Home Sales Asking prices up in 86 of 100 largest markets

Asking prices of homes listed for sale on real estate portal Trulia.com in January were up from a year ago in 86 of the 100 largest U.S. metros, including Seattle, according to a monthly report released today.

The report, which covers roughly 4.5 million for-sale and for-rent properties listed on Trulia through Jan. 31, showed asking prices up 5.9 percent from a year ago, and growing by a seasonally adjusted 0.9 percent from December to January — the biggest month-over-month gain since March 2012.

In some markets, the strong growth in asking prices doesn’t necessarily indicate that worries are over, said Jed Kolko, Trulia’s chief economist.

“In many local markets today, dramatic price gains can mask serious red flags,”Kolko said in a blog post. “Strong job growth, low vacancy rate, and low foreclosure inventory — not huge price gains — are signs of a healthy housing market.”

Signs of a healthy housing market

Trulia identified San Francisco, San Jose, Seattle, Denver and Salt Lake city as “booming” markets with strong fundamentals.

Find out just how much your house is worth in today’s market.  No pressure, obiligtion or fine print.  Just good solid information you can trust.

HARP program: Underwater Home Owners Get More Refinancing Help

Mortgage giants Fannie Mae and Freddie Mac announced that mortgage lenders will be able to offer up to $2,000 to home owners with little or no equity in their homes who are seeking to refinance their mortgage under the government’s Home Affordable Refinance Program.

The lender incentives may be offered to pay down mortgage balances, closing costs, or other expenses usually required of borrowers who are refinancing using the HARP program.

Up to $2,000 to home owners with little or no equity in their homes

The changes may encourage more underwater home owners to refinance — particularly those who had been reluctant to pay loan-origination fees or closing costs, which could total thousands of dollars.

The latest guidance “simply provides a clarification to lenders on benefits that can be passed back to borrowers on a HARP refinance,” says Meg Burns, a senior policy director for the Federal Housing Finance Agency, Fannie and Freddie’s regulator.

To date, nearly 1.8 million home owners have refinanced under the HARP program.

Need advice to avoid Foreclosure and Short Sale your property?  Let us help you.

4 Ways Buyers Can Mess Up a Loan Approval

This happens all the time.  Home buyers have gotten approved for a mortgage and now they’re just waiting to make it to the closing table.

It is just a waiting game.  Don’t throw your loan approval into jeopardy by making one of these common mistakes:

1. Making a big purchase: Avoid making major purchases, like buying a new car or furniture, until after they close on the home. Big purchases could change the buyer’s debt-to-income ratio that the lender used to approve the buyer’s home loan and could throw the approval into jeopardy.
2. Opening new credit: Now isn’t the time to open up any new credit cards. Don’t do it!
3. Missing any payments: You need to be extra vigilant about paying all their bills on time, even if they’re disputing one.
4. Cashing out: Avoid any transfers of large sums of money between your bank accounts or making any undocumented deposits — both of which could send up “red flags” to your lender.

Seattle ninth-best U.S. market for home sellers: Report

Seattle is the ninth-best market in the country for homeowners selling their home, according to a new report.

This is great news if you are thinking if selling your home anytime soon, and another reason to jump in if you’re buying!

According to Zillow Inc. reports that only home sellers in eight other U.S. cities have more leverage than Seattle home sellers. Zillow describes a seller’s market as one where homes are on the market for a shorter time, price cuts occur less frequently and homes are sold at prices very close to (or greater than) their last listing price.

In markets like Seattle, “sellers … are squarely in the driver’s seat with their homes selling within days of listing, often after bidding wars that increase the sale price above the asking price,” said Stan Humphries, Zillow chief economist, in a statement.

If you’d like to know what’s going on in your neighborhood, on your block for similar homes just like yours, call me for a no-obligation consultation.

Unrealistically Low Appraisal Values in Up Markets Are a Problem

Real estate agents continue to report that unrealistically low appraisal values continue to jeopardize sales. Appraisal values are in some cases affected by REOs which in some cases are reported as being used as comparable properties.

In other cases, appraisals are reported as not keeping up with the market. Also, there continue to be reports of appraisers having poor knowledge of local conditions as they come from outside areas (in some cases as far as 100 miles according to one agent.

• “Appraisals and BPO values are likely low because of the sort of comps that are available on the market. REO properties and lower value sales comprise the bulk of market activity which in turn leads to low appraisal and BPO values.”
• “Appraisals are definitely a problem. We are in a Vacation, second home area and we are getting appraisers from 100′s of miles away to appraise Lake Property. They don’t understand the values.”
• “Buyers are coming in with cash to close the gap between low appraisals and sellers sticking to their house price.”

Just Ask For Forgiveness

Something very important is happening on December 31st of this year – something that might impact your life, or the lives of your friends, family or co-workers.

What am I talking about?

The expiration of the Mortgage Forgiveness Debt Relief Act.  The expiration of the Mortgage Forgiveness Debt Relief Act.  As your real estate expert, I talked about the Act in a previous Coffee Break Newsletter.

Oddly enough, many homeowners (including those affected by the Act) are unaware of its existence, or of its ticking clock.

The Mortgage Forgiveness Debt Relief Act applies to debt relief “forgiven” between January 1, 2007 and December 31, 2012. At this point in time, it does not appear the Act will be extended.

What’s really at stake? Money!

Let’s take a step backwards to put this in perspective.

Debt “relief” comes about when a lender “forgives” debt owed by a borrower, as can happen with a short sale, foreclosure, or other type of loan “workout”. Ordinarily, that forgiven amount is taxable. However, under the Act, the borrower’s need to pay taxes on the amount of the forgiven debt is eliminated.

Of course, there are caveats that come along with this tax relief. For example, the debt must be related to a principal residence. In addition, the total amount of the debt can’t exceed the borrower’s original mortgage loan … plus the cost of improvements made to the home.

The implications of this tax relief are huge in dollars and cents! Take a look at an example.

In 2006, Mary Jones bought a home for $375,000 and took out a mortgage of $265,000. This month Mary is relocated across the country for work and must sell her home. Her current mortgage balance is $237,000. Luckily for Mary, her lender is a bank that is willing to work with her on a short sale … and she is lucky enough to find a buyer.
Mary and her buyer agree to a sales price of $218,000. However, that amount falls short of what Mary needs to pay off her mortgage, and pay closing costs – all of which is estimated to come to $227,620. Since Mary does not have enough money to bring to the closing table, Mary’s lender agrees to the short sale, forgiving debt in the amount of $9,260.

Prior to the Act, Mary would have been required to declare the $9,260 as income, and pay taxes on it. Under the current provisions of the Act, taxes on Mary’s $9,260 in relief are forgiven. For individuals in a 20% tax bracket, that’s almost $2,500 in tax savings!

And owners of high-end homes – defaults of which are on the rise — could be looking at very substantial tax breaks, depending on the amount of debt forgiven.

Which leads to several questions my clients have repeatedly raised about the Act:

• What is the maximum amount of debt relief under the Act? Up to $2 million may be forgiven for married couples ($1 million if single or if married but filing separately); of course, this must be for a principal residence. If there is debt forgiven above this amount the borrower is taxed at ordinary income rates.
• Does the Act apply to cars, boats, second homes, investment properties, credit cards, or other debt? Not under this provision. Only debt relief for a principal residence applies under the Act, however, bankruptcy debt relief is non-taxable, and that is sometimes true for insolvency as well.
• Do I have to report the forgiven debt, since I won’t be paying taxes on it? Yes! See the IRS and/or your tax professional for additional details.

I’m not suggesting that you hurry up and default on your mortgage loan so you can take advantage of the Act. However, it is important that you understand the implications of the Act and how it may affect you.

I encourage you to contact qualified professionals (such as attorneys or Certified Public Accountants) who can assist you with this program.  I have names of trusted service providers.  I also suggest you visit the IRS site for information on the Mortgage Forgiveness Debt Relief Act, which can be found on the IRS’s website. I used information from that site, in addition to information provided by NAR in preparing this blog post for you.

Most people are not aware of the Act’s existence, and pending expiration.  Call me at 425-330-0663 for more information on this important and expiring topic. Or just click here!

How long until you can buy again after short sale, bankruptcy, or foreclosure?

I get this question all the time and I finally got smart and decided to post it here for everyone. These are general guidelines and change often.

2011 FHA Waiting Guidelines

Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy.

You may apply for a FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy

Foreclosure – You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.

Short Sale / Notice of Default – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now.

Credit must be re-established with a 640 minimum credit score

2011 VA Waiting Guidelines

Bankruptcy – You may apply for a VA guaranteed loan TWO (2) years after a Bankruptcy

Foreclosure – You may apply for a VA guaranteed loan TWO (2) years after a foreclosure

Short Sale – You may apply for a VA guaranteed loan TWO (2) after a short sale, unless it was a VA loan then restrictions apply

Credit must be re-established with a minimum 620 credit score

2011 Conventional Waiting Guidelines (Fannie Mae)

Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for FOUR (4) years.

Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,

Short Sale / Deed in Lieu of Foreclosure – UPDATED 12/16/11 Currently treated the same as a foreclosure with a waiting time of SEVEN (7) years before you can buy again using a Fannie Mae conventional home loan.

TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment

FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.

Credit must be re-established with a minimum 660 credit score.

Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.

Preparing to Buy Again after Bankruptcy, Short Sale or Foreclosure

You should begin looking at your credit at least six (6) months before you are ready to buy again.

Quite often there are things left over on your credit report that can delay your ability to qualify.

With a little head start and good advice, you can get your credit in line, qualify for financing and buy again in the lowest priced real estate market that we’ve seen in years!

We specialize in helping people make sense of Distressed Selling so feel free to drop me an email, call/text anytime.

Buy A Home With Less Than 20% Down

It seems to be the common perception that if you want to buy a home in today’s market, you need to put at least 20% down. We are happy to say that is not always the case!

Fortunately, for many home buyers, there are many exceptions to this rule. Lending Tree recently released a study claiming that the average U.S. mortgage down payment is about 12.25%.

The following scenarios may allow you to purchase a home for less than 20% down.

FHA Loans

FHA loans are the most popular low-down-payment mortgage loans. FHA loans allow down payments of as little as 3.5%. FHA mortgages traditionally have a clientele of mostly lower-income homebuyers and first-time homebuyers. However, they have become extremely popular since the subprime mortgage crisis as an option for a low-down payment home loan.

VA mortgages

The primary remaining source of no-money-down mortgages is the Veterans Administration through a VA home loan. To qualify, you typically have to have either served or be currently serving in the military.

Certain nonmilitary persons can qualify for VA mortgages also, including certain surviving spouses of veterans, officers of the Public Health Service or National Oceanic and Atmospheric Administration.

Conventional mortgages

With as little as 5% to 10% down, you may still be able to get a conventional or standard mortgage. Fannie Mae or Freddie Mac backs these loans, and they generally require better credit than the programs mentioned above.

A lender will be more likely to approve you for a mortgage with only 5% down if you’re buying a home in a local market where real estate values have been relatively stable.

Fannie Mae’s Homepath

Fannie Mae’s Homepath program is a low-down payment program that doesn’t required mortgage insurance. Homepath is Fannie Mae’s program for selling foreclosed properties that have come into its inventory. Homepath mortgages require only 3% down, there’s no requirement for mortgage insurance, and you can borrow up to an additional $35,000 for necessary renovations and repairs.

Credit standards remain high for Homepath mortgage loans.

Keep in mind that if you choose a low-down payment program and put down less than 20% down, your interest rate may be higher and in many cases, you’ll have to pay some sort of mortgage insurance.

To discuss mortgage loans options and whether a low-down-payment loan is right for you, give me a call at 425-330-0663.

Great News for Veterans!

We like working with Veterans, I’m a Veteran and anytime we can pass on a great deal to those that have served our country I’m excited!

Did you know home loans guaranteed by the Department of Veterans Affairs continue to have the lowest serious delinquency and foreclosure rates in the mortgage industry. Veterans have also taken advantage of their home loan benefit in record numbers, as VA loan originations reached their highest total in eight years.

“The continued strong performance and high volume of VA loans are a testament to the importance of VA’s home loan program and a tribute to the skilled VA professionals who help homeowners in financial trouble keep their homes,” said Secretary of Veterans Affairs, Eric K. Shinseki.

Last year, VA helped 72,391 Veterans and Servicemembers who were in default on their mortgage loan retain their homes or avoid foreclosure, an increase from 66,030 from the prior year. At the same time, foreclosures on VA guaranteed loans dropped by 28 percent.

According to the Mortgage Bankers Association National Delinquency Survey, VA’s foreclosure rate for the last 14 quarters and serious delinquency rate for the last 11 quarters have been the lowest of all measured loan types, even prime loans.

In fiscal year 2011, VA guaranteed 357,594 loans, an increase of nearly 14 percent over last year. There are currently over 1.5 million active VA home loans. The program makes home ownership more affordable for Veterans, active duty Servicemembers, and eligible surviving spouses by permitting no-downpayment loans and by protecting lenders from loss if the borrower fails to repay the loan.

Much of the program’s strength stems from the efforts of VA employees and loan servicers nationwide, whose mission is to ensure all Veterans receive every possible opportunity to remain in their homes, avoid foreclosure, and protect their credit from the consequences of a foreclosure.

“We are committed to making even more Veterans and Servicemembers aware of this important benefit and delivering the assistance they deserve when financial difficulties arise,” said VA’s Under Secretary for Benefits Allison A. Hickey.

For Veterans and Servicemembers who have trouble meeting their mortgage obligations or anticipate problems in the near future, VA first recommends contacting their loan servicer.

Depending on the situation, VA’s loan specialists can intervene on a Veteran’s behalf to help pursue home-retention options such as repayment plans, forbearances, and loan modifications. Veterans and Servicemembers can also call VA toll-free at (877) 827-3702 to speak with a VA specialist concerning foreclosure avoidance.

Veterans may obtain a certificate of eligibility and sign up for eBenefits through the web portal at www.ebenefits.va.gov. The Department of Defense and VA jointly developed the eBenefits portal as a single secure point of access for online benefit information and tools to perform multiple self-service functions such as checking the status of their claim.

Servicemembers may enroll in eBenefits using their Common Access Card at any time during their military service, or before they leave during their Transition Assistance Program briefings.

Veterans may also enroll in eBenefits and obtain a premium account by verifying their identity in-person at the nearest regional office or online depending on their status, or calling VA’s toll free number at 1-800-827-1000.

Since 1944, when home loan guaranties were first offered under the original GI Bill, VA has guaranteed more than 19.4 million home loans worth over $1.1 trillion. To obtain more information about the VA Home Loan Guaranty Program, please visit the program’s home page at www.benefits.va.gov/homeloans.

I’m a Veteran and I’d love to help other Veterans so call me, 425-330-0663!

Are They Smarter Than Us?

People who are good with money are truly different from the rest of us. Know why? They use tax code to their advantage in ways the rest of don’t even know about or take the time to learn.

One example of this – they take the equity in their home, financed at a lower interest rate, then invest the it in tax-deferred accounts, according to a new study.

In other words, they are getting a tax break on both sides of the deal.  These investors deduct the mortgage interest on their tax returns and then sit back and watch their money grow tax-free.

The study found that taxpayers who itemize were more likely to have high mortgage debt and they also found that investing in a tax-sheltered retirement account was related to higher mortgage debt.

The results seem to indicate that the more sophisticated households are responding to government tax incentives by borrowing against their house and investing in their 401(k).

There’s nothing illegal here. The government has created this incentive.  It’s a wonder why even more people don’t take advantage of this this setup.

But is this a good idea to risk your home equity?

The downsides

In some ways, it’s not a good idea. For instance, the incentive — the mortgage interest deduction — that encourages homeowners to borrow against the value in their home results in this potential problem: It appears to encourage greater housing leverage and vulnerability to housing price shocks. Indeed, “there is increasing concern, especially in light of the recent housing crisis, that rising mortgage debt among older households is a prelude to foreclosure or financial distress during retirement.

Plus, you are more vulnerable to income shocks. If you lose your job at age 58 and you’ve got extensive mortgage debt and you’ve got all your money in sheltered accounts it might not be so easy to take your money early out of sheltered accounts to pay your mortgage every month.

What’s more, you could lose on both bets. The value of your house could decline along with the value o your 401(k), which is exactly what happened staring in 2006.  If you are in your late 50s, having an extensive proportion of your retirement savings invested in equities funds is the rational thing to do,” said Finke. “It just didn’t work out very well in 2008 and 2009.

Another potential downside is this: If tax law changes, especially the mortgage interest tax deduction, then you’ve got a little bit of risk there.

And finally, there’s the risk that you won’t invest the borrowed money in a sheltered account. Paying down one’s mortgage is an example of thrift and sound financial decision making.  And that’s essentially a behavioral argument That is saying that people are able to accumulate wealth passively by paying down their mortgage. And, if you encourage people to start pulling money out of their house they might then spend it on things that are not in their long-run best interest. So, you also have to consider when you pull money out of your house, are you really going to invest it in a sheltered account or are you the kind of person to buy an RV and deplete your wealth right before you need it the most in retirement.

The upsides

One positive, however, is this: When you look at your total portfolio, not just your financial assets, but the entire portfolio from which you plan to fund your retirement, you’ll find that taking on more mortgage debt changes your overall asset allocation in ways that might be beneficial.

As we age, we tend to accumulate home equity which is essentially increasing the bond share of our portfolios.  Borrowing against this home equity allows us to maintain our optimal portfolio balance of stocks and bond-like assets.

The home equity, Finke said, is not providing you the same kind of upside potential as an equity portfolio will.  What an economist would say is that you should have a rational allocation of your household wealth in bonds and equities. But what happens over time, with your home is that you are essentially investing more and more in a bond-like asset. And, so, by simply paying off your mortgage you’re investing more and more in a bond. And it may be rational for you, especially if you are in your 50s to be shifting some of the wealth into the stock market.

In practice

So what if you decide lever up your home and invest in retirement accounts?  Make sure you’re in a position to maintain your mortgage payments should you suffer an income shock. You’re exposing yourself to a certain amount of risk so you want to make sure you have enough in emergency funds to make your mortgage payment.

The present system encourages upper income households to increase their leverage and that could make them more vulnerable during a recession. If they lose their job, they may also lose their home.