Buyers

If a home is offered as a “short sale”, is the listing agent required to set a price that the bank will accept?

Mar 15th, 2009
by edsmith.
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We recently made a full price offer on a short sale home in Florida. We knew that the final selling price would be subject to bank approval. We recently were told that the bank would not accept our full listing price offer. We were told that an additional $42,000.00 would be required in order for us to purchase this house. We have received nothing in writing. Is this a legal “bait and switch” tactic? Any suggestions on how to proceed?
 
Yes, listing agents should try to list a property at a price that would be acceptable to the lender. Unfortunately, many agents do not have a clear understanding of how the short sale process works. First, each lender has their own “loss severity rate”. This is a numerical reflection of how much a given lender is writing off on deals gone bad. Today, it is not out of the question to see a lender with a LSR of as high as 60%. This means that they are only recouping 40% of the mortgage balance at closing. Each different lender has their own loss tolerance level. This is important to know because if you can keep their loss below that threshold, your odds of success are much greater.
 
Additionally, each individual lender has their own “sale to market ratio”. This is the lender’s in-house guideline indicating what percentage of fair market value will be acceptable. Most lenders want 90% of fair market value. Some 85%.  We have worked with one lender that can go all the way down to 75% if the property is in Florida. Knowing this number is likewise important. Again, your odds of success are much greater if your offer falls within these parameters.
 
Often, the lender will respond with a counter such as you described. Sometimes they want the seller to sign a promissory note, sometimes they want cash. Sometimes, they want to attach a mortgage on another property owned by the seller. Remember that the first counter is not likely the last.  You can always go back with another one. Submit additional comps to help justify the price that your offered. Sometimes, it is helpful to submit a new appraisal. Ask the negotiator before spending the money on one though.
 
The other wild card is the seller’s financial condition, which you will not likely be privy to. If the lender believes that the seller is much better off than he is reporting, the lender will take a much tougher stand.
 
You rarely get anything in writing when it comes to counters from the bank. Short sale negotiation is not a regulated process. It is not something that the bank has to engage in at all. There are no hard fast rules, only general guidelines. And the guidelines change weekly.
 
Hope this helps, and good luck to you!

 

 

First-time homebuyers: How to get the $8,000 tax credit

Feb 17th, 2009
by edsmith.
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This has been a hot topic, so we thought that this article may help answer a lot of common questions:

First-time homebuyers: How to get the $8,000 tax credit

WASHINGTON – Feb. 17, 2009 – How does a first-time homebuyer take advantage of the $8,000 tax credit that President Obama is expected to sign into law tomorrow? It comes with a few rules. According to the most recent analysis, the following rules will apply – though things could change as tax professionals weigh the details:

• The deduction is worth 10 percent of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.

• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.

• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.

• If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.

• It’s a tax credit, not a deduction. That means the entire amount goes back to the first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.

• The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 31, 2009.

• The tax credit does not have to be paid back, providing the homebuyer keeps the property for at least 36 months and resides in the home.

• To qualify as a first-time homebuyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.

• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.

• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.

The tax credit is not a downpayment, but it could be used toward a downpayment if first-time homebuyers plan ahead. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.

By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, these buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.

 

© 2009 FLORIDA ASSOCIATION OF REALTORS®

When does the tourist season actually start in Destin?

Feb 5th, 2009
by edsmith.
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Tourist season begins in earnest in March during the first spring break. The spring breaks actually hit us in waves in March and April as most of the southern states have staggered vacation schedules. This is occurring at about the same time that our winter “snow bird” guests are packing up to go home.

Our area attracts many families during spring break, as opposed to the stereotypical spring break locales featured on late night TV. With our upscale dining, shopping and accommodations, the Emerald Coast naturally lends itself to a more adult clientele.

Tourist season here will wind down around Labor Day, making the months of September and October two of the nicest times to visit.  While we do have very serene peaceful stretches of beachfront here year round, September and October usually bring lots of sunshine and great weather, and the restaurants and beaches less crowded.

We are first time buyers and like everyone else, are wondering if now is a good time to buy a home?

Feb 4th, 2009
by edsmith.
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The answer is yes, now is a great time to buy! It is unprecedented that interest rates and real estate prices are low at the same time. While property values may not rise for a while longer, interest rates may not be this low for long.  Even a slight rise in interest rates can have a pronounced effect on your monthly payment. So yes, take advantage of the fabulous opportunities that exist today. They won’t last forever.

 

 

One last thought … If you wait for the robins to sing, spring will be over.

 

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