The Housing Bubble

It’s Friday desk clearing time for this blogger! “There’s a large inventory of unsold condominiums in the Miami market. There are at least 50 buildings under construction or nearly completed in the downtown Miami area alone, consisting of about 20,000 units. To move inventories along, developers have gone to the auction block to get them sold.”

“A two bedroom unit that sold for about $600,000 last year, sold on average for $295,000. Dien Pham walked away with a two bedroom unit on the 19th floor. To put the price in perspective, a one bedroom priced at $350,000 sold on average at auction for $176,000, almost half.”

“He said, ‘I might be doing this prematurely. Perhaps in three to six months from now ten other buildings will be going to auction, and there might be better offers.’”

“Newtown currently has more than a year’s worth of housing stock on the market even though prices have dropped almost ten percent on average from the same period in 2006. One website is reporting more than half of those available homes may be currently in or about to go into foreclosure.”

“‘If someone moved into town a year ago and bought a $500,000 home, and they have to settle for $450,000, once you figure realtor commissions, bank and closing fees, and other related expenses, they might be writing a check to walk away,’ said Robert at Prudential Connecticut Realty.”

“Hawaii had one of the lowest home foreclosure rates in the nation in August, but the numbers are up sharply from July. Hawaii reported 145 foreclosures last month, according to RealtyTrac. It’s the highest number of foreclosures in any month this year and is up from 85 in July.”

“An article in a national real estate appraisers magazine that indicates Enid, Oklahma has a large problem with real estate appraisal collusion and possible fraud has many local professionals in the industry buzzing about the potential fallout.”

“‘Do I think the tendency for some of the newer companies or out-of-town lenders who have come in to make some money, are their practices of internal control a little lacking? Well, yeah,’ said Carmen Ball, who is the former VP of mortgage lending at Central National Bank.”

“House prices across much of Western Europe have stalled or begun to fall as spiralling borrowing costs and fears of over-supply take their toll on markets from Ireland to Spain, an industry survey has revealed.”

“The German housing market has been hit hardest. A glut of property for sale in former East Germany dragged down price inflation countrywide, leaving the national average down 6.9 per cent over the 12 months to the end of June.”

“The latest sign of stagnant home sales in the Valley is really a sign: ‘For Sale By Owner.’ Robert Baker put his two-bedroom, two-bath home on the market in April. And then he waited. And waited. He dropped his asking price four times to $240,000, below the Matanuska-Susitna Borough’s assessed value, normally viewed as a low estimate for sales.”

“He left his Realtor, a 40-year industry veteran, and struck out on his own. Nothing. ‘You don’t want to scare them away but I’m thinking, is there a big hook?’ he said. ‘Bring ‘em in, get ‘em drunk and have ‘em sign something before they leave?’”

“Russell Joyce, president of the Valley Board of Realtors, tells clients that they will most likely sell their homes for what they paid and not much more. People who did 100 percent financing since 2005, the last boom year for housing prices in the Mat-Su, without equity will likely pay to sell their house.”

“‘I have to be frank with anybody I’m listing a house for now: Be realistic on price,’ Joyce said. ‘If you want to build negotiating room in, or anything like that, or think there’s been any appreciation since 2005, unless it’s very certain instances, they’re missing the boat. They are.’”

“U.S. homebuilder shares jumped after the Federal Reserve cut interest rates. ‘Maybe our boy has righted the ship,’ Robert Toll, CEO of Toll Bros. Inc., the largest U.S. luxury homebuilder, said of Fed Chairman Ben S. Bernanke.”

“Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley and chairman of Rosen Consulting Group, called the rate cut ‘a small positive for homebuilders.’”

“‘We have such a huge inventory of unsold homes,’ Rosen said. ‘It’s the bad loans and overbuilding and over-speculation that caused the problem, not interest rates.’”

“You might conclude the Fed has signaled it will aggressively fight off a recession before it happens and take comfort in that. But it’s too early to buy into a happy ending for this story.”

“Here’s another one to chew on: 2.6 million. That’s roughly the number of empty houses in America, said investment strategist Jim Swanson. It’s not the number of homes for sale. These are places where nobody’s home. That’s in the neighborhood of 3 percent of the country’s housing inventory.”

“‘We’ve never seen numbers like that, and the Fed move doesn’t change that,’ Swanson said.”

“Last Tuesday, the Federal Reserve lowered interest rates half a point. It’s way too late for Shane Lovett, an Oregon man who received his foreclosure notice last January.”

“Lovett decided if he wasn’t going to live in his house, neither was anyone else. Before he locked the door and dropped off the key to his mortgage company, he smashed all his windows, ripped out part of the foundation, dumped a load of gravel on the roof and left three pigs in his living room, hoping that they’d finish off the place. It’s an emotional time in real estate.”

“One of the big questions about the foreclosure crisis is, why didn’t anyone see it coming? Why didn’t anyone look at the subprime lending industry and react the way Nancy DelMaro, a senior VP for Coldwell Banker and manager of the Salem branch did.”

“It just doesn’t make a lot of sense,’ says DelMaro.”

“Putting true victims of the housing crisis aside, there is a category of debtor that could be called “predatory borrowers.” These are individuals who have treated their homes like bottomless ATM machines and have played the housing game like ‘Wheel of Fortune.’”

“These borrowers purchased homes with little money down, with perhaps no income verification, and at debt levels they knew they could not sustain if their homes did not continue to appreciate.”

“For those borrowers who mortgaged a lifestyle they knew they could not sustain, the system should not come to their rescue.”

“It is remarkable how quickly the sentiment surrounding the housing market has turned from embracing accommodating lenders who facilitated people’s ability to benefit from the unending price spiral of real estate to now vilifying the same lenders for making borrowing too easy.”

“In an upcoming election year, politicians simply lack the courage to make individuals accountable for their actions. Rather, it is more expedient to blame faceless corporations for any negative outcome to the consumer simply because more votes come from homeowners than from corporate boardrooms.”

“As children, we were taught that consuming too much cake and ice cream would have the consequences of a stomachache. But for many adults, who have gorged themselves on too much debt, their financial indulgence is now somehow someone else’s fault and they should not have to pay the price.”

“For those who have overindulged in debt and abused the system, their most valuable compensation should come in the form of an important lesson that they can pass along to their children.”

The Record Searchlight reports from California. “August home sales in Shasta County were down 8.8 percent from a year ago. The number of homes sold in August was the fewest since August 1997, when 185 sales were recorded, DataQuick reported. Meanwhile, there continues to be a glut of home listings. Bill Parsons, who owns Parsons Realty in Redding, said it continues to be a frustrating time for sellers.”

“‘Sellers were concerned in the past that maybe it was something their agent wasn’t doing. Now they are beginning to realize it’s the market,’ Parsons said.”

The Mercury News.”Generally,appraisers perform their valuations for lenders to help determine whether the collateral is adequate. If it indicates they sold for less than the appraiser’s estimate of true market value, they are none the wiser. Nobody in the transaction has any incentive to break the bad news to them.”

“‘It certainly puts us (appraisers) in an uncomfortable position when we find that the selling price is below market value,’ says Karen J. Mann, a veteran appraiser in the Brentwood-Discovery Bay area east of San Francisco. ‘We wonder what’s going on out there - are sellers giving in to the bottom-feeders’ who are trolling for any hints of distress or urgency?’”

“Not all appraisers are surprised that appraisals are beginning to come in above contract prices. Gary Crabtree in Bakersfield, says bloated sales prices over the past five years, plus hidden concessions and fraud, ‘have distorted the data’ and the public records in some parts of the country.”

“‘When mortgage fraud and concessions get built into’ local recorded sales prices and tax assessments, he suggests, those inflated values ‘become the new comparables’ that appraisers use. In effect, hard-bargaining buyers today may be squeezing some of the cotton candy fluff out of prior sales.”

From KCRA 3. “The alleged mortgage fraud exposed by KCRA 3 is having a direct effect on property values in Elk Grove. All of the homes at the center of our investigation are now in foreclosure, and property values are plummeting.”

“Jim Martin and his business partners are accused of falsifying millions of dollars in loans. all those homes — more than $9 million in real estate — are now in foreclosure and having a negative effect on property values in those neighborhoods.”

From ABC 7 News. “There’s no greater evidence of the mortgage crisis than here in the San Ramon office of Diablo Funding Group, where President Bill Erb has had to lay off two-thirds of his 196 employees in just the past year.”

“‘These steps, the fed lowering the rate by half a percent is not going to make everything okay,’ said Bill Erb from Diablo Funding Group. ‘The fact that interest rates come down a little bit, whether you have an 11 percent loan or an 11 half percent loan, when you’re coming off a six and a half percent loan, probably isn’t going to help you much,’ said Erb.”

The Ventura County Star. “In an effort to entice buyers, Standard Pacific Homes is staging an aggressive campaign called ‘Mission: Possible’ to sell 200 homes across Southern California over a 10-day period, ending Sunday. A clear obstacle to moving those homes has been the depressed housing market. Sales have plunged over the past year in Ventura County and Southern California.”

“Alonso Escamilla, a property manager, owns two houses in Santa Barbara, but he’s looking for something more economical. Since the interest rate on his jumbo loan adjusted upward, his payment has become sizable. By selling one of his homes, he wants to be able to put 10 to 20 percent down on a $450,000 house.”

“‘I don’t want to leave Santa Barbara,’ he said. ‘But it’s either struggle, or move and live comfortably.’”

“This summer, JM Development permanently reduced prices by $80,000 at Henderson Cottages, a new 28-home community in east Ventura. There are 17 properties still available. ‘Realistically, would we do what Standard Pacific is doing? Come talk to us. We can give you a deal of the century,’ or mission possible.’ We can do the same thing.’”

The Acorn. “Home sales in Ventura County continue to drop, and home prices are just beginning to sag, but exactly how long the real estate market will stagnate and how low home price will go is still a question mark, according to a group of speakers at a recent Ventura County Real Estate and Economic Outlook Conference.”

“‘The number of foreclosures is surging and will soon reach unprecedented levels,’ said Mark Schniepp, director of California Economic Forecast, in a book produced for participants. Schneipp predicts Ventura County real estate will level out and experience a total price drop between 10 and 15 percent, he said. Not bad if predictions on other California real estate markets are expected to dip down 18 percent.”

“The current real estate slowdown shouldn’t be compared to the recession in the 1990’s, Schneipp said. At that time, the downturn carried on for 71 consecutive months, resulting in a 27 percent drop in prices. Schneipp said it seems ‘unreasonable and improbable’ that history would repeat itself in such a cycle.”

The Napa Valley Register. “The Napa City Council approved the conversion of the 38-unit apartment project to ownership housing Tuesday. Two-bedroom condos will sell for between $280,000 and $320,000, making them by far the cheapest entry-level housing in the city, said Randy Gularte, a Realtor advising the Cadillac Flats project.”

“Sue Dee Shenk, executive director of Napa Valley Community Housing, doubted that many of Cadillac Flats’ tenants, who now pay $1,000 a month, would be buying condos that carried mortgage, interest, taxes and fees of $1,800 a month. Buyers will pay condo dues of $260 a month, Gularte estimated.”

“Norbert Doran, who built Cadillac Flats 15 years ago, countered that $1,800 was a great deal. Buyers would have their own home, with values rising over time, he said.”

From NBC San Diego. “What was once the county’s fastest-growing city has suffered a financial setback. On Wednesday, Chula Vista had its credit rating lowered a notch by Wall Street. For a time, new homes and business generated millions of dollars in new taxes, but the financial tide has apparently turned.”

“Scott Barnett of TaxpayersAdvocate.org told NBC 7/39 the city should have known the cash flow would not remain unchanged. ‘This is not like cancer, or a plane crash, this is something that’s self-inflicted,’ Barnett said.”

“The new city manager David Garcia told NBC 7/39…the real estate bubble burst has hurt cities everywhere. ‘Chula Vista is at the heart of the sub-prime mortgage crisis right now. We have some of the top foreclosure rates in San Diego County. And San Diego County is the top 100 in the country.’”

The North County Times. “The recent surge in housing foreclosures is creating new headaches for Escondido’s code enforcement officers, who say they are struggling more than ever to contact homeowners who have broken windows, out-of-control shrubbery or scummy swimming pools.”

“‘Things really slow down when you start dealing with the banks, because they seem to be struggling with these situations just as much as we are,’ said Greg Smith, one of 13 code enforcement officers in Escondido.”

“Smith said the city boards the houses up to prevent homeless people from living in them, to prevent teens from partying inside and to avoid health and disease problems that could result from neglected pools or abandoned food left inside. Bank officials typically agree with the decision to board the homes up, he said.”

“The foreclosure epidemic, which officials blame on gimmick loans given to marginally qualified buyers, is not unique to Escondido.”

“About 200 Escondido homes are now in the midst of foreclosure proceedings, and banks and mortgage companies have become the official owners of more than half of them, according to data on foreclosureradar.com.”

“Smith said the foreclosed properties that have drawn complaints are spread throughout the city, adding that they also range widely in price. ‘I’ve seen everything from $900,000 homes down to $300,000,’ he said. ‘And it’s all over town.’”

“A mood of gloom has settled on California in the past few months, with foreclosures and tightening credit causing more residents to see bad times ahead than at any time since 2003.”

“Economic pessimism jumped by 20 percentage points since the beginning of the year, the poll found, with 59 percent of residents saying they expected bad economic times in the coming year. Among ‘likely voters,’ 62 percent were pessimists.”

“Worriers outnumbered optimists in every region of the state, every income bracket and among homeowners and renters alike. That is unlike typical responses during this stage of an economic downturn, said Mark Baldassare, PPIC president and the survey’s director.”

“‘The anxiety is coming from the insecurity created by housing and credit market turbulence and the impact that has on homeowners and would-be homeowners,’ Baldassare said.”

“In 2003, when PPIC reported the last steep dip in consumer confidence, the invasion of Iraq was on people’s minds. Yet homeowners dug into their equity lines and low interest rates made spending on credit easy, and the economy continued improving.”

“‘What has people a little bit worried now is not just what their homes are worth, but what it is going to mean to borrow,’ Baldassare said.”

Some housing bubble news from Wall Street and Washington. Fortune, “Barney Frank and Hank Paulson and Ben Bernanke want everyone to know this: They are not engaging in morally hazardous behavior. ‘Nothing being contemplated rises to the level,’ said Frank, chairman of the House Financial Services Committee. ‘I don’t see a moral hazard,’ said Paulson, secretary of the Treasury. ‘I see no problem,’ said Bernanke, chairman of the Federal Reserve Board.”

“No one wants to be accused of bailing out greedy lenders or irresponsible borrowers.”

“There was only one Presidential candidate at his hearing Thursday, though this ‘08 prospect wasn’t buying into the morality play Frank was eager to sketch. Libertarian Republican Ron Paul of Texas complained that ‘abnormally low interest rates’ — including the Fed’s rate cut this week — led to a morally questionable bailout of Wall Street.”

“‘We talk about market discipline, but there’s no possibility to have market discipline,’ the candidate declared. ‘What moral justification do we have to deliberately devalue the dollar?’”

From Bloomberg. “Bear Stearns Cos., the securities firm hit the hardest by the collapse of the subprime-mortgage market, reported its biggest profit decline in more than a decade Thursday.”

“Bear Stearns wrote down the value of mortgage assets and leveraged loan commitments by $700 million, after using financial-market hedges to mitigate the loss, according to Bear Stearns Chief Financial Officer Samuel Molinaro.”

The Orlando Sentinel. “Bear Stearns and its rivals may benefit from the Federal Reserve lowering its benchmark short-term interest rate Tuesday by a half-point to 4.75 percent. The cut reduced the cost of financing trades and loans for the securities industry.”

“Bear Stearns’ largest shareholder is now billionaire Joe Lewis. Lewis paid $860.4 million from July to September to quietly acquire more than 8 million shares of the investment-banking company.”

“‘The worst is definitely behind us,’ Molinaro said during a conference call with investors.”

The LA Times. “Yields on long-term Treasury bonds jumped, the U.S. dollar sank and the price of gold surged Thursday, intensifying questions about whether the Federal Reserve’s move this week to stimulate the economy could backfire.”

“‘The cost of getting a mortgage has gone up, not down, since rates were cut,’ said Jim Keegan, a bond fund manager at American Century Investments. ‘So far the market’s voting that [the Fed cut was] not the right thing to do.’”

“Former Federal Reserve Chairman Alan Greenspan said the odds of a recession remain ’somewhat more’ than one in three even after this week’s cut in interest rates, with home prices likely to drop further and hurt consumer spending.”

“‘Remember, we still have a problem out there, which is a large overhang of unsold newly constructed homes,’ Greenspan said. Home prices ‘are down only about 3 percent, but they are clearly moving lower.’”

“Greenspan said home values are ‘very important’ because they contribute to household wealth and support borrowing to finance consumer spending. Prices are unlikely to drop more than 10 percent, he said.”

“The former Fed chief reiterated he was wary of the Fed taking part in regulating the mortgage market, adding ‘I don’t know the answer’ of whether it is proper for the central bank to increase regulation of the market.”

“Bernanke indicated no doubt, repeating a pledge to lawmakers to come up with new consumer protections. ‘We are looking closely at some mortgage lending practices,’ Bernanke said in his remarks. ‘We will use our rulemaking authority’ to ‘propose additional consumer protections later this year.’”

“Greenspan said ‘it is fundamentally a job for state attorneys general,’ he added, citing fraud as a particular problem. ‘I think what you need is experts in criminal acts.’”

The BBC. “The US Federal Reserve chairman, Ben Bernanke has told a US finance committee that losses from sub-prime mortgages are worse that ‘even the most pessimistic estimates.’”

“Mr Bernanke went on to say that the loses were set to continue and estimated some 320,000 foreclosures - or repossessions adding ‘We are committed to preventing problems from recurring, while still preserving responsible sub-prime lending.’”

The Associated Press. “The government is casting a wide net in its scrutiny of Wall Street banks, investors, credit-rating agencies and others and the role they played in the subprime mortgage crisis.”

“‘We look at all the players’ to determine whether there were missteps in accounting and disclosure and possible insider trading, says Walter Ricciardi, deputy enforcement director at the Securities and Exchange Commission.”

“Ricciardi said the SEC is asking mutual fund managers, lawyers, company executives and credit-rating analysts for details of their involvement in trading of securities that came from bundled mortgages.”

“As housing market conditions worsen, regulators are realizing how hard it is to track the trail of transactions from home borrower to lender to investor, and that it may be even harder to determine blame and liability on some of the players.”

“‘They’ve thrown this dragnet out, trying to find out what these relationships are,’ said James Cox, a professor at Duke University who specializes in securities law. He called the undertaking ’staggering.’”

“‘It is time those responsible are held accountable —- and until now, Wall Street has been getting a free ride,’ said Sen. Robert Menendez, a member of the Senate Banking Committee. ‘We need to question what it will take to make sure we do not end up here again.’”

From Hedge Fund Net. “The month after it triumphantly announced it had anticipated the subprime meltdown and its clients would be rewarded, Australian hedge fund firm HFA said it had posted its largest loss in 10 years.”

“CEO Paul Jensen announced he would resign in the wake of the miserable performance. Fellow Australian hedge fund firms Basis Capital and Mariner Bridge have also been hurt in recent months. Both have cited fallout from the collapse in U.S. subprime.”

Frm Reuters. “HSBC Holdings Plc, Europe’s biggest bank, said on Friday that it would close its U.S. subprime mortgage unit, cutting 750 jobs and taking an $880 million writedown, because the business is no longer sustainable.”

“For HSBC, it was the latest blow from the meltdown in the U.S. market for loans to home buyers with poor credit histories.”

The Baltimore Business Journal. “All year-end delivery homes reduced by thousands. Live FREE for a year, Really. The Smart Home Savings event. Deal of the Century.”

“Those are just a few of the full-page advertising slogans home builders are trying out in newspapers throughout the region in the hopes of kick-starting the Baltimore area’s housing market. Across Baltimore, home sales are down and foreclosures are up, prompting nationwide home builders to try out the new sales techniques.”

“At the High View at Hunt Valley in Baltimore County, starting home prices were recently cut back by about $15,000, and home buyers will also get $2,500 toward their closing costs. Josh Brandt, a sales associate for High View, said the offers are helping to sustain interest from potential buyers even in the depressed housing market.”

“‘We’ve actually been doing very well’ Brandt said. ‘Part of the reason is the incentives. I think right now, in this market, people do expect some seller concessions.’”

“In Baltimore City, Pulte Homes has reduced prices at its McHenry Pointe townhome development in South Baltimore, with three-bedroom townhouses cut back from $618,485 to $549,990.”

“A record 26 percent of U.S. homeowners say the value of their homes has fallen during the past year, above the previous peak of 24 percent seen in 1992, a survey released on Friday showed.”

“‘Overall, the data indicate no let-up in the slump in home prices,’ said Richard Curtin, director of the consumer surveys, in a statement.”

“While the Federal Reserve’s half-percentage-point interest rate cut on Tuesday would help homeowners whose mortgage rates are about to reset, shrinking home values and tougher credit requirements would overwhelm the positive impact from cash-out refinancing in the coming year, according to Curtin.”

“Homeowners in the western United States, where some of the most dramatic home appreciation had occurred, have been especially hard hit by the real estate downturn.”

“In the third quarter, 33 percent of homeowners surveyed in the West said their home value fell during the past year, up from 23 percent in the second quarter. Nearly a quarter expect home prices to fall further in the coming year, up from 17 percent in the second quarter, said Reuters/University of Michigan.”

The Miami Herald reports from Florida. “Newly built Miami condominiums were auctioned Thursday night, an event that many observers expect to see repeated as more under-construction condo buildings are completed amid the struggling housing market. CNBC covered the event, which came with echoes of Miami’s 1980s condo bust when developers turned to full-throated auctioneers to unload units.”

“Eight of 20 units Thursday were offered with no minimum-bid requirement and prices ranged from $181,500 for a one-bedroom to $357,500 for a three-bedroom.”

“Some observers…noted that figures were significantly below what previous buyers paid for Platinum units. In May, for instance, a one-bedroom on the 14th floor closed for $360,000. But Thursday night, two one-bedroom condos on the tower’s 16th and 18th floors couldn’t crack $220,000.”

“‘Next week or the week after, look for the lawsuits on this building,’ said Jack McCabe, a Deerfield Beach real estate analyst. ‘Many people who bought are now upside down. The place isn’t worth what they borrowed, suddenly, thanks to this auction.’”

“Analyst Lew Goodkin said better bargains should come in 2008 when the market is even softer. ‘Going, going, gone,’ said Goodkin. ‘Sold to the schlemiel who should have waited. I think it’s too early in the game.’”

“What’s going on with appraisals in some parts of the country? Mortgage lenders, and appraisers themselves, say they’re increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers.”

“Are some sellers giving in to lowball offers, fearful that they can do no better in the wake of the subprime mortgage implosion and home sale bust? Or are appraisers simply lagging behind downward market adjustments?”

“‘We’re seeing it a lot now,’ says Patrice Yamato, president of Plaza Mortgage Group in Jacksonville, Fla. ‘Appraisals are coming in higher than the contract’ - a reversal of the pattern during the housing boom years, when appraisals often came in at or occasionally below the contract price.”

“‘I think buyers are pushing very, very hard,’ says Yamato - and they’re walking away with steals.’”

The News Press. “A study says Lee County ranks as one of the worst major markets in the country for decline in home prices.” “Moody’s sees a hard fall for Lee County because of factors ‘that are common for all Florida metropolitan areas,’ said Per Berglund, senior economist for Moody’s.”

“‘Namely, you have the tremendous increase in prices in the housing boom and that has clearly given the large imbalances in the market. We’ll definitely see further price decreases going forward,’ Berglund said.”

“Also, Berglund said, ‘Inventories (of unsold homes) have been built up to levels way out of balance. There’s five times the number compatible with market equilibrium.’”

“The median sales price of an existing single-family home sold by a Realtor, for example, fell 22.5 percent, from $322,300 in December 2005 to $246,100 in July, the last month available, according to the Florida Association of Realtors. The number of unsold homes is about 15,000, more than three times what it was a year ago.”

“Fort Myers-based real estate agent Brett Ellis said he agrees Lee County will have a sharp decline and said that if anything, Moody’s is a few months behind in its prediction. ‘I think we’ve already dropped 17 percent,’ he said. ‘The price drops have been fast and furious” in recent months.’”

The News Journal. “A real estate agency owned by Felix Amon and his wife, Ursula, developers of oceanfront condominiums, has filed for Chapter 11 bankruptcy protection.”

“The filing by RX Realty Inc…swiftly followed the decision of an arbitrator to award a former agent of the company more than $400,000 in unpaid real estate commissions.”

“Condominium units in two properties Amon developed on the oceanfront in Daytona Beach Shores and New Smyrna Beach recently were put up for auction, but did not sell, Amon said.”

The Orlando Sentinel. “Central Florida is experiencing an increase in advertisements for ’short sales.’ Just under 200 homes are being offered as short sales in Orange County right now, listings show.”

“Short sale attempts have increased but often fall through, especially when the seller also has a second mortgage to satisfy, says Greg Gary, president of Grace Title Inc. ‘Unless you’re a master negotiator, it’s hard to get Bank A to agree with Bank B on a price,’ Gary told me.”

“And don’t think it’s an easy out if you’re behind in your mortgage payments. The amount of debt forgiven on a short sale may be taxed as income. And while the banks may allow a short sale, they may not be willing to forget about it and walk away.”

“Banks often go after sellers for what they are still owed. ‘I’m going to turn around and sue the borrower for the short amount,’ said Robert Orsolits, president of a foreclosure and bank-owned asset and real estate management company. ‘We do it with investors a lot.’”

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