Archive for the 'Financing' Category
What would eliminating the mortgage interest deduction mean to Charlottesville area real estate?
May 17th, 2010 categories: Financing, For Buyers, For Sellers, News
Time Magazine online published a very interesting column regarding the possibility of eliminating the mortgage interest deduction. For those of you who don’t know, the IRS allows homeowners to deduct from their taxes a portion of the mortgage interest that they pay during the year.
The article seized upon a comment by Shaun Donovan, who is the head of the Department of Housing and Urban Development (HUD), during a recent interview. Apparently, Donovan seemed to float the idea that it might actually be better for everyone if the mortgage interest deduction was eliminated.
Talking about eliminating the mortgage interest deduction is a big political no-no. The deduction is extremely popular amongst taxpayers and the real estate industry. From time-to-time, the idea of eliminating the deduction is talked about as a way of raising revenue for the federal government.
Their are many arguments both for and against eliminating the mortgage interest deduction. The Time Magazine article outlines some of the reasons that eliminating the deduction might actually be good for everyone, even quoting an op-ed piece in the Boston Globe by Edward Glaeser, who is a Harvard economist in favor of eliminating the deduction.
It is hard to say what effect eliminating the deduction would have on home values in the Charlottesville area, or anywhere else in the country, for that matter. There is no doubt that taxpayers would be affected, but there isn’t any way to know for sure if home values would be affected either positively, or negatively.
So, we want to ask you– What do you think would happen to home values in the Charlottesville area if the mortgage interest deduction were eliminated? Are you for or against eliminating the mortgage interest deduction?
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3 Things You Should Know About Buying a Short Sale in the Charlottesville Area
January 20th, 2010 categories: Financing, First Time Buyers, For Buyers, Helpful Tips, Info, STR Market Info Blitz
This post is part of the Strong Team REALTORS Market Info Blitz. We’re heating up the Winter market by giving you three-months worth of the information you need, November through January. Check out the latest posts in the blitz, here.
There are many short sales in the Charlottesville Area
Over the last year, there has been a surge in a type of sale that was previously unknown to most people who were interested in buying a home– the short sale.
Now, if you are looking for a home in the Charlottesville area, it is a good bet that at least one of the homes that you want to consider is a short sale. A few years ago, this would not have been the case. The reality is that short sales are here to stay for the foreseeable future in the Charlottesville real estate market, so it is a good idea to know what to expect when you come across a short sale property.
If you want to buy a short sale property, then there are some things that you need to know so that you can give yourself the best chance for success.
What is a short sale?
Because of the downturn in the real estate market, and falling property values, some people owe more money on their mortgage than their house is currently worth. Sometimes, those people need to sell their homes now, and can’t wait for property values to rebound.
When a person needs to sell their home and the amount that they owe on the mortgage exceeds the value of the home, they are sometimes able to proceed with a short sale. When someone asks their mortgage bank to do a short sale, they are basically saying to the bank, “I can no longer afford to pay my mortgage. I need to sell the house, but I can’t afford the difference between the value of the house and my outstanding loan balance.”
If the homeowners are able to prove to the bank that they cannot afford to continue to pay the mortgage, and prove that the house is worth less than the remaining mortgage balance, the bank might approve a short sale.
So, what should you do when you are looking at homes, and you find out that the one you want to buy is a short sale? What should you expect? What should you know?
3 Things to know about buying a short sale
Navigating through the process of buying a short sale can sometimes be frustrating. There are 3 things that you need to know before you go into the process that can help you avoid some of the frustration that can occur and get you in the right frame of mind for successfully buying a short sale property.
1. Be very patient. The short sale process can take a LONG time. In a typical buying transaction, you would identify the house you want to buy, submit a contract to the owners, negotiate the contract, come to an agreement, and then go through the normal steps before closing. Usually, this might take 30-60 days. The short sale process adds another step that can significantly increase the amount of time it takes to successfully close on the house– the bank.
In a short sale, you will still submit the offer to the sellers, and you will still need to reach an agreement with them. Once that is done, however, the contract will still need to be approved by the bank (or banks) that hold a mortgage on the property. Banks are being flooding with short sale requests, and as of yet, they haven’t committed a lot of resources to processing these requests. That means that simply getting bank approval can sometimes take months, and this is after you have already agreed to a price with the sellers.
There is very little you, or the sellers, can do to speed up the process. Once the bank has all of the required paperwork, they will take however much time they want to either approve or deny the sale. If you are in a situation where you need to close on a house in 30-60 days, you are probably not going to be successful buying a short sale. Short sales routinely take twice that long, or longer. If you are in a short sale, then the best thing you can do for yourself is to remain patient. If it really is the house that you want, and you have the time to wait it out, then all you can do is wait.
2. Don’t expect the sellers to fix any home inspection items. If you are buying a short sale property, you already know that the seller cannot afford their mortgage payments any longer. Obviously, this indicates that the sellers are cash-strapped. If you are going to have a home inspection on the property, and you should, then you need to go into the home inspection assuming that you are going to be responsible for addressing any of the items that are found. Sure, you can ask the sellers to fix items, but don’t be surprised when they tell you that they don’t have the money to fix any of the items.
You should also keep in mind that you probably won’t receive any credits for home inspection items. Doing so is usually frowned upon by the banks involved, and getting approval for such credits merely serves to delay the process even further.
If you are going to have a home inspection on a short sale property, your best approach is to understand that you will be responsible for anything that is discovered, if you choose to go through with the purchase of the house.
3. You are negotiating with a bank, not a person. Sure, the sellers still own the house, and you submitted your offer to the sellers, and they are going to sign it. The reality, though, is that the bank is calling the shots. If the bank denies the short sale, the sellers can’t sell the house, and you can’t buy it from them.
All of this means that patience once again becomes paramount. Because the bank is the party that is really in control, there is going to be more paperwork involved. The bank may want you to sign agreements that wouldn’t be included in a normal purchase transaction.
Appeals to humanity probably won’t get you very far, either. Sometimes, you can endear yourself to a seller by telling your story, helping them get to know you so that they know where you are coming from in the process. The bank doesn’t care about you. For the bank, this is purely a financial transaction. It is purely a business decision that must go through the prescribed process. That is it.
Don’t get frustrated because you think the bank is ignoring you, or not considering your point of view. That might be true, but the bank really doesn’t care that you are frustrated. They just don’t.
Buying a short sale can be worth it
We’re not telling you these things to discourage you from buying a short sale property. We just want you to understand that buying a short sale property is different from going through the normal purchase transaction.
We have helped many buyers and sellers, from Lake Monticello to Albemarle, navigate the sometimes turbulent short sale waters. All of them felt that the process was worth the time and effort that it required. It might be worth it for you, too. It is just important to understand what you are going to be going through before it actually happens. That way, you are prepared for the success that you want achieve.
If you have any questions about buying a short sale or what to expect during the process, just let us know. We’re always happy to help people and prepare them for success.
Photo credit: http://www.flickr.com/photos/thetruthabout/ / CC BY-SA 2.0
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10 Things to Know About the Charlottesville Area Real Estate Market in 2010
January 4th, 2010 categories: Albemarle County, Charlottesville, Communities, Financing, First Time Buyers, Fluvanna County, For Buyers, For Sellers, Helpful Tips, Info, Lake Monticello, News, STR Market Info Blitz, Uncategorized
This post is part of the Strong Team REALTORS Market Info Blitz. We’re heating up the Winter market by giving you three-months worth of the information you need, November through January. Check out the latest posts in the blitz, here.
10 Things to Know About the Charlottesville Area Real Estate Market in 2010
We recently came across a very interesting article published a few weeks ago by U.S. News & World Report that was all about the national real estate market. The article was called, “10 Things to Know About Real Estate in 2010.” The article is well done, and definitely worth reading.
We thought that the predictions in the article were spot-on. All 10 of them, in fact. We realized, however, that the article focused on the national real estate market. Since you aren’t buying or selling all over the country, but rather buying or selling real estate right here in the Charlottesville area, we though it might be a good idea to adapt the 10 things from the article to the Charlottesville areal real estate market.
In fact, the article itself mentioned the need for local real estate analysis:
“. . .anyone interested in buying real estate next year can’t just read the national headlines. Instead, find a good blog that covers the local housing market and consider speaking with a real estate agent with experience in the area. “
We’d like to think that we fit squarely into that category. 
So, let’s get started. . .
10 Things to Know About the Charlottesville area Real Estate Market in 2010
1. Prices to bottom: We think this will be true in the Charlottesville area. In a few days, we will be releasing our 2009 Real Estate Year-in-Review Market Report. The data in that report should give us a good idea as to how prices will react in 2010. Given the trends that we saw in the 4th quarter of the year, it appears that prices have stabilized. It is important to note that reaching a bottom is very different from climbing. While we expect prices to stabilize, we certainly don’t expect to see a tremendous appreciation of prices. As we’ve been saying for a long time now, the days of 10% appreciation per year are over for the foreseeable future.
2. Mortgage delinquencies up: This is unfortunate, by probably true. We expect to see more foreclosures and short sales in the market this year than we saw in 2009. The state of the economy is a major factor in the rise in delinquencies, as is the fact that many homeowners owe more than what the home is worth. Those two factors inevitably lead to a rise in delinquencies. That being said, the Charlottesville area has fared much better than many parts of the country. While their may be increased foreclosures and short sales here in 2010, it will be much less than other areas, even in our own region.
3. Foreclosures move upstream: This is a rather interesting prediction that is made in the article. Basically, economists are predicting that foreclosures will increase among “prime” borrowers, and homes in higher price ranges. Remember how everyone was saying that the chief cause behind the mortgage meltdown was the “subprime” borrowers? Well, many of those borrowers are already in foreclosure, or have been through foreclosure. There are a lot of “prime” borrowers out there who might now be in danger. Most economists think this is due in large part to the number of Adjustable Rate Mortgages that are set to have interest rate resets in 2010. It is difficult to predict whether or not this will be true in the Charlottesville area. It stands to reason, however, that if there a high number of ARMs in the area, we might see increased foreclosure numbers in higher price ranges.
4. Mortgage rates to rise: Since mortgage rates are not geographically dependent, any national prediction about mortgage rates will be just as true here in the Charlottesville area. Mortgage rates have remained at historic lows, thanks primarily to programs put in place by the Federal Reserve. As those programs expire throughout the course of the year. Expect rates to rise. Their is a very good chance that rates could be at or near 6% for 30-year mortgages by the end of 2010.
5. Buyer’s market remains: With prices at the bottom, and mortgage rates at historic lows, this is obviously a buyer’s market. That most certainly will continue throughout 2010. As previously mentioned, however, mortgage rates are sure to rise, and prices probably won’t continue to fall in the Charlottesville area. This means that the leverage buyers currently have will probably decrease as the year goes on. One factor that will play a big part in the market shift will be inventory. If inventory numbers remain high, buyers will have continued leverage just because they will have a greater selection, and more competition among sellers. If inventory numbers start to fall, that will erode that leverage more quickly. By the end of 2010, the market should still favor buyers, but things will be much more even than they are now.
6. Modification plan could be modified: The Federal loan modification program is a mess. It simply hasn’t done what it was intended to do– keep borrowers in their homes. The program doesn’t address two of the key factors that lead to loan delinquencies– negative equity, and job loss. While job loss hasn’t been as big a problem in the Charlottesville area as it has in other regions, negative equity is certainly a concern. Only a relative handful of people have been helped by the program. If the government really wants to do something, the program is going to have to be modified. If that does happen, it could stem the tide of foreclosures and delinquencies predicted by numbers 2 & 3.
7. FHA lending standards may increase: This one is pretty much guaranteed. Loans backed by the Federal Housing Administration have been very popular. Unfortunately, that popularity has meant that FHA loans have also been hit hard by foreclosures. This has lead the FHA to push for increased standards. Increase the standards might have the effect of eliminating potential buyers from the marketplace. While such an increase should help stabilize the market in the long-term, it could have a short-term chilling effect.
8. Tax credit available through June: We’ve talked about what extending and expanding the tax credit might mean for the Charlottesville area before. November certainly saw an increase in closings due to the originally proposed expiration date for the tax credit. It is difficult to determine if the extension and expansion will have the same effect of bringing more buyers into the marketplace. Overall, we feel that the impact made by extending and expanding the tax credit program will have only a slight positive effect on the Charlottesville area real estate market.
9. Markets will vary a great deal by region: This is true every time, all the time. It is true on a macro level, and also on a micro level right here in the Charlottesville area. The different localities have been effected differently by the market changes. Albemarle has been effective differently than real estate in Lake Monticello or Fluvanna. Even different neighborhoods have been effected differently. As the article suggests, it is extremely important to find an agent who is knowledgeable about the market conditions in the area and/or neighborhoods in which you are interested.
10. Mobile maps can help: This one was a bit of a stretch by the author of the article, but it is still applicable in the Charlottesville area. Both Trulia and Zillow have iPhone apps that will allow you to search for homes by your current location. It is a neat feature, to be sure. We have found that our clients appreciate the visual feedback that map-based searching can provide, which is why our Charlottesville area real estate search engine has a map-based element to it. Since all three of us are dedicated iPhone users, never hesitate to ask when you have questions about mobile real estate applications. Between the thee of us, we’ve tried just about all of them.
Photo Credit: http://www.flickr.com/photos/23727257@N00/ / CC BY 2.0
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FAQ About the Homebuyer Tax Credit
December 16th, 2009 categories: Albemarle County, Charlottesville, Communities, FAQ, Financing, First Time Buyers, Fluvanna County, For Buyers, For Sellers, Info, Lake Monticello, Louisa County, STR Market Info Blitz
This post is part of the Strong Team REALTORS Market Info Blitz. We’re heating up the Winter market by giving you three-months worth of the information you need, November through January. Check out the latest posts in the blitz, here.
Take advantage of the homebuyer tax credit!
We told you about the extension of the homebuyer tax credit as soon as it was extended and expanded back in November. Since then we’ve received a lot of questions from folks looking to buy a home in the Charlottesville area about the homebuyer tax credit and how they might be able to take advantage of it.
We thought it might be a good idea to answer some of the most common questions about the homebuyer tax credit right here, so that anyone interested in it will have a better understanding of how it works. As always, if you have additional questions about the tax credit that might not have been answered in this post, please feel free to contact us, and we’ll be happy to help you.
How much is the first-time homebuyer tax credit worth?
The first-time homebuyer tax credit is $8000. If you are a married couple who files your taxes separately, the tax credit is $4000 each.
Who is considered a “first-time homebuyer?”
In order to be eligible to receive the first-time homebuyer tax credit, you must not have had an interest in a principle residence for 3 years prior to your current purchase.
How much is the tax credit worth for current homeowners?
Current homeowners may receive a $6500 tax credit. If you are a married couple who files your taxes separately, the tax credit is $3250 each.
<Who is considered a “current homeowner?”
In order to qualify as a current homeowner, you must have used the home being sold as a principle residence consecutively for 5 of the previous 8 years.
When does the credit expire?
The credit expires for both first-time homebuyers and current homeowners on April 30th, 2010. In order to take advantage of the credit, you must have a binding contract by midnight on April 30th, and the home must close by July 1, 2010.
Are their limits to eligibility?
Yes. The income limits for eligibility are $125,000 annual income for single persons, and $225,000 annual income for married couples. There is also a limit of $800,000 for the home being purchased.
Is there paperwork
As with any government program, there is some paperwork to be done in order to receive the credit. The IRS has special forms for your purchase, which you can get from your closing attorney or accountant. You will also need to attach to your tax return documentation of the purchase, which will at least include the signed HUD-1 statement from your closing.
Will the government send me a check?
Maybe. When you apply for the credit, it will be applied to your tax bill. That means that if you owe less taxes then the amount of your credit, you will receive a check from the IRS. If the amount of the taxes you owe is more than the credit, it will simply reduce your total tax burden. Some people who took advantage of the tax credit early filed amended 2008 returns, and were able to receive a check, since they had already paid their 2008 taxes.
Are their homes available that will work for me?
Of course! We’ve worked with a number of buyers this year who have taken advantage of the tax credit. There are plenty of homes for sale in Lake Monticello, Charlottesville, and Albemarle that are perfect for people who want to take advantage of the tax credit. We can help guide you through the process every step of the way. If you are interested in taking advantage of the tax credit, just let us know, and we’ll be happy to help you!
Photo credit: http://www.flickr.com/photos/wwworks/ / CC BY 2.0
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7 Ways to Grow Your Bank Account for 2010
December 11th, 2009 categories: Financing, First Time Buyers, For Buyers, For Sellers, Helpful Tips, STR Market Info Blitz
This post is part of the Strong Team REALTORS Market Info Blitz. We’re heating up the Winter market by giving you three-months worth of the information you need, November through January. Check out the latest posts in the blitz, here.
Fatten your piggy bank for 2010
2009 is almost over.
With the coming of the new year, most folks look forward to a fresh start. That is probably just as true for your bank account. 2009 was a tough year, economically; but that doesn’t mean that you can’t get things together so that you can start the year off on the right foot for 2010.
We’re always on the lookout for information we can share with our clients and customers that can help them improve their financial situation and help them reach their goals.
Technology website, Lifehacker, recently published a great list of things you can do that will help put you on sound financial footing in 2010. Here is a summary of their list of “Essential Year-End Money Moves:”
- Set up or review your automatic savings plans.
- Max out your retirement savings.
- Get your last tax deductions in.
- Get your 2009 free credit report.
- Jot down your accomplishments at the office this year.
- Calculate your net worth and get a 2010 budget set up.
- Get your will and insurance ducks in a row.
All seven of these items are very important for your financial future. We also know first-hand that one of the best ways to achieve success in your real estate goals is to have a firm financial foundation. We think these 7 things will help you establish a foundation that will help you reach your personal and real estate goals. To read the entire article and all the tips on the list, click here.
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