Update-Short Sales and “Walkability Scores”

Here are some quick notes on Short  Sales. If you are considering selling your home as a short sale- here is a list of things to consider  and to prepare for:

1. Talk with a tax advisor/attorney. In many cases- the forgiven amount is a taxable debt- therefore you will want to know the ins and outs of the tax laws pertaining to short sales.

2. Talk with a financial advisory/attorney. In many cases the forgiven amount is seen as a deficiency and the bank may hold you liable. They may ask for a promissory note for the difference, or seek a deficiency judgment. Short sale laws ar changing- so please make sure to talk with your real estate agent to discuss the latest and greatest.

Next- I wanted to post a note here about “walkability scores”  My friend and fellow real estate agent in Nevada-Brian  Grady- included some info in his latest newsletter. I hadn’t heard the term- so in an interest to keep up with the times- I did some searching.

A walk score is a ranking for neighborhoods as to how accessible stores, shopping, restaurants, parks, bus stops, etc are to a home/neighborhood. My score for my home is a 46- which apparently is pretty average. To put it into perspective San Francisco is the most walkable city with a ranking average of 86- Chinatown has a walkability score of 99.

In addition it has been found that homes with higher than average walkability scores commanded a premium of $4,000 to $34,000 over homes with average scores. (this study was for homes in typical metropolitan areas)

So there- learn something new everyday.

As always- I hope this info is useful- and let me know if I can be of any service to you in your real estate needs.

Lisa

Real Estate Agents and Clients

I read an article a few days ago online in regards to things your- or any- real estate agent doesn’t want you to know about themselves or the profession. This prompted me to think about what the public doesn’t know about real estate agents and what agents would like the public to know.

First and foremost this is a job/career/profession. And just like any job/career/profession a real estate agent is working in exchange for a paycheck. This may sound callous but it is the truth. There is the impression that real estate agents are money hungry salespeople with no scruples. In fact agents just want to make a paycheck for the work that is done. I don’t know of a single person who goes to work each day but doesn’t really care if they get paid or not.

This does bring up my next point- some agents have more ethics and scruples than others. It is up to the consumer (the buyer, the seller) to determine which agent they want to put their trust in, and who they want working for them. There are many agents to choose from (over 140,000 licensees in AZ)- find one that fits your needs, and with whom you can trust with your personal business. The relationship between client and agent is just that – a relationship. Make sure you like the person and that they like you. It makes the sales process much more enjoyable for all parties.

Work with one agent, and one agent only per transaction. If you are person in the market to buy a home- choose an agent to work with- but don’t work with 5 different agents. All agents have access to the same information. If the agent you have chosen isn’t providing you with all the information you need- tell them. Ask questions, explain what you are looking to receive. If you find that you don’t have the relationship you desire with that agent- tell them that you aren’t satisfied and want to work with a different agent. Believe me- agents will be much more receptive to the truth- than if they find out that all the work they have done is only adding to the work that 5 other agents have done for you.

The real estate agent has to uphold fiduciary duties to the client- and one of those is loyalty. The agent simply wants the loyalty to go both ways.

Communication is key- just like any other relationship.

Finally- as I mentioned earlier- there are over 140,000 people with a real estate license in Arizona. Granted – only about 50,000 are active- meaning they are legally allowed to sell real estate. But- this just goes to show that it doesn’t take a rocket scientist to get your real estate license. With that being said- the consumer will need to verify that the agent with whom they wish to work has the experience, knowledge and ability to meet the needs of the consumer. Whether it is selling a short sale, finding a home as a first time buyer, relocating to the area, or buying an investment property- make sure the agent knows how to get the job done. Just because you have a distant cousin with a real estate license- does not mean he/she is equipped to sell your short sale or guide you thru the process. You wouldn’t go to a dentist ,doctor or lawyer  just because they were family- why should that be the only requirement for your real estate agent?

Use a professional and you will get professional results. Bottom line.

Home Affordable Foreclosure Alternative Program

Taking effect on April 5th- the US Treasury department will put into effect the HAFA program. This program is to help struggling home owners to streamline the short sale or Deed in Lieu of Foreclosure processs. This program provides incentives to mortgage services, bank investors and to the borrower for relocation assistance.

Currently- depending on the bank who has to approve the short sale- an approval can take up to 8 months. During the time- the potential buyer may have moved on to another home, forcing the property back on the market.

The HAFA program has specific timeframes and will speed up the short sale process.  In order to take advantage of the HAFA program, the property and seller must have gone thru the HAMP (a loan modification program), have been found ineligible. The seller must wait 30 days and then the bank will approve the short sale and determine the price at which the home can be sold. Once the home is approved- it can be released on to the market as a HAFA approved short sale- and once a purchase contract is received- the bank then has 14 days to sign off on the contract and allow the sale.

The other benefit to this program is that the seller is released from future liability for the mortgage debt. (no promissory notes, cash contributions or deficiancy judgements will be issues by the lien holder)

While this program has it’s benefits- both to the seller and the potential buyer- the banks will now be determing at what price the home can be sold. This takes away the negotiating power of the potential buyer for these homes.

If you have any questions on this program- how to qualify, the banks/loan servicers participating in this program, etc- please contact me directly. (lisa@landdgroup.com)

As always- I welcome your comments and thoughts!

New Year- New Real Estate Market

As we look forward to 2010- we need to be aware of the changes that will be imposed in the Real Estate market with the new year. The changes we can prepare for (as I still have yet to receive my crystal ball) are in the mortgage industry. Here is what we can predict on interest rates- and how:

During their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it “just right.”

Along with this decision, the Fed emphasized and reminded that their MBS (Mortgage Backed Security) purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let’s look at the numbers from last week to get an idea. The Fed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down – it’s Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed’s purchases, home loan rates will naturally be likely to increase.

Keep an eye on interest rates- as we near the end of March- rates will increase. Unfortunately we can predict how quickly or how high they will go up- but we do know an increase will occur.

On the good news front- it has been made mandatory that all mortgage brokers and loan officers get licensed. Currently there are no regulations on who can be a mortgage broker or loan officer. Now- all current workers in the industry must get licensed by July 1, 2010. All newcomers to the industry will have to undergo training and licensing. As there currently exists with real estate agents- there will be  a system set up for mortgage brokers that allows you to research who you are working with to find out about any formal complaints filed, length in the industry, etc.

Have a Happy New Year- and a prosperous 2010!

5 Rules for Home Buying

There are 5 general rules to buying a home – at least as far as I am concerned. If you follow these rules- you can enjoy a successful home buying experience!

1. Save for a down payment: I understand that you do not have to have a down payment for VA loans and only 3.5% for FHA loans. However- having a 10% or higher down payment can improve your interest rates, lower your monthly payments and provide a buffer for in market downturns. Also- closing costs (fees charged by the mortgage lender and title companies) run around 3%. In a buyer’s market like we have now- agents negotiate for the seller to pay the buyer’s closing costs. However- when the market shifts (and currently some banks holding foreclosure properties will not pay these costs) closing costs will be the buyer’s responsibility. Something to keep in mind when you are determining how much money to save.

2. Live within your means: Mortgage lenders approve buyers based on the gross income. As a home buyer it is important to take into consideration what is realistic- after taxes, food, gas, clothing, movies, etc- what is a comfortable mortgage payment for you? Base your decisions on what you can afford on what you make currently- not what you might make next year if you get a raise. With home prices down to 2003 prices- affordability has gone up. Find a home that fits your budget- and focus on things like location, floorplan and ammenities. Don’t focus on paint color, countertops, fixtures, etc- these are things that can be changed over time- and gives an opportunity for you to personalize the home to your tastes.

3. View this purchase as a long term investment: enough said. Home buying is not a “get rich quick” scheme. I know you may have seen the informercials on how to get rich in real estate- but the market is different now and it is an investment in your future, not next week.

4. Each home market is different: while there may be similarities in housing markets across the country- downturn- this does not mean each city or region is experiencing the same level of foreclosures, sales, etc. Pay attention to comparable properties that have sold in the neighborhood in which you are looking, the number of foreclosures in the area and number of homes on the market.

5. Watch for market indicators: Pending sales is the indicator used by the NAR to determine where the market is headed. We have experienced a huge increase in pending sales for the month of October. While this is being attributed to the First Time Homebuyer Tax credit- this credit has not only been extended, but another aspect added to current home owners who wish to move up. While the holidays- November and December are notoriously a slow time in real estate- an increase in pending sales is expected. Also- keep an eye on appreciation percentages- a normal, healthy market experiences 4-6% yearly appreciation. When you see appreciation levels going up and up and up (we saw an increase from 32% to 93% in some areas of the valley in 2004-2006)- this may be a sign we will be experiencing a housing market downturn in the near future.

And finally- at the risk of sounding cliche- please contact a educated, experienced Realtor to assist you and provide answers for the many questions you will have when buying a home!

More Information on the Tax Credit

 Here is the most up to date and comprehensive information on the Home Buyer Tax Credit: Last week, a new Homebuyers Tax Credit bill was signed into law. The bill extends the tax credit for first-time homebuyers (FTHBs), as well as opens it up to current homeowners who are looking to buy. Here is a brief overview of the Homebuyers Tax Credit – and its benefits – based on the new bill.

Tax Credit for First-Time Homebuyers

FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Tax Credit for Current Homeowners

The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available.

What’s So Great About a “Tax Credit”?

The benefit of a tax credit is that it’s a dollar-for-dollar benefit, rather than a “tax deduction”, or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sales price of $800,000.

Home Buyer Tax Credit Extention

It looks like the first time homebuyer tax credit is being extended until April 30th, 2010. The same limitations apply- however there is a rumor that a tax credit will be extended to current home owners who want to move up to a new home. The home would have to be the buyers primary residence, and there are limits on household income- but this is still good news for people that want to take advantage of the housing market.

As more information is released- I will make sure it is posted here!

Home Buyer Scouting Website

I have worked with quite a lot of mortgage lenders, brokers, banks, loan officers, etc- whatever you want call them. I have worked with the good, the bad and the mediocre. In order to build a business that I can be proud of- I have to take into consideration the people with whom I surround myself- and align myself. Their goals, business model and integrity need to match my own. I have gratefully found those that I trust and feel completely comfortable referring to my clients- as thru working together we can reach my ultimate goal- placing a client into a home they will love and an investment that will provide security over the years.

I will now get to the point of my blog- which is a new website that is being hosted by one such mortgage company. The home buyer scouting website is an interactive website where prospective buyers can peruse thru all listings in the Phoenix Valley area. Buyers can set their own criteria, monitor properties, request additional information or showings, etc. While all realtors have access to the more widely known Multiple Listing Service (MLS) which is where listings are posted- the home buyer scouting site allows for the buyer to change their own criteria and gives the buyer more control over their specific home search. I am planning on enrolling all of my prospects into this system- as I truly feel it will give each person more control over their search for the perfect home for their family, investment opportunity or to simply satisfy curiosity. In the age of technology- it is important to provide clients with the most efficient way to reach their goals. I feel this tool is definately a step towards doing so.

Should you read this blog and would like to be enrolled in this system- please either comment on the post or email me at lisa@landdgroup.com

Insights

I had a great experience yesterday evening meeting with the new Ladies Who Launch chapter here in Scottsdale. As my partner and I work through the process of starting our own real estate brokerage- we realized that we needed some insight into being entrepreneurs. While as real estate agents, we are independant contracts and are responsible for building our own client base- beginning a real estate company is a whole different ball game. We understand that there exist negative  preceptions of real estate agents- and we want to go about changing those perceptions- so that the public understands that we are not all the same- and that some agents work with great integrity and honor. These are the foundations on which we will build.

Meeting with 20 or so woman- all in various stages of beginning their own companies- this gave much needed insight into the steps, processes and ideas that can help us as we begin this journey.  In addition, it allows us to offer up our experiences and thougths- so that we may also give back and perhaps give another woman some insight into her journey.

I am excited to add this new membership to my life- I believe it is a positive step for the growth of my budding new company- and also myself. We must all find things in life that allow us to grow- we become more well rounded people, more tolerant to others and others can learn from us. I am grateful for the people in my life that have offered me new ideas or shared their experiences with me- and I hope to pay it forward.

Overview of Loan Programs Available to AZ Real Estate Buyers

Overview of Loan Programs

Here is a brief synopsis of the various loan programs available to buyers:

Jumbo Loans- loan amounts of $417,000 or higher. 25-35% down payment required. Interest rates on a Jumbo loan are 1% higher than conforming rates.

Conventional Loans-10% minimum down payment required. 5% of the down payment can be gifted to the purchaser, and 5% can come from 401K or IRA accounts. Seller can contribute 3% to closing costs.

FHA Loans- Purchase price of $346,250 or under. 3.5% down payment required- can be gifted from family or pulled from 401K or IRA accounts. Seller can contribute 3% towards closing costs.

VA Loans- for military personnel only. No down payment required. Buyer does pay VA funding fee. Seller can contribute 3% towards buyer closing costs. Purchase price of $417,000 or under.

 

Credit score requirements for all programs are a minimum FICO score of 620.

You can obtain your FICO score at www.myfico.com

 

Costs to the buyer up front:

Earnest Money- due at contract acceptance. Generally 1% of purchase price. Will be held with the title company and is applied to buyers down payment or closing costs.

Home/Termite Inspections- due within 10 days of contract acceptance. Cost varies- on average $350-$500 depends on size of home.

Appraisal fee- cost varies- $200-$350.