U.S. home sales are gradually coming back. A mild winter and a stronger job market helped boost sales ahead of the crucial spring buying season.
The last two months made up the best winter for sales of previously occupied homes in five years, when the housing crisis began. And the sales pace in January was the highest since May 2010, the last month that buyers could qualify for a federal home-buying tax credit.
February sales slipped only slightly from January to a seasonally adjusted 4.59 million, the National Assn. of Realtors said Wednesday. That's 13% higher than the sales pace last July and just below the revised 4.63 million in January.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the lower February numbers "should not detract from the key point, which is that sales are trending upward."
The pace remains far below the 6 million that economists equate with healthy markets. And the number of first-time buyers, who are crucial to a housing recovery, continues to lag behind normal levels, while foreclosures remain high.
Still, Chris Jones, an economist at TD Economics, said that the "economic environment is ripe for home sales to keep gaining pace."
The median sale price of homes rose for the first time in four months in February, to $156,600. And the supply of homes on the market increased more than 4% in February to 2.43 million, which could signal that more homeowners became confident in the housing market.
There have been other signs of improvement in the depressed housing market.
Home builders have grown more confident in the last six months after seeing more people express interest in buying. In February, they requested the most permits to build homes since October 2008.
Mortgage rates are near record lows. And the supply of homes fell in January to its lowest level in seven years.
But sales among first-time buyers, who are crucial to a housing recovery, fell slightly last month to 32% of all purchases. That's down from 33% in January. In healthy markets, first-time buyers make up at least 40%.
Homes at risk of foreclosure made up 34% of sales, down only slightly from 35% in January. In more stable markets, foreclosures make up less than 10% of sales.
Wednesday, March 28, 2012
Monday, March 26, 2012
BofA To Try Converting Foreclosures Into Rentals
Bank of America Corp. has tentatively joined a nascent housing industry movement in which homes in or near foreclosure are sold to investors as rental properties.
The bank on Friday began a test program for 1,000 homeowners headed into foreclosure in Nevada, Arizona and upstate New York — borrowers it has been unable to help with loan modifications but hopes to keep on as renters. If successful, the program could be tried in California and rolled out nationally.
Consumer advocates maintain it often would be better for homeowners, communities and the banks themselves to keep troubled borrowers on as renters rather than kick them out. Seizing and selling empty homes creates neighborhood blight and accelerates downdrafts in housing prices, they contend.
Bank of America doesn't plan to become a longtime landlord for borrowers turned tenants. In the pilot, it hopes to take possession of homes for no more than three months before selling them to investors making a bet on the recovering housing markets. If the program becomes established, the goal would be for the investors to take over as soon as the occupants relinquish ownership and pay the first month's rent.
Whether this scheme can work is to be determined by the pilot, the first such test announced by any major mortgage company. The bank wants to find out whether getting a loan off its books with a quick sale at a deep discount is a better deal financially than the foreclosure process, which can drag on for months or even years in highly regulated states such as New York.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," said Bank of America's Ron Sturzenegger, who oversees about 1 million troubled loans inherited from aggressive mortgage giant Countrywide Financial Corp., which Bank of America purchased in 2008.
Homeowners can't apply for the program themselves, a bank spokesman said.
The trial is limited to a tiny slice of the 1 million loans that Bank of America owns outright. It is not testing any of the additional 8 million home loans on which it provides customer service but which are owned by investors in mortgage bonds.
Bank of America executives said the 1,000 homeowners selected are all at least 60 days late on their loans and are not qualified for or not willing to accept other alternatives to foreclosure.
They will be offered one final deal: hand their property titles to the bank, which would cancel their mortgages in what's known as a deed in lieu of foreclosure, and sign contracts agreeing to rent the home for up to three years at or below market rates.
Bank of America spokesman Dan B. Frahm said there are hundreds of investment groups across the country interested in acquiring troubled properties as rentals, each eyeing different regions and segments of the housing markets.
The pilot is designed to test the market for homes ranging in current value from $75,000 to $1 million, and to assess the program's viability in states such as New York that route foreclosures through the courts, as well as states that do not, such as California, Arizona and Nevada.
Initial interest in the pilot program is likely to be strong. Betting that the housing markets are bottoming out, hedge funds, private investors and even Omaha investment wizard Warren Buffett have expressed interest in snapping up distressed or foreclosed properties to rent out or sell to first-time buyers.
Indeed, some investment firms have been turning distressed properties into rental units for years.
TwinRock Partners, a private Newport Beach firm, recently told potential investors that more than 100 homes it has acquired and rented out over the last two years have produced annualized returns of 8.7%, with the potential for big resale profits if housing prices recover. TwinRock says it tries to keep the occupants in the house as renters and has done so about half the time.
The Obama administration has said it hopes investors will buy many of the nearly 250,000 foreclosed homes owned by government-controlled entities and turn them into rentals, although the former owners of these homes already have been given the boot.
The bank on Friday began a test program for 1,000 homeowners headed into foreclosure in Nevada, Arizona and upstate New York — borrowers it has been unable to help with loan modifications but hopes to keep on as renters. If successful, the program could be tried in California and rolled out nationally.
Consumer advocates maintain it often would be better for homeowners, communities and the banks themselves to keep troubled borrowers on as renters rather than kick them out. Seizing and selling empty homes creates neighborhood blight and accelerates downdrafts in housing prices, they contend.
Bank of America doesn't plan to become a longtime landlord for borrowers turned tenants. In the pilot, it hopes to take possession of homes for no more than three months before selling them to investors making a bet on the recovering housing markets. If the program becomes established, the goal would be for the investors to take over as soon as the occupants relinquish ownership and pay the first month's rent.
Whether this scheme can work is to be determined by the pilot, the first such test announced by any major mortgage company. The bank wants to find out whether getting a loan off its books with a quick sale at a deep discount is a better deal financially than the foreclosure process, which can drag on for months or even years in highly regulated states such as New York.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," said Bank of America's Ron Sturzenegger, who oversees about 1 million troubled loans inherited from aggressive mortgage giant Countrywide Financial Corp., which Bank of America purchased in 2008.
Homeowners can't apply for the program themselves, a bank spokesman said.
The trial is limited to a tiny slice of the 1 million loans that Bank of America owns outright. It is not testing any of the additional 8 million home loans on which it provides customer service but which are owned by investors in mortgage bonds.
Bank of America executives said the 1,000 homeowners selected are all at least 60 days late on their loans and are not qualified for or not willing to accept other alternatives to foreclosure.
They will be offered one final deal: hand their property titles to the bank, which would cancel their mortgages in what's known as a deed in lieu of foreclosure, and sign contracts agreeing to rent the home for up to three years at or below market rates.
Bank of America spokesman Dan B. Frahm said there are hundreds of investment groups across the country interested in acquiring troubled properties as rentals, each eyeing different regions and segments of the housing markets.
The pilot is designed to test the market for homes ranging in current value from $75,000 to $1 million, and to assess the program's viability in states such as New York that route foreclosures through the courts, as well as states that do not, such as California, Arizona and Nevada.
Initial interest in the pilot program is likely to be strong. Betting that the housing markets are bottoming out, hedge funds, private investors and even Omaha investment wizard Warren Buffett have expressed interest in snapping up distressed or foreclosed properties to rent out or sell to first-time buyers.
Indeed, some investment firms have been turning distressed properties into rental units for years.
TwinRock Partners, a private Newport Beach firm, recently told potential investors that more than 100 homes it has acquired and rented out over the last two years have produced annualized returns of 8.7%, with the potential for big resale profits if housing prices recover. TwinRock says it tries to keep the occupants in the house as renters and has done so about half the time.
The Obama administration has said it hopes investors will buy many of the nearly 250,000 foreclosed homes owned by government-controlled entities and turn them into rentals, although the former owners of these homes already have been given the boot.
Wednesday, March 14, 2012
How To Save On Your Taxes Using The IRS Code 1031 Exchange
What exactly is the 1031 Exchange and how does it work? Well let's first define 1031 Exchange.
1031 Exchange: "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of the like kind, which is to be held either for productive use in a trade or business or for investment".
This rule was based on the 1031 section of the IRS code and the term 1031 Exchange is a term that is used within the real estate business. Now let's take a look at how it works.
1. It will allow any taxpayer to defer the taxes on a property sale if it is exchanged one investment property for another similar type of property that is being used for business or investment purposes
2. You will need to hire a real estate lawyer to apply the legal processes that are required in the 1031 Exchange
3. If you would rather, you can hire a Qualified Intermediary or QI as a third party that is independent of the process. A QI will hold the profits from the sale of the first property that you sell until you are able to invest into another property or properties. You should have a minimum of two properties involved in this transaction
4. You are not allowed to use your own home to qualify for the 1031 Exchange. The 1031 Exchange only allows the exchange of one property for another of the like kind. When I say like kind, it does not mean the condition of the property or the value of the property but only that they are similar in their types like one investment property for another investment property
5. There are two very strict timeline guidelines: the Identification Period and the Exchange Period. These dates cannot be extended to meet your needs and the process has to be completed within the time that is allowed by the IRS to take benefits out of complimentary tax treatment
• Identification Period = 45 days from the actual date you sell your property and the time you view the new property that you want to buy
• Exchange Period = 180 days from the classification date up to the closing date. During this time you must get through the entire exchange process
Your best bet is to find a realtor who is very familiar with the 1031 Exchange tax code and dealing with investment properties. The 1031 Exchange can be very beneficial to you; however, you will have to make sure that you do everything accordingly. The only way you can make sure of this is if you have a realtor and a real estate lawyer to handle the proceedings for you.
1031 Exchange: "no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of the like kind, which is to be held either for productive use in a trade or business or for investment".
This rule was based on the 1031 section of the IRS code and the term 1031 Exchange is a term that is used within the real estate business. Now let's take a look at how it works.
1. It will allow any taxpayer to defer the taxes on a property sale if it is exchanged one investment property for another similar type of property that is being used for business or investment purposes
2. You will need to hire a real estate lawyer to apply the legal processes that are required in the 1031 Exchange
3. If you would rather, you can hire a Qualified Intermediary or QI as a third party that is independent of the process. A QI will hold the profits from the sale of the first property that you sell until you are able to invest into another property or properties. You should have a minimum of two properties involved in this transaction
4. You are not allowed to use your own home to qualify for the 1031 Exchange. The 1031 Exchange only allows the exchange of one property for another of the like kind. When I say like kind, it does not mean the condition of the property or the value of the property but only that they are similar in their types like one investment property for another investment property
5. There are two very strict timeline guidelines: the Identification Period and the Exchange Period. These dates cannot be extended to meet your needs and the process has to be completed within the time that is allowed by the IRS to take benefits out of complimentary tax treatment
• Identification Period = 45 days from the actual date you sell your property and the time you view the new property that you want to buy
• Exchange Period = 180 days from the classification date up to the closing date. During this time you must get through the entire exchange process
Your best bet is to find a realtor who is very familiar with the 1031 Exchange tax code and dealing with investment properties. The 1031 Exchange can be very beneficial to you; however, you will have to make sure that you do everything accordingly. The only way you can make sure of this is if you have a realtor and a real estate lawyer to handle the proceedings for you.
Friday, March 9, 2012
What Is Escrow And How Does It Work?
So what exactly is escrow. If you have recently bought a house or are thinking about buying a house, you will need to know what escrow is. Here is a quick overview of what escrow is and how it works.
Escrow is a deposit that is held by a third party or escrow agent. So in other words, an escrow deposit, is the money you put down on your new home. Your escrow deposit is held in a secure location by a neutral third party.
The escrow agent works for both the lender and the buyer and their purpose is to carry out the instructions that both parties have agreed on. The escrow agent will release your money once all of the terms of your agreement have been upheld.
Your mortgage lender will more than likely require you to open an escrow account to make sure there is enough money to cover your insurance and taxes. The way this works is you will make an initial deposit to your escrow account followed my monthly installments. Most lenders will arrange to have this included in your monthly mortgage payments. When your taxes and insurance premiums come due the escrow agent will release the funds to the appropriate party.
The reasoning behind having an escrow account is to protect the lender in the event you default on your payments. The lender is then protected from external perils that could arise as a result of you not paying your taxes or your insurance causing the lender to be left with no collateral.
An escrow account also helps the buyer because it allows you to spread your payments evenly over a 12 month period. Just imagine if your yearly taxes were $3000 and your yearly insurance was $1400, that would leave you owing $4400 in one lump sum.
Your escrow amounts could change from year to year due to the possible increase in your taxes and insurance. Therefore, your lender will review and adjust your escrow amounts annually and you will be given a revised mortgage payment if your taxes or insurance go up. On the same token; however, if your taxes or insurance rates go down, you will be given a refund.
Sometimes an escrow requirement can be waived. Some buyers prefer to pay all of their taxes and insurance directly. Your lender may allow you to do this if your down payment is more than 20% but they will more than likely raise your interest rate slightly to compensate. One thing to remember is that once you begin putting your funds into an escrow account, it can be difficult to cancel this process so make sure that you fully understand what your options are before doing anything.
Well, I hope that I have fully explained what escrow means and how it works. However, if there is anything you don't understand or anything you have questions about, please call your realtor. Your realtor has many years of experience with these kinds of things and will be more than happy to assist you.
Escrow is a deposit that is held by a third party or escrow agent. So in other words, an escrow deposit, is the money you put down on your new home. Your escrow deposit is held in a secure location by a neutral third party.
The escrow agent works for both the lender and the buyer and their purpose is to carry out the instructions that both parties have agreed on. The escrow agent will release your money once all of the terms of your agreement have been upheld.
Your mortgage lender will more than likely require you to open an escrow account to make sure there is enough money to cover your insurance and taxes. The way this works is you will make an initial deposit to your escrow account followed my monthly installments. Most lenders will arrange to have this included in your monthly mortgage payments. When your taxes and insurance premiums come due the escrow agent will release the funds to the appropriate party.
The reasoning behind having an escrow account is to protect the lender in the event you default on your payments. The lender is then protected from external perils that could arise as a result of you not paying your taxes or your insurance causing the lender to be left with no collateral.
An escrow account also helps the buyer because it allows you to spread your payments evenly over a 12 month period. Just imagine if your yearly taxes were $3000 and your yearly insurance was $1400, that would leave you owing $4400 in one lump sum.
Your escrow amounts could change from year to year due to the possible increase in your taxes and insurance. Therefore, your lender will review and adjust your escrow amounts annually and you will be given a revised mortgage payment if your taxes or insurance go up. On the same token; however, if your taxes or insurance rates go down, you will be given a refund.
Sometimes an escrow requirement can be waived. Some buyers prefer to pay all of their taxes and insurance directly. Your lender may allow you to do this if your down payment is more than 20% but they will more than likely raise your interest rate slightly to compensate. One thing to remember is that once you begin putting your funds into an escrow account, it can be difficult to cancel this process so make sure that you fully understand what your options are before doing anything.
Well, I hope that I have fully explained what escrow means and how it works. However, if there is anything you don't understand or anything you have questions about, please call your realtor. Your realtor has many years of experience with these kinds of things and will be more than happy to assist you.
Thursday, March 8, 2012
Unique Ways To Fund Your Downpayment
One of the biggest concerns many people have when it comes to buying a home is coming up with the down payment. Or perhaps coming up with a down payment that is large enough to lower their monthly payment. These are very legitimate concerns ; therefore, we have come up with some unique ways to help you afford your down payment.
1. The most popular(and maybe not so unique) is to dip into your savings account
2. Hit up some of your friends - who knows what kind of money they have lying around
3. Ask all of your relatives - if all of your relatives can give a little, perhaps you can reciprocate the next time they need a favor
4. Check with your 401k administrator - in certain cases you can borrow some money from it without penalties
5. Look at your entire portfolio - do you have stock proceeds you can use or maybe you could sell some stocks to beef up your down payment
6. What assets to you have - do you have anything that you could sell to come up with that extra down payment
7. Sometimes, depending on the lender , a co-signer might be an option
8. Does your city offer any down payment subsidy programs - sometimes these subsidies are $5000 to $10,000 - this is free money - who doesn't want free money. This will also significantly lower your monthly payments as well
9. Some banks still offer zero percent down - which means you have no down payment - these are usually reserved for first time home buyers with extremely good credit
10. Perhaps you might consider a lease with an option to buy
11. Sometimes a seller is willing to fund part or all of your down payment just to get the deal - this is called a carry back mortgage - it will help the seller sell their home faster and help the buyer buy a home that they could not otherwise afford
12. Talk to your lender about a second mortgage
There are many, many ways to fund your down payment. Ask your realtor to help you come up with the options that will work best for you. You might be surprised at just how well versed they are in helping buyers reach their down payment goals. So use their experience to your advantage and don't let a little thing like a down payment get in your way.
1. The most popular(and maybe not so unique) is to dip into your savings account
2. Hit up some of your friends - who knows what kind of money they have lying around
3. Ask all of your relatives - if all of your relatives can give a little, perhaps you can reciprocate the next time they need a favor
4. Check with your 401k administrator - in certain cases you can borrow some money from it without penalties
5. Look at your entire portfolio - do you have stock proceeds you can use or maybe you could sell some stocks to beef up your down payment
6. What assets to you have - do you have anything that you could sell to come up with that extra down payment
7. Sometimes, depending on the lender , a co-signer might be an option
8. Does your city offer any down payment subsidy programs - sometimes these subsidies are $5000 to $10,000 - this is free money - who doesn't want free money. This will also significantly lower your monthly payments as well
9. Some banks still offer zero percent down - which means you have no down payment - these are usually reserved for first time home buyers with extremely good credit
10. Perhaps you might consider a lease with an option to buy
11. Sometimes a seller is willing to fund part or all of your down payment just to get the deal - this is called a carry back mortgage - it will help the seller sell their home faster and help the buyer buy a home that they could not otherwise afford
12. Talk to your lender about a second mortgage
There are many, many ways to fund your down payment. Ask your realtor to help you come up with the options that will work best for you. You might be surprised at just how well versed they are in helping buyers reach their down payment goals. So use their experience to your advantage and don't let a little thing like a down payment get in your way.
Wednesday, March 7, 2012
Making Sense Of Points, Rates And Fees
You have just found the home of your dreams and the seller has accepted your offer. Now the fun begins. You keep hearing terms like "buy down", "discount points", "purchase points, but you have no idea what all this means. Do they all mean the same thing or is each term something different? This is where your realtor comes in. Of course you can always call your lender; however, your realtor is the one you have been dealing with and the one that will be more than happy to explain everything to you.
Purchase Points - which are also known as a buy down or discount points. Points is a term used to define an amount of money given to the lender at closing to lower your interest rate for your mortgage loan. Every point is equal to one percent of the total amount of your loan. So if you have a mortgage that is $100,000 then one point would equal $1000. Every point you buy will lower your interest rate by a certain percentage. Just remember, the more points you buy, the more money you are going to have to come up with at closing.
The question is - is it smarter to buy points or to hold on to your money? Well, that depends on how long you plan on staying in that home and of course what you can afford to pay. If you are planning on staying in this home for more than five years then my advice is for you to buy as many points as you can. Because this will lower your monthly payments and will save you interest over the life of the loan.
Interest Rates - interest rates fluctuate daily, and when you apply for a loan it doesn't mean that the rate you were quoted that day is the same rate you will get at closing unless you "lock in" your interest rate. Locking in your interest rate will give you a guaranteed rate within a specific time frame. Most lock in periods are for 15, 45 or 60 days. Keep in mind that the longer you lock in your rate the more it will cost you because a lender takes more of a risk to lock you in for a longer period of time.
Fees - since when have you ever bought anything that did not have some sort of fee associated with it? Well, a mortgage is no different. Some of the fees you can expect are: title fees, underwriting fees, land survey fees, appraisal fees etc. Each lender is different and will work your loan differently; some lenders will charge you lower fees but a higher interest rate.
So before you sign on the dotted line, make sure you do your homework and most definitely ask your realtor to let you know who they have had the best experiences with. Make sure there are no hidden fees and make sure that you fully understand what costs are involved and what your obligations are for the life of your loan.
Purchase Points - which are also known as a buy down or discount points. Points is a term used to define an amount of money given to the lender at closing to lower your interest rate for your mortgage loan. Every point is equal to one percent of the total amount of your loan. So if you have a mortgage that is $100,000 then one point would equal $1000. Every point you buy will lower your interest rate by a certain percentage. Just remember, the more points you buy, the more money you are going to have to come up with at closing.
The question is - is it smarter to buy points or to hold on to your money? Well, that depends on how long you plan on staying in that home and of course what you can afford to pay. If you are planning on staying in this home for more than five years then my advice is for you to buy as many points as you can. Because this will lower your monthly payments and will save you interest over the life of the loan.
Interest Rates - interest rates fluctuate daily, and when you apply for a loan it doesn't mean that the rate you were quoted that day is the same rate you will get at closing unless you "lock in" your interest rate. Locking in your interest rate will give you a guaranteed rate within a specific time frame. Most lock in periods are for 15, 45 or 60 days. Keep in mind that the longer you lock in your rate the more it will cost you because a lender takes more of a risk to lock you in for a longer period of time.
Fees - since when have you ever bought anything that did not have some sort of fee associated with it? Well, a mortgage is no different. Some of the fees you can expect are: title fees, underwriting fees, land survey fees, appraisal fees etc. Each lender is different and will work your loan differently; some lenders will charge you lower fees but a higher interest rate.
So before you sign on the dotted line, make sure you do your homework and most definitely ask your realtor to let you know who they have had the best experiences with. Make sure there are no hidden fees and make sure that you fully understand what costs are involved and what your obligations are for the life of your loan.
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