US Financial Crisis: Whose Fault Is It Anyways?

Yesterday Henry Paulson, US Treasury Secretary, announced a plan to spend $250 billion to purchase stocks in at least nine major financial institutions. This money infusion would give taxpayers ownership stake on these banks and guarantee a 5% return. It would also help banks build more reserves and in turn ease lending to consumers and businesses alike, at least that is what we hope banks will do.

The Emergency Economic Stabilization Act of 2008 H.R. 1424 is known in Main Street as the “Wall Street bail out” plan. However, in Wall Street it is known as the “rescue” plan. Regardless of the name; many people Read more

What is Your Code of Ethics?

Not too long ago “business ethics” was an expression that many considered an oxymoron. Then, in the 1990’s corporations made a remarkable turnabout by addressing codes of ethics, conduct issues in policy manuals, etc. The main reason was because businesses became increasingly concerned about ethics after realizing that ethical practices actually made business sense.

The rules of ethical behavior that govern businesses and Read more

H.R. 3221 Housing and Economic Recovery Act of 2008 Passes New Permanent Loan Limits

The House passed the massive housing bill last Wednesday, the senate voted Saturday to send it to the president and today President Bush signed the “Housing and Economic Recovery Act of 2008 HR 3221.”

HR 3221 is intended to aid in stabilizing our economy, support first-time homeowners and provide mortgage relief for Read more

Property Tax Relief: Helping Homeowners but Hurting Schools & Students

One of the areas in the Silicon Valley that has been hit the hardest by the mortgage meltdown is the East Side of San Jose while areas like Sunnyvale, Palo Alto, Los Gatos and Cupertino are still holding strong in value.

With property values coming down in some areas, their assessed value has also come down. This has made it possible for homeowners that got into the real estate market beginning in 2005 to receive a reduction in Read more

Buying a Short Sale or Pre-Foreclosure Property

Although several news reports state that the number of mortgage-defaults has continually gone up and that interest rates have not come down as expected keeping buyers wary about buying a home, they fail to mention that actually this is a great time to buy.

With property values already low, great number of properties available for sale, programs like: FHA and CalHFA (which we can qualify you for) helping buyers finance up to 97 percent and in some instances up to 102 percent with the option of having the seller cover for their down payment and closing cost, this is truly a buyer’s market.

Today more and more buyers are asking about buying foreclosed homes, but Read more

Buying a Home at Foreclosure Auctions

As explained on the previous post about “Buying Short Sales or pre-foreclosure homes,” an NOD (Notice of Default) will be recorded against the property of a delinquent homeowner and a Trustee sale date will be set. If the homeowner is unable to sell the home before such date, the lender will try to sell the home at a foreclosure auction, generally held on the steps of the county courthouse or in a designated room in a government building or city hall.

Anyone can attend these auctions and bid to buy these properties. Generally the minimum bid is set to Read more

Buying an REO (Real Estate Owned) Property

As I explained on the previous post about “Buying Short Sales or pre-foreclosure homes,” these types of homes offer some benefits but not without some delays. And as I mention on my other post about “Buying a Home at Foreclosure Auctions,” there are more risks for a regular buyer than there are benefits.

Another option available is an REO purchase. Even thought an REO purchase may not take as long as a Short Sale or be as risky as Foreclosure auction, there are a few things that you should be aware of when Read more

Opportunity for Buyers in a Slow Real Estate Market

Today’s real estate market could be seen as really gloomy. A market with an ever increasing number of unhappy sellers, unsold homes, short sales failing to sell because of a lender’s inexperience or lack of market knowledge, foreclosed homes at auctions not receiving any bids and being turned back to the lender and into the market again as REO properties. These are today’s mainstream news! These are the news you see on a day to day basis.

Sex and blood always sells and a bloody real estate market is no exception. However, consumers should really focus on understanding what this news really means to them. Read more

Opportunity to Improve Home Affordability in California Remains Unchanged

Everyone one of us that live in California know that we live in a high priced home state. “California has the third highest home price in the nation” said California Association of Realtors President William E. Brown. And although we have seen home values drop in most areas, this has only helped a miniscule number of buyers obtain their first home.

Today’s U.S. median home price is at $221,000 in comparison to Read more

Neighbor’s Gossip Hits The Web

While browsing through the Pittsburgh Homes Daily page I found this interesting article from Jackie Cueno’s blog from Zephyr Real Estate in San Francisco. She explains that one of her clients (which she choose to keep anonymous) told her about a new website where homeowners and soon to be new homeowners can check who Read more

Over the Top Incentives for Buyers in Today’s Real Estate Market

If you are looking to buy a home today, you pretty much know that there are bargains almost in every corner. You as a buyer have the upper hand because there are many homes to choose from. Homes from sellers who simply are looking to move out of the area, others desperate to sell before their ARM loan adjusts and others because they are about to loose their home in Foreclosure and are trying to sell it as a Short Sale.

In addition to benefiting from the increase of inventory in homes for sale, you may also benefit pretty soon from Read more

Taxing Short Sales and Foreclosures

It is surprising to many that one can loose a home by selling it as a short sale or letting the bank foreclose on it and still be liable for payment of income tax on the amount the lender lost during the transaction (Read the: “Homeowner’s Guide: Short Sales and Preventing Foreclosure“)

Two types of income can result from a foreclosure or short sale: Read more

Anti-Discrimination of Tenants’ Immigration Status

This is one of the many new laws enacted that may affect landlords, tenants and REALTORS® of California.

Beginning January 1, 2008, a landlord or landlord’s agent cannot inquire into the immigration or citizenship status of an existing or prospective tenant or occupant. A landlord may, however, request information or documentation necessary to determine or verify the financial qualifications of a prospective tenant, or to identify a prospective tenant or occupant. This law also prohibits Read more

Positive and Negative Appreciation Seen in the Housing Market Across the U.S.

The rate of home appreciation in the U.S. remained slow but positive in the first quarter of 2007. Each quarter the Office of Federal Housing Enterprise Oversight, an independent entity within the Department of Housing and Urban Development (HUD), releases the housing report House Price Index (HPI).

The HPI uses information from Freddie Mac and Fannie Mae (for which OFHEO has supervisory oversight) to estimate house prices based on mortgage closings of the same house over time. However these one-on-one comparisons of sales prices or appraisal figures Read more

New Laws Enhances License Requirements in Real Estate (CALIFORNIA)

Ever since I got my license some years ago, I was amazed how easy it was for others to get their “conditional” real estate license. This license is conditional because applicants with this license are required to complete two more courses within 18 months in order to receive an unrestricted license, nevertheless people got their temporary license and went on to sell your home or help you invest your future in a home……that is a scary thought!!

Basically anyone from your barber to your car sales man (no disrespect to these professions) was able to get their license and call themselves “real estate agents.” Many did it without having a clue of the real basics of our profession and without knowing how important it is to help people realize their dreams instead looking at each consumer as their next commission check.

Well, things are looking up for the consumer and for us licensed REALTORS® (yes…there is BIG difference between a real estate agent and a REALTOR®). According the new law AB 2429, individuals (in California) who Read more

Positive Outlook for 2007 and a Recovery into 2008

According to the National Association of Realtors® consumers are beginning to respond to more favorable housing market conditions but new-home constructions will still be dampened until inventories decline further.

David Lereah, NAR’s chief economist feels we’ve reached the bottom of the cooling housing market in 2006 and the recovery will come well into 2008.

The forecast of the Read more

If you sell, you pay Uncle Sam! Or do you??

The following article is not by any means tax advice, instead it should be taken as an encouragement to potential buyers (move up buyers) and sellers to consult with a qualified tax advisor BEFORE entering into a selling / buying transaction.

Prior to 1997, typical move up buyers (you sell your home to buy another home) could “roll over” accumulated capital gains from the sale onto the newly purchased home. Simply put if a person first bought a house for $50,000 and later sold it for $60,000 and then purchased a new home for $100,000. The capital gains tax on the $10,000 profit from the sale was rolled over into the new house. But in 1997, the rules changed. The “roll over” rule changed and was essentially replaced by exemptions from capital gains tax for the first $250,000 gain for single people and $500,000 for married couples.

Under present rules if a single buyer first purchased a home for $5000,000 and later sold it for $800,000 and purchased a new home for $900,000, the seller would have to pay capital gains tax liability on the amount of gain in excess of $250,000. In our example the seller would pay taxes on $50,000.

A similar exemption applies to married couples but the amount exempt from capital gains tax increases to $500,000.

There are certain rules that determine qualification for the $250,000 or the $500,000 exemption from capital gains tax. For example the property must be a principal residence and the owner/seller must have lived in the property for at least 2 of the last 5 years. Keep in mind that my description of the capital gains tax rules in this article are very simplistic.

Consult with a tax expert to determine your specific situation.

If you are thinking about selling your present home and purchasing another using the net proceeds from the sale as a down payment, be aware that the sale could create a capital gains tax liability. If in fact you do have a liability and have to pay capital gains tax, make sure you know how much and when you must pay it.

If you fail to consider this liability, you could end up receiving some unpleasant surprise, which could cut short your down payment amount.

Given the fast increase in prices, not necessarily this year but the past few years, many homeowners have gained a lot in equity. Therefore, they could potentially obtain a large profit from the sale and a possible tax liability on this profit as well. And this liability could be owed not only to the IRS but also to the Franchise Tax Board.

In conclusion, the net sales proceeds may not be all yours at the end, so you don’t want to over-commit on your next purchase. Do your homework and your math too so you can be prepared for any tax liability you may owe. Like the saying goes “Better safe than sorry”

For more information visit www.irs.gov and look for IRS Pub 523

2006 Year of the Buyer!!!

Lets start with some facts from year 2005. Last year, we had a strong economy and we also enjoyed very low interest rates. Interest rates were the lowest in 2003, even though they have been creeping up each year gradually, the combination of low interest rates and strong economy fueled the housing boom; which seemed to have ended in 2005.

For 2006, seller’s need to keep in mind that the party is over. If you were holding onto your property in 2005, hoping to make more money in 2006, I got news for you: “You missed the boat.” But there are many things you can do still to enjoy the profits from the sale of your home like fixing up your home, replace that old carpet, repaint the house, etc, etc.

I hope my readers (sellers) don’t think that I am trying to put them into panic mode. I am just trying to make you understand that in most areas you cannot hope to sell you home for the same price you could have sold in the middle of 2005. Prices have dipped a little and they are taking longer to sell but we still have a healthy normal market, which is where we really needed to be. Last couple of years were not normal markets, it was mainly a seller’s market but it got out of control in some areas of the country where they saw too much appreciation for their own good.

I am NOT telling you that the market “bubble” is going to burst but it is definitely deflating and this my friends, will give buyers a very good chance to get a good deal on a home.

Purchasing a home is an excellent investment, the Government subsidizes it, we still have low interest rates and over all Real Estate is the best investment you can ever make in your life.

If your are currently thinking but have not yet decided to buy a home, you should know that by the end of the year interest rates will be close to 7%, therefore you need to be very well prepared and do your homework early.

If you are currently thinking bout selling your home, understand your local market and do the fix ups and repairs needed to entice homebuyers and remember that buyers don want to spend more money on a home after they bought it.

Buying a home: Getting started

First thing you should do is fix your credit. It might not be too late for you to start fixing your credit. If you know what to do and how to do it, you could enjoy offers of low interest rates for your mortgage if you have a high credit score. You can obtain your free credit history once a year from each one of the credit bureaus by visiting the only place that is legally authorized to give you a FREE credit report www.annualcreditreport.com. This report will only give you your credit history but if you are looking for you credit score, then you can visit www.equifax.com or www.experian.com or www.transunion.com.

You don’t need to pay anybody any money to fix your credit score, you can do it on your own and it is very easy. Once you have worked on your credit score, the next thing is to get pre-qualified for a loan amount. This step is very crucial because many buyers and homeowners are taken advantage of because they felt uncomfortable asking questions.

Some tips to follow when searching for a loan is to start early, shop around and ASK QUESTIONS. Ask your loan officer or agent to explain to you the pros and cons of each loan program he offers you so you understand it. If he does not want to take the time to do this, don’t trust him/her.

A loan officer or agent that is working with you to obtain a loan for you, should give you a Good Faith Estimate (GFE) with-in 3 days detailing all the costs you will be charged. If you don’t agree or some fees don’t make sense, question them. Loan officers and agents DO NOT work for charity and we deserve to be paid for the work we do but at the same time we have a duty of honesty to our clients. Be aware that there are people that will look at you and only see $$$ dollar signs.

If you decide to look for a better offer, use the GFE to guide you and compare other offers. You have to also understand that every offer will be a little different because interest rates fluctuate daily but you could compare most costs and the type loan program between lenders.

If you are looking for a Real Estate and/or Mortgage broker, try not to respond to solicitations. I am NOT saying all solicitors are predators but ALL predators solicite heavily.

Find someone you trust, with a good track record or a referral from a close friend or family. Once you start looking for a house DO NOT fall in love with the house you want to put in an offer. By not doing this, you can negotiate with your wallet and not your heart. If you negotiate with your heart, your wallet will suffer the consequences of buying too much house, obtaining a bad loan program just to buy the house, etc.

When you do your research ahead of time and you don’t involve your heart in the process, you will always come out on top when buying Real Estate.

Do You Know What To Do When Closing a Deal For Your New Home!

I’ll give you a little quiz and see if you can answer this question correctly because it could happen to you.

Lets assume that you are a pre-approved buyer and you and your realtor have made an offer on a property for $700,000.00 with $70,000 (10%) down payment, a first trust deed of $560,000.00 (80%) and a second trust deed for the remaining $70,000.00 (10%) Your non-recurring closing cost (costs directly attributed to the transaction) are $14,000. After you’ve made the inspection of the home with a professional, the property inspection shows some needed repairs amounting to $17,000 worth of work. Lets assume that the seller agrees with this figure and offers to give you a $17,000.00 credit for the repairs.

You are not an experienced home buyer so you are not sure how a thing like this is handled so what do you think is the best way to handle it:

A. Your Realtor prepares an addendum stating that the seller will give you $17,000 credit. The seller and you sign this addendum and a copy is given to the lender.
B. The seller gives you a check for $17,000 after the close of escrow and this is not disclosed to the lender.
C. The purchase price ($700,000.00) is reduced by $17,000 and your down payment and loan amount are adjusted accordingly
D. Your Realtor prepares an addendum stating that the seller will give you $14,000 credit for non-recurring closing cost and the purchase price ($700,000) is reduced by $3,000 and your down payment and loan amount are adjusted accordingly

Do you know which way to handle this situation? What is the worst way to handle this situation and why?

Most lenders allow credits from sellers to buyers up to a certain percentage of the sales price, typically no more than 3% and only for non-recurring closing costs. Although lenders rarely accept recurring closing costs credit, these costs could be one year’s insurance premium, prepaid interest, and tax proration. The rule of thumb is sellers can credit buyers for an amount not to exceed non-recurring closing cost.

Inexperienced Realtors often choose option A; the problem is that in this example the cost for non-recurring closing cost is $14,000 and is much less than $17,000.

Option B would be the worst way to handle it because you, your Realtor and anyone else associated with the transaction and with knowledge that this is being done are committing fraud.

The correct way to handle it could be either C or D. Another way could be to buy the interest rate down. Points are non-recurring closing costs, and $17,000 is 2.4 points in this example, and could probably buy a fixed rate down significantly saving you money on your monthly mortgage payments. Always make sure to involve the lender immediately to prevent any problems and/or delays.

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