Public Policies to Solve the Housing Crisis

June 13, 2008 by

As real estate professionals, being knowledgeable about the market is a necessity. Below is information I found to be interesting and useful in understanding what needs to happen to get our market back to where it used to be.

Limited Government Intervention Needed Immediately

Here are our 5 suggested public policy solutions to solve the housing crisis:

1. Immediately Create Tax Incentives to Encourage Home Buying Activity: Allow for a tax deduction equal to 3% of the purchase price for anyone buying a home for their primary residence. This will bring buyers back to the market, which is what is needed to stabilize prices. Our data shows that home buying activity has corrected far more than the NAR data shows, which is one reason why policy makers have been so surprised by the unprecedented national price corrections that are going to continue unless something is done. This significant expense is likely to be less than the eventual expense of taking over the many regional banks that will not survive if prices continue to plummet.

2. Immediately Increase FDIC Insurance from $100,000 to $500,000: The $100,000 insurance amount was set in 1980. The Fed needs to let consumers (especially retirees) and the world know that deposits at federally insured institutions are safe, and that all federally insured deposits can be accessed within 2 business days. This will prevent a depositor run on local banks. The increased insurance expense should be charged to banks after this banking crisis is over.

3. Continue Encouraging Fannie, Freddie and FHA to Grow: Without these three agencies, the mortgage market would be virtually non-existent in many markets, especially California, Florida, Arizona, Nevada and Virginia. While this is a significant risk to their shareholders and probably taxpayers, we believe the risk is much greater if these institutions stop providing insurance or a second market for quality loans. Underwriting will need to be prudent.

4. Require the Mortgage Bankers Association to Adopt a Licensing Program for Mortgage Brokers and Underwriters: Similar to the CPA license, there should be individual and company civil and criminal liability that will allow regulators to fine and imprison brokers on loans that were later proven to be fraudulent, or pools of loans that exceed an acceptable default rate. Restrictions such as this should be phased in after the housing market has stabilized because mortgage lending needs to be made easier today – not more difficult.

5. Mandate Rating Agency Risk: Rating agencies should be required to absorb a small percentage of bond losses on future rated bond offerings. This will help ensure that risky debt is priced accordingly.

Have We Saved Our Homes? Deciphering Florida’s New Property Legislation.

February 15, 2008 by

You might have heard some of the buzz surrounding Florida’s new legislation.  We have broken it down in regards to what this means for you and what you need to start saving! 

Last month, the people of Florida voted in overwhelming numbers to save nearly $10 billion in property taxes with the approval of Amendment

1.  This tax relief is in addition to the $15 billion tax cut passed by the Florida Legislature in 2007.  Together, they add up to almost $25 billion in property-tax cuts over five years for Florida homeowners and businesses.   Citizens will gain the freedom to purchase a new home without huge tax penalties. Rental home owners, second home owners and businesses will benefit from limits on future tax increases.  The amendment contains two provisions that we have long advocated: doubling the homestead exemption and the ability for Florida families to take with them their Save Our Homes tax savings. Specifically, the constitutional amendment: 1.   Doubles the homestead exemption for almost all homeowners, providing an average savings of about $240 annually.  The new exemption applies fully to homesteads valued over $75,000, and partially for homesteads valued between $50,000 and $75,000.  This new exemption does not apply to school taxes.                                       

2.   Allows portability:  The Governor has heard from many Floridians that they feel trapped in their homes.  Portability allows homeowners to transfer their Save Our Homes tax benefits from their current home to a newly purchased home within any Florida county.  Portability applies to homes purchased in 2007 and later, and the benefit is capped at $500,000. 

3.   Provides an assessment cap of 10 percent for all properties not previously capped:  While homestead properties are already capped at three percent, now all other properties, including rental properties, second homes, and business properties, will be protected from huge tax increases.  This new exemption does not apply to school taxes. 

4.   Creates a new $25,000 exemption for business property, including office furniture, computers, machinery and equipment. 

What you should do to receive benefits of Amendment 1 On January 29, 2008, an overwhelming 64 percent of Florida voters helped change Florida’s property tax system.  To receive some of the benefits of the changes enacted on January 29, certain homeowners must take action by March 1, 2008 

The Constitutional amendment created four new opportunities for taxpayers to obtain taxrelief:

1.      Increased homestead exemption

2.      Portability of “Save our Homes” benefit

3.      $25,000 exemption for tangible personal property

4.      10 percent annual assessment cap for non-homestead property 

What taxpayers must do to receive these new benefits:

1.   Increased homestead exemption – Homeowners that are currently receiving the homestead exemption will automatically receive the increased homestead exemption. No action is necessary.

2.   Portability of “Save our Homes” benefits – If you received the homestead exemption in 2007 on a home that you sold or otherwise abandoned during 2007 and have purchased a new home by January 1, 2008, you are eligible to take some or all of the benefit of “Save our Homes” to your new home. In order to receive this benefit, you must apply by March 1, 2008 to your property appraiser for your new homestead exemption and for the transfer of the “Save Our Homes”     benefit to your new homestead for 2008.

3.   $25,000 exemption for tangible personal property – Tangible personal property taxes apply only to certain taxpayers in Florida – typically businesses and certain owners of mobile homes. The tax does not apply to homesteaded property. In order to receive the $25,000 exemption for tangible personal property, taxpayers subject to the tax must file a tangible personal property return with their property appraiser by April 1, 2008.

4.   10 percent limit on annual assessment increases for non-homestead property – The   10 percent limitation does not apply until 2009. No application is necessary for 2008. Apply by March 1, 2008, to transfer your “Save Our Homes” benefit to your new home. The Florida homestead exemption “Save Our Homes” benefit is now “portable” because of the passage of the constitutional amendment on January 29, 2008. The “Save Our Homes” benefit is the difference between the assessed value and market value of a homestead property due to the annual limit on increases in assessed value. Portability means that, from now on, you can transfer some or all of your old home’s “Save Our Homes” benefit to your new home. You must apply to your property appraiser to transfer your “Save Our Homes” benefit. For contact information on Florida’s property appraisers, go to http://dor.myflorida.com/dor/property/appraisers.html.
 

Portability for 2008:

 Portability first becomes available for homeowners who had a 2007 homestead exemption on their Former home and established a new homestead by January 1 ,2008. If you moved into a new home by January 1, 2008, you have through March 1, 2008, to apply to your property appraiser for your new homestead exemption and for the transfer of the “Save Our Homes” benefit to your new homestead for 2008. If you have already applied for a homestead exemption on your new home, you must complete a separate application by March 1, 2008, to transfer the “Save Our Homes” benefit to your new homestead. 

Portability for 2009 and after:

 If you move into a new home after January 1, 2008, and prior to January 1, 2009, and had a previous homestead exemption in either 2007 or 2008, you must apply for your 2009 homestead exemption and the transfer of your “Save Our Homes” benefit by March 1, 2009. 

In future years, you will be able to transfer your “Save Our Homes” benefit to a new home if you had the homestead exemption on your old home in either of the two preceding years.

For information about how to receive these new benefits, please read below or visit the Department of Revenue’s Web site online at www.myflorida.com/dor.  You may also wish to contact your local property appraiser’s office.

Also feel free to contact eThree Realty directly at 877-50-eThree to discuss how this may affect you with a real estate professional. 

Lenders Are Willing to Accept as Much as 20% Losses on Short Sales, Sellers Willing to Sell for Even More of a Loss

December 14, 2007 by

Short sales are becoming more and more common in South Florida’s real estate market. Lenders are beginning to accept low ball offers that are as much as 20% below the original loan amount, according to an article in the Miami Herald.

In years past, the normally accepted discount for short sales was 10%.

This shows what we all know: banks are increasingly willing to dump properties short of the loan amount to avoid the costly foreclosure process and the ultimate outcome of having overpriced real estate in their portfolio.

For example, a property that was bought at the high point of the market for $500,000 with a 10% deposit of $50,000 is now theoretically available to a buyer for $360,000 – which is $90,000 less than the previous loan amount.

The foreclosure process can cost as much as $40,000 to litigate, according to the article in the Herald.

For buyers in today’s market, this presents an opportunity to capitalize during the downturn. The one drawback is the amount of patience necessary to complete a transaction. Dealing with a bank often takes months. For instance, I submitted an offer of 85% of the loan on a short sale listing for one of my clients, and I was told that we would not have an answer for as many as 90 days. That is 3 months! My client does not have the patience necessary and has since moved on. Lenders will market a property and collect offers for as many as 60 days before they determine their strategy. Patience is a huge requirement in today’s market.

The interesting thing is that sometimes sellers are willing to accept even less than a lender. These sellers do not necessarily have a loan on their property, and their strategy is to get what they can and get out fast. These people are in desperate times. Buyers who can move quickly are in luck. DDevelopers, builders, and home owners alike are selling property for as much as a 30%, or even a 40% discount. The trick is finding a knowledgeable firm that has experience in negotiating those types of discounts – to make sure you are getting a true discount and to facilitate the transaction. The good news for you is that if you are reading this article, you have found that firm, eThree Realty.

The Condo Facts

December 4, 2007 by

As I’m sure most people have heard about the number of Condos that are on the market in South Florida. The media has bashed the condo market like one could not even believe. As a published writer in the Sun Sentinel I feel it is important to bring up some major points. The facts are as follows it has never been a better time to buy a condo in South Florida. Sellers are doing all they can to get these condos sold. A first time buyer the world at their feet. Buyers are always looking for the right time to buy well this is it. Closing costs and special rates are all in the mix now.

As time moves on whats going to happen is the prices will rise and the Buyers will all run at once and then say ” I should have bought back in November ” or what ever the case may be you catch my drift. It happens all the time. Now is the time to strike a deal and get that condo or home you deserve. Put your money to work for you.

If a person puts their home up for sale and it does not sell after a few weeks they lower the price on the home.This cycle continues until one of two things happen. They either sell the home or they take it off the market. Investors have bought all these condos and taking it off the market is just not an option. They must sell and in most cases will due what ever it takes to strike a deal. So eThree buyers take note an informed Buyer and know the market.

Real Estate Is Local

November 20, 2007 by

It’s funny how the media can twist things around, exaggerate, and change the way people think. The real estate market is a complicated beast, and no one sentence can sum it up accurately. Yet, as we all know, the media has everyone thinking one sentence: “the real estate market is crap” (excuse my French.) The media and the so-called experts speak in sweeping, general terms and they all conveniently forget to mention the most important fact which is “real estate is local.” In other words, not all real estate markets are the same. And many are, in fact, doing great.

 

Real estate is local. What this means is that every market varies – not only from one city to the next, but also from one community, one street, one house to another one. The market is created by supply and demand. There is a community in Boca Raton, for example, (a city which some may say has a slow market) where homes are snatched up as soon as they hit the market. It’s a young community in a good school district with less than 200 homes. There is very little inventory to buy. That market clearly is local and has nothing to do with the market in the city of Boca Raton, the state of Florida, or the nation for that matter.

 

Real estate is an imperfect market, which means there will always be deals. Part of our business is based on this principle, because to this day the most millionaires that exist have been born out of the real estate industry.

Busy is not so much a state of mind, but a state of existence. And a good one at that!

October 25, 2007 by

So here at eThree, we’ve been busy. We’ve recently added more Realtors to our office, outside and in house, to our firm. We’re still branching out to find even more great people to help us help people.

Our roster currently includes the likes of :

  • Keith Brown
  • Meredith Goldberg
  • Susan Granick
  • Susan Hoffman
  • Pauline Marazzi
  • Lucas Satten
  • Jeff Simons
  • Ray Subick

That’s not even including our broker Jordana Ende (who you’ve seen here on this blog!), or our finance division! Not to mention moi either.

We’re even holding a seminar on November 14th, to help teach people how to build wealth through Real Estate. It’s a free seminar being held at our office (well, in the nice conference room) that we are extending to anyone that wants to come. We are trying to encourage Realtors to bring clients or leads with them, to allow us to teach their clients for them.
If you’d like to see the members here, and get a feel for who we are, feel free to head over to our eThree Family page.

If you’d like to see more about our seminar, you can head to our Building Wealth Seminar page too

Now is the time to buy!

September 21, 2007 by

Over the past few months the media has scared Americans away from investing in real estate. Lenders were closing there doors left and right. Fans all over were being smeared with excretion. As time passes on, the tightening of the mortgage market directly affects real estate as a whole. The end result has positive and negative affects.

 

Let’s start with positive affects. As markets tighten, buyer pools decrease. In direct correlation, prices decrease as well. The tables have now turned. Two years ago, seller’s had buyers lining up outside there door in bidding wars. The seller no longer has the upper hand. The buyer now dictates the deal. The average time a property is listed prior to sale has more than doubled in recent history. Now when an offer is made, we are dealing with sellers scared of losing a potential buyer. The outcome is strongly in the buyer’s favor.

 

Over time, the real estate market shows a consistent trend. It goes up, and it goes down. This very simple theory has made people million and billions of dollars. When do you buy? The obvious answer is when the market is down. We happen to be in a very good down market. Why do I say this? Well, in the past, i.e. the 1980’s, the market was down but people were getting 30 year fixed loans at 17%! Today, you can still get a 30 year fixed loan at 6-7%! The government realizes the real estate crisis we are facing and have made changes to help sustain activity. Mid September the Fed was lowered by ½ point. Fannie Mae has expanded their guidelines to help more people qualify for loans. Action is being taken.

 

Where the market sits today is an extremely attractive time to invest in real estate. There is potential to buy properties well under market value and the ability to finance the transactions is still readily available. Talk to your realtor and see what is out there. This is how people get rich! Now is the time to BUY, BUY, BUY!

 

In the state of Florida (and throughout the nation), residential real estate developers have hit a wall. Due to the smaller pool of qualified buyers and the media telling the world that no one can get a mortgage, they are left with an excess of inventory. Yet, these developers borrow from banks who still want their money every month. When inventory stops moving, carrying costs become excessive. So what is the end result? Extreme discounts! Many developers are selling units at cost or even below cost to avoid foreclosure. What this represents to the world of investors is an opportunity to get into property at COST! Once again, BUY, BUY, BUY!

 

As I mentioned there is a downside to all of this. Many people out there took advantage of the mortgages made readily available to anyone that wanted one. Many people got 100% financing without showing a single document verifying income or assets. Many people were in 2-5 year ARM’s that are now starting to adjust. Their payments are shooting through the roof. These people call there mortgage broker or lender in today’s market and are immmediately shunned away. Their home is now appraising for 20k less than when they bought it. They owe the bank more than what the property is worth.

 

Even for people that put down 10-20% that did NO DOC loans, now go to refinance and are finding out they don’t qualify to refinance because they do not have the necessary documentation to qualify.

 

The downside leads to an excessive amount of foreclosures. This can be looked at in a positive light by the real estate investor as potential to pick up properties at discounted pricing directly from the banks.

 

In conclusion, the current real estate market is an ideal time to BUY, BUY, BUY! There is no investment more secure than buying “bricks.” When the market’s down, it really only has place to go – and that’s up! Simple yet effective.

Mortgage Fraud Brings Down US Real Estate

August 24, 2007 by

Well, I’m sure that title got your attention. And it’s not like it’s too far from the truth : people that shouldn’t have got loans did. Underhanded methods were used, and now we all pay for it.

Luckily, the only way the investment market was hit, is now the loans are just a bit harder to get. There is even MORE incentives offered then before. But….

Our booming real estate economy finally popped. We all knew it was coming. The sellers market is gone. Now we are faced with millions of foreclosures nationally, some pending, some not even started yet. All of them looming over the peoples head’s though. People feel betrayed, by simple interest only adjustable mortgages. The intention was to get a 2 year interest only adjustable, and then refinance the mortgage. But the market crashed, home values dipped down, so before when you had your 100% financed home at $250,000, it’s now only 230,000. You can’t refinance the mortgage without coming out of pocket.

But what does this mean for the home buyer? This means that people want to sell. Now it’s a buyers market. People are offering deals you never could have imagined, from money below appraised value, to money at closing, home warranties, you name it. The problem though, is getting your mortgage.

With more lenders closing their doors every day, a dire situation is brewing in the mortgage industry. With less funds available to lend out, combined with tighter security checks to make sure the people borrowing the money can actually pay it back, it all adds up to a more difficult process in buying a home.

Can’t say we didn’t do it to ourselves though.

According to Reuters UK, “150 billion to $250 billion of permanent capital is needed to normalize pricing in the depressed market for U.S. mortgage-backed securities.”

Real Estate and Mortgages will balance back out, that much we know. It cycles between booming and whichever term you want to use for our current and imminent state. So with time, and the proper stance, the industries can recover from the massive amount of under dealings that were committed.

Overseas Investors See U.S. Real Estate as Attractive

August 10, 2007 by

Despite the intense negative press, the U.S. Real Estate Market still makes a lot more sense and holds more potential than real estate markets in most of the rest of the world. The media tends to dwell on the subprime crisis and its effect on the housing market however keep in mind that despite the risk of foreclosure in the country’s poorer neighborhoods, much of the market is still continuing with small but persistent appreciation rates. American real estate is much more stable and consistent than say, real estate in Malaysia.


Here are some reasons why overseas investors think U.S. commercial and residential real estate is attractive:

1) Transactions in the US are less risky than in closed, opaque real estate markets like China:

2) Upward trend of foreign real estate investment into the US

3) Prime US markets are looking cheap by global standards

  • Dollar is crashing making US real estate cheap in the eyes of Europeans and Asians


The iFuture of Real Estate

July 5, 2007 by

Some analysts say that 500,000 iPhones sold around the world this weekend. Goldman Sachs says its closer to 700,000.
Either way, before we know it, the whole world will be accessing the web via a browser on their phone. Real estate investors needs to understand the value of this sort of product. It means that hundreds of thousands, eventually millions, will be able to search real estate listings online, effectively making the global world of real estate that much smaller.
As you may recall, when the iPod first came out in 2001, it revolutionized hand-held music devices. Within months, it become a phenomenon and trend, so that if you didn’t have white earphones peaking out of your jacket, you weren’t as cool as the guy next to you, who did. The iPhone stands to take after its predecessor and change the way we view our connection to the rest of the world – including of course, the real estate market. As an active real estate investor, these kinds of trends not only interest me – they excite me for the breadth of what the future offers.


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