Real Estate Information Archive

Obama proposes ‘Cash for Caulking’

WASHINGTON – Dec. 10, 2009 – President Obama proposed a program Tuesday that would reimburse homeowners for installing energy-efficient appliances, windows and insulation.

Under what has been dubbed “Cash for Caulking,” homeowners would get a 50 percent rebate on items like energy-efficient air conditioners, heating systems, washing machines and dryers, refrigerators, replacement windows, and insulation up to $12,000, meaning a household could spend $24,000 and get $12,000 back. There will likely be no income restrictions.

Steve Nadel, director at the American Council for an Energy-Efficient Economy, who is helping to craft the legislation, says they are contemplating having contractors or retailers pay part of the cost upfront to ease the need for homeowners to come up with lots of cash.

Source: CNNMoney.com (12/08/2009)

New FHA rules a mixed bag for condos

WEST PALM BEACH, Fla. – Dec. 9, 2009 – New guidelines from the Federal Housing Administration could increase sales in South Florida’s stalled condo market, making it easier, at least temporarily, to get FHA-backed mortgages.

The guidelines, which went into effect Monday, were written to address current market conditions and the glut of empty condominiums following the real estate bust.

Several of the policies, however, expire in December 2010, leaving some real estate experts to call the changes a mixed bag that will ultimately restrict sales.

Others contend the modifications are overall good for a market suffering from a lack of condominium financing.

Changes include reducing the number of units in a new condominium that must be owner-occupied, allowing condo boards to refuse buyers as long as it doesn’t violate the Fair Housing Act, and cutting the expensive requirement of having an attorney certify condominium documents before a sale.

“Palm Beach will definitely, definitely benefit from this,” said Grant Stern, president of Morningside Mortgage Corporation in Bay Harbor Islands, which does consulting work for developers. “It will allow local buyers to reenter the market with financing on good terms. It will also spur a lot of investor activity when they see the prices starting to creep back up.”

Most banks have shied from condo lending because the units are considered high risk. Those that still lend often want 20 to 30 percent down, a requirement that can eliminate the average buyer.

FHA-backed loans allow for smaller downpayments, but few condos are qualified for that kind of lending.

The Edge condominium at 300 South Australian Ave. in downtown West Palm Beach, which opened in 2007 with 307 units, is the only building in the 33401 area code approved for FHA financing, according to the agency’s Web site.

“Today, a new condo can be more affordable than paying rent, but people can’t buy because they don’t have the downpayment,” said Sarah Mazor, broker at Mazor Realty in Boca Raton, which specializes in new condo sales. “It slows down the market and the people who suffer are the middle class.”

Two big barriers to FHA financing have been a requirement that 51 percent of a condominium be owner-occupied, and a rule banning loans to buildings with “right of first refusal.”

The new temporary guidelines allow for 50 percent of units to be owner-occupied and doesn’t count units that are bank-owned, rented out, or vacant.

Allowing condos with “right of first refusal” access to financing is a permanent change.

Vicki White-Sklark, a government loan specialist with Sun Trust Mortgage in Sunrise, said she’s concerned about how new guidelines that tighten the approval process will ultimately restrict the market.

One change is that no more than 15 percent of total units can be more than 30 days behind on condo association fees.

Also, while other states are now allowed to independently approve FHA mortgages, Florida is still required to have projects submit applications to the U.S. Department of Housing and Urban Development.

“Right now, it’s a moving target,” White-Sklark said, about the guidelines. “I fully expect this to evolve over the next year as they realize the impact it’s going to have on the market.”

Obama Guidelines Aim to Ease Short Sales

In an effort to assist financially troubled borrowers attempting to sell their home, the Obama administration has laid out guidelines designed to encourage the use of short sales allowing the borrower to sell their home for less than what is owed on the loan. In effect this program also makes it easier for borrowers to voluntarily transfer ownership of properties through a "deed in lieu of foreclosure."

The program’s official name is the Home Affordable Foreclosure Alternatives Program (HAFA), and its part of the existing Home Affordable Modification Program (HAMP). HAFA will apply to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which cover over half of all U.S. mortgages; however, Fannie and Freddie will issue their own versions of HAFA in coming weeks.

This is the latest addition to the Obama administration's $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.

Under this plan, if a home is sold for less than the amount of the mortgage the borrower will receive $1,500 and the Mortgage-servicing companies will receive $1,000 upon completion of the short sale. The program is open to borrowers who may be eligible for the government’s loan-modification program but don’t end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.

Also under these new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.

Of Critical importance, borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the HAFA guidelines.

While the goal of the HAFA is to simplify the process in the hopes of increasing the number of short sales and “deeds in lieu of foreclosure” the rules can be a bit complex, and it comes with 43 pages of guidelines and forms. To review these guidelines and forms please click here.

This program will not take effect until April 5, 2010 but servicers may implement it before then if they meet certain requirements.

How Do Common Credit Issues Affect FICO Scores

A common question we are asked during our client consultations is “How will a bankruptcy, foreclosure, and/or short sale affect my credit score?” One common answer is “We have no idea, but there is no way to protect your liability without some negative impact on your credit, which can recover over time.”

Probably a bad answer, but now we have a new answer.

On Thursday, November 26, 2009, FICO (Fair Isaac Corporation) revealed its “damage points” information.  Previously, the company revealed only broad categories of factors influencing a consumer’s credit score, rather than the specific number of points at stake for credit mistakes. 

FICO is the company that pioneered consumer credit scoring, and is most familiar to all consumers. FICO assigns a three-digit number from 300 to 850, depending upon how well consumers handle credit. Other companies offer consumer credit scoring systems, but FICO’s version is the most well-known and most widely used by lenders in determining whether a consumer can borrow, how much, and at what interest rate.

As the table at left demonstrates, those consumers with excellent credit (780 and above) may suffer a bigger point drop than those with an average credit score (680 points). For example, someone with excellent credit who has a 30-day late payment will suffer a FICO score drop of between 90 to 110 points, whereas someone with average credit will suffer a smaller FICO score drop of between 60 and 80 points.

Unfortunately, given the high rate of foreclosures, record-filings in bankruptcy, short sales, unemployment, and all of the other economic woes outside the control of many consumers, it is difficult to avoid these drops in credit. However, given the information provided last week by FICO, when faced with two difficult decisions it is now easier for consumers to take the least-worst decision, if FICO score is more important to the consumer than liability to any particular creditor.

-Shawn M. Yesner, Esq.

Banks start to embrace short sales

WASHINGTON – Dec. 7, 2009 – Even before the government put pressure on them to embrace short sales, more banks were starting to take their lumps, do the short-sale deals and move on.

Three years into the housing meltdown, short sales have tripled to 40,000 in the first six months of 2009 compared to the same time period a year ago, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

Wells Fargo, Bank of America Corp. and JPMorgan Chase & Co. this year have hired and trained more staff to handle short sales and also developed software for expediting them.

“It’s really finally dawning on banks that they’re better off with a short sale,” says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”

Source: Bloomberg, John Gittelsohn and Margaret Collins (12/4/2009)

Cities with the most overpriced properties

ORLANDO, Fla. – Dec. 7, 2009 – Despite having no luck selling their properties, homeowners in some parts of the country have clung tenaciously to their notions of the value of their homes.

Forbes magazine ranked markets it considered the most overpriced based on the ratio of the median initial list prices compared to the median list prices at the time the properties actually sold. It also factored in how long the properties stay on the market.

In addition, the magazine considered expert forecasts of price increases in the areas, which could be what encourages homeowners to price high.

The top 10 areas where Forbes found the most over-priced properties were:

1. Orlando
2. Miami-Fort Lauderdale-Pompano Beach
3. Jacksonville, Fla.
4. Baltimore-Towson
5. Chicago-Naperville-Joliet
6. San Antonio, Texas
7. Denver-Aurora
8. Tampa-St. Petersburg-Clearwater
9. Indianapolis-Carmel
10. Austin-Round Rock

Hello,

CREDIT, CREDIT, CREDIT!! We even hear a song about it on TV now! 

Are you looking for a new home? 

Just want to increase your credit score? 

Questions about Short Sale and Foreclosure credit hits?

Tune in to the Nathan Bangs Real Estate TV show on UStream.tv on December 8th at 6:00 right from your computer.  Click on the link below and watch me interview Laurie Zoock who is a credit specialist.

http://www.ustream.tv/channel/tampa-bay-real-estate-show

Do you have a question, just log-in to the chat session and we will reply to your questions.

How great is this?  Watch a TV show customized to your needs right from the Internet on Nathan Bangs Real Estate TV show.

So many of my friends and clients ask about their credit score and as a Realtor I am not in tune with that information...so I have asked Laurie Zoock who is a Credit Specialist to speak and answer you questions.....

http://www.ustream.tv/channel/tampa-bay-real-estate-show

Thanks and let me know if you have questions prior to the show, I will add to my notes.

Nathan

Nathan Bangs & Associates

Q&A clears the air about homebuyer tax credits

McLEAN, Va. – Nov. 25, 2009 – If you’re in the market for a home, the world is your oyster. Interest rates are at record lows. Housing prices in many parts of the country are still depressed. And you may be eligible for a generous tax break, even if the home you buy isn’t your first.

On Nov. 6, President Obama signed legislation that provides a $6,500 tax credit for some current homeowners who buy another home. The law also extends the $8,000 tax credit for first-time homebuyers, scheduled to expire Nov. 30, until next spring.

A lot of people are interested in taking advantage of this tax break, but the expanded credit also has whipped up a lot of confusion. Here are some answers to frequently asked questions:

Q: How do I qualify for the $6,500 credit?

A: This credit is available for homebuyers who sign a binding contract on a new or existing home by April 30, 2010, and settle by July 1 (deadlines that also apply to the first-time homebuyer credit). You must have lived in your existing home for five consecutive years out of the last eight. The home you purchase must be your primary residence. However, the law doesn’t require you to sell your old home, says Bob Meighan, vice president at TurboTax, the tax software provider. You can use it as a second home or a rental and still claim the credit, he says.

Q: I sold a home I had lived in for more than five years and bought a new one in August. Do I qualify for a tax credit?

A: No. For existing homeowners, the $6,500 credit is limited to homes purchased after Nov. 6.

Q: Does the home I buy have to be more expensive than the one I own now?

A: No. While the real estate industry is hopeful that homeowners will use this credit to buy a nicer place, there’s no prohibition against using it to downsize, Meighan says. That makes this credit particularly useful for seniors who are interested in moving into a smaller home.

If you are planning to move up, keep in mind that you can’t claim the credit if the purchase price of the home exceeds $800,000. Unlike some other tax credits, this one doesn’t slowly phase out once you exceed the threshold, Meighan says. If you buy a home for more than $800,000 – and that refers to the purchase price, not the assessed value or the amount of your mortgage – you are ineligible for the credit, period.

The $800,000 cap also applies to first-time homebuyers, but only those who purchase a home after Nov. 6. First-time homebuyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria, Meighan says.

Q: I’m an existing homeowner, and would like to build a new home. Can I claim the credit?

A: Yes, but make sure your builder is good at meeting deadlines. You can claim the credit as long as you have a binding contract in place by April 30 and close by July 1. In the case of a new home, the closing date is the day you move in, Meighan says. If your home isn’t habitable by June 30, you won’t be able to claim the credit, he says.

Q: I bought a home in 2008 and claimed the old $7,500 first-time homebuyers credit, which must be repaid over 15 years. Did the new law change that rule?

A: No. That credit, which was available for homes purchased between April 9, 2008, and Dec. 31, 2008, must still be repaid.

The $8,000 first-time homebuyer credit, available for homes purchased after Dec. 31, 2008, doesn’t have to be repaid as long as you remain in the home for at least three years. Existing homeowners who qualify for the $6,500 credit don’t have to repay that money, either, as long as they meet the three-year requirement.

Q: We have a rental home and would like to sell it to our son, who has never owned a home. Would he qualify for the first-time homebuyer credit?

A: No. The legislation specifically prohibits taxpayers from claiming the credit if the sale is between “related parties,” Meighan says. A home sale to a parent, grandparent, child or grandchild would fall into that category.

Q: I sold my home this year and have been renting since. If I buy a new home, do I qualify for the expanded credit?

A: Yes, as long as you meet all of the other requirements, says Mel Schwarz, partner with Grant Thornton in Washington, D.C. The eight-year period used to determine eligibility ends on the day you buy your new home, he says.