Buyers Wonder, Are Short Sales Worth It?

You're all ready to househunt, and of course everyone is talking foreclosures being the way to go. Hard to avoid them really! But what about short sales. Are they worth the trouble? And what IS a short sale anyway?

Short sales - a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth.

These sales dominate the housing market. But they aren't for everyone. What you should know:

1. Typically the homeowner is underwater and has experienced a financial hardship such as a job loss. In order to limit the damage to his credit rating, the homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.

2. Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant - and sometimes vandalized - property, a short sale isn't a distressed home that will sell it at an extremely low price. According to the data from RealtyTrac, short sales typically sold for nearly 10% less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35%.

3. Home buyers wanting to purchase a short sale must have patience! In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.

4. Even with the challenges associated with short sales, buyers should not avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR can help buyers avoid frustration and surprises down the line.

I have been trained as a Certified Distressed Property Expert and have experience in both short sales and foreclosures. Let me know if you have any questions about purchasing short sales or foreclosures!

To read more about short sales:

http://realestate.aol.com/blog/2011/08/11/short-sales-are-they-worth-the-trouble/

Selling Your Home? The IRS Wants (to help) YOU!

The friendly IRS has come out with their Summertime Tax Tip for 2011! Read and learn...

"Ten Tax Tips for Individuals Selling Their Home"

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of this sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home cased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year's tax return.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

Whew! Did you get all of that? No sweat ... Well, for more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Would YOU Sell By Owner? You Gotta Read THIS!

When we first got into the real estate business, For Sale By Owner was really popular. There were several competing For Sale By Owner type brokers, and it seemed that a new one was popping up every week or so! Where have they gone? I was thinking about that the other day ... You just don't see much of those professional For Sale By Owner companies around anymore.

I just read an article that I have to share with you. The founder of ForSaleByOwner.com used a real estate agent to sell his New York apartment after he was unable to sell it by owner for six months. The agent came in, raised the price, and got multiple offers!

This is such an unusual story. For one thing, when owners put their homes up for sale themselves they typicall ask too MUCH, not too little! Even at the height of the home sales frenzy, many, many For-Sale-By-Owner sellers priced themselves out of the market. But that is not the point of this story.

The point of this story is that a good real estate agent knows the market! I have always loved real estate and I thought I kept a good eye on home prices when I wasn't selling real estate full time. I really figured I knew pretty well what was going on. Since being in real estate full time for nearly 10 years, I have learned just how wrong I was! The actual value of a home has so many variables that it was next to impossible for a lay person - even a lay person as crazy about real estate as I was, to have a pulse on the home market!

Only a full time professional has the "luxury" of spending hour upon hour, day after day, month after month and year after year studying and searching the multiple listings (which change daily) and reading every article about real estate, construction and lending that hits his inbox. I do it because it's my job, and because I LOVE IT!

So I say, "Good for you, Mr. inventor of forsalebyowner.com!" I am truly glad you sold your apartment and got a fair market price for it as well. That is what us professional REALTORs wake up to do each day!

To read the entire article, click here

http://realtormag.realtor.org/daily-news/2011/08/09/forsalebyownercom-founder-uses-agent-sell-home?cid=WR08092011:26043&ed_rid=230212

Thinking About Remodeling? Some Contractor Tips!

Ah, yes! Us die-hard do-it-yourselfers!

If you have decided to hire a contractor for the job this time around - or if you have never swung a hammer, here are a few tips on choosing the right contractor I found in an article in Business Weekly by Alina Tugend.



1. "Check the number of projects the contractor has going at the same time. Too many at once can add a considerable amount of time to your own."

We ran into this when we were building our house and acting as our own general contractor. Some of this just can't be helped, but ask around before hiring the contractor or general contractor. If they would consistently not show up when planned, they might not have very good delegation or organization skills - or perhaps they are trying to make do with a skeleton crew and are spread too thin.

2. "What margin does your contractor take to provide materials. Perhaps you can save by buying materials yourself. A friend saved about 20% doing that for a remodeling project. Contractors aren't always keen on it, though. If you get your own windows, for example, and they're the wrong size or cracked, the problem is yours to deal with, not his."

This is something we did do when building our home. Of course, it took a lot of time, which is why contractors have to add that 20% you are saving if you do it yourself! So be prepared for the time outlay shopping around and ordering materials. And I would suggest you know a little bit about what you're doing before you try. This wasn't our first building project. Get advise before you buy!

3. "Never go on a vacation and leave contractors to work on their own. Even with builders you can trust, it's better to be available. And at worst, it can mean little or no work gets done while you're relaxing on the beach."

4. "Listen to the ways the contractor and the subcontractors, like the plumbers and electricians, interact. A friend had four different contractors come with their subcontractors to bid on a major renovation. Listening to them talk together gave her a sense of how they respected each other and worked together. In the end, they didn't hire the cheapest guy, but the one they thought was the smartest and most creative and got along best with his subcontractors."

It goes without saying that you want a contractor who respects those he works with - his crew and his subcontractors. Good luck getting an interview with a contractor and his subcontractors all at once! Subcontractors are their own bosses and to have their schedules all align for an interview is not likely. Afterall, they will not have to all be there at the same time working anyway. Better to get a good referral on the contractor's character as well as his ability as a builder. It does matter!

5. "Finally, everyone said to hold some money back until the project was completed. And that means no small unpainted areas or loose tiles or bad grouting. Too often, builders, even good ones, leave small details unfinished once they've moved on to their next project. In fact, after you've unsuccessfully hounded the contractor for weeks to do the last bits and pieces, try this: take that money and hire a handyman!"

Completely agreed! Never pay contractors or even handymen all the money up front until the job is completed. Everyone only hopefully makes this mistake once! It's usual to pay at least half up front so materials can be purchased for your project, and perhaps add more to that as the project progresses, depending on the size. But keep some back in order to give the workers some accountability.

If you need a referral for a contractor, subcontractor, landscaper or handyman, give me a call or shoot me a text or an email. Being active in the housing community, I come across people I would refer quite often and I may be able to help you out!

New Loan Limit Would Hurt Home Sales

Unless Congress takes action, the current loan limits will expire on Sept. 30 and the cost of a mortgage could rise significantly, especially in high-cost areas such as California.

More than 30,000 California families could face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.

Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher conforming loan limits. As a result of C.A.R.’s and NAR’s efforts, in 2008, Congress temporarily raised the conforming loan limits from $417,000 to $729,750 and has extended them annually through fiscal year 2011.

Regionally,
Marin County would be impacted the most, with more than 12 percent of home sales rendered ineligible under the lower GSE loan limit, followed by Contra Costa (11.5%), San Mateo (10.7%), San Francisco (9.9%), Monterey (8.8%), San Diego (8.2%), Sonoma (7.9%), and Santa Clara (7.8%) counties.

Under the lower FHA loan limit, San Francisco County would be impacted the most, with
more than 14 percent of home sales rendered ineligible, followed by Santa Cruz (13.9%), Orange County (13.3%), Marin (13.2%), San Mateo and Ventura (both at 12.7%), Santa Clara (12.2%), San Diego (11.9%), Alameda (11.8%), Riverside (11.5%), and Contra Costa (11%) counties.

Read the full story http://mortgage.ocregister.com/2011/06/23/realtors-new-loan-limit-would-hurt-homesales/45927/

FORECLOSURE MYTHS: WHAT'S TRUTH?

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.

• Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure. In reality, contacting the lender or servicer is an important first step, and the sooner, the better. Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.


• It is a common misconception that missing one mortgage payment will lead to foreclosure. However, the foreclosure process doesn't begin until payments are 90 days delinquent. Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.


• Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole. Some homeowners try to solve this by depeleting their savings or dipping into their retirement accounts to become current on the loan. Most financial experts advise against this.


• Delinquent homeowners may think they should stop making mortgage payments to get their lender's attention, which often isn't the case. When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.


• Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply. Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.


• A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD). A list of HUD-approved agencies can be found at http://www.hud.gov (Read the full story http://lat.ms/ihLJTs

Don't hesitate to contact me if you have questions about foreclosure and whether or not a short sale could help your situation. I am a Certified Distressed Property Expert and have had a lot of experience helping homeowners in these situations!

Americans Say Home Ownership Still a Great Investment!

Seventy-five percent of Americans say that “owning a home is the best long-term investment they can make and is worth the risk of ups and downs in the housing market,” according to a new survey of 2,000 bipartisan voters by the National Association of Home Builders. And I concur!

Despite their situation — whether underwater on their home or even renters — the survey found Americans to be optimistic about home ownership. Eighty-one percent of those who own their homes outright, 76 percent with mortgages, 67 percent of renters, and 65 percent who have underwater mortgages cited home ownership as the “best long-term investment.”

When survey respondents were asked whether they’d recommend buying a home to a friend or family member just starting out, 80 percent of Americans said “yes.” Even home owners currently underwater — those who owe more on their mortgage than their home is currently worth — overwhelmingly (78 percent) said they would recommend home ownership to family or friends starting out.

More buyers are coming up through the pipeline too. The survey found that 73 percent of those surveyed who do not own a home said their goal is eventually to buy one.

The NAHB survey also found:

▪ 58 percent of Americans oppose eliminating the mortgage-interest deduction and 63 percent oppose lowering it. What’s more, 57 percent of those surveyed say they are less likely to support a candidate for Congress who wanted to eliminate the mortgage-interest deduction.

▪ Respondents were split on about requiring a 20 percent down payment to purchase a home: 49 percent were in favor and 49 percent opposed it. However, mortgage holders and renters aged 18 to 54 were more opposed to it: 58 percent of younger mortgage holders and 59 percent of younger renters opposed adding a 20 percent down payment requirement.

Source: “The Cook Report: The Home Front,” National Journal (June 2, 2011)

And Speaking of Scams ...

...an old scam is making a come back.

Most of us homeowners have had our mortgage servicer changed. We get the letter telling us where to send our house payments from now on. Well, con artists have found a way to hijack a payment or two!

First comes the letter from a fictitious company that says it has begun servicing your loan. You get your new "account number," along with coupons for your mortgage payments. Unfortunately, by the time you figure out your loan has not really changed servicers, you are already out a payment or two!

So how do you know the difference between a real transfer of mortgage servicers and a con?

• Under the law, your current servicer is required to send a "goodbye" letter notifying you that your payments should be sent to a new company as of a certain date.
• A week or two later, the law says you should receive a second letter, which, by law, should include a welcome missive from the new servicer with the details of the mortgage payment, which includes a breakdown among principal, interest, and escrow. This package is also likely to include a few payment coupons, if not a brand-new coupon book, and self-addressed printed envelopes for borrowers to make payments.
• Both the goodbye and welcome letter should include the original mortgage loan number. if either letter does not, or if the information included in one doesn't match what's in the other, you should call your original servicer to inquire.
• If you receive only one letter, be extra cautious. Even if everything appears to be standard procedure, you are still advised to call the first company's toll-free number just to be sure!

SELLERS! Don't Get Scammed!

Misfortune seems to bring out the good in most people; however, there are always some out there who wish to turn someone's misfortune into good for themselves alone!

A new study by CoreLogic shows banks and distressed home sellers will lose more than $375 million this year by selling undervalued houses to third-party buyers, which generally result in a quick sell and profit and tend to be fraudulent sales.

According to law enforcement and banking industry experts, the fraud works like this: Investor groups partner with local real estate agents whose job is to spot borrowers in financial distress and persuade the homeowners to sell to investors in a short sale at a low price. Then, the agent contacts the bank with the investors'
short-sale offer. So far so good. At least it appears so!

Meanwhile, the agent finds a buyer who wants to purchase the property for a higher price than that which the investor buyer is paying for the property, but the agent never presents this offer to the bank, nor does he tell the homeowner about this buyer. This new buyer knows nothing about the investor. To back up the investors' low offer - the only offer the bank is aware of - the agent produces an appraisal that confirms the low valuation. The bank then approves the sale and the investment group purchases the property. After the closing, the investors then sell the house to the other buyer at a higher price. The agent and investors then split the profits. The original homeowner never knows what hits them!

How do you keep this from happening to you? Or your friends who may be considering selling their home "short" in order to keep from foreclosure? Use a REALTOR you can trust. One who has experience in Distressed Property Sales. One who is looking out for the best interest of the seller.

I have had many years of experience in foreclosures, pre-foreclosures and short sales, on both the buyer side and the seller side. I am a Certified Distressed Property Expert. And most importantly, I can be trusted. Call me with any questions you have about your property - what it is worth, should you short sell or foreclose? Can you get a loan remodification? What options do you have? I would be glad to help you!

Home Improvements That Add Value

We are often asked what home improvements are cost effective. In these economic times, the answer to that is more important than ever!

Homeowners concerned with making home improvements that will pay off when it’s time to sell the property, should consider the following tips.

1. The first improvement/repair homeowners should consider are those that impact the home’s basic structures and systems. Potential home buyers generally do not want to face expensive repairs, and if items such as the foundation, roof, air conditioning, water heater, or other basic structure need to be fixed, the property will be considered a fixer-upper and its market price
will be discounted accordingly. It is very hard for homeowners to swallow that their home would be sold as a fixer-upper, but that is the nature of the buyer today! And it is, what it is! We can't stress home maintenance enough! It is your home's biggest selling point.

2. Some minor replacements will produce big results for minimal cost. Replacing and coordinating bathroom and kitchen hardware and fixtures are generally inexpensive, but tend to make a big difference. The same can be said for getting rid of dated finishes, such as old wallpaper, paneling and brass light fixtures.

3. Kitchens, bathrooms and master bedrooms sell homes everywhere in the country. And here in San Diego, a well kept yard/patio/balcony is a huge selling point, as well. Minor remodeling and fine tuning of these three or four areas of your home will pay off when it comes time to sell.

Homeowners who don’t know when or even if they will be able to sell their home are advised to choose home improvement projects carefully. Unless the home is located in an upscale neighborhood and the property already is immaculate, owners can skip expensive upgrades and
focus on the fundamentals.

Call me if you have any questions regarding a proposed project, even if you are not ready to sell. I would be happy to offer you my expert opinion based on showing hundreds of buyers hundreds of homes! Happy DIY'ing!

REAL ESTATE: Finally a Good Investment?

The housing market still looks pretty bleak: There were a record one million foreclosures last year, home prices are still falling in many regions and the number of "underwater" properties is at a record high.

And things don't look much better in other areas of real estate. The number of construction jobs continues to decline, even as other parts of the economy have added jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up during the past few months.

Basically, the real estate market remains a mess.

Real estate encompasses a wide range of markets – homes, apartments, hospitals, office buildings, strip malls, dormitories and other properties. But for our purposes, let's focus on residential real estate, or homes. Here are four reasons to think residential real estate might represent a bargain – with one big caveat.

Everyone hates homes.

Homes are probably the most hated asset class in the country. That's what happens when a bubble bursts. People avoid thinking about the value of their home. Sellers moan about no offers, buyers gripe about impossible lending requirements.

Hatred of an asset is often the precursor to contrarian interest, and being contrarian is at the heart of many investment strategies. To paraphrase Warren Buffett, be fearful when others are greedy and greedy when others are fearful. Mr. Buffett backed that idea when he invested in the stock market in the teeth of the financial crisis in late 2008 and early 2009.

Of course, being contrarian for its own sake isn't wise investing. Gold was hated for years ("dead money") before it recently became an attractive asset class. Still, a lot of smart ideas begin with the question: What does everyone hate?

Smart people are buying real estate.

This cohort is led by John Paulson, the hedge-fund manager who made $20 billion betting against the housing bubble. Last fall he said in a speech: "If you don't own a home buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home."

Why is Mr. Paulson so adamant? Because he believes long-term interest rates are not going to get much lower. They have, in fact, risen since he gave that speech, but they remain remarkably low by historic standards. Low rates and the expectation that home prices will rise is his argument. For his part, Mr. Buffett has predicted the housing market will bottom this year.

Real estate performs well during inflation.

There's no inflation these days, but when buying a home one should take a longer view. And the longer view shows that the economy has enjoyed a disinflationary period since the early 1980s. A number of folks think that cycle is slowly reversing itself.

If that's the case, then convention would argue for holding assets that do well in an inflationary environment. That includes Treasury Inflation Protected Securities, commodities and real estate. Remember that during the stagflation nightmare of the 1970s, real estate had a strong run.

Inflation isn't a significant issue in the U.S., but it's a growing problem elsewhere. China and India have taken steps to fight inflation, the euro zone is getting flickers of inflation and the U.K. has had oddly higher prices (above 3%) for an extended period of time. If the cycle is slowly turning, real estate makes more sense.

Demand may be coming back.

Supply isn't as out of whack as it used to be. At the end of November, home builders reported 197,000 new homes on the market, the lowest level since 1968, according to Yardeni Research. The National Association of Realtors reports that the inventory of existing homes for sale fell 4% to 3.71 million homes, which represents a 9.5-month supply at the current sales pace, down from a 10.5-month supply in October.

Those aren't pretty numbers, of course, but they are moving in the correct direction. And that may be a reason that many home builder stocks, such as KB Home ( KBH: 14.79*, -0.19, -1.26% ) , Hovnanian ( HOV: 4.45*, -0.06, -1.33% ) , Pulte ( PHA: 24.06*, +0.02, +0.08% ) and Toll Brothers ( TOL: 20.40*, -0.30, -1.44% ) , have come off their lows in the past several weeks.

It's all comes down to jobs. There are a zillion caveats to any positive home thesis, but the big one is unemployment. If the economy is not creating jobs, the chance of a rebound in housing is diminished. It's hard to buy a home without a job, and folks who aren't working don't want to take long-term risks.

The job market is still struggling and the debate is hot about when it will recover. Optimists see recovery this year. Pessimists see pain for several years ahead. How this X factor gets resolved will say a great deal about whether housing will rebound.

Taken from an article on SmartMoney.com. Read more: 4 Reasons to Buy a Home Now - SmartMoney.com http://www.smartmoney.com/personal-finance/real-estate/-1295050347411/#ixzz1BhVVZ0hR

A little-known strategy for cutting mortgage payments

Homeowners looking to lower their monthly mortgage payments and reduce their interest rate may be able to do so without refinancing. A little-known strategy called recasting or re-amortization is available through some mortgage lenders and servicers, and eliminates the hefty fees and daunting credit requirements of refinancing.

• Re-amortization requires borrowers pay off a lump sum of the principal amount on the mortgage and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so the new monthly payments decrease slightly and interest paid over the life of the loan is reduced.
• Lenders typically charge an administrative fee of $150 or more to re-amortize a mortgage; however, borrowers are not required to pay closing costs or submit to another credit check.
• Re-amortizing works well for homeowners unable to qualify for refinancing, especially those who are self employed or have low poor credit.
• Homeowners considering re-amortizing their mortgage should be aware that some lenders require a minimum amount to be paid toward the principal in the lump sum. JPMorgan Chase, for example, charges a $150 fee and requires a minimum $5,000 payment toward the principal.
• Another challenge is finding a lender, or loan servicer, that offers re-amortizing. JPMorgan Chase and Bank of America exclude loans backed by the Federal Housing Administration and Dept. of Veterans Affairs, and loans that were sold off and securitized may also need investor approval. By Lynnley Browning

If you're in a mortgage pickle, it may be worth a look-see into this strategy. Call me if you have questions and I'll try to point you in the right direction! - Mike