is why if you need to short sale your home, you should seek out an “Orlando Short Sale Expert”. This is an agent that specializes in doing only short sales and nothing else. Your short sale realtor should know the Orlando short sale process inside and out. This includes being up-to-date with all of the latest programs and laws that are in place to help homeowners that are going through financial hardship. If you choose the wrong realtor to do your short sale it could end up killing your short sale and put you in worse shape than you started out in.
Doing a short sale can be one of the most important decisions that a homeowner can make in their life and you need to be with an Orlando short sale specialist that understands this and that takes his or her job very seriously. You should also make sure that your short sale agent is a Certified Distressed property expert [CDPE]
One of the biggest complaints that I’ve heard from short sale negotiators over the years is that realtors fail to submit completeshort sale packages to them. This part of the process is extremely important because it can set the tone for the rest of your negotiations with the loss mitigation rep that is handling your file. Here’s a basic list of what most lenders require in order to submit a short sale package.
1-Hardship Letter-[A letter explaining the reason for your financial hardship]
2-Last 2 years’ tax returns
3-Recent pay stubs or profit and loss statement
4-Financial statement-[most lenders have their own that they will require you to fill out, these forms can easily be found online]
5-Listing agreement-[all lenders now require homeowners to have the home listed for 3 months or more]
6-Contract-[this is a contract between seller and potential buyer]
If this package is submitted incomplete or incorrectly, it can make the process a lot slower or stop it all together. A short sale package will not even be considered unless it’s complete to the satisfaction of the lender. Sometimes negotiators will even close the file and make you start from all over again.
I always tell my clients to call the bank themselves so that they know where they are in the process and how things are going. If are currently working with a short sale agent, you should be doing the same thing, call your bank and check on the agent’s work, and don’t just take the realtor’s word for it.
The Brokers Price Opinion [BPO]
After the lender receives the sort sale contract complete with the contract, the bank will then order what’s known as Brokers price opinion or BPO. The person that does the bpo is not an appraiser, but a local realtor. The BPO is crucial in completing a short sale because whatever that number comes in at will be the negotiating point. This will be a back and forth negotiation between the lender and the agent which can sometimes drag on for several months before both parties come to an agreement.
The Terms of the Short Sale
Negotiating what terms the short sale can be completed with is again very important. You need to make absolutely sure that you understand exactly what you are agreeing to. The last thing that you want to have to happen is finding out a year from now that you have a deficiency judgment against you for the balance of the short sale that you did on your home last year. I’ve seen it happen many times over the course of my career as a short sale broker and it’s a shame because usually, all it would’ve taken was for the short sale realtor to go that extra mile and continue negotiating until the lender agrees to not pursue the balance of the loan.
After it’s all said and done there is still another step that is crucial for you to follow up with and that is to make sure that the payoff has been legally recorded. As a matter of fact, you should continue to follow up with the short sale realtor as well as the title company until you have written proof that the payoff was recorded. If your payoff doesn’t get recorded for some reason this could kill your credit score.
The Mortgage Debt Relief Act of 2007
This is the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lender. However, the tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners are about to come to an end at the end of 2012. The good news is that if you’re considering an Orlando Short Sale, there is still time to take advantage of this very important law.
According to the law, borrowed money doesn’t need to be reported as income because you have an obligation to repay. But if your lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $350,000 and your lender forgives $50,000 of that debt in a $300,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes. Ouch!
Although the law doesn’t officially expire until Dec 31, 2012, anyone considering a short sale should get started now. We’ve had short sale files in our office that have taken up to two years to complete. It’s true that banks are moving Florida short sales along much faster now but overall they still move pretty slow.
Cash Incentives to Sellers for agreeing to a Short Sale
Bank of America, JPMorgan Chase, and Wells Fargo have all been offering cash incentives to their delinquent customers in Florida who agree to a short sale. It’s not unusual for a lender to give a cash bonus to foreclosed customers who leave their properties in good condition, which has become known as “Cash For Keys”. What is different about these new programs at the nation’s top three mortgage lenders is that the amounts are significantly higher, sometimes up to $30,000.00.
Short sales, while still not a particularly short process, are much more efficient and overall more beneficial for everyone involved.
In short sales, homeowners are protected from potential deficiency judgments and severe credit hits, while the banks themselves are able to recoup something, instead of nothing, from defaulted loans. They also save money that would otherwise be spent on the eviction process. It is the smarter business move for sure. Encouraging short sales is also a public relations boom for banks reeling from a recent lack of confidence from consumers. By helping people to avoid foreclosure, they present a more beneficent image. That improves their overall bottom line by bringing in new customers.
It may be smart business to offer a cash incentive for a short sale, but it really does help people, too. Those facing foreclosure frequently don’t know where they are going to live once their home has been taken away. They are often so strapped for money that they cannot afford a typical first-and-last-month’s upfront payment on a rental property. The cash makes a big difference in helping people to land on their feet. Some may even be able to use it as a down payment on a more affordable home.
The government also has a program, the Home Affordable Foreclosure Alternatives (HAFA), that provides cash, up to 3000 dollars, for short sales. To get the government credit, homeowners must meet certain minimum criteria, including that the loan is owned by Freddie Mac or Fannie Mae.
Working as an Orlando short sale specialist for over eight years, I get questions from both clients and realtors about short sales all of the time; How does a short sale work? Do I have to be behind on my mortgage to do a short sale? How will it affect my credit? Will my lender come after me for the balance? Can I get money back even though I’m in foreclosure? What are the tax repercussions?…just to name a few.
This two part post ” Orlando Short Sale Guide” is for people who have unanswered questions about short sales. This week I will talk about every aspect of short sales; what they are, how they work and the do’s and don’ts of whole process. In my next post I will also be talking about probably the single most important part of the whole process and that is finding the right Orlando realtor for you.
I think the best way to start this off, like anything else is by giving you a clear definition of what a short sale is. A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the property and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.
An Orlando short sale is most often the best method to Stop Orlandoforeclosure because it mitigates additional fees and costs to both the creditor and borrower. While credit is also typically damaged much less than from a foreclosure, both often result in a negative credit report against the property owner.
Who qualifies for an Orlando Short Sale?
Even though someone can easily prove that their house is worth less than what it owes, most lenders require the mortgage holder to be at least 30 days late on their payment to even consider a short sale. In my opinion, this is a huge flaw in the short sale process and I believe that any property that is worth less than what it owes should qualify as a short sale candidate. Creditors also require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency.
The Short Sale Process
Creditors holding liens against real estate can include primary mortgages, junior lien holders—such as second mortgages, home equity lines of credit lenders, home owners association HOA—all of whom will need to approve individual applications for a short sale, should they be asked to take less than what is owed.
Some liens such as student loans, back child support and I.R.S. liens cannot be discounted and have to be paid in full in order to get the deal closed. In our office, these liens are sometimes referred to as “Deal Killers”. Most large creditors have special loss mitigation departments that evaluate borrowers’ applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the Orlando real estate by obtaining an independent evaluation of the property with an appraisal, a Broker’s Price Opinion or [BPO]. One of the most important aspects for the borrower in this process is putting together a complete short sale package including hardship letter explaining why a short sale is needed on you Orlando property.
Due to the overwhelming number of defaulting borrowers due to mortgage failures and other causes as part of the 2008–2012 global financial crisis, many creditors have become adept at processing such short sales applications; however, it can still take several months or even a year for the process from start to finish, often requiring multiple levels of approval.
Jenny Zamora, Lic RE Broker/ Orlando short sale expert.
The internet is a great way to search for Orlando Realty
According to several research groups, Orlando was the #1 city for online home searches for the second quarter in a row. Potential Orlando home buyers are scouring the internet looking for their own little piece of Orlando Real Estate.“The City Beautiful” is a place that is extremely desirable for young families because of the abundance of family-friendly activities, amusement parks and beautifully planned neighborhoods.
Orlando is also home to some of the top schools in the state. When you put all of these factors together, Orlando is the perfect place to raise a family and it doesn’t surprise me at all that it’s one of the most sought after places to live in America.
Orlando Realty Consultants enables you to search for Orlando property quickly and easily like a pro
It’s never been easier for potential home buyers to search for Orlando Realty online. By using state of the art property search tools, people are able to quickly and easily search the entire state of Florida for their perfect home. As a matter of fact, many of my potential home buyers already have a list of Orlando properties that they are interested in because they used our Florida property search tool located on our ORC website.
I think that people really appreciate the property search tool because the are able to search for their potential Orlando property at their own pace for free without ever having to contact an Orlando realtor or complete some online registration form that is designed to capture your contact information. Of course, once they find a few properties that they like, they will need a licensed Orlando real estate agent to physically see the properties, but by using the property search tool it saves the potential buyer as well as the real estate agent a lot of time.
Junior lien holders are taking Potential Orlando short sales hostage.
The truth is that bargaining with second and third-lien holders is tough and causes serious delays deals and even killing some Orlando short sales, even though banks embrace the whole Florida short sale trend in order to avoid costly foreclosures and help clear the market of homes that are worth less than the loans on them.
There are private mortgage collection firms out there that buy up distressed U.S. home- equity loans and other junior real estate liens, often for pennies on the dollar. If your 2nd lien was bought up by one of these companies, then chances are thatthey will be much tougher to deal with than the original lien holder would have been.
The ever improving Orlando Real Estate market creates a great opportunity for these second lien holders to get a nice chunk of their money back. They are aware thatyou need them to cooperate with you in order to get the deal closed. The problem is some of these junior lien holders get to greedy and the result is the deal falling through.
Orlando short sales are being held up by second liens
Almost 50%of all Orlando homes that enter into foreclosure have more than one lien attached. Any Orlando short sale realtor can tell you that short sales with multiple lien holders requires a lot more work to complete and typically can take longer to sell. You pretty much have to do twice or even three times the work depending on how many liens are attached.
It reminds me of a hostage situation “Give me the money or I’ll kill your deal”
