Open Doors Realty Blog

 By John Spence Print Article

RISMEDIA, November 4, 2009—(MCT)—Congress is a step closer to extending the $8,000 first-time homebuyer tax credit and offering a new credit to other types of buyers, but some analysts are downplaying the controversial stimulus’ effect on the housing market. 

In a recent interview, Fox-Pitt Kelton analyst Robert Stevenson said the Senate’s proposal for extending the $8,000 tax credit for new homebuyers will have a “limited impact” on home sales.

A Senate committee reached a deal last week to extend the $8,000 tax credit and offer a smaller $6,500 credit for some existing homeowners. The main pitfall of the proposal is that it only pushes back the expiration of the tax credit to the end of April, Stevenson said. It is currently set to go away on Dec. 1. Stevenson said he’s skeptical the tax credit will drive activity during the slower winter months. The prime selling season for the housing market kicks off in the spring and tends to run through the warmer months. “Of course, Congress could come back and extend it again,” the analyst said. “When the next selling season starts, the housing market will depend on the state of the economy and mortgage rates, rather than tax credits.” 

The $6,500 credit for some repeat homebuyers would let more buyers participate albeit at a lower level, “but a lot of those people are effectively trapped in their current homes,” Stevenson said. 

From their peak in 2006, U.S. home prices have fallen about 30% through the end of August 2009 during the housing downturn, according to the S&P/Case-Shiller home price index. More Americans are falling behind on their mortgage payments or losing their homes in the recession as job losses pile up. Rising foreclosures are another key worry. Yet hopes that a recovery is in place were fueled by a report showing the fourth straight month of rising home prices. Some attributed the tentative rebound to buyers rushing to cash in on the expiring $8,000 tax credit. The push to extend and expand the credit has been led by home builders, Realtors and other groups connected to the housing market. 

“Failure to act now could derail the fragile housing recovery even before it has time to take root,” said Jerry Howard, president of the National Association of Home Builders, in a statement urging Congress to stretch the tax credit. “The consequences would be devastating for both housing and the economy.” Howard said the tax credit has already helped create nearly 200,000 jobs, drive home sales, stem foreclosures and stabilize prices. Homebuilder stocks were up sharply in the wake of the news on the Senate compromise. Still, some economists say the incentive’s impact is overblown. 

“I am not applying the recent home-price rebound to the tax credit,” said Cameron Findlay, chief economist at LendingTree, in a recent interview. “I don’t think the tax credit makes as big an impact as people make it out to be, although it certainly motivates first-time buyers,” he said. “If it expires, I don’t think it would shake the housing market as much as some have predicted.” 

The compromise on extending the tax credit doesn’t mean it’s a sure thing, and the proposal still face votes in Congress. One potential snag is a recent government report that uncovered fraud and abuse associated with the tax credit. Thousands of ineligible taxpayers have received millions of dollars under the program, according to the report. 

Stephen East, an analyst at Pali Research, said the proposed new $6,500 credit would likely have some impact on the lower-end of the move-up market. “In essence, this could slowly start to prime the pump,” East forecast. “That said, we remain wary that any measurable impact will be seen until after the holidays and investors need to reconcile their expectations to that.” 

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services. 

“Reprinted from RISMedia Real Estate News Service [month, year] with permission of RISMedia, Inc. www.rismedia.com, Copyright 200x. All rights reserved.”

Finding Your Dream Foreclosure: What to Know When You’re Buying an REO Property

By Amy Hoak Print Article

RISMEDIA, October 5, 2009—(MarketWatch/MCT)—Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.

“The vast majority of the banks don’t want us to advertise them as ‘bank-owned’ because it comes with a negative connotation,” said Ryan Melvin, co-owner of More Realty Group in Las Vegas.

That means no sign on the front lawn indicating the home is anything other than a traditional sale. A buyer probably won’t find a property advertised as a foreclosure on marketing materials, said Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.

Plus, in some markets, including Las Vegas, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.

If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.

Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.

And that’s not always true.

One option for finding foreclosure listings: Go straight to the bank.

Lender Web sites, such as those operated by Bank of America, Chase and Citibank, will list the properties the financial institution has reclaimed when borrowers defaulted. To find a list, simply do a Web search for REOs and the name of the lender. Contact information for the property’s listing agents is usually provided for each entry.

For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.

Foreclosures.com charges $49.95 per month, after a free seven-day trial.

Otherwise, you might want to enlist the help of a realty agent. Someone who works regularly with REOs might be able to track down the properties more easily than a traditional agent. Melvin is a member of the National REO Brokers Association, nrba.com, which has a searchable database of brokers on its site. There’s also the REO Network, reonetwork.com, which connects buyers with those who specialize in selling REOs.

Lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial.

“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.

“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.

You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.

Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, shovel the snow and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.

“When we live at home or drive the car, if something is off we notice it. We notice it and we deal with it,” Steward said. When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.

A neighborhood environmental report might also be worthwhile, he said, which could reveal if the property was the site of a drug lab, for example. When a meth lab is operating in a home, air quality issues can arise; when a home was used for growing marijuana, there is a tendency for mold problems from the high humidity, Steward said.

The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly, Goldman said. Other lenders are disorganized.

“It really depends on who you’re doing business with,” Goldman said.

But for your best chance at having an offer accepted and for a quick closing process, have everything in order before making the offer, said Duane Andrews, CEO of Clear Capital, a company that provides valuation products for the mortgage and lending industries. That includes having the financing firmed up and writing a clean offer — for example, asking for new oven racks as part of the deal could peg you as a demanding buyer who will be annoying to deal with, he said.

“What this tells the seller is this guy is going to be a pain and they don’t have time for this pain,” Andrews said.

In fact, most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering, Melvin said.

But don’t expect to bargain the listing price way down, Melvin added.

Banks typically price their properties at a 20 percent to 30 percent discount anyway, he said. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power, he said.

Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer, Melvin said.

Above all, make sure to follow directions when submitting the offer, he said. That likely includes having an approval letter from the bank and the correct amount of earnest money.

“Most listing agents will have instructions how we want buyers agents to submit the offer,” he said. Delays can occur when instructions aren’t followed exactly.

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services.

“Reprinted from RISMedia Real Estate News Service [month, year] with permission of RISMedia, Inc. www.rismedia.com, Copyright 200x. All rights reserved.”

Are Short Sales Anything but Short?

By Mary Shanklin Print Article

RISMEDIA, October 23, 2009—(MCT)—For buyers, short sales are a way to get a bargain. For upside-down homeowners, they are a way to avoid foreclosure. But for pretty much everyone involved, short sales are not a way to buy a house quickly. 

But short sales can be anything but short. Unless they work with highly skilled agents, buyers and sellers can get frustrated if the process is protracted, which may lead to the deals simply getting abandoned. 

Short sales—when houses sell for less than the mortgages owed on them—and foreclosures rise during tough housing markets. For example, they now account for more than half of the home sales in the Orlando area, according to the Orlando Regional Realtor Association. In the spectrum of home sales, the deals fall somewhere between a regular transaction and a foreclosure. Sellers faced with foreclosure may opt for a short sale because it does not mar their credit as much as if the bank took over the house. They typically contact a real estate agent and set a sales price, based on an appraisal. Once the property sells, the bank must approve the sales price. Getting banks to approve a sale for less than the mortgage amount is what takes time. The process can become so complicated, with different lenders setting different rules, that short sales take about a month longer than other home sales to complete, according to the association. 

Once a buyer signs a contract, foreclosure sales take five weeks to complete, traditional home sales take seven weeks and short sales take more than 10 weeks. And the time it takes to complete a short sale has only grown longer as the year has progressed, with the bank-approved transactions taking up to seven weeks at the moment. 

For sellers, the process can be a tortured farewell to a home that has lost its value. Wanda Gibbons’ 4,000-square-foot Florida home that she purchased at the peak of the market in July 2007 for more than $510,000 was just days from “going to the courthouse steps” to be sold at an auction when she contacted attorney Justin Clark to explore a short-sale option. 

She hired a real estate agent and got an appraisal that showed her five-bedroom pool home with the brick pavers was worth about half what she paid two years earlier. Once Gibbons had a contract on her house, Clark submitted to her lender a package that included everything from the appraisal and a hardship letter to a sales contract. And then the waiting began.

“The problem is, it depends on the bank, the people the bank has and how many mortgages they have,” the attorney said. “These banks, they’re so inundated.” 

Banks typically take 45 to 60 days to even acknowledge they got the paperwork and to assign a negotiator to work on the sale, Clark said. At that point, they get a broker’s price opinion on the value of the home and whether the sales price makes sense. If the sales price doesn’t measure up to the broker’s opinion, the lender may tell the seller the price should be higher. In some cases, Clark said, the buyer will agree to pay more, the seller may have to throw in a few thousand dollars or the real estate agent may agree to cut his commission. 

In Gibbons’ case, the process was somewhat easier because unlike many sellers going through the process of a short sale, she had no second mortgage. Some lenders refuse to share any of the sales proceeds with the bank that holds the second mortgage. In some cases, homeowners face getting their credit rating dinged for not paying the second mortgage. That becomes part of the negotiation, Clark added. At that point, the deals can fall apart. 

(c) 2009, The Orlando Sentinel (Fla.).

Distributed by McClatchy-Tribune Information Services. 

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 By Kathleen Lynn Print Article

RISMEDIA, October 17, 2009—(MCT)—You’re thinking of selling—but not just yet. Let’s say you’ve got a five-year plan to prepare an older, lived-in house for sale. 

Maybe you’re faced with tattered carpets, battered appliances and dingy paint. Or maybe we’re talking about truly scary problems, such as asbestos, underground oil tanks or leaking roofs. 

What should you take care of first? What can wait? What can be ignored altogether? And how do you keep costs under control? 

“Basically what we’re talking about is good, solid preventive maintenance on your home,” said Barbara Weissmann of Friedberg Properties in River Vale, N.J. She recommends that homeowners looking at a sale down the road hire a home inspector to check out the house. “You’re looking to discover defects that you can fix over time,” she said. She and other experts say it’s possible to get a house ready for market without spending a fortune, especially if you have time on your side. And if you’re going to fix up the property anyway, Weissmann said, “why not do it several years in advance so you can enjoy it?” 

The first jobs to tackle include anything that’s a danger to your health or the house’s future. If the roof is leaking, for example, that will damage the ceiling, walls and floors below. Funky wiring or leaky plumbing? Deal with it sooner, not later. “The biggest killer of a home’s value is no maintenance,” Weissmann said.

If there’s flaking asbestos insulation on the pipes, that’s a health hazard, and can also delay or kill a sale down the line. Don’t try to remove it yourself; get a licensed contractor. 

You should also make sure you have working smoke and carbon monoxide detectors. Check with your town; some require that at the time of sale, the alarms must be wired into the home’s electrical system, a job that requires an electrician. Other municipalities will accept battery-operated alarms. Either way, you also want these in place for your own safety, along with a fire extinguisher in the kitchen. 

When you’re ready to sell, the buyer will generally require that certain major issues be addressed. Better to handle them now than risk delaying or losing a deal later. Aside from asbestos, another big environmental concern is an underground oil tank, which can leak. Jeana Cowie, a RE/MAX agent in Oradell, N.J., recently advised a couple who plan to sell in a few years to deal with the tank now. “I felt that buyers will skip looking at the home because of oil heat,” Cowie said. “And a new gas furnace is a huge positive for all homes.” Maybe you’ve already dealt with the oil tank. But if it was only abandoned in place, be prepared: a buyer will often seek to have it taken out because of concerns that the job was not done properly, said Louis Chapman, a real estate lawyer in Wayne and Teaneck, N.J.. You might want to have it removed before putting the house up for sale. Check for radon gas and deal with it if it’s there; this is something a buyer will also insist on. Try your state department of environmental protection for testing and correction companies. 

Basement moisture often is an issue in home sales, said Dominick Laurita of Interstate Home Inspections in Califon, N.J. It can lead to mold, which can scare buyers away. The most common cause: gutters that aren’t draining rainwater away from the house. “It’s a simple fix,” said Laurita. 

A termite problem also could derail a sale, so you want to act quickly if you find evidence of that. Though inspectors can’t see termite damage hidden behind walls, the insects sometimes leave visible trails. Keep the paperwork on all these jobs to show an eventual buyer. 

Once you get past the most pressing projects, there are a cluster of jobs where you have to weigh the benefits against the costs. In general, home sellers get back only 60% to 80% of the money spent on home improvements, according to Remodeling magazine. “You’re not getting a dollar back for every dollar you spend,” Weissmann said. “Don’t do any remodeling whatsoever, but anything that has to be replaced should be replaced,” said Dick O’Connor, a Dumont, N.J., real estate broker. “You can spend $50,000 to remodel and get only $30,000 back. Just be sure everything is in working order.” 

Michael Fitzpatrick, a Hackensack, N.J., real estate lawyer, said it’s okay to leave some issues to be handled in a negotiation between the seller and buyer, rather than spend a lot to upgrade the house before you even put it on the market.

Most experts recommend against major kitchen or bath renovations. But less ambitious upgrades, such as replacing scratched countertops or outdated appliances, could make sense, they said. “You’ve got to make it look good,” said Maria Rini, a RE/MAX agent in Oradell. “But the spruce-up bill can be a lot less than you imagine.” 

When it comes to cost-effective fix-ups, most housing experts have three favorites: clear out clutter, paint the walls and rip up old carpet. If the wood floors under the carpet are in good shape, great; otherwise, they can be refinished at a cost that typically ranges from $1.50 to $3 a square foot. Bob Olson, a contractor with Home Resources in Ridgefield Park, N.J., said updating doors, moldings and trim can give a home “a fresh new look” at a reasonable cost. 

Improving the landscaping, especially the front yard, is crucial. But it doesn’t have to look like a manicured estate. “Clean up the flowerbeds and trim back the bushes to expose the house,” Rini said. Plant flowers, especially in the front, for curb appeal, advised Barbara Ostroth, a Coldwell Banker agent in Oradell. In winter, you can plant cabbage plants with colorful leaves. 

If your furnace or hot water heater dies, obviously you must replace it. If those items are old but still working, however, most real estate experts advise that you leave them in place and adjust the home price to reflect their age. “If the heating system is old but works, don’t touch it,” O’Connor said. 

One option is to buy a home warranty when you’re ready to sell. A warranty “is a great way to overcome buyers’ objections to older appliances, pipes, electric systems, furnaces and hot water heaters,” Ostroth said. 

New, energy-efficient windows? That’s a costly job that many sellers would rather just leave to the buyers, even it means getting a lower price for the property. “If you’re getting out of the house you would almost never redo the windows, unless they’re rotted through,” Rini said. 

If you decide to renovate a kitchen or bath for your own enjoyment, keep resale in mind. “Try to pick something that is salable. Keep it neutral; don’t put in a green countertop,” said Margrit Vogler of Margrit Vogler Properties in Oradell.

Finishing a basement could be worthwhile if the house is small and there’s no other family room or play space for the kids. But otherwise, most real estate advisers recommend just tidying up instead, by throwing out clutter and painting the walls and floor. 

(c) 2009, North Jersey Media Group Inc.

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Rates have been all over the board.  While rates are still hedging around 5% on a fixed the market is still daily changing.  I would recommend that if you can live with 5% to lock your rate in and close.

There are many factors affecting the market and it is anybody’s guess now as to where it will be tomorrow.

Donna  

H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 - 184. Later that day, the Senate also passed the bill by a vote of 60 - 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010. 
View how the U.S. House of Representatives voted>
View how the U.S. Senate voted>

The mix of provisions of interest to REALTORS® changed frequently throughout the legislative process, with changes continuing to be made just hours before the measure was released prior to the vote.  In the end, the elements of NAR’s housing agenda were included.  Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.  

The bill includes the following provisions:

Homebuyer Tax Credit
FHA, Fannie Mae and Freddie Mac Loan Limits
Neighborhood Stabilization
Commercial Real Estate
Rural Housing Service
Low Income-Housing Grants
Tax Exempt Housing Bonds
Energy Efficient Housing Tax Credits & Grants
Transportation Investments
Broadband Deployment

Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.  The credit does not require repayment.  Most of the mechanics of the credit will be the same as under the 2008 rules:  the credit will be claimed on a tax return to reduce the purchaser’s income tax liability.  If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

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