Avoiding Foreclosure

November 12, 2008

There are options to a foreclosure other than just walking away like Forbearance, Loan Modification, Short Sale, etc.

Click on the following to read more…Avoiding Foreclosure

Posted by Rosab | Filed Under Mortgage News, Real Estate Information 

Tax Credit Unveiled - or is it really just a loan to the consumer?

November 12, 2008

I’m sure you’ve heard about it by now, but do you really understand the new $7,500 first-time homebuyer income tax credit and how it works? I mean in-depth and practically? And do you also know how to make this new piece of legislation work for you? As long as your clients legitimately understand what they are getting themselves into, you can use this “credit” as a powerful tool to increase your business.

Before proceeding, I must clarify a few things. It makes me a little crazy every time I hear or use the term “credit.” You see, the entire initiative is administered by the IRS code, and “credit” is IRS terminology. It means that when qualifying individuals file their federal income tax returns, they get an actual income tax “credit” for 10% of the price of the home up to a maximum of $7,500. It’s only $7,500 when the home’s price is $75,000 or higher.

Let’s assume a qualifying couple purchase a $100,000 home between April 9, 2008 and June 30, 2009, and upon filing their federal tax returns are due for a small refund, say $300. Their $7,500 “credit” is tacked right onto the $300, and they end up with a pretty nice $7,800 income tax refund check.

Recapture

But that’s not the end of the story. This “credit” from the IRS must be “recaptured” over 15 years. Recapture doesn’t start until two years later, with payback at 1/15th of the full amount per year. Starting two years after their very nice check, Mr. and Mrs. Couple’s income tax burden is increased by 1/15th of $7,500, or $500 per year until such time that the IRS is paid back.

Now, doesn’t that sound like a loan to you? Agreed, the terms of the loan are fantabulous, with no interest due and a full 15 years and an additional two-year grace period to pay back. But in my book, a loan is a loan is a loan, which isn’t the same thing as a “credit.” And it’s a loan from the IRS, to boot!

Moreover, the (loan) recapture is accelerated if the home ceases to become the taxpayers’ primary residence or if the home is sold. The entire balance is due in the tax year of these occurrences. If the home is sold to a non-relative, however, the maximum recapture is limited to the gain on the home.

It is nice to know that the credit is forgiven for those homes sold at a loss. But as with everything that I cover here, always consult a tax accountant.

Who Qualifies and Other Facts

Other aspects of the income tax credit that I did not yet mention include that it applies to first-time homebuyers only. Under the law it is defined as having no ownership interest in a principal residence in the three years prior to the acquisition date of new home. If the borrower constructs their own home, count back from closing date or date of occupancy.

Ineligible borrowers include non-resident aliens; buyers who finance their home with tax-exempt mortgage revenue bond programs, where the home is purchased from a person who is related to the homebuyer, and a married person purchasing as an individual if the spouse is ineligible due to prior homeownership.

The credit is phased out for individuals with a modified adjusted gross income of $75,000 to $95,000, or joint filers with a modified AGI of $150,000 to $170,000.

If home is purchased in 2009 (prior to June 1, 2009), the borrower may elect to claim the credit on their 2008 tax return, and may amend 2008 returns if already filed.

Before I move on, I have barely scraped the surface of what you need to know, and believe it’s wise to read up further before you hit the streets. A couple of excellent resources are the National Homebuilder’s Association at www.federalhousingtaxcredit.com/faq.php or the August issue of my own e-zine, www.MortgageCurrentcy.com. Be wary of your sources, there’s a lot of misinformation out there. And above all else, remember that this is IRS tax code. Always defer to a tax accountant and do not offer tax advice.

Borrowers Short Funds

It’s time to make this credit/loan work for you. Think about using one of the following to get those difficult-to-come-up-with assets for those clients who are short funds:

* Scenario No. 1: the homebuyer borrows from their parents for downpayment, repays them with tax refund. With the Federal Housing Administration program, a loan from one’s parents is fully acceptable.

* Scenario No. 2: The homebuyer borrows from a 401(k) or other retirement plan. They repay in full with the tax refund. Neither Freddie (SS Guide Ch 37.16), nor Fannie (Selling Guide X. 603.15), nor FHA (4155.1 REV 5, 2-10, D.) require the monthly payment to be included in the debt ratio.

* Scenario No. 3: After closing, the borrower changes his/her W-4 withholding to recoup the credit immediately by decreasing the federal tax amount deducted from their paycheck. This can be very helpful to those who know they’ll be squeezed for money after closing.

* Scenario No. 4: Think ahead a few months to 2009. Immediately after the qualified homebuyer purchases, he or she goes to their tax preparer, files 2008 tax returns, and the credit is in his or her hands within minutes.

Realtor/Builder Business

This can absolutely help your Realtors and homebuilders increase their business. Create a handout with information that they need to know. (For a pre-prepared handout that you can personalize, visit Mortgage Talking Points at www.mortgagecurrentcy.com.) You’ll be surprised by how little most real estate agents and builders know about the credit.

Take it to the next level and bring the informational flyer with you to open houses. Take the time to put the property address of the listed house along with the Realtor information on the handout. Not only do you look good when the Realtor looks good, the flyer can be left at the home for future walkthroughs. It’s a great sales tool for the Realtor and the seller, so it’s likely to be left in the home. And it’s got your name and number on it when someone needs a question answered.

Mine Your Past Clients

This income tax credit is retroactive to April 9, 2008, including homebuyers who have already closed. It’s a great reason to stay in contact with prior clients and let them know that the credit exists, that they may qualify, and to talk to their accountant. And by the way, do they know a friend or family member who might benefit from the tax credit that you can help?

First-Time Homebuyer Classes

Create yourself a simple PowerPoint presentation for new homebuyers. Team up with an accountant, if possible, and market the class based on the tax credit. I’m sure the many accountants know clientele who may be very interested. Heck, team up with a Realtor and further increase your audience.

Don’t make it complicated, and please, again, put disclaimers on everything.

Leslie Petersen’s Disclaimer

I am not a tax accountant. I am not an attorney. I cannot offer legal or tax advice. I did spend an enormous amount of time researching and investigating the tax credit/loan that I’m covering today, but I do not represent the IRS. I cannot offer guarantees as to the accuracy of anything represented here.

To Your Success

Having said that, I legitimately want to see you succeed at what you are doing. I’ve barely scratched the surface. As mortgage brokers, you must be educated, and to thrive in this business, you must also be educators. The public knows little to nothing about the first-time homebuyer income tax credit. It’s new and thrilling information, and you can be their resource.

The first-time homebuyer income tax credit/loan is a powerful marketing tool and the window of opportunity is narrow. Use your expertise to attract new clients. Whether or not the credit/loan is right for them, you’ve still established new relationships and future business.

Leslie Petersen is a mortgage guideline expert. With over 30 years experience in mortgage lending, she writes an online newsletter, www.mortgagecurrentcy.com, on the changes in Fannie/Freddie, FHA, VA and other regulatory agencies, but with a twist. For originators, underwriters and managers, she also interprets them in plain English and shows them how to make the rules and changes work for them and get more of their loans approved. She can be contacted at leslie@MortgageCurrentcy.com.

Posted by Rosab | Filed Under Mortgage News, Real Estate Information 

Housing Real Estate Markets Most Likely To Rebound - Seattle is #1

November 6, 2008

If you’re a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest–and which will likely remain weak. The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.
The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don’t have a glut of condos or office space.These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).
Seattle is “a diversified market, has a good base of business and is becoming a 24-hour city,” says Stephen Blank, senior resident fellow, finance, of the Urban Land Institute. “It’s going to be in a good position to come back.”
Although the city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, Boeing and Microsoft are still relatively strong. Apartment vacancies are low and there aren’t too many new buildings going up, meaning the market won’t be oversupplied. The same is true in the retail space.

San Francisco comes in second with a 6.12. The City by the Bay learned from the tech crash of 2001 not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco’s port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.
Washington, D.C., New York and Los Angeles round out the top five.
Of course, there’s no guarantee that an improved commercial market will lead to an improved home market. However, investors have a better chance of seeing home prices rise in fundamentally strong markets like Seattle than in struggling cities like Detroit.
It landed at the bottom of the list, scoring a 2.24. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.
New Orleans also lands near the bottom with a score of 3.33. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.
What’s happening to housing in your area? Weigh in. Post your thoughts in the Reader Comments section below.
The other cities at the bottom of the list–Columbus, Ohio, Milwaukee, Wis., and Cleveland–suffer from dying industries and lack of tourist appeal.
Recent attempts to turn downtown Milwaukee into a thriving 24-hour city haven’t been enough to protect it from the coming downturn. Increasingly picky investors are expected to favor higher-quality port cities over Midwest towns. And while Columbus has the potential to become a major shipping hub for goods traveling cross-country, that revitalization may have to wait for a stronger economy and a government focused on improving the nation’s roads. For now, prospects are dim.

 

Dorothy Pomerantz 10.29.08, 4:00 PM ET Forbes Magazine

Posted by Rosab | Filed Under Mortgage News, Real Estate Information 

Get Rid of “Buyer’s Block”

October 18, 2008

REThink Real EstateBy Tara-Nicholle Nelson, Thursday, August 28, 2008. Inman NewsQ: I have always wanted to own my own home. I have been saving money for five years toward a down payment and I have worked hard to maintain excellent credit, with the idea that I would buy a home when I got married. I got married last year, and my husband and I together can well afford to buy a nice home in our area. Part of the time, we’re excited about buying because it seems like prices are really good right now. The other part of the time, though, we watch the news and it seems like the whole world is falling apart. Now we’re sort of stuck — we’re not sure what to do.A: Real estate decision-making has always been one of the most critical exercises that a household must undertake. Home ownership impacts not only your emotional well-being and lifestyle on a very large scale, but also your family’s personal financial wellness, both monthly and lifelong. A generation ago, people treated decisions such as the one you are currently facing with a deliberateness and gravity appropriate to the importance of the subject matter, but over the past decade or so — not so much. The recent foreclosure crisis, in addition to creating opportunities for buyers, has also had the silver lining of creating a national-level consciousness of what can happen when real estate decisions are not made with sufficient information, long-term lifestyle and financing planning, or attention to detail. You, like many smart home buyers, are doing the right thing by trying to educate yourself about the home-buying process and the real estate market before you jump in. The problem is that because real estate is such a hot topic in the media right now, the volume of information to sort through is totally overwhelming, and it is difficult to impossible to know how to sort the wheat from the chaff, much less to know how to make real use of the real estate information out there to improve your own personal decision-making.Mindset ManagementYou don’t have to be a conspiracy theorist to know that the mainstream media is in the business of getting you to keep watching the news, reading the paper, etc., and not to provide you with real estate advice. In fact, most of the TV news commentators I see doling out real estate dos and don’ts are not actually real estate professionals, with noteworthy exceptions like Barbara Corcoran. Unfortunately, studies have shown that we humans are more apt to stay interested in information that provokes fear, rather than the warm and fuzzy. The alarming headlines you’ve seen for the last two years have served their purpose of keeping you hooked in, but may also have infected you with a dream-zapping syndrome I call “buyer’s block” (kinda like writer’s block — you get the picture).Let me just say this: Real estate is an asset class. We’re talking about money and buildings here, not your ability to obtain food or basic shelter from the rain. So, ditch the fear — it is a totally unproductive emotion, and even causes people to make worse decisions than they would have if they weren’t so afraid. In fact, what we fear we often create: The more petrified you are that you’ll end up in foreclosure, the more your fear will interfere with your decision-making, making foreclosure more likely than it otherwise would have been. To get rid of the fear, just get clear on the fact that bad real estate decisions can be a huge downer, but they won’t kill you. So rather than approaching this home-buying experience from a place of fear and paralysis, approach it as a project. Your task is simply to gather the specific information you need to equip yourself to make the right decisions throughout your home-buying process, not to take in and sort out every real estate headline under the sun. No one has the mental bandwidth to perform such a feat, and it is simply not necessary to do so to make smart real estate decisions. Keep in mind that there is a flip side to every story you see reported in the real estate news. While headlines have been screaming about how bad the market is, I, as a buyer’s broker, have been seeing clients who never would have been able to afford a home two years ago break into the market, and start accessing the tax and other advantages of home ownership. Our country’s most brilliant investor, Warren Buffett, advised an audience to “look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” Decide right now not to participate in the folly of buyer’s block, and to take on the project of figuring out how you can benefit from the current market “crisis,” assuming that your family is currently in a good place — financially and lifestylewise — to be purchasing a home.Need-to-KnowsReal estate markets, values, negotiating practices and transactional procedures are very local — many real estate news reports that confuse people are not. Unless you live in New York City, it is not a good idea to base your personal real estate decision-making 100 percent on the information provided from an NYC-based expert on the national news. For example, last quarter, both home values and the number of purchase transactions were down severely, nationwide. However, in San Francisco, there was a dramatic 22 percent increase in purchase transactions from March to April, and a 3 percent increase in values. If you looked closer and broke it down by ZIP code, some ZIP codes showed major appreciation, while others were negative.You see, you simply cannot know what the market is like in your state, county, city or even neighborhood unless and until you obtain specific information from a local real estate professional. Similarly, the very brief amount of time allotted to TV and radio experts to dole out advice makes it difficult for them to give an appropriate amount of nuance in the information they present. So much of whether and when is the right time to buy is based on your personal finances, lifestyle and life plans, and no one in the news can analyze that for you. There is no blanket advice about whether to buy a home at any given time that will be right for every single individual or family. For example, lots of folks have been heeding national commentators’ blanket admonitions not to buy. In addition to the fact that in some areas, this will unfortunately result in currently qualified buyers waiting until a seller’s market to buy, there are high-income prospective buyers who are forgoing tens of thousands of dollars in much-needed tax deductions based on this impersonal and inapplicable advice. Bottom line: A decision of this magnitude truly warrants a custom analysis of your personal finances and family’s needs, by a local professional. It may even make sense to speak with several different types of professionals: a Realtor, a mortgage professional, a CPA, a financial planner, etc., depending on your situation, to determine whether now is the right time for you to buy, and how to harness current market conditions to make the best buy possible.Action Plan

  • Decide to make your decision whether to buy or sell based on your lifestyle and life plans. If you want to buy and are qualified to do so, don’t cheat yourself out of moving forward and obtaining the professional advice you deserve because of what you see on the news. However, you should get educated about your local market and make decisions about how to best execute your plan of buying in a way that takes advantage of current conditions.
  • Get your own team of professional advisors, by referral. At the very least, talk with a CPA about the tax implications of home ownership; a mortgage broker regarding the mortgage rates, terms and price you can qualify for; and a Realtor about current, local market conditions and what sort of home you can expect to find at your price range.
  • Go on a selective information diet. The recent book, “The Four Hour Work-Week,” sets out a very extreme version, but try to at least limit your intake of real estate information — which can be habit-forming! — to questions you need answered about your home-buying project.
  • Ask your professionals where they get their real estate news/information.
  • Build a repertoire of reliable sources of unbiased real estate information, rather than opinion. Then, stay very answer-oriented when you consult these sources. Don’t look for news articles to tell you whether to buy or when — look for answers to concrete questions, like how long the average home in your area is staying on the market, common concessions currently being offered by sellers, etc.

As you go through this process of preparing to buy a home, use the real estate news to find strategies and solutions to questions and obstacles that come up, rather than allowing fear to shatter your life goal of home ownership.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying

Posted by Rosab | Filed Under Real Estate Information 

Best Places to Retire…in our own backyard…Sequim, WA

September 26, 2008

Check out Money magazines “Best Places to Retire!.”  Sequim, Wa made the top 6 amount St. Joseph, MI - Durango, CO - Marble Falls, TX - Beaufort, S.C. - Dundein, FL.

http://money.cnn.com/galleries/2008/moneymag/0809/gallery.bestplaces_retire.moneymag/index.html

Posted by Rosab | Filed Under Real Estate Information 

Seattle is One of the Best Cities to Buy a Foreclosed Home!

June 28, 2008

Forbes magazine has named Seattle # 8 as one of their good investment cities to buy foreclosed homes.  (Charlotte, N.C. was the best place in the country.)

 The magazine factored in how quickly they thought the community was likely to recover from the current housing slump.

this is what it said about Seattle, “Long hailed as the exception to the national housing downturn, Seattle’s growth has steadied, though it remains a good market. Its inventory rates are the lowest of the country’s 50 largest cities, and its foreclosure rate of 0.47% is so low, it’s negligible in the context of the overall market.”

Read the whole report at: http://www.forbes.com/2008/03/19/homes-foreclosure-properties-forbeslife-cx_mw_0319realestate.html

Posted by Rosab | Filed Under Real Estate Information 

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June 18, 2008

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Check out commute before you buy

May 12, 2008

By Elizabeth Razzi

The Washington Post

WASHINGTON, D.C. — When you’re stuck in traffic burning $3+-a-gallon gasoline to creep along at walking speed, it offers time to think. Would it be easier if I left home earlier? Would I be better off riding a train? How bad will my commute be in five years? Would life be easier and cheaper if I found a job some place where the roads aren’t as crowded and the homes aren’t so expensive?

A new Web-based tool developed by the Center for Neighborhood Technology (CNT), a Chicago-based urban-development think tank, can help put facts behind those daydreams.

The CNT developed a Web site, at htaindex.cnt.org, that takes into account household expenditures for transportation, along with home prices, to estimate whether a home is truly affordable for households with moderate incomes.

Academics at the CNT argue that a home isn’t really affordable if its location forces a household to devote an excessive amount of the family budget to transportation.

How much is excessive? They say 18 percent of the area’s median pretax income is typical; lowering that to 15 percent would be better. That’s on top of the 30 percent of pretax income that they estimate as an affordable budget for a home’s mortgage principal and interest plus property taxes and homeowners’ insurance, which lenders call PITI.

The Web site is a data fest even by wonk standards. It’s a map-based tool offering information on housing and transportation costs for 52 metropolitan areas.

You can zoom in on individual neighborhoods and pull up U.S. Census information on the percentage of neighborhood residents who use mass transit, their average monthly spending on transportation, the number of wage-earners and cars per household, and other data.

The Web site also displays nearby subway and commuter rail lines and stations.

Other housing-affordability measures ignore the need to travel, CNT President Scott Bernstein said. Travel consists of more than your daily commute. “Only 20 percent of the trips we take in America are to work,” Bernstein said. All those other little trips, runs to the grocery, Little League games and the dry cleaner’s, actually make up the bulk of our travel.

The site has some major drawbacks. Although it was launched nationwide only last week, the database uses 2000 Census data, which are growing stale. Housing and transportation expenses have soared since the government collected that information.

But you can still use the site to compare one neighborhood to another. Then you can develop your own price estimates to help gauge whether a home will truly be affordable once you add in the transportation expenses.

Always do a trial commute during rush hour before you make an offer on a home. Time the ride and estimate your gas consumption.

As you size up neighborhoods, take the time to figure out where you will worship, buy groceries, go to the movies. Is bus or rail service available, even if only as a backup for days when your car is in the shop?

Copyright © 2008 The Seattle Times Company

Posted by Rosab | Filed Under Real Estate Information