Has the Housing Market Hit Bottom?

Rick Sharga, Executive Vice President with Carrington Mortgage Holdings, says the housing market is in a “catfish recovery,” with the market hitting bottom this year but prices mostly remaining flat until 2014.

The looming shadow inventories of distressed properties are continuing to prevent prices from rebounding, he explains.  Sharga, former Senior Vice President at Realty Trac, says more then a million foreclosure actions failed to move forward this year due to delays, which will cause a delay in prices rebounding.  Sharga made his comments during a talk at the Asian real Estate Association of America conference last week in San Francisco.  About 800,000 REOs remain on banks’ books, with three-quarters of those not yet listed for sale, Sharga says.  What’s more, an additional 800,000 homes are in foreclosure, and 1.5 million loans are delinquent, Housing Wire reports.

Sharga says he expects monthy foreclosures to remain high through 2012, and REO inventories to stay elevated through 2013.

California Tax Savings Programs

PROPOSITION 90

Senior Citizen’s Replacement Dwelling Benefit or Empty Nest Act

Proposition 90 ia a constitutional amendment approved by California voters in 1998.  It is codified in section 69.5 of the Revenue & Taxation Code and allows homeowners who are at least 55 years of age to transfer an existing Prop 13-factored base year value to a replacement residence located within another county, if certain qualifying conditions are met.  Not all counties have adopted local ordinances to implement Prop 90.  Before attempting to transfer a base year value to property in another county under the provisions of Prop 90, you should contact the local County Assessor to discuss eligibility.

Mello-Roos

Understanding Mello-Roos

When purchusing yournew home, your future monthly payments will be made up of principal, interest, real property taxes, and insurance, but what is the tax for the Commuity Facilities District, otherwise known as a Mello-Roos District?

What is a Mello-Roos District

A Mello-Roos districts an area where a special tax is imposed on those real property owners within a Community Facilities District.  This district has chosen to seek public financing through the sale of bonds for the purpose of financing certain public improvements and services.  These services may include streets, water, sewage and drainage, electricity, infrastructure, schools, parks, and police protection to newly developing areas.  The tax you pay is used to make the payments of principal and interest on the bonds.  Mello-Roos payments are normally reflected on the  property tax bills.

What is F.H.A.?

I’m often asked by people what is an FHA loan?  The FHA loans are  not loans available to only low income or limited income people.  All kinds of buyers qualify for FHA loans.

Federal Housing Authority, commonly know as FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States.  FHA insures mortgages on single family and multifamily homes.  It is the largest insurer of mortgages in the world!  FHA has insured loans on over 34 Million properties since it’s inception in 1934.  FHA does not create and fund loans themselves.  They federally insure them so that the lenders are more secure in lending money to potential home buyers, thus less restricted guidelines are the benefit.

Unlike conventional loans that adhere to the especially strict underwriting guidelines of today, FHA insured loans require very little cash investment to close a loan.  There is more flexibility in calculating household income and payment ratios.  The cost of the morgaged insurance is passed along to the homeowner and typically is included in the monthly payment.  In most cases the insurance cost to the homeowner will drop off  your monthly payment after FIVE YEARS or when the remaining balance on the loan is 78 percent of the value of the property whichever is longer.

REO Purchases – Buyer Beware!

“REO” stands for “real estate owned” which is how banks and other lenders categorize homes they have taken back in on either a foreclosure or a “deed in Lieu” of foreclosure.  As a buyer of an REO property you should be aware of several issues that make this type of transaction different from the usual real estate purchase.

1.  The lender/seller may have little or no knowledge of the property.  They do not have to complete a Transfer Disclosure Statement as most sellers are required to do giving a history of the property condition.  While lenders still have to disclose any conditions or defects that could affect the condition or value, those disclosures may be of little value in light of a lender’s limited knowledge of the REO property.

2.  The lender may take a long time to respond to your offer and in the meantime consider other offers as they come in.

3.  The lender may give you a verbal “acceptance” of your offer.  Such acceptances are generally not binding, in the absence of other signed documents sufficient to “an agreement to sell”.  If you are in doubt as to whether you have a binding agreement, you should consult your own real estate attorney.

4.   If you start incurring expenses, such as for inspection reports or for loan applications, prior to receiving a signed purchase agreement, you may be risking the loss of that money, which may not be recoverable from the lender/seller.

5.  REO lender/sellers usually will attach a lengthy Addendum to the standard purchase agreement, or may even require the use of their own contract form.  These addenda and contracts have been drafted by the lender’s attorney to favor the lender/seller.  I would strongly advise you to review this Addendum or contract with an attorney because as a real estate broker I am unable, nor am I qualified to give you advice on legal documents drafted by attorneys for other parties.

6.  If in the transaction you receive an REO property addendum, read it thoroughly for understanding since it will affect your contractual rights.  Some of the clauses may limit your legal rights in certain circumstances, or limit your recovery against the lender.  Some clause may impose daily charges for delays in closing.  Other clauses may require you to hold the lender/seller harmless in and release the lender/seller from certain potential liabilities.  Again I would strongly recommend that you get any “legal” questions answered by your attorney.

7.  Many lenders refuse to pay all or many 0of the expenses of escrow and closing that may typically be paid by sellers.  Such expenses may include title insurance, escrow fees, transfer taxes, home warranty plans and costs of repairs for the property.  While such items may normally be the subject of negotiation in a real estate transaction, you may encounter a lender who refuses to negotiate or to pay for these items.  This should be calculated into your overall cost of purchasing the property when you make the initial offer.

8.  Inspections:  Most of the REO properties and contracts therefore contain as “as is” clause.  Because the lender has limited knowledge of the property it is highly recommended that you have all inspections necessary for you to discover and understand any present conditions of the property.  These are normally in the form of inspection contingencies if allowed by the lender of the REO property.  Some lenders will allow only informational inspection.  If an information inspection during escrow discloses adverse information not previously disclosed to you you I would again advise you to seek the guidance of your attorney.

9.  Review the Preliminary Title Report  for liens, encumbrances and assessments.  Many of these will have been expunged or paid off during the foreclosure, or deed-in-lieu, process by which the lender came to own the property.  It is possible certain rights of others may continue after the sale to you.  You should discuss this possibility and the Preliminary Title Report with your attorney.

In conclusion there are many great buys out there for investors and home buyers looking for those “deals” but be informed when considering making an offer on an REO property!

FHA Seeks to Stop Buy-&-Bail Schemes!

It has evolved and been recognized that the Federal Housing Administration officials need to formulate a policy to prevent homeowners who are preparing to default on their current mortgage from buying a new home with FHA financing.  After the raise in loan limit to $729,000 the FHA loan product has become one of the most popular financing available to a majority of home buyers.  FHA wants financing to be available, but they don’t want it to be abused said  FHA Director Meg Burns. 

Fannie Mae is expected to issue guidelines soon that are designed to prevent such “buy-and-bail” schemes in which the borrower allows the first property to go into foreclosure.  FHA plans to announce a series of new requirements for borrowers who are buying a new primary residence and intend to convert their existing home into an investment property or second home.  These guidelines will make it more difficult for those borrowers who plan to buy a new home and bail on their existing home.  The FHA wants it’s policy to be consistent with those of the government sponsored enterprises without being too stringent.  Borrowers that are planning to walk away from the first property generally provide a bogus lease agreement showing the rental income will cover the old mortgage.  Fannie’s guidance is expected to require borrowers to show that they have the resources to support both properties.  Freddie Mac is also considering changes to its lending policies to deal with the issue.

Pleasanton/Dublin Real Estate Market Facts

Today, March 12, 2008 in the price range of up to 1,000,000 there are 17 pending listings in Dublin and 37 pending listings in Pleasanton.  In the price range between $1,000,000 and $2,000,000 in Pleasanton there are 13 pending listings and in Dublin 8 pending listings.  Above the $2,000,000 to $5,000,000 price range in Pleasanton there are 3 pending listings.

Common real estate tax right offs!

1. Home acquisition mortgage fees are a write off! If you bought your primary or secondary home this past year, you probably obtained a mortgage to finance the purchase. That mortgage is called an “acquisition mortgage” because it enabled purchase of the residence. If you paid a loan fee to obtain that acquisition mortgage, usually called “points,” that loan fee qualifies as an itemized interest deduction. Each point paid equals 1% of the amount borrowed.
2. Home improvement fees are a write off! Similarly, if you paid a loan fee to obtain a home improvement loan, that loan fee is fully deductible in the tax year it was paid.
3. Loan fees paid to refinance a home loan (or borrow against other real estate) is a write off! If you refinanced your existing home loan this past year, or borrowed against other real estate such as an apartment building, any loan fee you paid must be deducted over the life of the mortgage.
4. When refinancing, deduct any loan fees that have not already been claimed! Thanks to continued low mortgage interest rates, many homeowners refinanced again the last year, or borrowed against other real estate such as an apartment building. Any loan fee you paid must be deducted over the life of the mortgage.
5. If you bought or sold property in the last year remember to deduct prorated real estate taxes! A major write off many real estate buyers and seller overlook is the prorated property tax they paid ay close of escrow. Even if the other party remitted the payment to the tax collector, but you were charged a prorated portion of the tax bill, be sure to deduct your share on your return this year.
6. Deduct prorated mortgage interest in the year of property purchase or sale! Similarly, if you bought a residence and took over an existing mortgage, don’t forget to deduct your prorated interest share for the month of the sale. Your closing settlement statement shows your prorated share of the mortgage.
7. Mortgage prepayment penalties are a write off! If you paid off an existing mortgage early and were charged a prepayment penalty by the lender, that prepayment penalty is qualified as an itemized deduction.
8. When land rent payment qualifies as interest deductions! Millions of homes are located on leased land. Internal Revenue Code 163 allows land rent to be deducted like interest when the lease; (a) is for at least 15 years, including renewal periods; (b) is freely assignable; (c) contains a present or future option to buy the land; and (d) is likely a security interest such as a mortgage. Payments to rent the land are not deductible if you do not have the option to buy the land, such as a mobile home park.
9. Home construction loan interest is a write off! If you built a new home in the past year, or are building one now, don’t forget to deduct the construction loan interest paid. It’s deductible if the construction period does not exceed 24 months before occupancy of your principal residence.
10. Deduct prepaid property taxes and mortgage interest! If you prepaid next years real estate taxes this year as homeowners do to increase their tax deductions, or if you pay your January payment in December, don’t forget to deduct these extra mortgage interest and property tax payments on this years income tax returns.

Rules and regulations concerning the IRS and authorized deductions should be independenttly verified for the year in which you are claiming those deductions.

Stage this room!

Especially in a slow paced market staging is a must!  With a minor investment of between $500 – $1,000 or even less in some cases you will more then double your investment or triple your investment according to proven surveys by real estate’s giant.Homegain.  It’s not just important for showings but for the internet presence where buyers rely on photos to narrow their choices. 

Makeovers don’t have to cost a lot as most professional stagers can use items the seller already has.  By staging only the key rooms, those rooms are what buyers usually use to make their final decision on making an offer.   I usually encourage sellers to tuck away all their personal items and “de-clutter” as much as possible.  Have my stager simply re-arrange my client’s furniture can improve the look tremendously, and then by adding a few key elements you can achieve the look!  Remember, stage this room and you’ll receive the monetary benefits in your bottom line net.

10 Reasons to list your home during the holidays

  1. People who look for a home during the holidays are more serious buyers! 

2. Serious buyers have fewer houses to choose from during the holidays and less competition means more money for you! 

3.   Houses show better when decorated for the holidays! 

4. Buyers are more emotional during the holidays, so they are likely to pay your price! 

5.   Buyers have more time to look for a home during the holidays! 

6.    Some people must buy before the end of the year for tax  reasons! 

7. January is traditionally the month for employees to being new jobs.  Since transferees cannot wait until spring to buy, you must be on the market now to capture that market! 

8. You can still be on the market, but you have the option to restrict showings during  the six or seven days when you want private family time. 

9. You can sell now for more money and we will provide for a delayed close or extended occupancy until  early next year! 

10. By selling now you may have an opportunity to be a non-contingent buyer during the spring, when many more houses are on the market for less money!  This will allow you to sell higher and buy lower!

10 reasons to list your home during the holidays