As buyers actively pursue foreclosures in the country they may not be aware of certain statutes regarding the purchase of condominiums and/or properties located within a homeowners associations. In some instances condominium associations could be part of a homeowners association.

A prospective buyer should be sure the real estate agent they are selecting is aware of these statutes and be willing to obtain them in the case of a foreclosed property, when they are considering a purchase.

With foreclosed properties the seller (Fannie Mae, Freddie Mac, and REO’s) require a specific addendum to be made as part of the sales contract. The addendum is written to highly favor the seller and not the buyer. Although each seller of foreclosed properties has different clauses within the addendum and use different language through-out.  Prospective buyers should be aware of the clauses and should have a real estate attorney review the addendum prior to signing the addendum and be informed about issues within the addendum and how they could affect their purchase, as well as, ensuring state statutes are followed by the sellers.

Because each state has different laws, Fannie Mae, Freddie Mac, and the REO’s it is not possible for them to prepare an appropriate addendum meeting the requirements of individual state statutes.

The problem starts when a real estate agent representing the buyer in a transaction requests the required documents or disclosures, the listing real estate agent states the seller will not furnish any documents or sign any disclosures. If Fannie, Freddie or the REO is contacted by the buyer’s real estate agent calls are not returned, personnel are not aware of what the state statutes require, and executive directors do not respond to calls.

First, the buyer needs to be aware of the chapters addressing condominiums and homeowner associations. Buyers also should understand that a condominium association could be located within a homeowners association bringing both chapters into affect. Below are excerpts from the respective chapters.

For example, the State of Florida Statutes regarding the purchase of condominiums (Chapter 718) and properties located within a homeowners association (Chapter 720) could be ignored.

State of Florida Chapter 718

Section 718.503 Developer disclosure prior to sale; nondeveloper unit owner disclosure prior to sale; voidability.

(2) NONDEVELOPER DISCLOSURE.– (a) Each unit owner who is not a developer as defined by this chapter shall comply with the provisions of this subsection prior to the sale of his or her unit. Each prospective purchaser who has entered into a contract for the purchase of a condominium unit is entitled, at the seller’s expense, to a current copy of the declaration of condominium, articles of incorporation of the association, bylaws and rules of the association, financial information required by s. 718.111, and the document entitled “Frequently Asked Questions and Answers” required by s. 718.504. On and after January 1, 2009, the prospective purchaser shall also be entitled to receive from the seller a copy of a governance form.

State of Florida Chapter 720

PART II DISCLOSURE PRIOR TO SALE OF RESIDENTIAL PARCELS

Section 720.401 Prospective purchasers subject to association membership requirement; disclosure required; covenants; assessments; contract cancellation.–

(1)(a) A prospective parcel owner in a community must be presented a disclosure summary before executing the contract for sale. The disclosure summary must be in a form substantially similar to the following form:
“DISCLOSURE SUMMARY
FOR
(NAME OF COMMUNITY)
1. AS A PURCHASER OF PROPERTY IN THIS COMMUNITY, YOU WILL BE OBLIGATED TO BE A MEMBER OF A HOMEOWNERS’ ASSOCIATION.
2. THERE HAVE BEEN OR WILL BE RECORDED RESTRICTIVE COVENANTS GOVERNING THE USE AND OCCUPANCY OF PROPERTIES IN THIS COMMUNITY.
3. YOU WILL BE OBLIGATED TO PAY ASSESSMENTS TO THE ASSOCIATION. ASSESSMENTS MAY BE SUBJECT TO PERIODIC CHANGE. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____. YOU WILL ALSO BE OBLIGATED TO PAY ANY SPECIAL ASSESSMENTS IMPOSED BY THE ASSOCIATION. SUCH SPECIAL ASSESSMENTS MAY BE SUBJECT TO CHANGE. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____.
4. YOU MAY BE OBLIGATED TO PAY SPECIAL ASSESSMENTS TO THE RESPECTIVE MUNICIPALITY, COUNTY, OR SPECIAL DISTRICT. ALL ASSESSMENTS ARE SUBJECT TO PERIODIC CHANGE.
5. YOUR FAILURE TO PAY SPECIAL ASSESSMENTS OR ASSESSMENTS LEVIED BY A MANDATORY HOMEOWNERS’ ASSOCIATION COULD RESULT IN A LIEN ON YOUR PROPERTY.
6. THERE MAY BE AN OBLIGATION TO PAY RENT OR LAND USE FEES FOR RECREATIONAL OR OTHER COMMONLY USED FACILITIES AS AN OBLIGATION OF MEMBERSHIP IN THE HOMEOWNERS’ ASSOCIATION. IF APPLICABLE, THE CURRENT AMOUNT IS $_____ PER _____.
7. THE DEVELOPER MAY HAVE THE RIGHT TO AMEND THE RESTRICTIVE COVENANTS WITHOUT THE APPROVAL OF THE ASSOCIATION MEMBERSHIP OR THE APPROVAL OF THE PARCEL OWNERS.
8. THE STATEMENTS CONTAINED IN THIS DISCLOSURE FORM ARE ONLY SUMMARY IN NATURE, AND, AS A PROSPECTIVE PURCHASER, YOU SHOULD REFER TO THE COVENANTS AND THE ASSOCIATION GOVERNING DOCUMENTS BEFORE PURCHASING PROPERTY.
9. THESE DOCUMENTS ARE EITHER MATTERS OF PUBLIC RECORD AND CAN BE OBTAINED FROM THE RECORD OFFICE IN THE COUNTY WHERE THE PROPERTY IS LOCATED, OR ARE NOT RECORDED AND CAN BE OBTAINED FROM THE DEVELOPER.
DATE:
PURCHASER:
PURCHASER:”

It further states the following:

“The disclosure must be supplied by the developer, or by the parcel owner if the sale is by an owner that is not the developer. Any contract or agreement for sale shall refer to and incorporate the disclosure summary and shall include, in prominent language, a statement that the potential buyer should not execute the contract or agreement until they have received and read the disclosure summary required by this section.”

Below are excerpts from some addendum, which conflicts with the state statutes and responsibility falls on the shoulders of the buyer.

Example one is taken from the Fannie Mae addendum:

“If the Property is a condominium or planned unit development or co-operative, unless otherwise required by law, the Purchaser, at the Purchaser’s own expense, is responsible for obtaining and reviewing the covenants, conditions and restrictions and bylaws of the condominium, or planned unit development or cooperative within (10) days of execution of this Agreement by both parties pursuant to paragraph 1 hereof. The Seller agrees to use reasonable efforts, as determined at the Seller’s sole discretion, to assist the Purchaser in obtaining a copy of the covenants, conditions and restrictions and bylaws. The Purchaser will be deemed to have accepted the covenants, conditions and restrictions and by laws if the Purchaser does not notify the Seller in writing, within 15 days of execution of this Agreement, of the Purchaser’s objection to the covenants, conditions and restrictions and/or bylaws.”

Example two is taken from a REO addendum:

“If the Property is a condominium, planned unit development, subject to a homeowner’s association or cooperative, unless otherwise required by state law, Buyer, at Buyer’s own expense, is responsible for obtaining and reviewing the covenants, conditions, restrictions and/or bylaws of the relevant entity within seven (7) calendar days of the Seller’s delivery of executed contract to Buyer. Seller agrees to employ reasonable efforts to assist Buyer in obtaining a copy of said documents. Buyer will be deemed to have accepted the covenants, conditions, restrictions and/or bylaws if Buyer does not notify Seller in writing, within ten (10) days of Seller’s acceptance, or Buyer’s objection to the same.”

Example three is taken from the Freddie Mac addendum:

“IT IS EXPRESSLY AGREED AND ACKNOWLEDGED BY THE PURCHASER THAT ANY EXPRESS REPRESENTATIONS, WARRANTIES, OR STATEMENTS CONTAINED IN THE CONTRACT OF SALE, WHETHER REFERRING TO THE CONDITION OF THE PROPERTY, OR WHETHER REFERRING TO THE EXISTENCE OF FEATURES, FUNCTIONS OR SERVICES RELATING TO OR SERVING THE PROPERTY (INCLUDING, BY WAY OF EXAMPLE ONLY, WHETHER THE PROPERTY HAS PARTICULAR TYPES OF UTILITY SERVICES), ARE SPECIFICALLY WAIVED, DISCLAIMED, AND RENDERED NULL AND VOID.”

The clauses within the addendum are clearly not in compliance with state laws, however the seller of foreclosed properties should be made aware of the conflict or conflicts and work in an amicable manner to comply. Rather than being unresponsive to the prospective buyer or the buyer’s real estate agent, when the issue is being brought to their attention. One could go so far that the seller may elect to find real estate agents who are more familiar with the state or local laws governing documentation involving the sale and purchase of real estate.

A good buyer’s real estate agent understands the individual state laws and will obtain the documents the buyer should have as required. A buyer of a condominium in Florida is required to be furnished with the following documents:
1) Declaration of Condominium;
2) Articles of Incorporation;
3) Bylaws;
4) Rules and Regulations;
5) Most Recent Year-End Financial Statements;
6) Question and Answer Sheet;
7) Governance Form.

A buyer of a property located within a homeowners association should have the following documents:
1) Disclosure Summary for the Homeowners Association, at a minimum;
2) Declaration of Restrictive Covenants;
3) Articles of Incorporation;
4) Bylaws;
5) Rules & Regulations;
6) Most Recent Year-End Financial Statements.

A prospective buyer should be working with both a good the real estate agent and real estate attorney who are aware and knowledgeable of state statutes and know how and where to documents to satisfy and protect them )the buyer) in the case of a foreclosed property, when they are considering a purchase.

As prospective buyers run towards the purchase of less expensive condominiums in the Naples area – their attention has not been to the financial stability of the association. In other words they are running into condominium complexes that could be facing a financial distress situation. Warnings regarding the apartment to condominium complexes and their potential financial distress situations have taken place over several months, starting with the doubling of quarterly association fees of a North Naples condominium complex. Such a situation has come to light recently in an article found on the Marco Island News on December 7, 2009.

Liens by the homeowners association halted an auction for 55 condominiums at Granada Lakes Villas in eastern Collier County.

An auction advertised for Dec. 6 never happened and interested buyers have been put on hold. Some contracts were signed in the weeks leading up to the public event.

The liens were filed after the auction was heavily advertised.

“We had a lot of properties under contract. We were ready to start closing. This came up,” said Eric Chavarria, a Realtor with Real Estate Empire in Miami, which was handling the auction.

Granada Lakes Villas went from apartments to condos a few years ago but it was a late comer in the conversion craze that hit Southwest Florida back in 2004. Granada Lakes Villas has been plagued by foreclosure actions.

Analysis showed more than 100 default notices filed against owners in the community, which is the first step in foreclosure.

On the developer owned units, the average lien is about $10,000 for unpaid maintenance fees. It’s almost half a million dollars in past dues.

Source: Marco Island News

Don’t blame the banks or lenders for not approving a potential short sale for every property! You just might blame the seller and the real estate agent. Buyers need to be aware of the facts before they waste their efforts and time on a transaction which is doomed even before the offer is made on the potential short sale property.

There are many property owners using potential short sales to find relief either from their financial distress situation, a loan with unfavorable terms or because they don’t want to pay on mortgage for a property which is worth far less than when they purchased it.

In many cases the potential short sale does not obtain an approval from the lender(s) or bank(s). Below is a great example of an active listings for a single home for sale in an above average development.

The home is listed for $259000. If a full price offer was accepted by the seller, the contract would be submitted to the lender or bank. There is only mortgage on the property in the amount of $496800 and another lien from the homeowners association for $3742 (not including legal fees, court costs and interest) as of the fourth quarter of 2008. The estimated additional sum for the first half of 2009 is $930. Based upon the aforementioned facts, if the lender approved the contract, the lender would receive the net proceeds (purchase price less closing costs) of about $236000, after paying for the closing costs and for the release of the homeowners association lien.

The estimated market value of the home is $384000, based upon comparable homes sold within the past three months.

If the lender or bank forecloses on the property, the foreclosure will wipe out the entire homeowners association lien against the property.

After the foreclosure, the lender or bank could put the home on the market (if still in good condition) for about $345000. An offer could be put in and accepted on the home for about $311000 – could be higher. The bank or lender would realize net proceeds from the sale of about $289000.

The difference between the potential short sale net proceeds ($236000) and the foreclosure sale net proceeds ($289000) is $53000.

Why would a lender or bank approve the short sale when foreclosing on the home would increase the bottom line by $53000?

Could this situation cause the lender or bank to accelerate their efforts to foreclosed on the property?

Most buyers are not aware of the complications of the potential short sale property and will waste their time and effort on such a property as discussed in the above example.

Sellers and their real estate agents need to work the numbers to ensure the lender or bank makes a decision to approve the short sale.

Sellers of short sales often are not aware of the income tax effects of the short sale transaction and surprised to receive a form 1099-c.

Below is information for sellers of potential short sale transactions.

A short sale in real estate occurs when the outstanding loan against a property exceeds the market value of the property and the lender agrees to accept less than it is owed to permit the property to be sold.

The difference or shortage is an expense to the bank or lender and therefore becomes income to the individual(s) with the short sale. Put in simple terms – one’s expense is another’s income.

The best sources for accurate information are an appropriately qualified lawyer or the IRS itself (www.irs.gov) but as a preliminary guide, the following extract from the IRS site gives this basic information.

The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in 2007, 2008 or 2009. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

(Source: IRS Newsroom page)

The IRS has a special page dedicated to The Mortgage Forgiveness Debt Relief Act and Debt Cancellation. Below is the information presented by the IRS:

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:

What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

* Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
* Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.These exceptions are discussed in detail in Publication 4681.

 

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.

If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.

Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.

If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.

I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.

If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.

If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.

What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.

How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.

(2) File Form 982 with your tax return.

My student loan was cancelled; will this result in taxable income?
In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.

Are there other conditions I should know about to exclude the cancellation of student debt?
Yes, your student loan must have been made by:

(a) the federal government, or a state or local government or subdivision;

(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or

(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization.

Can I exclude cancellation of credit card debt?
In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681.

How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.

How should I report the information and items needed to prove insolvency?
Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.

To claim this exclusion, you must attach Form 982 to your federal income tax return. Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation. You must also reduce your tax attributes in Part II of Form 982.

My car was repossessed and I received a 1099-C; can I exclude this amount on my tax return?
Only if the cancellation happened in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See Publication 4681 for examples.

Are there any publications I can read for more information?
Yes.
(1) Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) is new and addresses in a single document the tax consequences of cancellation of debt issues.

(2) See the IRS news release IR-2008-17 with additional questions and answers on IRS.gov.

The available homes for sale in the Estero area saw a drop in the number of homes for sale as of the close of business on April 30. The current number of homes for sale was 471. This represents a drop in the inventory of 57 homes. The decline represents of about 11 percent. In the year over year analysis the current inventory represents a decline of 37 homes or about 7 percent. In addition, the number of home available for sale is at the lowest level since August 2008. In August 2008 there were a total of 456. Below is a graphical presentation of the historical data for active listings by month from January 2008 to April 30, 2009.

Trendline for Estero Homes for Sale - January 2008 to April 2009

The composition of the type of listings available for sale is rather interesting and could represent a major difference between prospective buyers’ perceptions, as well as, what is being reported by others as to how dire the Estero real estate market is. The vast majority of listings fall within the traditional listing category (traditional listings are listings being offered as a normal sale), followed by foreclosures, and potential short sales. The raw numbers for the various categories are 360 for traditional listings, 101 potential short sales and 10 foreclosures.

Composition of Estero Homes for Sale as of April 30, 2009

A question arises – will the closed sales for April reflect the same classification of the listings? The answer to this question will appear on this blog sometime within the next few days.

In previous posts you can compare the composition of both the Naples homes for sale and Bonita Springs homes for sale to Estero homes for sale.

Your thoughts and comments are always welcomed.

The available condos for sale in the Naples area saw a drop in the number of condos for sale as of the end of April or start of May. The current number of condos for sale is 4954. This represents a drop in the inventory of 274 condos from the end of March. The decline represents of about 5 percent. In the year over year analysis the current inventory represents a decline of 369 condos or about 7 percent. Below is a graphical presentation of the historical data for active listings by month from January 2008 to April 30, 2009.

Naples Condos For Sale - January 2008 to April 2009

The composition of the type of listings available for sale is rather interesting and could represent a major difference between prospective buyers’ perceptions, as well as, what is being reported by others as to how dire the Naples real estate market is. The vast majority of listings fall within the traditional listing category (traditional listings are listings being offered as a normal sale), followed by foreclosures, and potential short sales. The raw numbers for the various categories are 4289 for traditional listings, 595 potential short sales and 70 foreclosures.

Composition of Naples Condos for Sale

A question arises – do the closed sales for April reflect the classification of the listings? The answer to this question will appear on this blog sometime between May 8 and May 11.

Your thoughts and comments are always welcomed.

Jim Cramer: Florida Raises Hope for U.S. Real Estate

It appears that Jim Cramer thinks that Florida is the model for the nation’s real estate market. He thinks that Florida was the first state to feel impact of the real estate bubble and now after 2 years it has bottomed out with the rest of the country to follow. Below is his discussion from a recent interview he had on Wall Street Confidential.

Over the previous months subtle indications in the Naples, Bonita Springs, and Estero real estate markets have shown signs of improvement by the lowering of homes and condos for sale as well as less listings coming on the market than in previous 2 years.

Prices have declined to a point where multiple offers are being presented on properly priced properties.

Buyers need to be aware of the estimated market value of a property and
be prepared to rethink that a full price offer will be
the offer accepted and be willing to offer more than the listed price close to the estimated market value.

Sellers still need to be aware that they need to properly price their properties due to the competition from potential short sales and foreclosures.

August Naples Condo Activity:

Listings:

During the month of August 458 Naples condominiums were listed for sale. For the same month in 2007, 560 condominiums were listed for sale; this represents a decrease of 18.2 percent. The decrease from 2006 was 32.7 percent from the 680 new listings.

In July 2008 there were a total of 499 condominiums listed for sale.

The available for sale Naples condominiums have dropped from 5582 in February 2008 to 4675 at the end of August. This represents a reduction of 907 or 16.3 percent.

The number of months of inventory or the absorption rate is presently 29 months down from February’s 37 months.

Additional detailed information will be posted to explain where the listings and identification of where distressed properties and non-distressed properties are located for a better understanding of the Naples condo real estate market for both buyers and sellers.

Closed Sales:

A total of 157 condominiums were sold during August 2008. Comparing the same month in 2007 there were a total of 122 condominiums sold, the higher volume of 35 condominiums represents an increase of 28.9 percent. In August 2006 a total of 121 condominiums were sold or an increase of 29.8 percent (or 36 more condominiums).

In July 2008 a total of 155 condominiums closed or 2 more condominiums.

Condominiums with a sales price of less than $100000 represented about 9.3 percent of the total 157 condominiums closed versus 1.6 percent in August 2007.

Condominiums with a sales price between $100000 and $200000 represented another 35.4 percent compared with 2007 where the percent was 16.4 percent.
Condos sold with sales price of between $200000 and $300000 represented 20.5 percent of the closings versus 34.4 percent in 2007.

Eight developments within the Naples area accounted for 31.7 percent of the August condo closings – Park Shore (11.8 percent), Pelican Bay (4.3 percent), Vanderbilt Beach (3.1 percent), Cypress Woods Golf and Country Club (2.5 percent), Falling Waters (2.5 percent), Fiddlers Creek (2.5 percent), Pelican Marsh (2.5 percent), and Stratford Place (2.5 percent).

Distressed properties (short sales, pre-foreclosure, and foreclosures) represented 17.9 percent with median price of $135000.

Pending Sales:

In August 2008 200 condominiums were placed under contract or pending for closing (pending sales are where a buyer and seller have agreed on the price and terms of a purchase and the condominium is no longer available for sale). The 200 condominiums is an increase over the 110 condominiums (81.8 percent) in 2007 and 131 condominiums (52.7 percent) in 2006.

August 2008 was higher than the 155 condominiums in July 2008 and greater than the 173 condominiums in June 2008.

Median Price Paid:

During the month of August the median price paid for a condo was $215000. In the previous year, 2007, the median price paid was $285000 or a reduction of 32.6 percent. In 2006 the median price was $319900 or reduction of 32.8 percent compared to August 2008.

Non-distressed condominium sold for median price of $231500, compared with a median sale price of $135000 for distressed (short sales, pre-foreclosure, and foreclosed) condos.

In July 2008 the median price paid was $250000 down 14.0 percent on a month to month basis.

Referring back to closed sales the areas comprising the largest percentage of closings in August shows the following:

• Park Shore – $1425000 an increase in value of 46.2 percent from the 2007 median price of $957500.

• Pelican Bay – $572500 a reduction in value of 40.2 percent from the 2007 median price of $957500.

• Vanderbilt Beach – $950000 an increase in value of 60.3 percent from the 2007 median price of $592500.

• Cypress Woods Golf and Country Club – $149500 a reduction in value of 19.2 percent from the 2007 median price of $185000.

• Falling Waters – $173,700 a reduction in value of 15.3 percent from the 2007 median price of $205000.

• Fiddlers Creek – $279999 a reduction in value of 41.7 percent from the 2007 median price of $480000.

• Pelican Marsh – $422500 an increase in value of 1.8 percent from the 2007 median price of $415000.

Short sale condos had a median price of $180000, while foreclosed condos sold for a median price of $133000.

The analysis of the median price paid shows sellers and buyers should not only be aware of national, state, or area (city or town), but also by development or neighborhood to make an informed decisions in the condo real estate market.

HOMEOWNERS INSURANCE

Start shopping around now for the best rates on homeowners insurance for your Naples, Bonita Springs or Estero residence. As the largest insurer of homes, condos and apartments in the state, Citizens Property Insurance has nearly 9,000 agents writing policies. But the insurance agents say that Citizens doesn’t pay them enough, especially in light of the heavier workload expected in February when new forms are introduced for its windstorm policies.

FHA

Starting today, homeowners trying to save their homes from foreclosure may find it easier to get federal help. FHASecure guidelines have been relaxed, expanding its eligibility standards to include borrowers with ARMS who were late on two monthly mortgage payments in the past 12 months, even if they were consecutive.

FORECLOSURES

With foreclosure rates at record highs, the Bush administration has been trying to keep people from losing their homes. But “many of today’s unusually high number of foreclosures are not preventable,” Treasury Secretary Henry Paulson said last week. “There is little public policymakers can, or should, do to compensate for untenable financial decisions.”

MORTGAGES

If Fannie Mae and Freddie Mac collapsed, it would deal a blow to the mortgage market. But the federal government unveiled a broad program yesterday to bolster the troubled mortgage giants. Both companies said they were financially sound but grateful for the confidence-building efforts.

MORTGAGE RATES

Rates on 30-year mortgages rose again this week – to 6.45 percent – climbing to the highest level in more than nine months, reflecting concerns about how the Federal Reserve will respond to higher inflation pressures.

HOMESTEAD EXEMPTION

As county budgets shrink, officials are becoming more aggressive seeking out owners who lie about their living status in order to get a homestead exemption. If caught, a tax lien is typically placed on an owner’s property. The owner also faces a fine: 50 percent of the unpaid taxes for each year and interest at 15 percent per year.

FORECLOSURES

A series of lawsuits accuse mortgage lenders of disregarding bankruptcy laws. The lawsuits typically allege that mortgage-servicing firms mishandle borrower payments, triggering unwarranted late charges or defaults; bill homeowners for more than they owe; and charge for unneeded and expensive property insurance.

DOWNTOWN REVITALIZATION

The condo boom gave cities hope that they could revitalize downtown areas with a fresh mix of homes, stores and offices. When the real estate slowdown hit, however, plans went on hiatus, though officials hope for a payoff when things again turn around.