Something Needs to Be Done to Facilitate Short-Sales!

What is a short-sale?  It is simply an unfortunate situation where a seller simply owes more on the property than it is worth in today’s market.  Often this seller has an adjustable rate readjusting and can’t continue to make payments at the new interest rate.  Sometimes a seller took a “tickler rate” in hopes of appreciation or job improvement would allow for the inevitable rate hike.  Many times the forced sale is brought on by loss of a job or spouse.  Anyway, there are a million stories in the city!!  Portland real estate has plenty of stories to add to the mix.  We can debate all day whose to blame, but now there is no choice but to deal with the aftermath.  One solution is a short sale.  Since it is a solution for the seller (there credit is not as negatively affected as in a foreclosure) and a solution for the bank (they get a sale and do not have the expense and time involved in foreclosing), WHY is it so hard and tedious to get the banks to approve???  It is an exercise in “ultimate frustration” (the name of a new reality show???).  The listing Realtor begins the process of marketing the property to sale short.  The banks will not even talk with you until you have an offer.  Now once you have a willing buyer and a supposedly willing seller, you must deal with miles of bureacracy and red tape between the offer and any type of resolution.  You call the various banking loss mitigation departments and get a different “customer service” rep every time.  They simply read to you from a computer screen as to the progress (or the lack thereof).  You can be in review for months and don’t even get me started if there is both a 1st loan and a 2nd loan that must come to an agreement on what each will get…..oh my!!!  The entire process is cumbersome and lacking in any sense of urgency!  In the meantime, the attrition rate is huge as buyers balk because they get tired of waiting OR they continue to look for another property that doesn’t involve the short-sale process and find a suitable replacement. 

There is some hope on the horizon with federal incentives coming for short sales.  The mortgage servicing industry will see in coming weeks the details of an incentive program aimed to prevent foreclosures by encouraging servicers to pursue short sales.  The US Treasury Department confirmed that they expect to issue details on the program later this month.  The program is being finalized and will be announce as soon as possible according the Federal Housing Administration.  This program is supposed to simplify the process of pursuing short sales, which will encourage more servicers and borrowers to participate in the program.  The program will standardize the process, documentation and timeframe.  Yeahhhhhh!  is all I can say.

BIG Changes Coming to FHA! What else is new???!!!

As we continue to struggle with our national and local Portland Oregon housing markets, what we don’t need is more obstacles.  However, it appears that FHA (Federal Housing Authority) is facing a liquidity problem!  17% of FHA loans are in foreclosure, compared with 13% of the entire market.  Thus, FHA’s cash reserves have declined below acceptable levels.  Some new changes are “coming down the pike”.

FHA will hire a risk manager.  They will increase audited financial net worth requirement of approved FHA lenders from $250,000 up to $1,000,000.  The will increase minimum credit score standards for buyers.  And, they will now require income verification on streamline FHA refinances.  This may disqualify some buyers that are on the edge of qualifying and it will decrease the number of lenders that can do FHA loans. 

These new developments plus the up-coming end of the 1st-time homebuyer credit (homes must be closed by November 30th, 2009) should motivate some buyers to “step up to the plate”!!!

Portland Duplex Renovation Almost Complete! N. Mississippi/N. Williams Corridor Duplex Ready to Rent!

So, it started with me taking my own advice and purchasing some local Portland, Oregon real estate while prices were challenged.  I bought a duplex between trendy N. Mississippi and the new N. Williams Corridor with an investment partner and we dove into the exciting world of renovating property (you can go back through the “blogrolls” on the lower right side of this web site to see the updates starting the first week of August 2009).  It’s not my first experience and it was everything I expected and MORE!!  There were the set-backs; ugly vinyl tiles glued down over original hardwoods with hell’s version of “super-glue”, being “tagged” by neighborhood kids, everything taking a bit more time than planned….you know, the usual!  However, we are VERY, VERY close now.  One unit is actually ready to show so I planted a “For Rent” sign in the front yard and placed an ad on Craig’s List, as well as some other rental web sites (see:  http://www.postlets.com/rts/2680503 ).  I’m actually showing the first potential renter tomorrow!!  One unit has all the updates (only the doors are not re-hinged) including refinished hardwood floors, new paint, new lighting, new hardware, new lighting, new tile in the kitchen & entries, new vinyl in the baths and they look SO GOOD!  It’s hard work and time consuming but very rewarding.  I hope to find renters that appreciate the work and “real estate love” that went into the remodel!!! 

Here are some sights from an earlier summer N. Mississippi Street Fair:

and music and fun happening at the Lompoc/5th Quadrant and Pix Patisserie on N. Williams and N. Failing:

I love the energy of this area!  It’s been developing for awhile and it’s young and hip and full of life and hope! The location is so great, only moments from NE Broadway, N Mississippi and right on the bike lane to downtown (on the corner of NE Failing where the bike/pedestrian bridge crosses from N. Portland).  Also, easy access at the Fremont on-ramp for motoring commutes on I-5 or I-405!!  I love real estate!!  .  It’s an investment you can touch, feel, get your hands dirty, drive by and enjoy!

Are You Sick and Tired of Hearing About the $8000 Tax Credit?

okay, okay, okay….enough already about the $8000 tax credit!!  Portland home owners and home seekers have been barraged with information about the credit.  If you are sick and tired of hearing about the 8 grand in $FREE MONEY$ available as a “credit” not a “deduction” (see explanation below) then turn away from the computer.  Remember:  a first-time buyer under this program is someone who has not owned a home in the last three years….so, this credit could apply to a wider range of people than you may imagine.  Don’t hesitate to remind your friends, your family, your co-workers that the deadline for closing is December 1st, 2009 (which means the transaction must record on November 30th, 2009).  This ALSO MEANS you would need to be in contract (unless it’s a cash offer) by approximately the first of October to the 15th of October to ensure a close date of the end of November….especially if there’s a last minute rush on loans and with all the new appraisal regulations and requirements.  Please pay it forward……..(more FAQs below):

The “FIRST-TIME HOME-BUYER CREDIT”    (AND WHAT IT MEANS TO YOU, A FRIEND OR FAMILY MEMBER)!  

PLEASE pass the information to someone you know who might be in the market for their first home!!!

Q:  How much is the tax credit?

A:  The tax credit would be $8,000 or 10% of the purchase price, whichever is less. 

Q:  Who is eligible?

A:  Similar to the $7,500 tax credit included in the Housing and Economic Recovery Act of 2008, the $8,000tax credit (included in the 2009 Economic Stimulus Plan) is available for the purchase of the primary residence by first-time homebuyers.

Q:  What defines a “first-time home buyer”?

A:  According the IRS, any taxpayer who has not owned a home during the 3 years prior to the date of purchase can qualify for the credit.

Q:  Do I have to repay the $8,000?

A:  No.  Unlike the previous $7,500 tax credit that did have to be repaid (which made it essentially an “interest free loan”), the $8,000 does NOT have to be repaid, UNLESS the home is sold within three years of purchase.  If the home IS sold within that 3 years period the credit is simply reversed.

Q:  What if I have no tax liability?

A:  The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

Q:  Are there any income limitations on the tax credit?

A:  Yes.  The tax credit is strictly for individuals with adjusted gross income (AGI) of under $75,000 or $150,000 for joint filers.  AGI is total income for a year minus certain deductions, but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4.

Q:  If my AGI is a bit more than the designated $75,000 or $150,000 respectively, can I still claim the credit?

A:  It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose AGI exceeds the phase-out limits. 

Q:  What is the difference between a tax credit and a tax deduction?

A:  A tax credit lowers your tax bill dollar for dollar. A deduction shaves money off your taxable income, so the value depends on your tax bracket. For example, if you’re in the 25% bracket, a $1,000 deduction lowers your tax bill by $250. But a $1,000 credit lowers the bill by the full $1,000, no matter which bracket you might be.

Q:  What type homes qualify for the tax credit?

A:  Included are single-family detached homes, attached homes like townhouses and condominiums, manufactured homes or mobile homes and houseboats (as long as all other criteria are met).

Q:  What is the time frame for completing my purchase to be eligible for the “First-Time Homebuyer” credit?

A:  This tax credit applies to properties purchased on or after January 1^st, 2009 and before December 1^st, 2009 (so there’s still lots of time).  First-time home buyers who purchased a principal residence on or after April 9^th, 2008 and before January 1, 2009 may qualify for the former $7,500 tax credit (which must be repaid, but operates like a zero interest loan).  Purchase date refers to the date you closed escrow on the property.

Q:  What if I am eligible to participate in another state or local first-time homebuyer mortgage program? 

A:  You maynow claim the credit (previously this credit was prohibited if you participated in any other first-time homebuyers initiatives).

Q:  What if the home is a short sale or foreclosure?

A:  The credit does apply.

Q:  What if the home is in disrepair and I’m willing to do the work but worried about getting the home financed?

A:  There are two possibilities for financing:  the FHA 203k loan and a conventional “Purchase & Renovate” loan (call or write for more info on those forms of financing).