Tuesday, December 15, 2009

TRADE UP! 5 Reasons why this is the BEST market to upgrade!

Have you thought about getting that bigger, better house in a better neighborhood?
Whether you need more space, want to upgrade your location, or for any other reason, the current real estate market presents a unique opportunity to capitalize by trading up!

5 reasons why this is the best market to trade up!

1. You will make money NOW on the trade!
Here's how this works. You currently own a condo that was worth $1,000,000 three years ago, and now it's worth $700,000 (that's right, it's gone down 30%!). You may be thinking, I've lost $300,000, right? Wrong!
What you do is go out and sell your condo and purchase the home of your dreams for $1,400,000. That house, three years ago, was worth $2,000,000 and you probably couldn't have afforded it. By buying it now, what you've just done is bought your new home at a $600,000 discount! Just like that, on the trade, you've made $300,000! This doesn't even take into account the money you'll save on property taxes because you're paying taxes on a $1.4M house, and not on a $2M house.
2. ... AND you will make money LATER when you sell your new home!
OK you've listened to my advice, bought that new home of your dreams and traded up. YES! Fast forward five years and the real estate market has gone up 20%. Let's take a look at what has happened. Your old condo is now worth $840,000, for a $140K gain over today's value. Your new home is worth $1,680,000, or $280,000 more than when you bought it today. Just like that, you've made an extra $140,000 on the trade!
3. You can likely buy a house you otherwise could not have afforded, and may not be able to afford again!
Going back to my example above, you probably couldn't have afforded that $2M house three years ago when you bought your condo. You also may not be able to afford it again in 3 - 5 years when the market rebounds. If you've been dreaming about a bigger home or one in a nicer area, now is really the time to capitalize.
4. It's much easier to trade up in a down market than in an escalating market!
I've had clients say that they will trade up when the market "goes back up." Let's take a close look at that. Let's say that 5 years from now, the market is back up 20% from today's values. You then sell your condo for $840,000 and your dream home is now worth $1,680,000. You've gained $140K on your condo (from today's values) BUT your dream home is now worth $280,000 more! That means that, by waiting, you've now spent an extra $140K to buy that house!
5. You'll probably get a better house by trading up in a down market!
The current market presents some very unique opportunities. In most areas, inventory is pretty high and buyers have a lot of great choices. By shopping in this market, you can really get the home of your dreams and take your pick of all the inventory available. In most cases, you can get a good deal on a great property in a terrific area.
The bottom line is that if you can afford it, now is a terrific time to upgrade! Interest rates remain at historic lows and there is plenty of financing available.

Thursday, November 5, 2009

Why Is Now A Great Time To Buy Real Estate?

Let’s discuss two California families and the real estate market. We’ll call them Able and Baker.

Able sold a home at the top of the real estate market for $500,000 and bought a new home for $800,000, paying 10% down and getting a new adjustable rate mortgage for the remainder. Baker stayed in their existing $500,000 home, and we all applauded Able for selling at the top of the market.

There are many different opinions on the amount of the drop in prices but we can all agree prices have dropped, more in some areas than others. For our example, we will use a simplified 35% drop on all homes.

Today, Able is in their home with a loan still around $720,000 and can’t refinance because their value is $520,000. Their property taxes are still hovering around $8,000 per year. This is called being underwater, and they could be facing tax problems because of forgiveness of debt, etc.

Baker decides to sell today and finally move up to a bigger home. Their home has dropped in value and they think they have suffered a loss of $175,000 as the home is worth only $325,000. They sell and buy the former $800,000 home for $520,000. They get a loan for $468,000 at the current rate of under 5% and their taxes will be about $5,200 per year.

They might also qualify for a $8,000 tax credit and other inducements in today’s market. Also, there could be appreciation as the market recovers and would you rather have appreciation start now on a $325,000 home or a $520,000 home? Plus they’re living in their move-up home and the family is happy. So, who is better off now. Able or Baker?

Remember the old real estate advantage. Sell when everyone is greedy and buy when everyone is needy. Yes, I know the really smart thing to do would have been to sell three years ago and rent until now. Did many people do that? I don’t think so. I sure didn’t.

We can go back in time only in the movies and it’s too late for could’ve, should’ve or would’ve. Hey, we all misread the economy then so let’s move now and not misread it again. If you want to move up to a better home and can afford it, consider doing it now. Remember the $8,000 tax credit sunsets December 1st (but may be extended until June 2010). So, call your real estate agents and say hello. It just might be the best call you ever make.

By Duane Gomer

Tuesday, October 27, 2009

10 Homebuying Tips for Short Sales

Top 10 Home Buying Tips For Short Sales - Guide to Understanding Short Sale Foreclosure Real Estate
Published on Friday, September 25, 2009, by Todd Foust

Modern homebuyers will inevitably come across one or more properties currently classified as a short sale. A short sale is an attempt by the current owner to sell a home in lieu of the bank taking it back through foreclosure proceedings, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt.
The entire short sale process hinges on the hope that the bank will take a loss now, approve the sale, and eliminate the costly process of foreclosing, clearing, and reselling a home. Obviously, this is a big hope on behalf of prospective homebuyers as well and they need to understand some things in order to lessen the chance for disappointment of unapproved short sales. This is what they should know:
1) Price is usually set by the agent & seller, not bank - The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
2) Loans owned by 1 bank usually better than 2 - If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons are beyond the scope of this guide, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. A savvy Realtor can let you know this type of information.
3) Lowball offers get slow or no response - Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
4) Agent must check comparables before submitting offer - The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.
5) Don't hang your hat on the property - Short sales aren't necessarily "short." It can sometimes be a very long process. Don't get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. In most areas it is completely legal and risk-free to have multiple offers out at any given time with the proper contingencies.
6) Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference - Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promissory note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.
7) "Approved" prices are quickest - It is important to remember that short sales are not always timely; however, making an offer on an "approved short sale" can be a quicker process. An "approved short sale" has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn't end up buying the property. These types of short sales are some of the most highly desirable.
8) Some banks look at and want strongest buyers, some want strongest offers - The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.
9) Repairs are seldom done, credit is more frequent - If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
10) When you get approval, must close on time - During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We'd advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don't just assume it will happen.
Conclusion Short sales can be a great opportunity to find your new home at a competitive price. A Short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process.

Monday, October 19, 2009

Don't miss the 1st-Time Buyer Tax Credit- Expires 11/30/2009

The first-time buyer tax credit is set to expire on November 30, 2009. New buyers in the real estate market can get up to an $8000 credit on their tax bill if they buy a home this year and CLOSE ESCROW by the end of November.
With the longer time frames on loans that means, you better scramble and buy something this week, (less time needed for all-cash buyers). There are a lot of buyers expected to make their offers this week to ensure time to close, but with the Thanksgiving holiday in there, don't wait. Talk with your REALTOR now about this stimulus program to see if you qualify.