So you lose your home to Foreclosure and you feel that your biggest financial problem is behind you. What you may not know is that you might still be liable for the difference between what you owe on the house and for what the bank could sell it for.  This is known as a “deficiency” and many lenders are pursuing any means possible to collect this debt even if the bank approved them selling their home for less than it was worth (Short Sale).

After a property is foreclosed by a bank there is usually a large deficiency. Because of the rise in Foreclosures Banks are seeking means to collect on these huge losses by seeking more deficiency judgments against past owners.  Many past owners are under the impression that they do not owe anything back to these banks and have even signed documents that appear to release them from the debt of the loan.

There are 2 parts to mortgage: a pledge of collateral which is the home and a promise to pay off the loan. If a property is foreclosed, the Lenders will release property liens and pay off taxes in order to liquidate a foreclosure or to facilitate a short sale. Unless the borrower has the bank release the promissory note to pay off the loan, the bank can then convert the secured debt to an unsecure debt and seek a judgment against the borrower at a later date.

It should be noted that banks are selling these accounts to collection agencies. These agencies would not be paying for these accounts if they didn’t have a plan to go after past borrowers. It is not uncommon for these collectors to wait for the borrower to have recovered financially and then go after them for the bad debt. If Florida the bank can wait up to 5 years before they file a claim. Once the court grants the judgment, the bank has 20 years to collect the debt along with interest.

A borrower should always seek legal advice if they are not sure about the foreclosure process or Short Sale process. An attorney will always try to negotiate away any deficiencies when they facilitate a short sale or deeds-in-lieu. An uninformed borrower might find themselves with a ticking time bomb if they sign every document from the Bank without knowing what they are signing.

The final numbers for 2009 are in and as expected the overall results were quite positive for the Orlando area Real Estate market. We saw a 59.31% increase in sales over the same period for 2008, The inventory of homes dropped by 25% , the number of properties under contract more than doubled, the average days on market decreased to under 90 day.  There are all positive indicators that show the housing market trying to correct itself and recover.  We are in no means out of the woods just yet. Banks are predicting 2010 to be another big year for foreclosures as 5 year arm loans written in 2005 become due. Another factor that may affect this recovery is that the local unemployment rate is hovering around 11.8% as of November 2009 which is a big jump from the same period in 2008 of 7.4%. Mortgage rates are also a key factor in the market recovery. Currently mortgage rates are holding at 5.0% – 5.25%. Low rates are allowing first time home buyers to enter the market where several years ago they were unable due to higher rates and high home prices.

Lower inventories of homes should help stabilize property prices for 2010 as long as there is not a big influx of bank owned or foreclosure properties. This will be decided by the banks as they are now watching inventory levels to see when is the best time to list bank properties for sale.

Investors and second home / vacation home buyers will play a key role in the Orlando market for 2010. Over 25% of all transactions in the State of Florida were from outside the country. Foreign National Buyers see Florida as a great investment and should continue to purchase in 2010 as prices remain at or below current market prices.  We should expect 2010 to play out the same as 2009 as long as there is no new major economic shift.  Buyers should take advantage of the current market and purchase before the shift in foreclosures begins to decrease. The inventory of these properties is still very good. As these numbers decrease so will the quality of the foreclosures. Make 2010 the year you purchase your first home or a vacation property.

2010 brings in new requirements for all replacement or new are conditioning units being installed in a home. Starting in 2010 all new units must be R410a refrigerant systems. The new federal law requires all manufacturers to stop production on systems that use R22 which contains ozone depleting chlorine and switch to R410a which is much safer for the ozone and more energy efficient.

Here in Central Florida where air conditioning is a must during the hot summer months, this change will be most notable. Homeowners looking to replace older R22 units will see a slight increase in the cost of these new systems. As R410a becomes more common in the market and R22 is phased out we should see these prices drop. It should also be noted that the production of R22 refrigerant is also being discontinued in 2010. This will create a supply shortage of R22 and watch for prices to increase dramatically as it becomes harder to find this refrigerant.

Homeowners may want to consider changing over their cooling units to the new R410a system in the near future. Not only are these new units more energy efficient and environmentally safer, older R22 units will cost more for repairs making a new unit more attractable to purchase.

2010 is here so what does the Real Estate outlook for Central Florida look like for the coming year. We can expect pretty much the same as 2009. With all 5 year ARM loans coming due, we can expect a fresh round of foreclosures for the year.  The American Banking Association (ABA) is expecting 1.9 million foreclosures for 2010 slightly up from 2009.

Lawrence Yun, chief economist for the National Association of Realtors expects 2010 to be another favorable year for home buyer as market conditions and tax credits are boosting home sales throughout the country. First time home buyer $8000 tax credit was extended to April 30^th so we can expect the first quarter for the year to be very busy with buyers looking to take advantage of this tax credit.

The vacation home market which was hit the hardest with foreclosures is seeing many bargain hunters and investors looking to take advantage of this segment of the housing market. For Central Florida this is no exception. Vacation homes around the Walt Disney area were hit hard with foreclosures as many owners saw their property values plummet on high price properties that were purchased during the boom years. With values cut almost in half, vacation properties are seeing many international buyers come into the market who had passed on properties during the peak years of home sales.

Overall we can expect a steady stream of foreclosures for 2010 making the year another banner year for home buyers. Tax credits and favorable pricing will drive the sales throughout 2010. While inventory will be steady buyers can also expect competition from investors looking to pick up hot foreclosure properties.

With the news from federal investigators last week that imported Chinese drywall has higher levels of home chemicals than domestic versions, here’s how to tell if your home has the imported drywall.

While the Consumer Product Safety Commission isn’t aware of any definitive tests to determine if a home has the drywall, there are still some steps to take and common telltale signs to watch out for before tearing apart your walls, according to the commission and other experts.

First, contact your home’s builder, who may be able to answer the question immediately. If that’s not an option or if your builder isn’t helpful, look for signs of the problem drywall, including a sulfuric (think rotten egg) smell in the home and corrosion (a blackening) of metal items like bathroom fixtures, electric socket copper wires, air-conditioner copper coils and copper pipes. (On its Web site, the Product Safety Commission has images of what such corrosion looks like as well as a Q&A on the subject within its broader drywall information center).

Many consumers in homes with the drywall have also reported health problems like itchiness, breathing difficulty and headaches as well as frequent failures of heating and cooling systems, refrigerators, dishwashers, televisions, microwaves and other appliances. The general belief is that Chinese drywall releases chemicals that corrode wiring.

There also are other unscientific tests. If your home has central air-conditioning, Danny Lipford, a television home improvement expert, recommends hanging a piece of silver jewelry or a silver utensil on a string in front of the return air filter and watching it over a few days to see if it corrodes. It’s a trick he learned about at a recent industry event.According to Mr. Lipford, most of the Chinese drywall tends to be in homes that were built or remodeled in recent years by larger contractors and builders. The Consumer Product Safety Commission said it had received >nearly 2,000 reports from residents in 30 states, the District of Columbia and Puerto Rico, most of whom said their homes were built in 2006 and 2007. The most reports have come from Florida.

If you suspect your home has Chinese drywall, Mr. Lipford suggests going into your attic and raking back insulation to see if you can find a made-in-China stamp or the name of a manufacturer, though not all Chinese drywall has such markings. You may also want to hire a building inspector to confirm the presence of the drywall, consult with a lawyer about your options and contact your home builder, who may be able to work something out with you. The Consumer Product Safety Commission also wants all consumers to report complaints here. Eventually, there may be a more scientific or at least agreed upon test for distinguishing Chinese drywall from its American counterparts. The Consumer Product Safety Commission and other agencies, which plan to release the results of a 50-home study and a corrosion study later this month, are working toward developing a testing approach, said Scott Wolfson, an agency spokesman.

As the November 30^th deadline fastly approaches, lawmakers and the IRS are reviewing the very popular $8000 tax credit for first time home buyers. This tax credit which is first time home buyers allows them to file for the special tax credit on their 2008 or 2009 tax filings. While the program has been extremely popular with buyers there are concerns about the cost of the program as well as fraud by people who do not qualify.

The IRS has identified over 19,000 people who claimed the credit but had not yet purchased a home and 74,000 who had filed for the exemption that had prior home ownership. The IRS is currently reviewing all claims for the exemption and expects to take steps to those who fraudulently made claims.

Congress is currently reviewing the success of the program as well. While viewed as very popular several senators have raised concern about the cost of the program. 1.5 million Families have filed for the tax credit for a cost of $10 billion dollars. There are talks to have the program extended thru June 30, 2010 and make it available to all home buyers.  Whatever is decided there will be measures to watch the cost of the program as well as any fraud that may occur.

Based on the current market conditions congress will address some sort of extension for this program. With midterm elections a year away you can expect many members of congress supporting some kind of bill to keep the housing market going in the right direction.

Thousands of homeowners nationwide who bought new houses constructed from the defective building materials are finding their hopes dashed, their lives in limbo. And experts warn that cases like the Ivorys’, in which insurers drop policies or send notices of non-renewal based on the presence of the Chinese drywall, will become rampant as insurance companies process the hundreds of claims currently in the pipeline. At least three insurers have already canceled or refused to renew policies after homeowners sought their help replacing the bad wallboard. Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations. 

“This is like the small wave that’s out on the horizon that’s going to continue to grow and grow until it becomes a tsunami,” said Florida attorney David Durkee, who represents hundreds of homeowners who are suing builders, suppliers and manufacturers over the drywall. “This is going to become critical mass very shortly.” During the height of the U.S. housing boom, with building materials in short supply, American construction companies imported millions of pounds of Chinese-made drywall because it was abundant and cheap. An Associated Press analysis of shipping records found that more than 500 million pounds of Chinese gypsum board was imported between 2004 and 2008 — enough to have built tens of thousands of homes. They are heavily concentrated in the Southeast, especially Florida. 

The defective materials have since been found by state and federal agencies to emit “volatile sulfur compounds,” and contain traces of strontium sulfide, which can produce a rotten-egg odor, along with organic compounds not found in American-made drywall. Homeowners complain the fumes are corroding copper pipes, destroying TVs and air conditioners, and blackening jewelry and silverware. Some believe the wallboard is also making them ill. The federal government is studying the problem and considering some sort of relief for homeowners.Meanwhile, the AP interviewed several homeowners who, like the Ivorys, were unlucky enough to purchase properties built with Chinese drywall, and are now being hit with a second and third wave of bad news: Their insurers are declining to fill their claims, then canceling the policy or issuing notices that policies won’t be renewed until the problem is fixed. The homeowners have little recourse since neither the Chinese manufacturers nor the Chinese government are likely to respond to any lawsuits or reimburse them for the defective drywall. 

In each instance, the insurer learned of the drywall through a claim filed by the homeowner seeking financial help with its removal. The Ivorys have sued, but it could take months for their case and hundreds like it to work their way through the courts. In the meantime, they have moved back to Colorado because their three-bedroom ranch home two miles from the Gulf of Mexico is unlivable and soon will be uninsured. “It’s been an emotional roller-coaster,” said James Ivory, who is still making mortgage payments on the house. “It was all in our heads, nice weather down there, calm life, beaches. Now I don’t know what to do.” 

John Kuczwanski, a spokesman for the Ivorys’ insurer, Citizens Property Insurance Corp., said their claim was denied because the drywall is considered a builder defect, which is not covered under the policy. It also considers the drywall a pre-existing condition that could lead to future damage, which is why the company won’t renew the policy unless the problem is fixed. “If someone were to have bought a new car and there was a defective part, would that person go to their auto insurance to get that fixed or would they go back to the manufacturer?” Kuczwanski said. “We provide insurance, not warranty service.” Citizens, a last-resort insurer backed by the state of Florida for people who can’t find affordable coverage elsewhere, has received 23 claims about Chinese drywall, and has so far denied five. Citizens could not immediately say how many policies had been canceled or not renewed because of the drywall. 

Robert Hartwig, president of the Insurance Information Institute, agreed that homeowners policies were never meant to cover “faulty, inadequate or defective” workmanship, construction or materials. Tom Zutell, spokesman for the Florida Office of Insurance Regulation, said the cancellations are troubling, but legal. No law prevents insurance companies from canceling policies because of Chinese drywall. “We are staying out of the fray at the moment,” he said. Even if a homeowner does not file a claim over the drywall and remains covered, they could later be denied a claim for a fire or another calamity if insurance investigators determine the home contained undisclosed Chinese drywall.  “If you think that by not telling your insurance company about the drywall that you’re protected, you’re sadly mistaken,” Durkee said.  A newly married couple in Hallandale Beach, Fla., saved up for five years to buy their first home only to later discover it had Chinese drywall. They filed a claim with their insurer, Universal Insurance Co. of North America, and were denied. Universal then sent the couple a letter, stating their policy was being dropped because “the dwelling was built with Chinese drywall.” The couple then signed on with Citizens, but didn’t divulge the drywall issue, and hasn’t filed another claim. The 31-year-old man requested anonymity because he’s afraid of losing his insurance policy, and thus his home. “I honestly don’t know what I’d do if that happened,” he said. “All this has basically taken us back five years. We saved money to buy this home.” Universal did not respond to requests for comment. Louisiana lawyer Daniel Becnel Jr., who represents more than 200 owners of homes containing Chinese drywall, is advising his clients to avoid filing claims with their insurers or they could lose their houses. “I really believe everybody should have an insurance claim with this,” Becnel said. “But it’s hard to tell somebody to go make a claim, then they lose their policy … This is a nightmare for people.” “I tell people flat out if you file, you may lose your insurance,” agreed Mississippi attorney Steve Mullins, who has about 100 clients with Chinese drywall in their homes.  

One of Mullins’ clients, Chris Whitfield, a 29-year-old tire repairman in Picayune, Miss., says he moved out of his house because the drywall was making his family sick. His claim was then denied by his insurer, Nationwide, which followed up with notice that he would be dropped because his policy didn’t cover unoccupied dwellings.

WOW.. What great summer it has been in Real Estate for the Central Florida market. Sales are up, inventory is down, interest rates are still at historic lows, and home prices are still fantastic. It truly is the best time to buy a home.  For all those buyers sitting on the fence waiting for the bottom of the market, guess what???? You are missing it as I type this blog.  Several areas around Orlando have seen home prices level off and in some cases even increase slightly.

If you plan to take advantage of this foreclosure market now is the time to act. The longer you wait the fewer foreclosures that will be available and in conditions that are acceptable. Also for first time home buyers the tax credit of $8000 expires December 1^st so time is running out. Take advantage of this tax credit before it is gone.

As signs of the economy begin to improve the Federal Reserve board is expected to keep Key Rates at historic lows. These key rates are what the treasury charges banks to borrow money then in return the Banks loan this money to customers and businesses. The Fed had hoped that by keeping rates low that it would spark consumers to start spending more and stimulate the economy. Currently the Fed charges banks between zero and 0.25% for the lending rate. The Banks prime lending rate which is used to set rates on credit cards, home equity loans, and other consumer loans should then stay around 3.25% which is the lowest in decades.

All this sounds like great news but with Banks reluctant to loan and in some cases still pulling back lending in certain segments of the marketplace. It is hoped that with these low rates that banks will begin to free up more credit for consumers. The Fed is also reviewing rescue programs that were put into place to help spur spending. With the economy still frail we may not see any changes in these programs until there is stronger economic news and unemployment begins to drop.

All signs from the Fed indicate that we can expect rates to stay low until the end of the year and possible into the first quarter of 2010. With the worst past us now we are in the slow process of recovery. What will the next move from the Fed be? No one knows for sure but base on the current condition of the economy we can expect very little or any movement on the fed key rates.

A month ago we dwelled on the Pound’s reluctance to move above $1.67, the high achieved at the end of last October. Investors have been on a rollercoaster ride throughout July with the GBPUSD rate blundering between 1.63 and 1.66. The ride must have gathered momentum however, trading around 1.69 today.
 
The movement is primarily attributed to investors selling US Treasuries, therefore US Dollars, and buying equities and commodities. The positive data from the UK, however, cannot be ignored. Although still a negative value, the UK’s second quarter GDP figure shows the economy is gaining some strength. Consumer confidence is at the highest level since April 2008, and the Bank of England unanimously voted to hold interest rates at 0.5%. It still looks as though the eventual break will be to the upside, but there can be no guarantee. If you have an immediate transfer to make, buy now. If you have a couple of months, speak to your exert about utilizing a stop-loss and limit order to protect against a drop or maximize your gains from further upwards movements.   The Euro generally mirrors the trend of the Pound against the US Dollar; however the less than positive data from the Euro zone has dampened this effect with industrial orders under tremendous pressure. We should see a tight range this month for the Euro, trading between 1.45 and 1.46 and staying below the 1.50 level.  

 With Canada being a commodity-driven economy, the Canadian Dollar is benefiting from the current investor trend. Unemployment is rising and interest rates are very low but as long as the equity markets remain stable the CAD should remain strong against the weakening US Dollar. Trading levels between 1.05 and 1.12 are expected.