Late Summer 2010 Market Update...from Don Valantine, Your Real Estate Professional Revised 9-2-10 $8000 TAX CREDIT EXTENDED TIL SEPT. 30... First-time homebuyers—those who have not owned a home for the past 3 years—may be eligible for the $8,000 federal tax credit, but the window of opportunity is closing. To qualify for the credit, the buyer must be in escrow by April 30, and close escrow by September 30, 2010 (formerly June 30). The extension was just approved by congress on June 30.
MAKING SENSE OF THE STORY FOR CONSUMERS Finding the right house can take some time, so REALTORS® recommend home buyers start looking for a home as soon as they are able and ready to purchase. Buyers also should build in extra time to accommodate the lending process, which is taking approximately two weeks longer to process this year compared with last year. The tax credit is equal to 10 percent of the purchase price, up to $8,000, subject to income limits. Single taxpayers are eligible if their modified adjusted gross income is $75,000 or less, while married taxpayers filing jointly must have a modified adjusted gross income of $150,000 or less. Only primary residences are eligible for the federal tax credit, including new or existing single-family homes, townhouses, condominiums, manufactured homes, custom homes, and houseboats. Vacation homes and investment properties do not qualify. Purchases must be arm’s-length transactions, meaning the seller cannot be the buyer’s parent, grandparent, child, grandchild or spouse. Married people filing as such cannot claim the credit if either spouse has owned a primary residence within the last three years. However, unmarried joint purchasers may allocate the credit in any way they see fit, as long as it does not exceed the $8,000 maximum. The government will allow those who finance their purchases with a federally insured loan to apply their anticipated credit immediately toward closing costs or as additional down payment, rather than waiting until they file their 2009 taxes to receive the refund. INTEREST RATES HAVE FALLEN TO THE 4's!!... Interest rates are now in the 4's for 30 year fixed loans! They haven't been this low since 1947! These rates have been set artificially low by the Federal Reserve to jump start the market, but this will not last forever. Take advantage of the low rates to either purchase or refinance while you can. We never know how long these historic low rates will be with us. HOMEOWNERS BEWARE OF SCAMMERS!!... If you are in trouble and are considering short-selling or foreclosure, be very careful...there are scammers out there trying to take advantage of you for their own personal gain. Many charge upfront fees or ask you to sign over the property to them in exchange for 'helping' you...don't do it! There is free info available through real estate professionals, so call me. If you're considering a loan modification, know that HUD, the Dept. of Housing and Urban Development offers FREE info on that. For info go to www.makinghomeaffordable.gov. SHORT SALE VS. FORECLOSURE... Since many folks are hurting financially and are thus considering just walking away from their property, which means a foreclosure on their credit report. I don't recommend this because there are ways to avoid it. You should always try to at least short-sell the property first. Reason: a successful short-sale will lower your credit score 50-100 points while a foreclosure will lower it 200-300 points. Check with me first, I can likely help you. I do not charge for consultations. PRICES AND INTEREST RATES... Prices have fallen 30-50%, depending on the area. This might be the time for you to take advantage of the current low prices and historic low interest rates....currently in the 4's for fixed loans. This may be the opportunity you've been waiting for.....lower prices with low interest rates. There's a lot of competition for homes, so you must prepare yourself. Rates can go up at any time, so don't wait! MULTIPLE OFFERS RE-APPEAR... While many prospective home buyers are still waiting in hopes of catching the bottom, others are jumping into the residential real estate market feet first. In a growing number of instances, they wind up competing with a swelling legion eager to capture a bargain. "It's happening in all price ranges and in all communities," according to a Southland Association of Realtors survey. Offers are coming in near the asking price or in many cases, above the asking price. Multiple offers create a 'buying frenzie' and higher sale prices. I recently was representing a buyer who wanted to buy a foreclosure. I was in good condition in a good area and location. I told my buyer there would be a lot of competition for this property based on my research and experience. He decided to offer 10K above asking price, which was already low to begin with. Out of 29 total offers my client's was in 24th place even though offering above the listed price. This is what is happening all over, and buyer's need to be ready for this. Here's what happens....many listing agents will DELIBERATELY list the property too low in order to generate multiple offers! That's why it's important for your agent to show you all recent sales activity in the area you are looking so you will KNOW how much they are actually selling for. This new buying trend is a significant shift in the market where buyers, for the past 2 years, hesitated to make offers. Now more buyers are entering the market because of lower prices and government assisted programs, making home loans more available and affordable. Obtaining a loan is a bit more difficult now, but not impossible... requiring proof of income and down payment money, but as little as 3.5%. For example, FHA, a govt. insured loan program, has increased the loan limit to an incredible $729,750 with just 3.5% down. This is an attempt to stablize the housing market, and people are beginning to take advantage of programs like this. Conventional loans (not insured by the govt) often require buyers to put 10, 15, or even 20% down depending on the lender. GETTING A LOAN IS A BIT MORE DIFFICULT THESE DAYS... But again, NOT impossible....the days of easy mortgage loans is past. Borrowers should be aware that there will be tighter standards for most loan programs. Interest rates have recently been impacted by the lower bond market and oil prices. A 30 year fixed rates are in the 5's...an excellent rate! You can also buy down your rate even more. Rates can vary from lender to lender depending on each person's qualifications. The Fed may be reducing rates to help the housing market and overall economy. Homeowners looking to purchase or refinance must accept the new market reality that has made the loan process more difficult for some borrowers. Two realities now exist: 1) credit is now tighter than in recent years. 2) home values have been falling in most areas. Borrowers should be ready to face certain issues when seeking a loan. They may be asked to document all income, including debts and assets. Loans may take longer to process than before. If your loan officer asks for specific info, provide it as soon as possible. Borrowers with credit (FICO) scores of 660 or higher should have no problem qualifying. A loan officer needs your FICO score to be able to quote you an accurate interest rate. It depends on your score. Don can recommend a good lender to you if you don't already have one. Click here for latest rate update http://www.bankrate.com/brm/default.asp. SHOULD WE BUY NOW OR WAIT?... Many home buyers are asking if they should take advantage of the lower prices we are now seeing...or should they wait for the market to drop even further. Answer: You have to look at the overall picture. Will prices go down even more? Possibly they may. But, timing the market is extremely difficult. There are many factors to consider...your credit history, current employment, how much cash you have, etc....A good lender can perform miracles often, however! Even if prices go down more, if interest rates go up, it could offset any perceived savings. Meanwhile, you are still paying rent with no tax benefits and building no equity. If you wait a year or 2, there is no gaurantee that you will still have your job and income the same as you have now. With a job loss, you will not qualify at all. So, you have to weigh in all the factors. Another buying strategy is....if you believe prices will fall another 3-5%, for example, you could just make an offer 3-5% lower than asking price. Many sellers are entertaining lower offers right now, especially if they've been on the market for awhile. Note: This may not work if you are competing with other buyers for the same house, which is often the case especially on a desirable home in a nice neighborhood. For more info click here http://www.bankrate.com/brm/news/realestateguide2008/first-time-home-buyers-a1.asp?prodtype=mtg SHORT SALES AND FORECLOSURES LEAD THE PACK... Most of the homes on the market (less than 1000) are either a short-sale or a foreclosure of some kind. A short-sale is when the seller is asking the bank's permission to sell while he owes more than the property is worth...sometimes called 'upside down' or 'under water'. Short-sales can take 3-6 months to even get a response from the bank. That's a long time to wait just to find out if you get the property! Then the escrow period after that, usually 30-45 days. This is why I recommend avoiding short sales. An REO is a 'bank owned' property, also called a foreclosure. Many buyers are thinking they can just walk in and make an offer on these one day, and be in escrow the next. This is NOT the case! Since both of these require lender approval, there can be a delay of several weeks to a few months just to hear back from the lender on your offer! Buyers need to be very patient during this time. Often, you are competing with several other buyers on the same property, which will likely mean you have to offer more for the property than it is listed for, crazy as that sounds. Lenders are short-staffed and overloaded with more properties than they can handle. Many lenders are laying off employees. It takes an expert to get your offer into the right hands. This is why you need an experienced agent who can walk you through all of the necessary steps. I RECOMMENT AVOIDING SHORT SALES... Short-sales are the most difficult type of sale, especially if there is more than one lender involved (example: BofA on the first loan, and Wells Fargo on the second). It is hard for lenders to agree on who should take the biggest loss....often, they never do agree, resulting in a wasted effort in trying to purchase this home. Buyers are better off looking for a non-short-sale property in my opinion (yes, they are out there), or one that has only one lender and/or has approved the short-sale already. For more details, click here http://homebuying.about.com/od/4closureshortsales/qt/021208_BuyShort.htm NOTE: Often these properties are deliberately listed VERY LOW just to attract as many buyers as possible. Sometimes it is because the listing agent, hired by the bank, is not from this area and doesn't know our local market. Other listing agents do this because they will select the highest offer to present to the lender to pay off the debt that is owed. Savy agents who represent buyers realize what is going on and recommend that their buyers increase their offer if they really want the property. This is why it is difficult to buy a foreclosure 'cheaply' in this market. Deliberately listing for a low price also misleads people into believing they can get a house for the low list price. This is hardly ever the case! BE PATIENT IF YOU'RE TRYING TO BUY OR SELL IN THIS MARKET... It's taking an average of 100 days to put a house into escrow, and often much longer. Sellers need to be more accommodating to buyers if they want to sell the house. Things like sellers picking up all or a portion of the buyer's closing costs, doing repairs, allowing buyer contingencies...all of these make it easier for buyers to purchase. And remember.... price is still the MOST important factor when selling your home. DON'T BELIEVE THE NEWS MEDIA... Most people watch the evening news 'doom and gloom' about the real estate market, and draw false conclusions. Remember, the media always look for controversy and negativity. Often the lead story will begin with negative comments like....'Nobody can buy a home right now'...which is FALSE...or, 'No one can get a loan', again FALSE. If no one is getting a loan, then how do they explain the increase in sales volume? The problem is that they tend to broad brush information like this. You're better off talking to a real estate professional who can show you the real numbers in black and white. Don't fall for the media hype and broad brush. Check things out for yourself, and realtors can help you with that. ATTENTION HOME BUYERS: Since interest rates are BELOW historic lows... now is a good time to take advantage before rates go up. Call your bank or ask Don to refer you to a qualified mortgage lender for rate quotes and to get pre-approved. It is FREE to do this.
This e-news brief is compiled by Don Valantine, Real Estate Consultant, and is designed to keep you up-to-date on market conditions and current trends. For available listings and other important info, please access 'my featured listings'. Don't hesitate to contact me with all of your real estate questions and needs. I am here to help you when you need me.-Don Valantine 661-803-8896
~Expect the Best~ |