Real Estate Darwinism

From the Colorado Springs Real Estate Connection and the Wagner iTeam to you ¦ Happy Mothers Day to all the Moms out there - whether you are a Mom to your own children or a Mom-figure to others.

Have a wonderful day!

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There it is.  Gas prices that break the bank right on El Camino Real at 20th Avenue in San Mateo.  Not much else to say except this might be the future for all of us.  So start saving your pennies now.

Why is this gas station the only one in San Mateo charging so much?

Who buys gas there?  It's always empty when ever I drive by.

Florida voters will have a chance to voice their opinions on a new Property Tax proposal in November of this year.

Several changes have already been made:

• The 'Save our Homes' benefit that current owners enjoy on their primary properties is now at least partially portable - making the purchase of a new primary within the state more attractive and...
• The doubling of the $25,000 exemption on homesteaded real estate to $50,000 (on the non-school taxes).

While any reduction in property tax on our Palm Beach real estate is welcome, the new proposal makes a much more drastic cut.

The new proposal includes the following:

• A 25% average reduction in property taxes on primary properties
• An adjustment to the cap on the annual possible assessment increase on 2nd homes and investment properties from 10% down to 5%. The 3% cap on primary homes would not be changed.

The 25% cut is huge and the money the state will 'loose' has been estimated at about $8 billion pre year.

It is estimated that slightly less then half of that could be made up by increasing sales tax from 6% to 7%.

One way of making up the rest would be to tax services - this is a possibility, but the rumor mill has already started reporting that is is definite. As of the writing of this article it is NOT.

Other ways of making up for the loss include getting rid of the exemptions on certain luxury items or just having the State cut out wasteful spending.

Decreases to the amount of property tax that Palm Beach real estate owners' pay every year are very necessary if we hope to stimulate the market.

Regardless of any other changes, the idea of paying less for property tax should give real estate activity in Florida a good kick in the right direction.

Are You Safe in Your Own Home?

Your home is your safe haven from the world.  At least it is supposed to be.  What if it isn't?  What if anybody could get in at anytime?  Would you still feel safe?  My Dad sent me an email yesterday with a link to a news video about bump keys.  To say that it was enlightening would be a major understatement. 

Have you heard about Bump Keys yet?  Apparently they can be purchased online for about $2.00 each and can be used to open almost any lock in seconds. I urge your to watch this video. You may want to upgrade the locks on your Long Beach Homes after watching it.

How does this work? Check out this short video as well.

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Yesterday I started to talk about foreclosures and short sales - there is way too much confusion about them, so I'd like to simplify things a bit.

I finished up by mentioning the case of owing more on your real estate then it's actually worth or "Being Upside-down".  How could that happen?

Several ways:

• Regardless of your loan type, if you live in an area with extreme depreciation, the value of your home could be going down faster then you can pay down the loan.
• If you have an interest-only mortgage, ANY amount of depreciation would make the home worth less then the loan balance since the principle never gets paid off.
• If you have been using the minimum payment on an option-ARM you would be experiencing negative-amortization - you're making monthly payments, but they don't cover the amount of intrest owed each month.  This increases the outstanding balance.  So even if your home's value didn't go down, the amount owed would be increasing.  If you're one of the many that has that type of loan, I hope your Broker / Lender made that perfectly clear.

Of course, the lower the initial Loan-to-Value (LTV) the safer you would be, regardless of the loan type.

So what is FORECLOSURE?

Let's start with PRE-FORECLOSURE - you've stopped making your monthly mortgage payment, now you are in DEFAULT on the loan.  A red flag goes up at the bank and they let you know that you had better get back on track, quickly.  At this point, get in touch with the bank DO NOT just ignore the problem!  The bank isn't going to say "You seem like a good person -  don't worry about it!" - but you could possibly work something out with them before the worst happens.

You could go the route of the SHORT SALE - it's called that because by taking less then what they are actually owed, the bank is taking 'a short'.  Here's where it gets a little complicated.  You can't sell the house for what's owed so you list the property and any offers that come up go straight to the bank to approve or disapprove - you as the owner have no say in the matter. 

The banks really don't want to take your property from you, they already have more than enough and then they have to pay their lawyers for their work, re-list the property and try to sell it themselves (and pay more agents).  So, yes, they will take less then what is owed in many cases - but how much less?

You might as well roll the dice and take a guess because if there really is a hard and fast rule they're never going to tell you & me!

As an example, let's say that the loan balance is $500,000.

    Case 1:  An offer comes in for $480,000 - will the bank take it?  There is a reasonable chance, because they really aren't losing too much.

    Case 2:  An offer comes in at $350,000 - if the bank took that offer, they would have a considerable loss - but instead of just saying no, they won't say ANYTHING - for several weeks, while they wait for a better offer to come in.  The usual turn around time for offers/counteroffers does not apply here.  After all, it IS their money.

Currently, if the short-sale works, you will have to pay tax on the difference between what was owed and what the bank finally accepted.

Lastly there is Foreclosure - the bank takes your house. It is then referred to as 'Real Estate Owned' (REO) and they will they try to sell it -

You can always contact me at 561-282-7406, but if you think you're headed for any of the negative situations I've described it's very important that you contact your Accountant and/or Lawyer ASAP so that you find out as much as possible.