Saturday, December 12, 2009

Recommended Reading -- New Rules for Mortgages by Dale Robyn Siegel




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Dale Robyn Siegel, MBA, JD, writes a blog we follow Diaries of a Mad Mortgage Broker. An attorney, she is President of Circle Mortgage Group in New York and teaches at NYU, Baruch College, and the Learning Annex. 

This fall she published The New Rules for Mortgages, a "must-have for home buyers and homeowners in­terested in refinancing. The New Rules for Mortgages also belongs on the reference shelves of realtors, financial planners, and attorneys." From the product description:

New rules in the housing market call for a new rulebook...A wealth of info for consumers and mortgage professionals.

In the current credit environment, rules have changed for prospective home buyers-and this book explains them. Beginning with what makes up a FICO score, how to improve that score, and how to show a better credit profile; The New Rules for Mortgages explains the new credit guidelines that apply to mortgages. It sheds light on issues that can arise with appraisals, title searches, and home in­spections, and provides hard-headed advice. Using real- world examples, it covers the home buying and financing process in every situation, providing tips and exposing secrets that enable readers to improve their current or future position in the housing market.

The educated consumer makes the best decisions.


Photo:  "...with club sauce."
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Saturday, December 12, 2009
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Wednesday, December 09, 2009

NAR State of Florida 2009 Profile of Homebuyers and Sellers -- Highlights





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The National Association of Realtors (NAR) has compiled The 2009 Profile of Homebuyers and Sellers, Florida Report,  211 fun-filled pages describing the characteristics and motivations of FL’s most recent homebuyers and sellers. Trusting you don't want to wade through the entire thing, following are the highlights via Florida Realtors:

Characteristics of homebuyers

• Forty-one percent of recent homebuyers were first-timers, compared to 47 percent nationwide.
• The typical first-time homebuyer was 31 years old, while the typical repeat buyer was 54 years old. Nationwide, first-time buyers were typically 30 and repeat buyers were typically 48 years old.
• The 2008 median household income of buyers was $71,100 – lower than the median income of buyers nationwide at $73,100.
• The median income was $59,300 for first-time buyers and $83,300 for repeat buyers.
• Single females made up 18 percent of recent homebuyers, and single males made up 11 percent. Nationwide, 21 percent were single females, and 10 percent were single males.
• For 29 percent of buyers, a desire to own a home was the primary reason for the home purchase.

Characteristics of homes purchased

• New home purchases dropped to their lowest level in eight years nationwide –18 percent of all recent home purchases. But in Florida, new homes made up 26 percent of purchases.
• The typical home purchased was 1,850 square feet in size and built in 2000.
• Seventy-eight percent of homebuyers purchased a detached single-family home.
• The median price of a Florida home purchased was $176,500, compared to $185,000 nationwide.
• Three in four buyers (77 percent) considered commuting costs as “very” or “somewhat” important.


The home search process

• More than one-third of homebuyers started their home search process by looking online for listings.
• Seventy-five percent of buyers used the Internet to search for homes.
• Buyers had a high opinion of real estate agents, with 81 percent of those who used an agent saying they received very useful information.
• The typical homebuyer searched for 12 weeks and viewed 15 homes, compared to 12 weeks and 12 homes nationwide.

Homebuying and real estate professionals

• Sixty-seven percent of buyers purchased their home through a real estate agent or broker.
• Sixteen percent of buyers purchased a home in foreclosure. Nationally, 10 percent of buyers purchased a home in foreclosure.
• Thirty-nine percent of buyers found their agent through a referral from a friend or family member.
• Sixty-four percent of buyers would definitely use their real estate again or recommend the same agent to others.

Financing the home purchase

• Florida had more cash sales, with 81 percent of buyers financing their recent home purchase. Nationwide, 92 percent financed their recent home purchase.
• The typical buyer financed 93 percent of the home purchase price.
• Nearly half (45 percent) of homebuyers reported they made some sacrifices to buy the home, such as reducing spending on luxury items, entertainment or clothing.
• Thirty-one percent of first-time buyers reported their mortgage application and approval process was “somewhat” more difficult than they expected, and about one-in-ten reported it was “much more” difficult than expected.

Home sellers and their selling experience

• Real estate agents assisted 85 percent of sellers in Florida, the same percentage nationally.
• Recent sellers typically sold their homes for 93 percent of the listing price, and 65 percent reported they reduced the asking price at least once. Among all sellers nationally, sellers typically sold their homes for 95 percent of the listing price, and 60 percent reported they reduced the asking price at least once.
• Forty-two percent of sellers offered incentives to attract buyers, most often assistance with home warranty policies and closing costs.

Home selling and real estate professionals

• Thirty-four percent of sellers who used a real estate agent found their agents through a referral by friends or family, and 24 percent used the agent they worked with previously to buy or sell a home.
• Eighty-six percent of sellers reported that their home was listed or advertised on the Internet.
• Among recent sellers who used an agent, 84 percent reported they would definitely (57 percent) or probably (27 percent) use that real estate agent again or recommend that person to others.

For-Sale-by-Owner (FSBO) sellers

• FSBOs made up 10 percent of Florida sales, which is slightly less than the national rate of 11 percent.
• Almost half of the FSBO sellers (40 percent) knew the buyer prior to the home sale.
• If a seller wasn’t dealing with a buyer he already knew, the primary reason (62 percent) for going FSBO is that the seller did not want to pay a fee or commission.
• Over half of FSBO sellers took no action to market their home, and 58 percent did not offer any incentives to attract buyers.
• Fifteen percent of FSBO sellers reported that completing a transaction within their planned timeframe was the hardest part of selling their home.

Highlights via Florida Realtors
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Wednesday, December 09, 2009
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Sunday, December 06, 2009

How Certain Actions Affect Your FICO Credit Score -- The Curtain Parts, Slightly





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Fair Isaac, the creator of the FICO score, has [amazingly] revealed  to Liz Pulliam Weston at msn money how specific actions, from maxing out a credit card to filing for bankruptcy, can affect people with different credit scores. Caveat -- the impact the same action can have on identical credit scores varies from individual to individual because each person has a different profile -- a different mix of accounts, different lengths of credit history, and so on. That said, read on:

For someone with a 780 credit score, which is a good credit score, the impact of "negative events" is far greater (double in some cases) than on someone with a 680 score, which is still a fairly decent score. This is not a surprise, but this list should be - it's the first time hard numbers, albeit ranges, have been associated with negative events.

Effect on a 780 credit score:
- Maxed-out card: -25 to -45
- 30-day late payment: -90 to -110
- Debt settlement: -105 to -125
- Foreclosure: -140 to -160
- Bankruptcy: -220 to -240

Effect on a 680 credit score:
- Maxed-out card: -10 to -30
- 30-day late payment: -60 to -80
- Debt settlement: -45 to -65
- Foreclosure: -85 to -105
- Bankruptcy: -130 to -150
For further enlightenment on Fair Isaac's mystery-shrouded world which affects us all, read entire article at msn money.

Source: The Consumerist
Photo: "...with club sauce."
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Sunday, December 06, 2009
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Wednesday, December 02, 2009

State of Real Estate -- MLS Hotsheet and Housing Market Indicators 12/02/09





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Here is the Martin County recent housing data: Martin County RAMC Real Estate Trends Indicator October 2009. RAMC MLS Hotsheet covering the areas we market in the past 14 days:

RES - New Listings 138
RES - Price Changes 130
RES - Status Changes 309
RES - Other Changes 372
RES - Back On Market 23
RES - Expired Listings 64
RES - Temporary Off Market 6
RES - Pending w/Contingency 50
RES - Pending Listings 43
RES - Sold Listings 90
RES - Withdrawn Listings 20
RES - Transferred Listings 2
CND - New Listings 34
CND - Price Changes 66
CND - Status Changes 113
CND - Other Changes 117
CND - Back On Market 9
CND - Expired Listings 34
CND - Temporary Off Market 2
CND - Pending w/Contingency 13
CND - Pending Listings 15
CND - Sold Listings 22
CND - Withdrawn Listings 12
CND - Transferred Listings 3
LND - New Listings 23
LND - Price Changes 21
LND - Status Changes 21
LND - Other Changes 26
LND - Back On Market 4
LND - Expired Listings 7
LND - Temporary Off Market 0
LND - Pending w/Contingency 1
LND - Pending Listings 5
LND - Sold Listings 2
LND - Withdrawn Listings 2
LND - Transferred Listings 0

FL Realtors Housing Market Indicators :
Florida existing home sales: (month-to-previous-year comparison) 45%

Florida existing condo sales:(month-to-previous-year comparison) 82%

Florida existing home median price: $140,300

Florida existing condo median price: $105,200

Florida consumer confidence: 69 *

National existing home sales:(month-to-previous-month comparison; all housing types)
10.1%

National existing home median price: $173,100

National (Freddie Mac) mortgage rate: (all housing types) 4.83%

*Benchmarked to 1966--a value of 100 represents the same level of confidence for that year.

Photo: likeneelyohara
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Wednesday, December 02, 2009
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Tuesday, December 01, 2009

Should an Under-Water Homeowner Walk Away from their Mortgage? "Morality" Argument May Be Unfair to Consumers





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"Walking away" from a mortgage--defaulting on a debt--is not only a financial decision, but a moral one as well. As you can see from the graphic below, large percentages of US homeowners are "under water", owing more on their loans than their home is currently worth on the open market.




Some see advantages to "giving up". From The Los Angeles Times, Alejandro Lazo via Daily Real Estate News:

Increasing numbers of home owners are struggling with the decision to walk away from their homes because their mortgages are so far underwater.

Whether it is a good idea or not is an open question with strong arguments on both sides of the decision.

Leaving a home and a mortgage ruins a credit score, complicating future transactions, and makes it more difficult to rent another residence and buy a car.

Despite this potential pain, Glenn Kelman, chief executive of Zillow.com, believes that people should consider giving up.

"I think there are a lot of people who don't walk away from their house for moral reasons that are economically irrational," he said.

Some experts believe that credit-evaluation companies will view foreclosures differently in this era. "This is a once-in-a-century real estate market. The question that FICO will be asking itself is, is a foreclosure in 2008 and 2009 the same as a foreclosure in 1998, 1999 or 2003 and 2004?" said Todd J. Zywicki, a bankruptcy expert at George Mason University School of Law in Arlington, Va.

Brent T. White, a University of Arizona law school professor, argues "Homeowners should be walking away in droves," in a paper entitled Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis. WaPo reports :

The main point, he says, is that too often people's emotions get in the way of clear financial thinking about mortgages, turning them into what he calls "woodheads" -- "individuals who choose not to act in their own self-interest." Most owners are too worried about feelings of shame and embarrassment following a foreclosure, and ignore the powerful financial reasons for going through with it, he said.

Buttressing these emotions is a system that White labels "the social control of the housing crisis" -- pressures and messages continually sent to consumers by the "social control agents," namely banks, government and the media. The mantra these agents -- all the way up to President Obama -- pound into owners' heads, White says, is that "voluntarily defaulting on a mortgage is immoral."

Yet there is an inherent imbalance in the borrower-lender relationship that makes this morality message unfair to consumers: Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20 to 50 percent in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

Graphic via Book of Joe
Photo via Home Sweet Home
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Tuesday, December 01, 2009
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Tuesday, November 24, 2009

Existing Home Sales Rise October 2009 -- FL Median Price Continues to Drop



Happy Thanksgiving!

Find out what's happening in real estate!

State of Florida Floida Realtors reports that Florida’s existing home sales rose 45% in October, marking 14 months that sales activity has increased in the year-to-year comparison, according to the latest housing data. October’s statewide sales also increased over sales activity in September in both the existing home and existing condominium markets. Florida’s median sales price for existing homes last month decreased 17 percent at $140,300 from $169,700 a year ago.

Treasure Coast Locally, Palm Beach Post's Real Time reports Treasure Coast sales jumped 46 percent while the median  price of existing homes decreased to $110,400 from $134,600 since October last year.

Sales up or no, we have seen no sign at all that Realtors are "giddy" over these numbers, as TC Palm rather cavalierly suggests. Homeowners under water with their mortgage, in foreclosure, and losing market value daily on their homes is hardly cause for celebration by anyone.

Martin County Here is the data: Martin County RAMC Real Estate Trends Indicator October 2009.

St Lucie County TC Palm's Anthony Westbury tells that the news from  "St. Lucie County Property Appraiser Jeff Furst was grim and grimmer":
As Furst pointed out, our residential property values have fallen by more than 30 percent over the past two years. And, he said, we’re not going to get back to “normal” for a long time.

He’s predicting another 11 percent drop in the overall tax roll for 2010.

Furst has also been asked by St. Lucie County Administrator Faye Outlaw to look farther out, to 2011. His educated guess is that we’ll have seen the worst by then; Property values may slip another 5 percent, Furst said, before we begin a long, slow recovery that could take six or seven years.

It’s on the commercial side of real estate, however, that Furst dropped his “grimmer” bombshell.

A precipitous fall in the value of commercial real estate in the near future could be the other shoe to drop in the recession, Furst believes. He thinks we’re going to see values fall by about 30 percent, perhaps by next year.

Nationally Housing industry analysts with the National Association of Realtors (NAR) caution that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.  

NAR reports a strong uptrend established over the past seven months, driven by the first-time buyer tax credit. Existing-home sales nationally showed another big gain in October while inventories continue to decline. Sales increased 10.1 percent to a seasonally adjusted annual rate of 6.10 million units in October from a downwardly revised pace of 5.54 million in September, and are 23.5 percent above the 4.94 million-unit level in October 2008. Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

[Photo: "...with club sauce." ]
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Tuesday, November 24, 2009
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Thursday, November 19, 2009

State of Florida Advocates for Consumers -- Property Insurance Recommendations




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Sun-Sentinel's House Keys reports that Florida Insurance Commissioner Kevin McCarty told the Florida Cabinet Tuesday that "the state is developing a report card on insurers to help consumers and increase competition."Among the 30 recommendations Shaw's office has drafted are:
Requiring lenders to fork over claims payments to consumers more quickly so the hurricane damage doesn't spread. Insurers often make the checks out to both the policyholders and their lenders since banks are considered part-owners. "The mortgage company may be delaying the process a little bit so we’ll see if can tighten it up," Shaw told the Sun Sentinel Tuesday.

Requiring insurers to tell their policyholders to contact them if they find more damage to their property. Many homeowners think that their insurers’ initial damage estimate is the final amount that will be paid.

Imposing harsher penalties on unlicensed contractors that do shoddy work repairing homes because that can lead to more damage later.

Beefing up training for contractors, adjusters – people who draw up damage estimates – and others involved the claims process. For instance, adjusters can be trained on building and construction techniques to help them identify mold behind walls and other hidden damage that may surface later as a bigger problem.

These recommendations are supposedly aimed at helping consumers and increasing competition. However FR reports, via St Petersburg Times, that the state is allowing rate increases:

“The commissioner has stated it would be beneficial for everyone if (State Farm) did keep a presence here,” Insurance Commissioner Kevin McCarty’s spokesman Jack McDermott said Friday.

Official attitudes about property insurance cost increases apply to more than just State Farm. At one time, high insurance costs were derided from the top down, and officials promised to do whatever it takes to keep costs in check for homeowners. In the shadow of recent hurricane losses and potential losses, however, their tune has changed. A push for cost savings has changed to a push to keep private insurers in the state, relieving pressure on state-backed Citizens Property Insurance.

Over the past year, Florida’s more sympathetic stance to property insurers’ problems has included:

• Rate increase approvals for other private insurers, including Universal Property and Casualty, Florida’s second-biggest private insurer, which received permission to raise rates an average of 14.6 percent.

• Citizens Property Insurance recently received approval to hike rates up to 10 percent per year, with a planned 5.4 percent increase for basic policies and potential 7.7 percent increase for high-risk policies.

Photo: Michael Jackson's Neverland via Curbly
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Thursday, November 19, 2009
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Sunday, November 15, 2009

NAR's New Home Improvement Site: HouseLogic -- Some Home Renovations May Be Counter-Productive to Selling




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HouseLogic is the new consumer web site sponsored by our National Association of Realtors (NAR). This site offers a broad spectrum of free information home owners need to increase, maintain and protect the value of their home -- tools to help home owners with home improvements, maintenance projects, taxes, finances, insurance, and even community involvement. HouseLogic helps home owners make decisions about what is often their largest investment – their home. Check it out!

That said, expensive remodeling projects may not bring a large return when you sell. First and foremost, ask yourself -- are the renovations for your own enjoyment, based on what you and your family need and want in your home? Then consider the impact on your home's value. With selling in mind, HGTV has listed the 5 Worst Home Updates:

Over-the-top improvements. When it comes to renovations, bigger isn't always better....To get the best return on your investment, scour local listings to see what's standard in your area, and then bring your decor up to spee

Home office overhauls. If you work from home, a designated workspace is a must-have (and a potential tax deduction). But according to a report from Remodeling magazine, overhauling your office won't pay off when you sell your home -- especially if you borrow usable space from a bedroom, living room or garage

Swimming pools. Your backyard oasis could actually deter those buyers who don't want to deal with skimming, filtering, PH-balancing, heating, repairing and winterizing this high-maintenance amenity. [ed. note: This article makes an exception for Southern states, where pools are "the norm", but we agree--not everyone wants a pool.

New roofing. Cedar shakes, clay tile or architectural shingles can instantly transform your house, but they probably won't have the same effect on your sale price. After all, buyers think of a roof as a bare necessity -- not a luxury that will inspire them to shell out extra cash. Still, don't put off a much-needed roof repair.

Specialized spaces. Quirky renovations can personalize your home (and maybe earn you some bragging rights!) but buyers probably won't be willing to pay a premium for them.
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Sunday, November 15, 2009
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Wednesday, November 11, 2009

State of Real Estate -- MLS Hotsheet and Housing Market Indicators 11/11/09




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Home sales are up locally. Via TC Palm :
In the Port St. Lucie Metropolitan Statistical Area, which encompasses St. Lucie and Martin counties, Realtors’ sales of existing homes rose 48 percent in the third quarter compared with a year ago.

And while the median price of the 44,345 homes sold in Florida fell 26 percent, the median price of the 1,670 sales in the Port St. Lucie MSA dropped only 20 percent to $111,200. The median is a typical market price where half the homes sold for more, half for less.
MLS Hotsheet via RAMC for the areas we market in the past 14 days:
RES - New Listings 191
RES - Price Changes 192
RES - Status Changes 384
RES - Other Changes 421
RES - Back On Market 35
RES - Expired Listings 71
RES - Temporary Off Market 11
RES - Pending w/Contingency 67
RES - Pending Listings 42
RES - Sold Listings 104
RES - Withdrawn Listings 38
RES - Transferred Listings 6
CND - New Listings 77
CND - Price Changes 63
CND - Status Changes 126
CND - Other Changes 120
CND - Back On Market 13
CND - Expired Listings 29
CND - Temporary Off Market 2
CND - Pending w/Contingency 17
CND - Pending Listings 20
CND - Sold Listings 32
CND - Withdrawn Listings 12
CND - Transferred Listings 1
LND - New Listings 27
LND - Price Changes 19
LND - Status Changes 54
LND - Other Changes 48
LND - Back On Market 7
LND - Expired Listings 23
LND - Temporary Off Market 1
LND - Pending w/Contingency 0
LND - Pending Listings 1
LND - Sold Listings 19
LND - Withdrawn Listings 2
LND - Transferred Listings 0

Existing single-family home sales are up state-wide, according to the latest housing statistics from our state association, Florida Realtors:
Sales of existing single-family homes in Florida rose 33 percent in third quarter 2009 compared to the same period a year earlier. A total of 44,345 existing homes sold statewide in 3Q 2009; during the same period the year before, a total of 33,311 existing homes sold. It marks the fifth consecutive quarter that Florida has seen higher existing year-to-year home sales.

Statewide sales of existing condominiums in the third quarter rose 56 percent compared to the same time the previous year. This marks the fourth consecutive quarter for increased statewide sales in both the existing home and condo markets compared to year-ago levels.

Statewide sales activity in 3Q 2009 also increased over 2Q 2009’s sales figure in both the existing home and existing condo markets, Florida Realtors’ records show. For 3Q 2009, statewide sales of existing homes rose 2.82 percent over the 2Q 2009 figure; existing condo sales statewide in 3Q 2009 increased 0.37 percent over the 2Q 2009 level.

Housing Market Indicators via FR:
  • Florida existing home sales: (month-to-previous-year comparison) 34%
  • Florida existing condo sales: (month-to-previous-year comparison) 77%
  • Florida existing home median price:  $142,000
  • Florida existing condo median price: $102,500
  • Florida consumer confidence: 72**
  • National existing home sales: (month-to-prev month comparison; all housing types) 9.4%
  • National existing home median price: $174,900
  • National (Freddie Mac) mortgage rate: (all housing types) 5.03%
**Benchmarked to 1966--a value of 100 represents the same level of confidence for that year.
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Wednesday, November 11, 2009
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Monday, November 09, 2009

Mortgage Servicers Have "LIttle Incentive" to Help Distressed Borrowers -- Unregulated Banking Industry


 


Find out what's happening in real estate!

US banks are fighting major regulatory reform. According to a new study by the Service Employees International Union, the financial industry spending more than $35 million lobbying against measures aimed at helping individual consumers. According to the Sun-Sentinel, mortgage servicers are not playing fair.
This unregulated industry continues to be the source of much of the pain and distress felt by borrowers. They often try to seek help from the true holder of their mortgage, while simultaneously fighting against illegal foreclosure attempts by their mortgage servicing company.
There is a new grass-roots petition circulating and gathering momentum. Here are some snippets:
Tens of thousands of homeowners across this nation have spent hundreds of hours dealing with mortgage servicers who have little incentive to actually help them/us achieve permanent loan modifications; while in the process of obtaining a modification, many homeowners have been lied to, misled, foreclosed upon or threatened with foreclosure.

We propose an immediate halt to all foreclosures until new, mandatory guidelines are established and that these guidelines be overseen by a new Consumer Protection Agency, which was recently recommended by President Obama and endorsed by Sheila Bair, chair of the FDIC.

Homeowners are not the ones not complying with the rules. The banks are creating their own set of rules and regulations and are consistently “losing” paperwork during the application process, denying modifications for unjustifiable reasons after the trial payments have been successfully completed, and proceeding with the foreclosure process. This is often happening unbeknownst to the homeowners who are still faxing, mailing and e-mailing reams of duplicated documentation as requested by their lenders.

The American Dream has now become the American Nightmare courtesy of the banking industry, which is taking a cavalier approach to the stress, heartache and despair caused by the current lack of oversight, transparency and enforcement of loan modifications. It is of the utmost importance that action be taken to correct this travesty in order to preserve home ownership for the thousands of Americans that are and will continue to be struggling in this economic time.
To read the petition in its entirety and to sign / email, click here.
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Monday, November 09, 2009
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Saturday, November 07, 2009

Homebuyer Tax Credit Extended -- Upfront Bridge Loans for First-Time FL Homebuyers Available





Find out what's happening in real estate!

President Obama has signed legislation to extend the Homebuyer Tax Credit. The National Association of Realtors has a great Q & A on the basics to give you the scoop.

Our state association Florida Realtors  is a great local resource, providing info on the FHOP program (see below) enabling buyers to apply those tax credit funds upfront to the down payment and closing costs via  interest-free bridge loans.

WASHINGTON – Nov. 6, 2009 – President Obama signed H.R. 3548 this morning, enacting into law an extension, and adjustment, of the $8,000 tax credit for first-time buyers. Among other things, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a purchased home’s cost to $800,000.

First-time homebuyers

Most details for first-time homebuyers mirror the rules currently in existence. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”

• A purchase must be under contract by April 30, 2010.

• A purchase under contract by April 30 must close no later than June 30, 2010.

• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples; up from limits effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.

• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.

Current homeowner tax credit

An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. To qualify, that owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years.

• This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify.

• Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.

Long-time Florida homeowners who enjoy discounted property taxes resulting from the state’s Save Our Homes amendment qualify for property tax portability, notes Sebree. For more information or to calculate how much tax savings can be transferred to a new home, visit floridarealtors.org at: http://www.floridarealtors.org/LegislativeCenter/TopInitiatives/index.cfm

Florida Homebuyer Opportunity Program

Under FHOP, first-time Florida homebuyers can obtain interest-free bridge loans to access their federal tax credit before they complete a home purchase, enabling them to use that money upfront for downpayment and closing costs. Once buyers submit their returns to the IRS and receive their tax credit money, they repay their loans to the state.

The Florida Realtors-backed program came out of the 2009 session of the Florida Legislature. However, as part of the 2009-2010 budget year, did not become effective immediately. The tax credit extension will allow many first-time buyers to tap into the approximately $28 million in the program's remaining funds.

While funded by the state, the money is distributed through the city and county housing offices that operate the State Housing Initiatives Partnership (SHIP) program. There is no standardized program, and each local agency may operate under different rules for distribution. For more information, buyers should contact their local SHIP office.

To find a local SHIP office, go to: http://apps.floridahousing.org/StandAlone/FHFC_ECM/AppPage_SHIPLGContacts.aspx.


Additional changes

The tax credit extension includes other new rules, such as:

• The new law also impacts dependent purchases of homes, which weren’t addressed under the old rules.

• The new law requires a buyer to attach documentation about the home purchase to his or her income tax return. An audit found that some buyers are claiming the tax credit when they don’t deserve it, and investigators continue to seek out fraud. To minimize tax abuse going forward, buyers won’t receive the credit without submitting proof to the Internal Revenue Service (IRS).

The homebuyer tax credit is collected as part of the normal income tax process. As a credit, it’s calculated separately from an individual’s income tax, and paid regardless of taxes owed or withheld from income. As always, however, only a tax planner can render specific advice to anyone seeking the credit. For more information on the credit, contact a tax planner or visit the IRS website at: http://www.irs.gov.
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Saturday, November 07, 2009
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Wednesday, November 04, 2009

What Happens If You Don't Pay the Mortgage?-- Investment Home Foreclosure vs Short Sale



Find out what's happening in real estate!

It's rumored that roughly one-third of South Florida mortgages are "underwater". Due to the drop in market value, many homeowners hold a note on their home that way exceeds the price they can sell for. For example, a homeowner may owe $290,000 on a house that would only bring around $200,000 in today's market.

So the choices available are to keep on making the monthly mortgage payment or to try to renegotiate the terms of the loan, if the lender will take the call and can find your faxes. How about if the homeowner just stops paying the mortgage, called a "strategic default"? Sun-Sentinel says, "It may be a tempting idea, but it quickly leads to trouble."

Here’s what could happen if you don’t pay the mortgage.

Report to the credit bureau
If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.

The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.

Cards are closed, rates rise
In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.

Tightening of credit lowers your score
Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.

The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.

Lender response
The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.

But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.

What happens next
After four months of not paying your mortgage, you will likely be served with a foreclosure notice.

If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.

A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.

(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)

If you bought a second home and can't make the payments, the ramifications are different than for your principle residence. June Fletcher provides answers to the question Should Borrower Just Walk Away? in WSJ:
Unfortunately, people like you who bought a second home at the top of the market and have seen it drop in value get no relief from the federal government. The Internal Revenue Service counts debt forgiveness–the difference between the home's sale price and the amount owed on the mortgage–as regular income, although there are exceptions for bankruptcy, insolvency, forgiven deductible mortgage interest and seller-financed debt. You also cannot deduct losses from price declines, or expenses you incur for real estate brokers, attorneys or others involved in the sale. Primary homeowners, however, get a break from being taxed on the shortfall, at least until December 31, 2012, thanks to the Mortgage Forgiveness Debt Relief Act of 2007.

So you are stuck, though the short sale does have several advantages over the foreclosure. Some lenders don't report short sales to credit bureaus, or report them as "paid as agreed"; and even if they do, you'll likely have a lighter hit to your credit score than if you had a foreclosure. If you buy a home again, the loan application will ask if you have had a foreclosure; it won't ask about a short sale. Moreover, under Fannie Mae guidelines, if you have a short sale and have been current on your payments, you may qualify to buy another home immediately; or within two years if you were in arrears. If you go through a foreclosure, the wait is seven years.

Strategic defaults are among the highest in Florida, where house prices have dropped the most. Florida Realtors reports that borrowers who know someone who defaulted are 82 percent more likely to follow the crowd.
Posted by Ricki for John Widlak and Ricki Widlak, Realtors at Wednesday, November 04, 2009
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