New service promotes simpler mortgage shopping experience
We have touched on the subject of mortgage shopping recently, so I thought this would be a good article update.
http://lowes.inman.com/newsletter/2012/02/17/news/178085
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Posted by: Carmen Morrow, Broker/Realtor®
The Real Estate Link of the Carolinas
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North Carolina among the “richest states” in the “black”…which usually is a sign that a state’s economy is getting better. Come join us!
http://finance.fortune.cnn.com/2012/02/14/richest-states-america/?iid=SF_F_LN
Breaking News….Largest Housing Settlement Ever!
http://rismedia.com/2012-02-09/breaking-news-banks-states-reach-26-billion-foreclosure-settlement-in-largest-ever-housing-deal/
In Honor of the Grammy Awards …
Found this really fun piece about where “the other half lives”…a little something for the music lovers in honor of the Grammys. HAVE A WONDERFUL WEEKEND!!
http://lowes.inman.com/newsletter/2012/02/10/news/176866
Posted by: Carmen Morrow, Broker/Realtor®
The Real Estate Link of the Carolinas
“Going Green”…the new “granite countertops?”
Energy efficiency is, as one developer puts it, “the new granite countertop.” After all, no one asks what the payback period is for a countertop. Just as items that were once added to a new home or condo for an additional price are now standard, so too are energy-efficient equipment and design becoming standard features expected by the buyer or renter.
This shift is perhaps happening fastest in the single-family home industry as it looks for whatever it can find to move its homes. Green, it turns out, is the most effective way to sell a home. Buyers find it more appealing to buy a home that is already efficient than a less expensive home that needs major retrofitting as well as new appliances and HVAC systems.
So, where will these trends lead the industry? Inevitably, the green trend will lead to homes becoming energy net zero or net plus, linked to the grid and buying and selling as the day goes along. Green will no longer mean being a bit more efficient than before, but will mean that a home uses no net energy (net energy zero) or produces net energy (net energy plus). Homes that still draw all or most of their energy from the grid will see a marked decline in value, just as today’s homes that are far from sources of public transit are losing value while homes proximate to transit are holding value.
Making a house or an apartment net energy zero or plus will be achieved in a variety of ways, many of which haven’t been discovered yet. Even today, very few builders are experimenting with passive housing – homes that are so air tight, insulated, and sited as to need little more heat than that provided by the bodies of the residents, and can draw cooled air from the ground. Passive and active solar will become greatly more efficient, as will geothermal and wind power.
Many of the techniques will be from the past, like siting for passive solar and wind protection, shielding with trees and the like. Residences will be designed to the local environment once again – New England style in New England, adobe homes in the Southwest.
Other design trends to anticipate include smaller homes designed for a more open lifestyle. Homes will become smarter, adjusting themselves for greater energy efficiency throughout the day, and will be operable remotely (as some are now). For instance, the new Nest thermostat will automatically sense the presence of people, will learn how a resident wants the home’s temperature set over time, and can be run from a website by an iPhone or iPad, all for $250.
Lighting, heating, and cooling will be adjusted not just by machines, but also by external and internal shading, glass that changes, windows that open and close automatically to gain benefit when the outer air can be used, and other new techniques that limit human wastefulness. In short, the pace of technological change in housing will begin to mirror the pace of change in all other areas of technology development.
If all these changes seem far-fetched, remember that times of stress like the ongoing housing crisis greatly accelerate changes already underway. This means that the future is closer than it may seem. As Daniel Goleman, the author of Emotional Intelligence, says, “the future is already here, it’s just not evenly distributed.” (copyright 2011 by the Urban Land Institute.)
What Happens When You Walk Away From Your Home?
..It was just last summer that Charlotte Perkins made the hardest decision of her life as she and her husband Jim were caught in the vise of the housing bust.
Wanting to downsize their lives as they headed toward retirement, they bought a new house in Mesa, Arizona, before they sold the old one, also in Mesa. Their previous home had been appraised at nearly $400,000 at the height of the market, but as the housing crisis ravaged Arizona, they were told they’d be lucky to get $200,000 for it.
They were carrying a loan of $260,000 on their original home alone, meaning they were well ‘underwater,’ owing much more than it was worth. Combined with the mortgage on the new house, their housing payments had become an “anchor around our necks,” she says, threatening to gobble up all their retirement savings and leave them with nothing.
The couple made a difficult call: They would do a ‘strategic default,’ and simply stop paying the old mortgage. “We really had to wrestle with it,” said Perkins, 60. “We had worked all of our lives to build good strong credit, and we’re proud people. But it came down to, ‘Can we keep doing this?’ We had to say ‘No.’”
As the housing bust drags on, many homeowners are thinking like Perkins. Almost 11 million homes are now underwater, says financial information provider CoreLogic. Around 3.5 million homeowners are behind in their payments and another 1.5 million homes are already in the foreclosure process, according to online marketplace RealtyTrac.
As banks start to work through their backlog of distressed properties, the New York Federal Reserve estimates that 3.6 million foreclosures will take place during the next couple of years.
So, the question is: Does it make sense to keep paying a massive mortgage, knowing that it might be decades before a home regains its prior value? Or is that akin to – as columnist James Surowiecki recently wrote in the New Yorker – “setting a pile of money on fire every month”?
“I constantly get the saddest e-mails from people saying, ‘I’ve exhausted all my life savings, my retirement is gone, and now I have to default,’” said Jon Maddux, CEO of YouWalkAway.com,
a foreclosure agency that helps clients with strategic default (and charges a fee for it). “But if they had seen the writing on the wall a couple of years earlier, stopped paying the mortgage and stayed in the home throughout the whole process, they would be in a much better financial position.”
Moral Quandary
There’s a moral component to that decision, of course. People naturally feel embarrassed about breaking a contract and not paying their bills; no one wants to be branded a deadbeat. But remember that companies default on their obligations when it makes financial sense for them to do so, via the bankruptcy process. Even the Mortgage Bankers Association itself, in a flourish of irony, arranged for a short sale of its Washington headquarters.
It’s not personal; it’s business. So think of strategic default as a business decision, and do a cold-eyed cost-benefit analysis of whether it makes sense for you, advises Carl Archer, an attorney with Maselli Warren in Princeton, New Jersey.
[Also see: Small Money Missteps That Can Cost You Big]
“People think it reflects on their integrity, and say ‘I wasn’t raised this way,’” said Archer. “But the more businesslike attitude is to say that there’s a contract, there are penalties for violating that contract, and sometimes it just makes financial sense to break it.”
The penalties largely revolve around your credit record, which admittedly gets blown up in the near-term. For a few years you can likely forget about qualifying for a mortgage or a car loan. When lenders are ready to take a chance on you again, you’ll have to pay for the privilege, with stiff interest rates due to your default history.
What Happens to Scores
Charlotte Perkins watched her credit score go from a pristine 800 to 685, dropping every time she missed a payment. Credit-scoring firm FICO estimates that someone with a 680 score would see that number sink between 85-100 points after a strategic default, and someone with 780 could crater 140-160 points.
Not desirable, of course, but not the end of the world either. For Perkins, for instance, she already had a loan on her Ford Escape, and the mortgage on her new house, before she even started the default process. She hasn’t seen any changes on her credit cards since, in terms of limits or interest rates.
Now that the previous home was auctioned off in December, she can start slowly rebuilding her credit, a process that should take about seven years.
Strategic default isn’t a decision to be taken lightly, of course. If everyone did it, the housing market — and the banks — would be in much worse shape than they already are.
The following are some of the issues to keep in mind:
1. Look to it as a last resort, not a first option. Your financial troubles could be alleviated with a simple refinancing, especially since 30-year mortgage rates are near record lows of below 4 percent. If the banks are hesitant to rework your loan, look into the number of government programs designed to keep you in your home, which can be researched at MakingHomeAffordable.gov.
2. Location, location, location. Each state has its own rules and regulations regarding foreclosures, which affect both the length of the process and what you could be liable for in the end. In so-called ‘non-recourse’ states like Arizona, California and Texas, a lender cannot come after you for any deficiency (for instance, if your mortgage was $300,000 and they’re only able to sell the property for $200,000). In other states they can pursue the difference, in theory – which is why some homeowners opt to file for bankruptcy, to free themselves from those potential obligations as well.
3. Use the interim to save like a demon. If you’re in a state like New York or Florida, which require a judicial review of every foreclosure, it might be a couple of years before you actually have to pack up. In the meantime, be extremely disciplined about stockpiling cash. That will help you with a down payment for a rental, to pay for a car in cash if you need to, or to clear up other debts you might have. “Save money as if you were still paying the mortgage,” says Archer. “If you don’t, then you’ll run out of both time and money, and then you’ll be in a real tough spot.”
4. Know the tax implications. Historically, if you have a debt that’s forgiven, the canceled amount is considered taxable by the IRS. In the wake of the housing bust, though, the Mortgage Forgiveness Debt Relief Act was drafted to spare you those taxes. That legislation expires at the end of 2012, though – so if it’s not extended, you could potentially face a tax bill for the difference.
5. Talk to a professional. A bankruptcy or real-estate attorney can help you through a very tricky process. The National Association of Consumer Bankruptcy Attorneys, for instance, has a searchable database of lawyers at www.nacba.org.
“Strategic default is not an easy decision, and there’s a cost either way,” said Gerri Detweiler, director of consumer education for Credit.com. “Would you rather be $200,000 underwater, or would you rather have seven years of damage to your credit report? It depends whether you’re finally at the point where enough is enough.”
..
Turning Foreclosures into Rentals…
NEW YORK (CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.
The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.
In addition to getting the properties off the government’s books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.
Tax benefits and the pros of turning your long term residence into a rental
The Taxpayer Relief Act of 1997 changed not only the $125,000 one-time home-sale exclusion for persons over 55, but also the “rollover replacement rule.” Under the old law, a taxpayer could defer any gain on the sale of a principal residence by buying or building a home of equal or greater value within 24 months of the sale of the first home.
Tax on the gain was not eliminated, but merely “rolled over” into the new residence, reducing the tax basis of the new home.
The intent of the 1997 tax code, which replaced the “rollover” provision and $125,000 over-55 exclusion, was to allow most homeowners to sell their primary residence without tax — and not worry about keeping records. Taxpayers no longer can utilize parts of either portion.
In order to qualify for the $250,000 exclusion ($500,000 for married couples), taxpayers must have owned and used the property as a principal residence for two out of five years prior to the date of sale. Second, they must not have used this same exclusion in the two-year period prior to the sale.
So the only limit on the number of times a taxpayer can claim this exclusion is once in any two-year period.
(continued, follow link)
http://lowes.inman.com/newsletter/2012/01/27/news/174742
By: Carmen Morrow, Broker/Realtor® The Real Estate Link of the Carolinas
(704) 296-5465 or Toll free: 1-800-684-0885
