First-Time Home Buyers Tax Credit – EXTENDED TO April 30, 2010

Within the next day or so, our President will sign a new bill extended the ‘The American Recovery and Reinvestment Act of 2009′ . There are many new advantages available to new home owners and exisitng home owners with this new extension.

If you have been on the fence about purchasing a new home, now is the time to buy. 

To read more about the Tax Credit, click –> PropertyExplorerPDX.com

First Time Buyer’s Tax Credit & Down-payment

Q: Is the FHA going to allow qualifying Buyers to use the ‘First Time Buyer’s Tax Credit of $8000′ as the down-payment for their purchase?

A: No.  At the time of this posting the FHA has no plans or systems in place to allow use of this credit as a way to fund a down-payment of a purchase.  

Why?  Well, there are a few factors to look at;

First, there would need to be a government and/or non-profit agency to track these loans and make sure the money was recovered by the Buyer’s who used it.  To my knowledge this ‘agency’ has not been created.

Second, the Banks would need to approve the funding of an additional loan ( a 2nd mortgage in lending terms ) on top of first mortgage.  Banks have already been bitten once by this practice, and I’m sure they will be twice as shy to do this again.

Third, the mortgage default rate is 3 times higher on loans where the Buyer had no personal or monetary investment. 

Wanting To Buy Before Selling Your Existing Home

How to go about buying a new home when you still need to sell your existing home:

A guide to understanding the different options available to you.

There are a few ways to go about it.  Each has their positives and negatives and come with a fair amount of stress.

1. Sell your home first. Negotiating a long close date and the ability to rent back from the purchasers for a few days. Then find and make an offer on your new home, subject to the sale and CLOSE of your existing home. Both transactions should close simultaneously or at least within a day of each other.

   DRAWBACKS: Finding a new home in a fairly short period of time. Can you find something you like quickly?  The fear here is that you’ll end up homeless or renting an apartment to bridge the gap between getting into your new home.

2. Make an offer to buy your new home subject to the sale of your existing home. Negotiate a quick close on the sale of your existing home and a long close on your new purchase. Add the provision for the ability to rent back from the purchasers for a few days. You may end up needing to offer the seller a “nice” price to entice them to take your contingent offer. You’ll need to price your home to sell quickly. Again, both transactions should close simultaneously or at least within a day of each other.

   DRAWBACKS: You could lose your “dream house” if your existing home doesn’t sell in a timely manner.

3. The combination: Put your house on the market, priced competitively, with the listing subject to you finding suitable replacement housing. Shop for your new home. If you find your new home before your home sells, make a contingent offer on your new home and consider reducing the price on your existing home. If your home sells first, accept the offer subject to finding suitable housing. Most buyers will want a deadline by which you plan to find replacement housing. Buyers may want to be reimbursed for any costs should you not find something and do not sell to them.

   DRAWBACKS: Lots of contingencies.  People who need to know what is going on at any given moment don’t do well with this option.

All offers to purchase will be made subject to a satisfactory home inspection at your expense, subject to a clear title and subject to you obtaining financing for your new home.

In all cases you will want to do the following to prepare:

• Secure your down payment funds. Be sure to have a solid paper trail of where your down payment came from. Lenders want to know the money is legit.

• Meet with a lender and get pre-approved. Be sure to discuss your whole financial picture so your lender has a chance to fit the best loan product. Consider looking into the possibility of bridge loans and buying without selling.

• Chose a Realtor with whom you plan to list your house. Get a realistic list/sales price so you know how much you’ll net from the sale of your home. Your lender will need this information as well.

If you have any questions about these options, feel free to give John a call @ 503.467.9997.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

Casting Call… HGTV’s My First Place

HGTV’s show, “My First Place” is casting first-time homebuyers in the Greater Portland area. Candidates who are chosen for the show will also receive a unique surprise from HGTV.

If you would be interested in applying feel free to give me a call at 503.467.9997 or send me an email.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

Shouldn’t I just wait… (re-posted)

I posted this question about a year ago and thought that it was worth re-posting as it still rings true for Buyer’s sitting on the fence today. 

One additional factor to add; The government is now offering First-Time Home Buyer’s an $8,000 tax credit for purchasing a home that closes before 12/1/09!  To learn more about this credit, please read Have You Heard?

Q: With all the headlines about the housing market, shouldn’t I just wait “it out”? I’m sure to get a deal, when everything settles!

A: There are more factors to consider then just the list price.

I colleague of mine sent me this article (linked below) which I found quite interesting. The artical explains (second to last paragraph) how waiting for a lower price won’t equate to paying less.

Time Magazine
After reading the article, I did some additional research…

Property interested in purchasing, with 20% down payment…

Purchased Now…

• Price = $218,900
• Interest = 5.5%, @ 30 year fixed rate.
• Monthly Payment = $994.31
• Total Interest = $182,834.15, paid on the duration of the loan.

Purchased in 12 months…

• Price = $197,010, if the price was reduced 10%.
• Interest = 6.5%, @ 30 year fixed rate.
• Monthly Payment = $996.19
• Total Interest = $201,022.11, paid on the duration of the loan.

In either case, you are not saving anywhere near the $21,890 (or 10%) as one might think. If you take into consideration the additional payments for 30 years and the total interest paid on the loan, you really are only saving $3,025.24

Math to back me up…
ADDITIONAL MONEY YOU WOULD PAY BY WAITING A YEAR.

Difference in payment, paid over loan term…
$994.31 – $996.19 = $1.88 x 360 = $676.80

Difference in interest, paid over loan term…
$182,834.15 – $201,022.11 = $18,187.96

Now take both of the above totals and add them together ($676.80 + $18,187.96 = $18,864.76) then subtract this new total form the 10% you thought you saved ($21,890 – $18,864.76 = $3,025.24)

Oh, and don’t forget to subtract the money you shelled out for rent while you waited, plus the loss of the GREAT tax benefits!

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

Real Estate Owned (REO) Properties

Q: We hear that Real Estate Owned (REO) properties may be a better buy.  Are there any pitfalls to purchasing this type of property?

A: Potentially.  REO properties are properties owned by a Bank or Financial Institutions.  In simplest form, this type of property is a foreclosed property.  Here are the three most common pitfalls to the REO purchase process;

1. REO’s require a bit more patients from a Buyer.  Typical REO transaction can take months to hear if your offer is accepted.  I’ve had a transaction that took four months to hear if the Buyer’s offer was accepted.

   Why?  Well, the bank is looking to make the most money on their investment.  They will seek out any professional to advise them in making sure they are getting the most money.  This is typically done by the Bank to see if other offers are made on the subject property.  In turn, pitting you againt another Buyer.  The Bank has already taken a loss on the property by foreclosing on it, and remember Banks are in the business of making money not losing it.

2. REO’s take longer to close; REO’s can take upward to 90 days to close.  If you are looking to move in to your new REO home in 30 days, this may not be your best option.

   Why?  Usually, there is a chain of command for the sale process, the representative in which a Realtor will deal with does not have that authority to approve your transaction, their boss or a committee has to approve your transaction.  In addition, chances are your interested purchase may not be their only REO property.

3. REO’s are sold ‘AS-IS’.  This is where you as the Buyer will have to do your due diligence.  If there is anything that needs repair, you will have to repair it on your dime.  One would have to keep in mind that the Bank has not even seen this property, it’s just a file on someones desk.

   In addition, I’ve heard horror stories from other Realtors where their Buyer’s ended up buying the last owner’s problems within a home; ie, bad plumbing, structural issues and so on, costing them ten’s of thousands to repair.

While, I don’t discourage a Buyer from a REO property.  A Buyer would need to weigh the pros and cons of this type of transaction and see if this additional effort and time is worth it for them.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

What do I own? (Part I)

Q: What would I own, if I buy a condo?

A: The answer depends on the properties legal description;

If the word “Condominium” appears in the legal description without any mention of a lot or plat map, most likely you are buying the rights to the air inside the unit, and that would be it. Everything else; the structure and the land underneath it, would be considered property of the Home Owner’s Association (HOA).

If the word “Condominium” does not appear in the legal description, but a mentioning of a lot or plat map does, you are buying rights to the land and the air inside the unit. However, the structure would be considered property of the Home Owner’s Association.

Monthly HOA dues are collected by the Home Owner’s Association for the maintenance and upkeep of the property.

In either case, you are buying into the HOA. This is where you would have your Realtor do some research. You would want to know several key areas of it’s history. Some items to consider;

• HOA financial status.
• HOA Management company (there are a few bad ones out there).
• Any potential raise in HOA dues in the near future.
• Is there a FUTURE or PENDING or PAST litigation case involving the HOA / owners.
• Any Special Assessment pending.
• In a future blog I’ll explain what a ‘Special Assessment’ means to a Condominium owner.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

How much $ will a Realtor charge me?

Q: If I wanted a Realtor to represent me as a Buyer in a transaction, how much would it cost me?

A: ZIP, NADA, ZERO, NOTHING! (for RMLS listings)
Realtors get paid by the Seller of a property through the listing contract of the RMLS.

Now, one would have to keep in mind that services provided to a Buyer are free only for properties that are listed on the RMLS. Realtors’ may impose a “Buyer’s Agency Agreement” for Buyer’s representation on a ‘For Sale By Owner’ transaction.

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

Need a quick fix

Q: What are some inexpensive home improvement options available to aide in the selling process?

A: There are quite a few answers to this question; here are my top two responses.

1. A coat of paint will give you the most “bang” for your buck.  This is one of the best improvements that anyone can do themselves.  A coat of paint will give your home a crisp-clean appearance, which every Buyer will appreciate.  As far as choosing a color here are some tips; Nothing too bold, accent walls are ancient, faux is a NO, make sure that the paint finish (glossy or flat) is appropriate for the room and try to keep your color palette in a natural or light tones.  By all means stay away from boring beige!  

2. Look at your floors! Replacing old carpet or refinishing hardwood floors can go a long way when it comes time to sell.  Not only will replacing the flooring improve the appearance of your home, it could also boost the re-sale value.

The condition of your walls and floors will come under the most scrutiny, make sure they are at their best!

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…

I’d rather walk

Q: With the price of gas raising everyday, we feel it’s very important to purchase a home within walking distance of some shops. Is there a way to check out a properties relationship to nearby businesses?

A: Yes, and you won’t waste a drop of gas!

I use a website called WalkScore. This site maps out the distance of local shops in relationship to an inputed address. The maps are populated with information provided by the public county records.

Check it out for yourself. http://www.walkscore.com

ARE YOU IN THE KNOW?

Subscribe to Ask a Portland REALTOR…