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Monday, November 24, 2008

Auction Types

Absolute Auction (or auction without reserve)

1. The property is sold to the highest bidder, regardless of the price.

2. Since a sale is guaranteed, buyer excitement and participation are heightened.

3. Generates maximum response from the market place.

4. Many sellers, including financial institutions and government agencies have begun to use this method more frequently.



Minimum Bid Auction

1. The auctioneer will accept bids at or above a published minimum price. This minimum price is always stated in the brochure and advertisements and is announced at the auction.

2. Reduced risk for seller as the sales price must be above a minimum acceptable level.

3. Buyers know they will be able to buy at or above the minimum.

4. The seller may, however, limit interest in the auction to only those buyers willing to pay the minimum bid price, and therefore it must be low enough to act as an inducement rather than a hindrance.



Reserve Auction ( an auction subject to Confirmation)

In this scenario, the high bid is reduced, in effect to an offer not a sale. A minimum bid is not published, and the seller reserves the right to accept or reject the highest bid within a specified time -- anywhere from immediately following the auction up to 72 hours after the auction concludes. Sellers predetermine the price at which the property will be sold and are not obligated to confirm a sale other than at a price that is entirely acceptable to them. The main disadvantage of a Reserve Auction is that prospective buyers may not invest the time and expense of due diligence when there is no certainty they will be able to buy the property even if they are the highest bidder.

Source: NAR Realtor.org

Friday, October 31, 2008

Pricing Tactics to Sell Your Home Faster

Setting the right price is as much about knowing how buyers think as it is about how much you think the property is worth.

If you're selling a house, make sure the price is right.
Americans are constantly buying. But most of us don't do a whole lot of selling -- which means we don't have much experience at setting prices.
Want to improve your odds of finding a buyer? As you try to sell your home, consider these pricing tactics:

Looking slim. We all know that $1.99 is barely less than $2. Yet retailers continue to use this trick, because there's ample evidence it works.
"When we look at prices, we make judgments in a fraction of a second," explains Manoj Thomas, a marketing professor at Cornell University. "We read from left to right. We anchor our judgment on the first thing we see."
For instance, if you're trying to sell your car that you think is worth $8,000, you might set the price at $7,999. Potential buyers will read the seven first -- and have a sense the car is cheaper than it really is.
Alternatively, you might start at $8,222 and then quickly drop the price to $8,111. One study of price comparisons found that, if the left digits are the same, buyers will focus on the right-hand numbers.
At that point, buyers perceive the discount to be larger if those right numbers are declining from, say, two to one rather than from nine to eight. Even though the decline is the same in dollar terms, "people think they're getting a better deal," says one of the study's co-authors, Robin Coulter, a marketing professor at the University of Connecticut.

Stacking up. As buyers look at your house, they'll have in mind a price they are willing to pay. Home buyers are looking at other properties that are in their price range. You may want to provide information regarding comparable homes that have recently sold in the area.

Sending messages. Imagine you're selling your house, which you figure might fetch a little less than $300,000. A round number, such as $295,000, will convey quality, while a precise number, such as $295,325, will indicate a bargain.
The reason: We associate precise numbers with lower-priced goods. A precise number also may signal that you have given a heap of thought to the price and are less inclined to negotiate.

Trying to settle on an asking price for your home? "If it's a new development and you're trying to give the impression of prestige, you would want to go for the round number," advises Vicki Morwitz, a marketing professor at New York University. "But if you're going for the quick sale and you want to give the impression of a bargain, you would want to go for the precise number."

Cutting prices. In today's housing market, many homeowners are struggling to find a buyer.
Thinking of dropping your asking price? Suppose that, as in the above example, you initially asked $295,325. If you lower the price to, say, $279,595, potential buyers may perceive the price drop as relatively modest.
"You want to make the computation as easy as possible," Cornell's Thomas says. "If you use digits that make computation difficult, it will lead to a perception of a small difference."
What to do? You might specify the dollar discount -- or, alternatively, lower the price from $295,325 to maybe $280,325 or $275,325. That way, it will be easy for buyers to calculate the price drop.

Blogger’s Comment: Bear in mind that the majority of home buyers utilize the Internet when searching for their next home. Most will shop within their price range. Many websites allow the user to search for property by a given price range. These price parameters vary. Consider lowering the asking price in order for your property to show up within the first few page views. In the above example, if you are asking $275,325 it will NOT appear to the home buyer if they set the search engine’s price parameter to search for homes priced from the $250,000-$275,000 price range.

Source: Wall Street Journal

Thursday, October 23, 2008

$7,500 Tax Credit Now Available to First-Time Home Buyers

The tax credit is not a gift or a grant but essentially a 15 year loan to the homebuyer and, while it is interest free, will require filing a tax return and will carry the same IRS penalties for non-payment as accrue to delinquent taxes.

Further information and the regulations regarding this tax credit are now available. If you have an interest in the program, here are some basic facts.

The credit is available only to first-time home buyers defined as buyers who have not owned a principal residence for three-years prior to the subject purchase. The ownership test applies to both partners in a marriage; i.e. if a husband has not owned a home in the past three years but the wife has, neither spouse qualifies for the first-time home buyer tax credit. (It appears that this would be the case even if the husband is purchasing the property only in his own name.) A buyer can still be eligible for the credit even if he owns a vacation home or rental property not used as a principal residence.

Single taxpayers with "modified adjusted gross income" up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Individuals and couples with incomes above the thresholds may still qualify for a lesser credit, however, taxpayers with adjusted gross income above $95,000/ $170,000 phase out of the program completely.

There is no need to fill out an application to qualify for the tax credit. First-time homebuyers merely claim the credit when filing the tax return for that year. No pre-approval is necessary, but if you are relying on this program to purchase a home you may want to check your eligibility. Your tax advisor may be able to help you with this.

The credit is available even to those with little or no federal income tax liability to offset. This usually means that the government will send a check for part or all of the credit. Otherwise the credit is used to offset any unpaid taxes or increase a refund.

The credit is available for homes purchased between April 9, 2008 and July 1, 2009 and applies to both new and existing homes whether attached or detached, condominiums, mobile homes, or houseboats. A homebuyer contracting for a custom built home can qualify for the credit as long as the home is first occupied between the April 2008/June 2009 dates. (For newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.)

The $7,500 credit represents 10 percent of the purchase price of a low cost home. Most who use the program will be able to claim this full amount, however, in the event a home is purchased for a lesser amount, the 10 percent cap will apply. That would mean that a $65,000 purchase would result in a $6,500 credit.

There are other refinements to the program. For example, if it is to his benefit, a taxpayer can apply for the credit in a different year than the home is purchased. There is also a possible forgiveness of debt for homeowners who sell the home before the loan is repaid and do not received sufficient gain from the sale to cover the loan balance. Information on these and other details of the program can be researched on a website maintained by the National Association of Homebuilders at www.federalhousingtaxcredit.com.

Source: Grande Financial Newsletter
c/o Jim Burrington

Wednesday, September 24, 2008

Home loan documentation more vital than ever

Today, home buyers and homeowners are having a lot of trouble getting a home loan. Lenders are saying "no" even when buyers and owners have good credit scores and credit histories.

What has changed is how much risk some mortgage investors are willing to accept in the face of mounting real estate loan losses in the billions of dollars. Unfortunately, you can't kick start the real estate market until the panic in the credit markets has abated.

To apply successfully for a home loan, start by gathering together the following information:

-all W-2 forms for each person who will be a co-borrower on the loan. You'll also want to provide the contact information for the human resources manager or your direct bosses, so the mortgage lender can verify your income.

-copies of completed federal tax forms for the last two or three years, including any schedules or attachments. These will be required primarily of self-employed individuals or those who are claiming a history of rental income. Either way, you won't need your state returns.

-copies of one month's worth of pay stubs.

-copies of the last two or three bank statements for every bank account, IRA, 401(k), Keogh, other retirement account or brokerage account the co-borrowers own. Bring a copy of your most recent statement for any other assets you have.

-a copy of the back and front of your canceled earnest money check plus the escrow deposit receipt. If you don't get your canceled checks back, then access the electronic version on your account and print it out.

-a copy of the fully executed sales contract and all riders. You'll need both brokers' names, addresses and phone numbers (if you're using a broker or agent), and the same information for both your attorney and the sellers' attorney (if you're living in a state where real estate attorneys are used to close residential sales).

-If you're selling a residence at the same time you're buying it, you'll need a copy of the listing agreement and, if the home is under contract, a copy of the fully executed sales contract. (Be prepared to provide the contact information for the brokers and attorneys for your sale as well, if you're far enough down the line for that.) When the property closes, you may be asked to provide a copy of the actual disposition of funds from the escrow account.

-If gift or grant funds are involved, the giver (or grantor) must provide proof that he or she had that money to give, such as a copy of the giver's recent bank statement. If you're receiving a grant, the grantor should provide you with a letter outlining the grant and stating that the funds do not need to be repaid. Be prepared to show the paper trail for the money, including a deposit slip. The giver will have to fill out a gift letter affidavit, available from the loan officer, indicating that the funds were a gift and the gift giver does not expect repayment. In short, you'll need a copy of the check, deposit receipt and a bank statement verifying the deposit.

-copies of all divorce decrees and property settlement agreements.

-copies of a survey or title insurance commitment for the home you're buying, if available when you apply for the mortgage, or when it becomes available during the purchase process. In most states, the preliminary title report takes the place of a survey, lenders say. But a survey may be required in states like New Mexico.

-If you're self-employed, prepare complete copies of the last two years' federal business tax returns and a year-to-date profit-and-loss statement and balance sheet with the original signatures. Some lenders will agree to use a letter from your CPA stating that you are self-employed or a copy of your business license, but have your tax returns and profit-and-loss handy.

-a list of your addresses in the last two years.

-If you've made any large deposits ("large" means anything larger than your monthly salary) into your bank accounts in the last three months, be prepared to provide an explanation with proof as to where the funds came from.

-If you've opened a new bank account in the last six months, write a letter explaining where the money came from to open this new account.

-addresses and account numbers for every form of credit you have. Or alternatively, many lenders will use your credit history. Be sure to pull a copy from each of the credit reporting bureaus before you apply at AnnualCreditReport.com. Pay for a copy of your credit score while you're there (approximately $7) so you know what you're facing.

-documentation to verify additional information, such as Social Security, child support and alimony.

-If you've had a previous bankruptcy or foreclosure, make sure you have a complete copy of the proceedings, including all schedules, and a letter explaining the circumstances for the bankruptcy or foreclosure and the discharge certificate.

-For most loans these days, you'll need a photocopy of a picture ID (usually your driver's license or U.S. passport) and in some cases a copy of your Social Security card. Also, for VA loans you will need to bring proof of enlistment (your DD214) and Certificate of Eligibility for a VA loan (details for this are available at www.va.gov.)

-If you have any judgments against you that have been paid in full, bring a copy of the recorded satisfaction of judgment. But if you have a judgment against you or are involved in litigation, you will need copies of documents describing any lawsuits and may expect to have to settle and pay off any judgments prior to closing on the loan.

-If you are buying a new primary residence and turning your existing home into a rental property, you'll need to show a signed lease agreement as well as proof of receiving the security deposit from the new renter. You should also be prepared to prove that you have at least 30 percent equity in the existing property.

This seems like an incredibly long and detailed list, and your mortgage lender may not ask for everything on it or may ask for other documentation. But if you want your home loan application process to go smoothly, it pays to get your documentation in order, before you ever apply for a single loan.

Source:
Inman News, Ilyce Glink

Friday, September 19, 2008

New Fannie Mae Guidelines Encourage Short Sales

Fannie Mae recently released updated underwriting guidelines for new mortgage loans that directly address individuals with various types of foreclosure history.

Potential borrowers with a foreclosure on their credit record must wait 5 years to be considered for new funding, and are subject to additional credit and down payment requirements for 5 to 7 years
.
Deed-in-lieu-of-foreclosures warrant a 4 year wait with additional requirements for 4 to 7 years.

Finally, the silver lining...Short Sales requires only a two year wait with no additional requirements. These new guidelines make short sales a more attractive option for distressed homeowners and future home ownership.

Wednesday, September 3, 2008

End in Sight for Seller-Funded Down Payments

Prospective homeowners have until Oct. 1, 2008, to use down payment assistance from a seller to purchase a house.

The Housing and Economic Recovery Act of 2008 signed into law in July bars such seller-funded aid on Federal Housing Administration-backed mortgages.

Lawmakers added the provision to the housing relief package because about 40 percent of FHA borrowers who went into foreclosure in the past year received down payment assistance from a seller.

However, some industry professionals are worried that the rule change will keep some buyers out of the market.

Scott Syphax, president of The Nehemiah Corp., which runs a privately funded down payment assistance program, cites a report by housing research firm Zelman & Associates.

The report found that 10 to 25 percent of potential home buyers will have no way of securing home ownership without seller-funded down payment assistance, and stated that the rule change will have far-reaching implications for the real estate industry at large.

Source: Augusta Chronicle (GA), Tim Rausch

Monday, August 18, 2008

New Mortgage Law Has Buyers Scrambling

Housing industry observers expect that prospective buyers will scramble to take advantage of seller-funded down-payment assistance before a federal ban on such programs takes effect on Oct. 1.

The federal housing bill signed into law in July sews up a loophole that allows nonprofit organizations to gift mortgage down payments, and industry experts believe markets that have relied heavily on the programs could see new-home sales cut by as much as half.

Seller-funded downpayment assistance has served as a surrogate for subprime loans in some ways and has helped builders put first-time and low-income buyers into new homes.

"We will eventually go back to the mind-set of a society where you have to have 3 percent up-front to buy a home," says Phoenix real estate analyst Jim Belfiore.

Source: Poughkeepsie Journal (N.Y.) (08/18/08)

Monday, August 4, 2008

Housing Rescue Bill

President George W. Bush signed into law a bipartisan housing stimulus bill Wednesday that is expected to bring greater stability to housing markets nationwide.

The bill, strongly supported by the NATIONAL ASSOCIATION OF REALTORS®, will help some 400,000 home owners refinance into affordable, government backed loans and offer a temporary first-time home buyer tax credit, which is expected to serve as an attractive incentive to buyers and help reduce high inventories of unsold homes.
The temporary first-time home buyer tax credit would offer $7,500 for the purchase of any home and an be used for purchases between April 9, 2008, and July 1, 2009.

The bill — H.R. 3221, the Housing and Economic Recovery Act of 2008 — also includes reform of Fannie Mae and Freddie Mac, FHA modernization, and permanent increases in conforming and FHA loan limits.

"These are all designed to help the housing and mortgage industries and boost the U.S. economy," NAR President Dick Gaylord said in a statement. “NAR has been a leading advocate for many of these changes long before the current housing and economic downturn. We are pleased that the president and Congress worked together to enact meaningful legislation that protects and enables families in this country to continue to strive for and enjoy the dream of homeownership.”

Source: NAR, Associated Press (7/30/08)

Tuesday, July 22, 2008

Good Credit Is Step One for Buyers

Potential home buyers inevitably must confront their credit scores.

Here’s a primer for those who have never faced this issue before:

A credit score, commonly known as a FICO score, is derived from a history of taking on debt and paying it off.

FICO scores range between 300 and 850, with the highest reflecting the best credit risk. The median FICO score nationally is around 720-723, according to Fair Isaac, the company for which FICO scores are named.

Except for a first-time buyers or those who have a large down payment, lenders will want to see a FICO score of 680 or higher, says Robert Satnick, chairman of the California Mortgage Bankers Association.

To get their FICO score, potential home buyers can go to Myfico.com, a unit of Fair Isaac. Obtaining a FICO score and a credit report from one of the three credit bureaus that collect this history costs $15.95; the combination of all three scores and the FICO report costs $47.85.

The credit factors that determine the score are: a person's payment history (35 percent of the score), how much they owe (30 percent), the mix of credit and installment loans they have (10 percent), the length of their credit history (15 percent), and whether they have applied for new credit recently (10 percent).

Source: The Associated Press, Alex Veiga

Friday, June 27, 2008

Fannie Mae eliminates "declining market" downpayment.

Starting June 1, mortgage applicants who are underwritten by Fannie Mae's automated system online will qualify for 3% minimum down payments, wherever the property is located.

Borrowers whose applications require "manual" underwriting will pay 5% minimum down payments.

Under Fannie Mae's prior system, applicants buying in designated declining markets had to contribute 5% extra in upfront equity compared with borrowers in nondeclining market areas.

Freddie Mac's policy, which never employed a list of areas designated as declining, relied instead on lenders to flag applications using appraisal data or home price indexes. Freddie's policy also required 5% higher equity contributions upfront.

Critics, including the National Association of Realtors and consumer advocacy groups, had charged that Fannie Mae's policy served to further depress sales and real estate values in areas tainted as declining.

They also argued that many metropolitan markets experiencing price decreases contain sub-markets performing relatively well, and they do not deserve to be underwritten as high risk.

Fannie Mae's and Freddie Mac's policy switches should open the door to some additional low-down-payment mortgages -- and home sales -- in local areas once tagged as declining.

However, without the participation of private mortgage insurers, who report solely to stock market investors rather than to Congress, many borrowers will likely have to turn to the Federal Housing Administration, which accepts 3% down, does not have declining markets restrictions and whose loans can be purchased by Fannie Mae and Freddie Mac.

Source: Washington Post c/o NAR

Wednesday, June 11, 2008

Tips for Painting the Exterior of Your House

A great exterior paint job should make passersby think, “What a lovely home.” But if you get it wrong, people who drive by will wonder, “What were they thinking?”

If you are are considering a fresh coat of paint on the outside of your home, you may want to take some advice from color consultant Paul Helmer. He offers these suggestions for painting various parts of the home:
• The roof. Think of the roof as one noticeable piece of color. The steeper the pitch, the more noticeable the roof is. If the roof is a light-colored composite, don’t choose a dark color for the house or it will look like the roof is trying to fly away. Use a color wheel to find pleasing shades.
• Exterior stone, brick or metal. Orange-tinted bricks look better with warm tones. Rose-tinted bricks are enhanced by cool tones. Repeat shutters or trim colors whenever possible.
• Vinyl windows or siding. Don’t paint the windows white and the house a deep color, otherwise, your house will look like a whitewall tire.
• Landscape artfully. Don’t plant shrubbery that looks ghastly against your house. For instance Burgundy-leaved shrubs clash with a yellowish-green house.
• Respect the neighbors. Don’t paint your home a color that either matches or clashes with the house next door.

Tuesday, May 20, 2008

Simple Fix-Ups Pay Off Big for Sellers

Forget about overhauling the kitchen or redoing the bathroom. The fix-ups that pay off the most are often the simpler and more mundane, says Diane Saatchi, senior vice president at the Corcoran Group in New York.

Her specialty is selling high-end properties in the Hamptons. She recommends that sellers focus their improvements on small exterior changes rather than big-ticket projects inside the home. "Make the outside of the house look really great so that people fall in love between getting out of the car and the front door," Saatchi says.

That includes repainting the trim and adding new hardware, manicuring trees and shrubs, replacing old siding and replacing windows that aren’t energy efficient.

Nationally, returns for all major home-improvement projects are fetching 70 cents on the dollar, according to a Remodeling magazine’s survey of real-estate professionals conducted late last year. That's down from 80 cents in 2004.

Source: The Wall Street Journal, M.P. McQueen

Saturday, May 3, 2008

Foreclosure "Rescue" Scam May Be Busted

WASHINGTON, D.C. - The Federal Trade Commission has charged Foreclosure Solutions, LLC and Timothy A. Buckley with operating a nationwide mortgage foreclosure “rescue” scam that charged consumers as much as $1,200 to save their homes from foreclosure but failed to do so. The FTC seeks to bar them from further law violations and make them forfeit their ill-gotten gains.

According to the FTC’s complaint, the defendants market their services through direct mail to consumers named in court records of foreclosure actions and through Internet Web sites, including www.program10.com and www.foreclosuresolutionsusa.net. Through the direct mail solicitations, the defendants warn that consumers could lose their home within 10 days, and they promise that they can stop foreclosure proceedings. In one of their letters they claim a 93 percent success rate.

Consumers who call a toll-free number are told that the defendants will provide an attorney and a case manager to help them avoid foreclosure, the complaint alleges. The defendants allegedly state that they have helped thousands of others, and they promise to guarantee in writing that they will save each consumer’s home. In some instances, consumers are permitted to pay about half the fee up-front and the balance within 30 days for an extra $50.

The defendants allegedly send a representative to the consumer’s home to close the sale and collect the up-front fee. In the agreement they require consumers to sign, they attempt to disclaim their guarantee that they will save the consumers’ homes, stating that they will work faithfully but not guarantee the success of their efforts. The defendants also provide consumers with a money-back guarantee, promising a refund if the consumer follows their instructions to save money and avoid lender phone calls. They also require consumers to sign a power of attorney form, authorizing them to represent the consumer in the foreclosure action.

In addition, the complaint alleges that the defendants instruct consumers to open a savings account and to deposit, every month until further notice from the defendants, the consumer’s monthly mortgage payment plus an additional 25 to 35 percent. They claim that the extra payment will be used to negotiate with the lender to reinstate the loan. After consumers have paid for the services, the defendants often don’t answer or return their calls. In otherinstances, the defendants’ representatives allegedly tell consumers that they are working on a solution, that they need more information from the consumer, or that no solution can be found.

According to the complaint, the defendants hire attorneys to respond to the foreclosure complaints filed against consumers. In many instances, the attorneys file the same form response to every complaint, usually without investigating consumers’ individual circumstances that might identify defenses or counterclaims unique to particular consumers. In many instances, the defendants do not stop foreclosure or save consumers’ homes, and many consumers who have contracted for their services lose their homes to foreclosure.

Consumers who stop foreclosure through their own efforts sometimes learn that their lenders offer the same settlement terms regardless of whether the consumers negotiate on their own or through the defendants. Others learn that their lenders will negotiate only with them and not with the defendants.

The Ohio-based defendants are charged with falsely representing that they will stop foreclosure in all or virtually all instances, in violation of the FTC Act.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of Ohio, Eastern Division.

Source: National Realty News

Friday, April 11, 2008

FHA Loans Can Ease Mortgage Dilemmas

Potential home buyers may be hesitant as they start their hunt in today's market, but many quickly discover that their market is full of choices, sellers are becoming more willing to negotiate, and interest rates are still low.

That's not to say there will be no setbacks. The hard part may come when they go shopping for a mortgage.

Minnesota Mortgage Association President Tim Bendel said 100 percent financing has all but disappeared. He advises borrowers with good credit scores seeking a conventional loan to come to the table with at least a 5 percent down payment.

Borrowers with credit scores below 700 may need a more significant 20 percent down payment. But there is help on that front.

The answer for some buyers is a Federal Housing Administration (FHA) loan. Credit scores count less with FHA loans; the more important factor is whether the potential borrower has paid other bills on time, says Todd Johnson, CEO of Edina Realty Mortgage.

FHA's government-backed loans require only 3 percent down and allow cosigners and gifts for down payments.

Source: Star-Tribune, Kara McGuire

Wednesday, March 26, 2008

Home Sales Rise

Existing-Home Sales Rise in FebruarySales of existing homes increased in February and remain within a fairly stable range, according to the NATIONAL ASSOCIATION OF REALTORS®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 2.9 percent to a seasonally adjusted annual rate of 5.03 million units in February from a pace of 4.89 million in January, but remain 23.8 percent below the 6.60 million-unit level in February 2007.

The sales pace has been in a fairly narrow range since last September.Lawrence Yun, NAR chief economist, said the gain is encouraging. “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that the market is stabilizing,” he said. “Buyers taking advantage of higher loan limits for both FHA and conventional mortgages will unleash some pent-up demand. As inventories are drawn down, prices in many markets should go positive later this year.”

The national median existing-home price for all housing types was $195,900 in February, down 8.2 percent from a year earlier when the median was $213,500. Because the slowdown in sales from a year ago is greater in high-cost areas, there is a downward pull to the national median with relatively fewer sales in higher priced markets.

Source: NAR

Wednesday, March 5, 2008

Mortgage Relief Provision

IRS Explains Mortgage Relief Provision

The IRS has released IR-2008-17 to alert taxpayers how to comply with the new mortgage cancellation tax relief provisions enacted at the end of last year.

Borrowers who had some portion of their mortgage debt forgiven in 2007 should receive a Form 1099C from the lender identifying the amount of forgiven debt.

The borrower/taxpayer will file a newly-created form to report to the IRS that the debt relief was for a qualified mortgage.

The new form, Form 982, and instructions are available at the IRS website, http://www.irs.gov/.

The mortgage relief provision applies to debt forgiven in 2007, no matter when the mortgage was entered into. The most frequent circumstances in which there is a debt forgiveness is on foreclosure, short sale or mortgage workout or reformation agreed to with the lender.

Source: TBR Newsletter

Thursday, February 21, 2008

Buying Bank Owned Properties

There is a lot of interest in buying bank owned properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”. The fact is that there are no secrets, and making money requires effort.

What’s an REO?

REO stands for “Real Estate Owned”. These are properties that have gone through foreclosure and are now owned by the bank or mortgage company. This is not the same as a property up for foreclosure auction. When buying a property during a foreclosure auction, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be prepared to pay with cash in hand. On top of all that, you will receive the property “as is”. That could include existing liens and even current occupants that need to be evicted. A REO, by contrast, is a much “cleaner” and attractive transaction. The REO property did not find a buyer during foreclosure auction. The bank now owns it. In some cases, the bank will see to the removal of tax liens, evict occupants and generally prepare for the issuance of a title insurance policy to the buyer at closing. Do be aware that REO’s may be exempt from normal disclosure requirements.

Is it a bargain?

It’s commonly assumed that any REO must be a bargain and an opportunity for easy money. This simply isn’t true. You have to be very careful about buying a REO if your intent is to make money off it. While it’s true that the bank is typically anxious to sell it quickly, they are also strongly motivated to get as much as they can for it. When considering the value of a REO, you need to look closely at comparable sales in the neighborhood and be sure to take into account the time and cost of any repairs and remodeling needed to prepare the house for resale. Bargains with money making potential exist and many people do very well buying foreclosures.

Ready to make an offer?

Most banks have a REO department. Typically the REO department will use a listing agent to get their REO properties listed on the local MLS. Since banks almost always sell REO properties “as is”, you’ll want to be sure to have your Realtor include an inspection contingency in your offer that gives you time to check for hidden damage and terminate the offer if you find it. As with making any offer on real estate, you’ll make your offer more attractive when you include documentation of your ability to pay, such as a pre-approval letter from a lender or verification of available funds. Most REO require such documentation submitted with the initial offer. After you’ve made your offer, you can expect the bank to make a counter offer. Then, it will be up to you to decide whether to accept their counter or reply to the counter offer. Realize, you will be dealing with a process that probably involves multiple people at the bank, and they don’t work evenings or weekends. It is not unusual for the process to take days or even weeks. Additionally, recognize that your offer may compete with other offers from other buyers. You may be asked to bring your “highest and best” offer in order to have your offer accepted. Time is of the essence when attempting to purchase REO properties.

Tuesday, February 5, 2008

Is IT So Bad?

News from the Chief Economist for the National Mortgage Bankers Association, Doug Duncan
.
Following are the bullet points that he made regarding the current housing/mortgage issues:

 The foreclosure problem in this country is really a story about seven states.

 The biggest foreclosure problem is in Michigan, Ohio, and Indiana. These are predominantly manufacturing states.

 Since 2001 Michigan has lost 300,000+ jobs.

 The other four states are California, Florida, Arizona, and Nevada. In each of these states there has been a significant overbuilding. 25% of the foreclosures in these states are on properties that are held by investors who were speculating.

 California and Florida have been hit very hard.

 35% of the homes in the USA do not have a mortgage.

 98% of the mortgages in the USA are performing.

 Only 9% of ALL these mortgages are sub-prime.

 75% of all sub-prime mortgages are performing.

 In the other 43 states, foreclosures have fallen in 2007 from 2006.

Source: Toledo Board of Realtors newsletter

Friday, January 18, 2008

Tips for Pet-Owning Sellers

Pet-owning sellers may turn off potential buyers if they don’t keep their pets out-of-sight during showings.

If a dog or cat is around during a showing the buyer maybe afraid of or is allergic to animals. Sometimes they fall in love with the pet and don't pay attention to the house.

Here is a list of advice for sellers when showing a house that has a pet:

1. Remove photos of pets from the walls, shelves, or refrigerators.

2. Clean food and water bowls regularly, and hide them when not in use.

3. Stash away pet toys, crates, carriers, and leashes.

4. Vacuum carpets, upholstery, and wood floors.

5. Keep litter boxes clean and out of sight, and remove signs of doggy potty pads.

6. Open windows to let in fresh air.

7. Neutralize odors with fresh-smelling candles and air sanitizers.

8. Hire professionals to remove unsightly pet stains.

9. Board or crate animals during open houses.

10. Repair visible signs of pet damage, such as scratched walls or floors.

Friday, January 11, 2008

Bank of America to Buy Countrywide

Bank of America to Buy CountrywideBank of America Corp. announced today that it has agreed to buy Countrywide Financial for $4 billion in stock.The purchase will make Bank of America the nation’s largest mortgage lender and loan servicer. "Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation's premier lender to consumers," Bank of America Chief Executive Ken Lewis said in a statement.The sale will place the responsibility of sorting out the payment issues surrounding millions of dollars worth of troubled loans on Bank of America. "There's still plenty of risk involved," says Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. "[Lewis] is brave to do it. But I think that it's very likely down the road to be profitable, maybe not immediately, but long-term."The agreement has been approved by both companies' boards and is subject to regulatory and Countrywide's shareholders approval.

Source: The Associated Press, Ieva M. Augstums (01/11/08)

Wednesday, January 2, 2008

NAR Makes Tremendous Strides on Public Policy in 2007

Since 1908, REALTORS® have worked hard to earn a reputation as America’s leading community builders and dream makers. Today, the “Voice for Real Estate” is stronger than it has ever been, speaking for millions of consumers in neighborhoods across America. And, we’re just getting started.

Thanks to your participation in our advocacy efforts, NAR made tremendous strides on the public policy front last year, passing legislation in three key areas that will preserve the long-term value of real estate and help you grow your businesses:

Mortgage Relief – We achieved a major victory for consumers caught in costly mortgages, when President Bush signed the Mortgage Cancellation Tax Relief Act in December. We also are making affordable financing available to potential buyers through landmark FHA Reform. We expect this bill will go to conference early next year.

Terrorism Insurance – NAR also worked with Congress to keep the commercial real estate market strong and stable well into the future. President Bush recently signed a bill that continues the Terrorism Risk Insurance Program for seven years.

Banks in Real Estate – For the first time ever, Congress also passed a two-year moratorium on banks entering the real estate business, which will take effect early next year. We also have record support for a permanent ban through the Community Choice in Real Estate Act.

REALTORS® are in a prime position to succeed on many other key priorities in 2008, including GSE Reform, Flood Insurance Reform, Natural Disaster Reform, Affordable Housing Trust Fund and Mortgage Reform. All of these issues are critical to our professional success, a healthy real estate market and strong communities.

Dick Gaylord
2008 NAR President

Dale Stinton
NAR EVP & CEO