Mortgages are harder to obtain today, and deals require more money down, but it's still a good time for buyers. Here's how to get the home you want at the best price.
David Koeppel, MSN Money
Nervous about buying a home? You should be. Your home is probably the single biggest investment you'll make in your lifetime. With an unpredictable economy, a mortgage crisis and record foreclosures, the commitment to buy can be downright overwhelming. In recent years, lax lending standards eliminated some of the obstacles, but now lenders are once again getting picky. The good news is that for those who qualify for a mortgage -- with a steady income, strong credit and a modicum of savings -- this is actually a good time to purchase a home. Mortgage rates are low, and home prices have been declining in most parts of the United States. To help you navigate the uncertainties, especially if you're entering the market for the first time, here are 10 tips for buying a house:
1. Find out how much you can afford, and stay within your budget.
Don't overreach. Forget the McMansion on the hill if it's beyond your means. Focus on finding something that will offer affordable monthly payments and a debt load you can handle.To make sure you fully understand and remain within your boundaries, consider a preapproved mortgage. Many reputable lenders offer them. The preapproval process tells you exactly what you will have to pay. Preapproval also provides some extra peace of mind, ensuring that when the time comes, you'll have financing in place. That can be important to real-estate agents and sellers as well as to buyers. If you're planning to buy, your household budget should allow for hefty savings toward a down payment, unless you're expecting a generous gift from a family member. The days when first-time buyers could purchase a home with a down payment of less than 10% are gone. Lenders are now requiring buyers to put down a minimum of 10% and sometimes up to 20% to 25%. "First-time buyers must come to the table with some dollars," says Ilyce Glink, the author of "100 Questions Every First-Time Home Buyer Should Ask". "You need more income, a better credit score and to think about how much debt you can carry. It has become a more difficult process."
2. Shop around for the right agent.
Real-estate agents operate on different internal clocks. One may be inclined to call you every day, while another may want to call every few weeks. Ask questions about the agent's approach and try to find one well-suited to your situation. Ideally, the agent you choose will do a lot of business in your neighborhood of choice and will have been in the business for years, gathering plenty of useful information about lending options, title searches and useful ways to compare properties. Try to avoid real-estate agents who are doing on-the-job training. "Finding a Realtor is a lot like a short-term marriage," Glink says. "Shop around; look for the Realtor who is working the most. What's their level of experience? Are they a good fit with you personality-wise?"
3. Do your homework.
A diligent and dedicated agent by your side is not enough. Buyers need to research their potential new home and neighborhood as thoroughly as possible. Thankfully, a lot of that work can be done from your bedroom or office computer. The National Association of Realtors says 84% of buyers use the Internet to help them find a home. Do not be part of that other 16%. You'll find the Net is packed with resources about cities, neighborhoods, crime statistics and school districts. Local bloggers can give today's homebuyers insight into everything from pricing trends to who's feuding with a neighbor down the block. "The Internet is a terrific tool. When I last looked for a house in 1992, that kind of information was nonexistent," says Elliot Goldstein, 46, who, with his wife, Stacey, 45, and their two children, is planning to move to Hoboken, N.J. "I get virtual house tours, multiple listing services . . . everything I need to find out about Hoboken I can find out online."
4. Visit the neighborhood.
Rich as the information on the Internet is, it's no substitute for showing up. Experts suggest repeated visits to your neighborhood of choice, so you can check out homes for sale and attend open houses. Walk around. Shoot the breeze with the neighbors. Visit the community several times at different times of day. "Walk it, smell it, hear it," says Dennis Torres, director of real-estate operations at Pepperdine University. "At 3 p.m., maybe your lawn will be overrun with kids getting off school. At 10 p.m., there could be a club that's only open at night playing loud music."
5. Don't be afraid to haggle.
How low can you go? Real-estate agents say it all depends on the pressures facing the individual seller. Some of those pressures are related to particular locations -- towns go up and down in appeal -- and some have to do with the individual's situation. But broadly speaking, if ever there was a buyer's market, this it. "In a strong market, a seller would laugh off a lowball bid," Glink says. "Now you may be able to bid 20% less than you did nine or 12 months ago. Sellers will entertain lowball bids if they're truly desperate to get on with their lives." Or at least negotiate a few additional amenities. That was the case for first-time homebuyer Jenna Smith, 23, whose six months of near-constant house hunting in suburban Atlanta taught her what she could and couldn't negotiate. Smith wound up buying into a new suburban development in January. But first she asked the builder to install hardwood floors instead of carpeting. She also wanted a new refrigerator and microwave. The builder eventually agreed, and Smith had her home -- with hardwood floors and appliances -- for $197,000.
6. Buying foreclosed properties? Proceed with caution.
This gets a bit tricky. Real-estate experts are talking a lot about foreclosed properties. Many suggest that, under the right circumstances, exploitation of a foreclosure can give a buyer a nice home at a very nice price. Foreclosure filings and bank repossessions are up dramatically, according to RealtyTrac, a California company that monitors homes in stages of foreclosure. So much so that some agents and lenders have been organizing weekend bus tours (one charges passengers $97 a ride) to showcase foreclosed properties in hard-hit cities such as Stockton, Calif., Chicago and New Haven, Conn. The tours have been popular both with shoppers searching for homes and with investors interested in buying multiple properties. Though buying a foreclosed property can potentially provide big savings, it can also present a lot of problems that may not be apparent. Pepperdine's Torres recommends that buyers avoid homes with title uncertainties and consider only properties that have been officially foreclosed on and deeded back to the foreclosing bank.
7. Find the right lender and mortgage.
Many unscrupulous subprime lenders have been shut down. That doesn't mean there aren't still some shady characters around. Don't be tempted to deal with them. Find a lender with roots in the community and a record of integrity that offers reasonable rates. It pays to do some comparison shopping. Real-estate agents can be a good source. A good agent should be able to recommend reputable area lenders and help a buyer compare types of loans. "Mortgage rates are very near historic lows, and inventory is high," says Stephanie Singer, a spokeswoman for the National Association of Realtors. Thorough research of loan offerings will pay off. Smith, the recent buyer from the Atlanta area, landed a 5.875%, 30-year fixed-rate mortgage from her employer, Merrill Lynch. Merrill required her to come up with a 20% down payment on the $197,000 home, or $39,400. Her monthly mortgage payments are about $1,100.
8. A good home inspector is hard to find. But find one.
In recessionary times, the pride of homeownership tends to suffer. It's not that people don't want to maintain their homes; it's that other priorities intervene. With competing pressures coming from credit card bills, skyrocketing gas prices and rising grocery bills, that new paint job on the house may not make it to the top of the list. A good inspector can help you spot problems that may result from neglect. Bringing in a home inspector is relatively cheap (often from $200 to $300), but according to Torres, it's the least buyers should do to make sure they're purchasing a home in reasonably good shape. Torres recommends buyers accompany inspectors when they examine a home and look out for anything suspicious. Don't be afraid to ask plenty of questions, he adds. "Ask what every crack, what every stain might be," Torres says. "Look beyond the cosmetic, the paint, the carpet and the flowers. Check under the steps, check under the eaves."
9. Buy for the long run.
Homebuying should be viewed as a long-term investment. Don't expect the kind of price appreciation that occurred in the early 2000s. Buy a home you can live in happily for a good many years, if possible. A long-term commitment will pay dividends in peace of mind. "A home is about putting down roots," author Glink says. "It's not about fixing or flipping or making a mint no matter what some infomercial tells you."
10. Don't time the market. Do take your time.
When will market prices hit rock-bottom? No one knows for sure, so waiting to get in at the lowest possible price isn't recommended. Still, experts predict it will remain a buyer's market for the foreseeable future, so don't rush. Goldstein and his wife will be moving into their new
three-story row house in Hoboken for about $1.2 million at the end of August, allowing his two children to spend a final summer at the family home in Closter, N.J. If negotiations hadn't gone his way, Goldstein was prepared to walk away, he said. That's the way to do it. "Don't let other people talk you into something you don't want," says buyer Smith. "It's your house; they don't have to live in it."
Produced by Anh Ly
Monday, April 20, 2009
Tuesday, March 31, 2009
Existing Home Sales Post Surprising 5.1% Gain
Sales activity remains slow, but plunging prices draw in first-time buyers
updated 11:14 a.m. PT, Mon., March. 23, 2009
WASHINGTON - Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.
Economists said sales, while still extremely slow, may finally be coming back to life after declining sharply following the stock market plunge last autumn.
Prices, however, are expected to keep falling well into the year. Tens of thousands of homes reman tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
“The four-letter word in the housing market is 'jobs,'’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”
It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions, according the data released Monday. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.
The sales figures don’t yet reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. That should juice up early summer sales, but how much will depend on the overall condition of the U.S. economy.
Full article available:http://www.msnbc.msn.com/id/29836196/from/ET/
TAX CREDITS: As listed above, in its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for
first-time home buyers.
CA Home Buyer 10000 Tax Credit, entitled on new homes brought between March 1, 2009 and March 1, 2010 (must be new construction to meet the minimum requirements).
City of Los Angeles Housing Department (LAHD) will offer purchase assistance financing to
eligible low- and moderate-income homebuyers seeking to purchase a foreclosed home in an NSP Priority Area in the City of Los Angeles.
updated 11:14 a.m. PT, Mon., March. 23, 2009
WASHINGTON - Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.
Economists said sales, while still extremely slow, may finally be coming back to life after declining sharply following the stock market plunge last autumn.
Prices, however, are expected to keep falling well into the year. Tens of thousands of homes reman tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
“The four-letter word in the housing market is 'jobs,'’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”
It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions, according the data released Monday. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.
The sales figures don’t yet reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. That should juice up early summer sales, but how much will depend on the overall condition of the U.S. economy.
Full article available:http://www.msnbc.msn.com/id/29836196/from/ET/
TAX CREDITS: As listed above, in its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for
first-time home buyers.
CA Home Buyer 10000 Tax Credit, entitled on new homes brought between March 1, 2009 and March 1, 2010 (must be new construction to meet the minimum requirements).
City of Los Angeles Housing Department (LAHD) will offer purchase assistance financing to
eligible low- and moderate-income homebuyers seeking to purchase a foreclosed home in an NSP Priority Area in the City of Los Angeles.
Tuesday, March 24, 2009
EXISTING HOME SALES ROSE 5% IN FEB
Biggest jump in more than five years; median price down 5% to $165,400
WASHINGTON - Sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.
Economists said sales, while still extremely slow, may finally be coming back to life after declining sharply following the stock market plunge last autumn.
Prices, however, are expected to keep falling well into the year. Tens of thousands of homes reman tied up in the foreclosure process and are not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
“The four-letter word in the housing market is 'jobs,'’ said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. “If you’re worried about having a job tomorrow, you’re not likely to buy a home now.”
The National Association of Realtors said sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January.
It was the largest monthly sales jump since July 2003, with first-time buyers accounting for about half of all transactions, according the the data released Monday. Sales had been expected to dip to an annual pace of 4.45 million units, according to Thomson Reuters. The results, which came after a steep decline in January, mean that sales activity has returned to December’s levels, but still remains lower than most of last year.
The median sales price plunged to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-largest drop on record and prices are now off 28 percent from their peak in July 2006.
However, in a positive sign, asking prices are starting to rise in places like San Diego and Orange County, Calif., where declines have been severe, said Lawrence Yun, chief economist for the Realtors. That could be an early indication that prices are stabilizing in the most distressed parts of the country.
Meanwhile, in contrast with the housing boom, when buyers took out ever-riskier loans and maxed out their home equity lines, “homebuyers are not overstretching” Yun said. “They want to stay within their budget.”
The number of unsold homes on the market last month rose 5.2 percent to 3.8 million, a typical increase for the winter months. At February’s sales pace, it would take 9.7 months to rid the market of all of those properties.
“Inventories are still high relative to sales rates, and would probably be even more so if all those wishing to sell their home actually had the house on the market instead of pulling it off in the face of rapidly eroding prices,” wrote Joshua Shapiro, chief U.S. economist at MFR Inc.
Sellers don’t want to compete with foreclosures that have swamped the market, especially in California, Florida, Nevada and Arizona.
About 45 percent of sales nationwide are foreclosures or other distressed property sales, which typically sell at a 20 percent discount, according to the Realtors group.
Tuesday, February 24, 2009
New Homeowner Affordability and Stability Plan
Questions and Answers to the Obama $75 Billion Plan to Aid 9 Million borrowers suffering from falling home prices & unaffordable payments
Borrowers Who Are Current on Their Mortgage:
Q: I owe more than my property is worth, do I still qualify to
refinance under the Homeowner Affordability and Stability Plan?
A: Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
Q: Will refinancing reduce the amount that I owe on my loan?
A: No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Q: When can I apply?
A: Mortgage lenders will begin accepting applications after the details are announced on March 4, 2009.
Q: What are the interest rate and other terms of this refinance offer?
A: The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the
refinance and any associated points and fees quoted by the lender. Interest rates may vary across
lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Borrowers Who Are at Risk of Foreclosure:
Q: How do I know if I qualify for a payment reduction under the Homeowner Affordability and
Stability Plan?
A: In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final
eligibility will be determined by your mortgage lender based on your financial situation and detailed
guidelines that will be available on March 4, 2009.
Q: Do I need to be behind on my mortgage payments to be eligible for a modification?
A: No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
Q: I heard the government was providing a financial incentive to borrowers. Is that true?
A: Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
Q: My loan is scheduled for foreclosure soon. What should I do?
A: Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.
Q: How much will a modification cost me?
A: There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a
counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
Borrowers Who Are Current on Their Mortgage:
Q: I owe more than my property is worth, do I still qualify to
refinance under the Homeowner Affordability and Stability Plan?
A: Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
Q: Will refinancing reduce the amount that I owe on my loan?
A: No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Q: When can I apply?
A: Mortgage lenders will begin accepting applications after the details are announced on March 4, 2009.
Q: What are the interest rate and other terms of this refinance offer?
A: The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the
refinance and any associated points and fees quoted by the lender. Interest rates may vary across
lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Borrowers Who Are at Risk of Foreclosure:
Q: How do I know if I qualify for a payment reduction under the Homeowner Affordability and
Stability Plan?
A: In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final
eligibility will be determined by your mortgage lender based on your financial situation and detailed
guidelines that will be available on March 4, 2009.
Q: Do I need to be behind on my mortgage payments to be eligible for a modification?
A: No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
Q: I heard the government was providing a financial incentive to borrowers. Is that true?
A: Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
Q: My loan is scheduled for foreclosure soon. What should I do?
A: Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.
Q: How much will a modification cost me?
A: There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a
counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
Tuesday, February 17, 2009
Homeowner Help?......Finally
I haven't posted a commentary in quite some time. Finally I feel I've got something to say!! It's been a difficult 12 months, but help appears to be on the horizon. I will be truthful, I was not one for bailouts....any of them!!! In my heart, I still feel that we as homeowners have got to take responsibility.(i don't mean those of us who have always acted responsibly, pay our bills on time, live within our means etc.) There's a reason why everyone isn't able to own a home. It takes sacrifice, perserverance, determination and timing to make real estate ownership a reality. Now don't get me wrong, there are definitely individuals who were taken advantage of. But folks, if it sounds to good to be true, guess what......IT IS!!!!
As a mortgage broker, our industry is taking the brunt of this catastrophe. And although there were a few who acted criminally, the banks, wall street and now out of business mortgage bankers are really the true culprits. I say all this to say that I have resided to the fact that it appears there is no other way out for us except to bail out those who are upside down and those whose mortgage payments have skyrocketed. I don't believe in rewarding irresponsible behavior but I've finally come to except it's no other way. Let's just get it on and over with and begin to heal our country.
This is a painful lesson for all of us. We are back to the days of working to save for a down payment, having and maintaining good credit and demonstrating a stable work history. (this one could be the toughest)..... There are good reasons why everyone can't/doesn't own real estate.
As a mortgage broker, our industry is taking the brunt of this catastrophe. And although there were a few who acted criminally, the banks, wall street and now out of business mortgage bankers are really the true culprits. I say all this to say that I have resided to the fact that it appears there is no other way out for us except to bail out those who are upside down and those whose mortgage payments have skyrocketed. I don't believe in rewarding irresponsible behavior but I've finally come to except it's no other way. Let's just get it on and over with and begin to heal our country.
This is a painful lesson for all of us. We are back to the days of working to save for a down payment, having and maintaining good credit and demonstrating a stable work history. (this one could be the toughest)..... There are good reasons why everyone can't/doesn't own real estate.
Thursday, February 12, 2009
Home Buyer Tax Credit Help or Hindrance
The Senate measure offers the credit to anyone buying a primary residence. But buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four -- to get the full benefit.
By Ben Meyerson and Sarah Gantz 7:03 AM PST, February 9, 2009
Reporting from Washington --
The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.
The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.
As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.
But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."
Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.
But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.
Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.
Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.
"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."
But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.
"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."
But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.
"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.
People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.
The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.
But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.
Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.
Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.
"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.
Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.
"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."
bmeyerson@tribune.com
sgantz@tribune.com
By Ben Meyerson and Sarah Gantz 7:03 AM PST, February 9, 2009
Reporting from Washington --
The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.
The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.
As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.
But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."
Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.
But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.
Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.
Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.
"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."
But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.
"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."
But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.
"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.
People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.
The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.
But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.
Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.
Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.
"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.
Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.
"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."
bmeyerson@tribune.com
sgantz@tribune.com
Monday, January 26, 2009
Myths on Buying and Selling Your Home
The truth about the housing market
In today’s uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers, and five held by sellers.
Buyer myth No. 1: The longer the house is on the market, the more you can negotiate.
When buyers ask, “How long has this property been on the market?”, they think “six months” means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.
Buyer myth No. 2: The sellers today are desperate.
Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. “I’m being transferred to Dallas” is a very different answer than “We’d like to find something bigger.” The first homeowner is hot to trot.
Buyer myth No. 3: You can’t buy a home today with less than 20 percent down.
FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.
Buyer myth No. 4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.
Buyer myth No. 5: You shouldn't buy before prices have bottomed.
You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.
Seller myth No. 1: Now’s the absolute worst time to sell.
Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.
Seller myth No. 2: Never respond to a low-ball bid.
All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.
Seller myth No. 3: The first offer is never the best offer.
Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.
Seller myth No. 4: 'I can always reduce my price later.'
Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.
Seller myth No. 5: Before you refinance, shop around.
You can if you want, but you’ll usually get the best deal from your current lender. And you’ll be able to negotiate your closing costs.
Source: Barbara Corcoran
MSNBC.com The Today's Show
In today’s uncertain market, fear runs rampant on both the buying and selling sides of the fence. Many myths need debunking. Here are five untruths held by buyers, and five held by sellers.
Buyer myth No. 1: The longer the house is on the market, the more you can negotiate.
When buyers ask, “How long has this property been on the market?”, they think “six months” means they can negotiate the price down. It more often means the seller is stubbornly holding on to their price.
Buyer myth No. 2: The sellers today are desperate.
Most aren’t. Always ask why the sellers are selling. It’s the key to finding how motivated and anxious they are. “I’m being transferred to Dallas” is a very different answer than “We’d like to find something bigger.” The first homeowner is hot to trot.
Buyer myth No. 3: You can’t buy a home today with less than 20 percent down.
FHA loans require only 3.5 percent down, and you can even ask the seller to pay the closing costs.
Buyer myth No. 4: You need good credit to get a good loan.
Once again, the FHA to the rescue! They’re happy to lend money to buyers with bad credit.
Buyer myth No. 5: You shouldn't buy before prices have bottomed.
You can’t sharpshoot the real estate market. Once you identify the “bottom,” prices have already moved up.
Seller myth No. 1: Now’s the absolute worst time to sell.
Not necessarily. It depends upon where you live. Many of the worst hit markets, like Las Vegas, Phoenix or San Diego, are already beginning to turn around. And if you’re a homeowner who wants to trade up, the loss you’ll take on your current home will be more than offset by the bargain you’ll get on the next one.
Seller myth No. 2: Never respond to a low-ball bid.
All buyers today feel obligated to put in low-ball offers to see if the seller bites. If you respond with a reasonable counter offer, most buyers can be convinced to come up in price and make the deal.
Seller myth No. 3: The first offer is never the best offer.
Most sellers believe that it’s smart to hold out for something better. But four times out of five, the first offer is the best you’ll ever see.
Seller myth No. 4: 'I can always reduce my price later.'
Sellers often price their home high for a few weeks just to test the market. But buyers shop by price bracket and if your house is in the wrong one, you’ll just help sell everyone else’s home while yours sits there overpriced. And reducing your price later in small increments puts you in the position of chasing the tide as it goes out.
Seller myth No. 5: Before you refinance, shop around.
You can if you want, but you’ll usually get the best deal from your current lender. And you’ll be able to negotiate your closing costs.
Source: Barbara Corcoran
MSNBC.com The Today's Show
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