Frequently Asked Questions

UPDATE: The current Florida real estate market

As a buyer, you have heard many stories or rumors about the real estate climate in Central Florida. You will likely find this information quite sobering, however your application of it will absolutely determine your success. As a licensed professional with close to ten years experience in Central Florida real estate, HERE ARE THE CURRENT FACTS:

Fact: We have absolutely reached the bottom of the real estate market in this area. I am referring to Kissimmee, Orlando, Celebration, Windermere, Clermont, Davenport, Winter Garden, Longwood, Altamonte Springs, Winter Park, Saint Cloud, and the surrounding areas. The proof is in the fact that every decent piece of property has many buyers considering it, with many listings receiving MULTIPLE OFFERS at the same time on the same property! Because of this new rush on real estate bargains, you must act and decide much faster than you normally would.

Fact: Many of the real estate properties you are seeing for sale are NOT available
for immediate purchase. You are seeing many "amazingly cheap homes" in print and on-line.
Nowadays 60% of all the homes for sale are being listed as a short sale. This means the
property owner has placed their property at a low price to entice a buyer willing to write
a contract and thereafter expecting that their lender will exonerate their debt, accept the
buyers offer, AND agree to take a loss on the property. It's VERY COMPLICATED. How
successful is the seller at getting his lender to do this? Not very successful. Almost all end
up a year later in bank foreclosure. The statistics show that only 15% of the short sales ever
come to the closing table. To do so, the seller must wrangle for up to a year with his mortgage
company or companies, especially if they (the seller) have a 2nd mortgage with another lender.
Most sellers do. Also, there is the endless amount of red tape involved on the seller's side. Then
comes the long, long, long wait to see if the lender will accept this short sale offer from a buyer.
Plus.. there may be multiple buyer offers on the waiting list to make the process even more
frustrating. Because of this HUGE bottleneck in the Florida real estate debacle, I HIGHLY suggest
you avoid short sales. Avoid the temptation to even consider such a listing because they are not
what they seem. If you want a stress-free real estate experience, Avoid any property listing which
uses the phrase "Listing price may not be sufficient to cover all encumbrances", "Pre-foreclosure",
"Short sale", "Requires third-party approval". However, if you must have a particular home which
contains any of these terms, I have to charge a non-refundable upfront fee of $3,000 to cover the
immense time and gross attention to the transaction, with no guarantee your property choice will
ever be obtainable.

Fact: Actual properties (not short sales) which are listed for sale in the MLS for $80,000
or less are GONE with the exception of Poinciana, Pine Hills, and other less popular communities.
Cash paying investors are buying these inexpensive single-family foreclosed homes by the dozen.
If you are still seeing them, it is because they must remain active on the MLS until all signatures
and other legalities are firmly in place, Or the listed property is a short sale, which we already know
to be somewhat deceptive. In reality, those nice and cheap bank-owned properties are under contract with other buyers, and were accepted weeks and weeks ago. How do I Know? After no less than hundreds and hundreds of phone inquires and investigations into the availability of these real estate bargains, I can tell you these properties are taken. In addition, thousands of other Realtors will attest to doing the same investigation. Those very low priced homes are under contract often in less than one day. In Central Florida, this real estate frenzy is slowly but surely driving up the market and increasing appraisal values. So..how can you still take advantage of this real estate gold rush? It's very difficult. Remember, many other buyers like yourself are also looking for bargains as well! The good news is that there are still a ton of great deals. However, any property priced under $200,000 is selling VERY fast. You must be prepared to purchase at a moment's notice, often sight unseen, AND have your cash or financing already in place. Don't worry, you still have lots of protection and the ability to back out.

Fact: Lenders are normally NOT giving loans for condo or townhome purchases. The reason is because many condo and townhome owners have become delinquent in paying their HOA dues. Without this revenue, many condo and townhome communities have not been able to keep up with the maintenance of the property exterior and common grounds within the subdivision. Some communities have been discovered to be without the homeowners insurance needed to insure the exterior portion of these attached buildings. This scenario is not the norm. Most condo communities are managed fairly well, but it is the few bad ones that have spoiled it for everyone. This becomes a gigantic risk for some lenders who now refuse to take a chance on granting a loan for a condo or townhome purchase without a very, very, good record of HOA management. Only the elite and prestigious communities will qualify. If you are shopping for condos under $200,000 it is doubtful any lender will approve your condo loan. Hence, If you are purchasing a condo or townhome, it's CASH ONLY. Even new condo builders are not quickly offering in-house financing.

Fact: Foreclosure homes are being sold ABOVE list price. Banks have already adjusted their home prices to reflect today's market value. The notion that a bank wants to simply "get rid" of a property is ridiculous. Banks play by their own rules and will sell what they want, when they want, AND for what price they want! Unfortunately, I have seen many a stubborn buyer lose out on a fantastic home only to realize later that they didn't know how the bank perceives the real estate process. After three to five heartbreaking losses, the buyer finally begins to understand the mindset of purchasing a foreclosed home. Depending upon the LOCATION, INVENTORY, and FEATURES, some foreclosed homes are purchased up to $30,000 over the list price. The average forclosure is selling right now for 13% over list price. As an example: if you have $150,000 to spend, you should be looking at a property priced at $135,000 because you will most assuredly have to compete with many other real estate shoppers, and because of the increased demand, that property will very likely cost you $15,000 more than you expected. Hard to believe but true! If you don't like this particular process of purchasing a home, don't even consider a foreclosure! Find a nice seller who owns their home free and clear. A needle in a haystack, but the ultimate way to buy a resale home.

Fact: Investor loans require a minimum of 30% - 40% down payment. An investor is anyone who will not be residing in the property themselves. As you know, the investors share a large portion of the blame for today's housing meltdown. Banks view investor loans as very risky. Hence, be prepared to pay higher interests rates as well if you are seeking a second home, vacation, or investment property. If the property AND the price is right, the loan costs may be worth it.

Fact: Cash is not always king. There are 30 or more real estate professionals in my office that can tell you they have clients who have lost cash bids to non-cash buyers. This is because the sellers, (both bank foreclosure and plain property sellers) preferred to accept a higher offer on their property based upon a buyers loan commitment. Lesson: don't be prideful. Leave your ego away from the contract table. Your cash offer at times may be an advantage. Sometimes it is not. You may have to simply offer more money to get what you want. If you don't have more money, take out a small loan. It may be worth it! Listen to your trusted Realtor, who usually has the pulse on what the seller is considering.

Fact: Conventional sellers must compete within the market value calculation system the same way as foreclosed properties. This includes any and all neighborhood homes sales, whether bank-owned or non bank-related sales. Actively listed properties, sooner or later, will be adjusted and appraised based upon the most recent neighborhood sales activity. For a appraisal purposes, sales information was gathered from as far back as six months. Nowadays, any activity more than 90 days past may not even be considered. A word to sellers... don't be intimidated by competing short sale listings. Hopefully you've learned by now that those listings will probably not sell at those prices anyways, AND not any time soon.

Fact: All Realtors are NOT created equal. Some Realtors dabble in the business. Other Realtors are simply unknowledgeable about the process and the new procedures brought about by this housing crisis. I hope you can decern my experience in dealing with various real estate situations. I've chosen to tell you what you need to know to be successful. I hope you'll choose me to be your one and only trusted Realtor. You only need one good Realtor. Choose wisely. Have questions or comments?
Email Michael at wow@kua.net

Michael K. Johnson