Why NOW is still GREAT to Buy or Sell Real Estate

I can’t say it enough: this is about as good as it is going to get to buy and sell real estate. With prices having taken a beating over the last several years, and interest rates at probably the lowest point for possibly the next 20+ years, you HAVE to ask yourself: Am I living NOW in the home of my dreams? If not, what is holding me back?

Although some neighborhoods around town have not experienced significant declines in price, the majority have to some degree. Factor into your cost of money (interest rate on your mortgage) and like I said, now is an UNBELIEVABLE time to buy.

If you are a Seller, you have to consider the following: there is not that many homes for sale! In many neighborhoods, such as Willow Creek, Homested – there is a shortage of homes on the market (exception: the upper end of the market – homes >$750k). The listing inventory for the last 2+ years has steadily declined (see chart below).

Regardless of where you fit in these scenarios, it may be in your best interest to take a few moments to re-evaluate your situation.

Should Realtors be on their HOA Boards?

I was recently doing my usual door-to-door through a neighborhood with fairly strict covenants. I came up to two neighbors, said hello and introducted myself, and they replied very sternly: “You don’t live here, do you?” A bit taken off guard, I tentatively replied, “No.” She said, “Good! There are these Realtors on the HOA board and I think it is a conflict of interest. What do you think?”

Well, I personally live in a neighborhood with no covenants – on purpose. So I am a little biased. But nevertheless, I have come across instances where real estate agents put themselves onto HOA boards to server their own agendas.

And I guess that is my point: obviously, someone has to be on the board, and in a perfect world, the community rotates its members through so that everyone contributes, and the more people that serve the more the community is represented.

However, in past experiences I have seen both Realtors and non-Realtors get elected to a HOA board to serve their own personal agenda. So I am not going to lay blame into my fellow Realtors exclusively.

To my knowledge, their is not a specific, legal reason why real estate brokers shouldn’t/can’t serve on their own HOA boards. However, when disputes arise, it seems to me that the Realtor is now caught between two fiduciary duties – the HOA and clients (if they don’t sell homes in the neighborhood than this is a non-issue).

What I have seen is real estate agents get on HOA boards to a) get business; b) push their own agendas and opinions. The result is that members of the community get upset and a backlash ensues. I have seen this on more than one occassion, and in more than one state!

So, who am I to say what is right or wrong, it is definitely a personal opinion, however, you’ll never see me on an HOA board!

p.s. It doesn’t mean I wouldn’t support and assist in my community – it just means I think it is a potential conflict of interest and I can better serve in other ways.

Why to BUY/MOVE Up in a Down Market

People tend to think that when the market is down, they should do nothing, and wait until the market goes back up before they make a move. While that might make sense if you are “cashing out”, that is not the case if you are moving “up” into a more expensive property.

Why?

Let’s use the following example:
Your current house, House A, was worth $300,000 at the peak of the market.
Your “move up” house, House B, was worth $500,000 at the peak of the market.

So, to keep the math easy, let’s now say that the market is down 20%.
– House A is now worth 20% less, or $240,000 (20% of $300,000 is $60,000)
– House B is now worth 20% less, or $400,000 (20% of $500,000 is $100,000)

Here is the point: House A lost $60k, House B lost $100k. The difference between the two is $40,000. You actually SAVE/MAKE $40k by making the move BEFORE the market goes back up. Yes, you are losing $60k on your current house, but you “making” $100k on the new house. Why wait to pay $100,000 more for your new house?

AND, we haven’t looked at interest rates yet, which can make things even more expensive. Stay tuned!

3 Reasons Why Now Is An INCREDIBLE Time to Buy Real Estate

I just gave a speech on this topic, and actually, another way to say this is:

You can’t afford not to buy real estate right now.

I know this sounds like a sales pitch, and technically I am a salesperson, but being “salesy” is not my genetic makeup (that’s my wife – just don’t tell her I said that).

Seriously, there are three very good facts about why it makes sense to buy real estate RIGHT NOW.

First Time Home Buyers – Everyone has heard this right now, but if you are  first time home buyer, or you have not owned a home for less than 3 years, you can get $8,000 back from the IRS.  This is not a loan, this is an ACTUAL cash credit.   Why is this important:  the median sales price for a home in the Denver Metro area this yea is $195,000.  So the IRS is giving you 4% of the purchase price in cash to buy the house.  You only need 3 1/2% for a down payment, so essentially you can be getting a half a point back for buying your own home.  Need I say any more?

The other major factors to buy now are:

It always makes financial sense to MOVE UP in a down market.  So, you want that 3 car garage, or the house with a view, or the extra bed and bath for when you have visitors.  Whatever the reason, I will go through why this mathematically makes sense.

 Interest Rates affect your Purchasing Power, and interest rates are still at historic lows.  Every 1% change in interest rate fluctuation is equal to 10% purchasing power.  If the rates go up 1%, you just lost 10% of your purchasing power.

My next two posts will look into these two items in more detail

Median Sales Price up in Castle Rock

Surprising, but the average sales price has bounced up in the Castle Rock zip codes.

As of 7/22/2009 - zip codes 80104,80108,80109

I don’t have a specific explanation, but my overall sense is that the higher priced properties have softened on price, there have been distresses properties in the higher priced ranges that buyers have begun to take advantage of, and possibly a slowing of lower priced distressed properties.

Direct from the IRS: scoop on First Time Homebuyer $8,000 Tax Credit

Direct from the horse’s mouth: how you qualify and can receive the first time homebuyer credit.

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Getting that $8,000 tax credit NOW

The Federal Housing Administration (FHA) is working to monetize the $8,000 tax credit that is available to first time home buyers.

If they can figure out how to do this, new home buyers will be able to use that $8,000 NOW, when they purchase their home. Since a buyer needs 3 1/2 percent for down payment when using FHA loans, that $8,000 can be the 3.5% up to a $225,000 purchase.

Read details at: http://www.latimes.com/business/la-fi-harney24-2009may24,0,6944417.story

Lending Guidlines Change Again – Investors get HOSED!

According to one of my local mortgage associates, Fannie & Freddie have changed their lending standards for non-owner occupied properties.

Not only must investors come up with the 20-30% down but now the investor/buyer must have 6 months of P.I.T.I. in liquid reserves (retirement accounts don’t qualify).

What is this country coming to? Let’s incent the market on one hand (first time buyer credit of $8,000), but on the other let’s kill the investor market! These are not fix and flips, these are savvy people who believe in the value of buying and holding real estate, and now these people are getting punished!

What can I say? I am really frustrated by this…if anyone else has thoughts/ideas let me know…I am working to secure other sources of funding that don’t have this stringent requirement.

Why New Buyers Should Buy NOW: Economic Stimulus Bill for Homebuyers

There is lots written about the stimulus bill for homebuyers, but here is the recap:

Time frame to buy:  by Dec 1, 2009 – settlement date must be by 12/1/09

First-time buyer: a buyer who has not owned a home for three years.

Married first-time buyer:  both buyers have not owned a home for three years.

Claim tax credit – Claim the tax credit on your federal income tax return.

Other form or forms – No other form except your federal income tax return.

Credit limits – Single, $74k, Married $150k

Tax credit pay back - You are not required to repay except for certain conditions.

Access the tax credit now – Consider changing your withholding numbers.

Loan credit – State housing finance agencies to help buyers at closing by advancing the credit amount as a loan.

 

NOTE:  Buyers should speak with a tax advisor or other professionals.  I am not a tax authority, nor should the above statements be relied upon solely in making home purchasing decisions.

When combined with a HUD home purchase, new home buyers could get into a new home for $100!  I have seen many HUD homes in Centennial, Highlands Ranch, and Parker.

New FHA Appraisal Guidlines

This was just forwarded to me by John Jarvis, a  mortgage broker with First Source Funding in Parker. 

I am posting this for two reasons:  one, if you are a potential seller, you really need to understand that IT IS VERY TOUGH RIGHT NOW, not only must you sell the buyer, but you really have to sell the appraiser and the lender that the purchase price accepted by both parties is reflective of current market value – or there is NO LOAN!  No loan typically = NO SALE!

If you are a buyer, this is less important, however, it does demonstrate the increased attention to insure the property is accurately valued.

New FHA- Appraisal Guidelines

 

Revised FHA Appraisal Guidelines in Effect
for Appraisals Done after April 1, 2009

Last Updated March 26, 2009

 

I wanted to reach out to you to keep you informed of some revised federal guidelines that outline 10 things that appraisers must do or provide for all FHA appraisals done after April 1, 2009:

1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71).

2. At least 2 comparable sales within 90 days of appraisal date.

3. A minimum of 2 active listings or pending sales in addition to the 3 closed comparables.

4. Bracketed listings using both dwelling size and sales price when possible.

5. Adjust active listings to reflect the List To Sales Price Ratio.

6. Adjust pending sales to reflect contract sales price when possible.

7. Include original list price and any revised list prices.

8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

9. Absorption Rate Analysis.

10. Known or reported sales concessions on active and pending sales.

FHA also is restating its warning that…”Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.”