Why You Should Buy A House In 2010

If you are looking to buy a house anytime soon, there are some factors that you need to pay attention to coming up that are really going to effect your home purchase.

March 31st, 2010

You probably know that mortgage rates are pretty good right now, but how long will this low rate last? Many people don’t know that the Fed has been purchasing mortgage-backed securities to the tune of $1.25 Trillion dollars.

The result of this has been somewhat “artifically” low mortgage rates. Really, this is another way that the government has been doing to help with the housing market. Why not take advantage of it?

April 30th, 2010

This is the date that the first-time homebuyer tax credit is finished. You must have an acceped offer by this date and close by the last day in June to get the credit. Why not take advantage of it?

April 5th, 2010

This is the date that the FHA upfront mortgage insurance will go up from 1.75% to 2.25%. Many loans are going FHA these days because you only need 3.5% down and you can even get that as a gift, plus you don’t need as good of credit with FHA vs. Conventional. Why not take advantage of it?

These are pretty signifcant credits and discounts that you can use if you can find a house that meets your needs between today and the deadlines. Make sure to check out our home search to get access to the best homes.

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Buying A Home: 17 Steps To Success

Buying a home is a very important decision in your life and there are quite a few components of the process that you need to pay attention to as you move towards closing on the new house. Here are 18 steps that you need to know about before you start the process.

1. Hire a buyers agent. This is crucial because you need someone on your side who knows what to do and how to do it.
2. Get prequalified. Ask any agent and they will tell you that some lenders are just better than others at getting the job done.
3. Look for homes. Start looking for homes that make sure that you know what you’re looking for before you start.
4. Write a purchase and sale agreement. This is where you lay out your offer price in terms of the home purchase.
5. Negotiate and right counteroffers. This is when a good buyers agent comes in handy and their negotiation and experience can save you thousands.
6. Deposit your earnest money. Usually after the offer is accepted your earnest money will be deposited in a trust account.
7. Open escrow. Your buyers agent will coordinate the step and get all the required paperwork to the title company.
8. Order an appraisal. Your lender will usually coordinate the ordering of the appraisal and the appraiser is someone who is essentially working for the bank to make sure the value is there.
9. Seller disclosure forms. The seller list their home they typically fill out a seller disclosure form that discloses anything about the property that they know of.
10. Homeowners insurance policy. Coordinate with your lender make sure your insurance policy and binder is ready for closing.
11. Get your home inspection. This is probably the most important part of your home purchase even if it is a brand-new home.
12. Inspection contingency release. This is a form that you provide to the sellers laying out your terms based on the inspection.
13. Removal of all other contingencies. You need to take care of any other contingencies that you have that were written into the purchase and sale agreement.
14. Do a final walk-through of the property. This is done to make sure that the repairs are done that were required in the inspection.
15. Sign. This is when you go to the title company and sign your loan paperwork with the escrow officer.
16. Deposit funds. You need to write a check for your down payment and closing costs and the bank needs to transfer money to the escrow company to close the deal.
17. Close of escrow. Now everything is back into the escrow company they can find and record on your brand-new home.
2.5.2010 12:55 PM
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Process of Buying A Short Sale Home

If you are looking for a home these days, you probably better brush up on the process of buying a short sale home.  If you look on the available homes in your local MLS, you will probably find that many of them are listed as a short sale.  (Short Sale is when the owner is selling it for less than what is owed to the bank or banks.)

Lets talk about the process a bit.

First, the home is usually in default or in position to be in default.  Usually called a pre-foreclosure property.  If the sellers don’t see a way to keep the home or get their loan modified, they can list the home with a local real estate agent to see if they can sell it.  With the downturn in the real estate market, many sellers can’t sell their homes for what is owed on the home or more, so they have to sell it as a “short sale”.

Second, the real estate agent lists the home and discloses to the public or to the agents that the home is a short sale listing.  They usually price them fairly agressive on the MLS to get looks and eventually offers.

Third, home buyers look at the home just like a typical home.

Fourth, the sellers receive and offer and typically will sign it unless they feel the offer is way too low and the bank won’t accept the offer.

Fifth, the listing agent will compile a short sale package which includes the signed offer, seller financial statements, bank authorization letters, the listing agreement, and more to the bank in 1st position and to the bank in 2nd postition on the home if applicable.

Sixth, once the complete package is submitted to the lender or lenders, it is a waiting game in most cases.  The banks must calculate their proceeds of the short sale vs the proceeds if they have to foreclose on the home.  Keep in mind that they have to work with the 2nd lien holder and mortgage insurance as well to get approval.  Some of the large banks are taking up to 4 months for this process.  It is a real stressful time if you are a buyer putting your search on hold waiting for an answer from the bank.

Seventh, the bank either approves, rejects, or counters the offer.   If there is acceptance of the short sale offer, you should expect to close within 30 days from the acceptance.

The banks and the US government are working to streamline short sales this year so that these homes can be purchased faster and in turn help the economy get a jump start.  We will see what happens.

I personally try to find my buyer clients REO properties instead of short sales upfront to help lessen the stress.

Make A Low Ball Offer On A House: Dos and Donts

Question From Gary? Ben, I have a simple question. Tell me about making low-ball offers and get them accepted.

When you are searching for a home during a buyers market, you’re much more likely to get a lowball offer accepted. Before you make an offer on a property whether you plan to lowball the offer or submit a competitive offer, you need to make sure that you know the market and the market numbers. Talk to your professional buyers agent before you start your home search about your strategies moving forward.

Here are some common mistakes made by lowball buyers

Can’t afford the home.
There are many buyers that have made the mistake of thinking that they should get a lowball offer accepted by the seller because they only were approved for a smaller amount on the loan. Typically, sellers don’t really care if you are only approved for a certain amount, they just care about getting their home sold for the price they want. So, this is the wrong strategy to approach to negotiation.

Paying all cash. Buyers asking all the time is paying cash is going to help them with the negotiations. When comes down to it, paying cash or getting a loan is all the same to the seller. You can help you close earlier and avoid some of the issues that come up with financing home.

Walking away too soon. We make an offer, especially if it’s a lowball offer, expect to get counteroffers in the process from the sellers. If you expect us up front, you have less of a chance of being offended by the counteroffer and walking away from the transaction to soon. Be patient and stick around to see what happens.

Strategies that win with lowball offers.

What is the sellers motivation. If you have a little bit of information up front about the seller and of their time frames and motivation, you can tailor your offer in a way that meets their needs in some respects, but meets your needs when it comes to price. Make sure you have an aggressive buyers agent on your side that will dig up some information for you.

Make sure your offers clean. The number one thing that you’re looking for on the offer is the price you want. I always suggest that’s buyers give in other areas of the agreement so their offer looks as good and as clean as possible. Don’t ask the seller to pay for things they usually don’t pay for, or give up personal items with the house.

Countering their counteroffer. Just because they counteroffer doesn’t mean the deal is dead. Stick with the deal, counteroffer their counteroffer and he just might get a great deal in the house.

Justify your offer price. If you just throw in a lowball offer just to throw one in, you probably are going to offend the sellers and get a high counteroffer back or a rejection. Make sure you submit some type of justification as to why your offer is below their asking price. You’ll be surprised what a few statistics would do.

If you’re looking to purchase a home in the next six months make sure you check out our home search tool that helps you search like an agent and good luck with your lowball offers.

Buying A Home In Another State

When he moved from one state to another, it can be a very stressful time in your life. Just moving within a community can be stressful and you have to worry about relocating overlarge distance. Typically, an out-of-state buyer has a few disadvantages in the fact that they don’t know the area, communities, and laws.

I’m one thing we can do right off the bat is hire a professional buyers agent. This can be your first contact me have questions about homes in the market in general. This is a much better way to go about things versus calling the listing agents of each home that looks interesting to you. Keep in mind, that the listing agents are working for the seller and want to get the best deal for the seller. Buyers agent will be able to show you any home on the market, and it is usually free to you as a buyer to hire a buyers agent.

Here are some duties of your buyers agent.

• Your buyers agent represents your best interests throughout the transaction and doesn’t disclose any personal information about you, your money, or your motivation.
• Buyers agent will negotiate on your behalf.
• The seller or listing agent is the one that is typically paying the buyers agent for any services rendered during the transaction for you.
• Buyers agents can be a great asset and specialists in certain communities or neighborhoods.
• Overall, buyers agent will help you make the right decisions.

Sign into our home search to be connected with a recommended buyers agent for the area you’re looking to move into. The co-op with only the best agents taking into account productivity, experience, and real estate designations.

How To Make An Offer On A House and Competition

Question For Ben Janke: “Ben, We made an offer on a house this past weekend during an open house. We wrote the offer up with our real estate agent and put in our earnest money. We haven’t heard back yet on the offer. Can someone still come in and make another offer on the house? If they do, can we match their offer if they are higher than us in their offer?

Thanks.  Jennifer

Answer: Jennifer.  Thanks for the questions.  When you make an offer, you have a time limit for response put in the offer.  One of the advantages of giving the seller a short time to respond is to help prevent competing offers from coming in.  At the same time, you want to give them enough time to responds as not to aggravate them.

If someone makes another offer on the home before your offer is signed and accepted, the sellers have the option of taking the other offer, taking your offer, sending a multiple counter offer to both buyers, or rejecting both offers.  Will you get a chance to match their offer?  Not always.  It is up to the seller how they would like to proceed in this instance.  If the other offer is at their asking price and terms, and yours is not, you might end up losing the house.

If you know that someone else has made an offer, you can always submit an addendum right away to change any of your terms in hopes that the seller will take your offer.  Good luck and I hope you get it!

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First Time Home Buyer Tax Credit and Filing Your Taxes

I’m getting tons of questions about the first-time home buyer tax credit and its rules regulations. Rather than answer the questions over and over again, I thought I would get a quick post with some of the rules that you need to pay attention to before you make a move in the real estate market regarding the $8000 tax credit.

The $8000 tax credit for first time homebuyers only. The IRS to find a first-time home buyer as someone who has not owned a principal residence during the past three years.

You don’t have to repay the tax credit unless you sell the home within three years or move out of the home and turn the home into a rental.

Most people I talk to think that everyone gets $8000, but the tax credit only allows for 10% of the homes purchase price with a maximum amount of $8000. The tax credit only is allowed for homes under $800,000 in value.

The deadline for the tax credit is for purchases that were completed on or after January first, 2009 and you must have also completed the transaction on or before November 6, 2009. If you purchase during this timeframe, the income limits for the tax credit are $75,000 for single filers, and $150,000 if you’re filing jointly or married.

They did make an extension to the tax credit and also enhanced it for those who purchase a property after November 6, 2009 and before the end date of April 30, 2010. If you purchase during this time the tax credit limits for income are $125,000 for single, and $225,000 for married couples.

Also, keep in mind that you cannot each file your taxes if you’re claiming the tax credit. The reason this is is because the IRS is so backed up with fraudulent claims that they can’t keep up with all the filings, and they are also requiring that you send in a picture ID, and other mortgage documents with your taxes to ensure that you actually qualify for the tax credit. There’s been something like 75,000 fraudulent claims as far the first-time home buyer tax credit.

Claming Your HomeBuyer Tax Credit

Home buyers that purchased a house after November 6th, 2009 can now claim their $8,000 first time home buyer tax refund.  The IRS had a bit of a glitch on getting out the proper form 5405 that allows for the refund.  The bad news is that you can’t use the e-file system to if you want the cash, and there are some pretty long delays in acutlaly getting the money back.

Sources state that the IRS is estimating a 4 month time frame to have the refunds sent out to recipients.  Some tax payers did already receive their up to $8,000 credit back, but some of the fraud that has gone along with the program has caused some large delays.  For instance, James Otto Price III was recently convicted of filing the tax credit falsely for 15 of his accounting clients.

Because of the fraud,  you are really going to have to provide your information with your claim.  This includes,  a proof of residency, a signed mortgage statement, and a copy of your drivers license.   This should help cut down on some of the tax credit fraud, but there already has been so much fraud already perpetrated.

“Because of the scams, the IRS started sending back the amended returns and asking for proof,” said Mary Mellem of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals. “The system has no way of sending along the documents they’re requiring. Taxpayers must file a paper return instead.”

Short Sale Listings and How To Buy Them

Everybody’s wondering what exactly a short sale is. It is definitely a hot topic in real estate these days. Let’s get right into it.

A short sale typically occurs when the homeowner is not able to make their minimum monthly payments. After about three months of not making payments, the banks will typically send out a letter called a notice of default or an NOD which notifies the homeowner of the default in writing right to their doorstep.

At this point time, the homeowner has the option of either catching up on the payments, modifying their loan if that option is available for the bank, selling the home if they can and pay off their loan, selling their home for less than what is currently owed on the property (this is a short sale), or letting the home go to foreclosure.

So again, a short sale occurs usually when the homeowner owes more on the property than what it is actually worth and need to sell property. The events of them doing a short sale instead of letting the home go to foreclosure is that a short sell will not affect their credit as much as the foreclosure will. In a foreclosure, they might not be able to purchase a home for up to 5 to 7 years, and they’re credit may be hit as much as 200 points.

A short sale, could potentially allow the homeowner to purchase a home in 3 to 5 years, and they only hit their credit or FICO score up to around 100 points. This a much better option in most cases. How much a short sale affects one’s credit really depends on how strong the persons credit is to start with. So, there are no set rules.

If you’re looking into purchasing a short sale property, there can be some great benefits and also some big fallbacks. First off, if you haven’t heard yet short sale transactions can be a real pain in the butt for the seller, the buyers agent, the seller’s agent, and the buyer. Depending on the bank and their systems of employees, it could take anywhere from two weeks to seven months to get a response back from the bank on an offer that has been accepted between a buyer and the seller. I don’t know about you, but when you’re looking to purchase a home waiting seven months can throw a kink into plans and really throw off your timing.

Here some the steps of the short sale.
Step one: List the property on the MLS

Step two: Obtain an accepted offer on the property between the buyer and the seller.

Step three: Obtain a preliminary net sheet showing the lender what they will net him a transaction.

Step four: Prepare the short sell package. This includes the accepted offer, a letter of authorization which gives the real estate agent permission to talk to the bank about the loan or loans in question, prepare a hardship letter, gather proof of income and assets, added copies of your most recent bank statements, listing agreement, and also submit a comparative market analysis of property to show the lender what the homes worth.

Step five: Wait

Step six: Wait some more.

Once you have all this data, you can submit be offered to the bank. Keep in mind that some transactions might have two, three, or more banks involved.

So, if you have a lot a time and you’re very patient person, short sale can be a viable option for you if you want to get a good deal on your next purchase, but I would definitely check out the REO or bank owned properties first before making an offer on a short sale listing.

Oh, and by the way that you’re working with an agent who has experience with short sales.

Foreclosure Process Steps

If you are looking to purchase a home anytime soon, it is very important for you to understand the real estate foreclosure market. It is important to know how the foreclosure market works and what the process is. Once you understand the foreclosure flow, you can be one of those buyers that can snag a great deal.

Another point to understand is that just because a home is a foreclosure home does not mean that it is a better deal than a regular home that is active on the market. Foreclosure homes can sometimes be worth less that what the bank is asking or less than it sells for at auction.

Here are the steps to the typical foreclosure:

1. The homeowner stops paying their minimum mortgage payment.

2. Lien holder(s) file a notice of default typically after 90 days

3. Notice of sale date. Lien holder gives notice of when they will auction the property.

4. Foreclosure Auction.

5. If the home does not sale at the auction, it is “bought” back by the bank and now is considered an REO or bank owned property.

6. Bank will typically re-list the property on the MLS with their REO agent in the area.

Home Loan Pre-Approval – Why It’s So Important

Stop! I know you are excited to start searching for your next dream home.   It is an exciting time.  This is when you really need to make sure that you are thinking about some important steps that you need to take to make the process smooth and productive.

Go ahead and look around online, but before you actually step foot in any home, make sure you know what you can afford before you go shopping.  Get a home loan pre-approval.  It is vital.

I have seen many people find the perfect house only to find out that no lender would give them the money they thought they could get.  This is hard to recover from.  First, you have usually wasted weeks looking at homes that you can’ t afford and now you have to start looking at homes that you might consider to be “inferior”.  Lower Read more

Rent vs Buy: Keep Inflation In Mind

With all things being equal, it is hard to find too many instances where buying a home does not pan out better financially than renting a home. You get to be the one that benefits from the average 4-5% equity increase per year and you also get to write off your mortgage interest and even your mortgage insurance if you have any.

And if you play your cards right, when you sell you’ll be eligible for one of the best tax breaks around. This does not mean that everyone should be a homeowner.  That is what got us into so much trouble in 2004-2006.

Keep in mind that as time goes on, rents typically increase.  If rent averages were $600 per month 10 years ago, chances are that they are $900 today and so on.  When you buy, you can lock your payment for the life of the loan with a fixed rate mortgage.  The only thing that may fluxuate is the tax and insurance that you pay.  That may even go down, but when have we really expected taxes to go down.

Real Estate Tax Benfits and Savings

With your income tax deductions, essentially the US government has ended up subsidizing your home when you own. It is great because all of the interest that you accrue through your mortgage each years is a tax-saving write-off.

Lets take this example of you taking out a loan at $150,000 with an interest rate of 8%. During the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would be almost $10,000 less – due to the IRS interest rate deduction.  So imagine, if you make $50,000, your new tax liability is now $40,000.  In a 30% Read more

Idaho Short Sales

What is a short sale?

A short sale is when a homeowner needs to sell the property, and the property is now worth less than what they have the ability to pay at closing to the bank. So essentially, they are upside down on their house. Typically, most short sale properties are no longer being paid on by the homeowner. This could also mean that they are in the foreclosure process, or close to it.

Obstacles of short sales.

Every first obstacle of a short sale is the fact that they are typically worth less than homes that are not in need of a quick sell. Most of the listings on the Idaho MLS that are listed as short sales. Do not have an approved price from the bank. So what has to happen first is that the listing agent has to present an offer to the bank, the bank has to review the offer, and then the bank can either accept the offer, reject the offer, or counteroffer. The frustrating part about this scenario is that this process can take anywhere from two weeks to four months to get an answer from bank. By that time, most buyers have moved onto something else.

So if you want to make an offer and short sale, is going to serve you best to go after properties that are ready have preapproved value that the bank will accept. These will tend to go a lot quicker and a lot smoother. If that is possible with short sales.

So if you’re looking for a great deal in the Idaho real estate market, purchasing a short sale can be a great way to do it. But, it does come with some frustration and sometimes some long waits. And if you’ve waited for four months, and the bank doesn’t accept your offer, you have to restart.

What I suggested my clients is to either go after properties that have a preapproved price already, or properties that have already been taken back to the bank. These are considered REO properties. Rather than two weeks to four months, you typically will hear back anywhere from one to seven business days.

Click Idaho MLS to see the available homes.

$8000 tax credit

Who is eligible to get a tax credit?

If you’re looking to purchase a home and is your first time your eyeing a home, whether it be new or resale. You are eligible for the $8000 tax credit. If you qualify for the tax credit. Your purchase must be on or after January first 2009 stretching all the way to the end of the year of 2009. Keep in mind that this is tracked by the closing date of the property.

What is their definition of a first-time home buyer?

“First-time home buyer” is someone who has not owned a principal home during the three-year period prior to the purchase. So this means that if you have owned a home in the past but have not in the past three years, you can still qualify for this $8000 tax credit. If you are married, both you and your spouse have to qualify.

How is the amount of the tax credit determined?

Keep in mind that the bill says up to $8000. It is actually tax based on 10% of the homes purchase price up to the maximum of $8000.

If you need any more information about the tax credit. Please contact us.

Boise Housing Update July 2009

I wanted to give you a quick update on the market in the Boise, Idaho area. There are still quite a few REO properties and short sales available, so withstanding the fact, and is going to be difficult for any home prices to see an increase anytime soon. Fact of the matter is, the Idaho market just has too many homes available right now and too little buyers. Until that ratio changes, is going to be a buyers market for quite a while.

So if you’re looking to buy a home, it is important to know what the actual market value of that home is before you make an offer. Don’t rely on the active properties in the area to help you determine what the market value is. You need to get access to what has recently sold in the area for comparables. That is the only number that really matters when you’re going to purchase a house.

If your looking to sell your home, is important that you have a great marketing plan upfront, and also you have your home priced correctly up front. Without these two things coming into place in the beginning, it is almost impossible to move a house these days.