We just got the banks acceptance of a short sale offer, which had been at the bank awaiting approval for four months. My buyer is ecstatic. Think about it, four months to get approval and then we spend another 30 days with financing, appraisals and getting to the closing table. Five months total.
Its almost the first of March and if you write an offer on a short sale home tomorrow, March 1 and it takes the four to five months to get closed as we just experienced, if you are lucky, you are closing on the last allowable day, June 30, to get the $8,000 first time homebuyer credit from the federal government. Miss that by one day and you miss the $8,000.
Now I’m not a gambling man and don’t know if you are, but, I wouldn’t risk the chance of losing $8,000 waiting on the bank. There are thousands of homes out there for sale that only need the owner, Mr. and Mrs. Homeowner to sign and then you can close in less than 45 days from offer to move-in.
I am advising my first time home buyer clients to beware of short sales if they want to get to the finish line and collect $8,000. While I know this news disturbs all the agents with short sale listings, the main reason is many agents don’t understand the short sale process and have not done the work to get the front end work done to speed up the process.
Likewise I have a couple of buyers looking to secure the $6,500 second home buyers credit and I am advising them likewise to beware of writing a contract for a new home that has not been started, up out of the ground. With all the rain we have been experiencing there is a good chance of delays when digging a foundation, pouring concrete slabs and framing up a home.
Bottom line, there are risks with short sales where you can’t control the banks and new construction where you can’t control the weather. To be sure to qualify for the first time homebuyer $8,000 and second home $6,500 write a contract that has a great chance of closing in time and don’t ride a deal down to the end only to run past June 30.
Mark Lackey, Associate Broker with Solid Source Realty shares why home buyers need representation when purchasing a home. In today’s market more than ever, a buyer needs help navigating the market to make sure that he or she is getting sound advice.
FHA has announced sweeping changes that range from increased down payment requirement from 3.5% to 10% in certain cases, increased Mortgage Insurance Premiums (MIP) by half a percent and cutting allowed sellers contributions by half.
So you’ve decided the time has come to purchase a home. With the real estate market in decline, this can be an opportune time to purchase a property at a price well below market value. However, you will still need to make sure your credit is in order, so you can obtain a home at the best rate possible.
Your credit score will determine whether you can qualify to purchase a home, and will have a substantial impact on the interest rate you can obtain for a mortgage loan. A low credit score may mean that you will be charged high a interest rate on your loan, and in some circumstances, it may even disqualify you from buying a house altogether.
Before you even begin shopping for a home, it is a good idea to obtain your credit report from the three main reporting agencies: Experian; Equifax; and TransUnion. Lenders may use one or all of these agencies when determining if you qualify for a loan, so it’s important to know what the information is being provided by all three agencies.
You will also want to obtain your credit score from all three agencies. This score is not always included with credit reports, so you may have to purchase this information separately. Credit scores range from 300 to 800 – generally, mortgage lenders will want to see a minimum score of 650 before they will consider a loan applicant; most prefer a score of 700 or above.
If your credit score is lower than you expected, look through your credit reports for negative items, such as late payments and charge offs. If any of these items are present, make sure that they are accurate. If not, you will need to contact the reporting agencies to file explanations stating that these items are inaccurate.
If the negative items are accurate, only time and diligence will raise your credit score. In some cases, if an extraordinary event caused you to be late on credit card or installment loan payments, the lender will accept a letter of explanation detailing why these negative events occurred. However, this is the exception rather than the rule, so don’t expect the lender to be terribly willing to accept such an explanation.
Barring an explanation letter, you will simply need to re-establish a positive credit history to raise your credit score. The older a negative item is, the less it will impact your score, so paying bills on time and keeping loans current will help you raise your score relatively quickly.
If possible, you should wait until you have raised your credit score before you seriously begin looking for a home to purchase. Although there are lenders that will provide mortgage loans to applicants with poor credit, they will charge substantially higher interest rates, which can cost you thousands of dollars over the life of the loan.
At Atlanta Housing Source, we work with a mortgage company that can provide a “what if” scenario. What if I pay this balance off? What if I rearrange my balances more equally among all my credit lines? Etc. This allows our clients to know what to work on first and how long it will take them to qualify for the loan.
Congress has extending & expanded the home buyer tax credit. There are several changes, so we wanted to share with you what will be in effect as soon as the President signs the bill.
New bill will be in effect until April 30th 2010. Must have written binding contracts for the purchase on or before April 30th. Must complete sale by July 1.
First time Home Buyer Credit Amount
No Change – Up to $8,000 ($4,000 married filing separately)
First time Home Buyer Eligibility
No Change – May not have had an interest in a principal residence for 3 years prior to purchase.
Current Home Owner Amount of Credit
NEW *** Up to $6,500.00 ($3,250 married filing separately)
Effective Date for Current Home Owner Credit
Date of Enactment
Current Home Buyer Eligibility
Previous/ Current House must have been a primary residence 5 of the previous 8 years.
Income Limits
Increased from $75,000 – $125,000 for Singles
Increased from $150,000 to $225.00 for Married Couples
Additional $20,000 phase out still applies
Limitation on Cost of Purchased Home
The new bill enacts a limit of $800,000 effective the date of enactment
Anti-Fraud Rule
Do to the numerous people falsely claiming the credit, the new bill will require documentation of purchase along with the filing of tax return.
If you are interested in finding out more, please contact us.
We received the latest list of advertised foreclosures in the Barrow, Forsyth, Fulton, Gwinnett, Hall & Walton counties only. There were over 6,100 advertised foreclosures and that did not include the other 5 metro counties like Cobb, Paulding, Cherokee, Douglas, & Dekalb. We reported back in August what we thought was a record which was close to 5,000, so this month’s numbers are very shocking.
What we found when we look at the list this month was a lot more commercial properties which is also unusual. Even properties that are highly desirable and have tenants are being foreclosed. We read about the new shopping center in Norcross – The Forum, narrowly escaping foreclosure last month. In that article, it forecasted that there would be additional commercial up for foreclosure, but I had no idea that the amount of foreclosures would be this high.
So what is going to happen with this additional inventory coming onto the market? You probably remember your economics 101 class – more supply, less demand equals lower prices. Just when you think it can’t get even lower, we find that there is a near 20% increase into an already bulging market.
While this is a great opportunity for some, it is creating additional challenges for those who need to sell. Someone recently shared with me the concept that sellers are under “house arrest” because there is nothing that they can do to liquidate their home without taking a large loss in equity. Most homeowners are counting on their homes’ equity for retirement and with prices falling at an alarming rate, it is going to take a long time to recover from this loss.
So what is the upside in this? The only thing we can share is that if you are in the market to purchase, there is no better time to buy. If you can put up with the challenges of working with banks, there is great money to be made. Banks are realizing that there are not enough qualified buyers for their homes, so relatively reasonable offers are being considered and whether you are purchasing to occupy or put into rental service, the discounts are amazing.
If you want to take advantage of this great market, make sure that you are working with an expert real estate agent that understands how to work with the banks to get your deal accepted. Also, because the market is shifting, you want to make sure that you are getting the best information possible about a home and area to make sure that you are able to make the best buying decision.
Unlike the 2008 tax credit of $7,500.00, the 2009 tax credit has been raised to $8,000 and does not need to be repaid. Any home more than $80,000 qualifies for the $8,000. If the house is less than $80,000, then the home purchaser would qualify for 10% of the home value.
The house must be for a principal residence (where you live more than 50% of the time) and the credit lasts for home closed before 12/1/2009. It is also for first time homebuyers only. A first time homebuyer is classified as anyone who has not had any interest in a home in the last 3 years.
A qualified buyer claims this amount on their individualized tax return. So a person who has a tax liability of $9,200 would only pay $1,200. If the tax liability is less than the $8,000, the qualified home purchaser would receive a check for the difference.
There are some income restrictions for this tax credit. Single/Head of Household are eligible if their income is no more than $75,000. Married couples who file jointly have a cap of no more than $150,000.
It is easy to claim for this tax incentive. Just claim the credit on the IRS Form 1040 and it will be reflected on the Form 5040.
GEORGIA TAX CREDIT
This tax credit is NOT limited to first time home buyers. You can qualify for both the Federal and State Tax credits or just the State Tax Credit.
It applies to single family residences that are listed for sale prior to May 11, 2009 and only applies for properties that purchases that close before November 30th.
This credit is figured by taking 1.2% of the purchase price with a maximum credit of $1,800. Houses over $150,000 will receive the maximum amount of $1,800.
The credit for the state is calculated differently, it is over 3 years or up to $600.00 per year. You cannot amend your 2008 returns, it must start in 2009.
So there are the facts about how first time home buyers can be eligible for up to $9,800, but time is running out. So if you are thinking about buying your first home, start your search and let us help you find some of the best deals! Currently there are over 80,000 home and we allow you to search them for FREE. So let’s get started!
As a buyer in today’s market, you are most likely looking for opportunities where you can purchase a home with substantial equity. In recent years, short sales have emerged as an attractive option for savvy buyers. However, you should be aware of both the rewards and risks of purchasing a short sale.
The main advantage of a short sale is that you can purchase a property for quite a bit less than market value. Home owners who are behind on their mortgage payments will often consider a short sale as an alternative to property foreclosure. This means that you have the opportunity to negotiate a low purchase price with the lender, so you can benefit from the reduced price when you resale the home in the future.
One of the main difficulties with a short sale is that you may experience resistance from the lender when making a purchase offer. By definition, you will offer less than the home owner owes on the mortgage, so the lender will incur a loss on the short sale. However, many times, a short sale represents a smaller financial loss than a foreclosure, so the lender may be willing to entertain your offer with a bit of persuasion.
The other big disadvantage to a short sale is the amount of time it takes for the lender to agree to a short sale. Therefore, if you are in a hurry to purchase, you are on a strict timeframe, you should really consider this before you move forward. We have seen short sales take 2-3 months to close. There are also other considerations like inspections, repairs, and seller contributions that would need to be discussed with your real estate agent for clarification if this is a good strategy for you.
Overall, a short sale poses fewer risks than other types of foreclosure or pre foreclosure sales. If you have the time and patience to devote to contacting sellers and lenders to arrange short sales, this can be a valuable and profitable investment.
As a real estate agent, we help both buyers and sellers navigate the short sale process.
Quick turns can provide substantial profits if you take the time to properly research the homes you are interested in buying. You will want to look at comparable homes for sale in the area, to determine the best price for your property. If you exercise patience and persistence, you can purchase properties below market value, so you can sell them for a profit.
There are several risks involved with a quick turn real estate investing strategy as well. First, you may incur unexpected repair and renovation expenses after purchasing the property. You can make a reasonable estimate of these expenses by walking through the home and looking for the cosmetic items as well as purchasing a home inspection. Yet, even with these reports, often times you find that there are items that go above and beyond your initial budget once you start the project. We recommend that you build in a financial cushion for surprise expenses when determining if an investment will likely be profitable. Typically, we suggest 10 -15% of the overall initial cost just to be on the safe side. If not needed, you have only enhanced your overall profit.
Another risk is that you may be unable to sell the home quickly after repairs and renovations have been completed. Even the perfect home can sit on the market for months, and you will be responsible for mortgage payments, taxes, insurance, and other expenses until the property is sold. You should have an alternate plan, such as renting the home to tenants, in case the home does not sell as quickly as you had hoped. So you might want to establish a relationship with a property management company or be prepared to become a landlord.
You might also want to consider the tax implications of this investment strategy. When you purchase and sell the property in less than 12 month’s, the IRS looks at the profit you make from the sale as ordinary income. This will mean that all the profit from the sale will be taxed as your normal tax bracket. So if you make $50,000 profit, your tax will most likely eat almost 40 to 50% of that, but the time you calculate your federal & state tax rate.
It may be possible to accurately assess these risks yourself when evaluating and purchasing investment properties. However, you can save yourself quite a bit of time and expense by hiring a REALTOR® to help you navigate the quick turn process. An experienced REALTOR® who is a seasoned investor themselves, will help you find properties that will make profitable investments, and help you sell the home as quickly as possible once your repairs and updates have been completed. Not all real estate agents understand investing, so we highly recommend that you interview thoroughly to make sure the agent you have selected can provide you with accurate information and assistance.
If you have been planning to buy a home, you may be looking at purchasing a foreclosed home from a bank or investor as an option. While buying foreclosures is an attractive strategy for many people, it bears both risks and rewards.
The biggest reward of buying foreclosed properties is that you can often obtain a deep discount – between 35 and 45 percent, off the market value of the home. This gives you quite a bit of room to profit from the resale of the home, particularly if you can find a foreclosed property that only needs cosmetic repairs and upgrades. On a $200,000 home, you could make as much as $90,000 profit, minus repairs and fees.
One of the downsides of investing in foreclosed properties is that it takes quite a bit of work and research to find good investments. You will need to be able to research opportunities and determine whether they will make profitable investment. This is where a good real estate agent can help you tremendously. They can research the comparables and advise you on the values in the neighborhood.
One of the riskiest aspects of buying foreclosed properties is that underestimating the amount of repairs required on the property. Even with a home inspection to help identify the potential issues with the home, it can sometimes be difficult to determine the total cost to get the property in proper condition.
Another common problem when buying foreclosed homes is title encumbrances. While the closing attorney will perform a title search (although this can be expensive) to make sure you will be able to obtain a clear title for the property, the do this to protect the lender and not you. We also recommend purchasing an enhanced owner’s title policy to best protect your interests in case there are any issues with the title with the property. With all the foreclosures happening in today’s market, we are finding that even with title searches, there are issues with title and you want to make sure that you are covered.
Typically, a 3 to 10 percent down payment will be required for the purchase of a foreclosed home depending on if it can be financed as FHA or conventional loan. If the property needs repairs, they cannot typically be financed unless you get a special FHA loan called a 203K loan. This type of loan typically requires an owner occupy the property and is not for investment homes, so you need to make sure that you have enough money to pay for these repairs.
There is a lot to consider when purchasing bank owned properties, so make sure that you are working with a team of professionals to make sure that you have all the information that you need to make a good decision.
