February, 2012:

Fix it Anyway

“If it isn’t broke, don’t fix it” is popular advice, but if you’ve ever had a serious plumbing leak, you probably wished you could have headed up the problem in advance. 

Washing machines, like all appliances, are supposed to work without giving them a thought, and when they don’t, it’s time to have them fixed or replaced. However, there is a critical connection from your water supply that may even be older than your washing machine itself.

Ask someone whose hose broke while they were asleep or out of town and you’ll hear stories of how quickly the water can damage walls, flooring and furniture. Almost anyone can replace the hoses with a pair of pliers for under $30.00 to avoid this potential catastrophe.

As you’re shopping for the replacement hoses, consider the braided stainless steel connectors. The advantage is that the stainless steel offers additional protection should a soft spot develop in the hose beneath. They’ll cost a little more but offer considerably more protection for a nominal difference in price.

A reader asks … Are short sales a better deal to buy than bank foreclosures?

Oftentimes yes. Lenders can be more motivated to approve a short sale as it can save them time and money as opposed to the foreclosure path.

However, according to RealtyTrac most major lenders are accelerating their foreclosure actions this year to the tune of about 25%. This more aggressive foreclosure activity is expected to result in a 60% increase in short sales.

While this may not necessarily bode well for property values in the near term, the market cannot fully recover until the distressed and shadow real estate inventory is absorbed.

For more on this topic, visit www.DestinFloridaRealEstate.com or email us at smith@realtor.com

5 Major Banks Roll Over

Under an agreement between the U.S. Attorney General’s office and five major U.S. banks, e.g.,  Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial, the principal amount of mortgage loans for nearly 1 million homeowners will be reduced.

The agreement, worth an estimated $25 billion is also said to include a provision that would pay approximately $2,000 each to about 750,000 homeowners who may have been improperly foreclosed upon, particularly during the “robo-signing” period in which foreclosing lenders were accused of falsely and improperly executing foreclosure documents.

$10 billion is supposed to be earmarked for mortgage principal reduction. This may sound like a big number, that is, until you divide it by the number of homeowners affected. At 1 million targeted homeowners, this only equates to a reduction of about $10,000 per mortgage. As it is extremely rare to see a mortgage that is underwater by anything less than $50,000, this is an incidental gesture.

At least $3 billion is supposed to be earmarked for “refinancing”.  Again, if we do the math, this would only equate to 15,000 mortgages at $200,000 each.

According to the AG’s statement today, this settlement is “to ensure justice, and to recover losses, for victims of reckless and abusive mortgage practices”.  This agreement does none of those things. It certainly does nothing to ensure justice. It simply puts to rest a slew of politically motivated lawsuits in 49 of the 50 states. Oklahoma is the sole hold-out.

With 2.2 million mortgages said to be in some stage of foreclosure, today’s announcements look like little more than window dressing.  When the AG says “recover losses”,  the question becomes, recover losses for whom?  And who are these “victims of reckless and abusive mortgage practices”? No one put a gun to anyone’s head to force them to borrow money. No one forced anyone to take out a second mortgage or a cash-out refinance on their primary residence and then spend the money on condos, cars, boats, vacations  and bobbles.

This position on the part of our government serves to distract from the needs of the many responsible individuals who have become un or under-employed in this economic cycle.   Homeowners who are in need of mortgage assistance through no direct fault of their own. These responsible individuals are now being lumped into the same hamper as the so-called predatory buyers and mortgage abusers.  Is this just another way to reward those who abuse our system while punishing their responsible counter-parts?

In retrospect, it is clear that many banks were reckless and many borrowers were reckless.  The only difference between them? The banks can’t register to vote!

Question: Will I get a 1099 at the end of the year if I short sale my house?

Answer:  If your lender forgives part of the debt against you, they are supposed to issue a 1099 to alert you and the IRS of the canceled debt which is theoretically taxable. However, in the case of your principal residence (resided in for at least 2 of the last 5 years) you may be able to exclude up to $2 million of debt forgiven under the Mortgage Forgiveness Debt Relief Act of 2007.  But do not wait … The Act expires at the end of 2012 if not extended by Congress.

Vision Airlines – What’s Up?

Vision Airlines is the biggest local news of the new year. For months we have been reading stories about Vision’s failure to pay landing fees at some of the airports that it serviced.  At last tally, we were told that Okaloosa a/k/a NW Florida Regional Airport is owed approximately $225,000 in back fees. It was therefore no big surprise when Vision announced that they would terminate service here as of February 29th. The agreement between Vision and NWFRA was set to expire September 30, 2013.

An unfortunate event, but we still have American, Continental, Delta and US Airways servicing NWFRA. Additionally, great connections and fares are available in both Pensacola and Panama City. Will Vision be back? Maybe. Both if they do return, we hope that they will inject a little prudence into their business plan and take a more reasoned and methodical approach.