How Are People Paying for Daytona Beach Homes?

Sales of Daytona Beach homes have been strong this year. People are buying homes and condos, but how are they paying for their properties. There’s an interesting new feature in our local MLS (multiple listing service) that shows how people paid for the property purchase.

In June, 52.4% of buyers paid cash. This doesn’t surprise me at all. I’m seeing about 80% of my buyers paying cash. Here’s the breakdown of how properties were paid for:

• Cash – 255 (52.4%)
• Conventional Mortgage – 136 (27.9%)
• VA/FHA 72 (14.8%)
• Other 24 (4.9%)

I went back to take a look at how financing has changes since the boom days. In June 2005 the numbers were completely different. 74.4% of homes and condos were purchased through conventional mortgages and 22.9% were cash buyers. In rough terms, 3 out of 4 people were using conventional financing in 2005 and 1 out of 4 are doing so today. Also interesting is that 1.3% of buyers in June 2005 used FHA or VA loans versus 14.8% last month.

Conclusions

More than half of buyers of Daytona Beach condos and homes are paying cash, about 1 out of 4 are using conventional financing and 15% are using VA or FHA loans. This tells me that if you want to finance at the good rates and you’re eligible that VA/FHA money is available (see Get Your FHA Loan Now) and people are getting loans. Make sure to check this avenue for the best options. If you have good credit and are willing to go through the new more stringent processes, mortgage money is available.

Senate Extends Homebuyer Tax Credit Closing Date to September 30

Home buyers who can take the homebuyer tax credit, with binding contracts as of April 30th, will have until September 30th to close under the extension passed by the Senate last night and the House of Representatives last week. All that remains is for President Obama to sign the bill next week.

As we discussed last week in our article, The Current Daytona Beach Homes Market in 142 Words, fewer Daytona Beach and Ormond Beach home buyers are eligible to take advantage of the tax credit because they are buying second homes, vacation homes and rental properties.

Up to 200,000 home buyers nationwide were expected to lose up to $8,000 in tax credits if the closing date was not extended. The problem was that many buyer’s closings were delayed by lenders for the purchase, lenders who owned the distressed properties being purchased, or the closing process itself. Let’s just say that the closing process is usually not very elegant, and foreclosures and short sales complicate the process even further.

No New Homebuyer Tax Credit Likely

I review a lot of information about what’s happening in local and national real estate. I don’t see any indication that there will be a new tax credit. This will have minimal direct affect on the Daytona Beach area market, but has an indirect affect in perception. Buyer’s from out of town are more affected by national news even if that news doesn’t affect our local market. So, if there are reports of slowing home sales nationally, people may take that to mean that they should back off their purchase in our area. We haven’t seen that to date. We are very busy working with buyers and are receiving new inquiries every day.

As always, if you have any questions, please leave a comment here. You can also call me at 386-566-7503 to discuss this article or anything else about the Daytona Beach area market and your options.

Where Should I Buy?

A buyer has a dilemma. They like two homes in two vastly different neighborhoods. Should they buy the upgraded home in an older neighborhood, or, the new home in a newer development?

First, let’s assume you like both homes equally. You would be happy living in either. With both homes being equal in location, schools and other things that are important to you, it comes down to two big questions: 1) how long are you planning to stay in the home, and, 2) how important is appreciation for you?

If you are planning to stay in the home for a long time, appreciation is not as important. If you know you will likely move in a few years, appreciation is very important to you.

The old adage that location is important still holds, especially with waterfront homes and condos, but another important point is often overlooked – what are the most popular or “hot” neighborhoods and developments in the area. Ormond Lakes Homes are located in a newer development with great amenities and lots of small lakes. Tomoka Estates Homes are in a community of newer and older homes without amenities, but many of these homes are on the Tomoka River or canals leading to the river.

These two communities are popular for different reasons. Which one would appreciate more? In general the newer homes in a popular community, with a lot of demand, will appreciate faster than older homes in older neighborhoods. However, waterfront homes, whether river or ocean, will always be in short supply. The short supply creates demand and competition, so riverfront and oceanfront homes should appreciate faster than similar homes in a neighborhood that are not on the river or ocean. Ormond Lakes homes will probably appreciate faster than Tomoka Estates homes that are not on the river or canal. Homes on the river will be more expensive because of the land value.

Another important thing for you to consider is the value of the home compared to the rest of the neighborhood. For appreciation purposes, avoid the most most expensive home in the neighborhood. Why? Because if every other home sold in the neighborhood sells below the value of that home, it’s difficult for people to understand the price and value of the most expensive home. There will be no equal or higher comparisons to help justify the value and price. That being said, you may still want that home. The point to understand is that appreciation may be reduced by the neighborhood, especially at the top end of values.

When we lived in Pennsylvania in the early 1990s, we lived in a 100 year old home with beautiful rich wood throughout located right on Main Street. It was gorgeous and comfortable. Our last two homes in Florida were newly built homes in Halifax Plantation and Mallards Reach. We loved the 100 year old home, but we also loved our new homes.

In the end, it comes down to what you like, but understanding the difference in neighborhoods and developments should be considered.

What Important Steps Are You Missing?

More people are buying homes and condos. Sales of Daytona Beach Homes and Condos are up 32.7% in the first four months of 2010 compared to 2009. The reasons are pretty simple – low prices and low interest rates.

Daytona Beach short sales and foreclosures are presenting some truly amazing bargains and getting one of these great deals is what you are after. But, it’s important to follow some critical steps when buying. This short guide will give you the basics of buying in the current market.

Know What You Want

What do you want in a home or condo? How much will you pay? Where do you want to be located? Answer these questions before you get serious. The number of properties available in this market make this step really important. When you’re browsing, this step is not important, but when you think you are ready to explore buying, you really must define your wants and needs.

Know the Market Where You Buy

You need to know the local market and the smaller markets within the broad markets. You can find a lot of information and pricing trends at zillow.com, trulia.com, housevalues.com and many others. These services are great for research, but the information is often a few months behind. More current information is available from an active local real estate agent. We have access to the most current information. You can also search all current homes and condos for sales in Ormond Beach, Daytona Beach and the Shores, Port Orange, Ponce Inlet, Holly Hill and South Daytona. Just click here –> Search Daytona Beach Area Properties.

Get Your Financing In Order

In many cases these days, we are dealing directly with banks and mortgage companies. When we make an offer on a short sale or foreclosure, financing or proof of funds must be in place.

Venture Out

Once you know what you want, it’s time to view properties. Viewing properties is a process. We may start with a list of properties that interest you, maybe 5 or 10. You may like a few or none of the first list. Don’t be discouraged, this is part of the process and quite normal. What the best agents will do is ask you questions about each property you view to determine what you like and dislike. The next time you go out, you will be seeing properties based on that criteria. We continue through the process until you find the home or condo that meets your needs. Then we are ready for the offer and negotiations.

Make the Offer

How low should I go? The offer you make will be based on a few main factors:

• How long has the property been on the market?
• Are there other offers?
• Competition in the price range
• Time and Patience
• You

A two bedroom – two bath condo on the beach at a low price will draw competitive bids. If the property is on the market for a few days and has multiple offers, going well below the listed price will probably not work. If the property has been on the market for a long time, going low makes sense. For short sales and foreclosures, we often wait for weeks or months for an answer from the banks, so patience is needed.

In the Daytona Beach real estate market, homes and condos selling under $200,000 make up almost 79% of all sales. Well-priced properties under $200,000 will have more competition. However, over $300,000, fewer homes and condos are selling and being more aggressive makes a lot of sense.

The decision on making an offer on a property is yours and depends upon you more than anything else. We can offer guidance, but you need to make the decision. Let us get all the information available on the property and the most recent similar sales and tell you what we think, but you need to make the decision. However, you should negotiate in this market.

After Your Offer is Accepted

After the offer is accepted you MUST get an inspection. I don’t say must very often to my clients, but an inspection is necessary for you to protect yourself. You also need to carefully read to Title Report, especially if additions or modifications were made. Make sure what should have been permitted was properly recorded.

Read the Appraisal Report. You are looking for errors, missing features and anything else that could make the appraised value lower than it should be.

Get Help

A good real estate agent should make the process as easy as possible. You need an agent who is knowledgeable and active in the market. Work with someone who returns your calls and listens and responds. People tell us that that’s why they work with us. Call Lynn at 386-566-7503 with questions about the market or properties in the area. That’s why we’re here.

FHA 203k Loan Lets You Put Home Repair and Remodeling Money in Your FHA Loan

What if you could buy a home with 3.5% down and include the necessary repairs and remodeling in the mortgage – even if your credit is not the best?

One of the problems with many Daytona Beach homes in foreclosure or available for short sale is that need work to make them livable. With conventional financing, you will probably need to 20% down and then mortgage 80%. Then you still need to pay for the repairs.

The FHA has a loan program call the SF Rehabilitation Loan Program (203k) that they call Funds for Handyman-Specials and Fixer Uppers. On the FHA website they state the purpose of the program:

The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.

HUD’s 203(k) program can help you overcome this obstacle by enabling you to purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through approved
lenders nationwide and is available to persons wanting to occupy the home.

The beauty of the FHA program is that, as long as the appraisal, after the repairs, does not exceed the loan value, all other FHA loans features, like low down payments (about 3.5%) and availability to less than prime credit buyers is available.

The FHA outlines the program on their website:

• A potential home buyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with his/her real estate professional. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
• The homebuyer then selects an FHA-approved 203(k) lender and arranges for a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
• The appraisal is performed to determine the value of the property after renovation.
• If the borrower passes the lender’s credit-worthiness test, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.
• At losing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
• The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
• Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of thejob, 10% of each draw is held back; this money is paid after the lender determines their will be no liens on the property.

Yes, you can still get the Home Buyers Tax Credit with FHA loans. So you can buy a home that needs work, include that work in the mortgage, your contractor does the work, and then you move in. Plus you can get a tax credit for up to $8,000 if you go to contract before April 30, 2001. Plus, you may be able to apply the credit to the purchase costs of the home. Wow!

The $8,000 Home Buyers Credit Extended into 2010

First time home buyers and Homeowners who have lived in a current home five of the last eight years are eligible for $8,000 and $6,500 respectively in income tax credits. To take advantage of the credit, you must have a binding contract by April 30, 2010 and must close by June 30, 2010.

The $8,000 credit is available for first time home buyers ($4,000 for married couples filing separately) and $6,500 ($3,250 for married couples filing separately). First time home buyer means that you have not had an interest in a principal residence for three years prior to the purchase.

Income limits have been increased to $125,000 for singles and $225,000 for married couples. There is an additional phase for the next $20,000 in income with a reduced credit.

Homes up to $800,000 are eligible for the credit and yes this is a credit, not a deduction to you income. You will receive money back from the government if you owe less taxes than the value of the credit. So, if you owe $2,000 in income tax and you take the full $8,000 credit, you will get a check back for the difference – $6,000.

If you are planning to buy real estate in Daytona Beach, or anywhere else in the country in the next year, it makes sense to take advantage of this credit. There is no guarantee that it will be extended, especially if the economy is show signs of recovery in the early part of 2010.

Couple the tax credit with low interest rates, great affordability of homes and prices stabilizing and it may be your best time to buy. The National Association of Realtors (NAR) is estimating about 2.6 million homes will be purchased using the credit. Will you be one of them?

Is It A Great Time to Buy a Home?

As a real estate agent, people should be suspect if I say it’s a great time to buy a home. After all, I’m in the business of selling Daytona Beach and Ormond Beach real estate. The Atlantic magazine, weighed in this week when writer Daniel Indiviglio wrote an article on the subject.

Mr. Indiviglio writes about many of the things that we’ve been talking about:

• Foreclosures putting pressure on prices
• First Time Home Buyer Tax Credit
• Low low mortgage rates

He summarizes nicely, an approach that I would agree with for buyers:

“I think short-term real estate speculation is probably still
ill-advised. Even if home prices have hit the bottom, I don’t think
they’re likely to increase quickly over the next several years. So if
you’re hoping to get in and get out, you might be in for a rude
awakening.”

But if you’re in the market for a home as a long-term investment,
say at least 10-15 years, it’s pretty hard to make an argument against
buying now. Even if we aren’t at the precise bottom, it’s hard to
believe that home prices could plummet much further in most areas. And
even if they did continue to decline a little, the tax credit might
make up for most or all of that decline anyway. For anyone who can find
an especially good deal on a foreclosure or short-sale property, I find
it even more difficult to argue against buying.”

Daytona Beach foreclosures continue at a high rate, but the inventory is relatively low because it’s taking so long for lenders to process foreclosures to conclusion. There are many more short sales available and we believe this is where the best bargains are. The downside is that short sales are much more difficult to bring to conclusion. First it can take a long time for banks to respond to an offer. Then it can take a long time to complete the process.

Foreclosures are much less complicated because the bank is the owner and really wants to sell the property. However, the banks have already gone through the cost of foreclosure, so there is less of a chance on getting a great deal before market price.

Check out the article at The Atlantic here –> A Great Time To Buy A Home?

Here are Mr. Indiviglio’s final thoughts on buying a home now:

“So while it’s never possible to say with full confidence that any time
is the best time to buy a home, it’s hard to see right now as anything
other than a pretty good time to buy. It appears to be a buyer’s market
in every imaginable way.”

Well put!