Is Homeownership a Good FINANCIAL Decision?

The top three FINANCIAL reasons to purchase a home:

1.) You Can’t Live in Your IRA 

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially. 

There are two challenges with this conclusion:

• Today, in the vast majority of the country, renting is actually more expensive than owning a home.
• History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

2.) Homeownership Creates Wealth

Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

3.) There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:

You may qualify to exclude from your income all or part of any gain from the sale of your main home.

Maximum Exclusion
You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

• You meet the ownership test.
• You meet the use test.
• During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.
You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

We will let you decide for yourself whether homeownership makes sense financially.

Short Sale Myths Busted!

What exactly is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.
 
To be eligible for a short sale you first have to qualify!
To qualify for a short sale:

• Your house must be worth less than you owe on it.
• You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure.

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate.The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Banks are continuing to pursue the deficiency balances when the bank ultimately sells the property.  As an example, if the outstanding balance on your mortgage is $300,000 and the bank forecloses and sells the home for $200,000 then the bank has the right to try and collect the $100,000 difference plus all of their expenses like attorney fees and closing costs.

2.) There are no options to avoid foreclosure.
Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale.Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money.

4.) Short sales are not that common.At this present time the number short sales has gone up and is predicted to keep increasing in 2013.  A short sale should be looked at as a helpful tool, not a negative stigma.That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.


5.) The short sale process is too difficult and they often get denied.
Though the short sale process is time consuming; it is not as difficult as the media would have you believe. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this.  Short sales require a lot of experience, and a special skill set.

6.) Short sales will cost me money out of pocket.
A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale.  As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.


8.) I have already been sent a foreclosure notice so I can’t perform a short sale. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.


9.) I was denied for a loan modification, so I know I will get denied for a short 
sale.
Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.

10.) If I go through a short sale I cannot buy another house for a long time.
The time to buy another house depends on your entire credit picture and can vary from 2-3 years.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.

Pending Home Sales Remain on Uptrend

Pending home sales declined in December but have stayed above year-ago levels for 20 consecutive months, according to the National Association of REALTORS®.
The Pending Home Sales Index (a forward-looking indicator based on contract signings) fell 4.3 percent to 101.7 in December from 106.3 in November but is still 6.9 percent higher than December 2011 when it was 95.1!

“The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis,” he says. “Buyer interest remains solid, as evidenced by a separate Realtor® survey which shows that buyer foot traffic is easily outpacing seller traffic.” According to Lawrence Yun, NAR chief economist.

The tighter inventories, higher demand for homes and favorable affordability conditions are strengthening the upcoming housing market outlook! We expect a seasonal rise of inventory in the spring to help, but a seller’s market may be developing!!
That is great news for this years economy!

More Housing Market Predictions for 2013!

*More Homebuyers and sellers will be entering the market
due to the pent up demand over the last few years or so.
Also, rising rental rates will also be pushing home buyers into this years market.

*Homes Sales are projected to increase by 6-7% and home prices
will also increase by 3-4%.

*The availability of homes in the housing market will continue to increase.
This is in part to the increasing equity in homes which gives sellers the opportunity to sell their homes without losing money on the transaction.

*Higher priced homes will continue to increase in sales due to the increasing confidence in the housing market.

*Short sales will continue to increase as the process becomes more streamlined by lenders and servicers. This will be a great relief for many home owners that are facing the possibility of a foreclosure!

*Interest rates will remain low throughout the year, however expect to see a slight increase towards the end of 2013.

*In short, due to low interest rates and reduced home prices the market of potential buyers will continue to increase! 2013 forecasts to have the best home availability in years!

5 Reasons Why You Should Sell Now!

Current Market Opportunities That Should Not Be Missed

 Only Serious Buyers Are Out

At this time of year, only those purchasers who are serious about buying a home will be in the marketplace.  You can rest assured that the people coming to look at your home are will not be wasting your time!

There is far less competition 
Housing supply always shrinks dramatically at this time of year. This year will be a little different as some of the distressed properties being liquidated by the banks (in the form of foreclosures & short sales) will enter the market. However, for those buyers looking for a non-distressed property, the choices will be limited. Don’t wait until the spring when all the other potential sellers in your market will put their homes up for sale.

The Process Will Be Quicker
One of the biggest challenges of the current housing market has been the length of time it takes from contract to closing. Banks have been inundated with both purchase and refinancing loan requests. Both of these will slow in the winter cutting timelines and the frustration these delays cause both buyers and sellers.

There Will Never Be a Better Time to Move-Up
If you are moving to a larger, more expensive home, consider doing it now. Prices are only  projected to increase by over 15% from now through 2016. If you are moving to a higher priced home, it will end up costing you more (both in down payment and mortgage payment) if you wait.

You can also lock-in your 30 year housing expense with historically low interest rates right now!!  
There is no guarantee rates will remain at these levels in years to come.
Why wait, now is the perfect time to get your house on the market and look forward to a quick sale!

Real Estate Market Projections for 2013

The housing market has turned the corner and buyer demand has maintained its  momentum with the start of 2013!!  Historically the month of January is very slow however the market has not slowed down and is projected to continue to increase throughout the year!   Household formations shot up to boom-time levels in 2012 and are projected to increase at an even faster rate over the next twelve months.

Home Prices will also continue to Increase!  The pricing of any item is determined by supply and demand. Demand for housing will remain strong throughout 2013.

Move-Up Sellers Will Return in Great Numbers

Perhaps what many will find as the biggest surprise of 2013 will be the return of the ‘move-up’ seller. Over the last several years negative equity has prevented many of these sellers from moving up to the house of their dreams. However, with prices recovering, more and more of these sellers will realize that now may be their greatest opportunity to make the move to a lifestyle they always wanted.

Record low interest rates and the projected rise of home prices has pushed prospective buyers to make their home purchases sooner rather than later!! These two market conditions have contributed to the continued demand!

GREAT NEWS!! Mortgage Debt Relief Act Extended for 2013!!!

On January 1, 2013  Congress passed an extension of the Mortgage Forgiveness Debt Relief Act, which was set to expire December 31, 2012.  The extension of this act, which has saved homeowners more than $1 billion dollars in taxes so far, is great news for struggling homeowners nationwide!

The Mortgage Debt Relief Act was originally passed in 2007 to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.

Under the Mortgage Forgiveness Debt Relief Act, debt forgiven in a short sale, foreclosure, or loan modification, is exempt from federal taxes on primary residences. For homeowners facing foreclosure, this exemption saves them from paying thousands, or even tens of thousands, in taxes on top of losing their homes.

Now for another year, homeowners can take advantage of this exemption and avoid foreclosure without the fear of an impossible tax liability.

With the extension comes an increase in short sales, which means customers will be able to walk away from a home they no longer can afford in order to make a fresh start!!

And with banks recognizing the significance of short sales as an effective loss mitigation tool, they’re ramping up for business. Short sales will be the key loss mitigation tool used by mortgage servicers in 2013.