Did You Know? PMI is No Longer Tax Deductible…….
The ability of homeowners to write off the premiums they pay for private mortgage insurance – PMI – expired quietly at the end of December, along with 58 other tax code benefits that Congress failed to renew. Estimates are that this loss could cost individual home owners between $600 and $1,000 on their annual federal tax bills.
The loss of deductibility of mortgage insurance hits a segment of consumers – middle income and first time homebuyers – for whom affordability is especially important. What also hurt is that these are the same consumers that were hit with the fee that was taken to fund the temporary payroll tax cut and extension of employment benefits in 2012.
Did you do your taxes yet and was your accountant, online tax service, etc., aware of this?
Ok, I know “why” you don’t want to pay – but “why” don’t you want to pay?
Sound a little confusing? I’ll straighten out the two “whys” in just a minute. I am a Realtor – a Listing Agent, a Buyers Agent and an Agent who does a LOT of leases/rents. So – on to first “why”. I know why you don’t want to pay a Realtor. You think you can just stick a sign in front of the house, put an ad in the paper and get that tenant, and it will cost your very little , if nothing. And if you hire a Realtor, we will charge you to do the same things you just did, but it will cost you. Do I have that right? Is this what you are thinking???
On to the 2nd “why”. Why would you not want to pay a Realtor to do this job? I know what the current rental prices are in your neighborhood. I put it on the MLS which then feeds out to a lot more sites than you have access to. I know where to put it to get the most exposure for your home. I then show the home everytime anyone calls – either from the listing I placed on the MLS, the ads I place (and I place a LOT) , the information I put on the many Social Media sites I’m on or the sign that is in the front yard. I also open it up to other agents to show their clients your home and possibly get it leased even faster. I interview each and every person, make sure that I have current credit reports and FICO’s on every adult living in the home, verify their employment and housing histories to make sure that they will be a great tenant for you. I present you with each and every offer after doing all of this work and we work out an agreement that is suitable for everyone. I can then stay involved as to rent, repairs, whatever may be needed to be the go-between for you and the new tenant if required. I protect you and I protect them. I protect you and your tenants by making sure that everything that needs to be disclosed about the property is – is there, or has there been, mold, lead based paint, leaking, etc. Do you have all the necessary documents for this, or are you aware of everything that needs to be disclosed??? And yes, I charge for my services. Have you ever asked a Realtor what they charge to do all of this? I bet you will be mighty surprised to find out it not as much as you think it as, after finding out all the work we do for you.
Now, I had this little devious voice running thru my head the first lease I took a lease listing on. This was from a client that I sold a home to, and they thought they would then lease their current home out. I don’t seek leases out, but I will do them if asked. This little voice was saying – “Great, first time landlord, they will hate it by the end of the year and want me to sell their home – Yay, I will get another listing!”
Well, that little devious thought backfired on me! I did such a great job in placing a tenant in their beautiful home and it worked out so nice for everyone, that the tenants extended their lease and everyone is happy – including me, too. Every lease that I have done like this (selling the owner a home and leasing this other home) since has worked out exactly like this. There has also been an added benefit for me……the landlords have been so happy with me that I have been referred to a lot of their friends (either sell, buy or lease) AND the tenants that I have placed have also been so happy with me, that they have also referred me AND when they get ready to buy a home, guess who they call??? ME!!! And, yes, I do get that listing when the owners have decided it’s time to sell this home and purchase another one, maybe another lease for them, sell the tenants a home and then sell them another one and lease out the first one………it goes on and on and on.
So, why not hire a Realtor? I’m in it for the long term – selling, buying and leasing. I’m also a landlord so I do for you what I do for me and it works!
FHA? Conventional? Neither? None? And You Want To Buy a Condo? Uh-Oh…
“Wow, I’m so excited! I’ve saved 5% for a down payment, I’ve been pre-approved and I’m ready to buy my first home!
Sigh…..I wish I could be as excited as you are. I wish it was like it used to be – find a home, make sure you are pre-approved for a loan (any type of loan), place your offer, get it accepted, go thru escrow and get the keys – now that was exciting!!!
Yes, prices have dropped and yes, there are a lot more homes/condos/townhomes in your price range that are fantastic, better than you had hoped for a few years ago, when prices were out of your price range. But financing has gotten harder to get and that is the issue here. I’m sure that if you have gotten this far, you have heard the terms FHA financing and Conventional financing. These can both be low downpayment loans. If you are buying a condo, this is where we all run into problems.
FHA financing gives you the options to get loans at 3.5% to 5% down and your FICOs can be down in the low 600′s. Conventional financing also give you the options for loans starting at 5% down, but FICO’s must be in the upper 700″s for these very low downpayment loans. If these are the types of loans you are interested in, then buying a condo has become MUCH harder for you, and for me, and for your lender……
Southern California home prices have dropped a lot since 2007 and a lot of homesellers have been hurt by this. Either they have lost all equity in their homes and decide not to sell, or they find that the economy has really “done them wrong” and they have to sell. With that loss of equity, they will have to do a Short Sale – short selling their home where the mortgage is now higher than the current market value of their home. Now, here is where it gets really hard. These same homeowners – the ones who can no longer make their mortgage payment – also stop making their HOA payment and this hurts the new buyers!
Last year a lot of condominium complexes had their FHA certification expire but many are in the process of recertifying and some have decided that they will not go thru the process at this time. To recertify, they have to meet all of the criteria needed for these financing rules: There are 3 criteria that are very important for both type of financing in condo associations. There must be no litigation, the Owner to Tenant ratio must be at least 50% – 50% and the HOA dues deficiencies can be no higher than 15%. Short Sales and Foreclosures have caused the last two to become very prevalent in most HOA’s and therefore cause a bigger problem for the new prospective buyers. If these factors are in place, there is NO FHA financing and the only Conventional financing can be at 25% down – or the buyer has to pay cash!
When sellers decide they cannot sell for what they were hoping, a lot of them move and rent out their current residence and this causes the owner to tenant ratio to go up. When Short Sale sellers stop paying their HOA dues, this causes the deficiency to go up. Now, it can change on a daily basis – if the HOA deficiency is just a little over the limit, and there are a few homes in escrow, once they close escrow, that deficiency can be wiped out. If the new buyer will be the homeowner, then the owner to tenant ratio comes up. In a lot of complexes, tho, these ratios are so out of balance that the HOA has just decided not to seek recertification.
My job as a Real Estate Agent has now gotten much harder. It isn’t enough for me to find your dream home, work with your lender, walk you thru escrow and hand you the keys! (No, there is a LOT more that I do, but I’m just fine tuning it down) I now have to look into hundreds of complexes in the cities you want to be, in the price range you need to be and make sure the complex is FHA approved (even if you want to do conventional financing). A lot of the Listing Agents do not know the names of the HOA’s and if they are approved, so that becomes my job as your Buyers Agent. I am literally amazed when I make the phone calls to get this information and get told “I have no idea, you can find out”, “Yes, I know it was FHA approved last May” but now it’s February of the next year, “just find a buyer to pay cash” – yes, I get that one too. A lot of HOA’s don’t return phone calls or emails and by the time your lender can get this information, your 17 days contigency time period is just about up and you’ve already paid for your inspection and appraisal – not good.
As a Listing Agent, my first duty to both my seller and any buyer is to get that information from the HOA so that I don’t waste anyones time later. I like when I get phone calls from other agents thanking me for putting that information in the MLS so they don’t waste their time showing it to a buyer that has to go FHA. As a Buyer’s Agent, I’m frustrated when agents give me the answers quoted above and also thank the listing agent for being so forthcoming, saves me time. Something has to give, and soon. The more buyers cannot buy, the more sellers will lose their home to foreclosure, making all of the ratios rise even higher. I love working with buyers, those that are ready to go and excited and I hate being the bearer of bad news so if we are prepared up front to deal with this – great!! Stick with me, we will find a way to get your into that perfect condo!!! I may not sleep, I may pull my hair out, I may have a glass or two of wine (anymore than that and I will just go to sleep) BUT I will find a way to make this work!!!!
Real Estate Professionals were asked to rank online marketing sites on a scale from 1-5 scale and here are the results:
1. Facebook and other social media sites – 3.09
2. Trulia’s agent ads – 2.93
3. Zillow’s Premier Agent – 2.74
4. Yahoo Real Estate – 2.63
5. HouseValues.com – 2.23
6. Move Inc.’s Top Producer – 2.12
7. AOL Real Estate – 2.1
How many of these do you use, and do you consider them a success? How much have any of these contributed to your ROI since the majority of them have fees to participate in them?
This information came from a 2011 study by Citi Investment Research and Analysis
You watch a lot of HGTV, do you? You read where buyers can buy homes at large discounts, 40% discount, right? So, I have to ask – 40% off of which year? 40% off the peak of 2007 or 40% off fair market value now?
I am inundated with buyers all asking the same questions, and expecting that they are going to score that “deal”, the one where they bought a home at a huge discount that they read about all the time. Ok, let me fill you in – yes, there are almost 40% discounts off the peak of 2007 – we are down to 2002-2003 prices now in some areas. But to get a deal at 40% off todays fair market value? Nope, won’t work, no matter what anyone says.
Yes, I can get you a bank owned home for up to 10% less than what it is listed at right now, and I can even get you 3% closing costs back in that same purchase. A short sale all depends on the days on market. A bank wants to get the highest they can get, and that is what the latest sold comps show is happening in that one particular neighborhood, or close to it. But the longer it stays on the market, the more they are willing to negotiate. They still won’t pay for repairs or termite, but they will budge on price – possibly about 5% below what they started at. They will only give money back at closing if their net figures come in high enough, otherwise that’s something else they will not willingly pay. A Standard Sale – don’t even ask! If you low ball standard sales, you will be lucky if the seller even looks at your offer, let alone be gracious enough to make a counter offer for something more reasonable. They have equity in their home, they have value in their home, and they will be so insulted that you may be lucky if they even talk to your real estate agent again. Yes, you can place lower offers if your real estate agent has shown that comparable properties have sold for less and if you can justify that lower price.
There is an article in the Orange County Register today that bluntly states “to put the market in perspective, last month’s $400,000 median price was 38% below June 2007′s peak price of $645,000. So, I guess I could ask again – 40% off of what year? This article shows that we are only 38% below the peak, not the 40% you were hoping for……..
I love watching HGTV – Property Virgins is a good one – but realize that most of these programs are not filmed in Califoria, let alone Southern California. They are filmed in Canada and back east, where property values are a lot different than in the OC.
Everyone that lives in a condo complex, or a housing complex with an HOA has dues – fees you agreed to pay when you purchased the property. One of the many documents you signed was an agreement to pay these fees. But what happens when you can’t, or won’t make those payments anymore? Do you know?
This has become a strong topic with so many Short Sales and Foreclosures and with lot of HOA’s that have lost their FHA certifications due to too many HOA deficiencies. Years ago, an HOA could foreclose upon a property for non-payment of the HOA fees. That is no longer allowed but the HOA’s still need compensation for the dues that were not paid. Have you had a Special Assesment placed on you, or your property, from your HOA? That is one way that an HOA tries to compensate themselves for the loss of these fees. They will either raise the fees or will place a Special Assesment on all the homeowners.
But what happens to you if you do not pay these fees? Half of all the homeowners, Short Sale Negotiating Teams, Title Companies and Escrows polled are sure that the HOA fees follow the property, whereas the other half feel that it follows the homeowner. Have you ever had a Collection placed in your credit report? That follows you, not your property. Have you had a lien placed on you? Now, that’s a different matter since some liens do stay on the property and some follow a person. HOA’s can do either. They can first place the amount due in Collections, which will show up on your credit report, and then can place a lien on you and on your property. In fact, in one instance, a homeowner who lost his home to foreclosure months ago is being sued in Small Claims Court by his HOA since are trying to recoup whatever they can from him at this point. An HOA lien is considered a Jr. Lien, and therefore gets put behind your first Mortgage lien, and then the 2nd, if you have one. If the home is foreclosed upon, all liens can be wiped out, including this one, if it was placed on the property.
I always advise my sellers to continue paying their HOA’s, even if they are going to have to Short Sell their homes as there is no definitive answer on this but would you want to be a buyer of a home that will need you to pay their deficient HOA dues too??? I don’t know any new buyer who has the extra funds to pay what could be up to $15,000 in some cases. I also tell them this so that we don’t have to face this issue months down the line and find an escrow may not be able to close. Aha, you also may not have thought of that, did you? These deficient fees have to be paid by someone before any escrow can close. Will your lender pay it – the sellers lender pay it, the lender who is already been asked to accept lower than they expected to get? Do you think the sellers have the money to pay this off, or do you?
To try and get to the bottom of this, I also polled a few lawyers for their legal advise. As with all their advise, the first words out of their mouths were “Do Not Advise, tell your sellers (or buyers) to get advice from their lawyers”. I do not advise, I always tell sellers and buyers to get advice from their lawyers, but here was the general concensus on this one question: Look in your CC&R’s – it will be right there. There may be a category called “enforcement” or something along that line (I forgot to write that part down) and it will be specified in there how your HOA will deal with this issue. It is up to each HOA to set their rules – will they go after the homeowner or the property for the deficient HOA’s. Whatever is in writing cannot be changed unless done legally and you will have been notified of these changes in your monthly minutes. Each state is different in what they allow and each HOA is different – there is no standard in any of this.
So, when you feel that a Short Sale is what you need to do, think twice about not paying your HOA’s – it can come back to haunt you.
I am a 2011 Orange Coast Five Star Real Estate Agent!
Yes, I want to brag a little! I’ve been named a 2011 Orange County Five Star Real Estate Agent. I was also on this elite list in 2010!
How Was I Selected?
The research team contacted consumers in Orange County and asked if they had experience working with a real estate agent. Consumers who agreed to participate in the survey provided the name of the real estate agent and rated that individual according to key criteria such as integrity, negotiation and closing preparation.
Surveys were sent to Orange County residents who recently purchased a home over $150,000 (more than 30,000 households) within a 12 month period (February 2010 to February 2011) and 1,000 subscribers ofOrangeCoastmagazine. An additional 250 surveys were sent to mortgage and title companies.
The survey data was collected and score, resulting in the list of 2011 Orange Coast Five Star Real Estate Agents. The research methodology allows only 7% or fewer real estate agents in a given market to qualify for the Five Star award.
Five Star Professional follows standard sampling and survey practices used by other professional research organizations. Our research also includes feedback from industry peers and leaders, and a regulatory review to provide necessary checks and balances
Call me and let’s work together!
How to Buy a REDC/Auction.Com Home in 5 Steps – Successfully!
First step – Hire a Real Estate Agent! Disclaimer – I am a Real Estate Agent and took my clients thru one of these purchases. Let me walk you thru this $&(* process and you will see why you need the assistance of a Real Estate Agent – like me!! Did you know there can be 5 steps to this? I certainly didn’t do this for the money, as you will see at the end!
First step is finding a home. My clients and I started their homebuying process the standard way – we looked at numerous properties in numerous cities to find that “perfect” vacation home – or home away from heat 
We went from beach city to beach city, in their specific price range, and search criteria – walking distance to the beach, to downtown amenities, etc. They also wanted a view if possible, and not a view of the rooftops or the neighbor next door. We found a home, almost on the water with a fantastic view of the ocean………and a view of studs showing thru the wall, of a lot of holes in the drywall and electrical panels missing – get the picture so far??
Perfect! Let’s place an offer says my clients. I do the comps – the comparable sales in the area, what an appraiser will look at and since this is a bank owned (REO) property, how low a price we can come in with that the bank will accept since it needs a LOT of work. We come up with a price and submit it to the listing agent only to get an email back a few days later that the home has been put in auction and we need to contact the auction co.
Now starts the interesting process and I say interesting for the fact that I had never gone thru this and so was going to learn about it along with them. My hubby and I had thought about going to one of these live REDC/Auction.com auctions a year or so ago, but after being stuck in the line just to get into the parking lot for 45 minutes, he said absolutely no way and we left.
2nd Step – Pre Auction - We submit an offer to the REDC/Auction.Com company, same price that was offered for the sale originally. Wow, get an answer and some forms to start signing within a few days. Clients have to send a cashier’s check and a personal check for deposit to equal 5% of the purchase price to escrow within 24 hrs of receiving this email. Ok, this might a little too fast. Well, they get it done and now we have to wait for “investor approval”. Remember, this is a bank owned home and therefore no seller in the picture – just the bank/lienholder or the private investor. They are allowed 15 days to accept or decline the offer. We wait and wait and wait until day 14 and get told that the investor declined it, so “do they want to go to Online Auction in 2 days and see if they get it?”. Not really, but ok, this really is a condo they want. I tell them to register me as their agent when they are signing up online so that I can help them with this. I knew at that point what my commission would be and it wasn’t a heck of a lot but it was a home my clients wanted and I was going to do my best for them, no matter what!
3rd Step – Online Auction -They register, wait for the auction to start (in fact, delayed their vacation so they could last out the 3 days), get their bid in with a start price that was WELL below our offer price. I can’t access any of this, just know what is being told to me. At day 3, I get an email and so do my clients that say their price was over the reserve price – Congratulations!!! We assume (yes, I know exactly what that word means and really should never be used) that they have this condo – YAY! Their price ended up being exactly the same as their original offer at the start. Have to pay more to escrow within 24 hrs since the buyers premium now has been added in. They do this and we know to wait. Well, 10 days later, we all get told – AGAIN, that their offer was declined. They are frustrated as am I. The rep at the auction company told me that he had been talking with the investor to show him how he really should accept this offer, it wasn’t going to go higher, yada yada, to no avail. LOL, I get a phone call to see if they want to attend the LIVE AUCTION that will be starting in approx 6 hrs to maybe get this home, again. No, they do NOT want to come, it’s over and done, we are tired of it all. The Live Auction would have been the 4th Step
5th Step – Post Auction – Well, I get a phone call 2 days later to see if my clients are still interested in this home as it didn’t sell at auction. What is their highest and best offer? I told the rep that their offer, the same offer they started awhile ago was it, their highest and best. And of course, I told him this without even seeing if they really did want it, what did they want their offer to be, I just wanted the rep to get something started. My clients are so confused at this point, as am I, but what the heck, why not try one last time – and I had told the rep this was it, the final try, no more, we were all worn out. Paperwork again, make sure same money is in escrow, and GO!
3 days later I get a packet of paperwork from escrow – ??? What exactly does this mean, this didn’t happen before. It means the investor actually accepted the offer and we have 45 days to close an escrow. I was surprised at 45 days, great news.. For those of you that have bought properties, you know that you generally have 10 – 17 days to meet all your contingencies such as appraisal and inspection. An Auction purchase has no such thing – if you want an inspection, you have to do it prior to purchase, there is NO backing out. My clients were made aware of this because they were working with me but I bet there are a lot of you who don’t read the fine print of an auction purchase but I sure did!
Now their lender has work to do to get the loan closed on time – do they want to do an inspection just for their knowledge since it’s too late to back out now? No, they like to fix places up, so no problem. We didn’t find any severe major damage (and I had also placed a call to HOA to see what had caused the problems in the first place and felt assured by what I was told), basically it was a lot of nasty cosmetic work. I met the appraiser there armed with my comps and I knew they would be needed since this really was a unique property and the only true comparable was about 1/2 mile away with same view but completely upgraded, just gorgeous – and this one had holes in the walls. I had to justify the approved really low price! Guess I did a good job because it came in perfect, just what we needed.
I handed off their keys and a nice bottle of champagne a few days ago and they are moving in this weekend. We discovered beautiful, absolutely gorgeous, bamboo flooring under the ratty carpet when we tore it up – what a great discovery to go along with what I know is going to be perfect in a few months. Oh, and yes, I did get some commission out of this whole thing – a whopping 1%, but wait, I didn’t actually get the 1% because of some stupid fees that the auction company kept and then my broker gets his split. Yes, we agents do not get to keep all this commission that you think we all get. We have to split it with both agents and then both of our brokerages get their splits too – Whoo hoooo, by the time I get my check, I might be able to pay my cell phone and gas bill for all the expenses run up from this sale. But you know what, it was a great learning experience – I can sit here and write about it – and my clients are very, very happy and have referred me to two other people – so all in all it was great. Oh, and did I mention – the price my clients had to pay for this fantastic ocean view condo was $90,000 below original list price, and $125,000 below that comparable condo – and its not going to take anywhere near that amount to bring this condo up to that one! Now, that truly is a “steal of a deal”……one that I’m hoping to find again for their lender and a few other people – LOL
Ok so I don’t take great pictures, but this was from inside their condo, from the living room
window and the same view can be seen from their master bedroom window. Sit on a couch or chair with that view and what could you want? And as you can see, they are just steps to the water…..yes, this is what I’m calling a “steal of a deal” and they are far and few between. So, call me if you would like help to purchase your own auction “deal”!!!
The Wedge – words not necessary
Today – 9/2/2011
Last week I wrote about the 7 Deadly Sins of Overpricing and what it means to buyers and sellers, but I didn’t list them – here is that list:
Most experts would advise that the best way to increase your odds of a successful sale is to price your home at fair market value. But, as logical as this advice sounds, for many sellers it is still tempting to tack a few percentage points onto the price to “leave room to negotiate”. To avoid this temptation, let’s take a look at the seven deadly sins of overpricing:
1. Appraisal Problems
Even if you do find a buyer willing to pay an inflated price, the fact is over 90% of buyers use some kind of financing to pay for their home purchase. If your home won’t appraise for the purchase price the sale will likely fail.
2. No Showings
Today’s sophisticated home buyers are well educated about the real estate market. If your home is overpriced they won’t bother looking at it, let alone make you an offer.
3. Branding Problems
When a new listing hits the market, every agent quickly checks the property out to see if it’s a good fit for their clients. If your home is branded as “overpriced”, reigniting interest may take drastic measures.
4. Selling the Competition
Overpricing helps your competition. How? You make their lower prices seem like bargains. Nothing is worse than watching your neighbors put up a sold sign.
5. Stagnation
The longer your home sits on the market, the more likely it is to become stigmatized or stale. Have you ever seen a property that seems to be perpetually for sale? Do you ever wonder – What’s wrong with that house?
6. Tougher Negotiations
Buyers who do view your home may negotiate harder because the home has been on the market for a longer period of time and because it is overpriced compared to the competition.
7. Lost Opportunities
You will lose a percentage of buyers who are outside of your price point. These are buyers who are looking in the price range that the home will eventually sell for but don’t see the home because the price is above their pre-set budget.
Most buyers look at 10-15 homes before making a buying decision. Because of this, setting a competitive price relative to the competition is an essential component to a successful marketing strategy.
courtesy of Trulia.com
