Let's Talk Real Estate: November 2007

Friday, November 30, 2007

Why Blogging is Changing Real Estate

Next to email, people are turning to blogging as the fastest growing means of expressing opinions and finding answers to their questions on the Internet, especially when it comes to the subject of real estate and relocation. Blogging allows consumers, residents and real estate professionals to exchange information in new dynamic ways where everyone can talk about a topic of importance together. This is known as transparency and it is changing the way the real estate industry communicates with consumers.

Thursday, November 29, 2007

Top 10 metro home-value gainers for 2006

By Bankrate • Bankrate.com

Bubble burst? What bubble burst? The danger in talking about local situations as if they applied across the board is that real estate is always a local situation and what's a bubble bursting in one area can be a time someone else's balloon is expanding rapidly.

Take a look at these metro areas that were the biggest value gainers in 2006, according the National Association of Realtors.

2006 biggest value gainers

Rank	Metropolitan statistical area	One-year appreciation (%)
1	Salem, Ore.	19.8
2	Virginia Beach-Norfolk-Newport News, Va.-N.C.	19.4
3	Spokane, Wash.	17.7
4	Salt Lake City, Utah	16.7
5	Eugene-Springfield, Ore.	16.7
6	Baton Rouge, La.	15.9
7	Gainesville, Fla.	15.9
8	Ocala, Fla.	15.5
9	Dover, Del.	14.7
10	Portland-Vancouver-Beaverton, Ore.-Wash.	14.7

Source: National Association of Realtors, February 2007 Metropolitan Area Existing-Home Prices and State Existing-Home Sales report

-- Posted: March 8, 2007

How to sell in a buyer's market

You've got to be proactive on price, marketing and more. MSN Today has 10 steps to take before you plant the "for sale" sign. By Dana Dratch, Bankrate.com

If you're selling your home this year, be prepared for a marathon, not a sprint. In most places, those heady days of putting a property on the market, receiving multiple bids, getting more than you expected, and accepting an offer in just days or weeks are over. Now, for most houses in most parts of the country, it's a buyer's market. That means that more houses are for sale, there are longer stretches on the market, and prices have slowed, plateaued or, in some places, decreased. For more information go to: http://realestate.msn.com/selling/Article_bankrate.aspx?cp-documentid=5255869&GT1=10632

Wednesday, November 28, 2007

Early Detection Reminder

This is your Monthly Early Detection Reminder from the RE/MAX. Below you will find tips on early breast cancer detection.

Just as your period ends (or at the same time each month if you do not have periods), check for any change in the normal look or feel of your breasts. Reports any changes to your doctor or nurse. Go for regular breast exams and ask about a mammogram.

Step One: Lying DownFeel for a hard lump, thickening or any change in your breast tissue.

Lie down on your back with a pillow under your right shoulder
Use the pads of the three middle fingers on your left hand to examine your right breast
Press using light, medium and firm pressure in a circular motion
Follow an up and down pattern
Feel for changes in your breast, above and below your collarbone and in your armpit area.
Repeat on your left breast

These steps may be repeated while bathing or showering using soapy hands.

Step Two: In Front of the Mirror

Look for changes in the shape, size or appearance of your breasts. Look for dimpling, rash, or puckering of the skin or nipple, nipple discharge or any change from normal. Inspect your breast in four steps:

Holding arms at sides
Holding arms overhead
Pressing hands on hips to tighten chest muscles
Bending forward with hands on hips

For more information please visit : http://ww5.komen.org/home/

____________________________________________________

Tuesday, November 27, 2007

Working together!

(by Noemi Cardoso)

Every day when I speak with my existing or new clients I hear pretty much the same questions from buyers and sellers:

Buyers: How can I buy the most for less...
Sellers: How can I get the most for my home...

As you can see everybody is looking for a good deal one way or another.
For Buyers the high number of foreclosures can be a good deal but it requires patient and research since foreclosures and short sales are pretty much 'sold as is' condition and there are not much information or disclosures on the house. A good home inspection is advised but remember that many of those homes are winterized (not utilities). Buyers have sometimes the option to reconnect the utilities prior to the Inspection but he (Buyer) will be responsible for the cost of reconnection and winterizing the property again.

Many homes, due to the conditions will require a Rehab loan and at this time to have a good mortgage broker working with you is your best bet.

When it comes to a short sale patient is even more required....some offers can take up to 180 days to have an answer from the banks or mortgage companies....for example: I have an offer on the table for 107 days (as of today) waiting for an answer.

Don't discard the option of looking into regular sales since many owners are dropping prices to sell and you can also find good buys there with less problems.

Last but not least... some properties will be sold above asking price and a bidding situation may arise if the home in question is a good buy.

Now for mine and other sellers out there. These same foreclosures and the immense inventory

are driving the prices down and even though homes are still selling they have to be priced right. A reliable Real Estate Agent and an accurate Market Analysis can be a great help. Also pay attention on what the market within your immediate neighborhood (no more than one mile). Remember compare apples with apples.

Another great and reliable option is to have a professional appraiser to assess the value of your home. Many homes are selling right around or below assessed value.

Also consider making your home charming and inviting...remember the first impression can make or break a deal....remove clutter (a storage might be good idea), a good cleaning specially on bathrooms and kitchens, a professional carpet wash and always clean, nice and clean landscaping, fresh air can make wonders and make sure all your utilities are in perfect condition. If you can afford there are professional out there that can come and show you how to stage your home for a great first impression...

Work with your agent. Remember that his/her interest it is also to sell your property...there are no commission checks until your have the check...

If you have any topic or question that you would like to discuss please fell free to add.

How to escape a mortgage mess

If payments on your adjustable-rate mortgage are about to go up, act now. Plus, tips for mortgage shoppers. (By Mark Trumbull, The Christian Science Monitor)

Stress in the nation's mortgage industry is putting a financial squeeze on home buyers and homeowners alike.

Buyers are finding it harder to obtain home loans as lenders tighten their credit standards or even go out of business.

Homeowners with adjustable-rate mortgages (ARMs) face a double whammy. House prices are falling even as their monthly home payments adjust upward in a big way. So when ARMs reset, many may find they can neither make their payments nor sell the house for enough money to cover the loan.

With October identified as a peak month for such scheduled resets, can this group of homeowners escape from this mortgage mess?

Perhaps.

Today's credit environment certainly isn't as easy as it was a few years ago, when lenders often made loans that put themselves and home buyers at higher risk. Back then, as home prices rose, so did the popularity of loans with "teaser" interest rates that lasted only a couple of years. Subprime lending soared as lenders issued riskier loans, ignoring the elevated danger of default.

Now homeowners faced with the prospect of home loans resetting sharply higher are seeking solutions. Often what's needed is patience, persistence and a willingness to seek help.

Consider the recent experience of one Germantown, Md., couple who nearly lost their home. Vaughn and Candice bought a large brick-front colonial five years ago. A couple of years later, they refinanced their mortgage, allowing them to tap their home's equity to help pay college bills for two of their children. Their monthly mortgage payment was $4,000 a month. Everything seemed to be going well.

"We were fine," says Vaughn, who asked that his family's last name not be used in this story to protect their financial privacy.

But suddenly, a cosmetics business they ran began to dry up after one of the major stores at the mall where they operated shut down. They plowed their own savings into the business to try to keep it going. Despite Candice's income as a full-time engineer, they soon fell behind on their house payments. Vaughn's efforts to renegotiate with the loan company resulted only in an offer that he couldn't meet: $20,000 in cash by July.

The last straw: The interest on their ARM was poised to reset from 6.7 percent to about 9 percent as of that month.

By May, Vaughn was desperate, believing that a foreclosure notice could come any week. "I was asking God to show me the way," he says.

Through a news article, he learned about a nonprofit organization in Chicago that had partnerships with several loan-service companies, including his own, to help prevent foreclosures.

He contacted the group, the National Training and Information Center (NTIC), which cut a deal with the lender. Vaughn and Candice won a loan modification that shifts them from an adjustable to a fixed-rate loan. They'll owe $4,200 a month, but that should work for them now that they've closed the money-losing cosmetics business. The deal also helps their creditor avoid the costs of foreclosing and selling the house.

Not every strapped homeowner has such good fortune. But the financial rescue of this Maryland couple can happen for others, too. "I'm living proof," Vaughn says.

Housing experts say people faced with possible foreclosure, or a big upward reset in what they owe on an ARM, might consider this advice:

Know the value of your home. Selling probably isn't your first choice, but it's important to know whether the house could be sold for enough to pay off the loan, plus closing costs. Ask a real-estate agent for a free estimate, while mentioning that you have no immediate plans to put the house on the market. Also check out Zillow.com, an online real-estate information Web site that provides home-value estimates.

Consider refinancing. If your credit is poor, refinancing may not be possible or will carry big fees, but if a deal sounds good, get an estimate in writing. You can consider whether the offer is worthwhile by using an online calculator such as Financial Calculators (look under "Home & Mortgage").

Talk to your lender. Troubled homeowners may want to run and hide, and lenders may seem unresponsive, but "the longer you wait, the fewer options you have for a workout," says Ren Essene of Harvard University's Joint Center for Housing Studies. Keep records of when you called and whom you talked to.

Seek a loan-modification deal. If you're heading into default, ask to speak with someone in your mortgage lender's "loss mitigation" department. This individual generally has the authority to set new terms for your loan to avoid foreclosure. "Lenders will often ask for good-faith money toward a modification," so hoard cash if you can, says Michele Rodriguez Taylor of NTIC.

Get help. Some nonprofit groups can serve as a go-between with the lender or can offer advice about your options. A nationwide HOPE Hotline (888-995-4673), run by the Homeownership Preservation Foundation, offers counseling. Through the group Neighborworks, it provides referrals to local organizations that can act on your behalf. Some states have set up rescue funds for homeowners. The federal Department of Housing and Urban Development offers links to community groups, among other aids, on its Web site.

Beware of "rescue" scams. If someone calls out of the blue and offers to repay your loan if you sign the deed to them or asks for lots of money to help you stay in your home, hang up.

Selling may be best. "Consumers will do everything to keep their home, even if it's irrational," Essene says. Some refinance multiple times, draining their equity in the home, and still can't afford to keep it. They would have been better off selling sooner, she says.

Choose the lesser of evils. Foreclosure is generally the worst outcome for homeowners, blackening their creditworthiness for years to come. For families on the brink, some alternatives include a "deed in lieu of foreclosure" transfer of ownership to the lender. In other cases, the lender may let you sell the home for a value that won't fully pay off the loan.

Amid these troubles, it's important to keep the challenge in perspective. The current housing market, financial experts say, is tough for just about everyone.

"It's become tighter across the board" for borrowers, says Celia Chen, who tracks housing issues at Moody's Economy.com in West Chester, Pa. "There are few subprime loans being written. [But] for someone who has built up equity and is a prime borrower, they'll still be able to refinance."

Tips for mortgage shoppers

If you’re looking to buy a home, loans are available -- but new terms and conditions apply. Down payments are in. Mortgage approvals without documentation are out. Despite the downward spiral of lenders who financed high-risk borrowers, prime "conforming" loans (less than $417,000) still are available, says Holden Lewis, a senior reporter at Bankrate.com, which tracks credit markets. But jumbo loans (more than $417,000) now carry higher interest rates than they did a month ago, he says, and lenders require down payments of 5 percent or more.

Financial experts offer this advice:

• Educate yourself. Community-action groups often provide free buyer-education seminars. Visit Web sites of government housing agencies, especially http://www.hud.gov/, for guidance.

• Patch up any credit problems. For people with credit scores below 620, "there are very few options," says Chen.

• Shop around. This is especially true now. If an online mortgage lender can’t help you, maybe your local bank can.

• Think realistically. With home prices under downward pressure, don’t count on rising values to outpace your interest costs.

For more information please visit: http://realestate.msn.com/buying/advice.aspx

Lost your home? You may owe IRS

Even if you received no money from a foreclosure sale, you may have to pay capital-gains taxes on the phantom income. And that's not all. (By Kay Bell, Bankrate.com)

More from Bankrate.com

If you thought a foreclosure ended the financial miseries associated with your former home, think again. You soon could be hearing from the IRS about taxes due in connection with the residence you no longer own.

"You can walk away from the big house payment, but not from the potential tax implications," says John W. Roth, senior tax analyst at CCH in Riverwoods, Ill. "And if you couldn't afford the mortgage, you probably can't afford the taxes."

As the lending crisis continues to shake out, more homeowners, particularly those who used creative mortgages to buy their houses, could be in this predicament. Even longtime

homeowners who refinanced their properties based on increased value when the real-estate market was hot could find themselves in tax trouble if they lose their properties to the bank.

Forgiven but not forgotten

In many cases, the tax problem associated with a foreclosure arises from a seemingly benevolent move: The lender forgives some of the loan. This happens when a lender and a borrower negotiate a reduction in loan amount. Or when the lender forecloses on the property and sells it for less than the outstanding mortgage.

In both instances, the difference for which the borrower is no longer responsible is considered cancellation-of-debt, or COD, income. It also is called discharge-of-indebtedness income or discharge of debt. Regardless of the name, under the tax code, it's all taxable income. The tax on COD is calculated at ordinary rates, which range from 10% to 35% and depend upon your income.

"People who advise you to walk away talk about payment consequences, not the tax consequences," says Frederick M. Stein, RIA senior analyst from Thomson Tax & Accounting. "If they owe $50,000 and $10,000 is forgiven, they think of it as a gift. It may be a gift from the lender, but not from the IRS."

More on MSN

How much and what type of tax the IRS expects after a foreclosure depends in large part on whether the loan is "recourse" or "nonrecourse."

With a recourse loan, the debtor is personally liable for the debt. In a foreclosure, if proceeds from the home sale don't cover the outstanding mortgage, the debtor must pay the difference. This includes interest that accrues during the foreclosure process.

Nonrecourse debt is secured by the loan collateral. If money from the sale of the property doesn't cover the outstanding debt, the lender has no legal ability to get the additional funds from the debtor.

A sale is a sale is a sale

But with either type of loan, a foreclosed-upon homeowner could end up owing capital-gains taxes without ever receiving any money from the foreclosure sale.

"Foreclosure is not a sale in normal terms, but it is still treated under tax code as a sale," says Stephen Trenholm, CPA, MST (master's degree in taxation) and tax manager at Rucci Bardaro & Barrett in Boston.

"The outstanding balance of the mortgage is compared to the basis in house. If that produces a gain, it's a taxable gain. If it's a nonrecourse mortgage, it's a capital gain."

That's right: Even though you aren't selling the house and the bank is, the IRS views the transaction as if you were the seller. That means you could owe taxes on the sale. The bad news comes directly from the IRS, via Publication 544:

"If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. This is true even if you voluntarily return the property to the lender. ... You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized."

The calculations take into consideration any cancellation-of-debt income and the type of mortgage. Here's an example:

Let's say a homeowner has nonrecourse mortgage debt of $110,000 and $20,000 equity, or "adjusted basis," in the home, which has a fair market value of $100,000. The owner has no ordinary tax liability for that $10,000 difference between his debt and the home's value. But what about the $90,000 difference between the mortgage debt and his basis in the house ($110,000 less $20,000)?

That is seen as taxable capital gain from the "sale or other disposition" of the home. So even though the foreclosed-upon owner didn't get any cash from the transaction, he still owes taxes on what is known as phantom income. The only good news is that the taxes are collected at the lower 15% (or 5% for lower-income taxpayers) capital-gains rate.

If that same homeowner's mortgage was recourse debt and his lender forgave the $10,000 difference between the outstanding loan and the home's fair market value, the foreclosed-upon owner would owe ordinary taxes on the 10 grand. In addition, his capital-gains bill would be based on $80,000 -- the property's fair market value of $100,000 less his $20,000 adjusted basis.

For some struggling homeowners, the taxes on forgiven debt or phantom income are all too real.

"If it's $10,000, that's a relatively small spread; $2,000 to $2,500 in federal and state taxes," says Ted Lanzaro, CPA and owner of an accounting firm in Shelton, Conn. "But it's not just the working man having this problem. Everybody's getting in over their head these days.

"If you have a $700,000 mortgage and the bank can only get $500,000 in a foreclosure sale, now you're talking about some tax liability."

And don't think the IRS won't find out. The agency has a mechanism to catch foreclosure sales. The lender is supposed to issue a 1099-C to alert the former homeowner and IRS of the canceled debt and, in certain cases, a 1099-A showing the information you need to figure your gain or loss.

"Some people are moving and the 1099 has trouble catching up," says Gary Garwitz, tax partner with BKD in Springfield, Mo. "If you're in that situation and had a mortgage you didn't pay off, make sure you get that 1099."

The IRS definitely will get its copy and expect the associated taxes. If the taxes aren't paid, penalties and interest will be added.

"The IRS is far more tenacious than most banks," says tax analyst Roth. "Their responsibility is to collect the tax on the income you have."

Home-sale exclusion still applies

There is one bit of good news for our hypothetical homeowner and others dealing with foreclosure-induced taxes. You can get out from under at least part of the IRS bill if you meet the homeownership tax-exclusion rules.

This popular tax break allows a single homeowner who sells his property under the usual circumstances to exclude up to $250,000 profit from taxes; the exclusion is $500,000 for married couples filing jointly.

The exclusion also applies in foreclosures. As long as the "seller," in this case the foreclosed-upon owner, lived in the home as his principal residence for two of the past five years, he can avoid taxes on any capital-gain profit, phantom or real.

Bankruptcy and insolvency solutions

Two other circumstances offer tax relief in foreclosures, but both could cause other financial problems.

If a homeowner can show he's insolvent before the discharge of the mortgage and turnover of the property, as well as afterward, proceeds are not taxed. However, says CPA Trenholm, "insolvency is a little tricky. There's no strict definition of what assets (go in the calculation), but for the most part, a lot of people caught in the real-estate crunch can establish that condition."

The other option is bankruptcy.

"Forgiveness debts, in these cases, are not taxed," says Roth. "They don't want the bank chasing them down, which is why many times people going through foreclosure also go through bankruptcy."

However, filing for bankruptcy has its own set of considerations. "New bankruptcy rules don't give (filers) a lot of relief," says William S. Bost, a member of the Raleigh, N.C., law firm Ragsdale Liggett. "If you have a job and are making money, the new bankruptcy rules don't give you a whole lot of help. It gives you some time, but I don't think that's necessarily the way to go.

"It used to be like going to church -- you walk in and walk out absolved -- but it's not like that anymore," says Bost. "Now, it's not worth the pain you pay the rest of your life."

One thing lending and tax experts all agree on: If you're facing foreclosure, take action as soon as you realize you're in trouble. And get professional help to determine exactly what your personal tax liability might be in the transaction.

Lanzaro has two other recommendations: "The best advice is, don't buy a house you can't afford, and don't get an adjustable-rate mortgage."

Other options

If you're stuck with more house than you can pay for, you have a couple of options in addition to foreclosure. Either is likely to reduce the stress of this terrible time and probably will do a little less damage to your credit report.

Each, however, still has tax and other potential long-term financial implications.

Short sale: This real-estate transaction has become popular among homeowners who are having problems making payments on a mortgage that is more than their house is worth. Rather than waiting for the bank to foreclose, the owner works with the lender to complete a sale of the home for less than the loan balance.

"You have a property you're just trying to get out from under," says Paul Haarman, vice president of Renaissance Mortgage in Salem, N.H. "Everybody is all lined up at the table and the buyer buys the property and the lender agrees to the price. You have a $250,000 debt, the bank nets only $220,000 and that $30,000 is written as a foreclosure shortage."

A short sale keeps a foreclosure from showing up in your credit record, but the shortfall will appear there as a delinquent loan. It's not as bad as a foreclosure, but, says Bost, "It's on the credit report and, as a (future) borrower and consumer, it will haunt you."

Deed-in-lieu of foreclosure: In this case, says Trenholm, the homeowner basically says to the lender, "I want to save you some time, some money. How about I just turn over the property?"

This way the foreclosure process is avoided, which will help the borrower, because it won't show up on a credit record. However, it could still show up on a credit report as forgiven debt.

This process has "pretty much the same tax consequences as a foreclosure," says Trenholm. Because you are being relieved of the indebtedness on the property, for tax purposes it's still considered sale of the property.

"All it does is make it a little bit easier to go through the process," he says.

Tax liabilities remain

The argument for short sales and deeds-in-lieu is that they are beneficial to strapped borrowers. From a tax and financial perspective, however, they don't really matter.

"All of these situations are basically the same," says Stein. "The mechanics and timing may be a little different, but essentially in all of them at some point a lender is saying to the borrower you don't have to pay the rest of what you owe. When he tells the borrower that, that's cancellation-of-indebtedness income."

"The only benefit," says Bost, "is the 'It's over' factor."

For more information please visit: http://realestate.msn.com/selling/Article_bankrate.aspx?cp-documentid=5427263&GT1=10632

Dos and dont's to fight foreclosure

Homeowners have several options for saving money, their credit rating or their home -- but should beware of scams. (By Bankrate.com)

More on MSN

4. File Chapter 13 bankruptcy: If you can afford to make the future mortgage payments and the delinquent payments, too, file Chapter 13 bankruptcy. This is different from Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three- to five-year plan.

5. Short sale/deed in lieu of foreclosure: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. Why might a bank agree to either of these? Lenders spend $30,000 or more to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.

6. Walk away from the house: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.

Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.

Here are two options NOT to consider. In other words, they're scams.

2 dont's when foreclosure looms:

1. Signing over your property title to another company: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.

2. High-interest second mortgage: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70% of the equity available. The interest rate could be as high as 18% and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.

When facing foreclosure, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.

For more information visit: http://realestate.msn.com/Buying/Article_bankrate.aspx?cp-documentid=5716201&GT1=10632

Let's Talk Real Estate

Friday, November 30, 2007

Why Blogging is Changing Real Estate

Thursday, November 29, 2007

Top 10 metro home-value gainers for 2006

How to sell in a buyer's market

Wednesday, November 28, 2007

Early Detection Reminder

Tuesday, November 27, 2007

Working together!

How to escape a mortgage mess

Lost your home? You may owe IRS

More from Bankrate.com

More on MSN

Dos and dont's to fight foreclosure

More on MSN

Translate

Blog Archive