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🇺🇸🎆 Happy Fourth of July! 🎆🇺🇸 May your hot dogs be hot and long, your fireworks bright and loud, and
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Trust This.
By Joseph E. Seagle, Esq. ● Jul 01, 2022
Smart Brevity® count: 3.5 mins...939 words
🇺🇸🎆 Happy Fourth of July! 🎆🇺🇸 May your hot dogs be hot and long, your fireworks bright and loud, and your democracy free and powerful.
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1. Big thing: Rate increase pauses
The rapid rise in mortgage rates appears to be leveling out according to FreddieMac, suggesting that the housing market is rebalancing from a hot seller's market to a more even pace.
Why it matters: Rising mortgage rates have led to more listings sitting on the market longer, fewer offers from buyers, and price reductions. Some would say that we’re in a steeply declining market at this point.
What we're seeing: In our title closing operations each day, we’re seeing the effects of the higher rates on retail sales and investors:
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Subject-to closings, where the investor purchases the property subject to the seller’s existing mortgage on the property, are increasing in frequency. Buying a home with last year’s interest rates is enticing. Some investors are giving the seller a second mortgage for the equity in the property, but those second mortgages are getting smaller each day as equity shrinks and reinstatement fees increase.
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Wholesale fees, profits, or assignment fees are getting smaller. Investors who focus on getting properties under contract at a low price and then assign the contract for a fee, or “double-close,” are seeing those profits diminish as the property’s value continues to decline between the date of the initial contract and the closing.
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Brokers and flippers are reporting multiple views of their listings each day, but no offers. And the days of multiple competing offers from buyers appear to be in the rearview mirror.
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Brokers are reporting that sellers are more willing to reduce asking prices sooner rather than later. The only way to “win” is to beat other sellers in the pricing race to the bottom.
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More sellers are in foreclosure, requiring payoffs quickly from foreclosure law firms that don’t appear to be staffed up to handle this surge. The firms’ lender clients are at least agreeing to cancel hearings and sales in an effort to let the seller complete the sales transactions.
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Lenders of all types are tightening their underwriting requirements.
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Mortgage and property fraud incidents are rising.
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Piggyback second mortgages and downpayment assistance loans are becoming the norm.
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Smart REALTORs and investors are familiarizing themselves with new loan products like the Florida Hometown Heroes Housing program to help buyers afford homes at higher interest rates.
Our thought bubble: We’ve been here before, but it’s not as bad as it was in 2007. Lessons we learned then:
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Optimists and pessimists go broke. Pragmatists thrive.
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“Speed” is key in renovations, price reductions, sales and marketing processes, and closing processes.
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Prices will not rebound quickly.
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Convert properties for sale into properties for rent if they’re sitting too long. Rents, unlike sales prices, appear to be increasing for the foreseeable future.
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2. Another insurer bites the dust
Southern Fidelity Insurance Company was declared insolvent earlier this month. It is the fourth Florida homeowner’s insurance company to become insolvent since February.
The company’s 78,000 policy holders’ coverage terminates on July 15. The policies will then be covered by Citizens Insurance Company, the government-backed insurer of last resort that has grown uncomfortably large since its creation. However, homeowners will jump through some hoops first to obtain this coverage.
Citizens has some special provisions for Southern Fidelity policyholders who will be coming over:
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4 Point Inspections are required for all homes 20 years or older, but inspections are deferred for 90 days from July 15. Deferred; not waived.
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Citizens runs both a Loss History and Credit Report for all new applicants, requiring date of birth and social security numbers for each applicant.
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Policies are typically written as the deed is titled on the Property Appraiser’s site (Trust thave additional forms that must be completed).
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Citizens does NOT cover any sort of screened enclosure (pool, or patio)
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Personal Liability is limited to $100,000.
Situation Awareness: If you were insured by Southern Fidelity or any other insolvent insurer, and your property is held in a land trust, your trustee will be required to provide their birthdate and Social Security Number. If the trustee is an entity such as a limited liability company, this won’t be possible. To meet the requirements, you can change the trustee to a person willing to undergo background checks.
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73% of markets are deemed to be at high risk of price drops. Check the interactive map to see if your property is located in one of these areas. Fortune
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House flipping in the first quarter was the highest it has been since 2000, but profit margins are shrinking. Axios: What’s Next
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Millennial house hacking is becoming more prevalent as that generation has to get creative to buy a new home. Click Orlando
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Refinances are sick, dying, or dead. National Mortgage News
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Investors helped drive price increases. Fortune.
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Meet 2-year-old Edward, our newest office dog in addition to Rufous. Any day you visit the Orlando office, you’re liable to see Edward and Rufous lounging in an office or sitting by someone’s desk after eating some treats. They appreciate pats on the head, a thigh to rest their chin, and any kind of doggy treats.
At this time of year, this is the 🇺🇸 performance on repeat in my brain.
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We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.
Be on the lookout for our next issue! 👋
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