There were 1,854 closings in May, which brings the year’s total to 7,834; a total of 5,462 homes had changed hands by this time last year. Of those May sales, 50.97 percent of the homes were either bank-owned (795) or distressed (150). The remaining (909) “normal” sales made up 49.03 percent.

Bank-owned and distressed home sales have an influence on Orlando’s reported median price. The median price of all Orlando homes sold in May is $130,000 (a 38.51 percent decrease compared to May 2008), but the median price for “normal” sales is $165,000. The median price for bank-owned sales is $82,000 and the median price for distressed sales is $140,000.

In addition to an increase in completed sales in Orlando, there is more than double the number of homes currently awaiting closings (6,603) than in May of last year (3,225). Those pending sales, of which 3,455 are homes that came under contract in the month of May alone (the most in one month this year), are forward-looking indicators of an improving market.

Attorneys’ Title Insurance Fund notified its 6,000 member attorneys this week that it will not insure deals made with a popular – but controversial – method for closing flips of short sales. A short sale occurs when a lender agrees to allow a home to sell for less than the mortgage owed so that foreclosure can be avoided.

The Orlando-based fund is a major underwriter for attorneys who write title insurance in Florida. In a letter to attorneys, the fund said it has become aware of short sale programs advertised on the Internet that promise to make investors lots of money with little or no work.

The programs, the letter says, involve investors entering into option contracts with homeowners for “the exclusive right to purchase their property for a period of time.”

The investor negotiates a short sale with the lender by convincing the lender that the price it is offering is the market value of the property. The investor then finds a buyer for a much higher price. The sales happen simultaneously, and the investor pockets the difference.

The problem is that “the original lender is not told that the buyer is flipping the property on the same day for thousands more than the lender has been told is the market value of the property,” the letter states.

The fund’s decision could have a major impact on short sale flips because many investors use attorneys to close deals when traditional title companies won’t.

The option contract method has been gaining steam as a way to work off inventory in a bad real estate market.

Critics say lenders are misled and don’t realize they could be selling the home for more money. Some real estate agents and buyers complain that the option contracts lock some buyers out of the market. That’s because some types of loans forbid flips.

Some attorneys have raised concerns that sellers could have to pay the difference later.

But proponents say investors can make money and homeowners can avoid foreclosure. They say lenders would lose even more money if they foreclosed on the home.

“Orlando’s housing market appears to be following a recognized healing pattern — from the bottom up — as evidenced by the greater number of sales in the lower-price categories,” explains ORRA President Les Simmonds, L.G. Simmonds Real Estate Corp. ”For example 75 percent of homes sold in April were purchased for less than $200,000, while 10 percent sold for more than $300,000. And, we expect the ratio of sales of lower-priced homes to increase exponentially as more and more first-time homebuyers seek to take advantage of the $8,000 federal tax credit.”

Sales activity in the lower-price categories gradually stimulates sales in other categories as sellers who want to become trade-up buyers are able to sell their current homes.

Forward-looking factors also indicate an improving market: REALTORS® filed 3,412 new contracts in the month of April, nearly double than the number of contracts that were filed in April 2008 (2,012), and are awaiting the closing of a record 5,818 pending sales. There were 103.90 percent more homes under contract last month than in April 2008 (2,853).

The 1,741 completed closings in April is a 41.43 percent increase compared to April 2008 (1,231) and a 0.74 percent decrease compared to last month (1,754). Year to date, there have been 42.58 percent more sales than by this time last year (5,867 to 4,115).

The median price of all Orlando homes sold in April ($132,900) decreased by 37.01 percent compared to April 2008 while the area’s average interest rate increased to 4.86 percent, up from last month’s record low of 4.67 percent.

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