Latest on the stimulus bill and house tax credit

The US House is voting on the final passage of the bill today and then the Senate will follow shortly after. It is expected the “Stimulus” bill will have little problem getting through either chamber.

One new detail on the housing portion of the bill that I had not previously reported about has come to light. The Senate had wanted the tax credit for first time home buyers to be for on purchases of homes for one year, but the final version is only on purchases of homes that close by August 31, 2009.

Latest update on the house tax credit in the “Stimulus Bill”

making-sausageAt our office meeting this morning there was a lot of talk about the on-again, off-again tax credit in the stimulus bill so I promised a couple of the agents there I would research it when I got back to the office and post an update. Here is the latest. Yesterday the AP was reporting the tax credit was completely removed from the final version of the bill, then word came last night that said it was not removed, but reduced.

After reading more about it online one thing because clear, the old making laws is like making sausage is true. I contacted one of my old political buddies who works on the Hill and he did some quick research for me. Here is what the latest version is to the best of his understanding. He told me they have not even seen the final version has not yet been distributed to Republicans so he is going off what he has heard. In other words don’t take this for gospel.

  • The current tax credit which is set to expire in July is for $7,500. The version that passed the Senate in the new bill was for $15,0000. The final version looks to be $8,000 or 10% of the home purchase price, whichever is less.
  • The current $7,500 tax credit has to be repaid, the Senate version would not need to be repaid if you lived in the home for two years and the new version appears to have not have to be repaid, but we are unsure at this time if there is a time restriction on that.
  • The current credit on the books is for first time home buyers, the Senate version was for any home buyer’s primary residency and the final version is back to first time home buyers. First time home buyer is anyone who has not owned a house in the last three years.
  • There will more than likely be an income cap of around $150,000, you will need to make under that to qualify.

Again this is not gospel, just the best information we have at this time. As new information is clarified we will bring it to you.

$15,000 tax credit becomes zero relief for housing industry

Just a couple days ago I blogged about the “Stimulus Package” provision to add a $15,000 tax credit for home buyers to the bill. The $15,000 credit would have been allowed to have been taken by the home buyer over a two year period. The credit also would not have been required to be repaid.

You can disregard that post. Today the committees killed that provision.

Is buying a short sale the best deal?

father-timeThe phrase “short sale” has made its way into the every day language of home buying. I talk to people every week who are looking for a home and want me to send them a list of short sales. When I ask them why they want short sales they usually respond with something to the effect of “That is where the best deals are.” There can be some good deals in short sales, but are short sales really the best option or best deals for buyers?

If you are a seller a short sale may be your only option, but if you are a buyer a short sale should often be your last option. Contrary to popular belief, a short-sale is not often going to be the best buy for a home shopper. In a rare case where a home may be going to foreclosure in just a couple of weeks and a buyer can come in and make a purchase in cash and close in just a couple weeks, then there may be a good deal, if you can get them accepted. But for most buyers this is not the situation.

More often than not the better deal is going to be in the bank owned foreclosure property. These properties are often selling for 10% to 15% below conventional sales and banks are looking to work with buyers to get rid of them. One of the big differences with short sales vs. a foreclosure property is the time and patience it will take. If you want or need to be in a home in the next three months forget about even stepping inside a short sale listing. It is very common for it to take as much as 10 to 12 weeks just to hear from a bank if they will accept an offer or not. If there is counter or conditions set it could add as much as another four to eight weeks on top of that if negotiations are needed. We currently have one offer on our team that a buyer made on short sale listing which we presented to bank the first week of December and we are still waiting for an answer ten weeks later. No matter how many times we call, we still wait.

During those months that you wait for an answer hundreds of foreclosure properties could come on the market that are better deals than the one you are waiting for. During that time you are off the market completely because if the bank does accept the short sale it is a binding contract you signed. If you were to work on a bank owned foreclosure property over a short sale you are most likely to get an answer from a bank in under a week. If that deal does not go through then there are hundreds of other properties to choose from and you did not waste three to four months waiting to hear an answer.

Another problem that short sales present to buyers is the amount that actually get to closing. Less than 20% of all short sales actually get accepted and go to closing. If you were to put an offer in for a short sale you are taking yourself off the market for up to three months with only a 20% chance at best the deal will get done in the end.

If the market is down, why do some Mesa homes for sale have multiple offers?

lowballofferWe have had many cases over the last six weeks where a home for sale in Mesa or Queen Creek will have multiple offers placed on the home and even ends up going for even more than the asking price in many situations. How can that be if the market is down and this is considered a buyers market?

This may not be the case on every home, the homes this appears to be most relevant with is homes in move-in condition under $100,000. Buyers are in shock because they think they can swoop in with a low ball offer and the banks need to take it. Even though we may advise them against it, it usually takes two busted deals where the home gets multiple offers and sells above the asking price before the light finally comes on and they decide their agent may know what they are talking about.

One recent example was a 1984 Mesa 3 bedroom home that had just gone to foreclosure. The home was in great condition with granite counter tops, tile in the kitchen, halls and bathroom and newer stainless steel appliances. The home was move in ready and came on the market at $109,900. The fair market value for the home according to recent sold homes in the same neighborhood was closer to $118,000. This seems to be the case with many bank owned properties recently, get them on the market for a little below market and watch the investors swoop in and snatch it up quickly.

The buyers I was working with saw the home on the second day it was on the market. They wanted to make an offer and asked for my opinion. Instead of giving them an opinion of what I thought the home was worth I showed them comparables that placed the value of the home around $118K. They were excited and said great then let’s offer them full price. I informed them that I thought their chance of getting the home at that price were close to nil as investors would see the opportunity and bid this one up quickly. The decided they wanted to put in an offer for $112K.

I called the agent and told her the offer was coming. After being told the home already had three offers I asked if we were in the ballpark and she said if we added $10K we would be in the ballpark. The bank issued a highest and best and my clients stayed at $112K.

This is just one of many examples of what is happening right now in the local market. Buyers need to be educated if a move-in ready home is going for under what the current market price is, a low ball offer is not going to cut it anymore. If they want to make low ball offers they should be looking at houses that need work. If real estate agents give them the proper counsel from day one, even if the clients may not believe them at first, the real estate agents credibility will be boosted greatly when what they predicted would happen, happens.

Should I talk to a lender before I look for a house?

prequalify1Should I talk to a lender before I look for a house? When a new buyer starts talking to us, one of the first things we will always ask is have you talked to a lender yet? The biggest reason? We want to save time… time for us, time for you and time for sellers.

Most buyers when they start looking for a home will jump to a website with a mortgage calculator and plug in how much they want their monthly payments to be and hit calculate to produce that magic number. Now they have a selling price they think they should be looking for houses in. That only paints half the picture though. A professional lender is someone who will calculate into your purchase price taxes, insurance. lenders fees, HOA fees and closing costs for a house and will be able to figure that into your price range. Knowing this information going into the home buying process can save you a lot of time and heartbreak if you were to be looking at homes not in your price range.

Another reason to speak to a lender before house shopping is the lender may run across misinformation on your credit report which you will need to clear up. When the lender does find misinformation they can tell you who to talk to about the erroneous report and help you to get it cleared up. Getting your credit cleared up is something you will need to do before you can get the loan anyways, so better to start now.

Getting pre-approved will also help in determining what houses to look at. You may be approved for a VA, FHA or USDA loan, but not all homes will qualify for these loans. Knowing this information ahead of time will save you and your Realtor time in the home search process. It is very important that your Realtor knows these things so they can do their best job for you.

Some bank owned properties and even some private sales will require your Realtor to have a pre-qualification from your lender before they are allowed to show you the house. And when we submit your offer for that dream house when it is found, we just must submit an LSR (Loan Satisfaction Requirement) with the offer showing you are prequalified for a loan on that house.

Some may think it is a waste of their time talking to a lender first, but the truth it talking to a lender first can save you time and money in the long run.

Zillow, great source but buyer beware

zillowWant to know how much your home is worth? One popular way is to go to and get a zestimate. A zestimate is Zillow’s estimate of what your home may be worth. But how reliable is that zestimate?

A Zillow estimate can get you in the general ball park, but be prepared for the estimate to off by as much as 10 or 15 percent in some cases. The only way to get a true accurate value of your home is to have a quality Realtor look into the property.

If you were looking to sell a 2001 Dodge pickup truck and you found two that had sold in your neighborhood in the last 6 months, the first sold five months ago for $10,000 and the second sold three months ago for $6,000 what does that mean to the value of your pickup? It depends, maybe nothing at all. Just because one sold for $4,000 less three months later does not automatically mean that yours is worth $6,000 or less and just because prices were dropping quickly three months ago does not mean the still are. There are to many factors to consider like mileage, condition and features.

There is a lot to compare when doing a quality CMA (comparative market analysis). A Realtor can do their homework and make sure they are comparing Mac apples to Mac apples or Sunkist oranges to Sunkist oranges. A Realtor will also have more recent information than Zillow has access to. Another problem that Zillow can make is it goes off public records. If a public record is wrong, and yes it does happen, Zillow has no idea while a Realtor has a much better chance of telling you that is the situation.

Does that mean you can never use Zillow for a good rough estimate of what your home is worth? No, but if you are thinking about selling your home, and want to know it’ true value then talk to a Realtor who is willing to do a quality CMA and then you will know for sure you are getting what you are after.

Latest stimulus package and what it may mean to home buyers

im-just-a-bill-optWe can have a long debate about the latest stimulus package and whether it is a good thing of a bad thing. There are plenty of opinions on both sides and I will bite my tongue for now. There is one part of the bill that passed the United State Senate last night that I wanted to share with you as a potential home buyer.

You may have heard by now about the potential $15,000 tax credit for home buyers. The amendment will replace the current $7,500 tax credit for first time home buyers that is currently planned to expire in July of 2009. I have read the amendment two times, and being a former state representative you would think I could read a bill by now, but it is still somewhat confusing. Here is how I read it to be different from the current $7,500 tax credit.

  • The $7,500 tax credit is for first time buyers while the $15,000 is for any buyer who will use the house as a primary residence.
  • The $7,500 needs to be paid back, interest free, over 15 years while the $15,000 does not need to be paid back if you live in the home for 2 years.
  • The $15,000 is a maximum and based on 10% of your purchase prise. So if you purchase a home at $100,000 you will get a $10,000 credit.
  • The new amount will start on the day the bill is signed and be in effect for one year. It will not be retroactive.

Also likely to come some time before the stimulus package is finalized is an amendment that could greatly lower interest rates to as low as 4%.

*I am not an expert on this subject, this is my best understanding of the amendment from my reading of it. Also this has only passed the Senate and will need to pass the House and most likely a conference committee between the two chambers and could be changed at any one of those steps.

Is it time for me to buy a house in the Phoenix East Valley?

onsaleHave we hit bottom and is now the time for me to be buying a house in the Phoenix East Valley? I know there are several of you out there asking yourself these exact questions.

While it will be impossible for us to tell that we have hit bottom until several months after it has actually happened, the outlook is good for homes on the market under the $200,0000 price range. Homes that fall into this price range make up the majority of properties that are selling in todays market. We are also not seeing the rapid decline in price in these homes that we did in 2007 and 2008. Finally, you can purchase significantly more home than you could have within this price range for the last five years with prices falling over 33% from just a year ago.

When purchasing a property you need to remember that it is much more than an investment; it is a place to raise a family, make memories, spend your free time and yours to do with what you want. While we may not know if we have hit bottom, it is certainly a great time to buy. Interest rates are phenomenal, there are still great loan programs that allow you to get into a property for very little money down and again prices are better than they have been for years.

If you are one those people out there asking yourself these questions take a look at what is out there and I bet you will be surprised. In many cases you can now own for less than what you would pay in rent and not have to ask permission to paint the walls your favorite color. Home ownership is the American dream and today it can very easily be a reality!

7 simple appraisal tips to save you time and money

This week has been a little rough for us when dealing with appraisals. More than once this week, we had a home that didn’t appraise for what the borrower “thought it was worth” and as a result, we have had to restructure their loans.

In today’s market, often the entire loan will hinge on what the property appraises for, so I thought I would share a few simple things that you can do to be informed about the appraisal process.

1. Know What Your Home Is Worth
Have a good idea of what your home is worth before you even consider getting an appraisal. There are many tools that you can use to research the value of your home, and probably the most popular one is Zillow. While none of these tools should be relied on as the “absolute value”, they are good tools to use to give you a general idea of what your home is worth. The best way to get an understanding of what your home may be worth is to talk to a quality Realtor.

2. Comparable Market Sales
Find out what the comparable market sales of homes in your neighborhood were. You also can find these online – one of the simplest ways for people who live in Arizona is to look at the AZCentral’s recent home sales tool for this. These comparable market sales are also called “comps” and will have a *significant* impact on the value that your home will appraise for.

3. Use a Local Appraiser
Try to use a local appraiser when at all possible. There are some national appraisal companies who really just “outsource” the work to someone local – and rather than start with the national company, start by finding a local appraiser first. They will have a much better knowledge of the immediate area and understand the things that drive the value of your home up or down.

4. You Paid For It – It Is Yours
Usually you will pay for the appraisal at the time that the appraiser comes to the home. Since you paid for it, it is yours — make sure that your loan officer sends you a copy.

5. Sometimes You Need 2 Appraisals
Because of tightening guidelines, sometimes 2 appraisals from 2 different appraisers is required. Get ready for the appraisal bill to be closer to $700 – $800 rather than $300 – $400 if your home is worth more than $1million or you are trying to get cash out of your home with a loan to value of 85% or higher.

6. If You Are Getting An FHA Loan, Make Sure Your Appraiser Is FHA Approved
If you are getting an FHA loan, make sure that your appraiser is FHA approved and is doing an “FHA appraisal”. You may be surprised how many times someone needs an FHA appraisal and doesn’t find out that the appraiser they want to use is not FHA approved until late in the process.

7. Appraisal Rules Are Changing
Know that soon, the appraisal rules will be changing – lenders will require that they order the appraisal, not the broker or borrower. This means that you will have much less “control” over the appraisal process – but by understanding the key components of what goes into an appraisal, you can still be an informed buyer.

No matter how you say it – the appraisal process is more difficult than it was 2 years ago. It is more difficult to know what your house is worth, it is more difficult to find a “good” appraiser to work with and it is more difficult to get an appraisal through underwriting without having the underwriter cut your value.

Will following these 7 simple steps guarantee that the appraisal process will go smooth? No. But it sure will help!