Dawn Rivera’s Fremont & East Bay Real Estate Blog

Planning to buy a bank owned home with a FHA loan?    I recommend that you apply for the 203K  loan.  I am a realtor and have recently had two different clients use a traditional FHA  loan.   They were both planning to completely remodel the homes and so wanted to waive the inspections so they could close faster and be able to complete the work themselves, that way they would not have to pay labor expenses to a contractor.  The FHA appraisers came out to appraise the homes.  Both homes were in Hayward Ca., both were bank owned and there were two different appraisers.   One appraiser said that since the buyer waived the termite, roof and home inspections, they would recommend to fund the loan and let the new owner complete any remodeling at their own expense.  The other appraiser said that even though the buyer had signed an inspection waiver andcompleted an addendum stating that they were buying the home in as is condition, and waived all inspections including termite, roof and home inspections, the appraiser would not recommend funding until all inspections were completed and there was a roof and section one clearance.   The seller (bank owned)  said they would not allow any work to be completed by the buyer because of liability issues and the buyer did not want to pay a large sum of money for repairs on a home he/she did not own yet.   The seller was concerned that if they put money into a home before close of escrow the buyer may walk away.   A Catch 22!  If we had gone with the 203K loan we could have done a hold back.  The loan could fund and transaction close with escrow holding back from the seller the funds to complete the repairs. 

Lesson learned!

Buying a home

Homebuyers can make the most of several tax breaks that help lower their tax bill based on the purchase of an existing or new home. For instance:
-First-time homebuyers: The Recovery Act provides a credit of up to $8,000 if a taxpayer buys a home between Jan. 1, 2009 and Nov. 30, 2009. The homebuyer also must not have owned a home in the previous three years and the home must be the primary residence.
-Points: The points paid on a mortgage are generally deductible as interest if taxpayers paid enough of a down payment or earnest money at closing to cover the points. Homebuyers can deduct the points even if the seller paid them.
-PMI premiums: Buyers who make a down payment of less than 20% of the home’s cost usually pay private mortgage insurance (PMI). But the PMI premiums generally can be included in your home mortgage interest deduction.
-Job relocation: Taxpayers who moved due to a job change can deduct the cost of moving. In order to take the deduction, they must move within one year of starting the new job, work full-time at least 39 weeks during the first 12 months at the new location, and the new job must be at least 50 miles further than the old residence was from the old job. Qualified moving expenses include your out-of-pocket cost of moving yourself, your family, and belongings to the new location.

Owning a home

If a taxpayer typically has claimed the standard deduction, owning a home will likely mean itemizing for extra deductions. Some tax breaks for homeowners include:
-Mortgage interest: For most taxpayers, the biggest tax break comes from deducting mortgage interest. Taxpayers can deduct interest on up to $1 million of the loan used to buy, build, or make substantial improvements to a main or second home. Interest on a home equity loan up to $100,000 secured by the main or second home is deductible too.
-Real estate taxes: Taxpayers can deduct real property taxes they pay on real estate to their municipalities, whether made directly or through their lending company.
-Home improvements and energy credits: The Recovery Act gives incentives to homeowners making improvements and energy-efficient upgrades to their homes. Taxpayers can get credits for 30% of the cost of qualifying doors, windows, HVAC, water heaters, roofing and insulation, up to a maximum credit of $1,500. Solar energy and wind energy systems are each 30% of cost with no maximum.

Selling a home
Sellers won’t have to pay taxes on a profit up to $250,000 for single filers and $500,000 for joint filers. Taxpayers must have lived in the home for at least two of the past five years to claim this exclusion. In some cases, taxpayers can claim a partial exclusion if they are selling due to a change in employment status, health reasons, divorce or other unforeseen circumstances.

Taxpayers whose homes were foreclosed may be able to exclude the mortgage debt that was forgiven in connection with the foreclosure. This provision applies to debt forgiven in calendar years 2007 through 2012, of up to $2 million is eligible for this exclusion ($1 million if married filing separately).

Happy thursday! here is some more info on the existing home sales. Some good some bad news.

Sales of existing homes showed another gain in May, benefiting from favorable affordability conditions

and a first-time buyer tax credit, according to the National Association of Realtors®. May’s increase

was the first back-to-back monthly gain since September 2005.

Existing-home sales-including single-family, townhomes, condominiums and co-ops-rose 2.4 percent to a

seasonally adjusted annual rate of 4.77 million units in May from a downwardly revised level of 4.66

million units in April, but remained 3.6 percent below the 4.95 million-unit pace in May 2008.

Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very

affordable even with a recent uptick in rates. First-time buyers also are being drawn off the

sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in

sales is less than expected because poor appraisals are stalling transactions. Pending home sales

indicated much stronger activity, but some contracts are falling through from faulty valuations that

keep buyers from getting a loan.

Total housing inventory at the end of May fell 3.5% to 3.80 million existing homes available for sale,

which represents a 9.6-month supply2 at the current sales pace, down from a 10.1-month supply in

April.

The appraisal problem is serious. Lenders are using appraisers who may not be familiar with a

neighborhood, or who compare traditional homes with distressed and discounted sales. In the past

month, stories of appraisal problems have been snowballing from across the country with many contracts

falling through at the last moment. There is danger of a delayed housing market recovery and a further

rise in foreclosures if the appraisal problems are not quickly corrected.

A NAR practitioner survey in May showed first-time buyers accounted for 29% of transactions, and that

the number of buyers looking at homes is nearly 10 percentage points higher than a year ago.

The NATIONAL MEDIAN existing-home price for all housing types was $173,000 in May, down 16.8% from a

year earlier. Distressed properties, which declined to 33% of all sales in May from 45% in April,

continue to downwardly distort the median price because they generally sell at a discount relative to

traditional homes.

First-time buyers are concentrated in the lower price ranges, which include most of the distressed

sales.

Single-family home sales rose 1.9% to a seasonally adjusted annual rate of 4.25 million in May from a

pace of 4.17 million in April, but are 3.0% below the 4.38 million-unit level in May 2008. The median

existing single-family home price was $172,900 in May, down 16.1% from a year ago.

Existing condominium and co-op sales increased 6.1% to a seasonally adjusted annual rate of 520,000

units in May from 490,000 in April, but are 8.9% below the 571,000-unit level in May 2008. The median

existing condo price4 was $173,800 in May, down 21.9% from a year earlier.

Existing-home sales in the Midwest jumped 9.0% in May to a pace of 1.09 million but are 4.4% below May

2008. The median price in the Midwest was $145,800, which is 10.4% lower than a year ago.

In the South, existing-home sales were unchanged at an annual pace of 1.74 million in May but are 8.9%

below a year ago. The median price in the South was $157,400, down 9.9% from May 2008.

Existing-home sales in the West slipped 0.9% to an annual rate of 1.14 million in May, but are 11.8%

higher than May 2008. The median price in the West was $197,700, down 30.6% from a year ago.

Hi loyal readers, here is some new market info for you. Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7% to 90.3 from a reading of 84.6 in March, and is 3.2% above April 2008 when it was 87.5.

The Pending Home Sales Index in the Northeast shot up 32.6% to 78.9 in April and is 0.8% above a year ago. In the Midwest the index rose 9.8% to 90.4 and is 11.1% above April 2008. The index in the South slipped 0.2% to 93.0 in April but is 3.5% higher than a year ago. In the West the index rose 1.8% to 94.8 but is 2.9% below April 2008.

There are numerous buyer assistance programs around the country. Some states are offering bridge loans that allow first-time buyers to use the tax credit for downpayment and closing costs, but there are many other local government and nonprofit programs available to buyers, depending on location.

Just last week, HUD announced that qualifying buyers can use the tax credit for closing costs on FHA loans, to buy down the interest rate or make a larger downpayment. Buyers who are wondering about their options should contact a Realtor®, who can advise consumers on the housing assistance programs and resources available in a given area.

NAR’s (national asso. of realtors) Housing Affordability Index is in record territory. The affordability index rose to 174.8 in April from an upwardly revised 171.9 in March, and was the second highest monthly reading on record after peaking at 176.9 in January of this year. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.

A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20% downpayment, assuming 25% of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80% of that amount. The affordable price was well above the median existing single-family home price in April, which was $169,800.

The relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons, Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.

The total number of existing-home sales is expected to improve but with dramatic local market variation in the timing of recovery. The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline.

For more information, visit http://www.realtor.org.

Employers laid off 663,000 employees in March, this make 5 consecutive months of huge job losses, upping the total U.S. jobs lost in this recession to above 5 million and the unemployment rate is up four-tenths of a percentage point to 8.5%, according to the Labor Department.

Although the March job losses were high they were in line, with what economic forecasts had suggested.  This thankfully, provided some relief, that things aren’t worse than expected. That, and the fact that February job losses weren’t revised downwards, as previous months had been, suggests that layoffs may be flattening out.

Since jobs are a “lagging indicator,” the struggling U.S. economy will continue to shed them even after a turnaround has begun. Many economists think that the unemployment rate could top 10% this year, even if the condition of the economy begins to improve, as some indicators are starting to suggest.

Since December 2007, when the recession began, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the jobs being lost in the last five months.  According to the Bureau of Labor Statistics, “In March, job losses were large and widespread across the major industry sectors.”

Manufacturers trimmed another 161,000 jobs in March; factory employment has fallen by 1 million over the past six months, the BLS said.

Both residential and commercial construction remains in the dumps, and builders axed another 126,000 jobs in March. The new twist is that commercial construction is beginning to suffer just as residential construction was hit last year.

“Unlike previous periods in this economic cycle, the bulk of job losses for the first quarter of 2009 were in the nonresidential sector as opposed to the residential sector,” according to Anirban Basu, the chief economist for Associated Builders and Contractors, an industry group. “This suggests that the residential construction sector is much closer to its bottom than is the nonresidential construction sector, which is a relative newcomer to the ongoing downturn.”

The government’s economic-stimulus spending should begin to ease some of the pain in the construction sector by encouraging infrastructure projects by late this year.

Staging is all the rage across America right now. Whether you are selling a home or simply re-decorating, staging has simple principles that most people fail to grasp.

Most people cannot stage their own home. Their sentimental attraction to too many pieces will not allow them to minimize the space. A cute picture of their family together combined with a vase that they got at their wedding, though priceless to them, simply clutters the appearance of the room.

Staging is about clearing a room to show floor space. This means that the furniture needs to be off the wall. When was the last time that you visited a home and found that the couches were off the wall and pictures were on the wall? This is a huge part of staging.

True, staging does not care about groupings of like items. Staging incorporates sizes; the high, medium and low aspect of decorating and uses three or five items in each grouping.

Staging decorates every table for its function as if you are having a party now. Outdoor tables are set for dinner, game tables have games in action and tea sets are ready to go.

Fresh flowers are preferred instead of fake flowers, white towels are used instead of colored by preference, beds have way too many pillows and music is soft or jazzy instead of rock music. Also keep the TVs off.

Staging has played a huge role in getting homes sold quickly and for more money. The goal of staging is to make your home appeal to the broadest range of buyers by eliminating any offensive items or groupings of decorations that would detract a buyer’s attention. You want the buyer instead to be focused on the house and its elements that have attracted them to it.

Staging is a must for serious sellers. Don’t be fooled that you can do it yourself. Hire a professional.