Distressed home sales accounted for less and less of the total market month after month here in Florida the last 6 months. We have seen a normalization to the local housing market, but at the same time putting more of a squeeze on already-burdened buyers.
"The bargain days are gone," said John Tuccillo, chief economist for the Florida Realtors trade group. "That's the bottom line in all of this."
Distressed sales have been slowly shrinking for the past three years. Statewide, nearly half of all property sales involved a short sale or foreclosure in 2009, near the height of the housing bust. The properties typically sold for below market value to ready and willing buyers. Many of those properties would have multiple buyers waiting for their offers to be chosen only to be out bid.
But rising home prices over the past year turned Florida and many other parts of the nation into a seller's market. Short sales and foreclosures now are selling for list price and above, and many still have the attention of multiple buyers.
Thousands of owners who were "underwater" on their mortgages now have equity, even though in some cases it is just enough to get out with taking from their own pockets to make a deal work. They don't have to let the homes fall into foreclosure or need permission from their lenders to sell for less than they owe on the mortgage. Now they can go rent or buy something in the area they now like with out having to wait the two years to qualify, (as long as their credit is still intact when the sale is completed).
"There's less distress in the market, and those who are in distress have the escape hatch of equity," said Daren Blomquist, a vice president of RealtyTrac Inc., foreclosure listing firm.
One of the biggest issues here that I feel has been over shadowed is that the Federal lawmakers allowed the Mortgage Forgiveness Debt Relief Act to expire on Dec. 31st of last year. That means the amount of debt forgiven in the short sale of a primary residence is considered income and taxable. An owner with $100,000 in debt wiped away could face taxes of $25,000 or more depending on their individual tax rate. That is huge when dealing with this problem. At one time it was fight just to get the deficiency waived on an approved short sale now; it’s looking at bankruptcy to get rid of the tax burden after the short sale.
There is always talk now and again about renewing the Mortgage Forgiveness Debt Relief Act but it is always put on the back burner and seems like everything is always behind the Obama care news. Will they ever renew the Act? Will it be retroactive to Jan. 1st? Will it be the same old Mortgage Forgiveness Debt Relief Act we know of ? or will it become something new? ObamaDRA ? Your guess is as good as mine.