Today, April 30th, if you are not in contract to buy a home by days end, the Federal Homebuyers Tax Credit will have expired. If you are in contract you have until June 30th to close to take advantage of the tax credit.
Despite this, we all knew it was coming and cannot expect or want the Federal government subsidizing the housing market indefinitely. With that said, there is a California State tax credit that is being offered. This tax credit however is a little different than the federal tax credit most are familiar with.
Because I am not a tax preparer I highly recommend seeking advise of a licensed tax preparer, a CPA, or your attorney if you plan on taking advantage of this program. This post will break it down outlining the fundamentals of this State tax credit.
The credit begins May 1st of this year and pulls from a fund of 200 million offering a credit of 10,000 dollars for homebuyers. The program is said to run until the end of 2010, however if you are in contract to buy a home by the end of the year you can qualify for this credit if you close by August 1, 2011.
It is important to note that how this credit is applied. The tax credit is equal or lesser to 5% of the purchase price or 10,000 dollars, which is taken in equal installments over a three year period. This is for primary residences, and requires the homeowner to live in the home as their primary residence for at least two years or else the tax credit is forfeited and they must repay it.
This final note is an important feature as it may result in a sort of prepayment penalty enforced by the State for homeowners that buy, take advantage of this credit, and then for whatever reason look to move. It will be interesting to see how this detail plays out with the implementation of the credit.
One final note... with the Federal tax credit still available to people that get into contract by end of business today, there is a chance of double dipping and taking advantage of both the Federal and State tax credits. If this is your plan make sure you have a good tax preparer and or CPA.
Any questions or concerns are obviously welcome here.
Friday, April 30, 2010
Wednesday, April 28, 2010
Financing Your Vacation Home In San Diego
For those of you that cannot call San Diego home... the next best thing is financing yourself a second home, which, because we are a destination location is relatively easy to justify to an underwriter which means a great rate of interest for you.
A second home unlike an investment property has the same financing terms as your primary residence so interest rates are still incredibly low - currently below 5%... couple that with the unfortunate fact that median home prices have fallen around 40% since their highs, and we're talking serious opportunity.
There are a couple of things you should be aware of, namely the distance between your current residence and second home should be far enough away to be able to truly call it a vacation property.
OR... happen to do a lot of business in San Diego, then perhaps it is time to buy another home to save in travel expenses. A second home used as a place of dwelling while conducting business is perfectly acceptable.
Not every community has the priviledge of being able to call itself a desination location - and our stretch of coastline, and the desert recreation offered inland do justify vacation properties throughout our County.
I hope all readers familiar with our area share some of their favorite moments spent relaxing in some of the best weather in the Country right here in San Diego County. I hope your comments will provide possible home buyers different areas they may want to consider and the reasons why.
With so many incredible communities scattered throughout the County, I cannot and will not do justice all by myself, so I have delegated this responsibility to you my friends to take up in the comment section of this post. Have fun with it.
A second home unlike an investment property has the same financing terms as your primary residence so interest rates are still incredibly low - currently below 5%... couple that with the unfortunate fact that median home prices have fallen around 40% since their highs, and we're talking serious opportunity.
There are a couple of things you should be aware of, namely the distance between your current residence and second home should be far enough away to be able to truly call it a vacation property.
OR... happen to do a lot of business in San Diego, then perhaps it is time to buy another home to save in travel expenses. A second home used as a place of dwelling while conducting business is perfectly acceptable.
Not every community has the priviledge of being able to call itself a desination location - and our stretch of coastline, and the desert recreation offered inland do justify vacation properties throughout our County.
I hope all readers familiar with our area share some of their favorite moments spent relaxing in some of the best weather in the Country right here in San Diego County. I hope your comments will provide possible home buyers different areas they may want to consider and the reasons why.
With so many incredible communities scattered throughout the County, I cannot and will not do justice all by myself, so I have delegated this responsibility to you my friends to take up in the comment section of this post. Have fun with it.
Tuesday, April 27, 2010
Internet Shopping For Real Estate
More and more people are signing up and trying to deal in real estate online. Services include writing offers and listing real estate along with securing financing in which you act as the agent and submit all required materials online after agreeing to a particular fee structure. Basically conditions are then posted, you submit what is required, its evaluated, once satisfied final paperwork is drawn sent to a notary who you meet with, and so it goes. Imagine not having to deal with a loan orignator... would you feel comfortable working through the process by yourself?
The question, is there a real market for businesses structured to operate solely online in dealing and servicing real estate. Is the day of the real estate agent over? Can more cost effective financing be accomplished online without an originating agent at the helm? It's a difficult question to answer and a personal one.
In my opinion more and more is turning to online functionality and the brokers that are going to survive will have a market presense and practical applications that puts more in the hands of their clients.
How would you like to see real estate services evolve in the future? What would you like to see become available online? What real estate services should only be in the charge of professionals only? Nows the time to weigh in.
The question, is there a real market for businesses structured to operate solely online in dealing and servicing real estate. Is the day of the real estate agent over? Can more cost effective financing be accomplished online without an originating agent at the helm? It's a difficult question to answer and a personal one.
In my opinion more and more is turning to online functionality and the brokers that are going to survive will have a market presense and practical applications that puts more in the hands of their clients.
How would you like to see real estate services evolve in the future? What would you like to see become available online? What real estate services should only be in the charge of professionals only? Nows the time to weigh in.
Identifying a Real Estate Agent in San Diego County
When trying to identify a real estate agent to either list or find a new home to purcahse, it is important to consider who you are hiring. It was not too long ago that I heard a statistic (and we all know 70% of statistics are rumors) that one out of every five people held a real estate license in our State of California. That is a staggering statistic if in fact it is true. Throw a rock and you'll hit a licensed real estate agent.
Most of us laugh at a statistic like this, and then dismiss it as a useless piece of trivia. Realistically this statistic is a little scary... because most people will end up working with someone, despite their being licensed, that does not have the experience, resources, systems, etc... in place to secure the absolute best terms for their client.
Contracts, what is included, how they are structured and written, and even presented to the listing agent is imperative. Counter offers need to be well structured as well. The listing should be fairly priced commanding offers while securing the highest possible sale point. The responsibilities that a real estate agent has are significant.
So how do you identify the right real estate agent to represent you? Start with what you are trying to accomplish. Selling a home or buying a home? Their are specific agents that specialize in these independent fields. In addition understand what you are looking to sell or buy... a primary residence, investment property or second home. Again agents focus in these niches.
The most important thing you can do is find an agent that works exclusively in your market. This will ensure they have the resources and connections necessary to fulfill your expectations.
Ask for references. Get references from past clients.
Interview more than one real estate agent. You would be surpirsed how many people do not do this. Finding someone that you get along with and see eye to eye with is important. You do not want to be butting heads with your agent.
Test their negotiating skills, after all this is what you hired them for - negotiating. Remember all fees in real estate are negotiable. A buyer's agent can credit part (or all but good luck with that) of their commission to help you with closing. Don't be afraid to ask, and see how they handle your inquiry. I am not suggesting you not work with them if they are not willing to lower the commission, on the contrary, this type of questioning is meant to determine how good that agent is under pressure, and if they possess the capacity to justify they're earning their full commission. If they can't how can they justify selling your home for full list price, or justify your low purchase offer.
Negotiating skills by in large is the most important quality your agent should possess so make sure to test them on these abilities.
Full time. This should be a requirement for whatever agent you contract. Part time agents working real estate on the side simply are not involved enough in the day to day of the market to represent you and provide you the best/top level of service.
Focus in your area. Let's be honest Oceanside has very little in common with Chula Vista and Poway. Make sure your agent operates in the region you are interested in. Operating inside their area will ensure maximum knowledge about the market. Pull an agent out of their comfort zone and their resources may not apply. This is critical and should not be ignored.
This is a list that is by ne means complete, but does touch on the more important aspects of agency. I encourage professionals and consumers alike to add comments to this post sharing stories - good and bad - regarding agent experiences. Please refrain from using specific names unless you are prepared to identify yourself as well. This is not meant to call out bad agents, but rather provide the resources necessary for consumers to identify bad agents on their own.
Happy house hunting, and if you have any questions or are looking for an agent, I am happy to refer agents I know and trust inside our community.
Most of us laugh at a statistic like this, and then dismiss it as a useless piece of trivia. Realistically this statistic is a little scary... because most people will end up working with someone, despite their being licensed, that does not have the experience, resources, systems, etc... in place to secure the absolute best terms for their client.
Contracts, what is included, how they are structured and written, and even presented to the listing agent is imperative. Counter offers need to be well structured as well. The listing should be fairly priced commanding offers while securing the highest possible sale point. The responsibilities that a real estate agent has are significant.
So how do you identify the right real estate agent to represent you? Start with what you are trying to accomplish. Selling a home or buying a home? Their are specific agents that specialize in these independent fields. In addition understand what you are looking to sell or buy... a primary residence, investment property or second home. Again agents focus in these niches.
The most important thing you can do is find an agent that works exclusively in your market. This will ensure they have the resources and connections necessary to fulfill your expectations.
Ask for references. Get references from past clients.
Interview more than one real estate agent. You would be surpirsed how many people do not do this. Finding someone that you get along with and see eye to eye with is important. You do not want to be butting heads with your agent.
Test their negotiating skills, after all this is what you hired them for - negotiating. Remember all fees in real estate are negotiable. A buyer's agent can credit part (or all but good luck with that) of their commission to help you with closing. Don't be afraid to ask, and see how they handle your inquiry. I am not suggesting you not work with them if they are not willing to lower the commission, on the contrary, this type of questioning is meant to determine how good that agent is under pressure, and if they possess the capacity to justify they're earning their full commission. If they can't how can they justify selling your home for full list price, or justify your low purchase offer.
Negotiating skills by in large is the most important quality your agent should possess so make sure to test them on these abilities.
Full time. This should be a requirement for whatever agent you contract. Part time agents working real estate on the side simply are not involved enough in the day to day of the market to represent you and provide you the best/top level of service.
Focus in your area. Let's be honest Oceanside has very little in common with Chula Vista and Poway. Make sure your agent operates in the region you are interested in. Operating inside their area will ensure maximum knowledge about the market. Pull an agent out of their comfort zone and their resources may not apply. This is critical and should not be ignored.
This is a list that is by ne means complete, but does touch on the more important aspects of agency. I encourage professionals and consumers alike to add comments to this post sharing stories - good and bad - regarding agent experiences. Please refrain from using specific names unless you are prepared to identify yourself as well. This is not meant to call out bad agents, but rather provide the resources necessary for consumers to identify bad agents on their own.
Happy house hunting, and if you have any questions or are looking for an agent, I am happy to refer agents I know and trust inside our community.
Monday, April 26, 2010
30% equity required for Jumbo and Super Jumbo Loans in San Diego County
Have or are looking for a home loan over 697,000 dollars and live in San Diego County? If so you are in an elite market known as Jumbo or Super Jumbo. This designation simply refers to the size of the loan you would be looking to establish. Point in fact there are many lenders right now offering solutions for people in this market so you would think this competition would mean more options. Unfortunately this is an illusion, virtually all Jumbo and Super Jumbo lenders have their tradelines from a single source, and it is this source that ultimately makes the rules.
In other words you have one investor that all these lenders are representing. Because there is only one investor the guidelines for all the companies representing this one investor are the same (pricing wold be different due to different overhead and profit margin each of the independent lenders would be responsible for) and it is the guidelines that this post is addressing.
The guideline in question: a required 30% equity position to secure jumbo or super jumbo financing in San Diego County. Normally a guideline like this does not raise any flags, it is understandable that the lender expects an equity position for you to qualify for the loan. What is interesting is this investor has different equity requirements depending on where you live. Broken down by zip code, San Diegans find themselves needing 30% equity, while San Franciscans can secure finanincg in Jumbo and Super Jumbo markets with only 20% equity.
This raises a serious question: Is this investor guilty of redlining? If they are they would be in violation of federal law which clearly makes redlining illegal. What is redlining? When a lender takes a red marker and draws a circle around an area in which they refuse to lend for whatever the reason.
With this definition you can draw your own conclusions whether or not they are in violation of the law. The point is right now financing is available in certain areas at certain terms and not available in others. The fact that you can borrow 80% in certain areas and are limited to 70% in others is a major difference. On a million dollar purchase we're talking 100,000 dollars.
Even so, some proponents argue that the investor is not redlining they are simply protecting themselves for adverse markets. Well isn't that the point of redlining as well, to avoid adverse markets? The reasons behind the action does not justify the action.
Let's look at this another way. Imagine a company that took this model to an extreme and in certain areas they would loan up to 80% and in others would only loan up to 40% due to adverse markets. The simple fact is homeowners in the market that required a 60% equity position would have a much more difficult time securing financing than people in the market that only required a 20% equity position. In essense the requirement would curb lending in certain areas achieving the same thing banks use to do with a red pen and map that resulted in the redlining law. In essense you are placing a higher value on certain parts of our State which can and will have devastating results if it is allowed to continue unchecked.
I am not an attorney - but in my professional opinion as a licensed broker operating in CA, I do believe this is a violation of redlining. The purpose of this post is to inform all San Diegans in this market that they are currently required to have a 30% equity position and the reason why.
The secondary market investor that is responsible for this travesty is GMAC.
GM... didn't we the taxpayers bail them out? I highly recommend calling your representative and voicing your concerns over this. If enough people call and voice their concerns this policy will change.
In other words you have one investor that all these lenders are representing. Because there is only one investor the guidelines for all the companies representing this one investor are the same (pricing wold be different due to different overhead and profit margin each of the independent lenders would be responsible for) and it is the guidelines that this post is addressing.
The guideline in question: a required 30% equity position to secure jumbo or super jumbo financing in San Diego County. Normally a guideline like this does not raise any flags, it is understandable that the lender expects an equity position for you to qualify for the loan. What is interesting is this investor has different equity requirements depending on where you live. Broken down by zip code, San Diegans find themselves needing 30% equity, while San Franciscans can secure finanincg in Jumbo and Super Jumbo markets with only 20% equity.
This raises a serious question: Is this investor guilty of redlining? If they are they would be in violation of federal law which clearly makes redlining illegal. What is redlining? When a lender takes a red marker and draws a circle around an area in which they refuse to lend for whatever the reason.
With this definition you can draw your own conclusions whether or not they are in violation of the law. The point is right now financing is available in certain areas at certain terms and not available in others. The fact that you can borrow 80% in certain areas and are limited to 70% in others is a major difference. On a million dollar purchase we're talking 100,000 dollars.
Even so, some proponents argue that the investor is not redlining they are simply protecting themselves for adverse markets. Well isn't that the point of redlining as well, to avoid adverse markets? The reasons behind the action does not justify the action.
Let's look at this another way. Imagine a company that took this model to an extreme and in certain areas they would loan up to 80% and in others would only loan up to 40% due to adverse markets. The simple fact is homeowners in the market that required a 60% equity position would have a much more difficult time securing financing than people in the market that only required a 20% equity position. In essense the requirement would curb lending in certain areas achieving the same thing banks use to do with a red pen and map that resulted in the redlining law. In essense you are placing a higher value on certain parts of our State which can and will have devastating results if it is allowed to continue unchecked.
I am not an attorney - but in my professional opinion as a licensed broker operating in CA, I do believe this is a violation of redlining. The purpose of this post is to inform all San Diegans in this market that they are currently required to have a 30% equity position and the reason why.
The secondary market investor that is responsible for this travesty is GMAC.
GM... didn't we the taxpayers bail them out? I highly recommend calling your representative and voicing your concerns over this. If enough people call and voice their concerns this policy will change.
Friday, April 23, 2010
San Diego Default Rate Improving
Some good news to start off my new blog. Independent sources have confirmed that the default rate on homes here in San Diego County has fallen some 40% from last year according to Dataquick.
This is not only good news for banks and lenders, it is good news for homeowners who will begin to see a stabilization in home prices if they have not already. The question remains, what is the cause of this correction? Has the market truly corrected and now stabilized or is there to this than meets the eye?
It is important to note that this decrease in defaults may be due to the fact that lenders are now more willing to issue loan modifications or agree to short sales. Although loan modifications can lead to a reduction in principle balance (although not all that common), it is the short sale solution that has me a little concerned, not because I disapprove of short sales, quite the contrary, but rather because a short sale often times result in the same price break as a foreclosure (after all investors and home buyers typically understand a short sale is conducted in the wake of a possible foreclosure so they usually expect similar price breaks).
It is the price break that concerns me, becuase if short sales simply take the place of foreclosures, we still face the same problem, it just has a different name. Okay, okay it is not the exact same problem, short sales often result in the seller being able to salvage their credit which means they could potentially become homebuyers again in the near future... but this is not the point. The point is home prices are likely to remain somewhat flat in the coming months and years. So although this figure has good "face value" it unfortunately lacks substance.
Take this into consideration that on 2007 the median houshold income in San Diego was 69,400 (who thinks that figure has come down), and the median home price in San Diego County is 330,000 as of December 2009 and it becomes evident that home prices will remain at there current levels for some time. Why? Because until the median income rises to support higher home values the stricter lending guidlines that require full income doucmentation will not allow San Diegans to buy more home than they can afford.
This is not necessarily a bad thing. The point is, people should not look to their home a cash crops anymore, instead they will be required to return to more a more conservative outlook on investing. This new way of thinking has come at a steep cost however, with the median home price slipping around 35-40 percent over the last five years.
Yet we do have something to look forward to, because the point is after all the market is stabilizing, and everyone knows you got to wait for the earthquake to stop shaking the ground before you can start to rebuild.
This is not only good news for banks and lenders, it is good news for homeowners who will begin to see a stabilization in home prices if they have not already. The question remains, what is the cause of this correction? Has the market truly corrected and now stabilized or is there to this than meets the eye?
It is important to note that this decrease in defaults may be due to the fact that lenders are now more willing to issue loan modifications or agree to short sales. Although loan modifications can lead to a reduction in principle balance (although not all that common), it is the short sale solution that has me a little concerned, not because I disapprove of short sales, quite the contrary, but rather because a short sale often times result in the same price break as a foreclosure (after all investors and home buyers typically understand a short sale is conducted in the wake of a possible foreclosure so they usually expect similar price breaks).
It is the price break that concerns me, becuase if short sales simply take the place of foreclosures, we still face the same problem, it just has a different name. Okay, okay it is not the exact same problem, short sales often result in the seller being able to salvage their credit which means they could potentially become homebuyers again in the near future... but this is not the point. The point is home prices are likely to remain somewhat flat in the coming months and years. So although this figure has good "face value" it unfortunately lacks substance.
Take this into consideration that on 2007 the median houshold income in San Diego was 69,400 (who thinks that figure has come down), and the median home price in San Diego County is 330,000 as of December 2009 and it becomes evident that home prices will remain at there current levels for some time. Why? Because until the median income rises to support higher home values the stricter lending guidlines that require full income doucmentation will not allow San Diegans to buy more home than they can afford.
This is not necessarily a bad thing. The point is, people should not look to their home a cash crops anymore, instead they will be required to return to more a more conservative outlook on investing. This new way of thinking has come at a steep cost however, with the median home price slipping around 35-40 percent over the last five years.
Yet we do have something to look forward to, because the point is after all the market is stabilizing, and everyone knows you got to wait for the earthquake to stop shaking the ground before you can start to rebuild.
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