3 Tips for Avoiding House-Hunt Heartbreak Date:February 12, 2013|Category:Tips & Advice|Author:Brendon DeSimone It’s been said over and over and over: House hunting is like dating. A buyer sees a series of homes, much like going on dates, before finding “the one” and settling down, or purchasing. How will you know when you’ve found “the one,” and how can you determine when it’s time to move on? It’s important to keep your eye on the prize. “The one” doesn’t show up overnight. Much like dating, house hunting is an evolution. A buyer needs to see many houses, learn about the market and maybe even have a heartbreak or two. All of these experiences will inform the buyer and provide serious context when “the one” presents itself. Here are three tips for not getting your heart broken in the home search process. Prepare to get your feelings hurt by a seller The seller doesn’t have to sell to you. It’s entirely possible that, especially given the lack of inventory and the influx of home shoppers today, even if you offer the seller their list price the home may not be yours. Another buyer may offer more than you, may have a larger down payment or may offer the seller a swift closing and more favorable terms. Even if you think this is the perfect home for you and your family, starting a love affair with it in your head will only lead to disappointment down the road. Don’t obsess over one home Most buyers begin their home search with a list of wants, needs, must-haves and nice-to-haves as well as deal-breakers. You will never get it all, so it’s important to know when to compromise. Often the “perfect” home will come along, but the buyer loses sight of their objective. Saw a home with a designer kitchen that you can’t get out of your head? That might be great, but if the home doesn’t have room for two cars, doesn’t have the required square footage or lacks that all-important second bathroom, you need to move on. Harboring feelings for a home that you know won’t work only serves to get you sidetracked and out of focus Don’t fall too hard It’s no longer a done deal once the contract is signed. Many times a buyer and seller come to an agreement on terms and price, even sign a contract, only to have a series of issues come up in the disclosure and inspection phase. Don’t fall hard once you have a signed contract. This will only make the discovery process more heartbreaking. Know that dozens of issues can come up in escrow. If it’s not working out, be ready to move on. The longer you hang around and obsess over one home, the bigger the chance that you’ll miss out on Mr. or Ms. Right around the corner. Know upfront that the home shopping process will be a journey. Expect to see a lot of homes and learn a lot along the way. No matter how frustrating the process is, believe that the journey will eventually come to an end and that “the one” will present itself. Much like dating, touring many homes will allow you to play the field, see what’s out there and learn the market. The more you see, the more you will know when the right “one” comes along and you’re ready to seal the deal. Related: 3 Things Home Buyers Should Know About Today’s Sellers What to Expect When You’re Inspecting Bidding War? 5 Ways to Beat Out the Competition Brendon DeSimone is a Realtor licensed in both California and New York. He has collaborated on multiple real estate books, and his real estate expertise is regularly sought out by print, online and television media outlets like FOX News, CNBC and Forbes. An avid investor, Brendon owns real estate around the U.S. and abroad. You can find Brendon online or follow him on Twitter and Google + Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
5 Design Tips to Cure ‘Model Home Syndrome’ Date:February 21, 2013|Category:Tips & Advice|Author:BobVila.com Source: raleighdurham.about.com By Chris Gardner Most homes built in the U.S. these days are done by developers, which can be great — contractor-built homes are energy efficient, contain the latest features and technologies, and look brand new! But depending on your taste, that brand-new look can be awesome… or totally bland. So if you want all the benefits of contemporary living but prefer an old-home feel, check out these tips for adding some architectural details to give a new house lots of character. 1. Install (lots of) architectural molding Source: Greenside Design Build, LLC Built-in decorative features are an almost guaranteed escape from “model home syndrome.” Crown molding, ceiling coffers, baseboards, chair rails, transoms, cornice molding, wainscoting and recessed panels all impart new drywall with loads of vintage charm. Note: The earlier you install molding in a new house the better, as walls and floors are likely to become less square over time. 2. Change up your cabinet pulls Source: Cabinet Cottage You know what they didn’t have in the days of antique houses? Brushed aluminum and acrylic. So you know what you should replace in your house? The same! In your kitchen and bathroom, consider using glass knobs, which came to popularity in the early 1900s (when metal was in short supply due to the Great Depression and world wars). To echo the look throughout your home, do the same with your door knobs, desk-drawer handles and dresser pulls. 3. Address your staircase Source: Gast Architects Most new houses are modeled after colonial-era homes with the staircase front-and-center and the various rooms stemming off a main hall. Consider replacing the handrails and newel post with more elegant woodwork. Check local salvage yards, classified ads and online sites to snag pieces that will make an impression. And if you really want to go for it, rip up your wall-to-wall carpeting and install a stair runner for a signature-antique look. 4. Upgrade your light switch and outlet plates Source: My Knobs For very little time and money, you can easily upgrade all your switch plates and outlet covers. Look for nickel and brass finishes to stay era-appropriate. You can check antique shops if you’re a purist, but there are plenty of reproduction pieces that’ll do just fine. 5. Switch up your lights Source: Free House Interior Design Ideas Nothing screams contractor-built home like contractor-grade lighting. Though energy-smart and inexpensive, such fixtures make everything look as generic as can be. Neutrality is the goal when you’re trying to entice buyers, not when you want to create a beautiful space. Look for antiques like chandeliers — but old wiring can be problematic, so consider reproductions. Wall sconces especially will evoke the era you’re after. Related: 10 Great Looks in Tin Ceiling Tiles 5 Things to Do… With Beadboard 11 Sneaky Storage Ideas Bob Vila is the home improvement expert widely known as host of TV’s This Old House, Bob Vila’s Home Again, and Bob Vila. Today, Bob continues his mission to help people upgrade their homes and improve their lives with advice online at BobVila.com. His video-rich site offers a full range of fresh, authoritative content – practical tips, inspirational ideas, and more than 1,000 videos from Bob Vila television. Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
Using Gift Money for a Down Payment Date:January 16, 2013|Category:Finance|Author:Justin McHood It’s not uncommon for first-time home buyers to ask: “Can my mom and dad give me money to help me buy this house?” The good news is yes, you can receive a gift from your parents to buy a house, but the way that you actually receive the gift is very important. Mom and dad can’t just leave money under your pillow like the Tooth Fairy did when you were younger. The process of accepting a gift for your down payment isn’t complicated, and by following these simple rules, you can be sure that the underwriter who is reviewing your file will look at it with an approving eye. Write a gift letter If someone is going to be gifting you money to help you buy a house, you’ll first need a gift letter. The gift letter needs to be a short, sweet letter that is hand-signed by you and the person giving the gift. It needs to contain the following: The relationship between the home buyer and the person giving the gift. The amount of the gift. The address of the home being purchased. A statement that the money is a gift and not a loan that must be paid back. Establish a paper trail Next, you’ll need to create a paper trail. This is important because underwriters will look for where the money came from and where it went. In simple terms, they will look for proof that the money came from your parents’ account and went into yours. Each situation will be slightly different, but be ready to provide paper proof of your parents’ account having money in it, money coming out of that account, a deposit into your account and proof that your account now has the money in it. Accuracy matters when creating this paper trail, so make sure each transaction is for the exact amount of the gift. Write a gift letter and use this shortcut Creating a paper trail correctly has proven to have its fair share of hassles. Getting copies of transactions is time-consuming, and underwriters seem to question every little thing in the process (“where exactly did the $10,000 transfer that I see coming into mom and dad’s account come from?”). The good news is that there’s a shortcut when it comes to gift letters — one that makes the entire process easier. Simply add one sentence to the letter that says: “Will wire the gift directly to escrow at time of closing.” If you add this line to your gift letter, you can avoid all of the paper chasing that most underwriters will require. A day or two before closing, you can get wiring instructions from your escrow agent for mom and dad to wire the exact amount of the gift directly to the escrow company working on your transaction.
$166,000 a Year Is Middle Class? Only in Manhattan Date:February 7, 2013|Category:Finance|Author:LearnVest It’s hard to pinpoint the American middle class, but an income $166,000 per year probably isn’t it — except in Manhattan. The New York Times recently published a piece, “What’s Middle Class in Manhattan?” that’s either fascinating, appalling or just factual, depending on where you live. It explains how, due to the exorbitant cost of living in New York, the city’s residents exist within a social structure unique to the city and eons away from most of the country. Basically, the traditional markers of a middle-class lifestyle — a solid job (police officer or teacher) and a mortgage — don’t apply in New York. Due to the cost of living in the Big Apple, people in such occupations don’t fall in the middle of the pack income-wise as they would in other cities, and the astronomical cost of housing erases the stigma of renting. Among the points made by The Times: Rent for the average Manhattan apartment is $3,973 a month, $2,800 more than the average rent nationwide. Last year, the average Manhattan home sold for $1.46 million, compared to the nationwide price of a little under $230,000. The Pew Research Center found that, in terms of purchasing power, a $70,000 annual income is considered middle class for a family of four, but that same family living in Manhattan would need to make $166,000 to achieve the same purchasing power. To be considered part of the 1 percent in Manhattan, you must make more than $790,000 per year. To most Manhattanites, the numbers inspire more resignation than shock. For the rest of us, it adds some hard facts to those stories about one-percenters feeling poor or unable to keep up. Of course, they aren’t poor, but it’s quite possible that, living in New York City, they’re unable to keep up with their neighbors. Not that their myopia is necessarily excused — about half of the world’s 1 percent live in the United States. Above all, The Times article is a conversation piece, so let’s have a conversation: Where do you live? How does your home compare to New York? And if you live in Manhattan, how do you feel about the high cost of living?
Hit by a Disaster? You May Get Tax Relief Date:February 19, 2013|Category:Tips & Advice|Author:Mary Boone Wildfires in the West, flooding and landslides in Alaska and hard-hitting Superstorm Sandy were just a few of the major natural disasters that hit the United States last year. In all, 112 federal disaster declarations were issued in 2012. For those living in an area where a federal disaster has been proclaimed, tax relief may be available. Claiming losses If you have been affected by a federally declared disaster, you have the option of claiming disaster-related casualty losses on your federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get you an earlier refund, but waiting to claim the loss on this year’s return could result in greater tax savings, depending on other income factors. You may deduct disaster-related personal property losses that are not covered by insurance or other reimbursements; typically the IRS requires that the first $500 in losses be deducted from any claims. Disaster victims claiming their disaster loss on last year’s return are advised to write the Disaster Designation (i.e., “Superstorm Sandy” or “Noble Wildfire”) at the top of their tax forms so the IRS can expedite refund processing. Deadline extensions For some, the most welcome aspect of this tax relief will come in the form of extended tax filing and payment deadlines. The IRS has promised to abate any interest, late-payment or late-filing penalty that would otherwise apply. Affected taxpayers need not contact the IRS; this relief is automatically afforded to all taxpayers located in the disaster area. Beyond the relief provided to taxpayers in FEMA-designated counties, the IRS works on a case-by-case basis with taxpayers who reside outside disaster areas but whose books, records or tax professionals are located in the areas affected a disaster — specifically Superstorm Sandy. Affected taxpayers from outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief. The IRS is waiving the usual fees for copies of previously filed tax returns for disaster-affected taxpayers. Taxpayers should write the assigned Disaster Designation in red ink at the top of Form 4506 (Request for Copy of Tax Return) or Form 4506-T (Request for Transcript of Tax Return) before submitting it to the IRS. Additionally, workers assisting with relief and recovery activities in the covered disaster areas who are affiliated with a recognized government or philanthropic organization may be eligible for tax relief. For additional information regarding disaster-related tax relief, visit the IRS website or consult a qualified tax professional.
2 Million Homeowners Freed From Negative Equity in 2012; 1 Million More to Come in 2013 Date:February 20, 2013|Category:Market Trends|Author:Cory Hopkins Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow’s fourth quarter Negative Equity Report. The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value Index of $157,400 (when home values rise, negative equity falls). At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people. In the fourth quarter, Zillow determined where American homeowners freed from negative equity in 2012 were located. Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099 homeowners freed in 2012); Los Angeles (72,936 homeowners freed in 2012); Miami-Fort Lauderdale (70,484 homeowners freed in 2012); Dallas-Fort Worth (59,461 homeowners freed in 2012); and Riverside, CA (58,417 homeowners freed in 2012). Still, despite more than 1.9 million homeowners nationwide finding their way back above water last year, 13.8 million American homeowners are still struggling with negative equity. Many remain so far underwater that even the very high rates of appreciation experienced in many markets still can only bring them so far. In the Phoenix metro, for example, despite more than 135,000 freed homeowners last year, more than 300,000 homeowners — or 40.4 percent of homeowners with a mortgage — remain trapped in negative equity. This is largely attributable to the fact that although home values in Phoenix rose 22.5 percent last year, they remain more than 44 percent below their peak. So for those who bought at the peak, even with rapid appreciation, they still have a long way to go. The graph below shows the loan-to-value (LTV) distribution for homeowners with a mortgage nationwide in 2012 Q4 vs. 2011 Q4. You can see that even though many homeowners are still underwater and haven’t crossed the bold 100 percent LTV line into positive equity, they are moving in the right direction. The 2012 Q4 buckets on the 100 percent+ LTV side (the red bars) are getting smaller compared to 2011 Q4, and the black bars are getting larger. U.S. homeowners with a mortgage are slowly gaining equity back in their homes. We also wanted to know how many more homeowners would be freed in 2013 and where they would be located. New this quarter, the Zillow Negative Equity Forecast predicts the negative equity rate among all homeowners with a mortgage will fall to at least 25.5 percent by the fourth quarter of 2013, freeing more than 999,000 additional homeowners nationwide. Of the 30 largest metro areas, the majority of these newly freed homeowners are anticipated to come from Los Angeles (72,696 homeowners freed in 2013); Riverside (62,407 homeowners freed in 2013); Phoenix (43,044 homeowners freed in 2013); Sacramento (33,356 homeowners freed in 2013); and Dallas-Fort Worth (31,434 homeowners freed in 2013). Zillow forecasts negative equity by applying anticipated appreciation or depreciation rates to a home, according to the most current metro and national Zillow Home Value Forecasts, and by assuming all other factors remain constant. “As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous. Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets,” said Zillow Chief Economist Dr. Stan Humphries. “But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas. As a result, negative equity will remain a major factor in the market for the foreseeable future.” Also, new this quarter, users can zoom in on a portion of our Negative Equity visual and embed only that portion on their website. So, for example, if you were in Seattle and wanted to post the interactive tool to your site, we would be happy to show you how. Tags: Zillow Negative Equity Forecast, Zillow Negative Equity Report
With the clouds lifting over home sales, real estate stocks are up sharply. (Money Magazine) Housing stocks, which not so long ago looked as likely to pay off as a $2 Powerball ticket, have become a hot commodity. Anticipating the real estate recovery that surfaced in the fall — home prices in October were up 6.3% from a year earlier, and new-home construction reached a four-year high — housing-related stocks led the market in 2012. Homebuilders (returning 77% through early December), the lumber industry (74%), and home-improvement stores (55%) were the top-performing industries in 2012, according to Morningstar. And the Dow Jones U.S. Home Construction ETF traded in December at a lofty 27 times projected earnings — nearly double the figure for the S&P 500. These numbers may make a housing investment look expensive, but it’s not too late for you to profit from the revival. The 2012 surge in stock prices was merely a snap back from the worst real estate correction on record, says Michael Magiera, manager of real estate analysis for investment firm Manning & Napier. “Keep that performance in the context of the long cyclical recovery we’re going to have,” he says. Related: Million-dollar foreclosures Of course, various factors could delay progress: elimination of the mortgage interest tax deduction, for example, or an unexpected surge in foreclosures. Still, economists predict a continued upswing. Moody’s housing economist Celia Chen, for one, forecasts above-average growth in construction, prices, and home sales through 2014. “After that,” she says, “growth will still be healthy.” That’s good news for the slice of your portfolio invested in real estate. Over the past 20 years, home-related stocks have roughly tracked new construction, itself perhaps the best indicator of the housing market’s health. Plus, growth over a cycle can justify the high price/earnings ratios that housing stocks might have initially; future earnings and price appreciation can make those formerly costly-looking stocks seem cheap in hindsight. Related: Housing to drive economic growth To maximize your profit, though, you have to look beyond what real estate fund managers judge to be the most expensive parts of the industry: homebuilders and real estate investment trusts that own apartment buildings. So here are three creative strategies for investing in the boom, along with stock and fund picks for each. STRATEGY NO.1: Buy the suppliers, not the homebuilders The numbers support more growth in the housing market. October’s annualized figure of 894,000 housing starts — up 42% from a year earlier — was still well below the industry’s 50-year average of 1.5 million. Existing-home prices will rise 3.3% a year through 2017, forecasts Fiserv Case-Shiller. “All signs are flashing green,” says Jeff Kolitch, manager of the Baron Real Estate Fund. Problem is, the most obvious beneficiaries of this trend — homebuilders — are the costliest stocks in this arena, say Kolitch and other fund managers. “The risk-reward proposition,” he says, “is more interesting elsewhere.” One such area: companies selling to homebuilders. The suppliers may have similarly high P/Es, but their prospects for earnings growth are better, partly because their profits come as a delayed reaction to homebuilder activity. The picks: The division of Weyerhaeuser Co. (WY, Fortune 500) supplying lumber and plywood board to builders — a money loser in the bust — has begun to drive earnings, thanks to the minimal investment needed to boost production. The company’s profits, up 48% in 2012, are forecast by analysts to jump 88% in 2013. (Weyerhaeuser converted to a real estate investment trust in 2010, giving it favorable tax treatment in return for paying out most of its earnings as a dividend, now 2.5%.) While the company’s 30 P/E is high, a return to 2004 earnings levels — not a stretch — would translate into a P/E of only 12, says Ryan Dobratz, co-manager of Third Avenue Real Estate Value, where Weyerhaeuser is a top 10 holding. Related: $214,000 real estate bet a big risk for couple A broader way to play the growing demand for timber is via a low-cost exchange-traded fund: iShares S&P Global Timber & Forestry Index (WOOD), which has Weyerhaeuser, Rayonier, and Plum Creek Timber as its top holdings. The average-size home uses about $25,000 worth of lumber, according to the National Association of Home Builders, and construction activity powers the ETF’s performance. In December, the fund was up 19% for the year. STRATEGY NO. 2: Get in on the renovation resurgence Each percentage point of appreciation in housing prices translates to an additional $190 billion in home equity — or about $2,500 per household — says the National Association of Realtors. That uptick makes owners feel more confident about spending money to fix up their houses. U.S. remodeling spending, which by July 2010 had fallen 37% from its 2007 peak, is on the rise again, up 12% year over year in September. The NAHB predicts a 2013 rise of 3.4%. Companies tied to renovation didn’t go unnoticed in 2012; like the high-performing home-improvement retailers, furniture companies racked up big returns — 29% through early December. Still, many renovation stocks are expected to grow earnings at double the rate of the average large stock. The picks: Lowe’s (LOW, Fortune 500), operator of 1,745 home-improvement stores around the country, is one of the biggest beneficiaries of this upsurge in activity, says Dobratz; recently reported sales to professional contractors were particularly strong. The company does more business than larger rival Home Depot (HD, Fortune 500) in big-ticket items like cabinets and appliances, which are snapping back in the recovery. While its P/E ratio of 20.2, based on expected earnings, was higher than the Standard & Poor’s 500’s 14 in December, earnings at Lowe’s are expected to grow faster — 20% this year, compared with 11% for the S&P. MONEY recommended Home Depot in October, but Dobratz and other managers say Lowe’s, which had surprisingly good third-quarter results, is the better choice. Or you can buy a basket of home-improvement stocks via S&P Homebuilders ETF (XHB). Don’t be fooled by the name: The ETF has 45% of its assets in home furnishings and other remodeling-related companies (and only 25% in homebuilders). Lowe’s is its top holding; Whirlpool, Home Depot, and Pier 1 Imports are among its top 10. STRATEGY NO. 3: Profit from people on the move again Underwater mortgages and low-ball prices of distressed properties froze home sales after the housing bubble burst; sales of existing homes in mid-2010 bottomed out at the annualized rate of 3.4 million a year. That’s changing: Sales as of October were up to 4.8 million a year, reports the National Association of Realtors, which forecasts 5.1 million sales in 2013. Driving the sales, along with low mortgage rates, are rising prices. Related: 10 great foreclosure deals Longtime owners who were reluctant to match fire-sale foreclosure deals have been lured off the sidelines. And fewer shorter-term owners are stuck where they live, owing more on their mortgages than their homes are worth. Data firm CoreLogic says 1.3 million homeowners exited underwater territory as of June, and another 5% price increase would lift 2 million more borrowers above the waterline. The picks: Roughly half of all self-storage transactions are tied to relocations, according to the National Self-Storage Association. CubeSmart (CUBE) is one of the best values in the sector, says Magiera of Manning & Napier. It trades at a lower P/E than larger rivals and has better prospects as it swaps out facilities in low-growth areas for regions with more potential. A recent dividend hike boosted the REIT’s yield to 3.2%. A fresh coat of paint is a top item on the to-do list both for sellers preparing to list their homes and for recent buyers. Year-over-year growth in paint sales at Sherwin-Williams (SHW, Fortune 500) in the first half of 2012 was the highest since 2005, and the company’s cost of raw materials is falling. The stock, a top holding of veteran real estate manager Ken Heebner of CGM Funds, trades at a 30% discount to the S&P 500 when weighing its P/E against its projected earnings growth. As home sales pick up, another demographic trend comes into play: the aging of America. Fourteen percent of buyers over 50 bought senior housing in 2012, says the NAR, up from 10% in 2010. And the pool of potential buyers — purchasers’ median age is currently 64 — is expanding: The 65-and-older population will rise from 40 million in 2010 to 72 million in 2030. Two standout senior housing companies, says the Baron Fund’s Kolitch, are Brookdale Senior Living (BKD), which owns 565 properties in 35 states, and Emeritus (ESC), which focuses on assisted living and Alzheimer’s services. The firms, which are top holdings in his fund, trade for what Kolitch estimates to be 30% less than their private-market value — a wide discount compared to the REITs they resemble. Or you could simply buy Baron Real Estate (BREFX) itself, which is 18% invested in senior housing and 30% overall in housing-related stocks (much of the rest of its holdings are in hotels and gaming stocks). Manager Kolitch joined Baron Funds as a real estate analyst in 2005; the fund has topped its category in two of the three years since its January 2010 launch. The picks You can ride the housing cycle with these stocks, mutual funds, and ETFs. Stock (Ticker) P/E Earnings growth (%) Weyerhaeuser (WY) 30.1 N.A. Lowe’s (LOW) 20.2 17.3 CubeSmart (CUBE) 19.6 9.4 Sherwin-Williams (SHW) 19.0 13.0 Brookdale Senior Living (BKD) 10.3 11.5 Emeritus (ESC) 10.8 14.5 Fund (Ticker) Total return (1 year %) Total return (3 years %) S&P Global Timber & Forestry ETF (WOOD) 20.7 6.5 S&P Homebuilders ETF (XHB) 50.7 22.8 Baron Real Estate (BREFX) 39.6 N.A. NOTES: P/E ratios for stocks are based on projected 2013 profit. For CubeSmart, Brookdale, and Emeritus, P/E is price/projected funds from operations, used to measure real estate firms. Earnings growth is annualized three-to five-year projected rate; estimate is not available for Weyerhaeuser. Three-year-return figures are annualized. SOURCES: Bloomberg, Morningstar First Published: February 14, 2013: 5:53 AM ET
Borrowers who are still smarting from the mortgage crisis are passing up some real deals and missing out on real cash. By Becky Quick FORTUNE — American homeowners are in the midst of a hot and heavy love affair with low interest rates. But not every courtship has a happy ending. As the final days of 2012 slipped away, Lisa Price made her client an offer she thought he couldn’t refuse. Her client — we’ll call him John Doe — was paying a rate of 6.616% on his $435,000 mortgage, with 25 years left to go. Price, a mortgage banker for Quicken Loans, offered to refinance his loan at 4.125%, keeping the 25-year payout time. The deal would have knocked his monthly payments down to $3,383, a savings of $630 a month. Closing costs were minimal and would have been recouped through the savings within four months of signing. And with the streamlined process she proposed, it would have required very little paperwork and wasn’t contingent on any appraisal valuation. It seemed like a no-brainer. But John Doe said no thanks. “It didn’t make any sense,” says a stunned Price, reflecting on the rejection. “Usually when I call someone with a deal like that they’re really excited.” MORE: A sign the housing recovery just might stick It’s typically pretty easy for mortgage brokers to give away money, and indeed, refinancing activity has skyrocketed as interest rates plummeted in recent years. The one group of homeowners who didn’t participate in the refi boom — those whose home prices tanked, leaving them without enough equity in their home to qualify for refinancing — are now eligible to restructure their loans thanks to a new government program. But as Quicken Loans and other mortgage originators have learned, it can be surprisingly difficult to persuade some of these people to take sweet deals like the one above, even when the government is greasing the skids. The first government assistance programs after the housing bubble burst offered to help homeowners only after they stopped paying their mortgages. But a later program — the Home Affordable Refinance Program (HARP) — was designed specifically to help out those underwater homeowners still paying their mortgages on time by giving them access to the low rates so many others are enjoying. HARP has been refined several times since its inception in 2010, and every version of the plan has made it easier for homeowners to qualify. But getting the word out hasn’t been easy. Quicken and other mortgage originators have aggressively tried to let homeowners who qualify know about the program. “We get their home number, the business number, their e-mail, we express-mail packages to their house so it looks serious,” says Dan Gilbert, founder and chairman of Quicken. “We leave messages; we tell them, ‘Go look up HARP on Google and you’ll see it’s real.’ We don’t quit.” And yet almost half of these homeowners don’t respond. “If you would have told me all the facts about how this works before, I would have predicted we’d get 80% to 85%,” Gilbert marvels. MORE: We still have renters to thank for healthier housing market Ultimately, Quicken says, only about 25% of the homeowners who qualify for HARP actually end up refinancing. And that’s the shame of it all. HARP is a smart program. It rewards good behavior — those who have continued to pay their mortgages — while lending a helping hand to those who could really use it. And it attempts to even the playing field by giving more Americans fair access to the low interest rates enjoyed by big businesses and the wealthy. This program is also good for the economy, as consumers spend much of the money they save on their mortgage payments. So how do the government and mortgage originators convince the public to take advantage of a program that can truly help many who need it? It’s the classic lesson of once bitten, twice shy. Wounds from all those no-money-down loans and balloon payments have yet to heal for the homeowners bitten when the housing bubble burst. Others still feel the sting of paying hundreds for appraisals in an attempt to refinance, only to be spurned when their homes were valued at less than they owed on the mortgage. It may be hard for those consumers to trust again anytime soon. But for those with the courage to give it another go, love might actually be better the second time around. This story is from the February 25, 2013 issue of Fortune.
30-Year Fixed Mortgage Rates Rise Slightly Date:February 19, 2013|Category:Finance|Author:Camille Salama Mortgage rates for 30-year fixed mortgages rose this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 3.46 percent, up from 3.43 percent at this same time last week. The 30-year fixed mortgage rate hovered between 3.44 and 3.5 percent for the majority of the week, dropping to the current rate this morning. “Rates remained fairly flat this week with little news to suggest a change in slow-but-steady growth trends both in the United States and abroad,” said Erin Lantz, director of Zillow Mortgage Marketplace. “Due to the short week, we expect to see very little movement in mortgage rates this week.” Additionally, the 15-year fixed mortgage rate this morning was 2.65 percent, and for 5/1 ARMs, the rate was 2.32 percent. Contact Santa Realty a Real Estate Company in Granby, CT
Tax Benefits of Rental Property Tax Deductions for Owner-Occupied Rental Property How to Calculate Rental Property Appreciation for Income Tax Purposes Tax Deductions for Condo Fees on Rental Property Tax Implications of Owning a Residential Rental Property The Definition of Gross Receipts for a Rental Property 65 and Over Property Tax Benefits in North Carolina Owning rental property brings you a number of benefits. Many properties offer an attractive mix of equity growth and cash flow, but the tax shelter is probably the most appealing benefit. Since rental properties straddle the line between investments and businesses, you typically get liberal write-offs and tax advantages, including tax deferrals for exchanging rental properties. Tax-Sheltered Growth Most real estate investors hope their properties will gain value every year. Some of the growth comes from monthly payments on your mortgage, which increases your equity ownership in the property. Additional growth comes from your property increasing in value due to a healthy market or, in the case of rental properties, due to growing net operating income. Since the Internal Revenue Service does not recognize capital gain until you sell the property, your money continues to grow as long as it stays in the property. Sponsored Link 12% Yield Stocks to Buy These stocks yield 12%, yet most US investors don’t know they exist. www.GlobalDividends.com Tax-Sheltered Cash Flow The IRS only requires you to pay tax on the profit that you earn from your rental properties. To calculate your profit, add up all your rental and other income and subtract all your expenses. Your rental property expenses include obvious things like mortgage interest, repairs, property taxes and management fees. It can include expenses related to travel. For instance, if you own a beach house in Hawaii and spend a week there to work on it, the entire trip would be tax deductible. Depreciation of your property allows you to write off a portion of the property’s purchase price every year as a way of acknowledging that it gradually wears out. You don’t spend anything to get the depreciation deduction; it just helps to cancel out other income, reducing your tax liability. Passive Activity Loss Deductions With all the expenses you can claim on your investment property, it’s not that hard to end up with a taxable loss. In most cases, you can’t use losses from passive activities, like investing, to offset active income that you earn from your job. However, the IRS will allow you to claim up to $25,000 in passive activity losses from rental real estate against your regular income. To qualify for the tax benefit, your modified adjusted gross income must be below $100,000 — or below $50,000 if you are married and file separately. For income over the modified adjusted gross income threshold, your ability to claim a passive activity loss falls $1 for every $2 of income. Tax-Free Exchanges If you sell your rental property and use the proceeds to buy more investment property, even if it is of a different type or located in a different state, you can structure the sale as a tax-deferred exchange. By following the IRS’ rules, you can carry your cost basis from your old property forward into your new property. Since the IRS doesn’t look at this type of transaction as a sale, you won’t have to pay any capital gains taxes or depreciation recapture taxes on the exchange. Contact Santa Realty a Real Estate Company in Granby, CT