As much as we would like to say that the wave of foreclosures is almost over, it appears that it will be around for some time yet. Though foreclosures are harmful financially, emotionally, and socially for the home-owners, the communities and the economy, there has been one silver lining and that is the opportunity some new home owners have had in being able to purchase their new homes at fantastic prices. If you are considering purchasing a new home in this current market, here are some tips to help prepare you if you come across bank-owned homes in your search.
1.) Dress warmly. Between October 15th through April 15th, many banks “winterize” their listings. This means that they turn off the water at the street level and turn the heating system completely off. It is not uncommon for the home you are looking at to be colder than it is outside. (On a positive note, we have seen more bank-owned homes with heat on this year than the past three years).
2.) Be patient. Often, banks do not act as quickly as we would like them to. It is not uncommon for them to take several days to respond to your offer, several more days to get signed paperwork, and even a few more days to get the utilities on so that you can perform an inspection
3.) Understand the market. Bank-owned homes are typically listed for far less than their human owned competition. There are plenty of buyers looking at these opportunities and it is not uncommon to find yourself bidding against at least one or more potential other buyers. An aggressively pried bank-owned home can easily sell for well over the list price in just a matter of a few days.
4.) Do not count on things happening on time. Often with bank-owned homes closings are delayed. Banks will charge the buyer a per diem fee if the closing is delayed due to the buyer not being ready, however most delays in closings are due to the bank not being ready. Be sure to allow yourself a time buffer from when you close and when you need to be out of your current place. Line up your moving truck after your closing is completed. If you are trying to take advantage of some of the tax incentives, be sure to leave time buffers with the deadlines associated with this as well – Currently, purchase agreements need to be completely signed by all parties prior to April 30th, and closings need to take place by June 30th.
5.) Don’t get too wrapped up. Buy a home because it is the right one for you, not because you want to get the government incentive. Though the incentive is great, this is still one of the biggest purchases you will make, and it needs to be thought through carefully.
6.) Be prepared. Most bank-owned homes have a lot of deferred maintenance, will need thorough cleanings, new paint and carpeting, and new appliances. You will be required to purchase the home “AS-IS,” so a buyer’s inspection is even more important than ever. Make sure you have a good understanding of what the home will need after closing to make it function for you.
7.) Don’t exclude the human owned homes. Many people selling in this market are being very competitive with the bank-owned listings. They know that to compete they have to offer a great price and have their home in terrific condition. Many buyers who start out looking at bank-owned homes come to the conclusion that they would rather pay more a month in mortgage payments than come up with thousands of dollars and many hours to make their new home habitable. For every $1000 dollars your mortgage increases, your payment goes up just a little over $5.00 with the current rates. So, for example, going up $20,000 in price may cost you only $100 more per month. So, be sure to look at the big picture and determine what works best for you.
8.) Plan ahead. Have a budget, live within it, and have a reserve for the unexpected. If you qualify for the buyer incentives put a good portion of that into a savings account. We all look forward to the day that bank-owned homes are relatively rare again, and having a few mortgage payments in a savings account can make the difference for you if there is a loss of employment or an unexpected expense or health issue.
9.) Enjoy the process. Buying a home should be fun and exciting. It is also stressful, but ultimately your patience and hard work will pay off.
10.) Use a Realtor. In the State of Minnesota, we have buyer representation, and the Broker’s commission is almost always paid by the seller. The agent you hire has fiduciary duties to you to work in your best interest always and they will be able to help you navigate this process that has changed so much in the past four years.
Thursday, February 25, 2010
Friday, October 30, 2009
What you need to know about the $8000 tax credit
WHAT YOU NEED TO KNOW ABOUT THE $8000 TAX CREDIT
AUGUST 27th, 2009
The deadline for qualifying for the American Recovery and Reinvestment Act of 2009 First Time Home Buyer Credit of $8000 is fast approaching. If you are a first time home buyer (defined as someone who has not owned a principal residence in the last three years) and earn less than $75,000 a year (though income up to $95,000 or $170,000 for jointly filing married couples still qualify for a portion of the tax credit) and purchase a home intended to be your primary residence for at least $80,000 and close on or before November 30th, 2009 you will qualify for the $8000 tax credit. This money is not required to be paid back if you live in this home for at least three years, and this money can be used anyway you desire. One note for GLBT couples is that if only one buyer qualifies as a first time buyer, then that buyer can apply for the entire tax credit.
However, since the expiration of this incentive is coming up there are a few things a buyer should consider to ensure that they close in time to receive this benefit.
First, the process of finding homes and making an offer can take several weeks. The inventory is at it’s lowest levels in years. In fact, based on information from the Regional Multiple Listing Service of Minnesota, Inc for the period from January 2003 through July 2009, we are on pace to have fewer new listings in 2009 than we saw in 2003. And, we are also on track to have more pending sales than in 2007 and in 2008. A moderately strong finish of this year could mean that 2009 will have more pending transactions than 2006. Multiple offer situations (where more than one buyer is making an offer on the same property) is more common than not, particularly if the house is priced well, and especially if this well priced home is on the lower end of the price spectrum. Many buyers are writing five or more offers before getting an offer accepted. Buyers who realize that they have to make good offers, and often even offers above list price are more likely to win in these multiple offer situations.
Second, mortgages take time to process. The typical FHA mortgage (which allows for a down payment of only 3.5%) usually takes 30 days from start to finish once you have a signed purchase agreement. A VA mortgage takes about 45 days. An FHA 203k (rehab loan) takes 60-70 days, and a Conventional Mortgage (requiring a minimum of 5% down) takes at least 21 days. Be sure to allow enough time for the processing of your mortgage if you are trying to close before November 30th.
Next, be cautious of closing too close to the end of the deadline. It would be best to give yourself a cushion as the end of the month is typically the most popular time to close on a new home, and it is projected that underwriters and title companies may become backlogged as the deadline approaches. Also, if you are buyer of a bank owned home keep in mind that the selling banks are not always very good at making closing dates. A lot of delays going on right now with bank owned homes come from the banks not getting signed contracts to the buyers in a timely manner so they can get their inspection process started, not getting the utilities turned on in a timely manner so the buyer can complete their inspection and move forward with their mortgage, or not having their title work or power of attorney documents completed in time for closing.
Last, understand how short sales work before embarking down that path. The term short sale has nothing to do with the amount of time it takes to get the transaction done. It means that the seller is selling the home short of what they owe on it, and they are requesting the bank to consider taking the difference as a lost. The majority of these short sales take between 4 and 8 weeks for the bank to make a decision as to whether or not they will consider the buyers offer. There are currently a lot of short sales with offers being considered. As we get closer to the end of September, I foresee many of these buyers abandoning their short sale offers and looking for homes that take less time to get an offer accepted to ensure a closing before the end of November. Short sales can provide buyers opportunities for tremendous deals, and you may have to decide between getting the deal or getting the tax credit.
Anyway you look at it, with low interest rates and low home prices, now is a great time to be a home buyer. The $8000 tax credit sweetens the deal, but even without it the opportunities are incredible. There is still time to take advantage of this incentive, and keeping the above information in mind should help you to successfully close in time to receive the benefit.
And, if you do not qualify as a first time buyer or if you are an investor the best time to throw your hat into the ring just might be after the expiration of the $8000 tax credit as home sales are typically at their lowest in the months of December and January and many of the first time buyers will have completed their sales already to make the November 30th deadline, so some of the current frenzy should be dissipated. Look for tips on how to buy bank owned homes in the winter in the next issue of Q!
This article published in the Fall edition of Q!
AUGUST 27th, 2009
The deadline for qualifying for the American Recovery and Reinvestment Act of 2009 First Time Home Buyer Credit of $8000 is fast approaching. If you are a first time home buyer (defined as someone who has not owned a principal residence in the last three years) and earn less than $75,000 a year (though income up to $95,000 or $170,000 for jointly filing married couples still qualify for a portion of the tax credit) and purchase a home intended to be your primary residence for at least $80,000 and close on or before November 30th, 2009 you will qualify for the $8000 tax credit. This money is not required to be paid back if you live in this home for at least three years, and this money can be used anyway you desire. One note for GLBT couples is that if only one buyer qualifies as a first time buyer, then that buyer can apply for the entire tax credit.
However, since the expiration of this incentive is coming up there are a few things a buyer should consider to ensure that they close in time to receive this benefit.
First, the process of finding homes and making an offer can take several weeks. The inventory is at it’s lowest levels in years. In fact, based on information from the Regional Multiple Listing Service of Minnesota, Inc for the period from January 2003 through July 2009, we are on pace to have fewer new listings in 2009 than we saw in 2003. And, we are also on track to have more pending sales than in 2007 and in 2008. A moderately strong finish of this year could mean that 2009 will have more pending transactions than 2006. Multiple offer situations (where more than one buyer is making an offer on the same property) is more common than not, particularly if the house is priced well, and especially if this well priced home is on the lower end of the price spectrum. Many buyers are writing five or more offers before getting an offer accepted. Buyers who realize that they have to make good offers, and often even offers above list price are more likely to win in these multiple offer situations.
Second, mortgages take time to process. The typical FHA mortgage (which allows for a down payment of only 3.5%) usually takes 30 days from start to finish once you have a signed purchase agreement. A VA mortgage takes about 45 days. An FHA 203k (rehab loan) takes 60-70 days, and a Conventional Mortgage (requiring a minimum of 5% down) takes at least 21 days. Be sure to allow enough time for the processing of your mortgage if you are trying to close before November 30th.
Next, be cautious of closing too close to the end of the deadline. It would be best to give yourself a cushion as the end of the month is typically the most popular time to close on a new home, and it is projected that underwriters and title companies may become backlogged as the deadline approaches. Also, if you are buyer of a bank owned home keep in mind that the selling banks are not always very good at making closing dates. A lot of delays going on right now with bank owned homes come from the banks not getting signed contracts to the buyers in a timely manner so they can get their inspection process started, not getting the utilities turned on in a timely manner so the buyer can complete their inspection and move forward with their mortgage, or not having their title work or power of attorney documents completed in time for closing.
Last, understand how short sales work before embarking down that path. The term short sale has nothing to do with the amount of time it takes to get the transaction done. It means that the seller is selling the home short of what they owe on it, and they are requesting the bank to consider taking the difference as a lost. The majority of these short sales take between 4 and 8 weeks for the bank to make a decision as to whether or not they will consider the buyers offer. There are currently a lot of short sales with offers being considered. As we get closer to the end of September, I foresee many of these buyers abandoning their short sale offers and looking for homes that take less time to get an offer accepted to ensure a closing before the end of November. Short sales can provide buyers opportunities for tremendous deals, and you may have to decide between getting the deal or getting the tax credit.
Anyway you look at it, with low interest rates and low home prices, now is a great time to be a home buyer. The $8000 tax credit sweetens the deal, but even without it the opportunities are incredible. There is still time to take advantage of this incentive, and keeping the above information in mind should help you to successfully close in time to receive the benefit.
And, if you do not qualify as a first time buyer or if you are an investor the best time to throw your hat into the ring just might be after the expiration of the $8000 tax credit as home sales are typically at their lowest in the months of December and January and many of the first time buyers will have completed their sales already to make the November 30th deadline, so some of the current frenzy should be dissipated. Look for tips on how to buy bank owned homes in the winter in the next issue of Q!
This article published in the Fall edition of Q!
GLOOM & DOOM in the Twin Cities Housing Market . . . . or is it?
GLOOM & DOOM in the Twin Cities Housing Market . . . . or is it?
May 15th, 2009
Did the title of this article catch your attention? Well, gloom and doom sells. However, if you have listened to the news lately, you may have heard some positive snippets regarding the Twin Cities housing market. What you haven’t been hearing is that this trend actually started in July of 2008! Based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period from January 2003 through April 2009, we have actually seen an increase in pending sales for every month from July 2008 through April 2009 compared to the corresponding month one year prior (May statistics not yet available). The last time we had seen this was the month of January 2006 – which saw more pending sales than January of 2005. So, after a long 2.5 years , (yes this market started back in 2006) we have lots of reasons to be positive about the housing market in the Twin Cities.
One interesting point to note is this increase in pending sales took place during the height of the credit crunch. Yes, mortgages are no longer easy to come by. A buyer does now need to have a down payment, a job, and a good credit score. For folks not in the real estate business or in the real estate market, the news reports made it sound as if no one could obtain a mortgage. This simply was not true if you had the required items listed above. Though the new requirement can be frustrating for those who could handle a mortgage, but fall outside of the current underwriting guidelines – such as a lot of self-employed people, the new lending practices make good sound sense and along with the abandonment of the ARM mortgage, will hopefully lead to lower rates of default in the upcoming years
Another positive factor in the housing market is that the inventory is lower. This is due to two reasons – homes being purchased and fewer new listings. Again, according to the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period from January 2003 through April 2009, new listings are down for the first four months of 2009 - reaching numbers that were similar to what we saw in early 2005. Some of the factors contributing to this include: mortgage companies making some effort to keep home-owners out of foreclosure (they need to look like they are doing this in order to benefit from the bailout money), sellers deciding it is not the time to try to sell now, and a lowered rate of new construction.
As a real estate professional, I try to ignore the gloom and doom of the everyday news and look at the facts and the statistics. After 10 months of positive numbers in the Twin Cities, the news is finally catching on that we have some improvements. Once they state that we have hit the bottom of the market, it will be well behind us. In fact, I think in a lot of neighborhoods, the lowest priced homes hit the bottom sometime back in November of 2008.
This article publiched in the summer addition of Q!
May 15th, 2009
Did the title of this article catch your attention? Well, gloom and doom sells. However, if you have listened to the news lately, you may have heard some positive snippets regarding the Twin Cities housing market. What you haven’t been hearing is that this trend actually started in July of 2008! Based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period from January 2003 through April 2009, we have actually seen an increase in pending sales for every month from July 2008 through April 2009 compared to the corresponding month one year prior (May statistics not yet available). The last time we had seen this was the month of January 2006 – which saw more pending sales than January of 2005. So, after a long 2.5 years , (yes this market started back in 2006) we have lots of reasons to be positive about the housing market in the Twin Cities.
One interesting point to note is this increase in pending sales took place during the height of the credit crunch. Yes, mortgages are no longer easy to come by. A buyer does now need to have a down payment, a job, and a good credit score. For folks not in the real estate business or in the real estate market, the news reports made it sound as if no one could obtain a mortgage. This simply was not true if you had the required items listed above. Though the new requirement can be frustrating for those who could handle a mortgage, but fall outside of the current underwriting guidelines – such as a lot of self-employed people, the new lending practices make good sound sense and along with the abandonment of the ARM mortgage, will hopefully lead to lower rates of default in the upcoming years
Another positive factor in the housing market is that the inventory is lower. This is due to two reasons – homes being purchased and fewer new listings. Again, according to the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period from January 2003 through April 2009, new listings are down for the first four months of 2009 - reaching numbers that were similar to what we saw in early 2005. Some of the factors contributing to this include: mortgage companies making some effort to keep home-owners out of foreclosure (they need to look like they are doing this in order to benefit from the bailout money), sellers deciding it is not the time to try to sell now, and a lowered rate of new construction.
As a real estate professional, I try to ignore the gloom and doom of the everyday news and look at the facts and the statistics. After 10 months of positive numbers in the Twin Cities, the news is finally catching on that we have some improvements. Once they state that we have hit the bottom of the market, it will be well behind us. In fact, I think in a lot of neighborhoods, the lowest priced homes hit the bottom sometime back in November of 2008.
This article publiched in the summer addition of Q!
Friday, October 31, 2008
Why Vote for Al Franken?
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I just got home from the Get Out The Vote Rally in Minneapolis. There was a fine group of speakers giving engaging speeches including Walter Mondale, Amy Klobuchar, Keith Ellison, and of course Bill Clinton. They were all there to support Al Franken for Senate. The message was clearly spelled out on the jumbo-trons and the blue waving fliers “Obama + Franken = Change. In short, if Obama is elected President, he will need a supporting Senate that will not filibuster the changes he will be trying to accomplish. That is why it is so important for the democrats to have at least 60 seats in the Senate.
Kay and I have been fans of Franken for a long time. I happen to think he is incredibly smart. I maintain that in order to be a good political humorist, you need to fully understand both sides of an issue. You also have to have the ability to see what you are satirizing in clear terms, and then be able to convey these concepts in a concise manner. If you do not have the fundamental essence of the difference between two opposing views, then your humor is not going to be very funny. Unfortunately, if you then decided to run for office, there is an entire archive of material that can be used out of context to discredit you by your opponent.
While following him throughout this campaign I would like to add other characteristics that I would use to describe Al Franken:
Sincere. Al Franken speaks from the heart. He is touched by the struggles of the middle and working classes in Minnesota, and he wants to do everything he can to make their lives better.
Honest. Al Franken tells it like he sees it, whether or not he might have the most popular view. You know he is not going to say one thing and then turn around and do something completely different when it comes time to cast his vote.
Compassionate. Al Franken thinks we can do better as Americans when it comes to health care, education, meeting our energy needs, and taking care of our environment. He wants to make Minnesota an industry leader in renewable technologies, he wants to provide tax credits for college education, he wants to prevent the privatization of social security, he wants to repeal the law preventing Medicare from negotiating drug costs with drug makers, he wants to propose a “Credit Card Customer Bill of Rights,” he wants to end the war in Iraq and make sure our veterans receive the care they earned, he supports the Employee Free Choice Act. In short he wants to put the individual over the corporation, improve the lives of our citizens, regain our status in the world community, and be a steward of the environment.
Al Franken wants to continue the movement that was started by Paul Wellstone.
And, oh, by the way, he wants to get back the seat that once was held by Paul Wellstone. The seat that was, under tragic circumstances, obtained by Norm Coleman. Norm Coleman shares none of the values that were held so dear by Paul Wellstone.
I am a proponent of people making up their own minds regarding who they decide to cast their vote. However, when I talk to folks about Al Franken, too often I hear their concerns about him echoing the different rumors I have heard in the campaign ads ran by his opponents. If you are on the fence, or considering a vote for Barkley (who has 18% of the vote as of an October 30th poll), please visit Al Franken’s website http://www.alfranken.com/ and get to know him and hear who is endorsing him. And, equally important, remember that Barack is going to need Al’s vote in the Senate!
I just got home from the Get Out The Vote Rally in Minneapolis. There was a fine group of speakers giving engaging speeches including Walter Mondale, Amy Klobuchar, Keith Ellison, and of course Bill Clinton. They were all there to support Al Franken for Senate. The message was clearly spelled out on the jumbo-trons and the blue waving fliers “Obama + Franken = Change. In short, if Obama is elected President, he will need a supporting Senate that will not filibuster the changes he will be trying to accomplish. That is why it is so important for the democrats to have at least 60 seats in the Senate.
Kay and I have been fans of Franken for a long time. I happen to think he is incredibly smart. I maintain that in order to be a good political humorist, you need to fully understand both sides of an issue. You also have to have the ability to see what you are satirizing in clear terms, and then be able to convey these concepts in a concise manner. If you do not have the fundamental essence of the difference between two opposing views, then your humor is not going to be very funny. Unfortunately, if you then decided to run for office, there is an entire archive of material that can be used out of context to discredit you by your opponent.
While following him throughout this campaign I would like to add other characteristics that I would use to describe Al Franken:
Sincere. Al Franken speaks from the heart. He is touched by the struggles of the middle and working classes in Minnesota, and he wants to do everything he can to make their lives better.
Honest. Al Franken tells it like he sees it, whether or not he might have the most popular view. You know he is not going to say one thing and then turn around and do something completely different when it comes time to cast his vote.
Compassionate. Al Franken thinks we can do better as Americans when it comes to health care, education, meeting our energy needs, and taking care of our environment. He wants to make Minnesota an industry leader in renewable technologies, he wants to provide tax credits for college education, he wants to prevent the privatization of social security, he wants to repeal the law preventing Medicare from negotiating drug costs with drug makers, he wants to propose a “Credit Card Customer Bill of Rights,” he wants to end the war in Iraq and make sure our veterans receive the care they earned, he supports the Employee Free Choice Act. In short he wants to put the individual over the corporation, improve the lives of our citizens, regain our status in the world community, and be a steward of the environment.
Al Franken wants to continue the movement that was started by Paul Wellstone.
And, oh, by the way, he wants to get back the seat that once was held by Paul Wellstone. The seat that was, under tragic circumstances, obtained by Norm Coleman. Norm Coleman shares none of the values that were held so dear by Paul Wellstone.
I am a proponent of people making up their own minds regarding who they decide to cast their vote. However, when I talk to folks about Al Franken, too often I hear their concerns about him echoing the different rumors I have heard in the campaign ads ran by his opponents. If you are on the fence, or considering a vote for Barkley (who has 18% of the vote as of an October 30th poll), please visit Al Franken’s website http://www.alfranken.com/ and get to know him and hear who is endorsing him. And, equally important, remember that Barack is going to need Al’s vote in the Senate!
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