Impact on Eviction Moratorium on Palm Beach County

Q: I would love to see a training or session on foreclosures and short sales. Especially with the moratorium being lifted.

What our agent is talking about is that this week, the Federal moratorium on foreclosures and rental evictions was lifted in a 6-3 decision by the Supreme Court. The thinking that goes amongst some Buyers is that the tables have finally turned, and a flood of foreclosures, regular sales, and short sales will be coming on the market. According to Forbes, 8 million homes face foreclosure or eviction! 2 million are behind on their loans and 6 million behind on their rent.

A: You won’t see many short sales or foreclosures!?! You can try. Our website search will let you sort by short sales and foreclosures if you scroll down and check those boxes. You just won’t find much… and probably won’t for years to come.

The main reason is price appreciation. If an owner of say a $300,000 home at the start of the pandemic wasn’t getting paid and their home value was going down, the problem would be catastrophic. However, the value of that $300,000 house is probably now worth over $400,000. So, even if the landlord missed out on the entire $2,000 of monthly rent since March 2020 (17 months), the $100,000 more than covers the $34,000 in rental income. This will let a rental owner whether the storm.

The bottom line is people are not upside down on their home and you need that for short sales to thrive.

Short sales are like the honey badger. They are nasty.

Both in process and usually in the type of property you get. Fortunately, I haven’t done one in 5-6 years, and you rarely see them anymore. I didn’t even know what one was until my 7^th year in the business. My first one took 6 months, 300 faxes to the bank, 3 buyers walking away and then the Seller deciding to cancel when we got approval. UGH.

If you don’t know, a short sale needs 3 party approval and it’s used by the homeowner and the bank to avoid foreclosure. The buyer, seller, and bank(s) all must agree. Prices are never confirmed until the bank(s) confirm it, which is typically after the house goes under contract. Buyers get crazy over this because it can put false numbers on the market. The Buyer can then back out (assuming they checked the effective date starts after bank approval). The massive number of short sales in the Big Short Era (2007-2014) took place because the system was overwhelmed, market mass depreciation, terrible economy, and excess supply. Those ingredients are not in place but are now in fact the complete opposite.

Going back to the owner of the $300,000 house who let’s say owes $260,000. If the value dropped from $300,000 to say $200,000 you would have a reason for a short sell. If the owner in this situation wanted to sell, they could easily do so and make a lot of money.

Same goes for foreclosures. On both fronts though, the lending institutions have set up forbearance programs and are working with owners of homes to keep them in there. Banks don’t want to foreclosure as they are expensive, the owner lets the house go, and that’s why you didn’t see many even after the pandemic shock first occurred. This has usually been accomplished by tacking on extra years to the typical 30-year loan. Foreclosure takes a long time with lots of appeals. The courts will probably be flooded with appeals to rental evictions as well.

For homes that do get foreclosed, the more desirable homes that are newer or remodeled or have the best views will have appreciated the most and will never get to that stage. The 2-story with master upstairs, frame construction, linoleum floorings, popcorn ceilings, and views and sounds of the Turnpike is what you get. Hopefully it may tick up supply, but I doubt in our area. If anything, watch for the rental market to get tighter with lots of people in need of rentals.

Help is still on the way for people being evicted. Congress made $46.5 billion in emergency rental aid available, but the Treasury Department said only 11 percent of the funds have been dispersed to tenants facing eviction.

Jeff Lichtenstein is owner and broker of Echo Fine Properties, a luxury real estate brokerage selling real estate in Jupiter and homes in Palm Beach Gardens, Florida. He has 20 years of real estate experience, has closed over a 1,000 transactions, and manages over 50 agents in a non-traditional model of real estate that mimics a traditional business model. Some publications he has been quoted in.

Feel free to ask him a question directly at [email protected].

Posted in Jeff's Journal, Laws and Contracts, Rentals on August 28, 2021 at 8:33 am.

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Impact on Eviction Moratorium on Palm Beach County