Orlando Real Estate

Ok, these may not be the best numbers in the world, but they could be worse considering the weather. These numbers are so off compared to the last several months, I am concluding the weather had an impact on sales. Since March of 2009 our prices have been in the range of $125,000 and $135,000. January took quite a tumble with a median price of $105,000 on 1,498 closed sales. I believe the number of sales will end up closer to 1,800 which is also off from the 2,000+ that we have had each month since June of last year. All three categories of sales, REO, short sales and "normal" were off with 690 bank owned at $70,000, 391 shorts at $118,000 and 418 "normal" sales at $169,945. Of course weather cannot answer everything. There may have also been some price cutting to get homes sold by owners who just want to be done with it.

As far as the inventory is concerned, Orlando remains pretty stable with 15,930 active listings. Of those 1,655 or 10.4% are REO, while 5,996 or 37.6% are short sales. So, nearly half of all active listings are distressed properties. Pending sales remain very strong with 8,583 made up almost entirely of bank owned and short sales. There are 1,630 or 19.0% REOs, and 5,627 or 65.6% short sales for a total of 84.6% distressed pending sales. Short sales continue to be long shots for closing with just under 7% of the pending short sales closing in January. Distressed properties overall are having a tremendous impact on our market with almost 1 in two active being distressed, more than 4 out of 5 pending are distressed and almost 3 of 4 closed sales are distressed properties.

Aside from the these numbers, I personally am starting off very strong this year with four closings in January and four scheduled to close in February. Additionally, I have a two short sales that appear to be nearing approval.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

Orlando real estate has continued to post strong sales, but prices took a big nosedive in January. The median price for most of 2009 was around $125,000, but dropped to $102,000 last month. So far this month, as I reported yesterday on my blog at www.RealEstateOptimist.com, the prices are up a little to about $107,000. We saw a very different result here in Baldwin Park. In 2009 there were 190 closed sales with a median price of $346,500 and an average of $399,395. So far in 2010 there have been 19 sales with a median sales price of $430,000 and an average of $500,880. That is about a 25% increase either way you look at it. The big difference between Baldwin Park and Orlando overall is the impact distressed properties is having on the neighborhood. Of the 94 active listing in Baldwin Park less than 31% are distressed compared with about 48% in the marketplace overall. Pendings are close to the norm with about 78% distressed sales, but not so many are getting closed. Only about 42.1% of the closed sales so far have been distressed, which is far below the 70% in the greater Orlando market.

Orlando Real Estate, David Welch Real Estate Optimist

Currently, there are 16,216 active listings in the Orlando marketplace with 1,776 bank owned and 6,056 short sales making up 48.3% of the active inventory. That is a pretty big chunk of the market, but pales in comparison to the percentage of pending and closed sales so far this month. The good news is that pending sales are going through the roof with 9,467. The not so hot news is that 83.2% of the pending sales are distressed with 1,876 REO's and 6,002 short sales. The number of closed sales so far is 1,043 suggesting a pretty good month for the number of closed transactions. Closed sales so far are also very heavily weighted with distressed properties. There have been 464 bank owned and 268 short sales closed so far making up 70.2%. The high percentage is showing up in the sales prices too. The median sales price for bank owned properties is at $76,050, short sales is $99,000 and "normal" sales is $164,000. The overall median sales price is up slightly from January at $107,000.

The inventory remains fairly stable, sales remain fairly strong with around 2,000 closing per month since June of last year. So why are the prices coming down? I believe at least a part of the problem lies in the condition of the distressed properties that are for sale now compared to a year ago. When the foreclosures first started hitting the market here, many of them were investor purchased homes in excellent condition. In fact, many of them were brand new homes that had barely been lived in. More and more, I am showing homes in disrepair and otherwise poor condition. Some are newer homes, but the process to foreclose and market has taken very long and time and toll on the homes. Others are foreclosures and short sales created by economic conditions. The owners just began to neglect the home, because they could not afford to maintain it. Of course, some take out their frustration on the home by damaging and ransacking the property before the bank takes it back.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen On HGTV's House Hunters

The Fed announced an increase in one of their interest rates, so what does that mean to mortgage rates? The Fed rates that you hear so much about are short term interest rates that they charge member banks to borrow money overnight. Banks are required to maintain certain reserves in their accounts, but sometimes find themselves short. Typically, they will go to other banks to borrow the needed funds overnight, but in a pinch they will go directly to The Fed. This is the rate The Fed raised yesterday. Since this is where banks go as a last resort, it probably means nothing.

While short term rates have virtually nothing to do with longer term interest rates directly, they do have an indirect impact through pressure on the yield curve. Short term lending is less risky than longer term lending, so you expect higher yields on longer notes. If the short term rates get pushed up at some point investors will expect a greater return on their long term money. Again, the discount rate The Fed raised is rarely charged and should have little to no impact on other borrowing rates. Banks generally are able to obtain the temporary funds from other institutions, and that rate is called The Federal Funds rate. The Fed has done nothing to this rate which is still at 0-0.25%.

In a nutshell, don't look for any immediate changes in mortgage rates as a result of this move. The Fed noted their reason for doing this now is that they feel things are heading in the right direction and the emergency measures they took are less necessary.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

CNN Money looked at 330 metro areas and compared their values today with where they were back in 2006. Some people might be surprised to find Orlando in the undervalued column, but I am not. CNN Money found Orlando to be undervalued by 17.1% at $141,200. Again, I agree with their assessment that we are currently a bargain, but I have no idea where the value came from. It says they are looking at 2010, but we are only in mid February. I am not writing this is to argue about their numbers, just disclosing that I have no idea what their methods were in deriving them. The report was actually compiled by IHS Global Insight and PNC Financial Services using median prices, local interest rate, income, population density and "historical premiums or discounts." Our median price in Orlando in January was about $102,000 and for all of 2009 it was around $125,000, so I still am unsure where the $141,200 came from.

Based upon their suggestion that Orlando is 17.1% undervalued, our true value should be around $170,000. I don't believe it is any coincidence that the median price of our "normal" sales is in the $170's. This supports one of my thoughts that prices could take a pretty good swing upward once employment begins improving. Don't get too excited yet. There are currently over 6,000 short sales and about 1,700 REO's active right now, plus another  7,500 pending distressed sales. About 70% of the closed sales so far in January and February have been distressed properties. As long as there are bargains available, they will sell first. That does not mean you can sit and wait, because interest rates play a big part in overall affordability, and they are very likely to go up. I hope lots of people read this article, and take a look down the list to see what a bargain Orlando is.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

Bad weather up north has a significant impact on our real estate market here in Orlando. I have customers, under contract right now, from New York that have been snowed in this week, and so has their lender. Their file went to underwriting Tuesday, but nobody has been at work to actually do anything with the file. The appraisal was expected in on Wednesday, but again there was nobody there to review it. The home being purchased is a Fannie Mae foreclosure, and from what I have been seeing on the news Washington DC has also been at a stand still for several days now. I am hoping that the folks at Fannie can understand and appreciate the predicament my customers are in. We were under a very tight time frame to get the transaction closed, but now the weather is complicating things.

I believe the exceptionally bad winter is having an impact on our marketplace here. January's sales were off by about 400 sales compared to the monthly sales pace we have had since June of 2009. The purchase price was way off too, with distressed properties making a bigger impression than they have been. Cash sales are dominating the marketplace as investors snatch up the great deals out there among the lower priced properties. Local first time homebuyers are the other major player here. Of course, in general they are purchasing less expensive homes as well.

A big part of our market for higher priced homes comes from buyers moving down from up north. Another couple I am working with is making a move from Indiana. They cannot purchase here until their home there sells. I hope that Punxsutawney Phil is wrong this year. Although the flip side of the bad weather can be good news in the Spring. In thirteen years in real estate, some of the best years came after bad winters up north. I cannot tell you how many times I've heard "that is the last winter I am going to spend in _____", fill in the blank with some place cold. Right now the weather is slowing things down a little, but perhaps it will help pick things back up in the Spring.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

I had a comment on one of my recent posts inferring that buyers appeared to be willing to pay 20% more for a "normal" sale. That is not actually what is taking place here in Orlando. The bank owned and short sales just tend to be concentrated in lower price ranges. While half of all "normal" listings are priced above $249,000, only about 10% of all the closed sales are above $249,000. Around 7% of bank owned properties for sale exceed that number, and just under 13% of short sales are currently on the market for $250,000 and above.

In Orange County, there are currently 824 bank owned, 3,288 short sale and 4,243 "normal" properties for sale. That means there are 3,637 distressed properties listed under $250,000 and only about 2,100 "normal" sales listed in that price range. Conversely, there are 475 distressed properties priced higher than $250,000 with about 2,100 "normal" properties priced in that range.

I may be the most stubborn man alive, my wife and daughters think so anyway. I saw a sign the other day that read "behind every man is a woman rolling her eyes." I have further proof of my obstinence, a Bank of America short sale. This particular short sale has been my cross to bare for about 18 months now. We are on our third contract, and have actually received an approval for one of the offers about three months too late. The latest offer has been in the works since August, and you will not believe where it has been. I'll skip the usual details about how many times I had to fax the package to them before they would acknowledge receipt, or the typical issues I had with getting them to acknowledge that the seller's had authorized me to negotiate for them.

I will pick this one up two months into the short sale, when the file was moved to HRD. That is the Home Retention Department. This is where loan modifications are negotiated. I did not request the move and neither did the owners since they moved out of the area more than a year earlier. A loan modification package was reportedly mailed to the owners, which they never received because it was sent to the property. That did not deter HRD from continuing to work the file, while I was still working with the short sale department. In December, four months into this contract, I was told by the short sale department that the loan modification had been approved and the file had been taken out of short sale. This was actually the first time I had heard of the loan modification process going on behind the scenes. I requested the file be taken out of HRD and put back in short sale, and was told that would be taken care of when they discovered that the package had never been returned. (Keep in mind they approved the loan modification without receiving the request or the loan modification package?)

Late last month (January 2010), I was told the file was in HRD, and that I would have to have them release it back to short sale. I explained that I was already told that had been done. Apparently HRD has trouble letting go of these files. After being transferred to HRD, I was told they could not release the file because I could not verify the last four digits of the seller's social security numbers. I was reading them directly from their tax statments, but HRD had something different. I had the sellers call, and they told me that they were successful in having the file closed in HRD. I called short sale yesterday to follow up on the file being moved back, and was told that it was still in HRD. They transferred me to HRD, and they promptly transferred me back to short sale since that is where the file was headed. When I got back to short sale they kicked it up a notch to a "supervisor." The supervisor said the problem is that the seller's and I had not registered in the new "equator" system. This system will make the whole process much shorter he said. I asked myself if they realized that the equator is the longest line of lattitude around the globe?

FYI another agent in my office is also working a Bank of America short sale, and she had to upload her file to REO Trans. She was told that was the new system they were using to track short sales. REO Trans is typically used for bank owned properties. After loading her file to this system, she received nothing. No confirmations, no updates, nothing. When she called to check on the status, the short sale department said that since she had loaded her file into the system they could no longer help her. I have not spoken with her recently, but I can only suspect that she is having similar success.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

Yesterday, I wrote that there are three keys to success in real estate: Contact, Contract and Closing. I shared some of my observations about prospecting, the first C which is really just about contacting prospective customers. There are two types of contacts active and passive. A lot of the typical advertising strategies are passive in nature, while actually reaching out to people; face to face, direct mail and e-mail are more active strategies to make contact. As I mentioned in the first part of this post, I feel that is the area that may require the most effort but have the biggest reward in terms of impacting your success in real estate. Today I am going to focus on the other two C's.

Let's begin with the end in mind, closing, afterall, that is why we work so hard at this business. It is also the last opportunity we have to make a great impression on our customers. You don't have to give some terrific closing present to make a great impression.  I heard someone say that the real estate agent is like the shock absorber in the transaction. Get your customer to closing without too many bumps, making the process smooth and you can make a great impression. That begins from the moment you go under contract and continues right up until the keys are handed over. Expectations are a big part of transitioning from contract to closing. Staying on top of the details in the agreement is the other key to this aspect of the business. If you are not a detail oriented person, or you find yourself just too busy to keep on top of things, at this point a transaction coordinator can do wonders for your business. Most people are excited and more than a little nervous when the big day comes. If you handle the expected and unexpected bumps in the road and keep all the parties up to speed you can take a lot of the drama out of the closing room. The best part about this aspect is that transaction coordinators do not charge an arm and a leg for their services if you decide to go that route. If you want to improve on this and give your customers your personal attention, all you have to do is follow the contract and follow up with all the parties in the transaction. It really does not have to take a lot of your time to make the phone calls.

To get to the closing, you have to be under contract. The final C I am going to tackle comes at the heart of our business. It is also the aspect of the business where we probably spend the greatest amount of time and energy. Whether it is spent marketing and promoting our listings for our sellers or finding and showing homes to our buyers, this is the key to our ultimate success in real estate. In my opinion, this is the aspect that involves one of the toughest skills to learn, listening. You need to be able to listen throughout the entire process, but really understanding your customer's needs is critical in helping to transition into the contract phase. Again, setting realistic expectations, understanding your customer's needs and helping them negotiate a contract that meets those expectations and needs are the keys to success in this aspect of the real estate business. I know I am only touching the surface when it comes to this part of the business, because authors have literally filled books on this subject. Briefly, this is where knowing your market, and knowing your customer come together. Your marketing, pricing, people, listening and negotiating skills all converge at the point of contract.

I hope this at least helps you identify the area where you have the greatest opportunity for improvement. Hopefully, there are at least enough ideas here to point you in the right direction for making those improvements too. If nothing else, maybe there was something here to help you start a dialogue with your broker. A good broker either has the experience and tools to help, or can direct you to those resources internally or through your local Realtor association. Best of luck.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

If you are in real estate you already know there are three keys to success. I'm not talking about location, location, location. I am talking about the three C's: Contact, Contract, and Closing. To be successful in real estate, you need to be working on all three aspects of the business all the time. In my career, I have come across many people who spend the majority of their time in only one aspect of the business. Some do a good job in two areas, while fewer are able to juggle all three successfully. I believe the real estate team concept can help a great deal in compensating for areas of weakness, but don't go out and start a team just yet. There are other ways to compensate for those areas where you do not excel. The first thing you need to do is identify the area or areas in which you have the greatest opportunities for improvement.

My personal observations over the past 13 years lead me to believe that contact may be the most common area that needs attention. Contact is simply the act of prospecting which comes in two forms passive and active. I think most agents would say they do a pretty good job of passive prospecting which includes advertising, newsletters, calendars, magnets and of course everyone's favorite recipe cards. Probably the most important passive prospecting tool today is the agent website. Nearly 90% of buyers say they use the internet to search for properties. Personally 72% of my business last year came from the internet including buyers and sellers. There are somewhat active aspects to internet marketing such as search engine optimization and blogging, but the internet is primarily passive. Active prospecting involves actually contacting people first, and this is an area with which many agents have the most difficulty.

The good news is that many agents do have difficulty with this area. If you just try to make an effort to improve, you should be more successful. A lot of the coaching organizations put a major focus on this aspect of the business. Again, in my observation, difficulties in this area can be the most expensive and frustrating to overcome. The good news is that improving this aspect of your business brings the greatest improvements too. I say this is expensive, because the most successful approaches to improvement involve either personal coaching or paying tele-marketers to make the contacts for you. Either of these approaches can be costly. Even more costly is doing nothing to improve, because of all the lost business you might have had. It can be frustrating though, because more contacts mean more rejection, which is the basic reason so many agents have difficulty with this aspect of the business. Eveybody has heard that Babe Ruth hit the most home runs, but he also struck out the most. No matter how many inspirational stories you hear, it is still no fun to be rejected.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen on HGTV's House Hunters

Phil the groundhog has a real future as an economist; both try to predict the future. Some things are predictable like Winter which, by the way, lasts until Spring every year so there are always six weeks left after groundhog day. People are somewhat predictable, but not completely. Psychologists try to understand why people do what they do, but are often surprised. One thing I have noticed is that people get tired of the bad economic news and pessimissm. I have written several times before that economics is about supply and demand. Supply is something you can easily inventory. You can go out and count your widgets, and you can measure the cost to produce that inventory. Measuring demand is a little trickier. Demand gets into the psyche of the consumer, and the only pure metric of demand is the actual purchase of goods and services. That only measures the past, so how do we predict the future?

There is no crystal ball that answers what future demand will be. If there was, I am sure the banks, wall street and the US automakers would not have been looking for bailouts this past year. We do have the consumer confidence index which has been a somewhat reliable indicator for future purchases. The latest index just came out last week stronger than expected at 55.9. That was the third month in a row marked by an improvement in a quarter that saw a 5.7% growth in the economy. Of course, much of the growth is not sustainable being fueled by federal stimulus money. The third quarter also posted a modest expansion as fiscal and monetary policy started taking hold. So, is consumer optimism helping create the expansion or is the expansion generating greater consumer optimism? Either way, with two quarters of growth behind us, it is time for the consumer to take the lead again. Consumer spending is the biggest and most sustainable driver of our economy, and I don't want to wait six more weeks for Spring.

Orlando Real Estate, David Welch Real Estate Optimist, As Seen On HGTV's House Hunters