Florida Homeowner Insurance companies are having a negative effect on Orlando Real Estate Sales
Even though the real estate market in Orlando is recovering in leaps and bounds, homeowners are not happy about the high price of Florida homeowners insurance. As a matter of fact, for some potential home buyers, it’s proven to be the straw that broke the camel’s back.
There are still great real estate deals in Orlando, but even if the price of the property is affordable as well as property taxes, etc., the homeowners insurance in some cases can be almost as much as a mortgage payment. That’s insane!
Citizens Insurance raising it’s premiums on Florida Homeowners
The main reason for the high cost of homeowners insurance in Florida is the recent increase that Citizens has made to it’s premiums. Many times this will cause potential real estate deals to fall through or even worse, it puts the new homeowner in a position to fail because he went over budget, and potentially cause him to default on his payments.
The state run Citizens claims that the had no choice but raise the premiums because they are supposed to be a last resort for people and now they are covering many more homes than the program was designed for. That’s not all, if massive hurricane were to hit Florida and deplete all the company’s reserves, all Floridians would get taxed thus hurting the state economy in a big way.
Read the fine print when Buying Orlando Realty
When it comes to buying Orlando Real estate, there’s more than just deciding which homeowners insurance company you’re going to commit to. You have to read the fine print and be aware of everything that you’re committing to. So many first time home buyers end up in hot water because the fail to understand exactly what they’re signing. Then there is another type of buyer, the type that wants to get into that new house so badly even though deep down they know that it’s beyond there budget.
That’s why you need an experienced Orlando realtor to walk you through the complexities of buying a home in Orlando. I personally will not allow a client to make what I know will be a bad decision for them. As Orlando real estate agents, we have an obligation to look out for the best interest of our clients and help them in any way that we can when it comes to buying or selling Orlando real estate.
Financial Hardship is not the only reason why Orlando homeowners are not paying their mortgage
Strategic Default is when a homeowner decides to stop paying their mortgage, not necessarily because they can’t afford it, but because it’s a bad investment not worth paying into anymore. Even if the consequence means to possibly lose their house to foreclosure and damage their credit.
Orlando homeowners have been purposely defaulting on their mortgages for several years now. When people become aware of the reality of their situation, they make a conscious decision to stop paying their mortgage. In most cases, I can’t say that I blame them. Don’t get me wrong, I would never tell a client to stop paying on their mortgage. However, I do tell my clients what their house will sell for and about how long it will take to sell and they do the rest of the math on their own. Although Orlando real estate is making a steady recovery and I believe will continue to do so. There are Orlando homeowners that will never get the money back that they’ve put into their property.
Strategic default Vs. Moral Obligation
Some Orlando homeowners are worried about their moral obligation to pay the mortgage. The truth is that the homeowner entered into an arms-length transaction with their lender in which both parties had competing interests thus spelling out their obligations in a clear, signed contract. Unless the contract states that the homeowner has a “moral obligation to pay,” then it’s plain and simple – they don’t. Here are the facts; when a homeowner borrows the money to buy an Orlando property, they have entered into a business transaction. The lender evaluated the risks and concluded that it was a risk worth taking. For its protection, the lender also required that the homeowner put the property up as collateral, as well as any equity that they had in the house. The contract spelled out that if the homeowner doesn’t pay, the lender has the right to take the property and sell it before the homeowner gets any equity back – if there were any equity left, which of course in these cases, there isn’t. The lender would not have approved the loan if they didn’t think it was a smart business decision. The homeowners choice to enter into this agreement was also a business decision. It’s now obvious, that both the homeowner as well as the lender made a bad decision. Now, the contract spells out what happens if the homeowner stops paying, the lender gets the property.
However, there are other options available to homeowners like doing an Orlando short sale or a loan modification. In my opinion, most loan modifications that get approved just don’t make financial sense unless they reduce the principle balance of the loan.
Strategic default is actually something that is caused by the lenders. The fact is, lenders won’t even consider entertaining a short sale unless a homeowner is behind their mortgage thus forcing the homeowner stop paying the mortgage.
By doing a short sale, the homeowner is able to get their house sold and walk away from the responsibilities of the mortgage. Also, there are now several “cash for keys” programs available where lenders offer substantial cash incentives for doing a short sale, sometimes up to $30,000.00 depending on what kind of loan they have and who the lender is.
Your value as a person is not determined by the value of your real estate, or how much money you owe to a bank. You are worth more as an individual than your bank will ever understand. Life is too short, and there are so many things more important than an underwater mortgage. For many Orlando homeowners, it’s literally the difference between happiness and depression.
If you’re in a situation where you need to do an Orlando short sale on your house go speak with an Orlando short sale expert and find a solution, you owe it to yourself and your family.
Jenny Zamora, Lic Re Broker/Orlando Short sale Expert
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.
Are Orlando Short Sale properties being valued correctly?
The valuation of an Orlando short sale, as determined by the short sale lender, is probably the single most important factor of the transaction. The way it works is; we submit an offer to the bank, then the bank will order a BPO [Brokers price opinion] on the property. This person will usually be a local realtor that will go out and take photos of the property, record any damages that need repairing and after they put everything together they will complete their “BPO report” [their opinion of what the property is worth] to send to the short sale bank or the agency that hired them.
At this point there are three things that can happen that will dictate what follows.
1- The BPO comes in at a fair number that everyone is happy with and we proceed to closing.
2- The BPO comes in too low and the bank insists on another one being done. I hate when this happens because the 2nd BPO will almost always come in too high.
3- The BPO comes in so ridiculously high that the Orlando realtor has no choice but to insist that the short sale lender either order another BPO or walk away from the deal. [not on my watch]
Getting the Orlando short sale lender to order another BPO
Like an attorney presenting his case in court, it’s all about what you can prove to the lender.
We do this by preparing a report of our own called a CMA [comparative market analysis]. This report contains even more information than the BPO agent provided them with. Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depends on the Orlando realtor preparing it. What a CMA basically comes down to is a list of Active, Pending and Sold listings.
Active Listings- Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers.
Pending Listings-Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale.
Sold Listings- These are homes that have closed within the past six months and are typically your best source for comparable sales.
In addition to preparing a CMA for the short sale lender we provide them with a contractors estimate for repairs, lots of photos and a detailed letter explaining our case and why our offer is what it is.
Here at Orlando Realty Consultants we take the Orlando short sale process very seriously because we know what’s at stake for everyone involved, especially the sellers that I am representing. I tell all my Orlando agents to treat these situations as if they were an attorney preparing for the case of a lifetime.
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”
