Case Properties

Each of these links is a separate hint to help anyone looking to complete a loan modification.
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According to early reports, the new tax credit for first time home buyers or new homes has been budgeted for $200,000. However, it is divided equally between the first time buyers and purchasers of new (never been lived in) homes.

According to the Franchise Tax Board’s website, here are the details:

These tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010.  The purchase date is defined as the date escrow closes. Taxpayers may apply for the tax credits if they have entered into a contract before May 1, 2010, as long as escrow closes on or after May 1, 2010.

These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over 3 successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over.

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. For example, if a taxpayer is allocated $10,000 for the New Home Credit, the $100 million cap for the New Home Credit will only be reduced by $7,000. If a taxpayer is allocated $10,000 for the First-Time Buyer Credit, the $100 million cap for the First-Time Buyer Credit will only be reduced by $5,700. The 70 and 57 percent reductions do not impact the amount that can be claimed by the taxpayer.

We will allocate the tax credits on a first-come, first-served basis. 

Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

Taxpayers will not be eligible for either tax credit if any of the following apply:

• The taxpayer was allowed a 2009 New Home Credit.
• The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner (RDP) of the taxpayer is 18 or older on the date of purchase.)
• The taxpayer or the taxpayer’s spouse/RDP is related to the seller.
• The taxpayer qualifies as a dependent of any other taxpayer for the tax year of the purchase.

New Home Credit:  A qualified principal residence, for purposes of the New Home Credit, must:

• Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
• Have never been occupied. Sellers must certify that the home has never been occupied in order for a taxpayer to receive an allocation of the credit.
• Be eligible for the California property tax homeowner’s exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

Tax credit allocation:

• A Certificate of Allocation will not be issued if:
  • The seller does not certify the home has never been occupied.
  • We do not receive the application and a copy of the properly executed settlement statement within 2 weeks (14 calendar days) after the close of escrow.
  • We receive the application or reservation request after the total tax credits available have been allocated.
• FTB’s determination may not be protested or appealed.

First-Time Buyer Credit:  A qualified principal residence, for purposes of the First-Time Buyer Credit, must:

• Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
• Be eligible for the California property tax homeowner’s exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

A first-time buyer is any individual (and the individual’s spouse/RDP, if married on the date of purchase) who did not have an ownership interest in a principal residence, either in or out of California, during the preceding 3 year period ending on the date of the purchase of the qualified principal residence. If the buyer is married on the date of purchase and either the buyer or the buyer’s spouse/RDP had an ownership interest in a principal residence during the preceding 3 year period, the buyer does not qualify for the First-Time Buyer Credit even if the spouse/RDP is not going to be on title.

What this means is that there will be more than $200,000,000 available as the ‘pool’ of available dollars is reduced only by a percentage of the credit claimed. Only in government can this accounting be figured.

I highly recommend anyone who needs to know to visit this website: http://www.ftb.ca.gov/individuals/new_home_credit.shtml

If you have any questions, please contact us at 925-308-7045.

We work with a number of banks for a number of reasons; loan modifications for our clients, short sales, and REO (bank owned)  properties. After 3 years of working with them, we have found one thing that is true.

The banks would prefer working with your agent or a lawyer than directly with you, on the loan modification or short sale. It is not because they do not respect you, far from it. They know that the realtor or lawyer has been through the process many times before and knows what to expect as you go through the process. Many of these banks give priority to their borrowers that employ their real estate agents or a lawyer to do the negotiations for them.

The big difference is that your real estate agent, whom you should have a close relationship with, must do this work for you without charge. A real estate agent is not allowed to charge for these types of negotiations. A lawyer, of course, does charge for these and may charge up front for services that may not come to success.

We, of course, think that your real estate agent is the best choice for assisting you in the negotiations for a loan modification or failing that, a  short sale.c Short sales are for the near term, the easiest way to shed yourself of difficult financial situations if you cannot successfully negotiate a loan modification. Successful short sales are very near penalty free with regard to your credit and tax liability. Just recently, the State of California signed into law the abolishment of tax on the short sale forgiveness of debt. Along with the Federal government, there is now no tax liability for short sale for the majority of cases.

In short, id you think you may need to try for a loan modification, using your real estate agent may be the best choice. If you have any questions, please contact us at 925-308-7045. We have had success in these efforts and can help you as well.

Our real estate meltdown has been in force for 2  1/2 years now, and those who engaged in a short sale or a deed-in-lieu of foreclosure are beginning to come back into the real estate market looking for a home. The guidelines were then that the short sale or deed-in-lieu would have an impact of 2 years on their credit and that after that thety could again buy a home as the impact on their credit would disappear.

The collapse of real estate prices and the continuing search for the end of the potential millions of foreclosures have caused some backtracking by Fannie Mae (Fannie Mae, the Federal National Mortgage Association (FNMA), is a government created, privately held company that buys mortgages from institutions, thus making more capital available to the banks for more loans. The company, along with Freddie Mac(the Federal Home Loan Mortgage Corporation) currently are losing money. Together, they have lost over $380 billion; Congress has taken off the loss caps and there is no limit to how much they will lose.

Back to the point. If you know of anyone who had a short sale or a deed-in-lieu, they may have more of a problem getting the loan than they were led to believe. The current guidelines are as follows:

After overcoming the credit score limitations required (see your mortgage professional as to what your credit score must be) the qualification is as follows.

If you are putting a down payment 20% or more, the short sale or deed-in-lieu must have been 2 years ago or longer.

If you are putting 10% down to 20% down, the short sale or deed-in-lieu must have been 4 years ago or longer.

If you are trying to get an FHA (3.5% down) or VA loan (0% down), then your short sale must have been 7 years ago or more. This is the same as if you had your property foreclosed upon.

There may be programs from Fannie Mae (the HomeSteps program comes to mind, where you may be able to overcome some of these limitation; check with your lender).

If you have any questions, please contact us at 925-308-7045. These changes are happening all of the time and may change at no notice.

HR 3548 was signed recently. The tax credit of $8,000 for first time buyers and $6,500 for repeat buyers was extended until 2011 if they are veterans or other government workers.

Here is who qualifies:
-Members of ‘uniform’ services, members of the US Foreign Service, employees of the Intelligence Community (CIA, NSA, etc.), and are on Extended Duty from 12/31/2008 thru May 1, 2010.

As in the credit about to expire, qualifiers must be in escrow by April 30, 2011 and close by June 30, 2011. That is one year out from the tax credit that applies to most of us.

If you know of a veteran that may be interested in this program, please have them call us at 925-308-7045.

Interest rates are near historic lows, prices are lower now than in 1999, the Federal Government and the State Government are offering tax credits that can total up to  $18,000.00………..

and no one is buying; at least not in Contra Costa County.

Why is this? There are several rationales that make an explanation, but upon close examination do not stand up to logic. Let’s look at why.

1) The economy. It is weak with no projected end to the weakness according to the Board of Economic Statistics. We have 12% unemployment in the state with projections into the future of continuing high unemployment. Even at unemployment of 12%, 88% of the people are working. There are plenty of people that want to purchase a home but feel they cannot because of factors that do not affect them.  They read or hear the news, they see the number of people in foreclosure and all of the empty homes on the block and are afraid it could happen to them. Everyone has his or her own reasons, but to this point, these reasons do not apply to them.

2) ‘Timing’. As a rule people purchase things at the wrong time. Everyone is familiar with the catchphrase; ‘Buy low, sell high.’  However in our area people seem to do the opposite. Over the past 10 years peol;e have bought high and now they are selling low. Why? It has to do with the psychology of the masses. When everyone else was buying, many people were feeling forced to purchase a home as prices rose. They were afraid that they would be priced out of the market. At the top, many people were already priced out but deceptive lending practices got them into a home that a.) they really could not afford and b.) that really did not meet their needs. Timing the market is something that is done by professional investors. It does not apply to the purchase of a home or any other long term purchase.

3) Buying for the wrong reasons. During the meteoric rise in real estate prices, many peole lost their way with regard to buying a home, assisted by the lenders and the government. If you are a homebuyer, looking for your perfect home, it is not an investment. It makes no income and ,in fact, it is not calculated as part of your net worth, as in order to make profits from it, you must collect income, not just make a payment. Too many people were sucked into the belief that it was an investment as the monthly increases of prices were publicized often, making some people ‘paper millionaires’ with the current values of their homes. All of the paper profit has disappeared, as well as the homes that many people had due to the collapse of the economy.

An investment makes money; therefore investing in real estate requires that you must collect rent. If you live in your home, it is not an investmement. certainly if you live there 30 years and do not refinance the property, you will own it outright, but in order to make it an investment, you must move and become a landlord. Many people would prefer not to be a landlord, so the investment aspect of real estate disappears. If you purchase real estate on the hope that prices will rise, you are not an investor, you are a speculator.

The last time prices were at these levels, interest rates were 3 to 4 percent higher. Yet, people bought. I think the reason they bought their home was that they were not being bombarded by the constant onslaught of bad news.

My recommendation is to ignore the news and follow your needs, rather than someone else’s. We can help you as a homebuyer or as an investor; and know the difference. Give us a call at 925-308-7045.

We hear all of the time, ‘Buyers go to the Internet first when begining to look for a new home’. The National Association of Realtors claims that 90% of Home Buyers go to the Internet first. That may be true, but I must ask ‘Would you buy a home over the Internet without going to it first’?

We can buy lots of things on the web, books, home goods, toys, supplies, and loads of other things. But when it comes to making one of the most important purchases of you life, would you buy it over the web or would you use an experienced representative to ensure you are getting what you want at a fair price?

I think that an overwhelming number of you would choose to get a little help. Of course, the number one response I get to this is that many people would choose to use the Listing Agent to represent them, because after all, ‘he can get us the best deal…….’  To be honest, using the listing agent may be one of the worst ideas a Homebuyer can have. Of course, we will do it if the Homebuyer insists, but we recommend against it. We do this for one very simple reason; we have a contract with the Seller and we represent him. We are bound to get him the best price and terms, not the Buyer. We cannot disclose any of his private information but must relay to the Buyer his terms.

Getting back to the topic at hand. Prior to the Internet, there were the newspapers, prior to that you had to call a Realtor first, or you could cruise neighborhoods looking for open houses to visit. It was unlikely that the home you may have entered on a cold open home visit would meet your living requirements, price and budget, or other requirements. The Agent then could set you up to find a home that met your needs.

Many peole use the Internet the same way; they cruise the real estate websites looking for available homes (hence the claim that 90% of the buyers start with the internet). There is so much information on the web that it can (and does) overwhelm the average Buyer. Additionally, often the web is not up to date. Once in a while I look at listings on the web for the express purpose to find properties that have been off market for a while. It generally takes me about 2 minutes to find many homes advertised that have been sold or taken off market over 1 year in the past.

With todays gas prices, cruising neighborhoods is not the best use of  this precious resource.

Using the internet to find your new home is equally ineffective.

What is a Buyer to do?

Most real estate companies provide their agents a targeted search, often modifiable by the User. The best solution is to contact a Realtor and specify your search criteria; price, square footage, the number of beds and baths, location/neighborhood and lot size are common specifications but there are lots of others you can name. The tools then provide you an up to date list of homes available that meet the specification. After contacting your realtor, you can then get appointments to see the homes you are interested in.

The results? Lots of time and gas saved. You see homes, all of which may meet your needs. You may find that what you thought you wanted is not at all what you purchase (this happens all of the time). You are represented by someone who has your interests in mind.

All of this is the result of using the interent wisely. The web is not designed to be used like your car, idly meandering through the neighborhoods, wasting time and money. New tools means new approaches to accomplish old jobs.

We just got the report from the NAR that existing home sales were down in December from November by 17 percent. Rather than react to the way the media and the NAR want to present it, blaming the end of the Homebuyer tax credit,  this decline is the result of the following factors:

1) Buyer uncertainty – December sales were probably entered into contract in October or November. During this time, unemployment was rising and there did not seem to be any end to it, just as today. People look at their finances and hold back during times of uncertainty. This especiallt applies to large purchases, including homes. Until such time as there is a little confidence built into the news, this will be aconstant issues.

2) Seasonal influences. Sale ALWAYS GO DOWN during the holidays. Last year was no different. While this decline was nearly a record decline, see reason #1.

3) Availability of credit - although interest rates are low, financial institutions have raised qualifications, added tone of new rules and paperwork and denied loans that have been approved in the past. This began at the start of the 4th quarter last year and finally evidenced itself in December. Lending institutions are trying to deal with ever changing rules laid down by the regulators as well. Until this confusion ends, it will be more difficult to obtain credit.

The media and the Treasury know all of this to be true, but will not print it. You need a source you can trust to give you the facts.

Also, we are on Facebook. Use this link to add to your pages for this article and much more!

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It seems like every 6 months, the California Legislature must deal with a $20 billion plus deficit.

In the real estate business, we are concerned about it for a large number of reasons, but this time there is a real problem with the Section 8 part of real estate that we have not heard of for some time.

Section 8 Assistance has been part of the real estate mix for some time. 2 years ago (yes, it was that long ago) there was an uproar by many people in neighborhoods complaining about the number of Section 8 renters in thier neighborhood. While Section 8 was a part of the problem, the number of renters had gone up considerably over the past few years due to the number of investors purchasing properties and renting them out as values soared. Section 8 was a minor portion of the problem and it was an easy target for homeowners. Employees were also very close mouthed about the rental problem and added to the fervor.

All of this brouhaha has subsided as property values shrank, investors lost thier homes, and the renters had to leave, replaced in the main by new homeowners who have purchased these properties at a substantial discount to their original prices.

Section 8 is still a part of the rental picture, even more so than during the times mentioned above. Section 8 rental requests are at very high levels and properties thatg take Section 8 is limited.

There are new problems for Section 8 housing that impact everyone. With the California budget problems, the amount of money that will be available to Section 8 will probably by cut in the next budget year. While this does not mean that people will necessarily be removed from the program (this may also occur as well), it will mean that people who seek  Section 8 assistance will probably not have it av ailable to them. People who are removed from the program for violating terms will lose it as well.

This should free some housing for rental to those who are looking. It also may mean that the owners of these homes may not be able to keep them because the rental rates will also go down (Section 8 rental calculation methodology pays higher than market rents, this will be dealt with in another topic) and the rent is no longer guaranteed by the government.

The impact of this is that there may be more homes going on market, either as short sales but more probaly as foreclosures as the landlords can no longer afford the mortgage payments on properties that used to carry the mortgage.

The Governor has proposed a budget in the State for next year that hold the education budget steady but has an across the board cut of 10% in the remainder of the budget, this will include any mandated payments to the counties who need the money to operate the Section 8 programs. Additionally, property tax reduction over the past years has also reduced funds to the counties.

Section 8 Housing, a Federally mandated program, has some real challenges for the next budget year, none of which has an easy answer.

Each year we try to assess where the real estate market is headed for the coming year. Last year, we were way off the mark as there was no way for us to predict what would happen after the Treasury Department became more and more involved in the business due to their TARP involvement with the banking institutions. While the major players (Wells Fargo, Citibank, and most notably, Bank of America) have repaid their TARP funds, it does not mean that the governmet will continue to apply influence to real estate lending activities. In any case here we go:

Real Estate Supply

The market will probably have more supply of homes than last year, more than likely, a lot more. Banks have been trying with little success to stem the foreclosures through loan modifications in 2009. Despite all of the holdovers, approximately 31,000 modifications were done against over 4,000,000 loans in default. This low number of modifications is bad, but not as bad as it sounds. Many of the 4,000,000 homes in foreclosure were either 2nd homes, investments, already abandoned by the owners who may have alreay bought another, or brought the mortgage current prior to foreclosure without resorting to a loan modification.

Nonetheless, there will be a large number of homes available for sale in 2010 with the bulk of them to be foreclosed properties. This will put a lot of pressure on people who must short sell their homes this year. Buyers, when ready to buy, will look at foreclosures first, as they are much easier to close than short sales, which while easier than before, are still much harder to do. It will also put a large amount of pressure on investors who have been buying homes on the courthouse steps and reselling them at a profit. This practice has increased greatly over the past year but will be much harder to do with a large influx of foreclosed homes on market. We expect that by the end of the first quarter of 2010, the incresed supply will be noticable and that by the end of the year will may be at record levels.

The commercial real estate supply will also increase this year as many bad loans, many of which have already been negotiated have fallen into arrears. Until there are definite increases in business activity, this segment of the market will lag as well, perhaps worse than the residential market.

Real Estate Demand

In  the residential market this year, demand has outstripped the supply by numbers we have never seen. Choice properties in popular neighborhoods  have seen multiple offers for them (personally, we have had as many as 55 offers on 1 home and heard of properties that brought over 100 offers) throughout the year. This demand is pretty easy to see. Low prices, low interest rates, and a pent up demand due to low inventory is a recipe for prices to go up. This is what happened in 2009. Will it happen in 2010?

With the economy improving, but little improvement in the employment sector of it, demand would probably remain constant. There is promise of jobs in the ‘green’ economy, but many of them would be entry level jobs with low pay and benefits. If the health care plan passes in congress, taxes will go up by some amount. Prices on goods are projected to rise in 2010 due to higher taxes and the begining of inflation due to the excessive borrowing done by all levels of government. 

Even in the face of these things, if people are able to keep their jobs or find equivalent employment, the demand should remain constant.

The HomeBuyers Tax Credit, modified and extended through April 2010, allows for a $6,500 credit to homebuyers who have purchased a home and are ‘buying up’ and $8,00 to first time homebuyers. Both of these programs apply to owner occupied homes only. A recent survey of homebuyers who have purchased recently showed that nearly 70% of them would have bought a home whether the credit was there or not. We suspect the the expiration of this credit will have little impact on the demand for homes.

There is a lot to be considered when attempting to deal with all of the items that need to be taken into account with real estate demand, prices, interest rates, supply, employment, taxes; all are factors when making estimates into where the demand is coming from or going to. California added nearly 1/2 million people to the population this year. some of them will be buying homes, some will need rentals, purchased by investors.

Given everything, we expect that demand will remian fairly constant in 2010 unless there is a substantial shock to the system.

Interest Rates

Interest rate are today at near historic lows. Just on this basis, you should expect interest rates to rise. however, some people think we have created the ‘perfect storm’ for interest rates to rise. The federal government has borrowed so much that they have ’squeezed out’ all available funds for other borrowing. The State of California is in as bad a situation today as it was when they balanced the budget 6 months ago. There is such a demand for governmental credit that interest rates will have to be raised in order for people to buy government instruments, or the government will have to raise cash another way, that is, to print it.

In either case, with higher interest rates or inflation, impacts to the real estate market will be real.

Real Estate Prices

Recently (in fact for the past 6 months or so) real estate prices have been on an increase each month; the number of transactions has also increased. While geographically these increases were large or smaller, the result is the same, prices have increased as well as the number of transactions, indicating that there is a mini-boom in the real estate sector. New home starts also appear on the increase as well.

2010, unfortunately, does not look to hold the promise of an extended recovery. One factor, demand, looks steady at best and these increases are the result of demand outstripping supply. However, 2010 will see the following: increased supply, higher interest rates, continued high unemployment, and higher taxes. The impact of all of these factors can only mean one thing, lower real estate prices during the next calendar year.

Buyers will be looking for affordable payments. If interest rates go up, be sure that prices will decline.

We prefer a balanced market with prices remaining fairly constant in a quiet interest rate environment. This condition does not happen often. Real estate for the homebuyer, and for the investor as well, has historically on average been a 5 to 7 year hold. When people hold on longer (use the 1940s and 50s as a reference) prices tend to shrink, as there is little interest in moving. When people move more often as they have in the past 25 years, due to job requirements, larger and larger families, the demand for amenities, and other cultural changes, prices go up. When adding in the bubble environment that we had begining at the start of this millenium, the shcks to the system can be severe, as so many people in this country and around the world have seen and experienced firsthand.

Of course, we could be wrong (check our results from last year). Understandably, we hope we are and the real estate markets are strong and healthy for both buyers and sellers in 2010.