Only 63 days left to claim the homebuyer tax credit!

Congress voted to extend and expand the First-Time Home Buyer Tax Credit program on November 6, 2009.  There is only 63 days (as of Feb 26, 2010) to claim it. 

The $8,000 tax credit expiration date has been pushed forward to Spring, requiring homebuyers to have an accepted written contract no later than April 30, 2010 and to be closed on the purchase by June 30, 2010.

“Move-Up” buyers were also provided an incentive to purchase with the expanded program.  Homeowners that have lived in their current residence for five out of the last 8 years are eligible for a tax credit of $6,500.   Don’t get confused by the “move up” lingo–a current homeowner can purchase a home that has less square footage and amenities than the current residence and still be eligible for the credit.  For example, my folks have decided to move from their 3000-sqft home into a 1000-sqft town home and are eligible to receive the incentive.

The tax credit’s basic eligibility requirement remain the same: 

• A home cannot be acquired through gift or inheritance
• A home cannot be purchased from an entity in which your are a majority owner
• All parties to the purchase must meet eligibility requirements
• A home cannot be purchased from a parent, spouse or child

There are some additional criteria that must be followed, as well.

First, the property being purchased cannot exceed a sales price of $800,000.  Second, household income thresholds have been raised to $125,000 for those who file their taxes singly, and $225,500 for buyers that file taxes jointly.

Don’t forget that the incentive is a true TAX CREDIT—not a tax deduction.  A tax filer who is eligible for the full $8,000 credit would receive a check from Uncle Sam for $8,000 if there is no tax liability for that particular year.  What a time to buy! 

A complete list of qualifying criteria is posted on the IRS website.  It is important to review your qualifications with a tax professional in order to determine your eligibility. 

Interest rates along with home prices are at an all time low.  Contact Matt for additional information and/or to take advantage of this once in a lifetime opportunity:  208-869-3469.

Just over 60 days to go . . .

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Rental income—a good indicator for real estate stabilization:

Most of my buyers and sellers are concerned about where home prices are headed and want to know whether or not it is a good time to either buy or sell.  I, along with most which have an interest in real estate, wish we had a crystal ball.  If we were so lucky.  Possibly the next best thing is to follow the rental income to establish current market conditions.

“If you look at the trend in rents to see where housing prices are headed, you’re looking at the right measure.” Says Yale economist Robert Shiller who is the co-developer of the S&P Case/Shiller Home Price Indices that monthly track residential real estate values nationally and in 20 metro areas.

In the past, people have been willing to pay a modest premium to own rather than rent a home with recent studies reporting that in 1999 rental income averaged 87% of the after-tax mortgage payment for dwellings of similar size in the same neighborhood.  This percentage changed when home prices skyrocketed.  By mid-2006, rental income had fallen to less than 60% of after-tax mortgage payments with investors banking on appreciation.  In some markets, owners of property were paying twice as much as renters for a similar property in the same neighborhood and in select pockets, owner monthly payments were three times more than the average of rental income.  Wow!

The 87% ratio of rental income to ownership cost for 1999 is a very good benchmark since it stayed around that level throughout the 1990’—prior to the steep rise in home pricing.  With that as our guide, one can conclude that the stabilization of home pricing is on the horizon. By the end of 2009, rental income on average was up to 83% of ownership costs!

Conditions vary from market to market so check with me on current market pricing in our area.  With historically low mortgage rates plus the homebuyer tax credits, this is a great time to be buying.  Call me today for a no-obligation consultation! 

*The idea for this particular post along with some misc statistics were used from an email sent from Guild Mortgage.

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Don’t Be Ashamed. . . Seems like everyone’s doing it

Lack of jobs, divorce, injury and death of a loved one often forces hard working folks into default on their home loans.  Without help, foreclosure looms.  Don’t be ashamed to save your home and the opportunities for homeownership in the future.   There is hope. 

Three options that a homeowner in or nearing default has are 1) Deed in lieu of foreclosure, 2) Loan Modification, and 3) Short Sale.  From experience, the first two options have had a low success rate with the third having the highest.  It’s a mystery as to why this is the case yet feel the banks are a step behind and lack the work force to service those in need within a timely manner. 

You will need the services of an experienced short sale specialist upon deciding that a short sale is needed.  I specialize helping homeowners in need of alternatives to foreclosure.  Call me for no obligation consultation at anytime—869-3469.

1)  A Deed in lieu of foreclosure is a deed instrument in which a mortgagor (i.e. the borrower) conveys all interest in a real property to the mortgagee (i.e. the lender) to satisfy a loan that is in default and avoid foreclosure proceedings.

The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principal advantage to the borrower is that it immediately releases him/her from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he/she would in a formal foreclosure. Another benefit to the borrower is that it hurts their credit less than a foreclosure does. Advantages to a lender include a reduction in the time and cost of a repossession, lower risk of borrower revenge (metal theft and vandalism of the property before sheriff eviction), and additional advantages if the borrower subsequently files for bankruptcy.

Neither the borrower nor the lender is obliged to proceeed with the deed in lieu of foreclosure until a final agreement is reached. 

2)  Loan or Mortgage modification is a process where the terms of a mortgage are modified outside the original terms of the contract agreed to by the lender and borrower (i.e mortgagor and mortgagee). In general, any loan can be modified.

In the normal progression of a mortgage, payments of interest and principal are made until the mortgage is paid in full (or paid-off). Typically, until the mortgage is paid, the lender holds a lien on the property and if the borrower sells the property before the mortgage is paid-off, the unpaid balance of the mortgage is remitted to the lender to release the lien. Generally speaking, any change to the mortgage terms is a modification, but as the term is used it refers to a change in terms based upon either the specific inability of the borrower to remain current on payments as stated in the mortgage, or more generally government mandate to lenders

Mortgages are modified to the benefit of the borrower in one or more of the following ways:   1)Reduction in interest rate, or a change from a floating to a fixed rate, or in how the floating rate is computed, 2)  Reduction in principal, 3)  Reduction in late fees or other penalties, 4)  Lengthening of the loan term, 5)  Capping the monthly payment to a percentage of household income./

The borrower can be current, late, in default, in bankruptcy, or in foreclosure at the time the application for modification is made. The programs available will vary accordingly.

3) A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency. 

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is “doing the other a favor;” a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).

Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This presents an opportunity for “under-water” borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.

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Buying a foreclosed home 101

Don’t bother browsing through the legal filings in your local paper or showing up to courthouse auctions—there is too much risk and most banks will not sell at auction for less than the amount currently owed against it. Instead, contact myself or another Realtor at Trust Realty that can provide a list of homes for sale that are bank owned. Also, you can go directly to www.TrustIdaho.com to search specifically for bank owned property being offered at rock bottom prices.

It’s makes more sense to purchase homes that are being sold directly through the bank since a buyer purchasing homes at foreclosure auctions must have cash on hand at the time of the sale and typically hasn’t had an opportunity to inspect the home appropriately. Also, many homes sold at auction may have additional liens such as a home equity line of credit or a second mortgage that may have fallen under the cracks. If that is the case then the buyer of the auctioned home is responsible for clearing the lien(s).

When a bank takes final possession after foreclosure and lack of a winning bidder at the auction, the entity will clear the home of all liens and encumbrances. When buying a bank owned home, the purchaser has an opportunity to inspect the home and the offer and earnest money put down is contingent upon buyer approval of the inspection. A home purchased directly from the bank can also be financed.

Bank owned homes currently for sale on the public market typically have been sitting vacant for no less than six months and have often been vandalized or stripped of items such as water heaters, oven/ranges, microwaves and even cabinetry. “One mistake a lot of people make is underestimating how much work the home needs and the cost associated with fixing it,” say Rick Sharga of RealtyTrac. To avoid getting stuck with any surprise bills, it is essential to have a certified home inspector provide the true condition of the home. Secondly, it is important to properly estimate the amount of time and money needed to bring the home back to a livable condition.

Be aware, not all banks are selling their inventory (foreclosures) at fire sale prices; some are listed at or around market value. However, most firms offer property at or around 10% under current market value with the hope that a buyer will purchase within a 30-day timeframe. The larger the inventory of foreclosed homes the bank is holding along with the length of time the home has been on the market will determine your chances of nabbing a home drastically under market value.

Determine your offering price by finding out how many days the home has been on the market along with the activity associated with it (it is important for your representation to inquire with the banks representation to find out if there are alternate interested parties). I suggest offering 10% under the banks asking price unless it is found that the bank is highly motivated. You must also consider alternate buyers that may be willing to pay more than you at that time.

Be prepared to wait for a response to your offer when attempting to purchase a bank owned home. While some banks respond w/in 36 hours, others dealing with an enormous backlog can hold up response for as long as three month. While you wait, another party can unfortunately trump your offer with a higher one. With that, it is important to have multiple properties in mind and to get pre-approved for financing prior to making an offer (unless you plan on purchasing with cash). Even if the home of your dreams has gone into pending status prior to you writing an offer for it, be sure to have your representation continually check the status since real estate transactions do fall.

Remember, it is essential to have representation when purchasing bank owned, short sales or fair market homes. Contact me today to discuss the possibilities!

To search the MLS real time Click Here
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Is Buying the Worst House on the Best Street Good Advice?

Thomas Stanley, Ph. D. is back at it again with his newly released book “Stop Acting Rich.” His name should be familiar to you because he is the author of “The Millionaire Next Door” and “The Millionaire Mind.”

I loved his first two books and when I saw his new book, I couldn’t resist buying it. The message that permeates each book listed above is that most people look rich because they live in big homes or drive expensive cars, but when examined closely, they have accumulated very low levels of wealth. In other words, they wear big hats but have no cattle.

For some reason, we seem to measure our success in life by how we compare to others. Is our house bigger than theirs? Is my car nicer than Jim’s down the street? To feel successful, many people fall into the trap of buying things simply to impress others.

One of the main lessons Mr. Stanley makes throughout this book is that the amount of wealth you accumulate in your life correlates directly to the size and value of your home. Here’s a very telling quote from the book:

“If you examine homes by value from the lowest to the highest, you would find that as the value of the homes increases, so does the proportion of people who are living well above their means.”

The more expensive your home, the more you’ll be forced to spend on home repairs, maintenance and upkeep. This is hard enough, before you factor in what you’ll have to spend to keep up with your neighbors. If you buy a high-end home, you’ll end up sending your kids to expensive private schools and you’ll be forced to buy them all of the expensive clothes and gadgets the other kids have in the neighborhood.

The reason this happens is because it’s hard to avoid copying what you see every day. You won’t want to look like some schmuck who drives a rusty old car and sends his kids to the public schools in out-of-style clothes from Kmart.

The trick is to live in a nice home in a nice neighborhood that allows you to live below your means. It’s better to be a high earner in an average neighborhood than it is to be a low earner in a high-end neighborhood. Remember the old saying about “buying the worst house on the best street?” Well, as it turns out, this “best street” might actually lead you to the poor house.

Most of the millionaires profiled by Mr. Stanley live on less than 80 percent of their income. They are frugal and focus their attention on investment rather than consumption. Their goal is to convert income into wealth, which is significantly different than people who act rich.

A psychology study by Ryan Howell, which was written about in the book, found that having “things” isn’t what usually makes us happy. If “things” do, it’s short-lived happiness.

Instead, what makes us happy are life experiences. The good news is that life experiences are free.

**brought to you by Rob Minton

Keeping Your Home Safe from Water Damage

Pay attention to your bill: Major fluctuations in water usage from one month to the next could mean that you have a problem. Taking just a few minutes to look at your bill each month could make a big difference in your wallet!

Inspect appliances: While much of your home’s plumbing can be hidden behind walls and cabinets, most of your appliances that use water can be easily inspected for potential leaks. Each month, take the time to inspect areas around your water heater, dishwasher, refrigerator, washing machine, sinks, and toilets. If any hoses or seals appear old or damaged, replace them.

Also, inspect and repair obvious caulking and tile grout damage. It’s a small price to pay for what could be expensive repairs later.

Inspect the sewer line: Clear away build-up and roots from around your sewer line. Obstructions in this area could create major plumbing problems in the future.

Check your water pressure annually: This is easier than it sounds. Simply purchase a pressure gauge and attach it to the hose faucet. Normal results should range from 45 to 65 pounds per square inch (psi). A reading above 65 psi is considered high and could lead to problems down the line.

Find and fix leaks quickly: Make a habit of checking the main fixtures regularly so that when something out of the ordinary occurs you will notice it and take action immediately. Sometimes, however, slow water leaks aren’t very obvious. A great way to discover hidden leaks is to look for stains in areas where water is often used. For example, if you see even small stains on the cabinet floors beneath the sink in the kitchen or bathrooms, you could have a problem. Warm spots in the floor or tiles could also be an indication of hidden water damage.

Idaho slips out of top 5 for the most foreclosures

Idaho has slipped out of the top five for the most foreclosures, but expectations remain that the state will see a continue in its numbers.

RealtyTrac Inc., an online marketplace for foreclosure properties, Thursday said foreclosure filings increased 15% in January, compared to the previous year, but declined 10% from the previous month. Nevada, Arizona, California, and Florida posted top state foreclosure rates during the month. Further, RealtyTrac cautioned that the numbers may increase over the next few months.

While Financial News services writes The post-boom states of California, Nevada, Arizona and Florida still contribute more than half of filings, but Utah, Idaho and Illinois are starting to see foreclosures surge.

Only last week, it was reported Canyon County’s home defaults had dropped off in the last few months of 2009, but they came back with a vengeance in the first month of 2010.

The county’s foreclosures hit a high in January, rising from 214 filed in December to 365 filed in January for a total increase of 70.5 percent, according to IdahoDataProviders.com.

“What this all means is that you should brace yourself for a double dip in the housing market in 2010,” Charlie Nate, president of the foreclosure-tracking company, said in a release. “Look for local prices to still fall another 7% to 10% starting in the next few months. A bottom to the housing market and the beginning of a real recovery is unfortunately still at least one year away.”

Ada County’s number of foreclosures filed dropped 8 percent to 408 in January this year, a 19 percent increase from January 2009.

Short sales dropped 1.3 percent in the two counties in January, a lull which Nate calls the “calm before the storm.” He expects a new flood of short sales this year caused primarily by the U.S. Treasury Department’s Home Affordable Foreclosure Alternatives program, which must be implemented by April 5, 2010. The program requires each distressed property to first be considered for a loan modification, and then evaluated for a short sale or deed in lieu before a foreclosure can be initiated.

In its January 2010 U.S. Foreclosure Market Report, RealtyTrac stated foreclosure filings, which include default notices, scheduled auctions and bank repossessions, were reported on 315,716 U.S. properties during the month. The report also showed that one in every 409 U.S. housing units received a foreclosure filing in January.

Real Estate Owned, or REO, activity nationwide increased 31percent from January 2009, but was down 5 percent from the previous month. Default notices rose 4percent from last year, but dropped 12percent from the previous month. Scheduled foreclosure auctions were up 15percent from last year and down 11 percent from last month.

Despite an year-over-year decrease of about 18 percent in foreclosure activity, Nevada’s foreclosure rate remained highest among the states for the 37th straight month. One in every 95 Nevada housing units received a foreclosure filing during the month, which is more than four times the national average.

Arizona’s foreclosure rate was the second highest among the states in January, owing to a 4 percent month-over-month increase in foreclosure activity. One in every 129 Arizona housing units received a foreclosure filing during the month, the seller of default data said.

In California and Florida, foreclosure activity decreased by double-digit percentages from the previous month, and the two states registered nearly identical foreclosure rates with one in every 187 housing units having received a foreclosure filing.

With one in every 231 housing units receiving a foreclosure filing, Utah registered the nation’s fifth highest state foreclosure rate, although foreclosure activity declined nearly 12% month-over-month.

Other states with foreclosure rates among the nation’s 10 highest were Idaho, Michigan, Illinois, Oregon and Georgia.

Further, RealtyTrac said California, Florida and Arizona posted the three highest state totals in terms of properties receiving foreclosure filings in January. These three states together accounted for more than 44 percent of the national total.

In California, total foreclosure filings were 71,817 and Florida reported 47,069 filings. In Arozona, 21,048 properties received foreclosure filings in January.

**IBR

Short Sales 101

Brushing up on your short sale knowledge is essential in this market since nearly 50% if all homes currently for sale are distressed (either short sale or bank owned).  Bank owned homes can typically be purchased within 30 days since the home has been foreclosed upon and title has been transferred to the bank.  Purchasing a bank owned property is very similar to purchasing from a normal seller yet there are much more disclosures involved.  A short sale means that the current owner is requesting the bank to take less than what is owed in order to avoid foreclosure—short the bank on what is owed is a way to look at it.  This requires approval from the lending institution. 

 The process:

 1)     To be a short sale, the homeowner usually is in default or in a position to be in default (divorce, loss of job, injury, etc) The seller most likely has tried to get their loan modified yet to no avail.  Next step is to place the home on the market as a short sale.

2)     The agent marketing the property will advertise to the public as a short sale.  Short sales are typically priced very aggressively yet it is important to remember that the bank determines the final price. 

3)     An offer is submitted to the seller and the seller accepts it in writing (unless the seller feels that the offer would not be accepted by the bank) 

4)     The seller will compile a short sale package for submittal to the lender (or lenders) that includes the executed offer, seller financial statements, bank authorization letters, previous 2 years taxes, a hardship letter and listing agreement. 

5)     Once the package is submitted to the lender the buyer and seller must wait for approval.  The lender will typically request an appraisal to be completed firstly in order to determine value.  Second, they will compare proceeds of the short sale to the proceeds received if the home is foreclosed upon in order to determine whether or not the sale can be approved. Banks such as B of A and Chase can take as long as 4 months for a response.  Patience is a virtue!

6)     The bank approves, rejects or counters the offer.  If there is acceptances of your offer then expect to close w/in 30 days after the approval is obtained. 

 It is important for a buyer who is pursuing a short sale to keep all options open.  Most offers submitted on a short sale can be cancelled at any time prior to bank approval by both the buyer or the seller.  With that, I suggest continuing to look for homes while the offer is working its way through the approval process.  More often than not, an alternate home will come onto the market that fits the buyer’s needs and IS NOT a short sale. 

 The lending institutions are working in association with the US Government to streamline short sales during the year of 2010 and beyond in order to decrease approval timeframes that in turn helps fewer homes go into foreclosure.  Personally, I have noticed that banks are already responding to short sale offers more rapidly and hope that the trend continues.

BUYING A HOME 101

Buying a home has many components associated with the process. Although every transaction is different, below you will find steps linked with most real estate purchases.

1. Hire a buyers agent. A crucial step since it is essential to have an experienced Broker protected your interests.  Using the services of a buyer’s agent in the State of Idaho is free to the buyer in 99% of all real estate transaction.  Choose wisely!
2. Get pre-qualified.  A pre-qualification will provide you and your agent essential knowledge prior to step 3.  Visit your local bank or mortgage broker.  Or, ask me for a list of home loan specialists that have provided top-notch service along with lower fees. 
3. Start browsing for homes online—if you haven’t already. Go to www.TrustIdaho.com to view property descriptions, interior photos, virtual tours, community information, school ratings and much more.
4. View property.  By now you and your agent have probably have a list of homes to view.  Rely on your agent to schedule appointments and accompany you to all viewings.
5. Write a purchase and sale agreement. Now that you’ve found the home you would like, it is time to write an offer.  Consult with your agent for strategies.  Things to take into consideration are the following:  how many days on the market?  Short Sale or bank owned?  How much interest is there currently on the property? (your agent will find this out for you)   
6. Negotiate.  An essential element of the Broker’s duties.  Hiring an experienced real estate broker that has been involved with hundreds of transactions will have the negotiation skills that will save you time and money.  
7. Earnest money deposited.  Usually after the offer is accepted your earnest money will be deposited in a non-interest bearing trust account.  Your earnest money is credited to you at closing and can be returned if you are unable to obtain necessary financing or have an unsatisfactory inspection or appraisal. 
8. Open escrow or submit your offer to the title company agreed to on the purchase and sale agreement. Your buyers agent will coordinate this step for you and will review the title policy ensuring that you have clean title at time of closing.
9. Order an appraisal. Your lender will typically coordinate the ordering of the appraisal.  The purpose of the appraisal is to ensure value and safety for you and the firm providing financing. 
10. Review and execute all necessary disclosures.  Types of disclosure may include a Seller’s Property Disclosure Form, A Lead Based Paint Disclosure, FHA Disclosures, Lender Disclosures—so on and so forth.  Your agent will help make sense of it all.
11. Get a home inspection—even if the home is brand new. One of the most important aspects when purchasing a home.  Your inspector’s job is to go over your future investment with a fine-toothed comb.  He or she will typically provide a report of the findings.  Ask your agent for a list of quality inspectors if you don’t already have one.   If there are problems, you have the right to request that the seller make necessary repairs.   
12. Removal of all other contingencies. These contingencies could sewer and well inspections along with other miscellaneous contingencies—depending upon the type of property being purchased. 
13. Get Homeowners insurance. Provide to your lender proof of insurance so that it can be reviewed and approved prior to closing.  It is essential to have proper insurance yet remember to insure the structure, not the land.  I suggest shopping for the best insurance rate.
14. Conduct a final walk-through. Done to ensure that any repairs requested were completed along with making certain there was no damage to the property after the inspection was completed.
15. Sign closing documentation. Typically done at a title company.  Your lender and agent will most likely be present to walk you through the documentation.  
16. Deposit funds with the title company. Depending upon the type of financing you choose to use, a check for your down payment and closing costs may be required unless you are taking advantage of the first time homebuyer tax credit.  The title company will verify funds and also request funds from your lender.  
17. Get keys. Within 24 hours necessary monies will be transferred and the property will be recorded in your name.  At this time the home is officially yours. 

Make sure to keep in touch with your agent.  You may have questions after the fact or others that could use the services of a knowledgable real estate broker. Our  job doesn’t end at closing.

Canyon County defaults rise 70 percent in January

Canyon County’s home defaults had dropped off in the last few months of 2009, but they came back with a vengeance in the first month of 2010.

The county’s foreclosures hit a high in January, rising from 214 filed in December to 365 filed in January for a total increase of 70.5 percent, according to IdahoDataProviders.com.

“What this all means is that you should brace yourself for a double dip in the housing market in 2010,” Charlie Nate, president of the foreclosure-tracking company, said in a release. “Look for local prices to still fall another 7% to 10% starting in the next few months. A bottom to the housing market and the beginning of a real recovery is unfortunately still at least one year away.”

Ada County’s number of foreclosures filed dropped 8 percent to 408 in January this year, a 19 percent increase from January 2009.

Short sales dropped 1.3 percent in the two counties in January, a lull which Nate calls the “calm before the storm.” He expects a new flood of short sales this year caused primarily by the U.S. Treasury Department’s Home Affordable Foreclosure Alternatives program, which must be implemented by April 5, 2010. The program requires each distressed property to first be considered for a loan modification, and then evaluated for a short sale or deed in lieu before a foreclosure can be initiated.

**IBR

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