All Forum Posts by: Charles Heyward

Recently Congress approved a legislation that will extend the first time homebuyer tax credit beyond its initial November 30 deadline and expand it to even wider group of homebuyers. Here are some facts you need to know to take advantage of the tax credit.
Eligibility to claim the tax credit:
Anyone who purchases a principal residence is eligible for the tax credit. First time homebuyers are eligible for the tax credit if they haven’t owned a home in the past 3 years. If it is a couple, both the husband and the wife may not have owned a principal residence in the past 3 years. Repeat buyers (those who are selling one home to purchase another) are eligible if they have lived in the home for 5 consecutive years, during the last 8 years.

Amount of the tax credit:
Amount of the tax credit is 10% of the purchase price up to $8000 for the first time homebuyer and $6500 for repeat buyers.

Income limits:
There are income limits for homebuyers. For a single buyer it is $125,000 to $145,000 and for a married couple it is $225,000 to $245,000.

Types of homes that qualify for the tax credit
It can be a single family home, condo, or a town house. As long you are purchasing the home as a principal residence, it qualifies you for the tax credit.

Price limit on eligible homes:
The maximum price of the home cannot exceed $800,000 in order to get a tax credit.

Claiming the tax credit:
You can claim the tax credit by filling out IRS form 5405 when you file your income tax. You can re-file past year’s income tax return and get the refund when it comes. You can also file your next year’s return and submit that form with it.

If you need any other information, do not hesitate to contact me.

Best,
Charles

I have seen many homebuyers land into trouble when taking emotional decisions in buying property. They purchased the house just because it appears stylish and cozy but did not pay attention to dust coming from an agricultural land nearby. If you are a buyer, you need to step into the shoes of reality and do proper research to know whether the house is worth living in. I have prepared some tips you might want to consider before buying a new property.

Tip #1: Check affordability
Check your affordability before purchasing the house. Although the pool in the backyard may seem an attractive option, will you may not be able to afford the maintenance expenses.

Tip #2: Check the property at different times of the day
The street may be peaceful and quiet in the morning but in the evening, it may overflow with traffic. Or, Mr. Peterson may be peeping through your window during the night. That is why it is important to visit the house at all times of the day.

Tip #3: Inquire about the presence of neighborhood association
An association in the area means that the community in the neighborhood is closely knit. Find out if there are any newsletters or if the community in the neighborhood meets sometimes. A community indicates that neighbors care for each other and you can have good time during celebrations.

Tip #4: Past records
Ask the seller to provide you with past records of home improvement. For example, there are chances that if the air conditioning system was repaired long time ago, it may break down at any time soon.

Tip #5: Remodeling
If you think of remodeling the house, do examine the house closely. Perhaps remodeling the house may cost you a high price because the changes may not be as easy as you thought.

Tip #6: Surroundings
Observe the surroundings of the house you are planning to buy. If you see one or two houses torn down, there are chances of buildings coming up at a nearby location. A huge mall may arise blocking your view or some hospital or school may come up and cause inconvenience.

Tip #7: Past bills
Check how much the seller is paying in bills. The house may have high heating and cooling bills or water bill because of inefficiency in usage.

Tip #8: Tax bills
Tell your neighbor to show you past tax bills. Possibilities are that if the property value increases, your tax bills will show a steep rise.

Tip #9: Confirm the zoning
Confirm with the seller about the zoning in which the house is located and whether the house has any liens or restrictions.

Tip #10: Go through newspapers
Check the recent newspapers to find out if there are any proposed projects in your area. It is better to find out sooner about upcoming projects than to have surprises later on.

What not many Realtors or advisors are willing to admit from the very beginning is that when a homeowner is in debt, both the foreclosure and a short sale can have a devastating impact on the credit history. However, choosing the lesser of the two evils is important. It’s natural for sellers to be concerned about the impact of a short sale on their credit score. Who wouldn’t?
As a homeowner who is facing a foreclosure, don't expect that a short sale will not leave any marks on your credit record. But keep in mind that a short sale will affect your credit score for a shorter period and that you have better chances to buy a home again soon. Here are three issues that affect you the most.

Reason #1

Every state has different regulations on credit ratings but most often realtors talk about 80 to 100 point decrease in credit score due to a short sale. The score may be a little higher or lower depending upon other variables affecting the credit score as well. In case of a foreclosure, the credit drops by over 250 points! Even if you start off with an excellent 800 points credit, once you get a foreclosure on your report you will end up with 550 points, which is poor and hopeless.

Reason #2

What I find to be the biggest difference between foreclosure and short sale is that a short sale allows the purchase of a new property in case the owner does not miss any mortgage payments, has not signed a promissory note or a deficiency judgment has not passed. In case of any one of the occurrences, a homeowner has the freedom to buy a house within two years. On the other hand, if the homeowner signs a foreclosure, about 5 to 7 years are needed to apply for a new mortgage. And as if that wouldn’t be enough the borrowing terms for the new mortgage may become tighter as well.

Reason #3

A big minus that foreclosure carries is the deficiency judgment and that makes a short sale to be a better option. The chances of deficiency judgment with a short sale are lower compared to a foreclosure as the lender agrees on solving the problem together. This implies that the bank is not acquiring the property in a short sale and the homeowner is selling it to a buyer which he would do otherwise. And that’s very important when thinking of your future financial security!
The decision is up to you in the end. But before making it think of what now affects you the most and most importantly, what will affect you in the future: your credit score, the period in which you won’t be able to buy another home and the deficiency judgment.

I have the opportunity of working closely with both buyers and sellers. Sellers think that the best way to make their house look impressive is to make it stylish. On the other hand, buyers expect a simple house where they need to make minimum changes. They want a place which is comfortable enough to stay for a long time. If you are a seller, just make sure you don’t fall back on any of these guidelines to sell your house quickly.

• ‘Seeing is believing’ is the buyers approach when they come to your house. Keep your house neat and tidy without making it look gaudy.

• Buyers will see overall appearance of your house. Do not empty your house so much that it appears cold and sterile.

• Sometimes you may hesitate to show the house due to the feeling of unpreparedness despite making many changes. Remember that every house looks good if kept neat and tidy. Check carefully what the buyers want and what their expectations are. Observe what your neighbors are doing to sell their property.

• Never make your rooms . For example, some sellers place home gym in their bedroom hoping to impress their buyers. This will make the buyers think that there isn’t much room to move around.

• The most important thing that buyers will notice is the storage space. Buyers will open the cupboards and examine the space within. Clear out the storage space so that the buyers can have a good look at the space available.

I hope the five tips will give you some direction as a seller for staging your house. If you still wish to ask specific questions about how to sell the house, feel free to drop me a line at [EMAIL REMOVED]

I always try to mentally prepare buyers about two things that they shouldn’t forget when negotiating a deal: the first is that the negotiation can happen in more than two rounds so they shouldn’t expect a successful deal from the beginning and the second is that a deal has to be a win-win situation where neither the buyer, nor the seller is the looser. Besides that there are also some very basic rules that I’m always keen on.

Manage your behavior: This might seem just common sense but I’ve not seen it many times happen. Usually there will always be a bugging issue. So, while in a discussion with the sellers focus on the problem, don’t let yourself led astray by petty issues. If there is any difference of opinion, come up with a creative solution, which may be beneficial for the other party as well.

Prepare in advance: Always remember that the more you know about the seller, the easier it will be for you to negotiate the offer. Some minor issues, which if you are aware of, can make or break the chances of you acquiring the deal. To be more specific, gather as much information as you can on mortgage and financing, home inspection, their hired agent and the closing date, try to find out which are the pressures, the weak points. Research well on the location of the house and the seller’s circumstances before making your initial offer.

Plan your move considering the property price: When you judge that the property has a higher asking price in a down market, begin low with what you think is an appropriate price and move up step by step. If you think the seller has quoted an appropriate price then suggest a price, which is close to the quoted price. When it is the seller’s market, quote the highest price that you can give but make sure that the deal is affordable.

Provide value added: Draw the lines on the bargaining price and structure the deal in a reasonable way. Settle down for terms other than negotiation, such as payment for the repairs to offer a discounted price. Clearly define payment terms for title insurance, pest inspection, recording fees, transfer fees, survey points, bank attorney fees, title search, closing fees, broker’s commission and similar expenses.

The rule on the market appears to be offering 80 percent of the listing price. And generally that could be the start of the negotiation. But it’s not the case every time and you might look like you’re not determined enough to get a deal. Affix your priorities and adhere to them.

Best,
Charles

You must be tired of hearing the ‘experts’ saying that NOW is the best time ever to get into the buying spree. And I must tell you that the statistics generally tend to support this statement. Just by looking at the rise in short sales and foreclosures it’s obvious that investors have more opportunities flowing in as loan delinquencies increase.

Let’s check the stats for the first two quarters of this year. A Federal Housing Finance Agency report suggests that short sales rose by 45 percent between April and June 2009. In 2008, the total number of short sales was reported at 15,704. In just the first two quarters of 2009 the number of short sales has reached to 19,759, an increase of about 25 percent. The causes are easy to identify. The rise in short sales is primarily because of the rise in unpaid mortgage loans. The one month delinquent loans increased by 11 percent while the over two month delinquent loans saw a rise of 21 percent in the second quarter of 2009. In addition, foreclosures increased by 23 percent in the second quarter of 2009 with a rise in over three month unpaid loans.

A logical conclusion would be that the numbers mentioned in the Federal Housing Finance Agency report clearly indicate that buyers will be flooded with opportunities from short sales and foreclosures. But there are many skeptical people that are describing these phenomena as ‘just another bubble’ and frankly speaking the previous period has taught us to be at least more cautious.

Why do I still think that indeed it is the best time to buy? The answer is simple: merely because the processes of short sales have been accelerated. And that is not shown only by their increased number but also by the average period that is nowadays required to close the process and also by the increased level of authority for servicers to participate in short sales. You see, homes on the verge of foreclosure seem to be everywhere and I agree that it looks like another bubble ready to burst if there’s not a strong base to facilitate and accelerate the process of moving these properties from the market to the buyer. And in my perspective it’s not the case as now it takes a shorter time to make it happen and there are more people who can do it.

That is why, besides the rising loan delinquencies, I have reasons to believe that NOW is the right time to buy a property.

This is for all those who are getting ready to put their house for sale; One question to you, did you get a comparative market analysis (CMA) done? Sellers, this is a very crucial part of the sale, one that will help you to get the sale done quickly. I have seen a lot of cases where because of the wrong pricing, the sellers waited really long for any sale to happen.

Ask your real estate agent to prepare a CMA report, so that you get an accurate assessment of the market value of the house. The reports are generally offered as a complementary service.

This is how it will happen; your real estate agent will come to your house and inspect the property. Don’t worry if the house is not shiny clean at this point as the assessment will not be elaborate. However, the home must be tidy enough for him to make an accurate judgment of the condition. An important note here that in case you are planning to make any changes to the property, do inform the real estate agent about it.

After inspecting your house, the real estate agent will look at other houses selling in your area. He may use Multiple Listing Service (MLS) or have a general idea about the houses selling in a particular area if he is experienced. He will also consider data such as available homes for sale, pending homes, homes sold in the last six months, average prices, prices per square foot and days on the market to determine the current selling price of your house.

Sellers, this may seem more like an appraisal but it is different because it does not require any upfront payment and a licensed appraiser does not do it.

Cautions/Word of Advice

Get the CMA process done before your home is listed for sale.

Be careful of the real estate agent you choose - Despite getting data from the same source, different real estate agents will give different estimates for your property. This is because some agents may miss out on important information associated with specific location and ground their estimates solely on comparative pricing. On the other hand, an experienced local agent will consider all parameters.

In any case, house prices are all about location. A home close to a commercial area will sometimes sell for more than a property on the outskirts. So, an experienced agent will tell you which parameters affect the selling price of your home. Moreover, if he has worked with clients in your neighborhood he will know what circumstances or conditions led to the quick sale of the house or why it was sold at a higher price.

Therefore, choosing a localized and experienced real estate agent is important to have an accurate CMA report.

Best,
Charles

Hi Steve,
here are few general tips, hope you find it helpful.

Planning and preparation are two essential aspects before considering home inspection. If the proceedings are not planned properly, you may lose out on time, efforts and money.

1. Cross check for the Home Inspector
Before hiring a home inspector, ensure that the person is a part of the American Society of Home Inspectors (ASHI). ASHI qualified inspectors have appropriate knowledge and are considered dependable.

2. Get his contact details
Request the home inspector to give you his contact information so that in case your bank or insurance company asks for additional details, you can call him back.

3. Communicate with the seller
As a buyer, it is important that you communicate with the seller to figure out if he has any particular issues that he wants to be checked. Make a note of these points.

4. Arrange the information into ‘Categories’
Categorize and record each potential component of a house that a home inspector would look at. You can categorize them as roof, flooring, heating system, septic system, garden, swimming pool, air conditioning and others.

5. Do some asking to the Home Inspector

a) Clarity on the condition of the house
Inquire about the condition of the roof and other components and take down estimates required to repair them. Before buying your house, try to choose a house in good condition. However, do not be disheartened if the home inspector points out some negative characteristics. Examine your contract carefully to see which components need to be worked upon and which ones can be left. For example, even your air conditioning system is old but if it works fine, there is no need for you to replace it. In some cases, your contract may not entail any repairs, which frees you from the seller’s unreasonable refusals.

b) Geography
Ask whether the geographic location of your house can damage it in any way and what would be the cost of protection.

c) Safety Issues
Ask if he has observed any safety issues that you must specially consider because of the presence of pets or children.

d) Structure of the Report
Ask him to explain the structure of the report and briefly state the important points.

e) Environmental Issues
Ask questions about other environmental issues such as UFFI, radon, lead paint and the septic system certification, if necessary.

Best,

Charles

Since yesterday the story got updated. It started with articles based on rumors and sources. I wrote about the first rumor I've heard.

In conclusion nothing is final, as Brian says, no bill was passed. And we can talk about what "new" means or which "5 years" and we're still gonna get nowhere till the real thing happens. But Senate are finally talking about it and hopefully soon they'll pass a bill.

The news appears now with more or less same details on:

http://www.bloomberg.com/apps/news?pid=20601103&sid=aOcMZU6BreOM

http://www.bloomberg.com/apps/news?pid=20601087&sid=aE4U2k3Pf5oo

http://www.housingwire.com/2009/10/28/senate-will-agrees-to-extend-homebuyer-tax-credit-sources/

http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD9BKD9TG0

http://www.reuters.com/article/newsOne/idUSTRE59Q4DR20091028

http://news.yahoo.com/s/nm/20091028/pl_nm/us_usa_congress_housing_14

The big news is here: Senate agreed on extending the tax credit! And not only that, but also to add a $6,500 tax credit incentive for the existing home owners who have owned their home for the previous five years.

By the end of April all sales agreements should be signed and the deals should be closed until the end of June.

All the best,
Charles