Banks who spend the extra cash to rehab a foreclosed or REO property stand to sell the property much faster than a non-rehabbed REO, according to a new study by Field Asset Services Inc., a property preservation and REO asset management company.
For the last two years, the company has analyzed the number of days on market for remodeled foreclosure or REO properties versus those that are not remodeled.
In reviewing 17,252 properties across 13 states, researchers found that the average days on the market for REO properties that were not rehabbed was 222.8 days. On the other hand, properties that were rehabbed sold, on average, in 69.8 days.
So if you are wandering how you can sell your house faster, you know what to do. Make it look great, prepare to it so it appeals to a large audience. When people come look at your house, make them feel comfortable, remove all personal items (family photos etc.). Make sure the outside is clean, so they want to come inside the house. Clean windows, get new plants, fresh paint, clean carpet, or wood floor and show them you are ready to move out and not stay in.
Friday, April 22, 2011
Monday, April 11, 2011
How To Deduct Mortgage Points
A "point" is a percentage fee charged to by a lender to obtain a mortgage loan. Loan points, are also referred to as Loan Origination Fees or Loan Discounts.
Points paid to purchase, build, or improve the principal residence in which you will live can be deducted in full in the year incurred, otherwise points are "amortized" over the life of the loan such as in a refinancing situation or for the acquisition of any property that is not the principal residence of the taxpayer.
Interestingly if a seller elects to pay all or part of the points to help the buyer get the mortgage, or as an additional incentive to buy, the seller-paid amount is considered to have been paid by the buyer.
The mortgage lender generally will report any points paid in the acquisition of the loan on a principal residence on IRS Form 1098.
Deductible points are limited by the same $1 Million in acquisition debt as mortgage interest.
Points paid to purchase, build, or improve the principal residence in which you will live can be deducted in full in the year incurred, otherwise points are "amortized" over the life of the loan such as in a refinancing situation or for the acquisition of any property that is not the principal residence of the taxpayer.
Interestingly if a seller elects to pay all or part of the points to help the buyer get the mortgage, or as an additional incentive to buy, the seller-paid amount is considered to have been paid by the buyer.
The mortgage lender generally will report any points paid in the acquisition of the loan on a principal residence on IRS Form 1098.
Deductible points are limited by the same $1 Million in acquisition debt as mortgage interest.
How to Buy a Foreclosure Home The Right Way
There’s no cheaper way to buy a house than through a foreclosure auction. But foreclosure buying is also the riskiest and if you do not know what you do, it will cost you a lot of money and headaches.
For the typical home buyer, the process of buying a house entails driving a neighborhood with a real estate agent, visiting houses, getting pre-approved for a mortgage, negotiating a price, paying for a home inspection, termite inspection then signing a big pile of paperwork.
Now imagine buying a house in less than a minute. No home inspection. No mortgage. No real estate agent. No formal closing meeting and not much paperwork. That’s what it looks like when you buy a foreclosed property at auction from your local sheriff, county treasurer or other governmental agency.
Now imagine buying a house in less than a minute. No home inspection. No mortgage. No real estate agent. No formal closing meeting and not much paperwork. That’s what it looks like when you buy a foreclosed property at auction from your local sheriff, county treasurer or other governmental agency.
As the number of foreclosed properties nationwide surpass anything we've seen in decades, investors and other home buyers are finding what they consider the bargains of a lifetime. But while the prospect of eliminating real estate agents and lenders may seem an attractive proposition, buying a foreclosure is not for anyone.
If you’re going to attempt to buy at a genuine government-sponsored foreclosure auction (as opposed to the heavily advertised but completely different types of auctions from companies like Auction.com) be prepared to do a lot of homeowrk.
If you’re going to attempt to buy at a genuine government-sponsored foreclosure auction (as opposed to the heavily advertised but completely different types of auctions from companies like Auction.com) be prepared to do a lot of homeowrk.
The first question you should ask yourself: Is a foreclosure really right for you? One major drawback for those seeking a foreclosure (REO - Real Estate Owned) is that buying this way requires a lot of cash. You typically have to make a 5% to 10% deposit on a property before you can actually bid on it. Then, if you’re the successful bidder, you’ll be required to pay the entire purchase price within 24 hours of the auction. No mortgage allowed. You will also have little, if any, opportunity to inspect the property before you bid on it. Finally, you have to be especially careful that the property you’re bidding on doesn’t have hidden mortgages or other liens that take priority over the one you’re bidding on.
So how do you do it right? The important things to remember when buying foreclosed property at auction include:
- Make sure you understand exactly what liens are secured by the property you’re bidding on. This generally requires paying a title company to do a complete title search on the property. Only then can you be sure that the price you’re paying will leave you holding good, free-and-clear title to the property. Title searches can cost from $100 to $350. That’s money you’ll need to spend before you bid.
- Look at the property you want to purchase. While you’ll almost never be able to obtain a professional inspection of a foreclosed property (the people who are losing their home might very well still be living there) you can at least drive by and see the conditions of the hosue from the outside. It’s not the very best, since any property could contain major structural defects you can’t see from the outside, but it’s better than nothing.
- Avoid overbidding. As with any auction, it’s easy to get caught up in the heat of the moment and pay more than you should. Now that you understand the rules for buying foreclosures, here’s something that might blow you away: With the exception of avoiding overbidding, many foreclosure professionals totally ignore them. You should purchase a foreclosure list in your county you reside which gives a brief summary of every property coming up for auction both on paper and online. The cost is for the list will vary depending on where you reside.
So how does an amateur compete and win at this game? By learning to do it right. Unfortunately, there’s not someone offering free classes on buying foreclosures in most cities. But there are people with experience. Wherever you live, the information you need is both available and free.
The bottom line of foreclosure buying? It’s certainly not for everyone, and it’s not for anyone without cash or unwilling to take at least some degree of risk and some training. If that’s not you, then look for a foreclosure that’s for sale by either one of these foreclosure pros or a bank. Those REOs are available through regular real estate agents.
How to Buy an REO, Like It's Almost a Steal
If you want a bargain, forget the home-buying process you learned from others.
But getting a steal isn’t as simple as it might sound. It requires some homework. It also requires something that isn’t part of the traditional home buying process: speed. YES you will have to act very fast once you spot a deal.
Now let’s explore two options for buying houses well bellow market. Each has different obstacles.
Buying a foreclosure at judicial auction (as opposed to the heavily-advertised public auctions you see at sites like auction.com) will often net the lowest price. But buying this way isn’t anything like the typical process.
Buying REOs at Auctions
When a bank assumes ownership of a house through the foreclosure process, it becomes what’s known as a “real estate owned” property, or REO. Since banks are in the business of lending money, not managing property, they often want to get rid of these homes as fast as possible. They sell their properties the same way you’d sell yours: They hire a specialized real estate agent and list it. Unlike the way you’d market your home, however, the bank often does nothing to fix it up. They list it as-is, and to facilitate a quick sale, sometimes price it well below the market. But sometimes they will be willing to fix them to put them back on the market for an even quicker sale.
The REO market can get you a steal, but you cannot approach it with the same slow, methodical process you’d use in the traditional home-buying process. How it’s done:
The housing market is a depressing subject for homeowners but exciting for those looking to purchase now.
But getting a steal isn’t as simple as it might sound. It requires some homework. It also requires something that isn’t part of the traditional home buying process: speed. YES you will have to act very fast once you spot a deal.
Now let’s explore two options for buying houses well bellow market. Each has different obstacles.
Buying a foreclosure at judicial auction (as opposed to the heavily-advertised public auctions you see at sites like auction.com) will often net the lowest price. But buying this way isn’t anything like the typical process.
Buying REOs at Auctions
- Auctions often require a 5% to 10% deposit before you can start bidding.
- Once you win, you need to pay in full, typically within 24 hours. Which means, of course, there’s no time to get a loan from your bank. And if you don’t show up with the money? Say goodbye do your deposit.
- Most of the time it is impossible to do more than a drive-by inspection. Many homes sold at foreclosure auctions are still occupied, so there’s no opportunity to even see the inside, much less do a thorough inspection of the roof, foundation, heating and air conditioning, etc.
- Depending on the state where the auction is held, you may face liens on the property. There is a story where one woman almost paid $14,000 for a foreclosure property that came with an outstanding $140,000 bill. You can avoid this by paying $10-400 for a title search on the property before you bid, but that’s more money up front with no guarantee of winning the house.
- The competition for these houses is often fierce. You could be bidding against other investors with a lot more time, expertise, and cash than you’re bringing to the table.
Real estate owned properties (REOs)
When a bank assumes ownership of a house through the foreclosure process, it becomes what’s known as a “real estate owned” property, or REO. Since banks are in the business of lending money, not managing property, they often want to get rid of these homes as fast as possible. They sell their properties the same way you’d sell yours: They hire a specialized real estate agent and list it. Unlike the way you’d market your home, however, the bank often does nothing to fix it up. They list it as-is, and to facilitate a quick sale, sometimes price it well below the market. But sometimes they will be willing to fix them to put them back on the market for an even quicker sale.
The REO market can get you a steal, but you cannot approach it with the same slow, methodical process you’d use in the traditional home-buying process. How it’s done:
- Learn to spot a deal when you see one. Buying a home cheap means knowing what “cheap” is. When a below-market REO comes on the market, you’re going to have to make a very fast decision as you won't be the only one to spot it. So learn values beforehand and find an agent that can help you spot an REO and get you the comparables so you know how much bellow market it is priced.
- Be pre-approved for a mortgage. Be ready to pay for a bargain when you find one. That means having financing pre-approved.
- Be ready to pounce. “If it’s new on the market, it’s not something you can sleep on for a few days. By then, there will be several offers and it’s a bidding war. If you think you’ve found a bargain, put an offer immediately because “it’s important to control the property before worrying about the details. If the bank accepts your offer that includes a clause making it contingent on an inspection, you’ve “locked up” the property without being on the hook. Once you get it locked up, you can go through due diligence and if you think you overpaid you can back away. When you put your offer, ask for the bank to get back to you with an answer within 24 hours.
- Bid as high as you’re willing to go. The rules for buying an REO are nearly opposite those for buying a home the traditional way. Grimes says, “It’s not about how much under asking price you should offer, it’s really how much over asking price you should offer,” because the competition for bargain homes is fierce. How high do you need to go? If you want to get it, you will have to make the strongest offer first. If you don't and you're outbidded, then you will have to find another REO.
So, can you find a housing steal? Depending on where you’re looking, absolutely. But this isn’t the traditional house-buying process.
HomeGain 2011 Home Improvement National Survey Results
Posted by: Louis Cammarosano on January 18th, 2011
HomeGain.com announced today that it has released the results of its nationwide home improvement and home staging Home Sale Maximizer™ survey. Past findings from the survey have been a guide for thousands of home sellers in preparing their homes for sale.
HomeGain recently surveyed nearly 600 real estate agents nationwide to determine the top 10 low cost*, do-it-yourself home improvements for people getting their home ready to sell.
The top five nationwide home improvements that Realtors recommend to home sellers, based on average cost and return on investment (ROI) to sellers, are:
- Cleaning and de-cluttering ($290 cost / $1,990 price increase / 586% ROI / 99% recommended)
- Lightening and brightening ($375 cost / $1,550 price increase / 313% ROI / 97% recommended)
- Home staging ($550 cost / $2,194 price increase / 299% ROI / 80% recommended)
- Landscaping ($540 cost / $1,932 price increase / 258% ROI / 93% recommended)
- Repair Electrical or Plumbing ($535 cost / $1,505 price increase / 181% ROI / 92% recommended)
Costs are averages and rounded up.
Cleaning and de-cluttering continues to rank as the top suggested home improvement (since the survey was originally conducted in 2003). This low cost home improvement is recommended by 99% of Realtors and costs less than $300 but has a returning value of nearly $2,000 to the home’s sale price, or a 586% return (ROI).
In 2007 survey results, Lightening and Brightening had the second highest ROI followed by Home Staging. In the 2009 survey, Home Staging overtook Lightening and Brightening. The leapfrogging continues with the 2011 survey as Lightening and Brightening reclaims the number two position.
“Sellers need to prepare their homes for sale before putting them on the market,” said Louis Cammarosano, General Manager at HomeGain. “Homes that have initial appeal have a better shot at selling faster and closer to the asking price than homes rushed to the market with no improvements.”
Rounding out the top 10 DIY home improvements are:
Rounding out the top 10 DIY home improvements are:
6. Update kitchen and bathrooms ($1,265 cost / $3,435 price increase / 172% ROI / 75% recommended)
7. Replacing or shampooing carpets ($647 cost / $1,739 price increase / 169% ROI / 98% recommended)
8. Painting interior walls ($1,012 cost / $2,112 price increase / 109% ROI / 96% recommended)
9. Repair damaged floors ($931 cost /$1,924 price increase / 107% ROI / 93% recommended)
10. Paint outside of home ($1,467 cost / $2,222 price increase / 51% ROI / 81% recommended)
7. Replacing or shampooing carpets ($647 cost / $1,739 price increase / 169% ROI / 98% recommended)
8. Painting interior walls ($1,012 cost / $2,112 price increase / 109% ROI / 96% recommended)
9. Repair damaged floors ($931 cost /$1,924 price increase / 107% ROI / 93% recommended)
10. Paint outside of home ($1,467 cost / $2,222 price increase / 51% ROI / 81% recommended)
Friday, April 8, 2011
Who Gets Mortgage Tax Deduction? Equitable and Beneficial Owners
Equitable and Beneficial Owners
Generally real estate taxes and home mortgage interest are deductible only by the legal owner of a property, but only if paid by that owner.
There are instances where a taxpayer who does not have legal title to a residence may be able to claim a tax deduction for the real estate taxes and mortgage interest on that property if he or she, or both can be considered the "equitable and beneficial owner".
An "equitable and beneficial owner" is a person, or persons who has the exclusive "burden and benefit" of the property. That individual or couple must also exclusively occupy the property for the entire tax year, make all tax and mortgage payments, and importantly maintain the property.
In many instances young married couples or other family members cannot qualify to obtain a mortgage and in such instances their parents or other family members will buy a house either using the parents' money, the couple's money or a combination of both.
The deed and mortgage will be recorded in the name of the parents or other family members who live elsewhere, but the beneficial owners live in the property as their personal residence, maintain it, and pay all the bills, including the property taxes, and the monthly mortgage payments.
Generally if these conditions are met, and the intention of the parties were such that the property was in fact that of the beneficial owners then in such a situation the deduction for the mortgage interest and property taxes can be claimed by those that meet the requirements.
Generally real estate taxes and home mortgage interest are deductible only by the legal owner of a property, but only if paid by that owner.
There are instances where a taxpayer who does not have legal title to a residence may be able to claim a tax deduction for the real estate taxes and mortgage interest on that property if he or she, or both can be considered the "equitable and beneficial owner".
An "equitable and beneficial owner" is a person, or persons who has the exclusive "burden and benefit" of the property. That individual or couple must also exclusively occupy the property for the entire tax year, make all tax and mortgage payments, and importantly maintain the property.
In many instances young married couples or other family members cannot qualify to obtain a mortgage and in such instances their parents or other family members will buy a house either using the parents' money, the couple's money or a combination of both.
The deed and mortgage will be recorded in the name of the parents or other family members who live elsewhere, but the beneficial owners live in the property as their personal residence, maintain it, and pay all the bills, including the property taxes, and the monthly mortgage payments.
Generally if these conditions are met, and the intention of the parties were such that the property was in fact that of the beneficial owners then in such a situation the deduction for the mortgage interest and property taxes can be claimed by those that meet the requirements.
Wednesday, April 6, 2011
Limitations on Home Mortgage Interest Deductions
Home mortgage interest deductions have certain limitations relating to home acquisition and home equity indebtedness.
The first limitation is based upon the limit for loans obtained in the acquisition to purchase, build or substantially improve a residence. This type of debt is known as home acquisition debt. There also exists another limit for loans secured by a qualified residence where the funds are used for other purposes, known as home equity debt.
The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences, up to $1,000,000 in acquisition debt as it relates to the interest charges thereto. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence and cannot exceed $1,000,000 in regards to deductibility of the interest attached thereto. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000 in debt and the interest charges attached to that type of debt.
Home Acquisition Debt is any loan whose purpose is to acquire, to construct, or to substantially improve a qualified home. It also must be secured by that home.
Taxpayers may deduct interest on the loan balance of up to $1,000,000 of home acquisition debt secured by a qualified primary or secondary residence. The limit is reduced to $500,000 for taxpayers who are married filing separately.
Home Equity Debt is any loan secured by a qualified residence whose purpose is other than to acquire, construct or substantially improve a qualified home. Acquisition loans that exceed the $1,000,000 limit may also qualify as home equity indebtedness.
The interest deduction from a home equity loan is limited. Taxpayers can generally deduct interest paid on the first $100,000 of a home equity loan. The home equity debt limit is reduced to $50,000 for taxpayers who are married filing separately.
If the home equity loan was used to improve the taxpayer’s first or second home - or to purchase a second home – the taxpayer may be eligible for a deduction on an amount up to $1 million of debt as to the interest thereto. There is a problematic catch in these calculations in a down market as we are currently experiencing in that the deduction for home equity interest may be reduced below the $100,000 limit if the indebtedness exceeds the fair market value of your home.
The first limitation is based upon the limit for loans obtained in the acquisition to purchase, build or substantially improve a residence. This type of debt is known as home acquisition debt. There also exists another limit for loans secured by a qualified residence where the funds are used for other purposes, known as home equity debt.
The law allows taxpayers to deduct interest on two categories of indebtedness secured by their residences, up to $1,000,000 in acquisition debt as it relates to the interest charges thereto. Acquisition indebtedness is used to acquire, construct, or substantially improve a residence and cannot exceed $1,000,000 in regards to deductibility of the interest attached thereto. Home equity indebtedness is any debt other than acquisition indebtedness and cannot exceed $100,000 in debt and the interest charges attached to that type of debt.
Home Acquisition Debt is any loan whose purpose is to acquire, to construct, or to substantially improve a qualified home. It also must be secured by that home.
Taxpayers may deduct interest on the loan balance of up to $1,000,000 of home acquisition debt secured by a qualified primary or secondary residence. The limit is reduced to $500,000 for taxpayers who are married filing separately.
Home Equity Debt is any loan secured by a qualified residence whose purpose is other than to acquire, construct or substantially improve a qualified home. Acquisition loans that exceed the $1,000,000 limit may also qualify as home equity indebtedness.
The interest deduction from a home equity loan is limited. Taxpayers can generally deduct interest paid on the first $100,000 of a home equity loan. The home equity debt limit is reduced to $50,000 for taxpayers who are married filing separately.
If the home equity loan was used to improve the taxpayer’s first or second home - or to purchase a second home – the taxpayer may be eligible for a deduction on an amount up to $1 million of debt as to the interest thereto. There is a problematic catch in these calculations in a down market as we are currently experiencing in that the deduction for home equity interest may be reduced below the $100,000 limit if the indebtedness exceeds the fair market value of your home.
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