The state of Florida appears, on the surface at least, to be experiencing a housing collapse. Rampant real estate speculation, development and the subprime mortgage debacle are to blame for the glut of homes for sale that has left the market upside down and many homeowners underwater and facing the prospect of foreclosure. With many adjustable rate mortgages (ARMs) due to resetting at higher rates, the consequences may not be over. A further manifestation of the situation is the insurance premium increases that are expected to cover the devastation and property losses / claims associated with recent hurricane seasons.

Compounding the problem are expected increases in condo fees to cover property losses not covered by insurers. The fallout has created a unique opportunity to revisit real estate opportunities across the state. There are a couple of by-products for this type of market. One is an increase in properties for sale by owner. Homeowners look for any advantage they can get when looking to get out of a high net worth or negative value mortgages. A For Sale by Owner allows the owner more options when it comes to pricing. They can accelerate the sale of the property by transferring the real estate commission savings associated with a For Sale by Owner. This can represent a substantial savings to the buyer and will certainly make your property more attractive when you consider that the real estate commission savings on a $ 280,000 property is $ 16,000! The For Sale by Owner also has more freedom when it comes to making your home “look” more attractive.

They can offer creative concessions to the seller such as “no condo fees for one year” or “0% financing for 3 years.” Essentially, instead of passing the savings directly to the buyer, they create a “package” that can appear more attractive. I’ve personally seen everything from “Free Plasma TV’s” to “Timeshares in Puerto Rico.” Creativity can certainly pique someone’s interest, but I tend to prefer a direct “cash” discount or rebate. This allows the prospective home buyer the opportunity to decide how best to use the money. Cash has a fixed face value; $ 2000 always has a “value” of $ 2000 regardless of the buyer, while a “timeshare in Puerto Rico” will have different values ​​for different people.

The second by-product, unfortunately, is “foreclosures,” which have risen rapidly in Florida since 2006. Industry experts blame “subprime mortgages” for this rise. Subprime mortgages are higher risk because they are made to borrowers who generally do not qualify under the more rigorous traditional criteria due to limited or poor credit history. Subprime mortgages have a significantly higher default rate than prime mortgages. Subprime mortgages often have a higher debt service-to-income ratio, and the homeowner just can’t make ends meet. The end result is more foreclosures and an increase in homes for sale – the fact that they are “distressed” and vacant further erodes the overall values ​​of all homes. As the inventory of unsold properties continues to grow, residential real estate prices decline.

The bottom line is that there are an abnormally high number of existing homes currently for sale in Florida. As supply exceeds demand, property values ​​fall. The sale by the owner can allow the owner to save that drop in value and allow him to avoid foreclosure.

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