Short sale opportunity for nice 3 bedroom, 2 bath home in nice neighborhood on 6th hole of SaraBay Golf Club

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Local Short Sales

How widespread is this? More than 11 million families are in “negative equity”—that is, they owe more on their home than it is worth—according to a report out this week by First American Core Logic, a real-estate data firm. That’s a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That’s true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.

Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so? It’s time for some tough talk. Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one. And do the math. Even if you hope the real estate market is near the bottom—it’s possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even. Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.

If you are reluctant to give up on “your” home, realize that it isn’t “yours.” If you are in negative equity, it’s the bank’s home. You’re just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow. Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think. In “non-recourse” states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in “recourse” states, lenders may have limited ability to come after you. Often they’d have to jump a lot of legal hurdles, and it’s just not worth it for them. They’re swamped with cases anyway. “In my experience, right now they’re not really going after anyone,” says Richard Nemeth, a bankruptcy attorney in Cleveland. “They just don’t have the resources.”

If you’ve taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors. Sure, a strategic foreclosure may hurt your credit score. But if you’re in financial difficulties, it’s probably already suffered. And your credit score is not the only thing in life that matters. Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it’s wrong to abandon their obligations. They don’t want to be a deadbeat. Your instincts, while honorable, are leading you astray. The economy is fundamentally amoral.

Sometimes I think middle-class Americans are the only people who haven’t worked this out yet. They’re operating with a gallant but completely out-of-date plan of attack—like an old-fashioned cavalry with plumed hats and shining swords charging against machine guns. Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it? They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they’ve gotten away with it. And if they thought your loan was “risk free,” how come they were charging you so much more than the interest on Treasury bonds? If you’re only a small amount underwater on your mortgage, it’s probably the case that you’re going to be better off staying put. But if you are deeply underwater, it’s a different matter.

Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn’t have to give back one cent of that money when the companies went into bankruptcy. Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They’re not shy about protecting themselves if things go wrong. You shouldn’t be either.

Courtesy of  Brett Arends Wall Street Journal brett.arends@wsj.com

216 Arlington Drive

Park like setting with greenbelt & canal.  Walking distance to golf course, short drive to beautiful beaches.  Many upgrades, barrel tile roof, hurricane film windows & doors.  Granite counter,  tops/Stainless appliances.  Own your own piece of paradise. The additional HOA fee covers all landscape maintance and fert. for the yard.  Owner will consider selling furniture separate.

Price:   $349,000 reduced from $395,000

Courtesy of 1-27-10 article in ‘Sarasota Herald-Tribune’ -

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday inched up 0.2 percent to a seasonally adjusted reading of 145.49. The index was off 5.3 percent from November 2008, nearly matching analysts’ estimates that it would fall by 5.1 percent.  The index is now up more than 3 percent from its bottom in May, but still 30 percent below its May 2006 peak.
Case-Shiller does not track the Sarasota-Bradenton or Charlotte County-North Port market but does examine nearby Tampa and Miami.  Tampa’s housing prices dropped 0.4 percent for November when compared with the previous month. That came after a 1.6 percent September-October decline.
 
Like Southwest Florida, Tampa is a market where sales of distressed properties comprise about half of the total, said Cathleen Smith, a regional vice president with Coldwell Banker.  In Miami, prices were flat from October to November. Prices dropped 0.4 percent from September to October, and the community is down 12.1 percent for the year.  Prices in this region have been showing stability in recent months, according to data released Monday by the Florida Association of Realtors.
 
December prices in Sarasota-Bradenton were up 5 percent from a year ago and up 4.6 percent from November. The median — the midpoint between the highest and lowest price — was $167,400 during December. In Charlotte County-North Port, the median rose 9 percent to $111,800 from $102,400 a year ago. The price was up 11.8 percent from $100,000 in November.

Rising prices are important to the economic recovery because they make homeowners feel wealthier and lead them to spend more money. Price increases also help restore home equity for the one-in-three homeowners who currently owe more on their mortgages than their homes are worth.  In a research note, Deutsche Bank analyst Joseph LaVorgna wrote that the price improvements in some cities should lead to a $1 trillion increase in homeowner equity by the current quarter.  Karl Case, a co-creator of the index, pointed to signs of stability that were in stark contrast to rapidly falling prices a year ago. “Flat is good,” he said. 
 
Phoenix and San Francisco posted the highest month-to-month gains, on a seasonally adjusted basis, while New York and Chicago had the largest declines.  The tax credit for first-time homebuyers had been scheduled to end Nov. 30, but Congress extended the deadline through April, and expanded the program to include a tax credit for current homeowners.
 
“A lot of people are thinking now is the time to buy because they are going to get a great bargain or a steal,” said Bill Wilkerson, a real estate agent with ZIP Realty in Phoenix. “I’m looking forward to a very active springtime.”
 
Prices increased for the seventh straight month in San Francisco, where sales in the $500,000 to $750,000 range were strong. Buyers took advantage of the tax credits and low interest rates, said Chuck Colliver, president of Century 21 Alliance in Daly City, Calif.  In Las Vegas, prices edged up 0.1 percent, the first month-to-month increase since January 2007. Still, prices are down 56 percent in Las Vegas since peaking in April 2006.  The list of cities with price increases, on a seasonally adjusted basis, also included Los Angeles, San Diego, Denver, Boston and Charlotte, N.C.  While prices have risen steadily on a national basis, some economists predict they will dip again early this year because of high unemployment and foreclosures. 
 
“Until we get job growth, we won’t get complete healing of the housing market,” said Jeff Humphreys, an economist with the University of Georgia.
 
Information from the Associated Press was used in this report.

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