Big-Impact, Low-Cost Remodeling Projects

Working with sellers who have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements you can suggest to make their home stand out.

1. Tidy up kitchen cabinets.
“Potential buyers do open kitchen cabinets and look inside,” says Morrissey. “Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff.”

2. Add or replace tile.
“By retiling very inexpensively, you make a room look way cleaner that it was,” says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. “Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms.”

3. Add a breakfast bar.
When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. “In one home, there was a cutout in the wall between the kitchen and living room,” explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. “We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600.”

4. Install granite tile instead of a slab.
“Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade,” says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. “Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money.”

5. Freshen up a bathroom without retiling.
“With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300,” says Wilder. “And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000.”

6. Freshen up the basement.
“If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint,” recommends Wilder. “They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon.”

7. Add a room.
Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. “One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom,” says Quinn. “That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price.” Zuluaga has also added bedrooms inexpensively. “In a two-bedroom house, there was an archway that led to a third room that was used as a den,” he explains. “It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom.”

8. Spruce up cabinet fronts.
Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. “If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on,” explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. “With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes,” says Morrissey. “If they have oak cabinets today, they can have cherry the next day.”

9. Replace light fixtures.
“In a foyer and in bathrooms and kitchens,” says Wilder, “replacing overhead light fixtures provides a lot of pop for a little money.” If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.

10. Tech-up the garage.
“Sometimes we replace the garage door opener with a remote touchpad entry system,” says Zuluaga. “That costs about $425 and makes it look like a high-end system.”

Rental Market Emerges as Housing’s Bright Spot

Daily Real Estate News | Tuesday, October 18, 2011

“With rental demand rising and apartment economics improving, the multifamily sector is a positive signal for the U.S. housing industry,” writes Frank Nothaft, Freddie Mac’s Chief Economist, in the October 2011 U.S. Economic and Housing Market Outlook.

An increase of 1.4 million households moved into rental housing in the year ending June 2011–a 4 percent rise in the number of tenant households in one year alone, the Census Bureau reports. Meanwhile, the home ownership rate dropped about 1.5 percent over the past year.

“While home sales remain sluggish despite the most affordable purchase market in decades, households have turned to rental to meet their shelter needs,” Nothaft writes in the report.

The increase in rental demand is due partially to some households who may have faced a short sale or foreclosure of a home they owned, Nothaft notes. However, he says most of the rental demand is coming from young and newly formed households, who are postponing home ownership. The home ownership rate for household heads under 30 years of age has fallen the sharpest in recent years.

As demand increases, vacancy rates are dropping and rents are rising. New construction for larger apartment buildings is also increasing, as property sales rise. Dollar-sales volume of apartment buildings was at its highest point in the second quarter since 2007, according to Real Capital Analytics. New construction starts of apartment buildings with at least 20 dwellings is also on the rise, posting its highest level since the end of 2008 in the second quarter too.

Source: Freddie Mac: October 2011 Economic Outlook

Read More:

More Homes Become Rentals, Census Says

Should You Add Rental to Your Services?

Silicon Valley Seasonality and the Impact on Supply and Demand

by George Nowicki

I’m always being asked what is going on with real estate here in Silicon Valley. “Is it a buyer’s market or a seller’s market?” “Are prices still going down or are they going up”. “I read all this bad news but then I hear about bidding wars for homes. What the real scoop”.

First off let me say there are no any quick and easy answers. Each area, in fact each neighborhood, is different and has been affected by short sales and REO’s, also known as “distressed properties” differently. The following statements are of a general, not specific nature, and are made to help you understand the big picture here in Silicon Valley. Again each home and area will be different and if you would like to understand how your specific home is affected, feel free to contact me at 408-892-3379 or via email at George@Nowicki.net.

Here in Silicon Valley (not nationwide), the low end, say under $600K is still selling like hot-cakes with multiple offers in most areas. Demand is still very high. That will most likely continue until interest rates go up.  Just not enough properties to go around for investors and first time buyers. Also we are seeing regular folks back in the market, buying up in many cases.

In 2010 only about 23-25% of the short sales ever close nationwide (which is actually a great improvement). The supply of REOs is extremely limited in this price range due to the fact that the banks just are not foreclosing. They just sit there as short sales. Limited supply. High Demand. Multi-offers. They are still bargains but not at spring 2009 prices.

A little background for you. Roughly Midyear 2007 was when we first started seeing a large number of short sales. They didn’t sell because no one knew what to do with them including lenders, agents, appraisers, asset management companies, banks, processing folks etc. Late Spring 2008 we started seeing REOs which were all the short sales that didn’t sell in 2007. The REOs were easy to close compared to short sales but at the low end there still was no money until FHA really stepped in for first time buyers. Investors got in the game again. Late 2008 thru 2009 the Short Sales started closing but at a really low close rate. Many became REOs which sold fast at crazy bargain prices. Processes, which were pretty crazy at times, were in place with the asset management companies. The seller, usually a asset management company, held all the cards, made all the rules, disclosed nothing and communicated little. Regardless, there were bargains to be had and the REO inventory was sold off to investors and first time buyers and even a few regular folks at extremely low prices.

Prices are slowly increasing and they are still selling with multiple offers. Some areas were affected by the ending of the $8000 tax credit and others were not. The midrange is still fairly robust for well priced homes but there has be a slight tick up in supply as is typical when school gets out. High end is still having a hard time getting loans, especially now with the reduced loan limits earlier this month.

Prices are going up. Single digit percentages in most areas here in Silicon Valley that were not as affected but short sales, if you track average sale price as oppose to median price. Simple supply and demand. People are looking backwards and realize that we are on the upswing away from the bottom and want Silicon Valley properties while they are still at low prices and money is cheap. The only factor holding back demand is employment and consumer confidence. Until that is resolved it most likely continue to be just small, single digit increases in most areas. Most people who bought last summer at bargain prices have already seen good upside gains at least as a percentage of the purchased price.

Summer historically shows an increase in inventory in most price ranges. I think that the low end will continue to sell fast. The midrange usually has a bump in inventory in May/June that sells off over the summer. Another bump up in inventory in mid-August thru mid-September as people, buyers, finish up with vacations and get really for back to school. Late September thru Thanksgiving more inventory gets sold off. Thanksgiving thru New Years new properties are not added and many owner occupied properties are taken off of the market. Mid-January the feeding frenzy starts again.

Again, this is based on years of historic trends and analysis with added assumptions for the current political and financial environment, supply and demand and analysis and input from many other sources. Each year is different as you know and assumptions constantly change or adjust as the employment, political and financial environment change.

This is only my very general opinion as of today based on the data available to me from various sources here in Silicon Valley, MLS data, articles and various meetings with experts in the field.

Ten Reasons For Buyer Caution In Buying A Foreclosure

Foreclosed homes aren’t always the best deal in town – even if they do come with a price tag that appears to be lower than some other homes in the neighborhood.

Here are 10 reasons why that is true:

No heat in the winter . When a home has been left unheated, buyers run a risk of damaged pipes.
Not removed but ripped . Thieves and even angry former owners can do a lot of damage when they depart with fixtures and key systems like heaters and air conditioners.
Peeling, bubbling, and discoloration . Water incursion isn’t always obvious, but these are signs.
Mold . Where there is water there is mold. Look inside cabinets, behind drawers, and around built-ins.
Blocked drains and pipes . Sewer backups can be expensive to fix.
Black cobwebs . This is the result of a malfunctioning furnace, common in properties where there hasn’t been maintenance for a long time.
Homemade and handy . Where renovations don’t look professional, check with the municipal authority. They may have been completed without permits and that could mean they have to be redone.
Fresh paint everywhere . What is the seller covering up?
Check the basement . Look for discolored subflooring, which can point to mold. And search for asbestos, common in older homes that haven’t been brought up to code.
Air quality . Include air and surface testing in a home inspection. It’s a few hundred dollars well spent.

Appeal Your Property Tax Bill

By: Barbara Eisner Bayer

Published: October 8, 2009

Owning a home is an expensive proposition. There’s maintenance, landscaping, utilities, renovations, and, of course, taxes. It’s your civic duty to pay the latter, but it’s also your right not to yield a penny more than your fair share.

It’s possible to trim your property tax bill by appealing the assessed value of your home. But making a case against your real estate assessment, the basis for your property tax bill, requires doing a bit of homework. Initial research can be done online or by phone over two or three days, but the process can stretch out for months if you’re forced to file a formal appeal.

Read your assessment letter

A real estate assessment is conducted periodically by the local government to assign a value to your home for taxation purposes. An assessment isn’t the same as a private appraisal, and the assessed value of your home isn’t necessarily how much you could sell it for today. Real estate assessment letters are mailed to homeowners annually, or perhaps every two to three years, depending where you live.

The letter will include some information about your property, such as lot size or a legal description, as well as the assessed value of your house and land. Additional details—number of bedrooms, for example, or date of construction—can often be found in the property listing on your local government’s website. Your property tax bill will usually be calculated by multiplying your home’s assessed value by the local tax rate, which can vary from town to town.

If you think your home’s assessment is higher than it should be, challenge it immediately. The clock starts ticking as soon as the letter goes out. You generally have less than 30 days to respond, though the time frame varies not just between states, but within each state. Procedures are often outlined on the back of the letter.

Gather evidence

Start by making sure the assessment letter doesn’t contain any mistakes. Is the number of bathrooms accurate? Number of fireplaces? How about the size of the lot? There’s a big difference between “0.3 acres” and “3.0 acres.” If any facts are wrong, then you may have a quick and easy challenge on your hands.

Next, research your home’s value. Ask a real estate agent to find three to five comparable properties—“comps” in real estate jargon—that have sold recently. Alternatively, check a website like Zillow.com to find approximate values of comparable properties. The key is identifying properties that are very similar to your own in terms of size, style, condition, and location. If you’re willing to shell out between $350 and $600, you can hire a private appraiser to do the heavy lifting.

Once you identify comps, check the assessments on those properties. Most local governments maintain public databases. If yours doesn’t, seek help from an agent or ask neighbors to share tax information. If the assessments on your comps are lower, you can argue yours is too high. Even if the assessments are similar, if you can show that the “comparable” properties aren’t truly comparable, you may have a case for relief based on equity. Maybe your neighbor added an addition while you were still struggling to clean up storm damage. In that case, the properties are no longer equitable.

Present your case

Once you’re armed with your research, call your local assessor’s office. Most assessors are willing to discuss your assessment informally by phone. If not, or if you aren’t satisfied with the explanation, request a formal review. Pay attention to deadlines and procedures. There’s probably a form to fill out and specific instructions for supporting evidence. A typical review, which usually doesn’t require you to appear in person, can take anywhere from one to three months. Expect to receive a decision in writing.

If the review is unsuccessful, you can usually appeal the decision to an independent board, with or without the help of a lawyer. You may have to pay a modest filing fee, perhaps $10 to $25. If you end up before an appeals board, your challenge could stretch as long as a year, especially in large jurisdictions that have a high number of appeals. But homeowners do triumph. According to Guy Griscom, Assistant Chief Appraiser of the Harris County (Texas) Central Appraisal District, of the 288,800 protests filed in his Houston-area district in 2008, about 58% received reduced assessments.

How much effort you decide to put into a challenge depends on the stakes. The annual U.S. median property tax paid in 2008 was $1,897, or 0.96% of the median home value of $197,600. Lowering that assessed value by 15% would net savings of about $285. In some parts of New York and Texas, for example, where tax rates can approach 3% of a home’s value, potential savings are greater. Ditto for communities with home prices well above the U.S. median.

There are a few things to keep in mind as you weigh an appeal. The board can only lower your real estate assessment, not the rate at which you’re taxed. There’s also a chance, albeit slight, that your assessment could be raised, thus increasing your property taxes. A reduction in your assessment right before you put your house on the market could hurt the sale price. An easier route to savings might lie in determining if you qualify for property tax exemptions based on age, disability, military service, or other factors.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

Barbara Eisner Bayer has written about mortgages and personal finance for the past 15 years for Motley Fool, the Daily Plan-It, and Nurse Village, and is the former Managing Editor of Mortgageloan.com and Credit-land.com. She has successfully challenged her real estate assessment.

Nowicki’s Days on the Market Guide For Dummies

I know you have all seen the For Dummies books out there.  There are For Dummies books for everything from how to work your iPhone, how to use SalesForce to how to choose the right dog.  Pretty much anything.  You should check them out at : http://www.dummies.com/.

Now I have to admit that I’ve never read any of the For Dummies books personally.  I’ve seen them at the local office supply stores.  I’ll be standing there with my grossly overpriced HP ink cartridges and I’ll see them near the checkout. There will be a For Dummies book with a intriguing title and it always seem to make sense in a odd way.  Stuff you would never thing they would right an entire book about, but there it is.

So I decided to entitle this BLOG entry, “Pricing your home for Dummies”.  Why you ask?  Well based on some data I’ve seen there appears to be a need for a short, clear and painfully blunt explanation, in For Dummies terms, how to manage a home listings Day on Market.

Days on market (DOM), alternatively Active Days on Market, is a real estate term used to describe the age of a real estate listing. Typically, properties with a large DOM will command lower prices than a property with few DOMs because buyers perceive the property as over priced or less desirable. DOM is often used when developing a pricing strategy. DOM can also be used as a “thermometer” to gauge the temperature of a housing market.

In many respects, DOM is more important that the price.  The older the listing, the less visible it becomes.  With our MLS rules, the listing needs to be off the market for 30+ days to be relisted and to “reset the clock”.  In prior years all you had to do is relist or change brokers to start the clock again.  This was not a true representation of the true days on market and they change the rules, for the better in my opinion.

In this market, which has been beaten up quite a bit, the average days on the market increased.  This is because of distressed properties (i.e. Short Sales and REO’s) and due to the fact that people actually have to qualify for a loan now.  No more fogging up a mirror and you are approved for a 100% loan.
For example, in Almaden where I live, the average DOM was 46 days back in 2010.  In 2011 it jumped up to 68 days due to the sales on some very old listings.  Despite what the media is saying,  the well priced home are still selling fast, many time with multiple offers in a few days.  Back in the days of the hot market, no Short Sales and easy loans, it was well under 30 days, with many new listing selling less than 3 days.

Now that the prelims are over, I present to you the “Nowicki Guide to Days on the Market Management…. For Dummies”.  Fair warning.  This is painfully blunt.

1-7 Days           New Listing
The best time to sell a property, and to see the highest offers is in the first seven days.  Agents see these pop up on our daily searches and most search engines now have a sort by days on market.  Always try to price your property to get a lot of activity in the first 7 days.

8-30 Days           Active Listing
Still an active property but no longer “new” from an agent’s perspective.  Your goal should be to sell your property in 30 days or less to achieve the highest yield. Be proactive.  I always have a proactive plan in place with my sellers when I take a new listing to review the progress of the sales well before we get to 30 DOM.

31-60 Days           Stale Listing
This is a tricky one.  A couple of years ago this would be considered a stale listing.  Now with consumer confidence shot and money tougher to get, this is where most folks end up selling their properties, at slightly less than asking price. At this point if you don’t have an offer in hand, you need to sit down with you agent and reevaluate your pricing and marketing of the property. The clock is ticking.  Everything sells at the right price.

61-90 Days           Life Support Listing
You never want to get to this stage.  It’s not dead yet but it’s vitals are not looking good.  It’s pretty much off the radar for most buyer’s agents and buyers believe that there must be something wrong with the property.  Your neighbors are concerned.  If you do get offers, most of the time you are looking at low ball offers from smart buyers willing to “help you out” for a price.  Basically, you have waited too long to take proactive action.  You are in reactive mode now and time is running out. You are up against fresh new listings every single day.  You now need to be extremely aggressive to get Internet eyes on the properties and human feet in the door.  Start thinking of incentives and assistance for perspective buyer’s and higher commissions for buyer’s agents.

91-120 Days           Last Rites Listing
Pretty much dead inventory at this point.  Think of this as a listing in a coma.  It’s alive by not by much. Pretty much just sits there, with few signs of life.  Pretty much forgotten by everyone but the people who has to change the bedpan. Everyone assumes that you greedy, the property is grossly over priced or there is something majorly wrong with the property, or “why else wouldn’t it sell?” You waited too long trying to “get my price” and if you do by some miracle get an pity offer, it will be well under what you listed it at, which may have been the true value in the first place, minus some percentage for your lack of proactive pricing and marketing.

121-150 Days         Dead Listings
Pushing Daisies. Taking the big dirt nap.  Farting dust. The fat lady has sung.  Elvis has left the building. And so has your listing.  Your property is now considered a “career listing” by your agent who has spent way too much time and money marketing an overpriced listing.  You blame your agent for your lack of realistic pricing. You figure your agent must not have done his or her job, because you the seller, overpriced the property based on what you wanted, not what the property is actually worth. The agent doesn’t set the price.  You do!!!  Work with your agent up front when you first list the property to set weekly milestones in regards to marketing and pricing.  At this point, you might want to consider taking it off the market for a extended period of time, regroup, fix the place up with input from your agent who hopefully has been gathering info from open houses and agent showing follow up.  People need to forget this was on the market forever.  When you relist, make it a big deal.  Pull out all the stops and be realistic.  Any smart agent is still going to look at the property history.  Give them a reason to show the property again or for the first time to his or her clients.

151 and Over         Archaeological Find
Dead and buried deep as a T-Rex.  It could sell.  Heck, anything is possible. But statistically speaking, it’s been over for a very long time.  Your listing is the joke at the local brokers tour.  Your neighbors are upset with you. The paint is peeling off of your For Sale sign. Buyer’s aren’t interested in dealing with a unrealistic seller. And the term they use is not “Unrealistic.”  They are not quite so kind.  Buyer’s agents want to find a win-win for their clients. They don’t mind making you a lowball offer.  Often times it’s something you would consider insulting. Gee, Skippy,  whose fault is that?   You would do the same thing if you were in their shoes.  From their perspective, they are giving you a get out of jail card, for a price.  At this point, any offer is a good offer.  You have wasted a lot of time and money at this point.  Time to regroup, rethink and relist after being off the market for a extended period of time.

Bottom line.  Do your research before listing. Work with a agent who will be blunt, and honest with you. And most important.

PRICE IT RIGHT THE FIRST TIME!

How To Choose A Real Estate Investment Strategy

How To Choose A Real Estate Investment Strategy That’s Right For You

By Thomas Lucier
September 13

Unfortunately, there are no cookie-cutter strategies, which will work for all investors in every single real estate market nationwide. And that’s exactly why, when you’re starting out in this business, you must take your time and carefully analyze a real estate investment strategy and take into account, the:
1. Temperament, knowledge, skill and experience needed to implement the strategy.
2. Amount of cash and credit needed to finance the strategy.
3. Amount of time and energy needed to complete the strategy from start to finish.
4. Potential risks and pitfalls associated with the strategy.
5. Segment of the local real estate market where the strategy will work best.
6. Barriers to entering the real estate market where the strategy will work best.
7. Level of competition from other individual investors using the same strategy.
8. Transaction costs associated with the strategy.
9. Exit plans for the strategy.
10. Tax efficiency of the investment strategy.

Learn to Trust Your Gut Instinct When Choosing Investment Strategies

Another factor that you must not overlook, when choosing investment strategies, is your gut instinct. I’ve learned the hard way, not to ignore that little voice that we all have in the back of our head, which occasionally screams out to warns us, when we are about to do something really stupid, which deep down in our gut, we know is wrong. In other words, don’t let anyone talk you into using a real estate investment strategy, that’s outside of your comfort zone. For example, if you consider yourself to be a type B personality, who’s pretty laid-back and easy going, you may have a real hard time dealing with tenants and feel very uncomfortable in the role of landlord. And investing in residential rental properties probably wouldn’t be a good investment strategy for you to pursue.
Know Your Tolerance Level for Risk and Don’t Exceed it
When it comes to risk, the world is made up of two types of people: Those who are risk-takers, and those who are risk-adverse. At one extreme, there are high risk-takers such as dare devils and thrill seekers, who seem to have no qualms whatsoever, about laying their life on the line, when performing death defying type stunts. And at the other extreme, there are the severely risk-adverse, who seem to be petrified of taking any chances at all, and want everything they attempt to do, to somehow have guaranteed results. But I’ve found that most people have a tolerance for risk, that falls somewhere in the middle of both extremes. The trick, to achieving mental peace of mind as a real estate investor, is to stay within your tolerance level for risk.

Best to Include a Worst-Case Scenario When Analyzing Investment Strategies

I consider myself to be a pragmatic realist. And I fully understand that there’s always a fifty-fifty chance, that something “bad” could happen when using any investment strategy, which could take the wind out of my sails and knock me for a loop, financially. So, when I am analyzing a real estate investment strategy, to determine if it’s suitable for me to use, the very first question that I always ask myself, is this: What is the absolute worst thing that could go wrong, when I am using this investment strategy, and could I survive it? And if I come up with a financially devastating worst-case scenario, that has a much better than fifty-fifty chance of occurring, I take a pass, on using the strategy.

Why You Must Have More Than One Investment Strategy in Your Repertoire

In spite of what the real estate fairytale authors and slick seminar promoters are constantly telling a very gullible public, it’s hard to be a successful real estate investor, when you’re a one-trick pony, who’s limited to a single investment strategy. In order to maximize your chances of being successful in this business, you must be able to take advantage of various types of investment opportunities, the moment they become available. And to do this, you’re going to have to master more than a single investment strategy. As an example, I use four basic investment strategies, I buy:
1. Properties directly from owners in foreclosure.
2. Small mismanaged residential rental properties.
3. Properties with correctable problems.
4. Options on undervalued properties with immediate resale profit potential.

Real Estate is a Multifaceted Business with Numerous Opportunities for Investors

Real estate is a multifaceted business, that’s comprised of the following five types of properties, which provide savvy investors with numerous investment opportunities nationwide:
1. Residential.
2. Commercial.
3. Office.
4. Industrial
5. Land

Your Real Estate Investment Strategies Must be Goal-Oriented

The one thing, that all successful real estate investors have in common, is that they write down their investment goals, and develop a detailed step-by-step plan of action for achieving them. In the immortal words of the father of time management, Alan Lakein: “Failing to plan is planning to fail.” And as far as I am concerned, newbie investors, who fail to establish goals as part of their overall real estate investment strategy, are setting themselves up for failure. Lately, I’ve noticed that many wannabe investors, who consider themselves to be members of the hip “just-do-it” crowd, pooh-pooh goal setting as being old-fashioned and a waste of time, and somehow below their exalted status as MIMS or millionaires in the making. The “just-do-it” mindset may be hunky-dory for people, who are contemplating whether they should order Mountain Oysters in a swank restaurant, but for would-be real estate mavens, this kind of careless spontaneity can end in financial ruin. And unless you want to spend your time as a real estate investor, running around in circles, like a chicken with its head cutoff, your investment strategies must be based on achieving financial goals, which are clearly spelled out and include a:
1. Beginning date.
2. Detailed plan of action for accomplishing the goal.
3. Financial objective stated in a specific dollar amount.
4. Completion date.
5. Exit plan.

Why You Must Prepare a Written Plan of Action for Achieving Your Goals

To me, if you’re not willing to put pen to paper and write a detailed step-by-step plan of action, which outlines exactly how you’re going to accomplish your investment goals, you might as well not bother setting any goals in the first place. After all, what good are goals, if you have no idea about how you’re going to turn them into reality? A well-written plan of action is to a successful real estate investor, what a:
1. Blueprint is to a carpenter.
2. Roadmap is to a truck driver.
3. Flight plan is to a pilot.
4. Lesson plan is to a teacher.

Copyright © Thomas J. Lucier

Thomas J. Lucier is a Professional Real Estate/Small Business Coach and Best Selling Author. Visit http://www.avoidbadrealtors.com to learn more about Tom Lucier.

Rental Market Heating Up


The rental market is continuing to heat up and can offer potentially big returns for buyers willing to jump into the landlord role.

For investors looking to take advantage of low record-reaching mortgage rates and big discounts on home prices, the opportunities are plenty. Rents are rising and demand is up too, partially due to the 4 million former home owners who’ve faced a foreclosure and are now renters.

In response, more homes are turning into rentals: Nearly 35 percent of occupied homes were rented in 2010, which is a 33.8 percent increase from 2000, according to a recent study.

In more than 500 cities, demand for rentals has increased, with vacancies for rental housing reaching its lowest level since 2003, according to U.S. Census data. Plus, rents are on the rise too: Nationwide, rents increased 11.6 percent in 2010 to $1,320 a month, on average, according to Hotpads.com, a real estate research firm.

Investors are buying rental properties with the intention to hold onto it for a longer time too: On average, investors say they plan to hold onto the property for 10 years before selling, according to a survey by the National Association of REALTORS®.

“Whereas leverage is dangerous when buying stocks, [buying a rental] can be a good long-term strategy with real estate,” real estate investor Marshall Sonenshine told Money Magazine.

Experts suggest the wisest move for investors is buying a property nearby their permanent residence and sticking to buildings with four units or fewer to avoid stricter financing requirements, such as larger down payments and higher mortgage rates. Also, experts say rental income should cover at least the mortgage payments on the property as well as an extra 20 percent cushion to pay for any repairs, property management, or get you through any vacancies.

Source: “Cashing in on Rental Property,” Money Magazine (Sept. 2, 2011)

Changes in FHA Loan Limits

As you may or may not know, unless Congress extends the expiration deadline, Federal Housing Administration (FHA) loan limits set in 2008 will drop significantly beginning October 1. Congress raised the loan limit amount in response to the housing crisis to help spur the homebuying market. FHA loans offer borrowers very competitive rates and terms, and they only require a 3.5% down payment. Allowable debt ratios are higher than the typical debt-ratio limits imposed for conventional loans, and there are no income limit qualifications, so more people can qualify for them.

If the loan limit drops on October 1, many California homebuyers will face higher down payments, higher mortgage rates and stricter loan qualification requirements. Borrowers seeking larger mortgages will have to apply for conventional loans or jumbo loans, which may be subject to higher interest rates and down payments.

1. LOWER LOAN LIMITS. The conforming loan limit determines the maximum mortgage amount that FHA, Fannie Mae and Freddie Mac can buy or guarantee.

2. DROPS BY COUNTY. Under the new FHA loan limits, some counties will see significant drops in their loan limits. San Diego County will experience a $151,250 drop, Sonoma County a $141,550 reduction, while Orange and Los Angeles Counties will drop by $104,250.

3. JUMBO LOANS. The current FHA loan limit is $729,750. After October 1, that limit may drop to $625,500. Mortgage loans higher than that amount will be considered non-conforming jumbo loans, which typically have rates that are 0.875% to 1.5% higher than conforming rates, depending on the loan product, and require higher down payments.

4. MORE STRINGENT REQUIREMENTS. FHA loan requirements may allow for lower credit scores. So an applicant with a lower FICO score can still qualify for an FHA loan, even if they can’t for a conventional loan. Your clients may be able to obtain an FHA loan three years after defaulting or having a loan foreclosed.

Obama Expected to Unveil His Plan to Revive Housing

Official presidential portrait of Barack Obama...
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The Obama administration is expected to announce a new mortgage relief program next week to help struggling home owners stay in their home and reduce the number of foreclosures, Reuters reports.

While the exact details of the proposal are still unknown, analysts are speculating that President Barack Obama is likely to announce a plan that would help more borrowers to refinance loans, allowing them to lower their monthly payments and ward off possible foreclosure.

The refinancing plan will reportedly apply to loans backed by government-owned Fannie Mae and Freddie Mac or the Federal Housing Administration, allowing more home owners who have been unable to refinance due to poor credit, owing too much above their home’s current value, or unemployment, to take advantage of current low interest rates.

Other lawmakers who have pushed for such a move have argued that by lowering home owners’ monthly payments, it would free up cash for other spending, which will help stimulate the overall economy.

Source: “White House Could Unveil Mortgage Plan Next Week,” Reuters (Aug. 31, 2011)

So, what do you think?  Politics as usual?  Propose a plan that sounds good in theory but would just delay foreclosures?  Or do you think a plan like this would work over the long haul?

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A Little-Known Loan Program for Fixer-Uppers

By LYNNLEY BROWNING
BUYERS of distressed homes or any other fixer-upper not only face the daunting task of turning a run-down property into a livable one, but often worry about paying for it all.

There’s a way to make essential repairs and add other accouterments without dipping into savings or taking out a home-equity loan. The Federal Housing Administration’s 203(k) rehabilitation program provides for loans covering renovation costs as well as the purchase price of a primary residence — investors excluded — and it allows for just a 3.5 percent down payment.

“It’s a fantastic program, one that hasn’t been fully utilized by the American public,” said Arthur Hood, the owner of the Vanguard Inspection Group in Teaneck, N.J., which is certified by the Department of Housing and Urban Development to help borrowers with the program.

Although the program has been around since 1978, it is not well publicized, and many borrowers mistakenly think they have to buy a wreck in order to qualify. They don’t.

The house “doesn’t have to be falling apart; it could just be outdated,” said Joseph Latini Sr., the president of Hartford Funding, a lender in Ronkonkoma, N.Y. “It just has to appraise below market value and then at market value with the repairs.”

While “run-down” typically means a foreclosure, the program also applies to many historic and older houses as well as short sales and bank-owned homes. HUD outlines the rules on its Web site.
Luxury improvements are ineligible, though the program has wide definitions of “repairs” and “modernization.” Covered repairs include a new roof or heating system (geothermal ones too). Decorative changes, like replacing vinyl with ceramic tile on the kitchen floor replacement, or painting the interior, are covered.

The loan rates typically run around a percentage point higher than conventional ones, and come in 15- to 30-year terms, either fixed or adjustable. Additional paperwork for inspection, appraisal, title updating and the like pushes closing costs $1,000 or more higher than average. Most borrowers, however, refinance to a conventional loan after a few years, Mr. Hood said.

Demand for 203(k) financing has been on the rise, although experts predict some contraction given the major banks’ current moratorium on foreclosures. For the first nine months, HUD insured $2.9 billion in 203(k) loans, compared with $3 billion for all of 2009 and $401 million in 2005.

Home buyers must put down at least 3.5 percent of the current value of the property and use a HUD-approved lender, appraiser and a contractor approved by the lender for the repairs. One list of approved businesses can be found at 203kcontractors.com.

Using a HUD-approved consultant like Mr. Hood, who charges a flat fee of $400 to $1,000, is not required, but the agency recommends it to expedite processing. A HUD-approved inspector will make around four trips to the home to ensure that renovations are being properly done; each trip costs the borrower around $150.

Most 203(k) lenders are smaller regional and community banks. Loan limits vary by geography, and range from $271,050 to $729,750, which covers the total mortgage. The first $5,000 must go toward the more substantial repairs like roof replacement. HUD insures the loan.

Once the borrower receives the mortgage, money owed the contractor for repairs is held in escrow by the lender until the work is completed; all work must be finished within six months.
A miniversion of the 203(k) — called a Streamline (k) — has a repair-cost limit of $35,000 and restricts upgrades to minor improvements like replacing gutters. In this case, the do-it-yourself approach is permitted.

“This is a loan for someone who’s willing to be a little involved,” said Jon Sigler, a banker in Madison, Conn., who works for at the Franklin American Mortgage Company.

4 Shortcuts for Your Android Phone

Unlike Apple’s iPhone, mobile phones that run Google’s Android operating system come in a large variety and features can vary somewhat. But there are some commonalities. Here are a few time-saving tricks you may be unaware that your Android can do:

‘Long press’ to access shortcuts: The New York Times considers the “long press” an important key to unlocking many time-saving secrets with Android phones. The long press is when instead of tapping a button or icon on the screen, you press and hold your finger on it for two seconds. This will then usually bring up a menu of options specific to the type of item and you may unlock quite a few features.

For example, long press the home key on your phone’s case, you’ll bring up a menu of your eight most recently used apps. Long press the search key (it appears as a magnifying glass) and a microphone icon will appear that says “Speak Now.” You can then use voice commands to tell your phone what to do, e.g. “Send text to John Smith, will be at the showing by 5” or “Navigate to the nearest gas station.”

Quickly access phone, text, and e-mail: While in your address book, tap the photo of the person instead of the person’s name. You’ll get a menu of icons to call, e-mail, text, or even send messages through Facebook or Twitter.

Type faster: When texting or e-mailing a message, press the spacebar twice and the Android automatically will insert one period and one space at the end of your sentence so you don’t have to fumble around for the period key.

Send to voicemail: Maybe you have a few callers you want to avoid or you’re going to a showing and don’t want to be disturbed. Make sure the caller is in your address book and then click on “Additional info” option there. At the bottom of these extra options, you’ll find “Send straight to voice mail?”

7 Home Owners Insurance Tips

A house in my neighborhood burnt to the ground yesterday. It was not on my little cul-de-sac but I could see it from my driveway. I thought I’d repost this list on home insurance tips again.

By: Richard Koreto

Published: December 10, 2010

The new year is a good time to take stock of your home owners insurance coverage.

1. Make sure you can rebuild all, not just part of, your house

Don’t make the mistake of assuming that just because your home’s value has gone down that the cost of materials and labor have gone down, too. For example, home construction costs rose 1.3% from January 2009 to January 2010, according to construction cost consultants Marshall and Swift/Boeckh, even while many homes were falling in value. Make sure your home owners insurance pays you for full rebuilding costs in the event of a disaster.

2. Check your flood insurance

The National Flood Insurance Program can help by making affordable flood insurance available, but there are limits to how much coverage you can get, and it isn’t available everywhere. In addition, the NFIP has only been approved for a series of short-term renewals. (That is, Congress has been extending its provisions for only short periods and has not committed to making it permanent.)  Keep an eye on the NFIP to make sure the program remains in force.

If you can’t participate in NFIP or need more extensive coverage, see if you can buy flood insurance from your existing carrier. Flood insurance rarely comes with a standard home owners policy.

3. What’s new in your life?

If you’re recently divorced, and you got the house, make sure your ex-spouse’s name is off the policy. Did you build a playground for your children? Install a swimming pool? These may change your liability needs. Talk to your agent and compare your life status this year with last year’s to update your home owners insurance.

4. Maybe your valuables are worth more

Your art, jewelry, antiques, and other collectibles may have appreciated in value over the years. If your home owners insurance policy doesn’t have accurate values on these items, your company may not reimburse you for the full value in the event of fire or other home disaster.

5. Tally up any home improvements

Have you made any renovations or additions to the home, such as an expanded garage, new bathroom, or home theater in the basement? Your house may now be worth more and your home owners insurance needs to reflect that. Create a home inventory video and keep it in a safe place outside the home.

6. Give your trees the once-over

Hire an arborist to look at the trees on your property, and check with your home owners insurance agent to see if your policy covers you if one of your trees falls on the neighbor’s car. An arborist can tell you if your trees are healthy and advise whether they should be removed or trimmed.

7. Watch the nickels and dimes

Hunt for any special discounts that can reduce your home owners insurance premiums. For example, you may be eligible for a discount if you have an automobile or valuable articles policy with the same company has your home owners insurance policy.

These home features can also give you discounts on your home owners insurance–but only if your insurer knows you have them:

  • Burglar or fire alarms

  • Gated community patrol service

  • Storm shutters

  • Temperature monitoring system to protect against freezing, connected to a central station alarm

  • Permanently installed, electrical back-up generator

Richard J. Koreto, a freelance writer, is the former editor of several professional financial magazines and the author of Run It Like a Business, a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, N.Y., and a country house in Martha’s Vineyard.

Mortgage Rates Reach All-Time Lows…..Again

Freddie Mac
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Daily Real Estate News | Friday, August 19, 2011

Ongoing economic concerns continued to push mortgage rates to new lows, as 30-year and 15-year mortgage rates took another dip, pushing home affordability even higher, Freddie Mac reports in its weekly mortgage market survey.

30-year fixed-rate mortgages: averaged 4.15 percent this week, dropping from last week’s 4.32 percent average. The previous record low for 30-year rates was set on Nov. 11, 2010, when rates reached 4.17 percent. For comparison sake, in 2000, 30-year mortgage rates averaged more than 8 percent and just five years ago they averaged 6.5 percent.

15-year fixed-rate mortgages: averaged 3.36 percent, dropping from last week’s 3.50 percent. Last year at this time, the 15-year fixed rate averaged 3.90 percent.

5-year adjustable-rate mortgages: averaged 3.08 percent, dropping from last week’s 3.13 percent. Last year at this time, the 5-year ARM averaged 3.56 percent.

1-year ARM: averaged 2.86 percent this week, dropping from last week’s 2.89 percent. A year ago, the 1-year ARM averaged 3.53 percent.

“Not surprising, many home owners took advantage of this low mortgage rate environment and have already refinanced their loans,” says Frank Nothaft, chief economist of Freddie Mac. “The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey. In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter.”

Source: “Mortgage Rates Lowest in Over 50 Years,” Freddie Mac (Aug. 18, 2011)

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Foreclosures Driving Rental Boom

Foreclosed home owners are contributing to a boom in the rental market. Nearly half of property managers recently surveyed — or 47 percent — say they’re seeing an increase in applicants moving to rental units from foreclosed properties.

But foreclosed home owners may not find big deals in the rental market. As vacancies shrink, many property managers say they have increased prices on their rental units in the last year, according to a new survey of 1,252 property managers across the country by TransUnion, which provides rental screening solutions to both large property management companies and independent landlords.

“The majority of respondents said that they are not having problems finding residents even with the increases,” says Mike Mauseth, vice president in TransUnion’s rental screening business unit.

Rentals are in high demand: Nearly 90 percent of survey respondents report having a 10 percent or less vacancy rate.

Despite the boom in the rental market, property managers say that “finding reliable tenants at an optimal price point is paramount for this industry,” Mauseth says. “A reliable tenant ensures property managers are both solvent and profitable. Conversely, an unreliable tenant can cost property managers thousands of dollars in lost rent and property damages.”

Source: “TransUnion National Rental Survey Finds Large Property Managers Able to Raise Rates and Attract Reliable Tenants,” TransUnion (June 24, 2011)

Freddie Mac To Offer Up To $1500 To Move Old Condo Inventory

Freddie Mac
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Freddie Offers Cash Incentives for Buying Condos

Daily Real Estate News | Tuesday, August 16, 2011

Freddie Mac’s HomeSteps unit is offering cash to buyers willing to purchase one of its foreclosed condos that has been lingering on the market. HomeSteps is hoping to unload some of its high inventory of foreclosed condos through the incentive program, known as HomeSteps Condo Cash.

Through the “Condo Cash” program, condo buyers of HomeSteps properties can get up to $1,500 to help pay for standard home owner association dues.

The offer is only valid to owner-occupant buyers and on HomeStep condos that have been on the market for at least 120 days. To participate, buyers must submit offers between Aug. 15 and Nov. 15, and close escrow by Dec. 30.

Some of the homes also come with a two-year Home Protect home warranty to cover electrical, plumbing, air conditioning, heating, and other major appliances and systems. Home Protect also is offering up to 30 percent discounts on the purchase of new appliances (see www.HomeSteps.com/smartbuy for more information).

Source: “HomeSteps Offers Condo Buyers Up to $1,500 for Future Association Dues for Limited Time,” Freddie Mac (Aug. 15, 2011)

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The IRS Offers Some Tax Tips For Home Sellers

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Ten Tax Tips for Individuals Selling Their Home

IRS Summertime Tax Tip 2011-15,  August 8, 2011

The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

  1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
  2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
  3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
  4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
  5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
  6. You cannot deduct a loss from the sale of your main home.
  7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
  8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
  9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
  10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.

For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

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Is it time to buy a rental?

Rental Vacancies at Lowest Level Since 2003

Daily Real Estate News | Monday, August 15, 2011

With fewer rentals available across the country but strong demand, rents are expected to rise rapidly, experts say. Rents are expected to rise faster than the 2 percent to 3 percent average annual increase that was predicted earlier this year, RISMedia reports.

Vacancies for rental housing was 9.2 percent for the second quarter — 1.4 percent lower than a year ago — and a level that hasn’t been reached since 2003, according to the Census Bureau.

The multifamily sector is poised for growth. The National Association of Home Builders recently reported its Multifamily Production Index rising to 41.7 in the first quarter — its highest level since 2006. The index serves as an indicator for whether more multifamily developers and property owners believe conditions are improving.

Source: “Rental Vacancy Rate at 6-Year Low,” RISMedia (Aug. 11, 2011)

Silicon Valley Tech Boom Sparks Housing Boom

Daily Real Estate News | Friday, August 12, 2011

Housing isn’t hurting everywhere: A tech rush in Silicon Valley is once again causing mega-mansions to be in demand there. Real estate pro Alex Wang says he’ll get 17 or 18 offers on a property at times, and that buyers are even purchasing homes for hundreds of thousands of dollars over the asking price. Also, many of these buyers are paying cash and closings are happening quickly.

The social media tech boom in Silicon Valley has caused mansions to become sought-after, but with limited inventory of homes for sale, new construction and bidding wars are increasing, Fox News reports.

In Palo Alto, Facebook’s headquarters, the median sale price of a single-family home rose nearly 5 percent over last year to $1.3-million in June, DataQuick reports.

“The social media and explosion of high-tech IPOs are also creating a new work environment where people aren’t always in the office,” says Allison Buffam, marketing manager with SummerHill Homes. “They want to be able to be at home and work as well, and they want the best home they can afford.”

Source: “California Bay Area Mansions Are in Demand Due to Tech Boom,” Fox News (Aug. 11, 2011)

Home Lending at Its Lowest Point in 14 Years

Mortgage rates are near record lows and housing affordability is at its highest in years, but lending is at its lowest point since 1997. What’s more, new mortgages are down by a third compared to 2010.

Lenders will write about $1 trillion in home loans this year, the fewest number since 1997, according to the Mortgage Bankers Association. MBA projects that home lending will fall even lower in 2012.

“There is a burnout phenomenon,” Mortgage Bankers Association economist Michael Fratantoni said. Refinancers have stopped refinancing due to declines in home prices and with many now being underwater on their homes. “Borrowers who couldn’t qualify for 4.5 percent mortgages last year for the most part still can’t qualify this year,” Fratantoni said.

The tightening of credit and falling home prices have certainly limited lending, but some lenders are starting to ease terms for the first time since the housing crisis began.

“All those granular issues we were beating people up about over the last three years seem to be going away,” says Jeff Lazerson, a Laguna Niguel mortgage broker. “The hassles over old credit inquiries. Having to explain every entry on a bank statement.”

In fact, Wells Fargo & Co. and Bank of America Corp. say they’ve eased their credit standards slightly for loans backed by the Federal Housing Administration, which tend to be attractive to first-time buyers because of their small down payment requirements.

Source: “Mortgage Lending at Lowest Level Since 1997,” Los Angeles Times (Aug. 6, 2011)

Fed to Keep Interest Rates Low Until 2013

In an unusual step, the Federal Reserve vowed Tuesday to keep interest rates low for at least the next two years.

The Fed said it’ll keep its key benchmark interest rate near zero through mid-2013. The Fed’s commitment was welcome news to many in the real estate industry who see it as a positive move for the housing industry, allowing buyers more time to take advantage of ultra low mortgage rates.

The Fed said in a statement following its regular policy-setting meeting Tuesday that the overall economy has grown “considerably slower” than it expected and that consumer spending “has flattened out.” Some economists in recent days have expressed concerns that the U.S. is heading for a double-dip recession.

Fed officials “are very nervous about the economy,” says Mark Zandi, chief economist at Moody’s Analytics. “This is unprecedented for the Fed to indicate they are ready to keep rates low for two more years.”

Still, the Fed continues to forecast a moderate pick-up in growth for the economy in the second half of the year.

http://www.msnbc.msn.com/id/44064023/ns/business-stocks_and_economy/t/fed-says-it-will-hold-rates-fast-until-mid-/#.TkHUNq6CUbg

What the debt downgrade means for your mortgage

By Allan Chernoff August 9, 2011: 7:35 AM ET

What the debt downgrades mean for your mortgageBanks’ lending standards have been tough recently, and consumers need the wherewithal to qualify for loans. That appears increasingly difficult as the economy continues to sputter.

New York (CNNMoney) — At least one fear was not realized amid Monday’s meltdown: the concern that mortgage rates would immediately shoot higher in response to Standard & Poor’s downgrade of Fannie Mae and Freddie Mac, the government-sponsored entities that are the 800-pound gorillas of the mortgage market.

In fact, the initial response to Fannie and Freddie getting cut to AA+ from AAA was precisely the opposite. Mortgage rates were poised to continue declining.

HSH Associates, which surveys lenders, quoted the average 30-year fixed rate mortgage at 4.44% Monday. “We expect to see rates go into the 4.30’s by noon tomorrow,” said Keith Gumbinger, of HSH Associates.

Mortgage rates are set off of the interest rates on U.S. Treasury notes and bonds. Even though Standard & Poor’s pulled its AAA rating of the United States Friday night, investors still rushed into U.S. Treasury securities Monday as a safe haven, believing more in the “full faith and credit of the United States” than in the opinion of Standard & Poor’s credit analysts. As investors snapped up Treasury notes and bonds they pushed down interest rates on those securities, which move inversely to prices.

Late Monday afternoon, the 10-year Treasury note traded at a yield of 2.34%, down from 2.56% on Friday and 3% just two weeks ago, a huge move. That 10-year yield is the benchmark used to set 30-year fixed mortgages.

“The flight to quality effect is dominating,” said Walt Schmidt, senior vice president of FTN Financial Capital Markets. “The net effect is lower mortgage rates.”

Stock market plunge: Not just a rich guy’s problem

Fannie Mae and Freddie Mac, now 80%-owned by the U.S. government after receiving more than $150-billion in federal bailout funds, purchase bundles of mortgages from banks, providing lenders with fresh cash to make new loans. Fannie and Freddie then package those mortgages into securities that are sold to investors, most of which went sour during the financial crisis.

Indeed, on Monday investors demanded slightly higher interest rates for such mortgage-backed securities, increasing the difference- or spread- between mortgage securities and Treasuries. But that increased spread, which normally would result in higher mortgage rates, was more than made up for by the drop in Treasury security yields.

Your money in a AA-rated world

“That flight to safety is completely overshadowing any increase in rates that the downgrade might have brought,” said Gumbinger of HSH Associates.

Auto loan rates may also slide lower since they too are tied to Treasury yields. The yield on 3-year Treasury notes dipped Monday to .45%, which is likely to pressure down 48-month auto loan rates. The national average auto loan rate was 5.6% Monday, according to bankrate.com.

Analysts warn the drop in interest rates may not last. If investment flows were to move back into stocks and out of bonds, interest rates on Treasury securities, and consequently mortgages, would rise.

“Over the long-term, if the U.S. has to pay more in interest rates, consumer rates will likely go up,” said Greg McBride, senior financial analyst for Bankrate.com.

For now, lower mortgage rates may offer only limited benefits to American consumers. Banks’ lending standards have been tough recently, and consumers need the wherewithal to qualify for loans. That appears increasingly difficult as the economy continues to sputter.

How Long Is the Wait to Buy After Foreclosure?


Strange times we live in because this is a question I get a lot these days. The answer I usually give is “It depends”. I know that sounds like a cop out but the reasons for every foreclosure, short sale, or deed in lieu of foreclosure will be different. Plus, pretty much as soon as I publish this posting, the rules will most likely change. Sort of a moving target.

A sluggish housing market has caused millions of home owners to lose their home to foreclosure, short sale, or deed in lieu of foreclosure. But once these former home owners get a better handle on their credit, how long do they have to sit on the sidelines until they can secure future financing to buy a home again?

As an article in The New York Times notes “there are plenty of asterisks and conditions” when it comes to how long a borrower must wait after a “significant derogatory event,” like a foreclosure or short sale.

In general, however, The New York Times notes that the longest wait to buy again will come if there is a foreclosure in the former home owner’s past.

Fannie Mae and Freddie Mac have a three-year waiting period following a foreclosure, and a two-year wait following a short sale, deed in lieu, or discharge or dismissal of bankruptcy. However, if borrowers can justify that the circumstance for the foreclosure or bankruptcy occurred because of an illness or job loss — or other “extenuating circumstance” — that may help reduce their wait. But with no such extenuating circumstances, these former home owners may have to wait longer, even up to seven years following a foreclosure or four years after bankruptcy, the article notes.

For loans insured by the Federal Housing Administration, borrowers with perfect credit afterwards also will, in general, have to wait three years after a foreclosure and two years after a bankruptcy is discharged, The New York Times notes.

Following a short sale, borrowers will have to wait three years to secure another FHA loan — however, there are plenty of exceptions. Borrowers will have to wait three years if they were in default at the time of the short sale and had no extenuating circumstances. However, if the borrowers were on time with all their payments a year prior to the short sale, they may have no wait at all and might even qualify for an FHA loan immediately.

“The key is to avoid the foreclosure,” Andrew Wilson, a spokesman for Fannie Mae, told The New York Times. “That is what will help you be eligible for the shorter period.”

http://www.nytimes.com/2011/06/26/realestate/playing-the-waiting-game-after-foreclosure-and-short-sale-mortgages.html?_r=1&partner=rss&emc=rss

7 Home Owners Insurance Tips

By: Richard Koreto

Published: December 10, 2010

The new year is a good time to take stock of your home owners insurance coverage.

1. Make sure you can rebuild all, not just part of, your house

Don’t make the mistake of assuming that just because your home’s value has gone down that the cost of materials and labor have gone down, too. For example, home construction costs rose 1.3% from January 2009 to January 2010, according to construction cost consultants Marshall and Swift/Boeckh, even while many homes were falling in value. Make sure your home owners insurance pays you for full rebuilding costs in the event of a disaster.

2. Check your flood insurance

The National Flood Insurance Program can help by making affordable flood insurance available, but there are limits to how much coverage you can get, and it isn’t available everywhere. In addition, the NFIP has only been approved for a series of short-term renewals. (That is, Congress has been extending its provisions for only short periods and has not committed to making it permanent.)  Keep an eye on the NFIP to make sure the program remains in force.

If you can’t participate in NFIP or need more extensive coverage, see if you can buy flood insurance from your existing carrier. Flood insurance rarely comes with a standard home owners policy.

3. What’s new in your life?

If you’re recently divorced, and you got the house, make sure your ex-spouse’s name is off the policy. Did you build a playground for your children? Install a swimming pool? These may change your liability needs. Talk to your agent and compare your life status this year with last year’s to update your home owners insurance.

4. Maybe your valuables are worth more

Your art, jewelry, antiques, and other collectibles may have appreciated in value over the years. If your home owners insurance policy doesn’t have accurate values on these items, your company may not reimburse you for the full value in the event of fire or other home disaster.

5. Tally up any home improvements

Have you made any renovations or additions to the home, such as an expanded garage, new bathroom, or home theater in the basement? Your house may now be worth more and your home owners insurance needs to reflect that. Create a home inventory video and keep it in a safe place outside the home.

6. Give your trees the once-over

Hire an arborist to look at the trees on your property, and check with your home owners insurance agent to see if your policy covers you if one of your trees falls on the neighbor’s car. An arborist can tell you if your trees are healthy and advise whether they should be removed or trimmed.

7. Watch the nickels and dimes

Hunt for any special discounts that can reduce your home owners insurance premiums. For example, you may be eligible for a discount if you have an automobile or valuable articles policy with the same company has your home owners insurance policy.

These home features can also give you discounts on your home owners insurance–but only if your insurer knows you have them:

  • Burglar or fire alarms

  • Gated community patrol service

  • Storm shutters

  • Temperature monitoring system to protect against freezing, connected to a central station alarm

  • Permanently installed, electrical back-up generator

Richard J. Koreto, a freelance writer, is the former editor of several professional financial magazines and the author of Run It Like a Business, a practice management book for financial planners. He and his wife own a pre-Civil War house in Rockland County, N.Y., and a country house in Martha’s Vineyard.

Tax Deductions for Vacation Homes

By: Donna Fuscaldo

Published: November 17, 2009

Tax deductions for vacation homes vary greatly depending on how much you use the home and whether you rent it out.

Is your vacation home a vacation home?

If you bought your vacation home exclusively for personal enjoyment, you can generally deduct your mortgage interest and real estate taxes, as you would on a primary residence. Use Schedule A to take the deductions.

The IRS even allows you to rent out your vacation home for up to 14 days a year without paying taxes on the rental income. You might be able to deduct any uninsured casualty losses too, though you can’t write off rental-related expenses. (More on those below.) If the home is rented for more than 14 days, you must claim the income.

Now, if you own what you consider a vacation home but never visit it, or only rent it out, other tax rules apply. Without personal use the home is considered an investment or rental property by the IRS. Time spent checking in on a house or making repairs doesn’t count as personal use.

Tax deductions for rental owners

As an exclusive rental property, you can deduct numerous expenses including taxes, insurance, mortgage interest, utilities, housekeeping, and repairs. Even towels and sheets are deductible. Use Schedule E. You can also write off depreciation, the value lost due to the wear and tear a home experiences over time.

Treat the rental property like a business, says Mark Steber, chief tax officer at Jackson Hewitt Tax Services. Keep detailed records and maintain a separate checking account. Figure you’ll spend a couple of hours a week, on average, over the course of the year managing the property.

To maximize deductions you need to be actively involved in the rental property. That means performing such duties as approving new tenants and coming up with rental terms. You also need to own at least 10% of the property. See IRS Publication 527 for details.

If your adjusted gross income is $100,000 or less you can deduct from your taxable income up to $25,000 in rental losses–that is, the difference between your rental income and your rental expenses. The deduction gradually phases out between an AGI of $100,000 and $150,000. You may be able to carry forward excess losses to future years, or use losses to offset taxable gains when you sell.

Expenses can add up. HOA fees (average: $420), routine maintenance costs ($360), and six months’ worth of utilities ($1,100) alone total nearly $2,000. By deducting $2,000 from taxable income of $100,000, a married couple filing jointly would cut their tax bill by $488.

Mixed use of a vacation home

The tax picture gets more complicated when in the same year you make personal use of your vacation home and rent it out for more than 14 days. Remember, rental income is tax-free only if you rent for 14 days or fewer.

The key to maximizing deductions is keeping annual personal use of your vacation home to fewer than 15 days or 10% of the total rental days, whichever is greater. In that case the vacation home can be treated as a rental, meaning you get the same generous deductions. To avoid going over the 10% limit, essentially you shouldn’t use your vacation home more than one day for every 10 days you rent it.

Make personal use of your vacation home for more than 14 days (or more than 10% of the total rental days), however, and your deductions may be limited. If your rental income is less than your rental expenses, for example, you can’t use the loss to offset other sources of income. There’s a worksheet that determines which expenses you can carry over to the following year.

Another big blow: The IRS requires you to divide expenses between personal use and rental use. Let’s say you have a vacation home you personally use for 25 days and rent for 75 days. That’s 100 total days of use. You can only write off 75% of the expenses as rental expenses–75 rental days divided by 100 total days of use works out to 75%. Some of the personal expenses, such as mortgage interest and real estate taxes, may be deductible on Schedule A.

IRS closes tax loophole

A popular strategy used by owners of vacation homes to avoid paying capital gains on a sale was to convert a vacation home into a primary residence. This was accomplished by living in the home for two years out of the previous five before selling. By doing so a gain on the sale of up to $250,000 for single filers ($500,000 for married filing jointly) was tax-free.

The IRS hasn’t done away with the cap-gains exclusion, but it is closing the loophole for vacation homes. Starting in 2009, you have to pay regular cap-gains taxes on the portion of the gain that’s equivalent to the time you used the home as a vacation home after 2008.

Let’s say on Jan. 1, 2010, you move into a vacation home you bought on Jan. 1, 2002. Two years later you qualify for the cap-gains exclusion and decide to sell. You’d pay regular capital gains on 10% of the gain because in 2009 the home was a vacation home subject to the new IRS rules. The other nine years–2002 to 2008, when the old rules applied, and 2010 to Jan. 1, 2012, when the home was used as a primary residence–qualify for the exclusion.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

Donna Fuscaldo has written about personal finance for more than 10 years at the Wall Street Journal, Dow Jones Newswires, and Fox Business. She one day hopes to own a vacation home in the Catskills of New York.

Top Ten Reasons People Sell

When does a homeowner consider selling? From money problems to the need to downsize, the reasons vary by owner. Here are ten common reasons an owner takes to the market.

1. Risk of Foreclosure. This is listed as number one because around one-third of all sales in today’s current market are distressed properties. Many homeowners find themselves in mortgages they cannot afford, whether due to job loss or to rising monthly payments. It is far better for their credit score to sell or short sale before they are foreclosed upon.

2. Job Loss. This goes hand in hand with number one. If you have lost your job, but are still not behind on your payments, now could be a good time to take a pre-emptive strike to avoid foreclosure.

3. Relocation. Sometimes it’s necessary to follow a job or to move for a better job. These homeowners, including members of the military, sometimes find themselves needing to sell in a hurry.

4. Healthy Seller’s Market. You won’t find this trend in most of the nation. In fact, most areas of the nation are still experiencing lukewarm sales and depressed home values. There are, however, spots that are hot beds of activity. These homeowners may wish to sell to make a profit or to avoid the risk of attempting to sell later in a down market.

5. Downsizing. Baby Boomers are now entering retirement. As they are faced with empty nests and changes of pace, many will decide to sell in order to downsize to smaller, more manageable homes.

6. Dream House. It is a great time to buy. Home values are affordable and interest rates are at historic lows. If a homeowner has a solid amount of equity in their current home, it may be a good time to sell and move up to their dream home.

7. Changing Locations. A downtown loft may have been a perfect choice for a young bachelor, but as a family evolves and children enter the story, a move may be needed to get to the best school district.

8. Need Money. Your home can be one of your biggest assets. If you are in need of some liquid money, selling can free up cash.

9. Investors. There are investors that may sell to avoid taking further losses on already depreciated values. They may also sell flipped houses in order to make a quick profit.

10. Family Needs. Sometimes a move is necessary in order to deal with family matters. An ailing parent or grandchildren in need may prompt a move.

Selling Real Estate tip #29

Selling Real Estate tip #29.  Before you list your home in the summer months, before you have your photo shoot and virtual tour filmed, PLEASE for love of mankind, PLEASE, take down your dangling icicle Christmas lights.  There is one house in every neighborhood that leaves there Christmas lights up all year around.  We all know where that house is in our own neighborhoods.  All your neighbors know too.  Everyone in the neighborhood talks about it, but never to the owners of the home.  So before you list,  think about first impressions and having your Christmas lights still up in the month of June is the wrong first impression.  Put yourself in the buyers shoes.  First impressions mean everything when you are sell your home.  Remember,  you only get one first impression.  Make it a “WOW this is a  great house” as oppose to “WOW this house still have their Christmas lights still up”.

Short Sale: The Foreclosure Alternative

By: Gwen Moran Published: July 8, 2010
A short sale is far from hassle-free, but it’s a better alternative than foreclosure. And now you’ve got a little help from your friends in D.C. Here are the facts about short sales and how to get started.

Short sales get government incentives

Although short sales are not hassle-free, at least you’ve got the government backing you. The Home Affordable Foreclosure Alternatives (HAFA) program provides financial incentives for lenders and borrowers to avoid foreclosure through short sales or deeds in lieu of foreclosures.
Participation in the HAFA program requires adherence to guidelines–including a standard process and minimum timeframes–that speed the process, says Dallas-based REALTOR® Tom Branch, co-author of Avoiding Foreclosure: The Field Guide to Short Sales. The HAFA program is for homeowners who can’t keep their homes with the help of a loan modification.

Advantages of a short sale

  • You can be a homeowner again more quickly with a short sale in your past than with a foreclosure. New Fannie Mae guidelines help you qualify for a new mortgage in as little as two years after a short sale, as opposed to up to seven years after a foreclosure.

  • You will have more time to make relocation plans and save money than with a deed in lieu. A short sale may take four to 12 months. A deed in lieu of foreclosure arrangement typically requires you vacate your home within 30 to 60 days of signing, according to real estate attorney Lance Churchill.

  • You can receive up to $3,000 from your lender for moving expenses at the time of closing of a HAFA short sale or a HAFA deed in lieu of foreclosure. Relocation funds are part of the incentives of HAFA, but not necessarily for other short sale or deed in lieu programs of the lenders.

  • You can help your community’s home values. Because the lender often receives a higher amount of the remaining loan balance than it would from the sale of a home after a foreclosure, short sales help support home values in the surrounding community.

Disadvantages of a short sale

  • Your credit score will take a severe hit. But that would happen anyway with a foreclosure. Fair Isaac, creator of the FICO score, says foreclosure and short sales have virtually identical impacts on your credit score. VantageScore–a company that has created a credit score model for consumers–says a short sale will lead to only a marginally lighter hit when compared with foreclosure.

  • You may owe additional taxes. In the past, if your outstanding mortgage was $100,000 and your lender accepted a short-sale purchase offer of $90,000, you were liable for income tax on the forgiven $10,000, says Harlan D. Platt, economist and professor of finance at Northeastern University in Boston. However, the Mortgage Forgiveness Debt Relief Act of 2007, which runs through 2012, generally allows taxpayers to exclude income from the discharge of debt on their principal residence in some circumstances. Full relief is available only if the amount of forgiven debt doesn’t exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Consult a tax professional and an attorney to minimize or avoid this liability.

  • In some states, your lender may still be able to come after you for the difference between the short sale price and the amount needed to pay off the mortgage. Your actual agreement with your lender and state and local laws and regulations spell out the details. Consult a tax professional and an attorney to minimize or avoid this liability.

How to proceed with a short sale

  • Find a qualified REALTOR® experienced in short sales. Short sales are tough to navigate, and they’re further complicated by your loan type–FHA vs. Veterans Administration vs. conventional loans. Real estate agents who specialize in short sales will know the proper steps and order of the steps involved. They’ll also be able to navigate the many parties involved in the process and over-burdened loss mitigation departments. Look especially for agents who have Short Sales and Foreclosure Resource (SFR) Certification, which requires specialized training.

  • Gather evidence to support your need for a short sale as opposed to a foreclosure. You’ll need to prove that you have little or no equity in your home, you’re behind on your payments, and you’re no longer able to afford your home. You’ll need to write a hardship letter to the lender describing your circumstances, such as a divorce, job loss, illness, death, or other event that has impacted your income.

A short sale can be a time-consuming process, but if you can avoid foreclosure, it’s worth it in the long run.

Gwen Moran has been writing about business, finance, and real estate for more than a decade. Her work has been published by Entrepreneur, Newsweek.com, Financial Planning, Woman’s Day, and The Residential Specialist. She bucks the cottage trend and lives in a Colonial near the Jersey Shore.

Short Sales and Foreclosures are not always “deals”

Some find quality, convenience take back seat to price

Today’s buyers seem to have one thing in common: Everyone wants a great deal. So the real issue is whether the foreclosure, REO or short-sale property you’re eyeing is a bargain or a money pit.

The buying public seems to think that “great deal” equals foreclosure, short sale or bank-owned property. The truth is that these properties may appear to be bargains, but in many cases you could be buying someone else’s problems. If you’re looking for a bargain property, here are some key issues to consider:

1. What is your time line for purchasing?
You may find the perfect short-sale property, and the seller may accept your offer. The challenge is that you don’t have a deal until the bank approves the short sale. At many large lenders a single processor may have up to 500 files on his or her desk at one time. Realtors are reporting that it can take six or more months to get an offer approved. The wait can be extremely frustrating. It can also be costly.

For example, if prices are still declining in your area and price range, the offer you made six months ago may be too high. Also, if you qualify for a loan now, will you still qualify six to eight months from now if mortgage interest rates have increased? More importantly, can you afford to make a higher monthly payment? If possible, search for a short sale or an REO where the bank has preapproved the sales price. It still may take a long time to close, but not as long as it would if the price was not preapproved.

2. Are you prepared to be in a multiple-offer situation?
Since so many buyers are searching for distressed properties and the approval process takes so long, multiple offers are common. The lender will not tell you about other offers. They may, in fact, tell you that your offer will “probably” be approved — but you cannot rely on this representation.

If another offer comes in at a higher price and at better terms, the bank is obligated to take the best offer. If the property is a short sale, the seller’s signature on the document merely opens the negotiation — it does not finalize it. Furthermore, the seller/lender may continue to market the property even after they have signed a contract with you. This is simply smart business, as so many borrowers are having trouble closing transactions due to appraisal issues.

3. Ask the agent if the seller participated in the “Cash for Keys” program
The best candidates for good bargains are those properties where the sellers are still occupying them. Many banks have a program called “Cash for Keys.” This program pays the owners of foreclosure and short-sale properties money to keep the owner from trashing the property when they move out. I have seen copper piping ripped out of properties, concrete poured down the plumbing, and appliances stolen or destroyed. Cash for Keys is designed to minimize these behaviors.

4. Beware of vacant properties
Never purchase any property without doing a physical inspection. Also, if it takes more than 90 days to negotiate the transaction or if the house has been vacant, have the property re-inspected prior to signing off on the final deal. The reason for this is that the longer a house stays vacant, the more likely it is to have problems.

For example, pack rats and mice are more likely to move into vacant properties. They can chew through the wiring and generally wreak havoc with the home’s electrical systems. Also, if the dishwasher is not run at least once a week, the seals can dry out. If you live in an area where the pipes are not winterized and there are freezing temperatures, a pipe may burst. You may not discover the problem until you turn the water back on after closing.

5. Is the deal more important than your lifestyle?
A property can be a great deal in terms of the price, but is it worth it if it’s in a poorly rated school district or if the commute is an hour from your workplace? What if the property has a terrible floor plan, is in the flight path for a major airport, or occasionally gets a whiff of the sewage treatment plant? When you purchase, it’s important that you take all of these issues into consideration rather than focusing exclusively on the price. A property with any of these types of problems will be harder to sell in the future.

It’s important to consider the price in conjunction with the quality and the convenience of your lifestyle once you move in. For example, an extra 30-minute commute over a number of years can easily chew through thousands of dollars in terms of your vehicle costs, not to mention the wear and tear from the additional stress of commuting.

There are good distressed property deals out there. Nevertheless, don’t limit your search. Have your agent show you seller-occupied homes that are not distressed properties. Thirty-five percent of all properties are owned free and clear. These properties are often lovingly maintained, in top-notch condition, and in more desirable locations. In the long run, they may be a much better bargain.

Freddie Mac offers new incentives to buyers of REO Properties

In an effort to move existing REO inventory, Freddie Mac is getting proactive by offering up to 3.5% in closing-cost assistance to homebuyers who get into escrow before July 31st, 2011 and close escrow on or before September 30th, 2011.

They will also offer homebuyers and select non-profits an exclusive opportunity to purchase HomeSteps homes prior to competition from investors through the Freddie Mac First Look Initiative, during the initial 15 days of listing. The purchasers does not need to be a first time homebuyer to be eligible provided, however, that they are buying the home as their primary residence.

Foreclosure Buying 101

4 Mistakes to Avoid When Buying a Foreclosure

Foreclosures continue to flood real estate markets across the country, and buyers are looking to cash in on what they view as some of the best real estate deals. But experts say that while some foreclosures are a great purchase, buyers need to be cautious before jumping in to make sure they really are getting a bargain.

Dan Steward, president of Pillar to Post Professional Home Inspections, advises buyers considering a foreclosure to avoid the following:

1. Don’t judge a house by looks alone. A $2 million mansion may look fabulous but have mold hiding beneath the walls or need numerous, costly repairs. A fixer upper, on the other hand, may look rundown but have excellent bones and can be repaired at a reasonable cost. A home inspection prior to purchasing a property can help buyers determine if they might be getting in over their head, Steward says. He cautions buyers to not just rely on previous inspections, however, since vacant homes can deteriorate rapidly.

2. Don’t focus on price alone. Buyers may focus on the ultra-low price so much that they forget to factor in other qualities, such as the home’s school district, view, location, and crime rate. Steward cautions buyers to not assume that financial problems of the previous owner are the main reason for every foreclosure.

3. Don’t be tempted to “flip.” Purchasing a home at bargain price, updating it, and then trying to sell it for a lot more may seem tempting, but Steward warns buyers to be cautious. Unless the buyers are pros at house flipping, they’ll likely run into several novice mistakes in trying to make fast money on flipping a foreclosure. Steward recommends buyers consult a real estate professional, home inspector, and contractors before considering a flip.

4. Don’t go over budget. Foreclosures often require some fixes so buyers need to make sure they have the money to afford needed repairs. Steward recommends that buyers have at least half of the money in cash for needed repairs. He says that buyers will want to avoid taking more loans than needed, particularly private loans, because the interest on them will slowly chip away at their initial foreclosure bargain.

Source: “What to Watch Out for When Buying a Foreclosure: Help Your Clients Know Which to Buy … and Which to Walk By,” RISMedia (April 7, 2011)

Asbestos Removal: Caution and Costs

Asbestos Removal: Caution and Costs

By: Jan Soults Walker Published: March 25, 2011
Asbestos removal may be warranted when an asbestos-containing material in your home is damaged, flaking, or crumbling. Find out what to do.

Asbestos removal basics

It’s a two-step process. First, have the material tested to make sure it contains asbestos. Then, have it professionally removed. Here’s what you need to know:

  • Seek out accredited asbestos inspectors and contractors who are licensed and trained in safe asbestos testing and removal.
  • To avoid conflict of interest, have suspect materials tested by one company and abatement or removal done by another company.
  • Be prepared–in some cases, you and your family may have to temporarily relocate while the work is being completed.

Hiring a corrective-action contractor

It’s okay to hire roofing, flooring, and siding contractors who may be exempt from state asbestos removal licensing requirements, as long as they’re trained in asbestos removal. The EPA offers suggestions on what to do if you hire a corrective-action contractor.

Before work begins, you’ll want a written contract that clearly states all federal, state, and local regulations that the contractor must follow, such as cleanup of your premises and disposal of the materials.

When the job ends, get written proof from the contractor that all procedures were followed correctly. Have a follow-up check from a licensed asbestos inspector.

Asbestos removal costs

An initial asbestos inspection costs $400 to $800. A follow-up inspection when the project ends adds $200 to $400. For lab work, a sample analysis averages $25 to $75.

Asbestos removal costs vary depending on the extent of the work to be done. Many contractors have a minimum fee of $1,500 to $3,000, no matter how small the job is.

Complete removal in a 1,500-square-foot home with asbestos everywhere—walls, floors, ceilings, attic, roof, pipes—could be as high as $20,000 to $30,000.

With four home renovations to her credit, Jan Soults Walker is a devotee of improvements, products, and trends for the home and garden. For 25 years she’s written for a number of national home shelter publications, and has authored 18 books on home improvement and decorating.

3 Tips for Smart Vacation-Home Buying

Vacation homes are offering plenty of good deals at the moment. In many second-home hot spots, prices are still close to five-year lows. For example, single-home prices in second-home hotspot Napa, Calif., are down 47 percent from their peak in 2006, according to Fiserv.
If you have a buyer looking to cash in on vacation- or second-home values, an article at CNNMoney.com recently offered the following tips:

1. Is it rentable? Even for buyers who aren’t planning to rent it out, they may still want to consider the rental aspects of the property, particularly since a home’s rental potential can affect its resale value, says Catherine Jeffrey, a real estate professional in Fredericksburg, Texas. Buyers will want to check with the homeowners association or township to ensure that short-term rentals are allowed.

2. How do you plan to use the home? Your loan rate will depend on how you use the property. For example, if buyers intend to use the property primarily as a second home, they’ll pay about the same mortgage rate as a primary residence, says HSH Associates vice president Keith Gumbinger. However, if they plan to get rental income from the property, the property will be treated as an investment, which means they may need to pay as much as 25 percent for the down payment and pay up to one percentage point more in interest, Gumbinger says.

3. Are you eligible for the tax benefits? If the owners rent the house out for two weeks or less, they won’t have to report income to the IRS, and they’ll still be able to deduct property taxes and mortgage interest, experts say. If the owners stay in the home for less than two weeks or has 10 percent rental days, whichever is greater, they’ll be able to deduct operating costs, such as cleaning and maintenance fees, as well as the interest and property tax, says Rick Shapiro, a CPA in West Hartford, Conn. He suggests home owners talk with a tax expert to find out what tax benefits they are eligible for.

Source: “5 Things to Know About Buying a Vacation Home,” CNNMoney.com (April 5, 2011)

Lead Paint Removal: Options and Costs

Published: March 25, 2011 by Jan Soults Walker

If testing reveals the presence of lead-based paint in your pre-1978 home, here are a few of the options at your disposal for removing it.

What does it cost?

According to the EPA, professional lead-based paint removal for the following three options costs about $8 to $15 per square foot or about $9,600 to $30,000 for a 1,200- to 2,000-sq. ft. house. The average removal project costs about $10,000.

Lead paint removal options

Encapsulation. Typically the least complicated and most affordable method, encapsulation involves brushing or rolling on a specially made paint-like coating that creates a watertight bond and seals in the lead-based paint. However, opening and closing your doors and windows eventually may wear off the coating.

Encapsulation products start at about $35 per gallon. Expect to pay $600 to $1,000 to cover surfaces in a 1,200- to 2,000-sq. ft. home (not including labor).

Enclosure. With this method, the old surface is covered with a new one, such as putting up new drywall or covering windowsills with aluminum or vinyl cladding. If the enclosed surface is ever removed, you’ll have to deal with the exposed lead-containing surfaces underneath.

Removal. A variety of approaches are used to remove lead-based paints, such as wire brushing or wet hand scraping with liquid paint removers. Your contractor may opt to wet sand surfaces, and must use an electric sander equipped with a high-efficiency particulate air (HEPA) filtered vacuum. Another option is stripping off paint with a low-temperature heat gun, and hand scraping.

Forbidden methods of removal include open flame burning or torching, machine sanding without a HEPA attachment, abrasive blasting, and power washing without a means to trap water and paint chips.

Replacement. This more radical strategy calls for taking out the offending surfaces or features and installing new windows, doors, woodwork, and other surfaces.

The do-nothing option

If lead-based paint in your home is in good condition–no chipping or other damage–and no children under the age of 6 live there or visit regularly, you may safely opt to leave the paint untouched. You will need to disclose the presence of the paint if you decide to sell.

However, if the paint is peeling or chipping, or if intact lead-based paint is on window sills and stair rails and children under 6 are present, begin with a cleanup and find out how lead-based paint is regulated by your regional EPA office.

DIY cleanup

Even before lead paint removal occurs, minimize your family’s exposure:

  • Clean up paint chips immediately.
  • Clean floors, window frames and sills, and other surfaces weekly with warm water and all-purpose cleaner. Thoroughly rinse sponges and mop heads.
  • Wash children’s hands often, especially before meals, naps, and bedtime.
  • Prevent children from chewing painted surfaces, such as window sills.
  • Remove shoes to avoid tracking lead-contaminated soil inside.

For additional information, contact the National Lead Information Center (NLIC).

With four home renovations to her credit, Jan Soults Walker is a devotee of improvements, products, and trends for the home and garden. For 25 years she’s written for a number of national home shelter publications, and has authored 18 books on home improvement and decorating.

Buyers Are Using Home Inspections As Leverage

More buyers are using home inspection reports as leverage to get a price cut or get sellers to pay for extra repairs, says Harris Gross of Engineers for Home Inspection in Cherry Hill, N.J.


“The result depends on the financial position of the seller and the comfort zone of the buyer,” says Noelle M. Barbone, manager of Weichert REALTORS® in Media, Pa. “We are a coupon-clipping society,” with buyers trying to save every penny they can, she adds.
But home inspectors caution that home inspections are not intended to note every tiny defect and they aren’t there to “pass or fail a house.” Instead, the home inspectors job is to describe the overall condition of the home and indicate which components and systems may need repair or replacement, according to the American Society of Home Inspectors.


A home inspector’s standard report will cover the condition of the following:

  • Heating system;
  • Central air-conditioning system (temperature permitting);
  • Interior plumbing and electrical systems;
  • Roof, attic, and visible insulation;
  • Walls, ceilings, floors, windows, and doors;
  • Foundation, basement, and structural components.


Some larger home inspection companies may offer even additional reports, such as for termite inspection and radon testing.

Home Owners Beware Of Loan Modification Scams.

One in nine home owners are more than 90 days behind on their mortgage payments, which has prompted loan modification scams that promise to rescue home owners from foreclosure doom to skyrocket.

Four fair housing organizations released findings this week uncovering some of the most popular loan modification scam tactics after a yearlong investigation of about 80 companies.

According to the report, some of the common scam tactics used were:

* 55 percent required an upfront fee to begin work or required a low initial fee to conduct minimal work — such as reviewing loan documents — on behalf of defaulting home owners.
* 43 percent guaranteed or promised they would be able to secure a loan modification even prior to learning about the home owner’s financial limitations.
* 24 percent advised or encouraged home owners to stop making their mortgage payments or to stop contacting their lenders.
* 16 percent guaranteed a loan with a lower interest rate, between 2 and 6 percent.
* 12 percent discouraged home owners from getting free help from government-approved housing counseling agencies.

The report was issued by The National Fair Housing Alliance, The Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, and the Miami Valley Fair Housing Center.

What Is a ‘Safe’ Mortgage and what it means to you.

Later this month, the Federal Deposit Insurance Corp. will consider new rules that define what a safe or “qualified” residential mortgage is as part of the Dodd-Frank financial overhaul law.

Experts say the classification will likely have broad sweeping effects on the mortgage market..

The Dodd-Frank financial overhaul law, which was passed last summer, contains a risk-retention requirement that requires issuers of securities backed by mortgages and other assets to maintain 5 percent of the risk of a loan, if it is packaged into a security and sold to investors, Dow Jones reports. The idea is that lenders would be more careful with making loans since they would face steeper losses if a loan went bad.

Six federal agencies are working to resolve numerous issues on the proposal but one of the most controversial issues yet to be resolved is which loans are exempt from the risk-retention requirement and would be considered safe or “qualified” mortgages.

Expecting some heated debate, regulators have suggested issuing two different plans for public comment: One plan would call for a minimum 20 percent down payment, and another plan would recommend a 10 percent down payment as well as mortgage insurance.

FDIC banking regulators have called for a minimum 20 percent down payment requirement for new mortgages, but lawmakers and consumer advocates have argued that number is too high and could hamper an already sluggish housing market.

Loans guaranteed by Fannie Mae and Freddie Mac, which make up about 70 percent of the mortgage market, are expected to be exempt as long as they remain under government control. Government agencies such as the Federal Housing Administration are already exempt.

REOs, short sales aren’t always bargains

Some find quality, convenience take back seat to price

Today’s buyers seem to have one thing in common: Everyone wants a great deal. So the real issue is whether the foreclosure, REO or short-sale property you’re eyeing is a bargain or a money pit.

The buying public seems to think that “great deal” equals foreclosure, short sale or bank-owned property. The truth is that these properties may appear to be bargains, but in many cases you could be buying someone else’s problems. If you’re looking for a bargain property, here are some key issues to consider:

1. What is your time line for purchasing?
You may find the perfect short-sale property, and the seller may accept your offer. The challenge is that you don’t have a deal until the bank approves the short sale. At many large lenders a single processor may have up to 500 files on his or her desk at one time. Realtors are reporting that it can take six or more months to get an offer approved. The wait can be extremely frustrating. It can also be costly.

For example, if prices are still declining in your area and price range, the offer you made six months ago may be too high. Also, if you qualify for a loan now, will you still qualify six to eight months from now if mortgage interest rates have increased? More importantly, can you afford to make a higher monthly payment? If possible, search for a short sale or an REO where the bank has preapproved the sales price. It still may take a long time to close, but not as long as it would if the price was not preapproved.

2. Are you prepared to be in a multiple-offer situation?
Since so many buyers are searching for distressed properties and the approval process takes so long, multiple offers are common. The lender will not tell you about other offers. They may, in fact, tell you that your offer will “probably” be approved — but you cannot rely on this representation.

If another offer comes in at a higher price and at better terms, the bank is obligated to take the best offer. If the property is a short sale, the seller’s signature on the document merely opens the negotiation — it does not finalize it. Furthermore, the seller/lender may continue to market the property even after they have signed a contract with you. This is simply smart business, as so many borrowers are having trouble closing transactions due to appraisal issues.

3. Ask the agent if the seller participated in the “Cash for Keys” program
The best candidates for good bargains are those properties where the sellers are still occupying them. Many banks have a program called “Cash for Keys.” This program pays the owners of foreclosure and short-sale properties money to keep the owner from trashing the property when they move out. I have seen copper piping ripped out of properties, concrete poured down the plumbing, and appliances stolen or destroyed. Cash for Keys is designed to minimize these behaviors.

4. Beware of vacant properties
Never purchase any property without doing a physical inspection. Also, if it takes more than 90 days to negotiate the transaction or if the house has been vacant, have the property re-inspected prior to signing off on the final deal. The reason for this is that the longer a house stays vacant, the more likely it is to have problems.

For example, pack rats and mice are more likely to move into vacant properties. They can chew through the wiring and generally wreak havoc with the home’s electrical systems. Also, if the dishwasher is not run at least once a week, the seals can dry out. If you live in an area where the pipes are not winterized and there are freezing temperatures, a pipe may burst. You may not discover the problem until you turn the water back on after closing.

5. Is the deal more important than your lifestyle?
A property can be a great deal in terms of the price, but is it worth it if it’s in a poorly rated school district or if the commute is an hour from your workplace? What if the property has a terrible floor plan, is in the flight path for a major airport, or occasionally gets a whiff of the sewage treatment plant? When you purchase, it’s important that you take all of these issues into consideration rather than focusing exclusively on the price. A property with any of these types of problems will be harder to sell in the future.

It’s important to consider the price in conjunction with the quality and the convenience of your lifestyle once you move in. For example, an extra 30-minute commute over a number of years can easily chew through thousands of dollars in terms of your vehicle costs, not to mention the wear and tear from the additional stress of commuting.

There are good distressed property deals out there. Nevertheless, don’t limit your search. Have your agent show you seller-occupied homes that are not distressed properties. Thirty-five percent of all properties are owned free and clear. These properties are often lovingly maintained, in top-notch condition, and in more desirable locations. In the long run, they may be a much better bargain.