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. 

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.

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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!

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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.

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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.

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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

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