Maryland and International Real Estate

What is FHA?

2011-12-30T18:29:00.011-05:00

What is FHA?
The National Housing Act of 1934 established the Federal Housing Administration (FHA). In 1965, the FHA becomes part of the US Department of Housing and Urban Development(HUD). Since 1934, the FHA and HUD have insured over 34 million mortgages.

The FHA has also been active in financing the development of multi-family housing. The FHA loan process requires borrowers to have no foreclosures in the past three years and no bankruptcies in the past two years. FHA current down payment requirement is 3.5%. For many years FHA rules require every borrower to put down a minimum of 3.5 present to qualify for a loan. However, this year the organization raised that minimum that amount to 10% for borrowers who had a FICO score (credit score) lower then 580 in order to protect its financial reserves.

What is the limit for the amount of an FHA loan?
It depends on the market of the property being purchased. FHA limits are set on the basis of local area median home price. In low-cost areas, the limit is $271,050, but it could go as high as $729,750 in high cost areas. You can find the FHA's loan limits for your market at http://www.fha.com/lending_limits_state.cfm?state=MARYLAND

If you decide to seek an FHA loan there are certain guidelines that Agency loan counselors will want you to meet. Two of the most important are the relative amounts of your mortgage and your household income, and the monthly mortgage payment in relation to your total monthly debt obligations.

Generally, the FHA will want your mortgage payment (generally meaning principal, interest, property taxes and property insurance — PITI) to be no more than 31% of your gross monthly income. Further, your total monthly debt obligation including the mortgage; credit cards; auto loans; student loans; etc. should come to no more than 43% of your monthly income. These ratios are more generous than many that you will find for non-FHA loans being offered today. Even higher ratios are available if you are purchasing an energy-efficient home. The so-called “stretch” ratio is 33/45 — 33 percent for PITI and 45 percent for all ongoing monthly payments. The FHA requires an appraisal of the property. Beyond physical inspection, the applicant must disclose all “sales concessions” to the appraiser. Those may include loan discount points, origination fees, interest rate buy downs, closing cost assistance, payment of condominium fees, builder incentives, down payment assistance or monetary gifts. The FHA has a list of closing costs which it considers reasonable and customary. Those include:

•Lender’s origination fee (one percent maximum)
•Attorney’s fees
•Appraisal fee
•Inspection fee
•Title insurance and title examination fee
•Property survey
•Credit reports (actual cost)
•Transfer taxes and recording fees

If you are looking to buy condo from condo building - half of the units must be occupied by their owners. The condo must also be thre borrower's primary residence. Additionally, the building must meet FHA and HUD standards. To find out if the development has been approved, go to: https://entp.hud.gov/idapp/html/condlook.cfm

If you still have questions about FHA,
please call Tatyana: 443-527-4375

3 must-knows before backing out of purchase contract

2011-12-19T19:28:00.000-05:00

By Tara-Nicholle Nelson
Inman News®

Question: I have a contract on a home to purchase, but I have changed my mind. Can I back out prior to the closing without any penalty or repercussions?

A: That, as it so often does, depends. First: the formalities. Depending on your state, it's highly likely that the real estate purchase contract you signed offers some sort of an out, with conditions. In some states, these are known as contingencies -- basically, contractual provisions that allow the buyer to back out of the deal within a set number of days.

These provisions usually also give the buyer the access and opportunity to have the property inspected and appraised, to have her loan underwritten, and to undo the deal, without penalty, if her loan is not approved or the property condition does not meet her standards within the agreed-upon contingency period (usually around two weeks, plus or minus a couple of days, by default, but the time period itself is fully negotiable between buyer and seller).

In other states, the relevant provisions provide an objection period in which the buyer must voice her objections or intent to back out, or forever hold her peace.

At the end of an objection period, a buyer usually retains the right to back out, but will forfeit any earnest money deposit she placed on the property if she bails. At the end of a contingency period, the buyer must either:

•remove the contingency, signaling that she plans to close the deal, and rendering her deposit nonrefundable if she doesn't;
•exercise the contingency, killing the deal; or
•request an extension of the contingency until her outstanding due diligence is complete.
Those are the basics, but there are two important caveats if you happen to be buying a distressed property. If you're in contract on a short sale, your contingency or objection period likely doesn't even begin to elapse until you've received the bank's approval of the deal.

If you change your mind before that happens, chances are good that you can back out, penalty-free.

On the flip side, if you're in contract to buy a bank-owned property and you're in a contingency state, chances are good that the bank has effectively converted the contingency period into an objection period, so that your deposit becomes instantly nonrefundable if you haven't backed out of the deal by the end of your contingency period.

Hopefully, you know where your own contract falls within the above schemes. If not, check with your agent or attorney to understand whether you can actually back out, under the terms of your contract with the seller, without penalty.

With that said, just because you can back out doesn't mean you should. Buying a home is sort of like getting married in that anyone who takes it seriously will have a moment (or day, or week!) of doubt.

If the fact that a few thousand dollars' penalty would sway your decision in favor of moving forward with the transaction, that might be a sign that your desire to back out is just buyer's remorse.

Alternatively, if you're in contract on a short sale you're not sure actually can or will close and you happen to have found another property you like better, at the right price, that is more certain to close (i.e., is not a short sale), your change of mind might make more sense.

The inevitability of buyer's remorse at the prospect of such a major commitment as a mortgage is why I suggest buyers-to-be actually write down their "visions of home," getting clear on what they want their lives to look like on a daily basis once they own the home they envision, and determining what characteristics, features and amenities a home would need to have to facilitate that vision.

When buyer's remorse rears its head, it can be a useful exercise to revisit any written documentation you have of your original wants, needs, priorities or vision; compare the home against that; and use the comparison to quell any emotional freak-outs that might incline you to back out irrationally, or supply logic and reason to a rational decision to cancel the contract.

Finally, if a serious problem with your job, loan, health or life is what's making you want to back out, it might make sense to cancel the contract even if you will incur a penalty for doing so.

I've personally worked with buyers whose marriages broke up or jobs were lost during escrow, but after removing their contingencies they were happy to leave the transaction and forfeit their deposit knowing that doing so allowed them to escape the greater evil of being stuck with a home and a mortgage that is simply not going to work with their changed circumstances.

Howard County Land Records

2011-12-12T18:19:00.001-05:00

http://www.courts.state.md.us/courtrecords.html

6 Keys to Ensure an Approved Home Mortgage

2011-12-11T20:22:00.004-05:00

Qualifying for a mortgage might have been easier just a few years ago, but today’s tight lending standards help ensure borrowers have the financial ability to keep the homes they buy as long as they want to. If you’re applying for a mortgage today, here’s what you can do to ensure you quality:

1. Boost your credit score to 740 or higher. Though loans are available to borrowers with lower scores, with a FICIO score of 740 or higher you’ll get best interest rates and lowest down-payment requirement.
2. Provide your income. Lenders like to see consistent income over a period of two to five years. Of course, you’ll also need enough predictable income to handle your monthly loan payment, along with property taxes and insurance.
3. Flash the cash. The more down payment you invest in your home, the better risk you are considered by lenders. Lenders consider a 20% to 30% down payment ideal, with a solid emergency fund of four to six times monthly income. You may get a loan with less, but why not to go for the gold?
4. Minimize debt. Pay down credit cards and retire car loans debt, etc. to improve your debt-to-income ratio, leaving more room in your budget for mortgage debt.
5. Tell the truth. Your loan application information will be verified through the underwriting process. Remember, incomplete or false disclosures will simply derail lender confidence in you.
6. Avoid last-minute gaffes. Lenders will calculate your debt-to-income ratio at the beginning of the loan process. They’ll also pull your credit report justr before the settlement. Don’t change the picture by depleting cash resources, increasing debt or opening new credit accounts.

Call me if you have any questions: 443-527-4375

Pros and cons of a life estate

2011-10-27T13:29:00.001-04:00

Here is a general overview of the benefits and burdens of a life estate:

Real estate taxes: It is the general rule that the life tenant is responsible for paying all property taxes during his or her lifetime; if the document creating this estate is silent on rent, the life estate holder does not have to pay any rent.

Ordinary repairs, upkeep and maintenance: These are the responsibility of the life tenant; that person lives in the house and it is his or her obligation to preserve the property.

Improvements: This question comes up often. "I, the life tenant, want to make improvements to the house. Who pays for this?"

Ordinarily, a life tenant has no right to make permanent improvements to the home. If they are made, without the consent of the remainderman (i.e., the person who gets the property at the end of the life estate), it is at the expense of the life tenant. However, it is the obligation of the life tenant to make all of the necessary repairs so as to preserve the property.

Homeowners insurance: Unless specifically spelled out in the will, the life tenant is responsible only for insuring his or her interest, while the remainderman has the obligation to insure the remainder interest. Sounds complicated and confusing, but the insurance carriers can assist in resolving this.

Can the life tenant move out and rent the property? The law provides that a life tenant is entitled to both the possession and use of the property. Included in this "use" is the right to rent the property to another, and keep the rent money. However, any such rent would be taxable income to the life tenant.

Can the life tenant sell the interest? The answer is yes, but the potential buyer would get only what the seller has -- namely an interest that would end when the seller dies.

What rights does the remainderman have? The courts seem to treat a life estate as they do tenants. The general principles give the life tenant the right to peaceful possession without interference from the remainderman.

However, if it appears that the life tenant is not properly maintaining the property, he or she would have the right to inspect and make any necessary repairs. This may require court action.

There may be tax consequences of giving a life estate, and you have to discuss this with your own tax advisers.

Keeping your home secure

2011-10-08T19:17:00.003-04:00

Keep your Home Secure

At the end of summer owners of lake cottages and mountain retreats find themselves locking up for another year. Unfortunately, many owners do not leave their vacation homes very secure against burglaries.
Although there no fool-proof way to prevent a burglary, making things difficult for criminals is the best defense. These tips apply not only to vacation homes, but to your primary residence as well.

• Make your home look lived in. Add timers to lights so they go on and off in different rooms at different times. Consider leaving a light on over the stove to show that the most-used room is active.
• Secure all entry doors. Using a foot lock to jam doors can delay entry and deter burglars.
• Add motion-detector lights outside your home or put lights on timers. Ensure outdoor lights are mounted higher than someone can reach without a ladder to deter thieves from removing the bulb in order to work in darkness.
• Use a timer to leave a radio playing to sound like someone home. If you have a landline phone, turn down the volume so unanswered rings don’t get attention. With an answering machine /voice mail, don’t give details that the home is closed up for season and check to clear messages regularly.
• Determine what can be seen though open window coverings and close those that reveal too much while leaving others open on the second floor.
• Keep in contact with your neighbors. Inform trusted, local year-around residents of your schedule and of any service schedules. Provide them with contact information and consider leaving key with them for emergency. Ask them to pick up flyers, phone books, newsletters that collect on the front door and driveway.
• Consider installing security system for more peace in mind
• For the greatest security, hirea caretaker to live in the home or management company to check on the home regularly and conduct off-season maintenance /service.

3 keys to qualify for mortgage using cash income

2011-10-03T13:37:00.000-04:00

3 keys to qualify for mortgage using cash income

By Tara-Nicholle Nelson
Inman News™

Q: For the past year I have been holding two part-time jobs: one job pays me in cash only and the other pays me with a traditional paycheck. The job that pays me in cash allows me to save about $3,000 per month, which I put into a savings account, so I have quite a bit of cash saved up. I am planning to buy a house within the next year. I would like to use this savings toward my down payment. Will this be questioned or cause me problems?

A: First, you should be very proud of yourself for having the discipline and drive to both work two jobs and to save up such a significant amount every month. But you're smart to ask in advance about how your cash income will be construed by lenders. In terms of your down payment, all funds that have been in your accounts for two months or longer at the time your loan is being underwritten are presumed to be yours by a lender.

Your bigger challenge will arise in the event that you want or need the lender to consider that $3,000 per month in cash income as part of the income that qualifies you for the mortgage. If so, there are several things you'll need to put in place.

First, if this is a part-time job, you'll probably need to be able to document that you've been there at least two years for the lender to allow you to use it to qualify.

Second, be prepared to produce a letter from your employer, known in the industry as a continuity letter, essentially verifying your employment and indicating that your employment is "expected to continue."

And third, as with any sort of income, you will be required to produce two years' worth of federal income tax returns; the bank will average your taxable income from the last two years and use that as the baseline income upon which you'll be qualified. (If you haven't been paying taxes on your cash income, but you will want or need to use it to qualify for a home loan, now's the time to meet with your tax preparer and your mortgage broker and evaluate whether it makes sense to file an amended tax return and pay the appropriate taxes on your income.)

Depending on the specific facts of your situation, your lender might require you to jump through additional hoops in terms of documenting that income; on the other hand, you might not need the income to count for mortgage purposes if you can qualify for a large enough home loan on the basis of your traditionally paid income.

Long story short: Loop your mortgage broker or other lending professional in on your situation, stat, so you can begin the process of positioning and documenting this income to make the most of it in your mortgage application and qualification process.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com

Five steps to improve your credit score

2011-09-23T09:06:00.005-04:00

Strong credit affects many aspects of your daily life, including your ability to purchase a home. Looking to improve your credit score?

The Board of Governors of the Federal Reserve System offers five tips for doing so. Here is what they recommend:

1. Get copies of your credit report-then make sure information is correct. Go to www.annualcreditreport.com. This is the only authorized online source for a free credit report. Under federal law, you can get a free report from each of the three national credit reporting companies every twelve months. You can also call 877-322-8228 to request Annual Credit Report.

2. Pay your bills on time. One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you to pay on time, but be sure you have enough money in your account to avoid overdraft fees.

3. Understand how your credit score is determined. Your credit score is usually based on the answers to following questions:
• Do you pay your bills on time?
• What is your outstanding debt?
• How long is your credit history?
• Have you applied for new credit recently?
• How many and what types of credit accounts do you have?

To learn more about credit scoring, see the Federal Trade Commission’s website: Facts for consumers:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm

4. Learn the legal steps to take to improve your credit report. Read the Federal Trade Commission’s “Building a Better Credit Report” http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm
It has information on correcting errors in your report, tips on dealing with debt and avoid scams- and more.

5. Beware of credit - repair scams. Sometimes doing it yourself is the best way to repair your credit. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm It explains how you can improve your creditworthiness and lists legitimate resources for low-cost or no-cost help.

Do you have questions?
Call Tatyana Baytler
Phone: 443-527-4375

12 Steps to a Successful Settlement on Your Dream Home

2011-09-05T09:17:00.009-04:00

Just as with a GPS system, to get an accurate complete road map to your destination , you need a starting point and an end point. Following below steps, will help you to navigate Real Estate settlement transaction and to get to your desired destination - new home.

1. First: Get “Pre-Approval” letter by reputable lender or mortgage broker.
2. Second: Write up the list of housing desires /wishes (house futures, location and etc.)
3. Third: Get the knowledge of the state of the market and get understanding why it is an excellent time to buy. Search for your home and see them.
4. Fourth: Once you have identified the best property to buy and ready to enter into the bid/ contract process, ask agent to see comparable recent sold homes and provide to you Comparable Market Analysis (CMA) and /or order appraisal. Make an offer for your new home - sign all offer documents an agent provided to you. Write a check for your escrow account (deposit is hold in Trust account until you are ready to settlement and it will be used toward your settlement charges)
5. Fifth: Once contract is fully ratified / executed (signed by sellers and buyers), contact the lender and get a commitment letter from the lender not later then 10 business days from contract acceptance. Lenders are required to provide borrowers with a Good Faith Estimate (GFE) of closing costs and Truth in Lending Disclosure within 72 hours of application.
6. Sixth: Contact the lender to make sure providing all required documents to render a final loan approval. Ascertain that an appraisal has been ordered and the date scheduled.
7. Seventh: Hire licensed home inspector. Get the inspection report. If necessary, re-negotiate contract and provide updated version to the lender.
8. Eighth: Communicate with the lender every couple of days to ensure all elements of the loan process are in order and proceeding in accordance with the contract commitment date.
9. Ninth: When you have received the formal loan commitment, coordinate directly with lender to make certain any and all underwriting conditions have or will be satisfied.
10. Tenth: When the lender’s commitment letter is received, in coordination with the agent, order title work and schedule the settlement date and time acceptable to all parties.
11. Eleventh: Find insurance company for your new home. Insurance policy’s effective date must coincide with the settlement date.
12. Twelfth: Ask the agent to order Home Warranty for your new home.

If you are consistent and realistic about all of above real estate transaction steps, while enlisting your "Team of Experts" - your real estate agent, lender, inspector, title company / attorney, you will successfully settle on the home of your dream. Be persistent. Good luck!

Tatyana Baytler
443-527-4375
www.LagretRealEstate.com

5 Home Projects to Finish Before Labor Day

2011-08-11T19:37:00.000-04:00

If the back-to-school radio or television commercials haven’t clued you in yet, summer is nearly over and with that, so will be the longer days and warmer temperatures.

Now is the time to finish up those home improvement projects sitting at the top of the to-do list before Labor Day and the beginning of fall.

Curb Appeal Projects

Get going on outdoor projects that can increase your home value and up your curb appeal, such as exterior painting, landscaping or installing a new front door. Paint won’t cure in cold or wet weather, so tackle this big project before the weather takes a turn.

Clean and Caulk Windows

Make things a bit clearer by taking time to clean the outside of your windows. While you clean them, take note of any cracks or any places that may need caulking. Sealing your windows (and doors) well will ensure your home stays warmer and your utility bill stays lower during the colder winter months.

Scrub and Seal Your Deck

Your deck gets a beating year-round from rain and snow and freezing temperatures during the winter and sun and dry air during the summer. Give it a scrub with approved deck cleaner to get rid of mold, then apply a stain or sealant to protect it from rain and snow during the upcoming months.

Clean out the Garage (or other spaces)

It’s no fun to labor in a garage in the dead of winter, so get de-cluttering and organizing now when the weather is nicer. Donate unwanted items to charity or host a garage sale.

Seal the Driveway

If you’re seeing cracks or holes in your driveway this summer, they will most likely get worse with winter weather. Seal or repair your driveway to prevent further damage. Additionally, asphalt pavement doesn’t cure as well in cold weather; if you are considering a paved driveway, summer is the time to do it.

June Howard county Market Uprate

2011-07-18T19:40:00.002-04:00

FHA loan requirements could change

2011-06-24T21:34:00.000-04:00

House Republicans have proposed a bill to "strengthen FHA" by raising the minimum down payment for FHA loans from 3.5 percent to 5 percent.

They also want to prohibit FHA borrowers from financing their closing costs and to lower the limits on FHA loans (FHA's maximum loan limits are already scheduled to fall in October. The bill suggests making them even lower).

If approved, the bill could significantly increase the upfront costs of buying a home with an FHA mortgage.

But if you are on the market for a home and have just finished saving enough money for a 3.5 percent down payment, there is no need to panic -- yet.

The proposal is just a draft at this point and is expected to face great resistance when legislators start discussing it Wednesday during an Insurance, Housing and Community Opportunity Subcommittee hearing.

Ron Phipps, president of The National Association of Realtors, a strong opponent of the bill, is scheduled to testify during the hearing.

He says NAR supports "reforms to strengthen the program" but "changes should not be made at consumers' expense by drastically impacting the affordability and availability of mortgage capital."

A higher down payment requirement would only increase "the number of creditworthy borrowers ineligible for home ownership and does little to reduce risk of default," he says.

Proponents of the bill say by having more skin in the game borrowers would be less likely to default, which would help improve FHA's finances and protect taxpayers.

Yeah, too bad they are a few years and some $700 billion late.

Why didn't legislators think of introducing this bill in say, 2004, when FHA was insuring mortgages for lenders who gave out loans with their eyes closed? Maybe it's because they were too busy pushing for the Zero Downpayment Act of 2004.

Ironically, on March 24 2004, members of a former housing subcommittee sat in the same room where this bill is scheduled to be discussed Wednesday, and talked about why they thought FHA should insure loans with no down payments.

This is a statement John Weicher, who was then Assistant Secretary for Housing and Federal Housing Commissioner at HUD, made on that day:

Under this new program, FHA will insure 100 percent of the cost to acquire the home for first-time home buyers. We would allow them to finance the full purchase price, as well as all of the closing costs. Potential home buyers would not have to make the minimum down payment of 3 percent that is required in our regular Home Mortgage Insurance Program.

Studies have consistently shown that the single biggest obstacle to homeownership for most families is the inability to come up with enough cash to meet down payment and closing costs. Many potential home buyers pay the equivalent of a monthly mortgage in rent, but are unable to save toward a down payment on a home. … This Administration is committed to helping all Americans address this barrier to homeownership. … We are proud of this effort, and we are proud of the results.

And he had plenty of other proud supporters. Here is the transcript if you're in the mood.

Read more: http://www.bankrate.com/financing/mortgages/fha-requirements-could-change/#ixzz1QFPBvJWn

Sellers: New Thinking To Make A Ro0m Pop

2011-05-13T14:08:00.006-04:00

Transforming a room from ho-hum to hip can be time consuming and expensive, especially if you don't hire an interior decorator. With a few ideas from top designers, here are some insider tips to try around your home for a quick makeover without breaking the bank.

Lighting. Found a wonderful chandelier you don't have a place for your foyer or dining room? Try it out in a bedroom to bring instant glamour and elegance.

Seating. Who says that all your dining room chairs have to match? If you have some antique chairs from your grandmother - or an estate sale - blend them at the same table with other styles - and even colors - for an instant eye-opening change to your dining room or eat-in kitchen.

Surprises. If your tableware is boring bone or bland white, splash things up by adding a few brightly-hued plates and bowls in your favorite, unexpected color. Colors will make settings glow!

Bathrooms. Turn up the hues in the bathroom to create not only a feeling of warmth, but interest as well. Change out towel colors, rug textures and few wall hangings of outdoor scenes to bring nature inside.
Don't forget to use these tips if you're selling a home. Staging with a few unexpected accents can make your home memorable to the buyers coming through on tours.

Is seller financing worth the premium price?

2011-05-13T14:00:00.003-04:00

By Tara-Nicholle Nelson
Inman News™

Question: My wife and I have recently entered into a contract to buy a beach house in Charleston, S.C. This is an owner-financing deal where the house has no liens. We are paying $785,000 for the house, with 10 percent down. I think we are paying 10 percent too much, as the market is still dropping in the Isle of Palms.

Do you see a bottom in pricing for this type of investment? We do plan on renting it out as much as possible. Anything in particular we should look out for?
--Roger

Answer: I know human nature is not to want to be predictable or fall into a clichéd stereotype -- at least here in America it is. We all want to be respected for our individual talents, style and preferences. But the fact is, Roger, almost all buyers think they paid too much for their home -- and especially buyers in today's market, which in many areas is still depreciating, as you've pointed out.

First, you must take into consideration that you are receiving seller financing, which often comes with a premium price and a premium interest rate payable to the seller. Why? Because the seller is taking on some level of risk by virtue of forgoing the possibility that a buyer who can pay the full price would come along and buy the place, allowing them to cash out.

And they are often doing so on the word of someone who couldn't qualify for a loan to buy the home otherwise -- either because they are credit-, income- or asset-impaired or, as may be your situation, because a mortgage lender requires 25 percent or 30 percent down on an income property, while you may be willing or able to put down only the 10 percent you mentioned.

Additionally, seller financing can favor the buyer in that many of the mortgag-qualifying hoops through which both the buyer and the property would have to jump are eliminated, as are many of the costs that accompany mortgage loans, like origination fees, doc fees, and the like.

That's a long way of saying that I do believe some premium price is acceptable for seller financing. What the premium is is negotiable, but if the market could bear a lower price for the home at the terms on which you're buying it, it seems that you would have negotiated that lower price upfront.

I can't predict what the bottom of your investment is, but I can give you a number of things to watch out for. Because there's no mortgage lender demanding it, many buyers of seller-financed properties forgo protections like home inspections, title searches and title insurance. Don't fall into this potentially costly trap. Make sure you get these items done, and that you obtain hazard insurance on the property, effective the date the transaction closes.

Also, I'd encourage you to have a real estate attorney work with you and the seller on the contract and the seller-financing documents, as well as to record them with the county recorder's office.

This should prevent any of the tragically unfunny funny business that occasionally happens with seller-financed properties, like the one where the seller goes out and takes on a bunch of new mortgages against the property, then defaults on them, pocketing the buyer's cash and leaving them to be evicted when the house forecloses. That's certainly a worst-case scenario, but recording your interests in the property publicly will avoid this and a myriad of lesser evils.

In terms of evaluating your investment, for all but the most seasoned rehabbers buying foreclosures at extreme discounts, I am discouraging investors from the flip mentality of trying to project out when they'll recoup their money and how much their return will be.

At this moment in time, in your situation, you should not buy at bizarrely inflated prices, but your focus should be much more on (a) planning to hold the property over the very long term, which is absolutely necessary to stack the decks against losing money on the deal, and (b) projecting out completely accurate and favorable cash flows from the property -- before you buy.

Talk with property managers and other rental property owners in the area to get a realistic sense for how frequently their homes are rented out, and at what rate. Build in easily forgotten line item expenses like local business income taxes (which are often charged to landlords of vacation homes, as many cities consider them to be businesses), insurance, property management, and age- and weather-related maintenance reserves.

Do that math and talk with your tax adviser before you remove contingencies or otherwise finalize the deal. And good luck!

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Am I ready to Buy a Home? Test for Readiness

2011-05-08T19:04:00.005-04:00

Simple test give you the answer if you are ready, just answer 'yes' or 'no' to each question below.

1. Do I have a current, reliable source of income?
2. Is my employment history strong for the past two to three years?
3. Is my job reliable?
4. Do I pay my bills on time?
5. Is my credit score not low ( above 640)?
6. Do I have few loans that are current or recently paid off that illustrate my creditworthiness and payment history?
7. Do I have a downpayment (20% of purchased price) to buy today?
8. Am I able to pay a monthly mortgage payment, property taxes and insurance and manage repairs and/or maintenance of the home? ( Ideally, having a savings cushion of 4 -6 month of living epenses is good planning)

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If you've answered yes to all of these questions, you are ready to start shopping for new home. Congratulations, it is time to call me and see that is your situation and what home fits your financinal picture.........

Crime statistics in Howard County Maryland

2011-05-08T12:08:00.003-04:00

Once I have been asked to provide crime statistics to the family with small kids moving in to the area. I made a research on line and found few helpful web sites.

1. Crime report ( Crime Reports). You can search the address and accidence by the address displayed around your searched area. This is very good because it's break down the crimes by categories and shows addresses of sex offenders. Also, you can create an alert when event /accident is registered you get the notification by email.

2. Crime statistics ( Crime Statistics). This web site give you visual map where you can click on the place and it gives you the summary of accidents occurred in that area

4 Commercial Investor Tips

2011-04-28T19:33:00.002-04:00

Emerging Trends in Real Estate 2011, an annual investor survey conducted by PricewaterhouseCoopers and the Urban Land Institute, offers these investors tips.

1. Lock in loans. Don’t make the mistake of waiting for loose credit that may be a long time coming. Interest rates are low but will inevitably increase.

2. Hold REIT shares. REITs are all about yields (forget appreciation) and a solid dividend in an uncertain environment. Even with recent REIT value run-ups of 28 percent in 2010, according to the National Association of Real Estate Investment Trusts, funds with high-quality assets should be less volatile than most stocks.

3. Buy land if you can afford to hold it. Developable land prices are cheap, although the wide bid-ask spread is still a challenge for buyers. Remember, says Rochelle, historically most of the big money is made in land plays.

4. Choose infill. Predicting the direction of new growth is tough, so central locations are somewhat lower-risk investments. Infill offers businesses a more diverse employment base, especially among younger workers who prefer urban living.

Source: Mitch Roschelle is U.S. real estate advisory practice leader for PwC, New York.

Below-the-Radar Short-Sale Issues

2011-04-28T19:30:00.001-04:00

You could end up having to pay those outstanding incidentals if you don't work out responsibility for the seller's lenders with buyers ahead of time.

Incidental fees. In short-sale transactions, the seller’s lender typically won’t pay many of the outstanding incidental costs at closing such as title and survey fees, unpaid water bills, and overnight document delivery fees. So, you could end up having to pay those if you don’t work out responsibility for them with buyers ahead of time.

Home inspections. Given the uncertainty of obtaining the lender’s OK, it’s not unusual for buyers to want to delay ordering the home inspection until after lender approval. But such a delay can hurt buyers if the inspection turns up something they don’t like. They need to be comfortable with the condition of the house before seeking lender approval for the deal.

Contingencies. Buyers face the same contingency issues that they do in any other transaction. They need to be sure they can get financing before asking the seller’s lender to approve the deal; otherwise, after their lengthy wait for the seller’s lender, the deal might still collapse.

Client communications. During the approval process, weeks can go by with no contact from the seller’s lender. You should remain in regular contact with buyers to tell them what you’re doing even when you’re hearing nothing from the lender. If the lender eventually says no to the deal, your clients might wonder if you did all you could during the process. By checking in regularly, you signal to buyers that you’re on the job.

Distressed HOAs. Look carefully at the financial condition of the home owners’ association because lenders can throw your buyer for a loop if they refuse to make a loan for a home with a distressed HOA. From lenders’ perspective, there’s a risk of deferred maintenance and repairs and a risk of future dues assessment increases. Review the HOA’s financials with an accounting specialist, and look for elevated spending by the HOA on attorney fees.

Source: Kevin Coyne, The Coyne Law Firm, Oakbrook Terrace, Ill

Spring 2011 Market Update

2011-04-27T21:00:00.003-04:00

6 Reasons Overpricing Does Not Pay

2011-04-25T15:16:00.003-04:00

1. Most buyer activity comes within the first 30 days a home is on the market. Overpricing means you’ll miss that activity by discouraging qualified buyers who’ve seen similar homes for less.

2. A too-high price eliminates a whole class of buyers. Many buyers know just how high they can go and don’t even look at homes priced above their price limit.

3. Overpricing helps sell other, more competitively priced homes first. Your home’s over-market listing price makes them look better.

4. You waste time and suffer added weeks or months of stress as your overpriced home languishes on the market, preventinh you from moving on.

5. Your home may eventually be seen as “ stale inventory,” suggesting structural or mechanical shortcomings (although in realty, none may exist), even after you’ve lowered your price. A further price reduction, below true market value, may be needed to sell your home.

6. If you do get an offer, the contract may fall through because the appraisal of the buyer’s lender comes in too low. The buyer may not be able to borrow enough, or come up with enough cash to proceed with closing.

Price your home right -inside tips for serious sellers

2011-04-08T19:17:00.017-04:00

Here are the factors we'll consider to arrive at the right listing price for your home:
1. Recent sales. In the fast changing market, using sales within the very recent past is imperative. What a property sold for last year-even six month ago- is just old news.

2. True comparables. We compare your property with similar, nearby properties called comparables, or comps.
Using true comps is key to setting the right price. We'll compare apples to apples looking at homes that are alike in terms of amenities and condition and also considering whether the comp is a distressed sale.

3. Expired. We'll also check prices of 'exprired' (properties whose listing contract ran out without a sale) and 'withdrawn from market' comparable properties. These properties may have been overpriced and the market indicated the listing price was higher than buyers are willing to pay.

4. Pending sales. When price information is available, we may use pending sales (properties under contract but not yet settled or closed), because these properties offer a trend indicator about what price active sellers and buyers are agreeing, right now, is the right price.

5. Active listings. Only closed sales truly reflect what buyers in today's market will pay. What other sellers are asking has little relation to the value of your property. Using other listings as a guide, however, is a smart way to position your property to beat the competition to the right price and great terms.

6. Appraisal. Although a seller-paid appraisal is often unnecessary, it can be an effective strategy in a situation where the seller wants to list as 'being sold under appraisal' to position a property as distinct from the competition in the area, especially where many similar properties are already for sale.

7. Online valuation. Home valuation websites that provide instant price estimates tend to be an unreliable guide to the right price. At best, these valuations give a ballpark one-size-fits-all estimate. As your area specialists, we know what your property is really worth in today's market.

8. New price. If your home has been on the market for two to four weeks, but has gotten to no traffic- or if there has been traffic, but no offers-this indicates the market believes your home is overpriced. What's more, since it was listed, other homes may have come on the market with better positioned prices. Buttom line: Time for a new price.

If you have any questions about setting the right price, call Tatyana!

5 Tax Tips, Tricks and Traps for Homeowners

2011-03-08T09:11:00.004-05:00

Ask a roomful of homeowners what's so great about owning versus renting, and you'll hear them holler in unison: "the tax deductions!" And it's true – homeowners who itemize their taxes are able to deduct 100% of their mortgage interest and property taxes from their income tax returns.

That means that if you're in a 28% tax bracket, Uncle Sam effectively subsidizes about a third of your borrowing costs or more, making your home more affordable or allowing you to buy a larger home than you could have otherwise. Also, big chunks of your closing costs are tax deductible, and hundreds of thousands of dollars of any profit (or capital gains) that you realize when you sell your home are exempt from income taxes.

At tax time, it's critical to know what you're entitled to, so you can claim it. So, here are five essential need-to-knows about home-related income tax tips to help you get the most tax-reducing bang out of your home-owning buck – and to avoid hefty home ownership-related tax traps.

1. You Have to Itemize Your Return to Claim Your Deductions

During the recent debate on Capitol Hill about whether the mortgage interest deduction should be eliminated (it won't be, not anytime soon), it came out that nearly 40% of homeowners lose out on their major tax advantages every year when they fail to itemize their income taxes. If you own a home and otherwise have a fairly simple return, it might be tempting just to take the standard deduction – and if your mortgage, property taxes and income are low enough, the standard deduction might outweigh your homeowners' deductions. But you'll never know if you're losing out on the tax advantages of itemizing unless you try; before you grab a pen and start filling in that 1040-EZ grab those forms from your mortgage company and answer the questions on tax software like TurboTax, which will automatically do the math on whether itemizing or taking the standard deduction will result in the lowest tax bill – or the highest tax refund – for you.

2. Plan Ahead and Be Strategic When Taking a Home Office Deduction

According to the Small Business Administration, the average home office deduction is $3,686 – multiply that by your tax bracket – 15%, 20%, 30% or whatever it is, and that's what you'll save on your taxes by writing off your home office. Know, though, that the space you designate as your home office cannot be exempted from capital gains tax when you sell your home later. The $250,000 (single)/ $500,000 (married filing jointly) income tax exemption for capital gains is only good on your personal residence, after all – not including any space in your home you've claimed as your tax-advantaged office. If you foresee selling your home for much more than you bought it in the future, near or far, discuss this with your tax preparer to see if the few hundred bucks you save is worth the capital gains complication later.

3. Tax Relief for Loan Modifications, Short Sales and Foreclosures Is Only Around Through 2012

While the long-term housing outlook is beginning to look up, 2011 is projected to be the peak year for foreclosures during this market cycle. Distressed homeowners who are on the brink of a short sale, loan modification or foreclosure should be aware that normally, any mortgage balance that is wiped out by one of these outcomes is taxed as what the IRS calls Cancellation of Debt Income, or CODI.

Under the Mortgage Debt Forgiveness Relief Act of 2007, the IRS is currently not charging income taxes on CODI incurred through a loan mod, short sale or foreclosure on most primary residences through 2012. But right now, banks are taking many months, or even years, to work out mortgages in all of these ways; the average foreclosure in New York state right now occurs only after 22 months of missed mortgage payments. If you foresee any of these outcomes in your future, don't put things off. Do what you can to get to closure on your distressed home and loan, ASAP, while you won't have income taxes to add as the insult on top of your significant housing injury.

4. Project the Income Tax Consequences of a Refinance or Property Tax Appeal

Homeowners everywhere are working on applying for a lower property tax bill on the basis of the last few years' decline in their home's value. Those who have equity have flocked en masse to refinance their 7% home loans into the 4% to 5% rates of the last few months. These strategies offer some of the heftiest household savings out there for the corresponding investment in time and money they take. But here's a caveat for savvy homeowners who slash these costs: remember that property taxes and mortgage interest, the very costs you're minimizing, are also the basis for the major tax benefits of being a homeowner. So plan ahead for your income tax deductions to go down along with your taxes and interest.

5. Don't Forget Those Closing Costs

If you bought or refinanced your home in 2010, you may be so focused on your mortgage interest and property tax deductions that you forget all about your closing costs. Any origination fees or discount points that were paid to your mortgage lender at closing are tax deductible on your 2010 return, get this – even if the seller paid your closing costs. If you can't figure out exactly what you paid, look for your HUD-1 settlement statement, that legal sized paper full of line item credits and debits that you should have received from your escrow provider or title attorney at, or just after, closing. Can't find it? Drop your real estate agent or mortgage broker an email; they can usually get a copy to you quickly.

4 Savvy, Smart, Sensible Tips To Get Your Home Sold

2011-02-26T12:55:00.010-05:00

1. Price Aggressivly. If you are eager to get your home sold, you need action. To get action for your property, you need a price that is better than good. Price to sell. Set a competitive price that motivates-maybe lower than you'd like but better than the majority of your competition. with a competitive price, you will see action, and likely lots of it-possibly even multiple bids that can bring offer prices above your listing price. Call us for details.

2. Organize, clean, stage. Before you list your home for sale, go through it from top to bottom and organize every nook and cranny. Attractive homes attract buyers. If you don't have room for items, store, sell or donate them. After this all-out organization task, clean every space in your home. Spic and span sells. After the clutter and dirt are cleared away, stage to entice buyers. Set the table, put out flowers, set up a checkers game on the family room coffee table. Finally, get an inspection and fix problems that could kill a sale.

3. Be flexible. Don't be discouraged by buyers looking for the moon. Don't ignore an offer. Every offer deserves a counteroffer. Once a buyer " falls for your home", price and terms are simply negotiation items. We'll help you negotiate effectively to get the price you want or need by coming up with creative ways to counteroffer. if you have flexibility in your timeline( when you need to move, etc.), be sure to let us know too!

4. Work with a pro. Selling strategy is what we are all about. When you choose to work with us, we'll help you sell quickly for the best price. We'll work with you every step of the selling process, answering your questions and navigating the myriad of details. Our customer service is beyond your expectations because we have the experience to navigate today's real estate market. If you are thinking of selling your home, collecting information or event ready to list, please contact us at any time. We're here to help you achieve your real estate goals!

LagretRealEstate.com
Office 443-420-7235
Mobile 443-527-4375

5 Stages of Buying Your First Home

2011-02-22T10:15:00.003-05:00

Buying a home is not a discrete event; it's a process - a sequence of events that happens over time, sometimes over as long as several months or even years! While general guides to buying a home are a dime a dozen, I'm excited to share with you some insider secrets you may not have heard elsewhere - one for each stage involved in buying a home. Here's to helping you make the best decisions at every phase of your homebuying process!

Stage One: Deciding Whether It's The Right Time to Buy.
Insider Secret: The market is the least important factor you should consider when deciding whether and when to buy a home.
Why: Everyone knows affordability is at an all-time high. Home prices are low, and so are interest rates. But trying to time the market is a fool's errand; many who get caught up in that game of trying to make sure they buy at the absolute bottom will end up losing out on very, very favorable conditions.

Beyond that, the most important considerations when deciding whether and when you should buy a home are personal, not market driven. On today's market, it only makes sense to buy a place if it's going to be sustainable and work for you for at least the next 4-5 years [if your town's real estate market has been fairly recession-proof] or 7-10 years [if the housing/foreclosure crisis has hit your area pretty hard].

Against this "smart holding period" backdrop, smart buyers decide to buy when it makes sense for:

•their life plans (i.e., they are comfortable making the commitment to live in the same town, and the commitment to )
•their family plans (i.e., whether they plan to get married, have children or empty their nest in the time they plan to own the home - and the implications of these plans on their space needs and location priorities)
•their career plans (including, but not limited to: whether they have job or income security, whether they feel they will be working in the same area for the foreseeable future, and whether they want to work less or start their own business in the months or years to come)
•their financial plans (including foreseeable changes in income and expenses, e.g., kids going to college or making partner at the firm).

Stage Two: Getting Pre-Approved.
Insider Secret: Working with a mortgage broker referred by your real estate broker or agent may save you money.
Why: Bolstered by the real-life stories of a couple of bad apples, TV pundits and some consumer advocates have spun the tale of a real estate industry cartel, whereby sinister agents hook unsuspecting buyers up with shady mortgage brokers, who place them in crappy loans and kick back some bucks to the agent. I'm here to tell you, in my experience, the opposite is true the vast majority of the time.

When you work with a mortgage broker who has a strong track record of helping your real estate agent's clients out, you end up in a best of all worlds situation, nine times out of ten. First off, your agent will take you much more seriously once a mortgage broker they know and trust has run your credit, checked your income and approved you for a loan, as well as communicated with your real estate pro about your qualifications and what you can afford. Secondly, your agent can help you communicate with your mortgage broker, sometimes helping get past appraisal glitches or facilitating other workarounds, as they come up. Third, you get the assurance of working with a mortgage pro who has been vetted and vouched for by someone you not only trust, but someone who can verify that the mortgage broker has the ability to get transactions closed in the timely manner required of today's real estate sales contract. Otherwise, you may end up working with a competent mortgage broker who has a great track record when it comes to refinancing, but can't keep up with the pace and common obstacles to getting a home financed in the context of a sale.

On top of that, sometimes the relationship can help you negotiate out of a couple of line item loan fees (if your particular mortgage rep has the power to get them down at all), if push comes to shove and cash is tight to close the deal. Assuming you are working with a real estate pro you really trust, working with a mortgage broker they trust can save you, rather than cost you, money.

Stage Three: House Hunting
Insider Secret: "Distressed" doesn't always equal "discounted" - in some cases, a "regular" sale can be a deeper deal.
Why: Short sales and foreclosures have grown to comprise roughly 30 percent of the homes sold on today's market, even higher in some areas. The average sale price of foreclosed homes was 32% lower than the average sale price of non-foreclosed homes, at last count. However, it's not always the case that foreclosed homes or short sales - homes which are being sold for less than what the seller owes on their mortgage(s) - offer the buyer a fabulous discount.

Mortgage servicers and asset managers who make decisions about distressed properties are on the hook to their investors to recoup as close as possible to the current fair market value of every home they sell. Some banks even have a general rule of rejecting offers more than 10 percent or so below the home's list price, preferring instead to reduce the price by that amount and put the home back on the open market to see if any new buyers are activated by the price reduction to make an offer better than the lowball offer that was initially put on the table. On short sales, the bank is trying to get as close as possible to recovering what the seller owes - and may or may not be concerned with what the fair market value of the home is. (Nine times out of ten, there will be a big gap between fair market value and the seller's outstanding mortgage balance. If there wasn't, the seller wouldn't need to do a short sale!)

With so many distressed properties and homes with depressed values on the market, in many areas, the individual, non-distressed home sellers who are putting their homes up for sale right now are those who are very motivated to sell. Further, they are more likely to be flexible with you on everything that is negotiable, from contingency and escrow periods, to price, to repairs and included items.

Also, individual sellers can be emotionally motivated to sell to move on with their lives, get into their bigger (or smaller) house, or move on to their next job; banks, on the other hand, aren't people (!), so lack that emotional sense of urgency to get the properties sold, no matter how urgently you may think they should be trying to get rid of the foreclosed properties they own. (If you've heard the old advice that banks don't want to be in the home-owning business, I can tell you this. That is true, in a very general sense, but now they are and will be - for a long time to come. They have no emotions, have no urgent need to sell or move, and are not willing to give houses away at pennies on the dollar to get out of it, no matter what those infomercial folks say.)

Long story short: you can sometimes negotiate a better deal with an individual seller on a "regular" sale than with a bank on a distressed home sale. So, don't limit your house hunt to foreclosures and short sales, if you're looking for a good deal on your home.

Stage Four: Negotiations
Insider Secret: Your family and friends can cause you to lose your dream home.
Why: With so much information on the web and the news every day about the recession and the buyer's market, everyone seems to be an armchair economist/real estate savant. But much of that news is national and based on medians, averages and trends. That is, it might not necessarily apply to every home on the market in every city, and more importantly, it might have nothing to do with "your" particular home.

When I was a little girl, my best friend's grandfather would very carefully hand each of us a quarter, always doling it out with the sage admonition: "Don't spend it all in one place." We'd always smile, look at each other, then go ask our Moms for ten bucks apiece. In the same vein, people who are not currently in the market for a home have no idea what an individual home should "go for." If you tell your parents, church pals, or colleagues at work the blow-by-blow details of your offer, counteroffers, etc., you should expect to hear things like, "Oh, you're paying way too much!", "I think you should push them down another $10K," or "You know, you're in a better bargaining position than that." And sometimes, taking that sort of advice will end up blowing your deal. Work with your trusty real estate broker or agent to develop a smart strategy - with their experience in your local market - about what price and terms to offer. Then keep working with them to manage and maintain realistic expectations as you proceed through negotiating the contract to buy your home.

Stage Five: Escrow, Inspections and Underwriting
Insider Secret: It's critical that you attend your home inspections.
Why: When it comes to inspections, many first-time buyers expect that a home will either pass or fail. Except in a few jurisdictions where the government imposes certain condition requirements for a home to be sold, the home inspection is more about educating you, the buyer, as to the details and nuances of the home's condition than about seeing if the place hits a particular target for "good" or "bad" condition.

Home inspectors don't just look for things that need fixing, they also look to understand the home's systems and features, as well as to point out areas that will require your ongoing maintenance, highlight emergency shutoffs and other need-to-knows, and indicating where you should have specialists further inspect items of concern. Many home inspectors create vivid, detailed electronic reports - some, complete with color photos. But that's not enough!

If you're physically onsite at the home during the inspections, the inspector can physically show you the shutoffs for water, gas and electric - and how to use them. They can also point out, in person, any things that need repair, and give you some tips for maintaining the place in tip-top shape. Also, in many states, the general home inspector is legally prohibited (vs. the pest, roof or other "specialty" inspectors) from issuing a written quote or bid for repairs, to avoid a conflict of interest where they'd try to fabricate flaws in the home to get the repair job. However, the repair costs are one of the most important things a smart buyer wants to know!

If you show up, many inspectors will give you a rough range it would cost you to do various repairs, or otherwise indicate to you whether the needed repairs are "big deal" or "$10 home improvement store" fixes; some will even give you a few references to contractors they trust.

All around, you'll get much more of the detailed information you need to know whether and how to move forward with the transaction if you should up in person to the home inspections, rather than just waiting for a copy of the report to come to your email.

SAFE Act

2011-02-22T10:03:00.003-05:00

Is it true that a seller can no longer offer owner financing to a buyer?

The answer is “It depends.” In 2008 the Secure and Fair
Enforcement for Mortgage Licensing Act, commonly referred to as the SAFE
Act, was enacted. The SAFE Act requires licensing or registration of loan
originators. This legislation led to a variety of activities related to
implementation, including indirectly imposing requirements on seller
financing and legislative and regulatory activity at the state level.
The SAFE Act was intended to enhance consumer protection and reduce
fraud.

The law required states to establish loan originator licensing
requirements with respect to residential mortgage loans made primarily for
personal, family or household use. Loan originators who are employees of
banks are subject to less onerous registration requirements. All states,
including Maryland, have enacted legislation requiring licensing through the
Nationwide Mortgage Licensing System and Registry (NMLSR).

The SAFE Act does not exempt individuals who choose to finance the sale of
residential property they own (often referred to as seller financing), but HUD
guidelines and its proposed rule do exempt from licensing requirements
individuals selling their own residence.

The SAFE Act exempts from licensing:

1. Homeowners selling and financing their own residence. HUD does not
limit this exemption to a principal residence, so the sale of a vacation
home with seller financing is also exempt.
2. Homeowners who are real estate licensees and are selling their residence
with seller financing, to the extent they are performing real estate
brokerage activities, not lending activities compensated by a lender. This
means that the vast majority of REALTORS® are NOT required to be
licensed as loan originators.
3. Real estate owners selling property to someone who intends to use the
property as a rental. Investors selling non-residential property, with seller
financing, are also exempt. These categories are exempt because the
financing must be primarily for personal, family, or household use to
trigger the licensing requirements.

Now let’s look at who’s not exempt:
1. If you own real estate other than your own home and want to provide
seller financing for the sale of the property to a buyer who plans to use the
property as their residence, you are not exempt.
2. If you provide financing for a property you do not own, you are not
exempt.
In other words, anyone who wants to provide seller financing for a residential
property to a buyer who will use the property for personal, family or household
uses is not exempt from the loan origination licensing requirements under the
SAFE Act, unless they are selling their own home.

In response to the SAFE Act, the 2009 Maryland General Assembly revised
the State’s mortgage lender and mortgage loan originator laws. Chapter 4 of
the Acts of 2009: 1) altered the licensing requirements, initial license terms,
and renewal license terms for mortgage lenders and mortgage loan originators;
2) required applicants and licensees to submit certain information and fees to
the Nationwide Multistate Licensing System and Registry (NMLSR); 3)
increased civil penalties for violations of the mortgage lender and mortgage
loan originator laws; and 4) authorized the Commissioner of Financial
Regulation to issue interim mortgage loan originator licenses and affiliated
insurance producer/mortgage loan originator licenses.
Chapter 4 also requires an applicant for a mortgage lender or mortgage loan
originator license to provide the NMLSR with fingerprints for a criminal
history background check and established pre-licensing education,
pre-licensing testing, and surety bond requirements for mortgage loan
originators

4 Traps of Foreclosure Buyers Need to Know

2011-01-25T08:58:00.001-05:00

Interest in buying a foreclosed home is on the rise, but so are concerns about the risk involved in the process. In a December survey, Trulia found that 49 percent of Americans were at least somewhat likely to consider buying a foreclosure, up from 45 percent in May 2010. But the number of US adults who believed there are disadvantages to buying foreclosures had also increased, from 78 percent to 81 percent over the same time frame. Among those folks who had qualms about purchasing a foreclosure, the top concerns were:

•that buying a foreclosure might involve hidden costs,
•that the buying process itself is risky, and
•that the home might continue to lose value, after escrow closes.

While there certainly are risks that run with buying a foreclosed home, the most risky way to do it is also the least common method: at the foreclosure auction itself. Auction buyers often don't have the opportunity to fully vet the foreclosure to ensure that they are receiving clear title and/or to make sure they're not getting a lemon. With that said, most foreclosures are resold not at the foreclosure auction, but as an REO (short for Real Estate Owned - by the bank), listed by a real estate broker on the Multiple Listing Service and on Trulia!

When you buy an REO in this way, you have lots of opportunities to use some tricks of the trade, so to speak, to avoid some of the traps you may fear. Here are my Top 4 Tricks and Traps for Foreclosure Buyers:

1. As-is means as-is, period. (Most of the time.) Banks have very little interest, inclination or even the logistically necessary resources to execute repairs on your home. Many of these homes are managed by an asset management company in another state, and may not even have a local person besides the agent who can handle large repairs. Generally speaking, bank-owned homes are sold on a very strict "as-is, where-is" basis, which just means that you should expect to take possession of it, if you buy it, in exactly the position and location it is, no matter how defective. Do not walk into a viewing of a foreclosed home, notice how the plumbing is all ripped out of the wall, and make an offer for it, assuming you'll be able to get the bank to "fix" the issue later. Usually, if the bank is willing to do any repairs to a foreclosed home, they do so, on the advice of the listing agent, prior to the home being listed.

Out of hundreds of foreclosure transactions I have personally been involved in, I have seen exactly four where the bank did agree to do some level of repairs at a buyer's request. Every one of those times, the repair was to fix a health-and-safety endangering property defect, like a gas-leak or an electrical fritz. And every one of those times, the property defect was highly non-obvious - not something even a diligent buyer could have detected visually prior to making an offer. Maybe another few times I've seen a bank agree to a small price reduction due to surprising condition problems. And dozens of times, I've seen transactions fall apart or buyers take on the property’s repair costs, when they request repair credits, price reductions or actual repairs from the ban seller.

If a foreclosure you're considering has obvious property damage, have your contractor stop by with you or gather whatever information you need to get as comfortable as possible with your offer price, assuming that the bank will not be chipping anything in for repairs, before you make the offer.

2. The bank speaks no evil. When it comes to real estate disclosures, the fact is, the bank speaks not much of anything! Many states exempt banks and other types of corporate homeowners from making substantive disclosures about the condition of the property. Even in jurisdictions where the bank is not legally exempt, most banks will simply write across the required disclosures something to the effect that the bank has no knowledge of the property's condition. (Before you protest with a "that's not fair!!" keep in mind that the bank never lived in the property, so most often truly does have no idea of any important facts or details about its condition or location, the things an average home seller would be required to disclose.)

Even in a normal transaction, it behooves a buyer to be thorough in having the property inspected and meticulous about reviewing the resulting inspection reports. But buying a foreclosure ups even that ante, as you have no seller disclosures to highlight particular problems you should have looked at, and none of the usual legal recourse you would have if a “regular” seller made incomplete disclosures. Get a property inspection. A pest inspection. A roof inspection. A sewer line inspection. A pool inspection, if you have a pool and care about its condition.

Yes - all these inspections cost money, but the drama and thousands each of them can save you is well worth it. And read your state’s buyer inspection advisory or similar document (ask your agent), just to make sure you’re aware of all the inspections that are available to you, and work with your agent to determine which ones make sense, and which are not appropriate.

Some insider tips:

•Vacant foreclosures often have their utilities disconnected. Work with your agent to make sure the utilities get turned on - even for a single day - so that your property inspector can run the water taps, test the stove and dishwasher, see if the water heater and electrical outlets work, and so forth.

•If appliances are there, the bank will probably leave them there, even though they may not have technical “legal” ownership of them, so they may not be included in the contract, like in a "normal" home sale.•However, the bank will not give you any sort of warranty on appliances, so try to obtain any warranty coverage you want or need elsewhere - from a home warranty company or, potentially, the original manufacturer/retailer.

3. The contract terms, they are a changin'. One thing squarely in the wheelhouses of local real estate pros are local market standard practices. From negotiating practices to which party pays which closing costs, every market is different, and experienced local agents are experts on this information. If you’re buying a foreclosure, though, the bank will often require you to use it’s own purchase contract, rather than the more commonly used state forms. Many times, this is done to advise the buyer of the bank’s refusal to make substantive disclosures (see above) and to change some of the normal practices for your area to the bank’s standard practices.

For instance, if you are buying a home in a contingency state, where you would usually have to sign a document proactively releasing contingencies, the bank’s contract will probably change that, so that your transaction operates on an objection period. In "objection" based transactions, you have a certain period of time in which you must either speak up about your concerns with the property and/or cancel the deal, or you will automatically be presumed to be moving forward with the deal and your deposit money will be forfeited if you change your mind after that date.

If you’ve been making offers on non-foreclosures on the standard contract form, or you’ve bought homes before and think you know the drill, please - I implore you - READ every word of the contract you sign when you buy a home from the bank, and ask your broker, agent or attorney to explain anything that doesn’t make sense.

4. Expect the unexpected. When you buy a foreclosure, you might end up working with the bank’s escrow company, instead of a company you or your agent selects. And the bank's escrow provider might be slow or disorganized. C’est la vie. The bank might rush you for your deposit money, but take their own sweet time coming up with the necessary signatures on their end to close the deal. Par for the course. You might expect that the bank would be desperate for buyers, and instead find out that there are 20 offers on the same REO. Or, you might be the only offer and still get your aggressively low (but still reasonable) offer rejected, only to have the bank reduce the list price of the home to the same price of your offer! (They often want to see if exposing it to other buyers at the new, lower list price might generate more interest and higher offers.)

When you’re buying a foreclosure, expect glitches, expect your calendar to be derailed, expect the bank to be inflexible and possibly even unreasonable. It’s not overkill to ask your broker or agent to brief you on the common complications they see in REO transactions. Having realistic expectations may keep you from pulling your hair out. And if the transaction turns out to run smooth as silk? You’ll be pleasantly surprised.

Grant Money (up to $7.5k) for a downpayment for the First-time buyers available in 2011

2011-01-11T10:04:00.009-05:00

Good news for the first time buyers!
The borrowers get up to $25000.00 towards the downpayment that is forgivable (don’t have to pay it back!)

-can not have owned a home within the past 3 years
-must have 640 credit score
-must take a short homebuyers class
-must be their primary residence, no rental properties
-income restriction similar to grant

Call Tatyana to get them before they run out....

What To Ask Your Home Inspector

2010-12-25T12:35:00.016-05:00

If you have not bought a home recently, you may not familiar with todays's home-inspection process. Here are some important questions and answers to concider:

1. Why do I need a home inspections?
Home inspection allows you to determine through expert examination whether there are flaws or problems in a home you are about to purchase. A smart buyer will always consider a home inspection contingency in their home purchase offer.
2.When do I call a home inspection? As soon as you have a signed purchase offer on a home, call to schedule a professional home inspection. Your purchase agreement may specify an inspection deadline.
3. What does a home inspector check in a home?
The inspection will cover the conditiona of the home's teating system, Central Air Conditioning system, plumbing and elevtrical systems, roof, attic and visible insulation, walls, ceilings, floors, windows and doors, foundation, basement and structural components.
4. What issues will a home inspection not cover?
If yo have concerns about lead, radon, mold, asbestos or other issues, be prepared to hire a separate specialty-licensed inspector who inspects for these issues. Your general home inspector can recommend local professionals.
5. How do I find a qualified home inspector? consider and inspector that is member of ASHI -the American Society of Home Inspectors. Visit their website at www.TinyURL.com/FindAnInspector. Depending on local ordinances, your inspector may need to be licensed.
6.Will I be able to attend the inspection? It's a good idea to shadow your inspector and ask questions along the way to learn more about the home.
7. How long will a home inspection take?
A home inspection can run two to three hours, but varies depending on home size, complexity and characteristics.
8.What will the inspection cost? Home inspection costs vary widely, but be prepared to budget several hundred dollars for a thorough inspection.
9.What type of inspection report do inspectors provide and will I get a copy?
Prior to inspection, ask to see other inspection reports to get a feel for style, thoroughness and terminology. Many inspectors provide reports within 24 hours of inspection.
10. What if the inspector finds problems with the home that need to be fixed?
Your Real Estate agent should advise you whether the home seller should make the repairs before purchase or be asked for a monetary credit to fix repairs after you move in. the home inspection clause in your home purchase contract may allow you to cancel the purchase and find another home to buy if the home repairs are serious or expensive and you do not want to take on the responsibility of that home.

Which Insurance Do You Need?

2010-12-25T11:27:00.007-05:00

Home buyers are sometimes surprised to find out there's more than one type of home-related insurance. Here are the more common types of insurance products a home buyer is likely to encounter:

► Homeowners Insurance: Also called "hazard insurance"; it covers the dwelling and its contents for damage or loss resulting from events such as fire, wind, hail and theft. In most cases, it also protects the owner against claims by anyone injured on the property. Most homeowners’ insurance policies specifically exclude flood damage and limit the amount of coverage for items such as jewelry, antiques and collectibles. Additional "rider" policies may be purchased for items that exceed the maximum values of standard policy.

► Private Mortgage Insurance (PMI): Typically required by lenders to protect against default on loans for which the down payment is less than 20%. Usually, the PMI premium is paid a year in advanced at the settlement/closing, then monthly to the mortgage paydown reaches the 22% threshold (Under certain conditions, homeowner can request PMI cancelation when their equity reaches 20%)

►Title Insurance: Often required by lenders at the buyer's expense, title insurance protects the lender's interests against losses arising from claims on the property due to a defect in the title. Some buyers purchase title policies to protect their own interests, as well, should a claim on the home arise.

► Credit Life Insurance: Also called "mortgage life", this insurance pays off the remaining mortgage loan balance in the event the borrower dies due to reasons specified in the policy.

►Flood Insurance: Usually required by the lender if the property located within an area subject to periodic flooding. Home buyers may be able to obtain flood insurance through the National Flood Insurance Program (NFIP).
For specific insurance questions, contact your local insurance agent or broker.....

Experts disagree on housing recovery

2010-12-16T14:50:00.001-05:00

Foreclosures, jobs to impact prices into 2011
Dian Hymer Inman News™

The National Association of Realtors (NAR) predicted the housing market would improve by the end of 2010. In September 2010, Lawrence Yun, NAR's chief economist, said that he expected the housing recovery to be "slow and gradual because of lingering economic uncertainty."

The 2010 housing market has been characterized by lower sales volume than a year ago. However, the median price increased 0.08 percent in August from a year ago. The number of homes sold nationally in August increased 7.6 percent from July, 19 percent below the August 2009 level.

August closings reflect sales made in April when the homebuyer tax credit was still available. We could see lower sales volume and median sale prices moving forward. This will vary from one area to the next.

Real estate is a localized business. In California, home sales for 2010 are predicted to rise 2 percent from the 2009 level. The median sale price is expected to increase 11.5 percent from a year ago to $306,500 and another 2 percent in 2011, according to the California Association of Realtors. The state's median sale price was $522,700 in 2005.

Research by First American CoreLogic indicates that 24 percent, or more than 11.3 million homeowners, have negative equity. Negative equity occurs when the unpaid mortgage balance exceeds the market value of the property. According to CoreLogic, homeowners with negative equity are unlikely to reach positive equity until 2015 or early 2016.

Foreclosures are one of the factors putting brakes on a housing market recovery. According to NAR, distressed sales accounted for 34 percent of homes sold in August, up from 32 percent in July and 31 percent in August 2009. Foreclosures will continue to impact the housing market in 2011.

According to RealtyTrac Inc., a foreclosure data company, banks took back 816,000 homes during the first nine months of 2010. Complicating the picture is that many mortgage lenders recently put a freeze on foreclosures to review documentation to make sure they hadn't cut corners when they evicted homeowners.

Some experts think the stall in marketing and completing sales of foreclosed properties will have little impact on the housing market. Others think that if the freeze lasts for months, it will have a negative impact on home prices -- pushing sales scheduled to close in 2010 into next year and making it impossible for some properties to be ready for the spring 2011 market. Already, some lenders have resumed processing foreclosures.

HOUSE HUNTING TIP: A recent nationwide survey done by Fannie Mae revealed that most Americans think the housing market has hit bottom. Some 67 percent believe that housing is a safe investment. Most consumers think that it's still a buyer's market. However, they are taking a more cautious approach to homebuying.

Some analysts think home prices could decline another 15 to 20 percent before stabilizing. Bill Wheaton, an economist at the Massachusetts Institute of Technology's Center for Real Estate, disagrees. He thinks the housing market will make a strong comeback and demand will return to pre-recession levels in 2011.

During a housing recession, builders stop building new homes. The Census Bureau reported that the number of new-home starts fell from 1.7 million in 2006 to less than half that amount in 2009. Wheaton expects the unsold inventory will be sold or occupied by 2013, and that it will take a long time for construction to meet demand. This could put upward pressure on home prices. Construction will provide jobs, which will have a positive impact on the overall economy.

No one knows for sure when the housing market will turn around or how aggressive the recovery will be. It's impossible to time the market. If you need to sell, you may do better selling sooner rather than later, depending on your local market.

THE CLOSING: Buyers should buy for the long term and below their means.

Source

В США объявили раздачу бесплатной земли

2010-11-30T11:15:00.003-05:00

По меньшей мере в семи населенных пунктах страны можно получить бесплатный участок земли. Эта инициатива распространяется главным образом на граждан США – но, возможно, для иностранцев будут сделаны исключения.

Малые города США страдают от оттока жителей в города большие. Некоторые махнули на происходящее рукой, другие «стоят до последнего» и бесплатно раздают свои земли в попытке стимулировать приток населения.

Происходящее напоминает XIX век, когда в США был принят так называемый «Хомстед акт». По условиям этого закона, получить бесплатную землю мог любой человек, достигший 21 года и являвшийся главой семьи (или же одинокий). Получить землю могли как женщина, так и бывший раб, а также иностранец, выразивший желание стать гражданином США.

Телеканал CNBC составил список из семи населенных пунктов, в которых и по сей день можно получить бесплатную землю.

Марн, штат Айова.

В конце XX века население городка начало стремительно сокращаться и к настоящему моменту составляет порядка 149 человек. В попытке вернуть городу привлекательность власти выделили четыре бесплатных участка. Три предназначены под жилую застройку, один – под коммерческую. На строительство дома можно получить грант Агентства по развитию сельской местности, а также $10 тысяч из средств Совета по планированию юго-запада Айовы.

Для того чтобы получить бесплатную землю в Марне, необходимо предоставить подробный план дома, который на ней появится. Возбраняется ставить на участке трейлерные дома, а также разводить скот или лошадей.

Нью-Ричленд, штат Миннесота

Население городка составляет порядка 1 200 человек. На северной окраине города предлагается бесплатный участок земли под застройку жильем. Объект должен быть построен в течение года.

Получателю земли необходимо оплачивать услуги, предоставляемые городом (водоснабжение, канализация, уборка улиц). Их совокупная стоимость достигает $25 тысяч. Однако для успешных кандидатов эта сумма снижается до $14 тысяч, которые можно выплачивать в течение 15 лет вместе с налогами на недвижимость.

Штат Канзас

В штате Канзас предлагается столько бесплатной земли, что для обработки и хранения этой информации был сделан отдельный онлайн-портал под названием Kansas Free Land. Он содержит ссылки на более чем 12 населенных пунктов, от Херндона с населением 124 человека до Уилсона с населением 9 698 человек.

Беатрис, штат Небраска.

В городе создана новая версия «Хомстед акта», по условиям которой здесь предлагается несколько бесплатных участков земли по принципу «кто первый пришел – тот и получил». Права собственности на землю перейдут получателям после того, как они проживут на ней в течение пяти лет. В некоторых случаях на участках уже есть построенные дома. Судя по отсылкам к «Хомстед акту» XIX века, не исключено, что на получение участка могут рассчитывать иностранцы.

Маскегон, штат Мичиган.

Одноименные город и округ предлагают компаниям, которые создадут здесь 25 и более рабочих мест на полную ставку, бесплатный участок промышленного парка. Власти надеются привлечь представителей пищевой индустрии и провайдеров альтернативных источников энергии. За создание 25 рабочих мест полагается пять акров земли, 50 – 12 акров, 75 – 15 акров, 100 и более – 20 акров.

Кертис, штат Небраска.

Город с населением 832 человека предлагает более 10 участков земли в разных районах под застройку домами на одну семью. Три участка уже заняты. Особо отмечается, что участки находятся на мощеных улицах, а все необходимые коммуникации к ним уже подведены.

Кэмден, Новая Англия.

Город с населением 4 052 человека предлагает участок земли площадью 3,5 акра бизнесменам, которые создадут по меньшей мере 24 рабочих места. Главным образом власти заинтересованы в привлечении компаний, работающих в сферах биотехнологий, IT, финансовых услуг, кино, альтернативных источников энергии.

Для справки

Иностранный гражданин имеет право получить гражданство США при соблюдении всех следующих условий:
• если ему исполнилось 18 лет;
• если он легально въехал в страну и находился в стране минимум пять лет в статусе постоянного жителя;
• если является «высоконравственным человеком»;
• владеет английским языком на высоком уровне;
• знаком с историей США и их государственными институтами;
• готов дать присягу на верность.

Право на постоянное проживание в США можно получить несколькими путями, в том числе выиграв гринкарту или вступив в одну из программ инвестиций средств.

Howard County Market Statistics

2010-11-23T09:17:00.000-05:00

Howard County Market Statistics show that 92 % of all sales in the county YTD were under $699,000.00. There have only been 12 sales over 1.25 million in the last year, that’s just about one per month.

The most listings active listings last month fell between $300,000 and $40o,000.

The average sales price is up from $423,000 to $434,000.

Inventory soared 20% compared to last October.

Contracts are down 20.3%

Maryland Housing Statistics October - Nov 2010

2010-11-23T09:07:00.003-05:00

Maryland Housing Statistics were released this week revealing a downward trend in both settled and pending homes and an increase in active listings. Currently there are about 1,400 less pending contracts in the state of Maryland as there were in September of 2009. There are about 500 more compared to September of 2008 however. The active listing inventory crept up to 46,457 homes compared to 44,204 in 09 and 51,021 in 2008.

Many experts are expecting this inventory level to significantly decrease as active foreclosure listings are pulled off the market for review during the current robo signer debacle within the mortgage banking industry. Just yesterday 109 listings were pulled from MLS that were foreclosures actively for sale the day before. Of course these homes are not going to disappear forever. Inevitably they will hit the market again, most likely in a few months when the reviews of processes and files are complete by the auditors. Since typically from November 15th to January 15th is an unwritten moratorium period for the foreclosure industry (it’s simply ugly and creates bad press to evict someone around the holidays) this time frame will start early in light of what’s happening and a huge wave of foreclosures will hit the market next spring.

It is already expected that 2011 will see a minimum of double the amount of foreclosures put up for sale so now it is my prediction that an inventory wave of tsunami type proportions will come down on our market this spring and shoot the falling inventory levels to record highs. What does this mean to the consumer? If your a seller ...sell now! There will be less competition in the coming months. If your a buyer….wait till spring cause a buyer’s market awaits.

HEAT LOSS SOLUTIONS FOR THE HOME

2010-11-23T08:32:00.000-05:00

With heating costs rising, people are eager to heat their homes without breaking the bank. But despite newer technologies that detect energy loss, many people waste energy because they lack fundamental knowledge of low tech fixes.
Check Insulation. Having a newer home does not guarantee that your insulation is adequate. Make sure your insulation depth is enough for today's standards. Filling in cracks and gaps, especially in the attic, will keep your home warmer in winter.

Remember Basements. We often ignore the basement. It can be a big source of energy loss. Use the spray foam around pipes that go outside. We seal our door that goes outside. It's really not necessary to use it during the winter. A piece of rigid foam cut to fit snugly can help quite well with heat loss.

Attics. Make sure the whole house fan is covered. Heat rises and much can be lost here. If you have pull down stairs, purchase a kit to cover the stairs or scuttle opening.
Seal duct joints and pipes If you have a forced air heating system you need to make sure that the ducts that carry the heat are sealed at the joints. Much heat can be lost this way. You can use foam here. Make sure if you are working around hot pipes or a metal flue to use a non-combustible high temperature product.

Plug the Fireplace, Close the Flue. When the fireplace is not in use make sure the flue damper is tightly closed. Using fireplace doors and chimney plugs can further prevent heat loss.

Remove or Cover Air Conditioners. Yes I know it's a royal pain, but you really must remove your window air conditioners every fall. You can't imagine how much heat is lost here; it also doesn't do the unit much good even if you cover it. If your unit fits in a wall opening, put an insulated panel over it.

How to Decorate Home Fast for Holidays

2010-10-08T19:24:00.003-04:00

1. Think white. White branches sprayd white, flowering plants like poisettias, cyclamen or orchids add an elegant touch to any holiday.
2. For a festive table, fill a pretty bowl with red and green apples, oranges and lemons. Add springs of pine or holly among the pieces of fruit.
3. Cut long branches to place in large vase or even an umbrella stand.

Moving this Summer? Get Settled Before School Starts!

2010-07-02T14:53:00.001-04:00

If you plan to move or change schools this summer, we recommend getting out early to look at homes! If you think about it - there are less than 60 days from now until the end of summer. That's not a lot of time to complete the home sale process and settle before the start of school. If you are looking for reliable information about the schools you are considering - these websites will help you make wise decisions when you select a school in a new community:

Baltimore County Public Schools - www.bcps.org

Baltimore City Public Schools - www.bcps.k12.md.us

Carroll County Public Schools - www.carrollk12.org

DC Public Schools - www.dcps.dc.gov

Howard County Public Schools - www.hcpss.org

Frederick County Public Schools - www.fcps.org

Montgomery County Public Schools - www.mcps.org

Great Schools is an also independent, non-profit organization that provides parents with information and tools to choose schools and support their children's education. Great Schools has information about public schools, private schools, charter schools, home schools, No Child Left Behind, and school choice options. Check them out at:

Great Schools at www.greatschools.net

School Matters at www.schoolmatters.com

Maryland Real Estate Statistics - May 2010

2010-06-28T13:48:00.003-04:00

New Maryland Real Estate Statistics show Howard, Anne Arundel and Baltimore Counties UP and Caroline and Garrett counties down.

The Maryland State Association of Realtors released it’s May 2010 statistics today.

Prince Georges County showed the most significant increase in sales with a 61.7 % increase in pending units sold. P.G. County home sales surged from 494 last May to 799 this year.

Howard, Baltimore and Anne Arundel Counties all showed decent gains in units sold.

Garrett County, home to Deep Creek Lake showed a nasty 32% drop in home sales showing that the 2nd home buyer is slipping away in a cash strapped economy.

Average sales prices continued to decline:

5% Drop May 2009 -May 2010
11.8% Drop May 2009-May 2008
5.5% Drop May 2008 -May 2007

In May 2007 the average sale price was $366,072 compared to this May’s average sales price of $289,900

Big Question is will 2011 show an increase or a continued decline?

Foreclosure alternative gaining favor

2010-06-28T13:38:00.001-04:00

By Kenneth R. Harney
Saturday, June 26, 2010

Short sales have been the hot solution for financially stressed homeowners and their lenders for the past year, but here's another potent foreclosure alternative that's about to take center stage: deeds in lieu.

Some of the largest mortgage servicers and lenders in the country are gearing up campaigns to reach out to carefully targeted borrowers with cash incentives that sometimes range into five figures, plus a simple message: Let's bypass the time-consuming hassles of short sales and foreclosures. Just deed us the title to your underwater home, and we'll call it a deal. We won't come after you to collect any deficiency between what you owe us on the mortgage and what we obtain from the home sale. We might even be able to wrap up the whole transaction in as little as 30 to 45 days. How about it?

Mortgage companies say troubled borrowers are increasingly signing up. One of the largest servicers, Bank of America, has mailed 100,000 deed-in-lieu solicitations to customers in the past 60 days, and its volume of completed transactions is breaking company records, according to officials.

What are deeds in lieu? The full name is deeds in lieu of foreclosure. They are voluntary transfers of property ownership from borrowers to creditors that make court-directed foreclosures unnecessary.

The concept is one of the oldest in real estate, but it got a special boost this year when the Obama administration included it as an option in its Home Affordable Foreclosure Alternatives program, and mortgage giant Fannie Mae cut the penalty-box time for homeowners who use the technique from four years to two before they can qualify for another home mortgage.

Deeds in lieu also are surging because they provide a win-win for borrowers and mortgage investors that short sales often cannot match. Tops on the list: speed. Travis Hamel Olsen, chief operating officer of Loan Resolution, a Scottsdale, Ariz., firm that works with lenders to solve troubled borrowers' problems, said deeds in lieu represent "a very expeditious way to move on" for underwater borrowers who are facing potential foreclosure.

"A lot of owners just want to be finished with it now," he said. "They don't want to deal with [the house] anymore." They don't want to deal with real estate agents or signs on the front lawn that reveal their financial squeeze to neighbors. They don't want to haggle with potential buyers coming in with lowball offers. But they also don't want to simply walk away -- strategically default -- because that will crater their credit files and scores for as much as seven years.

Greg Hebner, president of the MOS Group of San Diego, which also works with banks and investors across the country to resolve defaulting borrowers' situations, said a key motivation is that lenders are stuck with massive backlogs of underwater homes that haven't yet gone through foreclosure and been put on the market -- the so-called shadow inventory.

Not only is it cheaper for them to do deeds in lieu to gain control of those properties, but with mortgage rates below 5 percent, they also will probably be able to resell them faster and on potentially more favorable terms in the summer and fall.

"If you can get a lot of inventory moving in the next couple of months" of prime home-buying season, Hebner said, "you are solving a lot of problems."

Matt Vernon, Bank of America's top short sale and deed-in-lieu executive, said the technique works so well for borrowers and mortgage owners that his company is running pilot programs in major housing markets to alert borrowers who might benefit but are not familiar with deeds in lieu.

To sweeten the pot, Bank of America is offering cash incentives that range from $3,000 to $15,000 -- and is getting a strong response, Vernon said.

What are the downsides or limitations of deeds in lieu for homeowners? Probably the most important, experts said, is that they don't work for every situation involving serious mortgage default. For example, if you have equity in the property, you'll probably want to pursue a loan modification first, then a short sale, rather than hand your equity stake over to the lender.

Deeds in lieu usually don't work when there are multiple mortgages from different creditors encumbering the property. Also, though deeds in lieu do less damage to borrowers' credit histories than foreclosures or bankruptcies, they definitely leave a mark.

Fair Isaac, developer of the widely used FICO credit score, said on its "MyFico" Web site that deeds in lieu and short sales are treated as "not paid as agreed" accounts and are treated the same by the FICO scoring model.

Original article

Statistic report for home sales in Howard county Maryland

2010-06-15T09:56:00.004-04:00

Based on Howard county Howard County Board of Realtors statistic report Real Estate market dropped 25.7 percent.

With the homebuyer tax credit expiring at the end of April the number of sales in the Howard County Real Estate market dropped 25.7 percent. the number of listings put on the market new increased with the spring season to a 13 month high at almost 1,300 homes for sale. Compare that to January’s 850 home inventory and you wonder if people even watched the news about the tax credit before strategically deciding when to sell their home.

Settlements spiked almost 40%!!!! This of course is due to the June 30th settlement deadline for the tax credit. You will see a good month next month with regards to settlements as well and then a significant drop in July.

Condo sales suffered a major drop to it’s lowest amount in a long time including the Holiday months of year end. You would have had better luck selling your condo at Christmas and Hannakuh time than you would have in May!

For Rent: 4BR/3+1BA Townhouse in Ellicott City, MD, $1,950/month

2010-05-24T11:47:00.001-04:00

For Rent: 4BR/3+1BA Townhouse in Ellicott City, MD, $1,950/month

2010-05-24T10:50:00.000-04:00

New Move-Up Buyer Tax Credit

2010-02-12T18:37:00.005-05:00

Qualified move-up buyers may now take a $6,500 credit (($3,250 if married filling separately) for buying up to an $800,000 home by April 30, 2010, with closing/ settlement by June 30, 2010. They must have lived in their home for five consecutive years of the previous eight. A full credit is available to married-joint files that have Modified Adjusted Gross Income up to $225,000, with a reduced credit available up to $245,000. The income limit for single /married filing separately is $125,000, phased out up to $145,000. Other rules apply.
Remember, first-time buyers may still qualify for an $8000 tax credit($4000 if married filing separately) if they purchase by April 30, 2010.

Call or email if any questions.

Tatyana Baytler
443-527-4375

How to Calculate APR in Excel

2010-02-12T15:45:00.000-05:00

How to Use Excel to Calculate APR

Foreclosure Properties in Howard county Maryland

2010-02-12T09:41:00.004-05:00

List of bank owned properties for sale in Howard County.

Home Price Range
$0 - $200,000

Home Price Range
$200,000 - $400,000

Home Price Range
$400,000-$800,000

If you see something that you would like to see call me or email and let me know.

Tatyana Baytler
Phone 443-527-4375

"Best Places to Live" -Columbia and Ellicott city, MD

2009-10-06T14:23:00.004-04:00

In Money Magazine's recent release of its annual "Best Places to Live" list Columbia / Ellicott City was rated #4 in the top 10 of over 745 cities.

Money Magazine set out to find small livable cities that had the best possible blend of good jobs, low crime, quality schools, plenty of open space, reasonable home prices and lots of enjoyable events. The list is a reflection of the qualities that most Americans want when it comes to a place to live and raise a family. This contributes to their own and their family's prosperity and provides a quality of life that allows them to enjoy the fruits of their work.

Undertaking several months of research, Money's team of editors and writers reviewed data on a wide range of economic and quality-of-life indicators. Cities across the country were then visited, while residents, community leaders and local officials were interviewed.

Howard County residents should be proud to have the vibrancy of our home recognized and ranked as one of the top 10 great American towns.

Just one more reason why we are the kind of place people want to call home.

Best Pleaces to live in America - Columbia /Ellicott city, Maryland

Tatyana Baytler

443-527-4375
www.LagretRealEstate.com

Why First-time Buyer Should Buy Home in 2009

2009-09-23T14:49:00.010-04:00

You Can’t Afford NOT to Buy a Home

You may wonder whether it is worthwhile to wait to purchase
your home until prices are at their lowest. The prices are very low now.
Read my previous blogs.

However, prices are not the only factor that should drive your decision.
Currently, interest rates are at generational lows that greatly improve the affordability of homes.

Further on the annual cost table, you can see that even
if home prices decline, the possible tax savings of owning a
home lead to a lower cost for the buyer, not the renter.

Also, there are special, additional tax benefits for first time home buyers that may be available for a limited time only in 2009.

Finally, and most importantly, when you have made the decision to commit to homeownership because you are financially ready, market conditions are a secondary concern.

Tax advantages

Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3.5% per year. If that trend continues, that means that an apartment or home renting for $1,000 per month will cost more than $1,300 a month in ten years.
If you rent the same home for ten years, the total amount you would pay for rent will equal $140,777.

None of that $140,777 ( rental payments over 10 years) is returned to you, either through savings or as an investment.
Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money.
For many homeowners, part of the monthly mortgage payment “comes back to you” in tax savings.

Homeownership is a Good Investment for Qualified Buyers

For the majority of Americans, their home is their largest
financial asset and a major player in their investment portfolio.
The NATIONAL ASSOCIATION OF REALTORS® estimates that home value rises, on average, by 4.5 percent a year. That’s a steady return on investment; one’s own home is a much less volatile asset than stocks, bonds or mutual funds, even when the recent downturn is considered.

How do you build up your net worth?

As a homeowner, you build wealth in two ways:
1. through paying down the principle on your mortgage
2. through those “appreciating returns” on your home

“Appreciating” Returns

As an example, let’s look again at that $200,000 home.
Unlike your rental unit, your home should appreciate over time.
Instead of assuming average growth, we assume that prices
are flat in the first year of ownership and pick up, but only
slightly, in the second year. In the third year of ownership, your
home has appreciated to a modest $210,858. After ten years,
assuming a return to an average 4.5 percent appreciation rate*,
your $200,000 home will be worth $286,948. Not only do you
earn a rate of return on your original purchase price, you also
get a return on any subsequent appreciation.
* Average price appreciation from 1970 to 2008 was 6.0%

Buyers Come Out Ahead

You may be surprised to see that the homeowner still comes out ahead of the renter even if there is a decline in the home's value over the next year.
Extraordinarily low interest rates and lower prices have ushered in some of the best affordability conditions in a generation in 2009.

Homeownership Builds Wealth for Households

The Federal Reserve Board estimates that homeowners’ net worth has ranged between 31 and 46 times more than that of renters in the years 1998 to 2007.
In 2007, the median net worth for homeowners was $234,200 compared to $5,100 for renters.
Even though that difference will surely narrow as a result of house price declines since 2007, median homeowners will likely still have substantially greater net worth than median renters."

As home price growth returns to a normal level the amount of wealth that you net from appreciation will increase. At the same time you pay your mortgage reducing your outstanding debt.

As your debt decreases through the years and the home value increases, you accumulate
wealth from the value of your home. In addition, over this ten year
period, you will have a significantly lower after-tax payment
for housing. Each year as your home appreciates and you
continue to pay down your mortgage debt, you increase your
own net worth.

Stimulus package

Given recent changes in home prices and the current low mortgage rate climate, there have been significant gains in affordability for prospective first-time homeowners.
In 2009, a provision in the Stimulus Bill provided for a first-time Homebuyer Tax Credit of 10% percent of the purchase price of the home up to $8,000.

Requirements:
1. property should be pricipal residence.
2. the buyer must not have owned property during 3-year period before date of purchase.
3. the property must be the buyer's principal residence for 36 month after the purchase, othervise, the credit must be re-paid back.
4. some income restriction exists. Tax credit begins to phase out if modified adjusted income is over $75,000 (or $150,000 for joint filers) no tax credit at all if modified adjusted gross income is over $95,000 ( or $170,000 for joint filers)
5. Date of Purchase should be before November 30, 2009

Call to Tatyana Baytler if you have any questions about the stimulus package or any other questions.

Appraiser Checklist

2009-09-23T12:54:00.002-04:00

Here is some details about appraisal process for you ...

Incentives and concessions. Most of today’s buyers expect to pay the lowest possible price and still get some extras. Sellers and home builders are offering money toward closing costs, remodeling and decorating, upgrades, and association dues. The price set initially may not be the final price once concessions are factored out. Appraisers care about that final number.

Closing date. Forget what comparable neighborhood houses sold for a few months back. Appraisers want prices from the most recently closed transactions. “If a sale was more than 45 days ago, even 35, the price may be irrelevant,” Hillas says.

Condition and curb appeal. Appraisers typically find several properties with similar interior and exterior features to determine value. When markets are healthy, blemishes matter less, but when markets soften, problems—a dated kitchen or barren lawn—can reduce prices and deter buyers. “The difference in value is not just the repair costs but the time and hassle to make them. It’s better for sellers to do work in advance,” Hillas says.

Foreclosures. Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market, says Herndon. “But when several neighborhood homes are abandoned, it’s hard not to caution sellers that this is a troubling trend and may affect home values,” she says.

Changing demographics. If a house is in an up-and-coming area, the value can be expected to rise. A location that’s perceived as safe also may help attract the increasing number of single female buyers.

Economic clouds. If there’s an oversupply of comparable homes for sale, or if the local job market is suffering, buyers may be hesitant to invest. Hillas advises setting prices aggressively from the get-go.

Chemistry. It’s hard to account for those times when buyers fall in love with a house, despite a high price, poor condition, or tough economy. “Emotional attachment is a factor that can’t be predicted,” says Herndon. Hillas agrees, “It’s what makes it harder to appraise homes versus commercial buildings, where buyers care more about the bottom line.”

Source

Statistics August 2009

2009-09-19T13:47:00.003-04:00

US tax $8000 credit may help you buy house in 2009

2009-09-17T20:22:00.002-04:00

You might be able to use the $8,000 first-time homebuyer credit to buy your house, instead of having to purchase the house first and then claim the credit on your tax return.

The U.S. Department of Housing and Urban Development says that the tax credit can be applied to cover purchase costs, including in certain cases the down payment, if you are taking out a mortgage insured by the Federal Housing Administration. This doesn't apply to other types of mortgages.

"It is a very attractive offering, and basically it addresses one of the hurdles that keeps more people from buying a home - getting help with the down payment or paying closing costs," says Bob Meighan, a vice president with TurboTax.

The first-time homebuyer tax credit, part of February's economic stimulus package, is worth up to 10 percent of the price of the home, but not more than $8,000. To qualify, you can't have owned a home in the previous three years, and you must buy the house this year between Jan. 1 and Nov. 30. The credit can be claimed next year when you file your taxes, or you can file an amended 2008 return to get it this year.

But according to recent guidance issued by HUD, you will be able to get the use of the money even earlier if you take out an FHA-backed loan with the help of a state Housing Finance Agency or from one of the FHA-approved nonprofits and private lenders.

There are no income limits to qualify for an FHA mortgage, although there are caps on the size of the mortgage. Limits differ from county to county. In Maryland, loan limits for a single-family home range from $271,050 in Allegany County to $729,750 in Montgomery, Frederick and Prince George's counties. In Baltimore City and Baltimore and Howard counties, the cap is $560,000.

There are two ways to tap the tax credit early:

You can get an advance on your credit from an FHA-approved lender or nonprofit. You will likely have to repay the money shortly after getting your tax refund, says Meg Burns, FHA's director of single-family program development.

Lenders also can charge a nominal fee - 2.5 percent of the credit or less - to make the advance.

The advance can't be used for the 3.5 percent down payment required under FHA-insured loans. But it can be applied to other purchase costs or to make a bigger down payment, thereby reducing your monthly mortgage payments.

For a list of FHA-approved lenders, visit www.hud.gov or call 800-CALL-FHA (800-225-5342).

The second way to tap the credit is through your state's housing finance agency, which helps low- to moderate-income homebuyers. Under this way, the agency lends you the amount of the credit. The loan terms, including any interest and the amount of time to repay, will vary from agency to agency, Burns says. The loan also can be used for the required 3.5 percent down payment or other closing costs.

Not every state housing agency or FHA-approved lender will participating in this tax credit program, so call in advance to find out.

For instance, Maryland's agency, the Maryland Department of Housing and Community Development, currently doesn't have a loan tied to the tax credit, but offers closing cost assistance worth up to $5,000 for first-time homebuyers who meet certain income limits.

Do you have questions about it? Call Tatyana Baytler: 443-527-4375

Housing sales in the United States may rise to a 2-year-maximum - forecast ....

2009-09-17T20:05:00.001-04:00

Experts of the Freddie Mac mortgage agency claim that sales of primary and secondary housing in the United States can climb to an annual level of 5.1 million units in Q3 2009. This would become the largest quarterly increase in sales over the past two years.

In comparison to the indicators of the preceding quarter, which have amounted to 4.61 million properties, sales could increase by 11%, Bloomberg reports. This trend is reasoned by low housing prices and governmental measures aimed on supporting property buyers.

Besides that, housing sales contribute to the growth of consumer spending, which accounts for 70% of U.S. GDP. New homeowners are most likely to purchase household appliances, furniture and household utensils.

According to Freddie Mac’s chief economist, Frank Nothaft, the recent series of positive news - regarding the increase in sales volumes of primary and secondary housing and the quarterly increase in prices - suggests that the U.S. housing market has started to stabilize.

The Virtual Vacation Home

2008-08-01T14:55:00.002-04:00

Second-Home Owners 'Visit' Via Webcams; Spying on Guests, Monitoring the Pool Guy
By JUNE FLETCHER

Helena Peterson's favorite show these days depicts shadows flickering on artwork and furniture in a deserted dining room.
It's not an avant-garde production but a Webcam view of the vacation house that Ms. Peterson bought last year in Southport, N.C. Using a computer at her primary home in Ellsworth, Maine, she monitors the house in the tiny fishing town via an Internet connection. Though there's little to see she says she finds it mesmerizing -- and a way to spend time, at least virtually, in her second home while stuck at her first one. "It's a fantasy experience," says Ms. Peterson, a public-health program director.
PODCAST: VACATION-HOME MONITOR

WSJ's June Fletcher discusses how owners of vacation homes are using webcams and other home-monitoring devices to spy on their tenants.
As Webcams and other home-monitoring devices become smaller, cheaper and easier to install, some people have become voyeurs of their own vacation homes. While the ostensible purpose of the cameras is to monitor for intruders, some people use them to check up on the lawn guy or cleaning service, spy on visiting relatives or renters, or simply daydream about a place they'd rather be.
Last November, Tim Duchene installed a Webcam on the patio of the ocean-view condo that he and his wife, Carolyn, bought on Maui, Hawaii, three years ago. He intended to use it as a marketing tool to attract renters, but finds himself checking it daily to watch storms, see the palm trees sway and track the ash clouds given off by distant volcanoes. Because airfares have skyrocketed, the Aliso Viejo, Calif., couple gets to the island only half as often as before. The Webcam is a bit of a compensation, says Mr. Duchene, a technology executive.
Bruce Macpherson
Second-home owners often plug Webcams into an old PC or laptop they keep turned on and connected to the Internet. Other Webcams can link up to the Internet directly via WiFi or a cable. Basic Webcams cost as little as $10, though makers put out far more expensive ones with more capabilities. WowWee Ltd. and iRobot say they'll soon launch Webcam-topped robots that can roam about the house while sending pictures, then dock themselves at a base for recharging.
Using a $10.95-a-month Web service called Rogo, Bill Edwards of Raleigh, N.C., checks out the doings at his Wrightsville Beach, N.C., vacation home several times a day -- from his office, his home, even his car. "I'm spending way more time on this than I should," he admits. The real-estate broker has his weatherproof Webcam mounted outside his house and focused on his backyard, where he can keep an eye on his new 27-foot boat and watch visiting grandkids play. And since he can check out his house live on his iPhone, it's also a great way to show it off to his friends, he says.
WowWee says its planned Wi-Fi robotic camera, Rovio, will roam houses.
Other systems are more complex and costly. Alarm.com provides wireless Internet cameras as part of elaborate home security and monitoring setups. Customers can remotely arm or disarm the system or set up temporary access codes for service people. Such dealer-installed systems typically cost $300 to $1,000, depending on how many sensors are used, with monthly monitoring fees of $30 to $46.
Webcams sometimes catch questionable behavior. Using his Alarm.com camera, Tom Tweit in South St. Paul, Minn., saw teenage houseguests standing by the front door of his Orlando, Fla., vacation home sharing a suspicious-looking pipe. The retired electrician contacted the teens' parents and the youths left the house.
Most of the time, Webcams are put to more mundane uses. Interior designer Louis Cohen says he uses cameras to cut down on the amount of time he needs to spend for maintenance reasons at his pied-a-terre in Philadelphia and a family retreat in Aventura, Fla. With Webcams posted at entrances he can see whether landscapers, pool cleaners, deliverymen and other service people show up when they say they will -- and once caught a no-show dog walker this way. "They don't know they're being watched," says Mr. Cohen, whose main home also is in Aventura.
Above, Logitech's QuickCam Vision Pro is one of many Webcams on the market. Below, IRobot, maker of robotic floor cleaners, also plans a roving Webcam device, ConnectR.
But watching other people without their knowledge in a private home -- or even in a backyard not visible from a public street -- can pose legal issues, says David Elder, a professor of law at Northern Kentucky University and author of "Privacy Torts." Mr. Elder says homeowners, especially those who rent out their houses, should refrain from pointing Webcams towards interior spaces -- particularly bedrooms and bathrooms, which people expect to be private. "People do bizarre and strange things in leased apartments," he says. Cameras should be revealed to tenants and guests, preferably in writing, he adds.
Ross Twiddy, a property manager who oversees 780 houses on the Outer Banks of North Carolina, promotes wireless security systems that also allow remote control of water heaters and air conditioning. But he says he draws the line at cameras due to privacy concerns.
In February, Tamara Cowen placed a Webcam aimed at a beach used by renters of her nine vacation cabins at Big Wood Lake in Jackman, Maine. She installed the $500 weatherproof camera both as a marketing tool and to quell the curiosity of would-be renters who constantly ask her about the weather. Worried about how renters would respond to being watched, she posted a sign pointing out the Webcam's presence and an offer to take it down should anyone object. No one has -- in fact, one renter used it to wave to envious co-workers while he was on vacation, while another posted a sign on the beach asking his brother to hurry up and join him at the cabin, she says.
John Scott had Webcams installed as part of security system overhauls both in his primary home in College Park, Md., and the vacation home that he and his wife, Anne, bought in May in Port Aransascq, Texas. Together, the alarm systems cost $3,200, plus monthly monitoring fees. But the expense is worth it, he says. When he's in Maryland, knowing that his Texas property isn't being damaged by storms gives him peace of mind. Yet he's also found it surprisingly soothing while in Texas to watch the trees rustle gently and sunlight flit across the yard of his Maryland house. "It relaxes me, so I really feel like I'm on vacation," he says.
Write to June Fletcher at june.fletcher@wsj.com

Russian Maryland Network Up and Running

2008-07-23T13:02:00.002-04:00

Join us...on RussianMaryland.ning.com .

View my page on Russian Maryland

Good-Faith Changes From HUD

2008-07-17T10:58:00.002-04:00

Washington post
By Jack Guttentag

Ever since its last effort to reform mortgage market practices was defeated by the lending industry in 2002, the Department of Housing and Urban Development has been promising to come back with some less ambitious, but possibly more acceptable, proposals.
This spring, it finally did.
The latest proposals have three major thrusts. The first is to convert the required good-faith estimate of fees and charges into a document that borrowers can use to shop among loan providers. I'll discuss that this week.
The second thrust is to protect borrowers against various types of opportunistic pricing that the current good-faith estimate facilitates. The third is to make mortgage brokers' pricing transparent, which the current system does not. I'll discuss those in future articles.
The good-faith estimate provides borrowers with an estimate of costs associated with a mortgage, but it is not binding. The form does not have the critical summary information on loan features that borrowers need to shop effectively. In addition, the fees and charges shown are not totaled in meaningful ways. Even if the information were complete and dependable, furthermore, the borrower doesn't get it until after submitting a loan application, which is too late for it to be useful in shopping.
For the good-faith estimate to be an effective shopping tool, it must 1) provide borrowers with critical information about the features and prices of the borrower's desired loan; 2) limit the right of loan providers to change the fees and charges; and 3) require loan providers to view issuance of the good-faith estimate as a loan approval, subject only to verification of the information provided by the borrower. The proposed good-faith estimate does all of this.
The information on the proposed good-faith estimate includes the interest rate, total lender charges and total third-party charges. That's enough to allow a borrower to shop effectively for fixed-rate mortgages. On adjustable-rate mortgages, HUD plans to require additional information on the factors that affect future rate adjustments and is seeking comments on how best to do this.
The fees and charges laid out in the proposed good-faith estimate would no longer depend entirely on the "good faith" of the loan provider. Changes between the numbers shown on the estimate and those contained in the HUD-1 final closing document will be limited.
The new good-faith estimate would also be a conditional loan approval -- my term, not HUD's -- based on six pieces of information provided by the borrower: name, Social Security number, property address, gross monthly income, loan amount and house value. HUD envisions borrowers seeking estimates from multiple loan providers, making a selection from among them and then submitting a loan application. The application provides the much more detailed information required by lenders, but it cannot be rejected unless the new information is materially different from that submitted in applying for the good-faith estimate. The burden of proof is on the loan provider.
One loose end I see is verification of the borrower's income. If the borrower cannot verify the income stated on the good-faith-estimate application, the lender must be allowed to reject the application without becoming vulnerable to legal challenge. The best way to deal with this is to add an item to the list required for the good-faith estimate: "Will you verify income?" If the borrower says no, the loan provider can set the higher price of a "stated income" loan. If the borrower says yes, it is clear that the burden of proof shifts to the borrower.
The proposed good-faith estimate would not protect the borrower against lowballing -- when a loan provider offers a low quote to get the business, then raises it when the borrower locks the price. The first item on the new estimate reads, "The interest rate for this GFE is available until . . . " followed by a blank space where the loan provider will place a date. In practice, that date will always be the current day, because in a volatile market no loan provider would ever commit to tomorrow's price.
HUD's unsuccessful 2002 proposals included a rate-indexing provision for dealing with this problem, but this time it has been ignored. While price volatility is not a problem that can be solved by regulation, borrowers should be placed on notice that the problem exists. HUD views the new good-faith estimate partly as an educational document, yet leaves the borrower wholly in the dark on this critical issue.
In addition to warning borrowers about this problem, HUD should encourage them to ask the loan provider how a new price will be determined after the borrower submits a loan application and wants to lock the price. When loan providers realize that their answer to this question may well affect whether they get the loan, they will come up with solutions. One would be to index price quotes to wholesale prices.

Short Sale know how

2008-07-16T12:10:00.001-04:00

If you've taken out a large mortgage, and perhaps refinanced to cover remodeling or other expenses, you may find yourself unable to keep up with your mortgage payment after a layoff, divorce or illness. More and more people are finding they need to sell their homes for less than they owe on the mortgages, known as a "short sale."

Selling short is definitely better than foreclosure, which stays on your credit record for ten years. But it's best to try to work things out with your lender before going through the embarrassing and laborious process of selling your home on a short sale.

Tax Issues
Before you put your home on the market for a short sale, it's best to talk with a tax advisor about possible tax repercussions. It's likely the IRS will consider the difference between the value at which you sell your home and the mortgage balance as "income" on which you'll have to pay taxes.

An exception to this rule is if you can prove that you were "insolvent" - that your debts were bigger than your assets- before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you'd be considered insolvent by IRS standards.

If you can't prove you're insolvent, and the tax bill on a short sale would be more than you can pay, you may have to let the mortgage lender foreclose, or declare bankruptcy.

Be Upfront With The Real Estate Agent
If you find selling you house for less than you owe on the mortgage is an option short of foreclosure or bankruptcy, you'll want to find a real estate agent who understands your situation. Agents typically take a much lower commission on short sales, and it often takes much longer to actually close the sale once the seller accepts an offer. But many agents sympathize with financial problems brought on by unexpected circumstances, and may want to help.

Convincing Your Mortgage Lender
The buyer will need your help in negotiating a short sale approval with your mortgage lender.

Your bank will have to be convinced that you deserve to be approved for a short sale. You'll need to tell your mortgage lender about your financial hardships, including layoffs, divorce or medical issues.

While this may seem obvious, now is not the time to rack up the purchase of luxury items, like fancy cars or jewelry. Your lender will see these debts on your credit report and become convinced you're a loose spender who doesn't deserve a break.

It may also be necessary to provide the lender, either directly or through the buyer or buyer's agent, documentation of your financial hardship, such as paystubs, bank statements and so forth. While this may seem like an invasion of your privacy, try to think of it as the fastest way out of an otherwise overwhelming debt.

Short sales take much longer to close than more conventional sales, so plan accordingly. If it works, you've avoided bankruptcy and an ugly mark on your credit report. If it doesn't work, you'll know that you've done everything you could to avoid foreclosure and/or bankruptcy.

Если какие-то ограничения в американском законе для иностранцев?

2008-06-30T11:12:00.003-04:00

Вопрос об инвестировании:
Если какие-то ограничения в американском законе для иностранцев?
Ответ: Никаких ограничений нет.

Права и процедуры приобретения и аренды недвижимости

Иностранец (физическое или юридическое лицо) может приобрести в собственность недвижимость на всей территории США.
Для покупки недвижимости надо иметь счет в американском банке, так как большая часть расчетов осуществляется через банк.

Приобретение недвижимости проходит несколько этапов:

Первый этап – это выбор агента (подписание с ним договора). Рекомендуется иметь собственного агента, а не пользоваться агентом продавца, поскольку агент продавца представляет его интересы, следовательно, заинтересован в более высокой стоимости приобретаемой недвижимости. Выбранный агент будет подбирать вариант, соответствующий вашим требованиям и желаниям.

Второй этап – переговоры и подписание договора о намерениях. Если достигнута предварительная договоренность (дом и цена нравятся), то подписывается договор о намерениях, и вносится депозит в размере 1%, который вернется в случае расторжения договора о намерениях и уйдет продавцу в случае совершения сделки. После этого покупатель проводит экспертизу дома (Physical inspection, termite inspection) и получает подтверждение получения кредита (если это необходимо), на это дается 17 дней. Если есть намерение приобрести недвижимость в кредит, оптимальным будет считаться наличие предварительного согласия банка о его предоставлении (pre-approved letter).

Третий этап – открытие Escrow (специального счета), изучение и подготовка всех соответствующих документов. Составление договора купли-продажи обычно происходит после всех инспекций (поскольку они могут существенно влиять на стоимость дома). Если объект покупается в кредит, то на проведении всех необходимых инспекций будет наставить банк, если наличными – то это дело владельца. Договор содержит имена сторон, подробное описание объекта, данные о вознаграждении продавца.

Завершение сделки. Когда контракт купли-продажи подписан и авансы внесены, банк направляет оценщика для определения обоснованности продажной цены объекта. Если проверка прошла успешно, покупатель получает от банка документ (Commitment Letter), подтверждающий согласие выдать ему конкретную сумму в виде ипотечного кредита на конкретный объект недвижимости. Это может занять некоторое время. Оптимальной является ситуация, когда у покупателя имеется предварительная договоренность с банком, подтверждающая готовность банка выдать ипотечный кредит. После этого все докуаменты передают адвокату, которого нанимает банк для завершения сделки.

Завершение процесса приобретения – оформление settlement statement. Затем осуществляют официальное закрытие сделки – обязательно в присутствии нотариуса. Происходит передача денег и ключей от жилья. Сделка должна быть зарегистрирована в тот же день в специальном районном отделе регистрации. Право собственности на жилье подтверждается свидетельством о праве собственности (Title).
Рекомендуется производить не только страхование дома, но и страхование прав владения недвижимостью (если окажется, что какие-либо документы неверны).
После приобретения недвижимость может быть сдана в аренду, продана, передана по наследству, отдана в управление.

Расходы на проведение сделки:

Операция:

Страхование и проверка подлинности документов 0,5%–1,0% покупатель
Реестровые пошлины 0,5%–0,2% покупатель
Судебные пошлины 0,5%–1,0% покупатель
Судебные пошлины 0,5%–1,0% продавец
Налог на передачу прав собственности 0,01%–2,0% продавец
Плата брокеру 6% продавец

Раcходы покупателя: 1,05%–2,20%
Расходы продавца: 6,51%–9%

Кредитование

В Соединенных Штатах существуют два основных варианта покупки недвижимости: вы можете купить недвижимость за наличные деньги или в кредит.

Единственная разница при получении ипотеки для нерезидентов состоит в том, что – в отличие от американцев – первоначальный взнос при приобретении недвижимости составляет для них не 10%, а 30%. В остальном же условия для всех абсолютно равны.

Townhouse for Sale in Owings mills, Maryland

2008-06-30T11:12:00.001-04:00

Short sale unlikely for owners current on mortgages

2008-04-11T09:58:00.003-04:00

Unemployed couple seeks best way to preserve credit when they default
By Ilyce Glink, Friday, April 11, 2008.

Co-written by Samuel J. Tamkin
Inman News

Q: We have worked extremely hard to preserve and improve our credit our entire adult lives. We currently have a homestead property, and are upside down on a second property in a hybrid option adjustable-rate mortgage.

I am current on the mortgages, but we are close to imminent default.

We just hired Realtors to do a short sale, as we just cannot afford the second property. My wife and I just lost our jobs. The property was listed at $450,000, and we received an offer for $375,000 -- which the banks will reject -- but there seems to be interest in the property.

If we can build a short-sale case for the banks, the second-lien holder will get essentially nothing but will save on the costs of foreclosing. Because we are not late on our payments, the banks view us as current on the loans, but we are desperate.

Our goal is to preserve and shield my credit as much as possible. We will not do a deal with a deficiency judgment. Can we push for the bank to agree to our terms without stopping our payments on the mortgages? Will our credit be affected?

A: You are in an unfortunate situation, one that many homeowners share. You're correct that most lenders have their hands full with borrowers who have already defaulted on their loans. These borrowers have had their loans go into foreclosure and seen their credit scores plummet.

It's unlikely that a lender will even talk to you about the prospect of a short sale when you are current on your mortgage. You should try anyway, but the lender is under no obligation to accept a short sale -- that is accepting an amount that was offered to you to buy your second property, but is less than what you owe your primary lender.

Unless you fail to make payments on your mortgages and have a contract in hand with a buyer for your home, you probably won't be able to get the lenders' attention -- much less get the first lender to accept a short sale and get the second lender to release the lien on the equity or second loan on your home.

But your credit history and credit score will certainly be affected by your failure to make payments on your loans and your failure to pay the first lender in full and your failure to pay the equity lender at all.

Currently, you are at the mercy of the slowdown in real estate and credit problems in the marketplace. You probably have no easy way to preserve your good credit history and credit score at this time. If you fail to make your payments to any of your lenders, both your credit history and credit score will suffer. If you fail to make good on paying in full your loan obligations, your credit history and credit score will also be hurt.

It's tough to see how a lender would agree to let you off the hook for paying your loan obligations in full without hurting your credit. You might get the first lender to accept the short sale and may even get the lender to agree to not report the short sale negatively to the credit reporting bureaus, but if you can't and won't pay anything to the equity lender, that lender will likely report the loan as written off and delinquent.

It doesn't seem likely that you are in a position to agree to repay the balance of the mortgage or equity loan after the sale of the home. You should know, however, that either lender has the right to sue you for the amount you owe under the loan unless you pay each loan off in full or have each lender agree that they will not seek additional payment from you after you sell the property.

If you do not get an agreement from each of the lenders, they could sue you after the closing and obtain a judgment for the difference between what they got paid and the amount owed under the loan. That judgment would be called a deficiency judgment.

You should know that your credit score will be affected, but the methods of computing how and to what degree your credit score would be hurt is proprietary.

In the range of options, if you were to declare bankruptcy, your credit score would be hurt the most and if you're able to have the first lender agree to take a short sale and have the equity lender agree to forgive all of the debt, your credit will still be hurt but, perhaps, not as much.

But it may help to know that if you wipe your slate clean and start over, you will be able to rebuild your credit history and score in just a few years.

Q: We just sold my wife's deceased mother's house and we got a 1099-S form that says gross proceeds were $525,000. What amount do we pay taxes on? The money went directly into my wife's living trust. We got a check from the closing in the amount of $434,000.

A: I'm sorry for your loss. If you sold the house within a year of your wife's mother's death, it's possible that you will owe no taxes on the sale.

Let's step back. Form 1099-S is merely the form that the closing agent sends to the seller of real estate that sets forth the sales price for the home. In this case, you sold the home for $525,000. That number reflects only the price the home sold for and does not indicate whether you made a profit or loss on the sale of the home.

If this was your home and you had purchased it for $500,000 and sold it for $525,000 and had closing costs of $25,000, you still would have no profit on the sale of the home and probably would have no tax to pay the IRS.

However, if you inherit a home, you would pay tax on the difference between the value of the home at the time the person died and the sales price of the home when you sold it.

You know the sales price for the home, but you may or may not know the value of the home at the time your wife's mother died. Generally, if the property is sold within a year of the time of death, that sales price is a good indication of the value of the home.

If you sold it a couple of years after she died, you would have to determine the value for the home at the time of her death and then factor in any costs to sell the home and, perhaps, any improvements you made to the home to get it set for sale. A new roof, for instance, could be added to the cost basis of the home.

For more information, talk to an accountant, estate attorney or enrolled agent, and for general information you can go to the IRS Web site at www.irs.gov. One publication that is useful in reviewing the factors that affect the value of a home is Publication 523.

Understanding Starker exchange rules

2008-04-03T12:22:00.000-04:00

The difference between death and taxes is death doesn't get worse every time Congress meets." --Will Rogers

In this series of tax articles, I have discussed the tax benefits for residential properties, such as the exclusion of gain of up to $500,000, or the various tax deductions available to homeowners.

Now we turn to the tax benefits available to real estate investors.

If you own investment property, and sell it, you will have to pay capital gains tax; for 2007, the tax rate is 15 percent.

But investors are required to depreciate a portion of their property. While this may provide a small tax benefit each and every year, when the property is ultimately sold, in many cases this depreciation must be recaptured at the rate of 25 percent.

Enter the like-kind exchange, which is a way of deferring that tax. At the outset of this column, it must be pointed out that contrary to popular opinion, this is not a "tax-free" transaction. The exchange, authorized by section 1031 of the Internal Revenue Code, will only defer -- not avoid -- the capital gains tax. It will not relieve you from the ultimate obligation to pay the capital gains tax.

Many years ago, a man by the name of T.J. Starker sold property in Oregon, pursuant to a "land exchange agreement," but did not receive any money for the sale. Instead, the seller -- a couple of years later -- transferred replacement property to Starker. The Internal Revenue Service considered this a taxable sale, but the 9th Circuit Court of Appeals held that this was a deferred exchange permitted under Section 1031 of the Tax Code. In other words, the exchange did not have to take place simultaneously.

The ideal exchange is a direct exchange. I own investment property A and you own property B (also investment). Both are of equal value. On Aug. 1, 2007, you convey B to me and on that same day I convey property A to you. If there is a written agreement between us that this is to be a 1031 exchange, neither of us will have to immediately pay any capital gains tax on any profit we have made.

But it is almost impossible to arrange such a transaction. The logistics of finding the replacement property to be exchanged simultaneously with the relinquished property is very difficult to coordinate.

Accordingly, most 1031 exchanges today are deferred.

There are two kinds of deferred (Starker) exchanges:

Forward exchange: You sell the relinquished property, and within the time limitations spelled out in Section 1031, obtain the replacement property;

Reverse exchange: You obtain title to the replacement first, and then sell the relinquished property.

The rules are complex, but here is a general overview of the process. With some important exceptions (discussed below) the rules apply equally whether the exchange is forward or reverse.

Section 1031 permits a delay (non-recognition) of gain only if the following conditions are met:

Must be investment property: The property transferred (called the "relinquished property") and the exchange property ("replacement property") must be "property held for productive use in trade, in business or for investment." Neither property in this exchange can be your principal residence, unless you have abandoned it as your personal house. Your vacation home would also not qualify as investment property, unless you actually start to rent it out more or less full time.

The area of vacation homes is complex and often misunderstood by taxpayers and lawyers alike. The IRS recently promised to provide more information to taxpayers regarding the treatment of these vacation homes.

There must be an exchange: The IRS wants to ensure that a transaction that is called an exchange is not really a sale and a subsequent purchase. Practically, an exchange looks like a sale, but the paperwork involved with the transaction makes it an exchange. It is important that anyone considering a 1031 exchange retain counsel who is familiar with the various rules.

The replacement property must be of "like kind": As a general rule, all real estate is considered "like kind" with all other real estate. Thus, a condominium unit can be swapped for an office building, a single-family home for raw land, or a farm for commercial or industrial property.

Once you meet these tests, it is important that you determine the tax consequences. If you do a like-kind exchange, your profit will be deferred until you sell the replacement property. However, it must be noted that the cost basis of the new property in most cases will be the basis of the old property. Discuss this with your accountant to determine whether the savings by using a like-kind exchange will make up for the lower cost basis on your new property. Many taxpayers are excited about the concept of deferring their gain, but when they analyze their situation, they realize that the tax will only be a few thousand dollars. Additionally, becoming a landlord again may not be that attractive.

There are two important time limitations that are spelled out in the statute and cannot be waived or modified:

1. Identification of the replacement property within 45 days. Congress did not like the fact that Mr. Starker had no time limitations on when the exchange could take place. Accordingly, the law now requires that the taxpayer identify the replacement property no later than 45 days after the relinquished property has been sold. According to the IRS, the taxpayer may identify more than one property as replacement property. However, the maximum number of replacement properties that the taxpayer may identify is either three properties of any fair market value, or any number of properties as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of all of the relinquished properties.

The replacement property or properties must be unambiguously described in a written document. According to the IRS, real property must be described by a legal description, street address or distinguishable name (e.g., The Nathan Apartment Building).

2. A neutral party is essential. If the taxpayer has any control of even one penny of the relinquished property's sales proceeds -- even for one minute -- the exchange will fail. All such proceeds must be held in escrow by a neutral party until the taxpayer is ready to close on the replacement property. At that time, the funds must go directly into that purchase. Generally, an intermediary or escrow agent is involved in the transaction. In order to make absolutely sure that the taxpayer does not have control or access to these funds during this interim period, the IRS requires that this agent cannot be the taxpayer or a related party. The holder of the escrow account can be a broker or an attorney, unless the attorney had within the past two years represented the taxpayer. In such cases, the IRS takes the position that the client controls the attorney and the funds would be constructively in the hands of the taxpayer.

3. Take title within 180 days: Title to the replacement property must be obtained no later than the earlier of 180 days after the relinquished property is transferred or the due date of the taxpayer's income tax return for the year in which the transfer is made. If, for example, you transferred the relinquished property on Dec. 1, 2007, your tax return is due on April 15, 2008, which is only 136 days. You either have to obtain the replacement property by that date or get extensions from the IRS so that you can extend out to the full 180 days. Nowadays, getting an extension is automatic. If by the due date, you file Form 4868, you will get an extension for six months. Please note, however, that while this allows you to late file your tax return, you still have to pay the tax by April 15, 2008.

4. Interest on the exchange proceeds.

What happens to the interest earned while the sales proceeds are held in escrow? The IRS calls this the "growth factor," and any such interest to the taxpayer has to be reported as earned income. Once the replacement property is obtained by the exchanger, the interest can either be used for the purchase of that property or paid directly to the exchanger.

Reverse exchanges: It is often difficult to meet the 45/180-day requirements. You have found the replacement property, but do not yet have a buyer for your relinquished property. And the owner of the new property is not prepared to wait until you are able to go to closing on your current property.

The reverse Starker -- if done properly -- can solve this dilemma. Here are some of the important rules:

1. The taxpayer must arrange for the replacement property to be held in a "qualified exchange accommodation arrangement." In government language, this is called "QEAA."

2. Qualified indicia of ownership of the property by the QEAA is required. This means that the QEAA must either have legal title to the replacement property or some other arrangement that is acceptable to the IRS to demonstrate ownership. For example, a land sales contract (also called "contract for deed") may suffice. Under this latter arrangement, the QEAA will not have actual legal title, but will have contractual obligations. This may -- depending on state or local law -- avoid having to pay a double recordation-transfer tax. Otherwise, this tax must be paid when the property is first transferred to the QEAA and then again when it is transferred to the ultimate taxpayer.

3. No later than five business days after the property is transferred to the QEAA, the taxpayer and the exchange accommodation titleholder (called the QEAT) must enter into a written agreement that states that the latter is holding the property for the benefit of the taxpayer in order to facilitate an exchange under section 1031. Generally, this can be accomplished by a lease of the property from the QEAT to the taxpayer.

4. Both the taxpayer and the exchange accommodation titleholder (the QEAA) must file separate federal income tax returns, so as to advise the IRS of any income and expense incurred while the QEAT had ownership of the property.

5. No later than 45 days after the replacement property is transferred, the taxpayer must identify the relinquished property. The IRS allows the taxpayer to identify alternative and multiple properties, and if the taxpayer owns several investment properties, this provides some flexibility as to which property will be sold.

6. No later than 180 days after the replacement property is transferred to the QEAT, it must be conveyed to the taxpayer.

7. Perhaps the most important aspect of a reverse Starker is the requirement that the taxpayer have a legitimate desire to engage in a 1031 exchange. According to the IRS regulations:

At the time the qualified indicia of ownership of the property is transferred to the exchange accommodation titleholder, it is the taxpayer's bona fide intent that the property held by the exchange accommodation titleholder represents ... replacement property ... in an exchange that is intended to qualify for non-recognition of gain (in whole or in part) or loss under §1031.

In other words, you cannot buy the replacement property and then -- as an afterthought -- decide to treat the transaction as a 1031 exchange.

The rules are extremely complex. You must seek both legal and tax accounting advice before you enter into any like-kind exchange transaction -- whether forward or reverse.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

'Creative financing' tactics to lure home buyers

2008-01-28T13:18:00.000-05:00

Retired seller moving abroad not looking to make big profit

By Benny L. Kass
Inman News

DEAR BENNY: I recently retired and am planning to move out of the country. I own a single-family house in a desirable area. I owe only about $70,000 on my current mortgage. The value of the house before the recent market crash was about $470,000. Despite the current market, numerous people have looked at the house, but only one has made an offer (a very lowball offer). I am not desperate to sell, but I want to move on with my retirement plans. The house is older, but has recently had about $30,000 in improvements in order to appeal to buyers.

Since I will not need the money from the sale of the house, how could I offer a very appealing owner-financed mortgage, perhaps with an introductory "teaser rate"? I called the bank that holds my mortgage, but it does not have anything in place to assist individuals with owner-financing. I could offer the house with a fair rate, but I do not want to have to fly back from another country to collect late payments, foreclose, make repairs or redo legal paperwork. Therefore, I am apprehensive about renting or offering a mortgage to anyone with less-than-perfect credit. Any suggestions you could offer would be appreciated. --Bob

DEAR BOB: There are a number of ways that you can market your house with what I call "creative financing."

First -- a land sales contract. Here, you enter into an agreement with your buyer that he or she will start making monthly payments. Your attorney will hold the deed to the property in escrow. When the buyer is able to obtain sufficient funds to pay the entire contract price, the deed will be recorded in the buyer's name. If the buyer does not make the payments, the agreement states that he or she will immediately move out, and you still own the house and keep the moneys that have been paid thus far.

Second -- a wraparound mortgage. You sell the house and take back a mortgage (deed of trust). Since you already have a mortgage that has not been paid in full, this would be a second trust.

Example: You sell the property for $470,000; the buyer pays you $20,000; and this second trust is for $450,000. Let's assume your current mortgage carries an interest rate of 5.5 percent, and the new mortgage is at 6.5 percent. You receive payments based on the higher mortgage rate, but pay off your lender at the existing rate. In my example, you will make 1 percent on the money you owe your bank, and 6.5 percent on the difference.

Third -- a seller take-back. If you -- or your buyer -- can come up with the money to pay off your outstanding mortgage, then you can take back a first deed of trust at an interest rate to be negotiated. You can start off with a low rate for a couple of years, and have it increase periodically.

You do not have to worry about flying back to handle these issues. You can appoint a bank or an attorney to handle all of these issues, including collecting the monthly mortgage payments or assessing any late fees, and you can enjoy your retirement wherever you are.

DEAR BENNY: I am on the board of directors of a 112-townhome development. A new development is being built right next to ours, and the developer has requested permission to tap into our water line. I assume that since he asked we must have some rights. We have an attorney researching this. Our development is approximately 22 years old. What are the pros and cons for allowing this and should we charge a fee? Thanks for your advice. --J.D.

DEAR J.D.: It appears obvious to me that your association has certain rights; otherwise, the developer would not be asking for your permission.

The very first thing I would have your attorney do is contact the water authority in your county, which must be involved in any discussion and decision that is made.

It concerns me that your water line will be used by another development. Is this only a temporary request (which under certain conditions would not bother me as much) or is this a permanent situation (which in my opinion is not acceptable)?

Yes, if the association and the developer enter into a written agreement, the developer should pay for the use of your water. But I am not sure how this can be determined. I suspect that a submeter will have to be installed, which must be at the expense of the developer and subject to the approval of the local water authority.

Bottom line: It's not a good idea.

DEAR BENNY: My daughter and her boyfriend are thinking about buying a house, and she is putting a larger down payment. Is this a good idea? --Doug

DEAR DOUG: There are ways to protect your daughter should they end up separating before marriage. As you no doubt recognize, that is always a possibility.

There are two ways they can take title -- either as tenants in common or joint tenants with right of survivorship.

Under the latter arrangement, should one of the owners die, the other owner will automatically -- by what is known as "operation of law" -- become the owner of the entire property. Unfortunately, very few states (to my knowledge) allow a disproportionate interest with such a tenancy. Basically, both parties own the entire property equally. So there is no guarantee that your daughter's investment in the property will be protected.

In a tenants-in-common arrangement, ownership can be based on the amount of money that each party invests in the property. So, for example, if your daughter is putting up 75 percent of the down payment, title can be held as tenants in common, 75-25.

With that arrangement, should one of the parties die, his or her interest will be distributed in accordance with that person's last will and testament, and probate is required. So if your daughter has a larger interest, her share will go by way of her will.

Accordingly, at least until the couple gets married, I would recommend a tenant-in-common arrangement. Once they get married, if they so desire, they can change the title into tenants by the entirety, which is reserved for husband and wife.

I also suggest that they enter into a "partnership arrangement," which would spell out such matters as what happens if one party wants out of the deal, dies or cannot afford to assist with the house payments.

DEAR BENNY: My husband and his mother bought a commercial property as joint tenants seven years ago. His mother has developed a mental illness and has announced that she wants to file bankruptcy. What are his legal options? His mother's business is located in the building, which she is going to include in bankruptcy. She has quit making mortgage payments but will not agree to sell. --Leigh

DEAR LEIGH: This is obviously a difficult problem for you and your husband, especially since his mother is involved. I am not a bankruptcy attorney and suggest that you immediately consult an attorney with that expertise.

Did your mother-in-law ever give anyone her power of attorney? That should be investigated. If there is such a document, the holder of that power may be able to take appropriate action and resolve the situation.

If there is no such power, you may want to consider going to your local court to have a conservator and guardian appointed to act on her behalf. Your mother-in-law will have to be in court, if she is able to do so, and the judge will have to find that she is incapacitated -- meaning that she does not have the capacity to make financial or personal decision on her own. Again, your attorney should be able to assist you.

Depending on what conditions the judge puts in the court order, a conservator will have full authority to investigate the matter and take all appropriate action. However, the conservator must act in the best interests of your mother -- and not your husband.

DEAR BENNY: We want to accept a contract on our property. The buyers disclosed on their financial statement that they have $10,000 in a checking account. They wrote the earnest money check for $20,000 from that account. All other items on the contract are acceptable. Do we have a contract at this point? --Greg

DEAR GREG: In order to have a binding, legal contract, there must be (1) an offer, (2) acceptance and (3) consideration. Money -- the earnest money deposit -- is the consideration.

In a follow-up e-mail, you told me that you do not want to sell the house now. So if you have not signed the document, there is no contract. You may have a problem with your real estate agent who may claim that you owe a commission based on your listing agreement, but that's a different issue.

If you have already signed, there is a contract. You should demand that the real estate agent holding the check deposit it immediately. Agents generally have the legal obligation to deposit those checks within a certain period of time -- usually five to seven days from receipt.

If the check is good, you have a valid, binding contract and it will be difficult to get out from under it. If the check is not good, there was no "consideration" and thus no binding sales contract.

I don't know why they wrote a check for $20,000 when they disclosed that they have only $10,000 in their checking account. It could be that they deducted the deposit check and then disclosed the difference on their financial statement.

IRS to step up enforcement of Starker exchanges

2008-01-24T12:07:00.000-05:00

Survey finds property owners abusing tax rules

By Benny L. Kass
Inman News

If you are considering a 1031 exchange (also known as a "Starker exchange"), you better make sure that you do it right. The Internal Revenue Service plans to increase its audits and its enforcement of these exchanges by the summer of 2008.

Usually, when a taxpayer sells a business or investment property, the taxpayer must pay a tax on any profit that is made. If the property was owned for more than one year, it will normally be considered a long-term capital gain and the tax will be based on your income. Currently, the highest tax rate is 15 percent.

However, if the taxpayer engages in an exchange, and strictly follows the complex rules, this gain can be postponed. For example, if you purchased your investment property for $100,000 and sold it for $200,000, you would in most cases have to pay the IRS $15,000 in addition to any state or local tax. However, if this property was sold in connection with a Starker exchange and you obtained another investment property worth $300,000, you would not have to pay any capital gains tax. Instead, the basis of the old property would be transferred to the new one; you would have to pay the tax only when you ultimately sold the replacement property and did not engage in yet another 1031 exchange.

But you must understand that a 1031 is not a "tax-free" process; it only defers the time when you have to pay the capital gains tax.

In a report issued last month, the Treasury Inspector General for Tax Administration (TIGTA) advised the IRS that "there appears to be little IRS oversight of the capital gains (or losses) deferred through like-kind exchanges."

When a taxpayer engages in a 1031 exchange, he or she must file Form 8824 with the IRS for the year in which the exchange took place. The Inspector General reported that more than 338,500 forms were filed in 2004 (the year of the TIGTA's study). This amounted to deferred gains or losses of more than $73.6 billion. According to the report, "while this represents a doubling of the number of like-kind exchanges reported in 1998, the total dollars amounts deferred more than tripled."

Like-kind 1031 exchanges serve a valuable function. According to the TIGTA report:

Taxpayers who take advantage of like-kind exchanges increase their purchasing power, as well as their financing and leverage capabilities, because payment of federal tax on the gains is deferred ... with additional equity to reinvest, taxpayers can execute exchange after exchange to create a pyramiding effect. The tax liability may be forgiven upon the death of the investor because the heirs may qualify for a stepped-up basis on the inherited property.

But because of the lack of enforcement by the IRS, taxpayers have been taking advantage of these favorable tax rules. For example, the Government Accountability Office (GAO) conducted a similar survey and found that taxpayers often made misrepresentations of the assets that were being exchanged. In order to have a successful 1031 exchange, real property must be exchanged for like-kind property. While this is a very broad category -- you can exchange a single-family investment property for raw land, an office building for a shopping center, or a condominium unit for a cooperative apartment -- the exchange will not be accepted if you want to exchange your principal residence for some other kind of property. Nor can you exchange a business for real property: it is not "like-kind."

However, the Inspector General discovered that the IRS generally will not impose any penalties if a taxpayer does not file Form 8824.

The report also highlighted other abuses, such as related party exchanges, incorrect basis figures, and partial, step and bartering exchanges. These are highly complex technical issues that will not be discussed or explained in this column.

Based on its findings, the Inspector General made three specific recommendations, all of which have been accepted by the IRS.

1. The IRS should study tax-reporting and compliance issues involved with like-kind exchanges The IRS agreed to conduct research studies and complete its work by Aug. 15, 2008. Based on the outcome of this research, it appears likely that exchanges that take place this year will be given greater scrutiny.

2. The IRS should provide better information and guidance to taxpayers on how to conduct a proper 1031 exchange. The IRS has agreed that by Jan. 15, 2008, it will provide more information on a number of its publications and forms so as to assist taxpayers in understanding how the exchange process works. Specifically, Publication 17 (entitled Your Federal Income Tax) will be updated to specifically remind taxpayers that they must file Form 8824 with their income tax return if they have been involved in a 1031 exchange during the previous year.

3. The IRS must provide clear guidance to taxpayers regarding the rules and regulations governing like-kind exchanges with respect to second and vacation homes that were not used exclusively by owners.

This is an area that is extremely complex. According to the Inspector General, "the absence of clarification on this issue leaves unrebutted the sales pitch of like-kind exchange promoters who may encourage taxpayers to improperly claim deferral of capital gains tax by selling nonqualified second and vacation homes through 'tax-free' exchanges."

Here, too, the IRS agreed. By March 15, 2008, the IRS will provide additional information to consumers and to tax practitioners about the filing requirements for Form 8824. More importantly, the IRS will increase its "consumer warnings" so as to caution taxpayers to be "wary of individuals promoting improper use of like-kind exchanges."

The IRS will not discourage the use of the Starker exchange. This process is specifically authorized in Section 1031 of the Internal Revenue Code. But investors must be on their guard against deceptive and fraudulent promotional schemes. Keep in mind that a Starker exchange is not a "tax-free" exchange; it is a "tax-deferral." If done properly, it will allow the taxpayer to use the moneys that otherwise would go to Uncle Sam for additional investments.

If you plan to get involved in a 1031 exchange, you should make sure your own lawyer and accountant review the process at every step.

In fact, depending on the amount of your gain, it may be best to just pay the capital gains tax and not become a landlord on the new replacement property. Your financial advisors will be able to assess and assist you in making this important decision.

(Note: The entire report can be located on the Web at www.tigta.gov; click on 2007 audit reports. It is report 2007-301-72).

10 ways to sell your home faster

2008-01-22T15:34:00.000-05:00

A few basic elements can make the difference between a quick home sale and a frustrating ordeal. The experts offer their best tips.

By Liz Pulliam Weston

No matter how long your home lingers unsold, you can comfort yourself that at least you're not Mark Twain.

The celebrated author put his Hartford, Conn., home on the market for $60,000 in 1901, according to biographer Fred Kaplan. Despite repeated markdowns, the elaborate house failed to attract a buyer until the price was finally slashed to $25,000 two years later.

What was a once a much-loved home -- and one in which Twain estimated he'd invested more than $100,000 -- became a painful albatross.

"I would rather go to hell," Twain wrote the friend who was helping him sell the place, "than own it 50 days longer."

If you want to avoid Twain's agony, you'd be smart to do some work up front to make sure your house sells fast. That's particularly important these days as some of the hottest real-estate markets show signs of cooling and homes start to linger on the market longer than their sellers expected.

10 tips from the experts
Here is some of what experts advise to speed up your sale:

Finish the "honey do" list. Just about every homeowner has a string of little repairs that never quite get done. Now's the time. Fix the screens, oil that squeak, patch the cracks, paint the trim. Stuff that you've long since stopped noticing could be shouting "Deferred maintenance!" to every potential buyer.

The cost: A few bucks if you're handy, a couple of hundred or so if you hire someone who is.

Get inspected. A pre-sale inspection can help in two ways, says real-estate columnist Tom Kelly. Professional inspections can identify problems that could thwart a sale in time to fix them. And if there are no major problems, he said, an inspection can publicize that fact to skittish buyers.

"Having an inspection (report) right on the counter during the open house… shows the buyers that the seller's got nothing to hide," said Kelly, author of several real-estate books, including "Cashing in on a Second Home in Mexico."

The cost: Around $400.

Pack up the clutter. "Clutter eats equity," said real-estate broker Barb Schwarz, CEO of StagedHomes.com and a pioneer of the concept of professionally preparing houses for sale.

Too much stuff makes rooms look smaller and focuses buyers' attention on your possessions rather than the home you're trying to sell. That's why many professional stagers recommend removing as much as a third of your things to better show off rooms and closets.

"Since you're going to have to pack it up anyway, do it now," advised Schwarz, who said she has staged more than 5,000 homes. Buyers "can't imagine themselves living there if they can't see the space."

The cost: $150 to $300 a month for three months' storage.

Depersonalize and neutralize. The first items that should go in those packing boxes: family photos, collections and just about anything else that says "you." Streamline your artwork and consider toning down bold decorating statements, said Ilyce Glink, author of "50 Simple Steps You Can Take to Sell Your Home Faster and for More Money in Any Market." That means neutral shades if you need to repaint walls or replace carpets.

"Buyers have a hard enough time envisioning how their stuff will look on your walls," Glink said. "By neutralizing your decor, you can help give them the blank canvas they need to imagine your house as theirs."

The cost: $10 and up for paint; $500 and up for new carpet.

Clean like a fiend. "I mean Q-Tip clean," said Schwarz, who recommends taking a cotton swab to faucets and fixtures, scouring fingerprints from all the switch plates, shining windows until they're spotless and vacuuming up every last dog hair from the baseboards. "You should be able to eat off the kitchen floor, the bathroom floor."

You'll need to banish suspect smells as well; you don't want your house to become known in real-estate circles as "the cat pee place." If your pets have had one too many accidents, you may need to replace the affected carpet and padding and have the underlying floor sealed. If you're not sure how your place smells, get your least tactful friend to take a few whiffs and tell you the honest truth.

The cost: $10 or so in home cleaning products, if you do it yourself; $75 and up if you hire help.

Stage the rooms. Stand in the doorway to find each room's focal point, and use furniture placement to highlight that. The back of your sofa shouldn't block the view of the fireplace, for example, and the dining room table shouldn't be sharing space with a stair climber.

You should remove any extraneous pieces of furniture, but you may be able to "repurpose" them in another room. A wingback chair that's crowding the family room might help create a nice reading nook in the master bedroom, Schwarz suggested. The cost: Nothing, if you do it yourself; $1,500 and up if you hire a professional stager.

Tend to the floors. Keeping them spotless won't help if they're dated, worn or impossibly stained. You shouldn't spend a fortune installing hardwood or tile, though, since you're unlikely to recoup the cost. Look for compromises that can improve the home's appearance without busting your wallet. If the damage to a tile floor is limited, for instance, replacing a few tiles and regrouting might do the trick, according to home-improvement expert Joseph Celli, author of "First Aid for Home Sellers." (Available through his Web site.) If it's extensive, he recommends replacing the floor with high-quality vinyl as a more cost-effective option.

Carpets should be steam-cleaned to see if they're salvageable, Celli said. If not, you may be able to reduce the costs of replacement by offering to do some of the work, such as removing the old carpet and moving furniture.

And banish scatter rugs, Schwarz advised. Little rugs add to the visual clutter and can be dangerous besides.

The cost: Anywhere from a few bucks to a few hundred bucks.

Kick up the curb appeal. By now, you probably realize the garden gnomes are a no-no. But you may not realize how many sales you're losing before potential buyers even get to the front door.

"Most people will start their search for a home on the Internet. If your house's Internet photo doesn't 'wow!' them, they might never call for a showing," Glink said. "That's why your front landscaping needs to be in perfect condition."

Given the pressure to make a good first impression, you'll need to do more than trim back the hedges and plant a few pansies.

"Hire a professional landscaper to clean up the leaves, plant some fall flowers, trim the bushes and trees, and really manicure your lawn," Glink suggested. "If your front walkway is cracked, now might be the time to replace it."

The cost: $300 to $500 for the landscaping, more if you need to fix walkways or driveways.

If you're going to try to sell your home yourself, make sure you're up for the job. Hawking a home, especially in a slowing market, can be hard work.

The cost: 3% to 6% of the sale price of your home.

Set the right price. In frenzied markets, sellers who put outrageous price tags on their homes sometimes are rewarded. As markets cool, however, a too-high asking price can lead to a home being shunned by agents and buyers. A seller may think she's just testing the market, assuming buyers will at least make an offer, but buyers may assume she's unreasonable and move on.

Your goal should be a fair price -- something that's reasonable given the price of other homes in your area.

"Buyers who are actively searching for a fairly-priced home," Glink said, "will pounce on what they perceive is fair value."

How to prevent foreclosure

2008-01-09T11:07:00.000-05:00

Contacting lender before missing payments offers advantage

By Ilyce R. Glink
Inman News
I received a call to my radio show just before the end of the year from a woman who had just received a letter from the bank that it was starting foreclosure proceedings.

Let's just say that it wasn't the year-end gift she was hoping for.

She told me how she had lost her job and used up all her savings to keep making her mortgage, home equity line of credit, and credit-card payments each month. After awhile, it was too much to manage, even after she got a new job.

What she wanted to know was where she could go to get help that would stop the foreclosure proceedings.

By the time you get a court date, it's a little late to unwind the clock. Instead, if you want to stop the bank from foreclosing on your house, the time to get help is before you've missed a single payment.

Most people know how to account for every dollar that comes in. It may not be your favorite task each month, but if money is tight and you're trying to make ends meet, you know when the budget is about to snap.

When you have a list of debts and bills, you should sort them from most important to least important. While all of the bills should be paid, the one that goes at the top of the list is the one that will cause your family the most damage if it isn't paid on time.

If I were organizing a list, it would read: mortgage payment; home equity loan/line of credit payment; utility bills; car payment(s); credit-card debt(s); and other bills.

Once you know that you won't have enough cash to go around, it's tempting to skip the biggest bill, which is typically your mortgage payment. But in some states, foreclosure is fast-tracked, which means you could find yourself receiving a foreclosure notice from your lender in as little as 60 days.

So let's back up: Once you know there isn't enough money to go around, and you know you'll be missing a payment, you need to call your lender. If you've already missed a payment, and your lender has called you, you need to pick up the phone and return the call. Talking to your lender is the best way to stop foreclosure.

Many borrowers have complained that when they call their mortgage company, no one picks up the phone. Or, they get transferred from department to department.

The truth is, if you don't talk to the lender, and it doesn't get recorded in your file, it doesn't matter how often you tried to call. When it comes to foreclosure, "trying" doesn't count.

If you're having trouble reaching your lender, call a HUD-certified housing counselor, who may be able to reach out to your lender on your behalf. The toll-free number is (800) 569-4287, or go online to www.HUD.gov/foreclosure/index.cfm.

Once you miss a payment, your lender will start sending you letters. If you want to avoid foreclosure, open the letters. These are supposed to contain information on how you can save your home.

In order to help you save your home, lenders can make changes to the terms of your loan agreement. The best time to do this is either just before or just after you miss your first payment.

Lenders can: (1) reinstate your loan (you'll catch up with everything you owe by a certain date; (2) offer forbearance (give you a few months off from making payments, while developing a plan to get you current on your loan down the line; (3) set up a repayment plan (where you agree to pay a little each month for the next six months or a year until you're caught up); or (4) modify your loan (this will change the terms so that the payments are more affordable).

All of the talk you're hearing about the government-sponsored solution to the mortgage crisis deals with loan modifications. The federal government is pushing investors who bought your loan to agree to modify the terms for the next few years. When a lender agrees to modify your loan, it could mean that the missed payments will be added to the loan amount, or that the interest rate will be changed from a variable rate to a fixed, or perhaps it will be lowered to a different interest rate. A final loan modification option is to adjust the amortization schedule, so that you have a longer loan term, but your payments each month are smaller.

For some borrowers, there's one other way to save your home: It's called a partial claim. A partial claim may be available only on certain loans and in limited circumstances. If you and your loan are eligible, you can set up an additional loan that will help you make up your missing payments.

This limited program is available to people who are several months behind in their home loan payments, and it allows them to become current on the loan. But the borrowers' circumstances must be such that they have overcome the reasons why they couldn't make their payments and can make the future payments on their loan. For more information, you can contact your current lender or get more information from HUD at http://www.hud.gov/offices/hsg/sfh/nsc/faqpc.cfm.

But don't delay in contacting your lender. The longer you wait, the tougher it will be to stop the lender from foreclosing on your property.

7 Tips for Selling a Home Faster and for More

2007-12-14T15:41:00.000-05:00

Online real estate firm Redfin offers seven recommendations for selling a home faster and for more money.

The seven tips come from an analysis of academic research, multiple listings service data, and from information posted on Redfin’s various Web sites.

1. Don't overprice your property. According to a 2002 academic study of 3,490 California listings, homes without a price reduction sold for 97 percent of the initial list price, whereas homes with a price reduction sold for 88 percent of the initial list price.

2. Set your price to show up in Web searches. A September 2007 Redfin study analyzed how online search filters affect traffic to a listing. Because real estate sites filter on price in $25,000 or $50,000 increments, listings priced at or below these thresholds — $250,000 rather than $251,000, or $325,000 rather than $326,000 — get as much as 7.1 percent more online visits.

3. Debut on Friday. A December 2007 Redfin analysis of its online traffic for 119,079 listings across seven markets found that listings that debut on Friday get on average 7.7 percent more visitors in their first seven days than those that debut on the worst day, Thursday.

4. Get sellers engaged with your agent. According to several academic studies, motivated, active sellers are able to sell their property as much as 30 percent faster.

5. Market the property online. Promoting a listing on Web sites beyond the local Multiple Listing Service can drive a significant number of new online visits to a property. A December 2007 analysis of 121 Redfin listings found that promoting the listings on Craigslist resulted in an average of 6.8 online visits to the property for each Craigslist promotion.

6. Have sellers stay put. The study of 3,490 California listings, cited earlier, found that vacant homes were 9.5 percent more likely to undergo a price reduction.

7. Wait to list your property until neighboring foreclosures are off the market. According to a November 2007 report from the Center for Responsible Lending, a foreclosure costs neighboring home owners an average of $5,000 when listing their property.

Source: Redfin (12/14/07)
www.LagretRealEstate.com

Figuring out the math when it's time to move on

2007-12-14T05:40:00.000-05:00

By Lew Sichelman

WASHINGTON -- In a hot housing market, it doesn't seem to matter what price sellers put on their homes. Whatever you ask, someone will offer more.

But in a slow market, pricing is key. Price the place too high and it will languish, soon taking on the aura of a white elephant.

Yet the key isn't so much your asking price as it is how fast you want to sell, said Zan Monroe, a senior instructor for the Council of Residential Specialists based in Fayetteville, N.C., and proponent of "absorption-rate pricing." If you've got time on your hands and are in no real hurry to move, then, yes, you can offer your place at the high end of the market. But if you want out fast, you have to be much more realistic. You need to find the price point at which your house will sell as quickly as you need it to.

Absorption-rate pricing isn't new. Practically every type of business uses the technique. But it is new to real estate. "Our industry is just now catching on," said Monroe, who teaches agents how to help clients determine an asking price commensurate with their need to move on.

First, realize that only a certain number of houses will sell in any market, strong or not, in any given time period.

To determine the odds that your house will sell, you'll need help from an agent whose firm participates in your local multiple-listing service. You'll need to know how many houses were on the market in the last six months, how many sales closed in that period and how many new listings were entered into the MLS during the same time frame.

Six months is the perfect time search, Monroe said. Any longer presents an inaccurate picture because the same house may drop off the market and come back as another listing. It appears as two different properties, when in fact it is the same.

Let's say there were 53 closings of the 128 listings that entered the MLS in the last six months. That means 41% of the houses that entered the market sold. So the odds of your place selling in the 180 days after you put it on the market are just over 40% -- regardless of how low the price. Most people find this exercise rather sobering. "I've never met anyone who considered the fact that their house will not sell," said Monroe, the real-estate educator. "But in some places right now, there's only a slim chance, if any."

Remember, you can cast as wide a net as you want. Or you can drill down to, say, your own neighborhood, a certain price range, school district or even house style. The more detailed the search, the more accurate the results, Monroe said.

Once you determine your criteria, you can figure out the absorption rate. And you'll also want to ascertain a trend line, so you'll need to go from a 12-month analysis to a six-month review and then to a three-month survey. The longer time period gives you the most data to work with and, therefore, a good average, while the shorter time frames tend to show the most up-to-date sales picture. This, Monroe explained, "tells you exactly what the market is doing."

Say, for example, that 1,200 sales fitting your search criteria closed in the last year. That's an average of 100 per month. Divide the number of active listings -- say, 800 -- by the average closed per month, and you'll now know that there's an eight-month supply of houses on the market.

According to Monroe, a six-month supply is a balanced market. Less than that is "not enough houses to fill demand," he said. "More means there are not enough buyers."

Next, perform the same analysis doing a six-month search and then a three-month search, and you can see exactly what's going on. If the months' supply of houses is going down, the rate of sales is speeding up. But if it is going up, sales are slowing.

If you have given yourself a year to sell your place, then an eight-month supply shouldn't bother you. But in Monroe's 27 years in the real-estate business, he has never heard of any seller who has had that long.

"Usually," he said, "sellers have a time frame of 90 days. And if they have to be in that new house or new job in three months, then they really need to find a buyer in 60 days, not 90."

Now it's time to decide where to price your place in relation to the market. Here, Monroe suggested asking yourself what your "walkaway" price would be. This is the amount of money you'll have in your pocket after settlement. Look at the prices of the homes in your search criteria that have been sold and that are still on the market to see if your "walkaway" price is in the ballpark.

"For most people, this is a reality check," Monroe said.

Based on the absorption rate in your search, you can see how long it will take to sell your place. If it will take more time than you have, you'll have to set a lower price. That, in theory, should attract more potential buyers and allow you to put up a "sold" sign sooner rather than later.

"Every house has a selling price," Monroe said. "But sellers need to be more realistic. There's a one-day price, a 30-day price, a 60-day price and so on."

House for sale in Columbia, MD

2007-12-10T11:06:00.001-05:00

See the House for Sale

When will market hit bottom?

2007-12-10T10:55:00.000-05:00

Dissecting the downturn

By Glenn Roberts Jr.
Inman News

For economist Dean Baker, the next U.S. economic recession is more a matter of when than if.

"I don't know how we avoid a recession," said Baker, co-director of the Center for Economic and Policy Research, a research and public education organization.

While Baker is less optimistic about the fate of the housing market and U.S. economy, market predictions by even the most optimistic real estate and economic analysts have generally grown gloomier in the past several months as troubles in the mortgage and credit markets have boiled over.

That has led many housing-market experts to reach a common conclusion: It's worse than we thought.

The bottom of the housing market is likely deeper and wider than previously imagined, they say, so the housing slump could drag down the economy with greater force and further delay a recovery.

Problems ranging from foreclosures and unavailable mortgage loans to subprime mortgage-company bankruptcies and skyrocketing losses associated with mortgage-related securities have sent shockwaves from Main Street to Wall Street.

Home sales have dropped off substantially and home prices are falling in many markets.

The global nature of mortgage financing has entwined the course of the United States' real estate downturn with factors outside of this nation's control, and troubles in the U.S. housing market and economy may likewise signal a host of international financial problems.

"We're really at the beginning of this," Baker said, noting that the unprecedented run-up in U.S. housing prices fell out of line with inflation and other fundamentals. "My expectation is that the bulk of that run-up will disappear."

A recession, he noted, "can be hard to recognize even when it has already begun."

While Baker said it doesn't appear that the United States has entered a recession yet, he said he is surprised to see continuing strength in some segments of the economy despite other downward trends.

Employment numbers have shown some resilience, he said, though many jobs are low-paying and don't offer much in benefits.

Also, while home ownership reached record levels during the latest housing boom, the rate of equity to value is at a record low as people have borrowed against their homes, Baker noted.

The economic recovery that followed the technology bubble and stock crash in 2001 was aided by growth in the housing market, and this time around there may not be another similar crutch to prop up the economy.

"What I worry about with this recession ... it might be very hard to get out of," Baker said.

He expects more of a slow, drawn-out bottoming and recovery cycle. "The unraveling could take two to three years."

It could be quicker, he said, if there is widespread real estate panic and the market floods with home sales and corrects more rapidly. Some markets have already been inundated with for-sale inventory.

Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at University of California, Berkeley, said during a mid-November presentation that a recession is becoming more likely and it's prudent to plan for the worst, though he says there is still a 55 percent chance that the nation will avoid a recession.

Home prices may continue to fall another 5 percent to 7 percent nationally before the market turns around, he said.

Pressure on home prices

Economist Robert Shiller said during a presentation in late November that a recession is more likely than not, and he also said it would not be a surprise to see massive home-price declines. "I think we are in a period of exceptional uncertainty about the value of our homes."

The Standard & Poor's/Case-Shiller U.S. National Home Price Index -- an index that Shiller helped establish -- dropped 4.5 percent in the third quarter compared to the same quarter last year and dropped 1.7 percent compared to the second quarter, which represents records in the 21-year history covered by this index.

And the Office of Federal Housing Enterprise Oversight reported the first quarterly decline in average U.S. home prices in 13 years for the third quarter -- down 0.4 percent -- based on a separate price index.

Another index released by the National Association of Home Builders and Wells Fargo found that the national median price of new and resale homes sold in the third quarter dropped 3.6 percent year-over-year, and the National Association of Realtors reported a 2 percent year-over-year decline in the resale home price in the third quarter.

The U.S. Census Bureau and Department of Housing and Urban Development reported that the median sales price of new homes slid 13 percent in October compared to October 2006, and the Realtor group reported that the median price of U.S. resale homes fell 5.1 percent year-over-year in October.

National home sales have been dropping, too, while the volume of foreclosures has been rising.

The foreclosure problem will likely be with us through 2009, said Mark Dotzour, "The foreclosure situation nationally ramped up pretty dramatically in 2007 and will continue all the way through 2008 and well into 2009 as well, and then it's going to fall off pretty abruptly in the first quarter of 2010," said Mark Dotzour, an economist at Texas A&M University.

He said there is still a steady stream of adjustable-rate mortgages that are heading for a reset in rates during this period, which he likened to "sticks of dynamite where the fuse has already been lit."

Loose mortgage underwriting standards during the boom have created a sort of "renter" class among homeowners who cannot afford their payments and will be forced to leave, he said.

"We just had thousands of families move into homes thinking they were homeowners, when basically they are just 'renters' with no equity in a home and no hope of getting equity in a home."

In addition to problematic mortgages and rising foreclosures, home builders have contributed to the market downturn by overbuilding in some markets, Dotzour said, which has led them to offer discounted prices and other incentives.

That, in turn, has put downward pressure on resale-home prices.

"People have been asking me, 'When are we going to start to see a turnaround in housing?' The very first sign is when builders offer homes for sale without concessions," he said.

Builders also must pull back more on home production, he added. "I don't think we'll even start the beginning of a turnaround until we see a significant further reduction in the amount of houses being built.

"The fact is they're still building too many homes. Unfortunately what we'll have to see is a large segment of the home-building industry withdrawing from the market totally, either voluntarily or through bankruptcy."

Despite efforts to reduce inventory by offering incentives and cutting production, several large public home builders have reported huge multi-million-dollar quarterly losses. And many builders have cut staff to help reduce costs during this downturn.

Some builders have exposure to the subprime mortgage meltdown and credit crisis, too, through subsidiary lending divisions.

Dotzour said he expects the housing market to regain some balance in supply and demand in 2010, "barring any sort of spectacular government intervention."

The federal government may intervene to prevent the foreclosure situation from getting out of hand, he said, though political actions could "exacerbate the problem rather than help it," and the upcoming election year may increase the probability that Congress or the president "will do something dramatic to make political points."

Today's downturn more severe

Nicolas Retsinas, director of Harvard University's Joint Center for Housing, said it appears this housing slump is more severe than most, and it may be 2009 "before we start to see even a modest recovery."

If it weren't for the credit problems in the mortgage market, housing may have been ripe for a recovery in 2008, he said. "Credit is the lifeblood of housing in this country, and the squeeze basically shut off demand."

A surge in foreclosures could be "the last shoe to drop" in this downturn, he said, and could lead to a "more dramatic falloff in prices."

Jobs are a key indicator for the economy, Retsinas said, and if the nation continues to add jobs then the economy could weather the impact of the housing downturn and avoid a recession. "If people are still working we will find our way through this."

The mortgage and credit market problems have sparked a renewed interest in government regulation of the mortgage industry, Retsinas also noted.

The Federal Reserve has taken some actions that are intended to prevent the credit crunch from snowballing into an economic disaster, though Retsinas said that recent Fed interest-rate cuts haven't provided much of a lift for the housing market.

"I daresay the Central Bank of China probably has more to do with interest rates than the Fed," he said.

Ed Leamer director of the Anderson Forecast, a quarterly economic forecast produced at the University of California, Los Angeles, said that Fed actions in setting rates won't have much impact "until we start getting stable, appreciating prices."

Leamer is more optimistic than some economists about when the housing market will turn the corner. Foreclosures will likely peak in 2008, he said, and return to a normal level.

His expectation is that the housing market "will stop being a drag on growth in mid-2008 but will not experience a rapid bounce-back. No recession, this time."

Rising home prices will be the clearest signal that the real estate market is in a recovery phase, Leamer said.

"Excessive appreciation drove the market up, and now prices are declining. We need a half-year or more of rising prices to get the sense of urgency back into home buying. That is going to take awhile, which means expect a painfully slow recovery," he said.

Actions by Congress or federal regulators that are aimed at assisting distressed homeowners may realistically have more of an impact on the next real estate market cycle than on the current one, said Jonathan Miller, executive vice president and director of research for Radar Logic Inc., a New York-based real estate research and analytics company.

"I think there will be more quick fixes in the election year than there will be long-term solutions," he said.

Miller, who notes that local real estate markets are unique and some are faring quite well, said that nationally he doesn't expect to see the market hit bottom until 2010. "I think we've got more than two years -- probably two-and-a-half years to go," Miller said.

"This is not a short-term situation. The inventory overhang is so significant and sales have dropped so much over the last year and a half that it's going to take a long time to absorb the inventory."

Miller last year wrote in his blog that he expected the nation to enter a recession in 2007 or in early 2008, and "I still believe we're going in that direction," he said.

"One of the things that has always amazed me in discussions about the economy ... is that we have this disconnect from what the housing market is actually doing and what its potential impact to the economy is."

The health of the housing market is vital to the health of the economy, he said.

Whether or not you believe the United States is headed for a recession, the answer will likely become more clear in the first quarter or second quarter of 2008, said Josh Bivens, an economist for the Economic Policy Institute, a nonprofit, nonpartisan economic think tank.

"I expect the housing market to be awfully tough through the entirety of 2008," Bivens said. "My guess at a recession in the next year is at about 50-50 -- housing is the number one reason why I'm that concerned about it."

It remains to be seen how heavily the economy relied on mortgage-equity withdrawals, as "soon that's going to fall to zero," he said. If nothing can replace those withdrawals as an economic engine, "then we'll have a recession."

Home prices will probably continue to fall into 2009 as rental prices and home prices close a gap that had dramatically widened during the housing boom, Bivens said, adding that he wouldn't be surprised if home prices remain "really flat for a long time."

Soaring home-price growth of the up-cycle has led us to "uncharted waters," and if the nation does enter a recession then prices could fall steeply. "How much will home prices fall? It has me worried."

If you apply the same type of price correction relative to past market cycles, Bivens said it is possible prices could fall 25 percent nationwide.

"Historical experience says that's definitely a possibility and how the economy responds to a fall like that is a real worry," he said.

He expects that the impact of foreclosures will stretch beyond economically depressed markets like Detroit and Cleveland and hit markets like Boston and Washington, D.C.

He shares the view of several other economists that legislative actions will probably not stop the market's overall trajectory.

Also, he believes the global economy will suffer if the U.S. economy falters. "It's hard to imagine global growth being that good without the U.S. economy dragging it along."

www.LagretRealEstate.com

Why Sellers Should Cut Prices

2007-11-29T10:42:00.000-05:00

By Lauren Baier Kim

Here's a look at what's new in real-estate markets across the U.S. from around the Web. (Some links may require registration or subscriptions.)

Hope for borrowers in California

Under a plan announced last week by Gov. Arnold Schwarzenegger, help may be on the way for half a million California homeowners whose subprime mortgages are due to reset to higher interest rates within the next two years, says Carolyn Said in a San Francisco Chronicle article.

According to the story, four lenders -- Countrywide, GMAC, Litton and HomeEq -- have voluntarily agreed to maintain the initial lower interest rates on mortgages for these borrowers, as long as they live in their homes, are making payments on time and can prove they cannot afford to pay higher rates, the Chronicle says.

It's not known how long lenders will freeze rates, but Larry Litton Jr., chief executive of Litton Loan Servicing, says his company will maintain the initial interest rates for as much as five years. Such a move may make sense for both investors who hold the loans and for homeowners: "It feels like a no-brainer for a loan servicer to keep the payment where it is, keep another piece of real estate off the market and keep the borrower in the house," Mr. Litton says in the article.

Forget the incentives -- cut the price instead

Thinking about throwing in a new car with your home sale, or perhaps offering your broker a bonus to move your property? Forget about it. Price discounts are the most effective way to get your house sold in today's housing market, according to a Bloomberg.com article by John F. Wasik. "Buyers just want price," he quotes one real-estate broker and consultant based in Stuart, Fla., as saying. "Buyers have become more educated and they can easily cut through the fluffy incentives," he says.

Related Links

Read news and analysis on the housing market at WSJ.com's Developments blog.

More Open House columns

Mr. Wasik notes that about 2 million homes may fall into foreclosure this year and that living near such a property could slash as much as $5,000 from your house's value. In many markets, homeowners should offer an asking price that's at least 10% below the competition, he says. He points out that in Boston and in Calif.'s Orange County and Sacramento, more than half of the homes on the market have already been reduced.

Brits snatch up U.S. homes

Americans may have hit the malls on Black Friday, but across the pond, Britons are looking for a different kind of bargain -- U.S. residential real estate, says an article in the London-based the Observer. With the exchange rate above two dollars to the pound and with housing prices on the decline in the U.S., Brits are buying up stateside holiday homes, selling their own U.K. properties to relocate to the U.S. and even purchasing U.S. residential real estate in the hopes of renting it out, the Observer says. Twenty percent of overseas buyers in the U.S. are purchasing for investment purposes, while about 50% are buying second homes, the newspaper says. Top places of interest for British buyers are Manhattan, California and Florida, the article says. "People can't believe the amount and type of property you can get," says the owner of one Florida firm who advertises to overseas buyers. "They would expect to pay twice that amount for the same thing in the U.K."

Grosse Price Declines

Grosse Pointe, Mich., is one of the most exclusive suburbs of Detroit, but it's now a place "Where Mansions Go Begging," according to the headline of a recent New York Times article by Keith Schneider. Mr. Schneider notes that since June, home prices in the exclusive suburb have been dropping by about $100,000 a month. Homes on the market number at 700 -- twice as many as there were at the same time in 2005 -- and may take 12 to 18 months to sell. Sixty homes foreclosed in the suburb this year as of last month, the article says.

For instance, one home buyer mentioned in the article purchased a 5,900-square-foot house in the area for $1.5 million, or $500,000 off the asking price.

Grosse Pointe has been hit by the same slump that's affecting the general Detroit area, where housing prices have dropped at least 20% in the past year, the article says. There are 41,000 homes on the market, twice as many as there were in 2005, and thanks to a flagging auto industry, the state has an unemployment rate of 7.7%, the highest in the nation.

Сити - будущее или вчерашний день?

2007-11-28T05:16:00.000-05:00

Сейчас в России в каждом городе есть проект делового центра с большим количеством высотных бизнес-центров. Но нужны ли такие деловые центры с учетом развития современных технологий связи и обмена информации? Создание деловых центров приводит к новым пробкам и крупным ежедневным "миграциям" жителей. Сейчас на Западе в моду входит создание самодостаточных районов, где есть и жилье, и торговля, и офисы. При этом снижается общее количество перемещений людей по городу (экономия времени, бензина и нервов) и количество пробок.

вопрос:

"Я в США никогда не был, поэтому очень интересно Ваше мнение о будущем развитии городов. У нас сейчас активно строятся коттеджные поселки. А я читал, что часть из пригородов в США пришли со временем в упадок, так как первоначальное единство социальной среды со временем начинает нарушаться. Это действительно так?"

Ответ:

Мы живем в городе Коламбия, Мариланд, где такая планировка началась 50 лет назад. Город разделён на центры (их пока 5) Центр - магазины, банки, химчистки и т.п. Многоквартирные дома, дальше по более широкому радиусу домики на 2-4 семьи и самые удалённые от центра отдельно стоящие дома...выбор жить здесь выпал по географическому положению-близко к Вашингтону и Балтимору-два больших города где есть всегда работа и здесь хорошие государственные школы. Вы немного ошибаетесь насчет упадка пригородов ...Я бы привела пример Балтимора.

30-25 лет назад центр города распродовался за один доллар за дом, если хозяева обязались зделать капитальный ремонт. Почему Балтимор пришел в упадок...есть разные причины: экономические, социальные и даже вина губернатора - плохое руководство...Но в пригорадах Балтимора очень много хороших преуспевающих рай-онов. Живет много обеспечанных и преуспеваюших людей...30 лет назад была тенденция расселения в пригорадах (был дешевый бензин), сейчас наоборот -люди переезжают назад в центр города - хотят выть ближе к событиям. Например старые заводские здания переделываются на современные комфортабельные открытые квартиры и т.п. Там, где выла фабрика, делают кафе...
Нарушается ли социальная среда? Скорее нет...люди разных соц положений крутяться в своей среде и только если необходимо выходят за свои рамки...

When can my rental become my dream home

2007-11-19T07:16:00.000-05:00

Clearing up confusion over 1031 property exchanges

By Benny L. Kass
Inman News

DEAR BENNY: In a recent column, I read that 1031 property transfers had to be held for a period of one to two years to establish "intent." I thought that a law was passed in October 2004 that stated the "intent" period was five years. I bought a 1031 property in California in 2005 and would appreciate this being clarified. Thank you for column! --Nancy M.

DEAR NANCY: The column was correct and so are you -- but you both are referring to different aspects of a 1031 (often called a "Starker") exchange.

Issue #1: Here, too, there are two issues: (a) How long can you hold the replacement property before you can exchange it again? and (b) How long do you have to keep the property as investment before you can move into the property and treat it as your principal residence?

As for (a), the statute clearly says that in order to get non-recognition of gain, you have to keep it for at least two years. As to (b), as that recent column properly stated, there is absolutely no IRS official guidance. Some tax lawyers take the position that one year and one day (i.e. go through one tax year) is sufficient. Others rely on what we call the "old and cold rule," namely that if the transaction took place more than two years ago, the exchange will generally not be reviewed by the IRS.

I have lots of clients who exchanged their investment rental property for a retirement home in Florida or Nevada, and want to know how long they must rent it before they can move in and establish it as their principal residence. The safe harbor is two years.

Issue #2: That leads us into the second part of your question. You are correct in that Congress a couple of years ago made some changes to 1031 exchanges. If you do an exchange and then convert it to your principal residence, in order to take advantage of the up-to-$250,000 exclusion of gain ($500,000 if you are married and file a joint tax return), you have to own the property for a full five years before it is sold. You also have to meet the two-year occupancy requirement. The actual text of the law reads as follows:

PROPERTY ACQUIRED IN LIKE-KIND EXCHANGE -- If a taxpayer acquired property in an exchange to which section 1031 applied, subsection (a) shall not apply to the sale or exchange of such property if it occurs during the five-year period beginning with the date of the acquisition of such property.

I hope this clarifies the confusion.

DEAR BENNY: My wife and I and another couple are in the middle of buying a condo together and should be closing this month. The other couple has already been preapproved for 100 percent financing. We've been told that since they are already approved that they should go ahead and buy the condo and then amend the title while we're in escrow and add my wife and I to the title. I was curious as to whether this would work. --Josh

DEAR JOSH: I don't think so. Your friends have been approved for a loan, but you have not. At closing (you call it escrow) the lender will give specific instructions that will include that your friends will have to sign the promissory note and deed of trust. I seriously doubt that the escrow company will permit you and your wife to be added without the approval of the lender.

Can you qualify for the loan? Have you discussed the situation with the lender? The lender may also want to consider this an investment loan, which could result in an increase in the mortgage. Your friends could, of course, add your name to the title after escrow, but that might be grounds for the lender to call the loan based on the "due on sale" clause that I am sure will be in their deed of trust (the mortgage document).

So, I suggest that you talk to the lender and see what can be done between now and the escrow date.

But, your question raised two additional issues that concern me. First, you state that the loan is 100 percent. I don't know your financial situation (or that of your friend) but such loans have recently been associated with the many foreclosures that are taking place throughout the country. Have you -- or your friend -- carefully examined the terms of that loan? At some point, that loan will change whereby you will have to start paying principal and interest -- but at what interest rate? I am not a fan of such 100 percent loans.

Of equal importance, do the four of you have a written agreement as to how you will handle the property? What if you and your wife want out of the deal? What if someone dies? What if one of the partners gets divorced? What if someone cannot pay his or her share of the monthly mortgage payments?

All of these issues must be reduced to a written partnership agreement. The time to resolve these issues is when you are talking to each other.

DEAR BENNY: My wife and I are considering helping our son buy his first house. He is a recent college graduate with a well-paying professional job. He has been working for about a year, with about four months in his current job. He is living in our home paying some rent while saving the bulk of his paycheck. Given the cost of homes in the area and his lack of credit history, my wife and I figure he would need our help to buy his own home. Do you have any suggestions on how to approach this situation? We are not crazy about the idea of co-signing, as we consider that a risky proposition, but would be more amenable to co-ownership. Even if we agree to co-ownership, how can we protect our interest if the property is not maintained properly? Any tax consequences for us? --Steve

DEAR STEVE: Good question and very timely. As you suggest, property values nowadays are out of reach for many young adults.

There are several ways to approach this. First, do you have the money to buy the house and then rent it to your son? Every year, you and your wife could gift him up to $24,000 of the value of the house (you can gift up to $12,000 per person tax- and gift-tax free). You will need an attorney to assist you with this arrangement.

Next, can you be the bank? Can you lend him all the money and take back financing? He would pay you a fixed interest rate, which could even be greater than you are currently getting from your investments.

Finally, you could enter into what is known as a "shared-equity" arrangement. For example, you and your wife would own 50 percent of the property and your son would own the other half. You have to discuss with your attorney how title will be taken. But with a shared-equity arrangement, you both pay your share of the mortgage, taxes and insurance, and your son pays you rent for the half of the house that you own.

You need a written agreement, which will spell out all of the terms and conditions regarding the property. You asked about maintaining the property; the agreement will include provisions that should give you the protection you need.

There are two benefits for a shared-equity arrangement. Many lenders will give you a loan based on a personal residence rather than as an investment loan. Thus, you would get the benefit of a lower interest rate. Second, while you would have to pay tax on the rental income you receive from your son, you will also be able to deduct for tax purposes your share of the mortgage interest and real estate tax. You should also be able to take depreciation on the portion of the property that you rent to your son.

DEAR BENNY: What is a "hard-money lender"? I have read that they are entities that lend money out at 10 to 12 percent interest. They stay in business because the people who borrow their money will pay the higher interest to get the money faster and without a credit check.

Do people who buy at foreclosure sales or get involved with short sales use this as a means of financing these properties? Where do I find these "hard-money lenders"? --John

DEAR JOHN: There are good and bad hard-money lenders. These lenders usually make short-term, high-interest loans, and often they are "bridge loans.. For example, you want to buy a new house but have not yet been able to sell your current one. You have sufficient equity in your house, so you borrow money using your house as collateral. You hope that your house will sell quickly and thus are not concerned that the interest rate is higher than you can get from a commercial lender.

Usually, these hard-money lenders rely on the equity in your house rather than on your financial ability to pay.

But that's where problems start. Too many lenders make such loans knowing that the borrower will not be able to make the monthly payments, and thus the lender will ultimately foreclose on the property. In effect, these loans are designed to fail. They are called "predatory lenders."

You can find hard-money lenders just by typing those words in your favorite Internet search engine. But they should be the "lender of last resort." If you have to rely on a high-interest, short-term loan, maybe you are not ready to make that purchase.

Calculating the Cost Of Building a New Home

2007-11-13T12:05:00.000-05:00

By June Fletcher
From The Wall Street Journal Online

Question: I want to build a 2,800-square-foot home with four bedrooms, two and one-half baths, a gourmet kitchen, walkout basement with media room and three-car garage in Pennsylvania. How can I estimate the cost to build the house? And what do you think about modular homes?

-- Sheila, Spring City, Pa.

Answer: According to B4UBuild.com, which sells books on the subject of cost estimating, the average cost-per-square-foot to build a home on site is between $95 and $150.

Contractors generally agree that cost-per-square-foot is a terrible way to budget for a home, because there are so many variables involved. Do you insist on top-of-the-line cabinets and appliances for your gourmet kitchen, or will mid-range ones do? Are you planning to side the house with cheap vinyl or expensive stone brick? Is the house going to be one story, or two? (The latter is generally cheaper because the foundation is smaller.) Will you have simple, rectangular rooms that minimize the materials and the labor required for framing, or unusual shapes like octagons with vaulted ceilings? What sort of flooring, bathroom fixtures and heating and cooling system will you have? Is the lot easy to access, relatively flat and easy to dig, or is it rocky, heavily wooded and uneven?

There are a few Web-based calculators that can help you make rough cost calculations. One easy-to-use, free one is Building-Cost.net, which adjusts not only for the quality levels of finishes and fixtures, but also for location, down to the city level. But bear in mind that this and other calculators won't give you an exact estimate, since ultimately that will be determined by the profit margins of the contractor you hire -- information you can't really know in advance.

So if you go the site-built route, I suggest that you start with a dollar amount that you're willing to spend. Interview at least three contractors and check their licenses and references and look at their work.

Once you've found someone you like and trust, the two of you can take your preliminary budget and work backwards, including the must-haves and eliminating the mere wish-I-hads as money allows.

Be sure to keep a cushion of at least 10% to 20% of the total project cost to cover last-minute changes, delays and other problems you can't foresee (for example, the cost of lumber spiking mid-project).

Now to your question about modular homes. Manufacturers of these homes, which are built in a factory in sections, say they are a lot more durable than site-built ones, since they are constructed in controlled conditions. But modular homes still make up only a tiny fraction of new home sales -- only 3.6% of the 1.06 million new homes sold last year, according to the National Modular Housing Council. (Click here for a list of manufacturers.)

That's partly because some consumers remember how uninspired modular homes looked in the 1980s and because some people still confuse them with so-called "manufactured homes," also known as mobile homes or trailers.

But these days, computer-aided design means that almost any house plan you choose can be made into a modular home. I think modular homes are fine and definitely worth considering, as long as you can visit a model or a nearby factory. Don't assume you'll save a few bucks, however. In fact, by the time the house is delivered to your lot and assembled, it may cost as much as a site-built one.

Can tenant break lease because of illness?

2007-11-01T10:43:00.000-04:00

Rent it Right

By Janet Portman
Inman News

Q: We rent a single-family house and have a two-year lease. A month into the lease, the owners told us they'll be selling the property, and sure enough, we've had droves of real estate agents and potential buyers traipsing through our home. My wife has a serious medical condition (she's in a wheelchair and uses a ventilator) and needs peace and quiet so she can rest, but with this commotion it's impossible. The landlord refuses to be reasonable. We want to leave, but do we have grounds to break our lease? --Steve F.

A: Most states have laws governing when, for what reason, and with how much notice a landlord may enter a tenant's home. Entry to show the property to prospective buyers is always on the list of permitted reasons. As disruptive as it is, if your landlord is following your state's access rules, there's not much you can do on that front. But if your landlord is violating state law -- by not giving adequate notice or insisting on inappropriate showing times -- you may have some recourse. Practically speaking, however, unless the landlord's violations are extreme and repeated, you won't be justified in breaking your lease (you'll have to sue in small claims court for invasion of privacy and ask for money damages).

But don't give up just yet. First, consider whether your wife's condition qualifies her as a disabled person under the Fair Housing Amendments Act. Does she have a physical or mental condition that substantially limits one or more major life activities? If so, the owners are legally bound to adjust their business practices so that she can live safely and comfortably in her rented home. This accommodation should mean at the minimum a willingness to work with you to minimize the disruptions caused by showing the property.

If the owners still won't budge, suppose you break your lease and move. The owners will probably retain your security deposit to cover unpaid future rent -- and may sue you for the rest of the rent, too. In your defense (and request for the return of your deposit), could you prove to a judge that the owners knew they'd be placing the property on the market when you all signed the lease? If so, and if you can also provide credible evidence that the owners knew of your need for peace and quiet, you may be able to convince a judge that the owners should have disclosed their plans, and this failure justifies your breaking the lease. You'll be relying on a garden-variety legal principle that when one side to a deal has information that it knows is critical to the other side's decision but fails to disclose it, the contract can be voided.

Q: The quiet street where our rental property is located is about to be widened, to make way for a four-lane roadway. This will take away the front yard and expose the residents to considerable traffic noise and pollution. We're upset, as are the neighbors. We all suspect that the large shopping center nearby is the driving force behind this project. Can we stop it?--Barry and Katie S.

A: It sounds like your city is about to exercise its power of "eminent domain." This power traditionally gave government the ability to seize private property (and pay for it) in order to build roads, hospitals, schools and other structures that benefited the public in general. But what about taking private land to benefit private interests? The United States Supreme Court addressed this question in the Kelo case (Kelo v. City of New London, 545 U.S. 469 (2005)), where it allowed New London to seize property that would be used by a private developer.

The public, however, was not happy with the Kelo decision. In the 2006 midterm elections, citizens in 12 states placed initiatives that would rein in eminent domain use. Many states now prohibit outright the use of eminent domain for economic development, and others permit it only to eliminate slums and blight.

If your state has trimmed the permissible use of eminent domain, you and your neighbors may have an argument that the city is using it improperly. You'll want to know who will benefit from that wide new road other than the shopping center owners. Are other developers circling, ready to begin commercial or residential building once access is improved? For more information on the states' reactions to Kelo, and suggestions on how to protest an eminent domain taking for private development, check out castlecoalition.org.

Q:We rent a home in a neighborhood that has a homeowners association. We have a problem with our next-door neighbors -- they don't like the fence our landlord put up, and have taken to dumping trash and yard cuttings on our side. Worse, they yell racial epithets at us. We've secured a restraining order, but it doesn't help. Our landlord has gotten nowhere with the homeowners association, which says it's a private dispute. The landlord is willing to let us out of our lease, but we don't want to move. Any suggestions on what we can do to stop this harassment?--Tim and Diana F.

A: It's time to talk again to that homeowners association. Traditionally, these associations left neighbor-to-neighbor disputes alone, figuring that if the dispute didn't involve common areas or external appearances, it was a matter for the neighbors to work out or refer to the police. But now, they ignore disputes like yours at their peril. That's because courts are increasingly recognizing that condominium and even homeowners associations are subject to the Fair Housing Act (the federal law that prohibits discrimination in housing sales or rentals). This means that they need to take steps to stop the kind of situation you describe (lawyers would call it a hostile housing environment based on race.)

Your association needs to take action to stop this obnoxious behavior in its midst. The association surely has a rule against illegal activity among its members, with consequences for its violation, including fines or suspension of privileges. Failure to address this situation will set the association up for a fair-housing lawsuit brought by you, which can be extremely expensive -- especially if the association's insurance policy does not cover such claims.

Desperate plan to keep home after falling behind on property taxes

2007-10-26T11:55:00.000-04:00

Why loaning father-in-law money is better than him quitclaiming ownership

By Ilyce R. Glink
and Samuel J. Tamkin

Q: My father-in-law owns property with his sister. He lives on the property, but she doesn't. They each own an equal share of the property, but he now can't afford to pay the expenses.

He wants to quitclaim his half of the property to me and my wife, and I'll take over his property taxes plus pay all past-due taxes. Do I need a lawyer to help fill out the forms or is this something we can do ourselves. Also, I should tell you that the property is mortgage-free.

A: You certainly can try to do it yourself, but you would probably be wise to talk with a real estate attorney to know what you are getting into. While paying past-due real estate taxes might sound simple, in some cases it can be cumbersome.

Also, if your father-in-law has paid all the expenses on the property and has lived there, does his sister still want to own her share of the property?

If she dies, her share of the property will go to whomever she has listed in her will. If you or your wife are listed as the heirs to her share of the property, that will help. But if you are not named the heir of the property and there are other siblings or relatives, you should know that you may be setting yourself for a big problem by taking over your father's share of the property.

You should sit down with your father-in-law and his sister to discuss the property and what they really want to do with it. There are other ways to handle this situation other than with a quitclaim deed.

If your father-in-law still wants to or needs to live on the property, you may want to help him with his expenses or even loan him money for the payment of those expenses. He and his sister can then give you a mortgage in return for the loan.

You would protect your money and your father-in-law could continue to live on the property.

Sam Tamkin
In many states if you own the property and live there as your primary residence, you get substantial tax benefits, such as the homestead exemption. You might lose these benefits if your father is no longer on title.

Furthermore, if you take title of the property now by a quitclaim deed, your father-in-law would effectively be gifting you the property prior to his death. The value of the gift would be your father-in-law's share of the value of the property when he purchased it plus any improvements made on the property.

If the property has appreciated in value substantially, you will end up paying taxes on the appreciation. If you and your wife were to inherit his share of the property, you would inherit the property at its value at the time of your father-in-law's death.

There is more to your question than just the transfer of the title to you. There are tax consequences and estate-planning issues you should consider. The best thing you can do is to consult with an estate attorney or real estate attorney who can help you think through these issues and decide what course of action to take.

Q: I hired a builder to build a custom home. We had ordered some upgrades and two weeks prior to closing I asked the builder for the final price of the home to secure financing. He gave me the number and said we would be fine.

So we closed with that purchase price. Two weeks later, he said some more bills had come in and that we owe him an additional $14,000. Is this my responsibility or is he out of luck because we have already closed?

A: There are multiple variables that would determine whether you owe the builder the amount he now claims. If the builder made an honest mistake and you recognize that he made this mistake, it would seem unfair to deprive him of the money he is owed.

However, your purchase contract should govern the transaction. Some contracts have language in them that would permit the parties to revisit an error like the one you are describing. If the contract has no such language, the builder may be out of luck. The price he set at closing would be the price for the sale.

First, you need to determine whether the builder is right about the numbers and whether he may be entitled to reimbursement. If you think he is, you should sit down, read over the contract, then talk to a real estate attorney and decide whether you will use the terms of the contract to shield yourself from paying the builder.

If you clearly recognize that the builder is owed the money, you might decide to pay him anyway. It would be a good-faith gesture, and in so doing you might be able to get the builder to extend the warranty on the home or get something else in return.

www.LagretRealEstate.com

Realtor vs. auction: Which will get seller top dollar?

2007-10-25T11:09:00.000-04:00

Owners want to sell home 'as is' with no contingencies

By Ilyce R. Glink
Inman News

Q: My sister and I recently inherited our mother's home in California. It is an old house with all the value in the location. We want to sell it "as is" with no contingencies.

Developers have built on both sides of the property and sold those properties for between $1.5 million and $2.5 million. We are thinking about selling the home at an auction versus listing with a real estate agent.

What's your recommendation? And what would the tax ramifications be?

A: You have a valuable property on your hands. Whether you decide to sell at an auction or by using a real estate agent will be up to you. But certainly you should investigate further to determine whether you might get a higher price by using an auction or a real estate agent. If you're thinking you'll net out more by using an auction over an agent, you might be surprised by the outcome. Auctions aren't cheap.

But there are some reasons to use an auction. Depending on the type of property and its location, the auction route can be quick and yield good results. But you really need to make that determination after you talk to various knowledgeable real estate agents who really know and work in the area where the home is located, as well as talking to the most experienced auction houses that have dealt with properties like yours.

Keep in mind that auction house sales often have high transaction costs. Those costs can be greater than what some real estate brokers charge. Then again, what if it takes six months to a year to sell the property with a broker? A quick sale at auction with higher costs might be better than getting the same price for the home but having to pay the costs to own the home for an extra year.

The first thing to do is consult with several local real estate agents to get their take on the real estate market in that area. You might even want to investigate how quickly new construction homes are selling in that area. If the market is still rolling along where your mom's home is located, you might even be able to call local builders and to see if they have any interest in buying your mom's property.

Now let's talk about taxes. If you recently inherited the property, the value for federal income tax purposes will generally be the price you sell it for. Therefore, you should not have to pay any federal income taxes on the sale of the property.

If you inherited the property a couple of years ago and are just now selling it, you'll have to pay federal income taxes on the difference between the value of the property at the time your mother died and the price you get from the sale of the home, less expenses and other costs.

Don't forget about state estate taxes. Depending on the state in which you live, you may owe state estate taxes even if your mom's estate isn't at the threshold for federal estate taxes. You'll probably want to hire a real estate attorney to help with the sale. For details about state and federal estate taxes, talk to an estate attorney or your tax preparer.

Q: I read your answer to a recent question about inheritance taxes. You might want to point out that some states tax estates in full or at levels less than the federal level. Maryland happens to tax estates over $1 million.

A: Thanks for pointing out that as the federal estate tax exemption has grown larger, many states have opted out of tying their estate taxes to the federal level. This can create some expensive headaches for people whose assets may be below the federal level and above their own state level.

It also helps explain why some people are flocking to states that have no state taxes, such as Florida and Nevada.

If you have a large amount of assets -- even if your primary asset is real estate worth in excess of $1 million -- please talk to an estate attorney about your state laws and what you need to do to reduce any estate taxes that may be owed.

Q: I signed a contract to buy a house. We were supposed to close within 30 days.

Unfortunately, the seller did not turn on the gas so that the furnace could be tested. So, the closing date has already passed. Now the seller wants to rent the house out and not sell the house at all to me.

We asked that the gas be turned on so that the furnace could be tested because this was an issue in our inspection. My real estate agent then put in the extension line for settlement "TBD" but with no date. Can the seller just walk away from the deal?

A: If there was no firm date for you to buy the home, there may not have been a true contract agreed to. Depending on where you live, the back and forth of the contract documents may have ended up with you and the seller never agreeing to the terms of a contract. If there was no agreement, there was no contract and the seller is free to sell the home or rent it to someone other than you.

If you signed a contract and the contract was binding, then the question is what notice was given to the seller regarding the home inspection. If the notice given to the seller was that you did not approve of the inspection to the home due to the gas being off, that notice might have been construed as your disapproval of the condition of the property. If you disapproved the condition, the contract would have died at that time.

So, the first thing you need to determine is whether there was a valid contract for the purchase of the home. Then you need to know whether the notice to the seller regarding the gas and furnace also included language that could have terminated the contract. Lastly, you would have to know what your rights and remedies are under the contract if it is still valid.

You failed to buy the home, and the seller did not turn on the gas for you to test the furnace. You probably were not assisted in this process by an attorney and if you want to force the seller to sell you the home, you'll have to hire an attorney to review the paperwork and, perhaps, sue the seller to force the sale.

On the other hand, if you get your deposit money back from the seller, you may ultimately decide that the best course of action is to find another home to buy.

For more guidance, you should discuss your problem with a real estate attorney in your area.

Go to www.LagretRealEstate.com

Security deposit too small to cover pet, smoke damage

2007-10-25T10:58:00.000-04:00

Can landlord raise deposit or is he stuck paying repair bill?

By Robert Griswold
Inman News

Question: I have a rental unit that I have leased out with only a $200 security deposit. I inadvertently rented to a smoker with a small dog. I was aware of the dog, but not the smoking. The tenant seems to be a chain smoker -- when I enter the unit to do repairs it smells like an ashtray. He never leaves the door open and the windows are always closed. He hardly lets his dog out and I also noticed that his dog pees on the carpet. I feel that by the end of his lease the carpet will be totally trashed and the smell unacceptable. The deposit is not enough to cover the replacement of new carpets. In the meantime, is there anything I can do?

James McKinley, an attorney for landlords, replies:

Since neither the dog nor the smoking is prohibited by the lease, there is little that you can do at this time. However, in order to avoid further damage to your property, you should give your tenant notice that you do not intend to renew the lease 30 days before the lease expires (or a longer notice if required). After you give your tenant notice of termination of the tenancy, you are required to notify your tenant, in writing, of his option to request an initial inspection of the premises and his right to be present at the inspection. You should also consider meeting with the tenant prior to the end of the lease to give your tenant an opportunity to remedy the identified deficiencies, in order to avoid deductions from the security deposit. After the inspection, you are required to give your tenant a statement specifying repairs or cleaning that need to be completed in order to avoid deductions from the security deposit. After the tenant vacates, you should to give an itemized statement showing how the security deposit was applied to rent, cleaning and/or damages, as required by state or local law. The tenant is still responsible for the costs of cleaning or repairs not covered by the security deposit, but you will have to commence a small claims action or general civil action to recover those damages.

Steven Kellman, an attorney for tenants, replies:

While you are bound by the lease in allowing the tenant to live there with his dog and his cigarettes, you are not forced to allow the continuing damage to your property. Tenants are entitled to many rights, but they must also act responsibly to earn those rights. I would suggest considering taking a course of action now rather than waiting for the tenant to move out. Pet owners and smokers must conduct themselves in such a manner so as not to cause material damage or create such a significant interference with the quiet enjoyment of the other tenants at the property. If this tenant allows his dog to damage the carpet and if he smokes in such a manner as to cause "smoke damage" to the unit, you may demand that he stop both activities right away. This is in the best interests of your property and the neighbors who do not want to be impacted with offensive smells or increased rent to cover damage costs.

You may view the tenant's behavior as a breach of the part of your lease that requires the tenant to maintain the unit without damaging it. In that case, you would give him a legal notice to cure that behavior thus saving the property and his tenancy. If you feel the damage is significant, you may then try to view the conduct as a nuisance, which may result in a termination of the tenancy with a different legal notice. In either case, the appropriate legal notices can be tricky so advice from an experienced local tenant-landlord attorney is recommended before taking such action. If you are forced to wait to the end of the lease, you should be sure to terminate the lease without renewal and handle the deposit as James advises.

Property manager Griswold replies:

The attorneys seem to have covered what to do at the end of the lease, but I think you are also asking what can you do now and I would like to give you an option. While it isn't popular with many tenants, you do have the legal right upon proper notice to increase the security deposit from the current $200 to an amount that would be more likely to cover your anticipated costs of repairing the damage that may be caused by the pet and/or the tenant. Make sure that you comply with any local restrictions or maximum amounts, but in most jurisdictions you can simply raise the security deposit upon lease renewal or by giving written notice if the tenant is on a month-to-month rental agreement. The purpose of the security deposit is not just to have funds to cover damages but it can also be an effective incentive for tenants to maintain the property during their tenancy as well as make efforts to leave the property in good condition. Most tenants really want and need those funds when they move. If you ever want to see what damage can be done to a rental unit, rent your property to a tenant and don't charge a security deposit or, better yet, offer a $99 move-in special!

How to sell in a buyer's market

2007-10-18T13:53:00.000-04:00

You've got to be proactive on price, marketing and more. Here are 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.

Sellers "need to be prepared for a sustained effort," says Colby Sambrotto, chief operating officer of ForSaleByOwner.com.

Homes are staying on the market for about four months, according to the most recent averages from the National Association of Realtors.

If you plan to plant your "for sale" sign, here are 10 things you can do beforehand:

1. Recognize every market is different. Your state, town or neighborhood could dovetail with national numbers or buck the trend entirely. "There really is no national market," says Sambrotto. "There's a patchwork of regional markets." Never rely solely on one person's advice or opinion. Talk to a handful of professionals, do your own research and listen to your gut instinct.

2. Get your home inspected. "Before I would even call a real-estate agent, I'd have my home inspected," says attorney Diana Brodman Summers, author of "How to Buy Your First Home." Some real-estate agents advise against spending the money (basic inspections range from $200 to $400, according to a 2004 survey from the American Society of Home Inspectors), because the buyers will get one anyway prior to closing. Others recommend it because it gives sellers an early warning on any repairs they might have to make.

But in this market, says Summers, it's better to be proactive. "I would rather know what the inspector is going to find and be able to fix it -- and pick who will fix it," she says. This method also allows you to shop around for the best price instead of perhaps paying an inflated price later on.

3. Shape up before marketing. A buyer's market means you've got more competition. "You want to put your best foot forward," says Eric Tyson, co-author of "House Selling for Dummies." If your home isn't appealing and in good repair, potential buyers won't even stop. Some sellers think it's OK to skip this step and take less, but if the house is not appealing, you may not get the chance to negotiate. "Six weeks before you want to put it on the market is a great time to get it done," says Summers. You don't need to renovate, but make sure everything looks good and works well. Easy ways to make your home stand out:

New paint. Paint the whole house, if it needs it, or just the trim, shutters and door to freshen up.
A clean entryway. Sweep or pressure-wash the front walk and porch. Polish the outdoor metalwork, clean the windows and glass, and replace any burned-out bulbs in outdoor lighting. And, if you can, add planters with flowers.
Lush landscaping. Think new mulch, sharp edging, a healthy lawn and beds of flowers.
"Maximize your chances of people being excited about your listing when it hits the market," Tyson says.

4. Devise a marketing plan. Do you want to use a real-estate agent or would you rather sell it yourself? If you try doing it yourself, set a time limit after which you want to enlist the aid of a professional. Selling it yourself can save you the real-estate commission (usually about 6 percent), which can be an advantage in a tight market. But in a buyer's market -- or rapidly changing market -- it can help to have a little professional expertise to price, market and move your property. And don't forget, potential buyers may think that if there's no agent involved, the price should already be 6 percent less. Both buyer and seller can't save the same 6 percent.

5. Check into company relocation assistance. Are you moving to take a new job? If so, the company might offer resources to make selling your house easier, says Summers. Some companies will even provide a list of real-estate pros who will work with you at a discount. If you're selling in a tight market, every little bit helps. Best source: Call your human-resources department.

6. Interview real-estate agents. If you're interested in using an agent, interview several early on about listing your home, says Tyson. "Ask them for their advice," he says. "That's a good way to select an agent." What would they highlight about your home? What would they change before it goes on the market?

Ask to see an activity list -- a list of all the buyers and sellers they've represented, the areas of town and the price ranges. You don't want private details, says Tyson. But you want to see if they've worked in your neighborhood, in your price range and if they have a track record of successful sales.

How old are the comparable sales (often called "comps") they are showing you? A few years ago, you could study comps that were six months or a year old. This year, because many markets are changing, you want neighborhood comps that are no more than three months old, says Summers.

And find out how long each has been a professional. Experience counts. "If you're going to pay 5 to 6 percent, you might as well get the best your money can get," says Tyson.

7. Set a price. The rules are different in soft markets. "You don't overprice your house 20 percent to leave wiggle room for negotiating," says Tyson. That kind of strategy might never be a good idea, but it can really backfire in 2007. It's not a matter of being willing to negotiate. If your price is too high, potential buyers may not even look at it. And they may very well see a negative message in such a high price. "Those who overprice their homes in this market are wasting everyone's time," he says.

If you're not using an agent, get your own comps -- from the local paper, from sites such as Zillow.com and Realtor.com -- to see how similar houses in the area are priced. Also find out which newspaper in your area publishes notices when properties are sold. Sometimes it's the local daily or legal paper. Tracking those is a good way of learning actual sales prices, as opposed to asking prices.

Then set a realistic figure. Your goal: to maximize the chances that the perfect buyer will actually see it, Tyson says.

To get an idea of what's going on now, you want recent comps. But you may also want to look at comparables from the past six months. "You will see trends," says Patricia Fitzgerald, broker/owner of Coastal Properties in Jupiter, Fla. Are properties moving? Are prices holding steady or are sellers dropping prices?

Pricing is strategy. And much of it comes down to just how motivated you are to sell -- or how quickly you have to leave.

If you plan to pad the price, it's "an art, not an exact science," Tyson says. "Five to 10 percent is one thing. Fifteen to 20 percent and you have a problem."

Two more points to consider:

Modern technology. Agents and buyers most likely are using computers to search for properties. If you want to sell yours for about $400,000, consider listing it at $399,999 rather than $400,500. That way, a computer search of anything between $350,000 and $400,000 will include your listing.
Commissions aren't add-ons. Don't add the real-estate commission to the value of the home to come up with your asking price, says Tyson. If you use an agent, the fee comes out of your share of the profits. Otherwise, "you're going to get penalized for overpricing your house," he says. Instead: Try negotiating your commission with the agent. When the recent seller's market was in full swing, it was easy to get agents to list your property for as low as 4 percent (split with a co-broker). They knew the property would sell in days or weeks and their marketing costs would be low. Now it's reversed. Agents commonly are looking at four to six months to sell a property, which increases their marketing expenses. This makes them hesitant to offer a discount.
Beware of hidden financing costs. Not all financing is the same from a seller's point of view. With some types of financing, such as FHA and VA home loans, the seller pays the points on the loan. Understand the different types and what will be required of you as a seller, because that could affect how much you net in a sale.

8. Understand your price. While you don't want to undervalue your house, many sellers today won't make as much as neighbors who sold last year, says Summers. If you have your heart set on a certain amount and find out that houses aren't selling for that, you may "have to change your mind and sit on the house," she says.

9. Get rid of the junk. "This year, it's more important because buyers are going to be more fussy," says Summers. "Buyers are going to come in with an attitude." Throw things out, ship them early or rent a storage locker. But clear out that clutter. Buyers look for space and light. To show it off, you need to be able to tour a group comfortably through the house, as well as actually walk into those "walk-in" closets.

10. Stay on top of the market. "You must be aware of market changes," says Summers. That's one reason she recommends using an agent. Stay on top of what is happening with mortgages and finance rates, keep looking at comps and "see trends before they happen," she says. "The real-estate market is still in a time of correction. You have to be so careful with both buying and selling."

Does soldier qualify for $250K tax break?

2007-10-18T11:23:00.000-04:00

Sudden overseas deployment leaves 2-year occupancy rule unsatisfied

By Ilyce R. Glink
Inman News

Q: I have a friend who is in a bind. He is an active-duty Marine. Less than two years ago he was transferred to Camp Lejeune (North Carolina) and bought a home. He just received orders to report to Okinawa, Japan, by the end of the month. His home is for sale and will sell soon.

The problem is that his property has appreciated somewhat and he will make a profit after his expenses are factored in. According to the IRS, you have to live in your house for two of the last five years in order to keep up to $250,000 in profits tax free.

Is there a special clause or waiver for someone in his situation where he can sell his home now and still receive his capital gains up to $250,000 per person tax free? Or is there any chance with his particular case that waiting until the two-year mark before escrow closes that he may receive this capital gain tax free?

Also, if he is allowed to receive his gains tax free, is there a time limit established on how long he has to spend this capital gain?

A: The IRS allows homeowners to avoid having to pay any taxes on the gain from the sale of their home up to $250,000 for a single homeowner or $500,000 for married couples. However, the homeowner must have lived in the home as his or her principal residence for two years out of the last five years. If your friend has a gain from the sale of his home and it is less than $250,000, he would want to avoid having to pay federal income taxes on this profit.

But the IRS has some exceptions for people like your friend who have to move because of certain unforeseen circumstances, including death, divorce, taking a new job that is at least 50 miles from your previous job, health problems, and having twins or triplets. Other unforeseen circumstances include natural disasters and terrorist attacks, according to the IRS.

Your friend's job change to Japan seems to qualify as an "unforeseen circumstance" and he should be entitled to get part of the exclusion. The IRS publication has a table your friend can use to determine the percentage of the $250,000 exclusion that he will be entitled to.

Here's how to calculate his exclusion: If he lived in the property for 18 months, or 75 percent of the time needed to keep up to $250,000 in profits tax free, then he would be able to keep up to 75 percent of the $250,000 exclusion, or up to $187,500.

The formula would change if he had bought the home more than two years ago, rented it for some time and then lived in it for some of the time. But unless there is something extraordinary about the situation, the IRS will allow some of the exclusion to be used by your friend.

As an additional consideration, as a member of the armed forces, if he decided not to sell the home, he could disregard that time that he moved out of the home and rented it while he was serving in Japan. When he is reassigned back in the states, the five-year time period would be back in force.

There are certain rules he must follow, but the IRS effectively tells a member of the armed forces (Uniformed Services, as the IRS refers to it) that he or she will be given a pass on the five-year rule under certain circumstances.

The IRS offers a free booklet that explains the process of determining who qualifies for the exclusion and the various rules that must be complied with to avoid having to pay taxes on the gains from the sale of a home. Go to the IRS's Web site, www.irs.gov, and look at Publication 523, "Selling Your Home."

www.Lagretrealestate.com

Real Estate for Sale

2007-10-17T10:35:00.001-04:00

Rent-to-own deals gain clout in today's market

2007-10-17T10:16:00.000-04:00

Situation a win-win for buyers and sellers alike

By Ilyce R. Glink
Inman News

What do you do if you want to buy a home but don't have the cash for a down payment or even the credit score to qualify?

You might try to find a "rent to own" situation where you can lease the property and purchase an option to buy it down the road when you're ready.

When the real estate market was steaming along and sellers had buyers lining up out the door, renters found themselves out of luck.

If a seller can sell a property and get rid of it, why play landlord? It's better to have the buyer's cash in hand and move on. That's why rent-to-own properties were more difficult to find in the last six to seven years.

But now that the real estate market has turned, there are hundreds of thousands of sellers who are desperately searching for buyers. While being a landlord isn't the typical seller's first choice, rent-to-own situations can help a seller turn a renter into a buyer.

Here's how a rent-to-own situation typically works: The renter/buyer agrees to rent the property for a certain period of time. An option to purchase the property at a specific price is agreed to, and a nonrefundable option fee is paid. Sometimes this fee is credited toward the down payment at the time of purchase. In addition, a portion of the rent paid is often credited toward the down payment as well. At the end of the lease term, the renter/buyer decides whether to buy the property or pay another option fee and continue renting the property.

Sellers might like a rent-to-own situation if they've had trouble finding a buyer for their property, and if they can get enough rent to carry the property without losing any money. Often, a renter/buyer will be more motivated to pay the rent and take better care of the property if he or she is seriously considering buying the property at the end of the lease/term.

If you're a first-time buyer looking for a rent-to-own situation, here are some issues you might want to consider:

Companies advertising rent-to-own properties may not be what they seem. If you search Google, Yahoo! or even your craigslist for local rent-to-own options, there are thousands of listings that come up. But if you click through, you'll see that many are developers looking to unload property. Or, they're Web sites that claim to help you find the rent-to-own house of your dreams. Except that once you sign up, nothing happens.

Check out the "houses for rent" and "houses to buy" sections of your local newspaper or Web site. Sellers may not know whether they'll attract a tenant/buyer if they advertise their property for rent or sale. So, they may advertise in both sections. You should also look at some of the more popular for-sale-by-owner (FSBO) Web sites for sellers who appear open to a rent-to-own or lease/option deal.

Ask for what you want. A seller may not want to be a landlord, but local market conditions or his personal finances may force him to rent because he can't sell. As a tenant/buyer, you can ask the seller to fix up items in the house, repaint, and replace or clean the carpet (if the property needs it).

Take the time to explore the neighborhood before you sign on. If you're serious about buying a home, you'll need to seriously think about the neighborhood. That means making sure you're in a good school district, with plenty of shopping, services and restaurants nearby. Is there public transportation and good access? Who is on the streets during the day and evening? While you're renting now, the goal is to turn you into a home buyer.

Negotiate the rent credit and pick-up price before you sign the lease/option agreement. If the landlord/owner has promised to credit a portion of the rent and the entire option fee toward your down payment, get it in writing. You'll want to know what percentage of the rent will be credited and if that credit will earn interest over the course of the year. Do the numbers before you agree to anything. If the reason you're renting instead of buying is because you don't have enough cash for a down payment, be sure to negotiate for a sufficient rent credit so that you have enough for a 5 to 10 percent down payment if you pick up the option to buy the property.

Rent-to-own and lease/options are legal transactions. Before you sign any documents, be sure you talk to a local real estate agent who can help you figure out if the price is right (you don't want to overpay for the property if you buy it down the line). You'll also want to have an attorney review your documents to make sure you're protected. Like any purchase agreement (which is what a lease/option is), you'll want the right to cancel the deal for certain reasons.

Reasons to Sell First and Then Buy

2007-09-20T14:11:00.000-04:00

From Elizabeth Weintraub,

Simultaneous Home Buying and Selling

Homeowners who are planning to move up often wrestle with the dilemma: "Should we sell first or buy first?" You'll find plenty of agents advising you to buy before you sell, but that's rarely in your best interest. It's in the agent's best interest because if you buy, you will need to sell, and the agent will be guaranteed two sales, regardless of how much it cost you to do it this way.
If you decide to sell first and then buy but, say, your home doesn't sell or it attracts very low offers that you do not want to accept, the agent will get nothing. Think about it.

Of course, which comes first, the chicken or the egg, depends on the market -- is it a buyer's or a seller's market -- and your personal motivation. However, for most sellers and buyers, the smart thing to do is to sell before you buy.

Ability to Negotiate.

By selling first, you have the luxury of time. You don't have to take the first offer that comes along because you already have a place to live. It's called your home.

Higher Sales Price.
Sellers who aren't under pressure to sell often obtain higher sales prices because buyers realize the sellers are not desperate. Nothing yells "discount your offer" like a listing that reads: "seller motivated, bought another."

Contingent on Concurrent Closing.
By making the sale of your home contingent on closing concurrently with your new purchase, you have basically said to the buyer, "If I can't find the home I want to buy, I'm under no obligation to sell to you." You don't have to name the property address. You can simply state: "This sale contingent on closing concurrently with the purchase of seller's replacement home."

In fairness, a smart buyer's agent won't let a buyer sign a contract with a contingency clause like that; however, I get away with inserting that clause because few agents understand its implication.

Contingency Period.
OK, let's say the buyer's agent is smart enough to strike a concurrent closing clause from the contract. The next best thing to ask for is a time period during which you are free to look for a replacement home. A contingency period will give you the right to cancel the contract during that time period if you so choose, which can range, on average, from 7 to 21 days.

Renting After Closing.
Some sellers who want to take their time to find the perfect home, that one-in-a-million, will often opt to rent after closing. If the buyer doesn't require immediate occupancy, the seller might rent back their own home for the amount of the buyer's new mortgage payment. Or the seller might move out, put their belongings into storage and rent a furnished, short-term apartment.

Can we claim $500K tax break if renting to tenants?

2007-09-20T11:06:00.000-04:00

Couple learns tax implications of selling primary home, rental

By Robert J. Bruss
Inman News

DEAR BOB: We have rented out a legal apartment in our primary residence for 17 years. My wife and I intend to sell our house and shelter $500,000 of our gain. In order to do so, must we be "tenant free" for 24 of the last 60 months? --Bruce C.

DEAR BRUCE: No. You can sell your principal residence with the tenant still living in the apartment.

For capital gains tax purposes you will be making two sales. One is the sale price of your principal-residence portion. The other sale is the sales price of the rental apartment.

But the Internal Revenue Code 121 principal-residence-sale tax exemption up to $500,000 for a qualified married couple (up to $250,000 for a single home seller) applies only to your capital gain profit on the principal-residence portion. That's presuming you both occupied your primary residence at least 24 of the last 60 months before the sale.

The capital gain on the sale of the rental apartment has two components. One is the "recapture" tax at the special federal tax rate of 25 percent for the depreciation you deducted after May 6, 1997. The other part of the capital gain on the rental apartment is taxed at a maximum federal tax rate of 15 percent. For full details, please consult your tax adviser.

EVICT TENANTS IF YOU FEEL STRONGLY ABOUT THEIR BREACH OF LEASE

DEAR BOB: What recourse do I have when my rental tenants don't honor the terms of their lease? The house they rent from me has a nice yard. The lease terms require them to maintain the property. But the trees look like they are dying. I asked my tenants to water the trees, but they say they don't have time. What are my options to have them honor their agreement to maintain the property? --Lisa D.

DEAR LISA: Even if your tenants have a lease, if it requires them to maintain the yard and they fail to do so, you can evict them if you feel strongly about their breach of the lease terms.

Just follow the state unlawful detainer (eviction) procedure, such as delivering a "Notice to Quit" and then filing the court lawsuit. If this is your first eviction, I suggest you hire a local attorney who specializes in evictions so you can learn how it is done.

If the lease is about to expire and you don't want to evict, you have another alternative. It is to substantially raise the rent (presuming no rent-control limit applies). The tenants will then either move out or you will have the extra rent money to hire a gardener to keep the yard and trees looking good.

CHECK SPOUSE'S DEBTS BEFORE ADDING HER TO HOME TITLE

DEAR BOB: I want to add my spouse (not married) to my deed. We want to take advantage of that $500,000 tax break when I sell our home. But I want to be sure she has no liens before I do this. She had several loans with her ex-husband and then a bankruptcy. She went to our local courthouse and was told there were a couple of liens but it looks like they were cleared. How can I verify this before proceeding? --Harry G.

DEAR HARRY: You say you want to add your spouse's name to your deed but you're not married. If she is not married to you, she is not your spouse.

The only way to be sure she doesn't have any liens that could attach to your home's title if you add her name is to obtain a new owner's title insurance policy. Before issuing such a policy, the title insurer will thoroughly check for possible judgments and other liens against her. Her informal search at the courthouse was a waste of time.

However, if you are legally married to her and you want to claim the Internal Revenue Code 121 principal-residence-sale tax exemption up to $500,000 (instead of $250,000 for a single home seller), her name does not have to be on the title. However, to qualify for the $500,000 exemption, you both must occupy your principal residence at least 24 of the last 60 months before its sale. For full details, please consult your tax adviser.

www.LagretRealEstate.com

It's not a gift, it's an investment

2007-09-17T15:10:00.000-04:00

Family member seeks healthy return for help with down payment, mortgage

By Jack Guttentag
Inman News

Gifts of equity within the family are common. Parents often provide the down payment on their child's first home purchase. Many parents, however, can't afford a sizeable gift -- among other things, they may be concerned about the adequacy of their assets for retirement. Yet they might welcome an opportunity to help their children if it took the form of a reasonably safe investment yielding an adequate rate of return.

A house purchase by a family member may provide such an investment. Over the years, I have advised a number of families who asked me about how to set up a plan that would meet their particular needs. I even wrote a few articles describing such plans. On reading these articles now, however, I am not very pleased because they provide limited help when the individual circumstances differ from those in the article, as they often do.

Usually the investor contributes to the down payment, but some home buyers may need help with the monthly payment as well. In addition, sometimes the investor is a co-occupant, though not necessarily for half the house.

I have come to believe that there is a large untapped market for intrafamily investments in house purchases. The reason that so few actually materialize is that every deal is different, and designing it properly is very complicated. To remedy this, I have developed a spreadsheet that accommodates a wide variety of preferences of the home buyer and the investor.

The spreadsheet calculates the percent of the home equity (property value less mortgage balance) that is owned by each party at the end of each year. The respective ownership shares depend on the amount they each contribute to the initial cost of the home, the amount they each contribute monthly, the rent that is credited to the investor, and the interest rate that is used to calculate the future value of each party's contributions, including the rent credit.

The spreadsheet has two purposes. First, it is a simulation tool that allows the buyer and investor to see how each will fare under alternative combinations of interest rate, rent credit, investor contribution and property appreciation rate. They can try different scenarios to find the one that leaves them both satisfied.

Second, the spreadsheet provides the accounting record of where the parties stand at any point in time. They can watch their equity shares change over time, and can use the simulation capacity to forecast what they will be in the future.

The spreadsheet is a tool, not a contract. To use the tool effectively, the parties should have a contract that addresses four major issues.

Rent Credit: The parties must agree on the rent payment credited each month to the investor. The rent credit ought to approximate what the home could be rented for in the market, net of taxes, insurance, utilities and routine maintenance, all of which the occupant should pay. If both parties are occupants, the rent credit disappears or, if they occupy different amounts of space, is scaled down.

In addition, there must be agreement on how often the rent will be adjusted, and how. One possibility is to adjust the rent credit every year in line with changes in the rental component of the Consumer Price Index.

Interest Rate: The parties must agree on the interest rate used to calculate the future value of the contributions. The rate should approximate what the investor could earn if the funds were placed in investments of comparable risk. In many cases, the mortgage rate might serve quite well as the investment rate.

Property Improvements: Because of the potential for conflict, it is useful for the parties to agree beforehand on how improvements are to be handled. The spreadsheet treats expenditures on improvements in the same manner as other payments, recording a credit to the party making the expenditure. However, investors and occupants won't necessarily have the same interest in an improvement. For example, the occupant might want a swimming pool, which might add little to the value of the property.

One approach would be to reduce the credit on improvements initiated and paid for by the occupant using a credit schedule based on general experience. For example, an added bedroom might be a 100 percent credit while a swimming pool might come in at 40 percent.

Termination: Most investors, even within the family, want to terminate the deal and get their money after 5-10 years, so a termination provision needs to be included. Assuming the buyer has not sold the house before the termination date, the investor must be paid off. This may require the buyer to do a cash-out refinance based on the equity remaining after the investor has been paid off.

Where to market your home on your own

2007-09-14T10:49:00.000-04:00

Craigslist.org: Craigslist has listings for cities all over the world and posting is simple. A recent look at the London and Frankfurt Craigslists found many Florida homes for sale. Be sure to list your home in euros or British pounds, not U.S. dollars.

Homesonsale.co.uk: A UK-based site offers free advertisement of a home for 365 days or until home is sold with up to five photographs. Forums include discussions about buying homes abroad.

Listnlook.com: Free listing with one photo, $25 for Web site with four photos, $50 for two-page Web site with up to 16 photos, virtual tour and featured on home page. Listings remain active until sold.

Homesgofast.com: Based in UK with an office in Florida. Lists houses offered by real estate agents. Individuals can also list homes for sale. One-time fee of $69, $129 or $189 depending on services you choose, but all listings include eight photographs and no commission.

When home won't sell, consider 'rent-to-own'

2007-09-14T09:04:00.000-04:00

Despite above-market rent, all parties benefit

By Robert J. Bruss
Inman News

You've been looking for months for your first home, or you want to upgrade to a nicer home in a better community. It's a great time to buy a home, everybody tells you.

Finally, you find the ideal home for sale, which has most of what you want (there is no such thing as the "perfect home.")

But when you sit down with the mortgage lender to go over your income and credit to see if you can obtain the home loan you need, the lender says your FICO (Fair Isaac Corp.) credit score is too low to get an affordable interest rate. A mortgage at 7.5 percent interest is the best he can arrange, but he's not sure you can qualify for the high payment.

Will you give up, resigned to waiting a year or two before buying a home? Of course not.

You know the house you want to buy has been listed for sale three or four months so the sellers must be anxious. The eager real estate agent phones to ask if you got your mortgage preapproval. You report the bad news that you're not willing to pay 7.5 percent interest.

Fortunately, you're working with an experienced realty agent. She suggests renting the house for up to two years until you can improve your FICO score. Then she explains you can lock in the purchase price at today's market value. "Tell me more" is your swift reply.

WHAT IS A LEASE-OPTION? Your real estate agent then explains a lease-option, also known as "rent to own" in many communities, is a combination rental, sales and finance technique that has been used by thousands of home buyers and sellers.

However, a lease-option is not the same as a lease-purchase, which obligates the buyer to buy, usually within a year or two. With a lease-option, if home prices plummet, the buyer doesn't have to exercise the option to buy.

Personally, I bought my current residence with a lease-option when I realized I was "cash challenged" without enough money for a down payment. Through my buyer's agent, I offered the sellers a 12-month lease at $1,500 per month with $10,000 nonrefundable option money. As the vacant house had been listed for sale about six months, I asked for a 100 percent rent credit toward my option purchase price, which was just slightly below the asking price.

After hesitating about 10 days, my sellers accepted, but only for a six-month rental term. I readily agreed. Three days later, I hired a moving van and moved into my new home. About five months later, I exercised my purchase option and took title. At the closing, I received credit against the option price for my $10,000 option money plus the $7,500 total rent paid for five months.

Lease-options work especially well when there is an oversupply of homes listed for sale, such as the current "buyer's market" in many cities. When a home seller needs someone to pay enough rent to cover the mortgage payment but doesn't require an immediate cash sale, a lease-option can be ideal.

THERE ARE ALWAYS MORE LEASE-OPTION BUYERS THAN SELLERS. For some unexplained reason, there are usually more "rent to own" buyers than sellers. Having used lease-options to buy and sell houses for almost 30 years, I've learned a properly marketed lease-option can solve problems for both buyers and sellers.

The key to lease-option success is the amount of rent credit the tenant will earn each month toward the down payment. Although I negotiated a 100 percent rent credit when I bought my present home, as a seller I usually agree to only a 33 percent rent credit. As a motivated seller, I've agreed to 50 and even 100 percent rent credits.

Although the lease-option buyer doesn't get any income-tax deductions, the buyer's rent credit is far better, like a "forced savings account." Of course, if the buyer doesn't exercise the purchase option, the rent credit plus the option money is forfeited.

Here is an example of how to advertise lease-options in the newspaper under the "Houses for Sale" and "Houses for Rent" classified ad categories:

$5,000 MOVES YOU IN
3 BR, 2 BA home, Rent-to-Own, $2,000 Total Monthly Rent
$500 per month Rent Credit Toward Purchase Price
Open Sunday 1-3 PM, Bring Your Checkbook; Won't Last!
777 Easy Street, Pleasant Heights

Of course, the numbers should be adjusted, depending on the market value of the home and its monthly rent. My experience has been, as a seller, lease-option renters are willing to pay at least 10 percent above fair market rent in return for the rent credit and locking in the option purchase price at today's market value. As a seller, I prefer a one-year lease-option, but I have been known to agree to a two-year term.

LEASE-OPTION PROS AND CONS FOR SELLERS. If your home hasn't sold "the regular way," consider the lease-option "rent to own" advantages for sellers: (a) continued income-tax-deduction benefits, including depreciation, until the option is exercised; (b) upfront cash from the buyer, which is the first month's rent plus the nonrefundable option money; (c) monthly rent cash flow instead of having a vacant house or condominium; (d) there are usually more lease-option buyers than sellers; (e) above-market rent; (f) lease-option tenants usually treat the property very well; and (g) lease-option buyers will agree to a top-dollar option purchase price. The only significant seller disadvantage is the lack of an immediate cash sale.

LEASE-OPTION PROS AND CONS FOR BUYERS. Among the many lease-option benefits for buyers are (a) low upfront cash requirement as compared to buying; (b) it's usually cheaper to rent than own; (c) the rent credit toward the down payment is like a "forced savings account"; (d) if the home goes up in market value, the buyer benefits from the locked-in option purchase price; and (e) buyers can try out the home before buying.

Possible disadvantages for buyers include no itemized income-tax deductions (this is more than offset by the rent credit) and uncertainty knowing if you will be able to afford to buy before the purchase option expires.

HOW DOES THE REALTY AGENT GET PAID? When a house is listed for sale but it hasn't sold, some listing agents are reluctant to recommend a lease-option because they won't immediately receive a full sales commission.

But I often suggest to agents, "Isn't it better to take part of the commission now and part of the commission when the option is exercised, rather than earn no sales commission at all?"

HOW TO FIND HOUSES AND CONDOS TO LEASE-OPTION. Because there is usually a shortage of lease-options, buyers need to get creative. One strategy is to read the "houses for rent" and "houses for sale" classified newspaper ads for clues. Often a landlord can be converted to a lease-option seller by dangling some nonrefundable option money (after you decide you want to "rent to own" the house or condo).

Another strategy is to run your own "House for Rent Wanted" or "House Wanted" classified ad. I learned this technique from a real estate investor who advertises "Executive needs 3 BR, 2 BA house on five-year rent to own. $5,000 option money. Call Jimmy (555) 555-5555." He doesn't get many phone calls, but one or two from motivated home sellers, landlords and real estate agents will be enough.

www.LagretRealEstate.com

Buying distressed homes not easy in today's market

2007-09-07T09:54:00.000-04:00

How to get it on foreclosure, short-sale properties

By Robert J. Bruss
Inman News

Are there any foreclosures, short sales or distress properties in your town or neighborhood? If you answered "no," you probably aren't paying close attention to the local real estate market.

Good times or bad, these situations always occur. Even during the peak years of 2004 and 2005 for home sales, there were still mortgage lender foreclosures and distress property sales. Today, the numbers of these sales are rapidly rising. If you're interested, the current buyer's market in most cities is a great time to acquire these below-market-value properties.

WHAT CAUSES FORECLOSURES AND DISTRESS PROPERTIES? There are many reasons, but the cause usually is the property owner isn't thinking straight. Reasons for foreclosures include divorce, unemployment, drugs, alcohol, death or serious illness in the family, disputes between owners, local economic conditions, mental problems, and good old-fashioned greed.

But the real reason for foreclosures and distress property situations usually is the borrower isn't acting rationally to solve the problem. Imagine you can't afford the increased monthly payments because your adjustable-rate mortgage just "adjusted" and your payment went up by $300. To make matters worse, home market values in your neighborhood are stagnant or slipping so your market value is no longer appreciating.

You consider selling. But local Realtors tell you there is a glut of listings for sale nearby and you would be lucky to sell for the amount of your mortgage balance. Should you stop making mortgage payments and walk away? Of course not. That would ruin your credit and you need a place for your family to live.

Rather than face foreclosure, the obvious solution is to increase your monthly income by at least $300. Maybe you can get a part-time evening job. Or perhaps your spouse or teenage child can get a part-time job to help out. One way or another, virtually every foreclosure and distress property situation can be avoided.

SOMEONE PROFITS FROM EVERY FORECLOSURE. The grim reality is somebody will profit from every foreclosure and distress property situation. If you didn't cause the problem, you might as well profit from someone else's problem.

Most institutional mortgage lenders do not want to foreclose and acquire the property. It costs lenders thousands of dollars to hold foreclosure property instead of keeping their mortgage money earning interest.

However, if you understand the simple foreclosure rules, you can profit from someone else's distress. That's why it pays to understand the basic foreclosure profit opportunities.

STEP 1 -- THE JUDICIAL FORECLOSURE LAWSUIT OR NOTICE OF DEFAULT. Until the mortgage lender gives up on the borrower, the public usually does not know there is a problem. But when the lender records a judicial foreclosure lawsuit on a mortgage, or files a notice of default on a deed of trust, the borrower's default becomes public knowledge at the local court house.

At this point, bargain hunters swing into action to contact defaulting borrowers to see if there is a "preforeclosure opportunity" during the lender's reinstatement period before the official foreclosure auction.

This reinstatement period, which can be as short as 21 days in Texas but generally is three to six months in most states, gives borrowers time to either sell the property or reinstate the mortgage before losing the property at a foreclosure sale.

SHORT SALES USUALLY ARE NOT BARGAINS. Sometimes during the mortgage reinstatement period it becomes evident the home's fair market value is less than its mortgage balance. When that happens, the real estate listing agent confronts the mortgage lender to accept a "short sale." That means the lender agrees to accept less than the mortgage balance as full payment of the mortgage.

For example, suppose a mortgage balance is $250,000 but recent comparable sales prices of similar nearby homes are only $225,000. If the mortgage lender agrees to a $225,000 short sale, the buyer can purchase for $25,000 less than the existing mortgage balance.

The defaulting borrower on a short sale walks away with nothing. However, the borrower gets rid of his mortgage obligation without a foreclosure on his credit record. But the downside, in this example, occurs when the lender sends the borrower an IRS 1099 form showing $25,000 of taxable debt-forgiveness income.

As a general rule, the buyer of a short-sale house does not get a bargain purchase price. Lenders are usually very demanding to insist that the home sell for as much as can be obtained.

Another problem with short sales is lenders often take 30 to 90 days before deciding to accept or reject a short sale purchase offer. For this reason, smart buyers set a reasonable deadline, such as 15 days, for the lender to accept or reject a short sale offer.

STEP 2 -- BUY AT THE FORECLOSURE AUCTION. If a property buyer cannot purchase the home from the defaulting borrower during the reinstatement period, the house will go to either a judicial court foreclosure sale or a nonjudicial trustee's sale.

The advantage of buying at such an auction is any junior liens are wiped out. To illustrate, if a house has a first, second and third mortgage, plus a judgment lien and a mechanics' lien, they will all be wiped out when the first mortgage lender holds a foreclosure sale.

But the disadvantage of buying at a foreclosure auction is cash (actually cashier's checks) are required either at the sale or shortly thereafter. This is one place your MasterCard, Visa and American Express cards are not welcome.

Raising enough cash to bid at a foreclosure sale can be difficult, especially when the amount of the defaulted mortgage is large, often $100,000 or more.

Another problem is foreclosure auctions are "as is," meaning there is no opportunity to inspect the house before purchase and the foreclosing lender will not pay for any repairs. In most states, foreclosure-sale sellers are not required to disclose even known defects at the auction.

STEP 3 -- BUY AFTER THE FORECLOSURE AUCTION. When there are no bidders at the foreclosure auction, title to the property then goes to the foreclosing lender. This is called REO (real estate owned) property. Lenders are usually very anxious to get rid of REO property, which costs money to maintain and incurs liability risks.

Astute buyers often approach foreclosing lenders who acquired property immediately after the sale to make a purchase offer. My favorite tactic is to send a FedEx overnight letter to the lender's president, offering to purchase for the amount of the foreclosed mortgage (presuming the property is worth that much).

Of course, the lender's president never sees the letter, but it will get referred to the right decision-maker in the REO department.

www.LagretRealEstate.com

Transferring title into LLC could trigger loan repayment

2007-08-30T10:20:00.000-04:00

Why strategy to protect asset is likely to upset lender

By Ilyce R. Glink
Inman News

Q: I purchased a fourplex, and wanted to protect my personal assets. I formed a limited liability corporation (LLC) and transferred the title to the fourplex into the LLC.

My mortgage has a clause in it that states that the lender can accelerate the repayment of my debt because of this transfer. However I do not think they will find out unless I don't pay the debt I owe them.

But now my insurance company is going to notify my lender to change the insurance policy to the name of the LLC. What should I do? I am the only member of this LLC.

A: For the most part, you may be correct. As long as a lender obtains its payments and the property is insured, the lender may not find out that there has been a transfer of the property title. Your insurance company, of course, has to tell the lender that the policy has changed and that the new entity is the owner of the property.

While the lender may not care, particularly since you are the sole member of the limited liability company (LLC), you probably should have called the lender prior to setting up the LLC and transferring title to the new company.

Now that you have done that, if the insurance policy still names you and the LLC, you may find that the lender doesn't care. If the lender does care, you will have to explain to them why you transferred title to the LLC and hope that they do not accelerate the debt.

Most, if not all, mortgages have a clause that says that if a property is sold or title to the property is transferred, the lender has the right to call the loan. "Calling the loan" means that the lender has the right to tell the borrower that it's time to pay up and pay off the loan in full.

The lender reasons that it made a loan to a particular borrower and wants to make sure that that borrower always has an interest in the home. If the borrower sells the home, the lender wants the right to quit the arrangement and get repaid.

It's time to call the lender and see if it will work with you in the transfer. Many lenders will send you a letter and tell you what you've done is OK; others may not.

One possibility is that the lender will approve the change but maintain the right to call the loan in the future.

But if you knew in advance that your lender would not approve the transfer and did it anyway, you're playing with fire. I hope you have enough cash on hand or can refinance the property quickly.

Q: I am purchasing a lot next door that has an easement giving me a right of way to my otherwise landlocked home. In order to preserve this lot next door as a lot plus the easement, do I have to deed the property to a limited liability company?

I have been told that if I deed it to myself, the entire lot would become one giant easement, instead of a lot plus an easement.

A: Someone is giving you good information. If you are the beneficiary of an easement -- in this case the easement gives you access to your landlocked property -- and you buy that property, the easement is no longer needed and merges into the newly formed property.

The easement does not become a "giant easement." The easement is eliminated.

Whoever gave you the advice of buying the property in the name of a limited liability company -- or in any other manner other than in the name in which your landlocked property is owned -- is giving you sound advice to preserve the separation of the adjacent lot and easement.

But if you are consolidating the two properties and plan to always use them as one, you wouldn't have to worry about the easement and could buy the adjacent property any way you want.

You may have various options in buying the adjacent property and you should really consult with a real estate attorney in your area.

www.LagretRealEstate.com

Best way to sell house in buyer's market

2007-08-27T10:09:00.000-04:00

Consider rate buydowns when buyers are short on cash

By Jack Guttentag
Inman News

These days, I hear many complaints from home sellers. Among them: "It's been on the market for nine months with nary a nibble"; "I cut the price three times, still hasn't sold"; and "Three other houses on my block are up for sale, so I took mine down."

In a buyer's market, sellers not only compete with each other, they are also in competition with builders. But builders have an advantage: they have affiliations with lenders through whom they offer financial inducements that most individual home sellers don't know about. Yet the fact is that there is nothing that builders offer that individual home sellers cannot match, provided they know how.

Typically, the first thing sellers think about doing to make their houses more marketable is reduce the price. Very often, that doesn't work, because the price is not the problem. If potential borrowers are cash-constrained or income-constrained, a price reduction provides very little help.

Here is an example. Jones has her house listed at $200,000, and lenders will lend 95 percent of that at 6.5 percent on a 30-year fixed-rate mortgage to a borrower with adequate income and good credit. The cash-constrained borrower, however, can't come up with the $14,000 in required cash, consisting of a $10,000 down payment plus (say) settlement costs of $4,000.

If Jones cuts the sale price by 7.5 percent, or $15,000, the cash required from the borrower drops from $14,000 to $12,950, or by a measly $1,050. (These and other numbers below can be found in a spreadsheet on my Web site). For this potential buyer, it makes far more sense for Jones to pay the $4,000 in settlement costs, which reduces required cash by $4,000.

Next, let's consider the case of an income-constrained buyer. The income constraint may be imposed by lenders, who set maximum ratios of income to expenses, or the constraint may be self-imposed, based on what buyers believe they can afford.

The $15,000 price decrease, which reduces the loan amount from $190,000 to $175,000, reduces the payment by $90.07, or 7.5 percent. From the seller's perspective, that is not a lot of bang for the buck.

A better option is to pay points to reduce the rate on the buyer's mortgage, retaining the same sale price and loan amount. If the interest rate on the $190,000, 30-year, fixed-rate loan were reduced from 6.5 percent to 5.5 percent, the payment would fall by 10.2 percent. The cost to the seller would be about 4.6 points, or $8,740. This is about 40 percent less than the price reduction needed to reduce the payment by 7.5 percent.

Points paid to reduce the rate are sometimes termed a "permanent buydown" because the lower rate and payment run for the entire life of the loan. An even more powerful way to lower the payment is for the seller to buy down the payment in the early years of the mortgage. This is called a "temporary buydown" because the payment reduction doesn't last.

On a 3-2-1 buydown, the mortgage payment in years one, two and three is calculated at rates 3 percent, 2 percent and 1 percent, respectively, below the rate on the loan. On a 2-1 buydown, the payment in years one and two is calculated at rates 2 percent and 1 percent below the loan rate. And on a 1-0 buydown, the payment in year one is calculated at 1 percent below the loan rate.

I will use a 2/1 buydown to illustrate because it is the most common. Using the same mortgage as before, the payment in year one is calculated at 4.5 percent, which is 2 percent below the 6.5 percent rate paid the lender. The payment in year one is reduced by 19.8 percent, which is almost twice as large as the reduction with the permanent buydown. In year two, the payment is reduced by 10.2 percent. And in year three it is back to what it would have been without the buydown.

The total cost to the seller is $4,324, which is about half the cost of the permanent buydown. The $4,324 is placed in an escrow account from which monthly withdrawals are made. The total payment received by the lender, consisting of the payment made by the borrower plus the withdrawal from the escrow account is exactly the same as it would be in the absence of the buydown.

WARNING: The buydown cost assumes the seller is not credited with any interest on the buydown account. Don't fight about that; the interest is reasonable compensation for setting up the arrangement. But some lenders go beyond that and calculate the buydown amount on a 2/1 as 3 percent of the loan amount, which would increase the cost to $5,700. (On a 3/2/1, they would charge 6 percent). This is a rip-off, which you can avoid by making your arrangement through an Upfront Mortgage Broker. Since their fee to the borrower is set in advance, they don't profit from any such rip-offs and won't use a lender who practices them.