What Does the First Time Home Buyer Tax Credit Extension Mean to our Economy and our Future?

It looks like the Congress is on the verge of extending first-time home buyer tax credit of $8,000 through April 30, 2010. The Obama administration has said they support an extension. In addition, repeat buyers who have owned a home for at least five years and buy a new house will receive a $6,500 tax credit under the Senate version of the bill.

What does this mean for the economy and for our future?

More taxpayers’ money is being handed out to anyone who buys a home for the first time or to those repeat buyers fitting the qualifications. The government has yet to release close to $8 billion in housing recovery effort under the stimulus package. In the end when the economy turns around, lawmakers could ask for higher taxes from responsible taxpayers to pay for everything else and make up for their lavish spending. Our pain is just about to begin.

Our country is awash in debt. By some estimates, the total cumulative debt for each American may be around $700,000, according to discussion on the topic at wikipedia.org. Money has been borrowed from many foreign countries, chiefly China and Japan. When the loans come due, what will we give them? Trade concessions; military concessions; land? Anything but money, because we don’t have it. Whoever has the most money holds massive power. America is financially strapped and may not hold on to the power it has for so long.

But back to the matter at hand — will the housing market recover faster with or without the $8,000 home buyer tax credit? Given the correct approach and perception, the housing market would recover without the $8,000 or with a reduced tax credit. The perception that home buyers should buy a home because of the tax credit is flawed. Instead, lawmakers should encourage home buyers to buy a home now because it is good for them and good for their future. If they buy a home now, they get ridiculously low prices. Some prices are below building cost, interest rates are very low and home buyers get instant equity with their home purchase. These are more than enough reasons to buy NOW. To add a whopping $8,000 tax credit to the deal is to spoil home buyers for doing something that already benefits them!

Anyway, why an $8,000 tax credit? Why not $2,000? How did Congress come up with the figure? For all the benefits that home buyers already get in this market, $8,000 for every home purchase is way too much.

In the end, the lawmakers should focus on increasing home values more quickly instead of increasing sales. If potential home buyers realize that prices are moving convincingly higher, they will feel a sense of urgency to buy a house now, before prices move higher, which will fuel a recovery in the housing market. That is much better than an $8,000 tax credit and would save taxpayers a lot of money.

Breaking News – Home Buyer Tax Credit Extended and Expanded

The U.S. Senate has agreed to extend and expand the home buyer tax credit. Do you think this is a good move?

I don’t know where our government is getting all this money to hand out to home buyers. It seems to me our lawmakers work without any budget and that they think money falls from the sky. Our country has trillions in debt and is giving away more money, obviously spending way more than its means.

Home prices are historically low, interest rates are extremely low and equity is instant. These alone are enough reasons to buy a home NOW. I think our government should stop spoiling home buyers and let them realize the built-in benefits of buying a home NOW. Let potential buyers know that buying a home in today’s market is good for them and stop bribing them unnecessarily. It’s like giving a child candy for being good. The child should realize that behaving well is good for him or her and for his/her future.

Lawmakers — if you decide to extend the home buyer tax credit, be discreet enough not to increase our taxes.

For a full story on this news, click here.

What will it take for Metro-Phoenix’s Home Values to Rise Faster?

1. Job creation and stability: Buying a home is not only about location, it is also about financing. People need decent jobs that they can hold onto in order to buy homes. The state’s jobless rate dropped slightly to 9.1 percent in September, the Arizona Department of Commerce reported this week; the rate was 9.2 percent in July. That improvement, while modest, is good news for Arizona and the nation as a whole. If people have better-paying jobs, they are more likely to be able to afford bigger homes in higher price ranges. Cities around the valley could also work towards attracting businesses that will employ high-salaried employees, not just service workers.

2. Lender-Owned Pricing: The sooner banks price the homes they’ve taken ownership of at market value rather than below market value, the sooner we will see prices go up. At the moment, banks list their lender-owned homes at 10,000 to 15,000 below market value – for a reason: This elicits multiple bids, which usually ends up driving the selling price to a level at or above market value. It would help the market rebound if the banks price homes close to market value. Of course, this is a double-edged sword for the banks. If banks price homes higher, they would probably not get above-list-price offers. However, when they price below market value, it stalls the housing recovery. But banks don’t really care about the housing market – only profits.

3. Loan Modification Approval: If qualified borrowers are allowed by their banks to modify their loans to terms that are beneficial to homeowners in the long-term, the number of foreclosed homes would be reduced. However, not all homeowners can afford to pay for their homes despite loan modification and therefore may still end up in default. And these homeowners are likely to short sale their homes down the road.

4. Short Sale Pricing: Short sales are dominating the Metro Phoenix market. The homeowner sells his or her home for less than what it is owed, which requires lender approval. The success rate of short sale approvals have increased by half. If we are to see home values rise much sooner, lenders would need to be more careful about approving short sales at very low prices. This quarter, the short sale purchase prices have decreased to levels comparable to foreclosure prices. A bank typically approves a short sale offer which is 10 percent less than the broker’s price opinion. To keep home values from going down, banks probably should think of approving sales at a level not less than 5 percent below the broker’s price opinion. Realtors listing short sales should price homes based on their value, not simply to elicit a quick offer. Some Realtors’ strategy is to price their listings lowest within the neighborhood to get a quick offer, even if the home could realistically sell for more. This practice may turn the sale over quickly for the agent so he or she can move on to put other homes on the market, but it is not helping home values go up sooner.

In a crazy market where short sales and foreclosures are dominating, nobody really seems to care about overall home values. The homeowner who short sells his or her home is not getting a single penny from the sale. So, it does not matter to him what the home is priced as long as he avoids foreclosure. The lenders are so overwhelmed with selling millions of properties, they are happy to sell their inventory quickly and for less. Similarly, some Realtors, not wanting to spend a lot of time or effort with each listing because of the reduced fees they are earning, look for quick sales without regard for the cumulative effect these low prices are having on the market and future sales prices.

Obviously, the best thing that can happen for everyone with direct or indirect ties to real estate – homeowners, banks and Realtors — is for prices to go up. An increase in traditional real estate sales where the homeowner is selling to profit from the house will help home values to improve. These homeowners care about home values and would like to sell for a good price.

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Arizona Real Estate Market Great For Canadian Buyers

Earlier this month, a story in a prominent newspaper in Canada reported how many Canadians are taking advantage of the incredibly low prices of homes in Phoenix while the Canadian dollar is really high.

Prices on houses in some areas of Metro Phoenix are 50 percent lower than they were in 2005. Canadians can purchase a home in Arizona for an average 35 percent down payment, depending on the institution they get a mortgage from – or they can pay cash.

Canadians may purchase a home for investment purposes, as a winter home, or both. Phoenix averages 320 sunny days per year and is the golfing capital of the United States – both strong selling points to our friends north of the border.

There are also many active-adult communities available to those who are at least 55 years or older. These communities offer state of the art amenities and activities including exercise rooms, ballrooms, swimming pools, billiard halls, golf courses, tennis courts and more. These developments are very popular areas as second homes among Canadians in their senior years. In addition, affordable neighborhoods with varying age groups including families and seniors are also great options for those looking for a different lifestyle. Most Canadian visitors – often dubbed “snowbirds” – visit Arizona during the cool months of November through May, then return back to Canada in the summer.

With the Canadian dollar strong and home prices at historic lows, now is a great time for those snowbirds who haven’t already invested in their own home in Arizona to consider doing so.

I occasionally have the pleasure of working with Canadian buyers and sellers and enjoy helping them with their specific needs. If you have questions on how a Canadian or other foreign buyer can purchase a home in Arizona, please feel free to contact me at (480) 650-0075.

First-Time Home Buyers Rush to Benefit from $8,000 Tax Credit

The Arizona real estate market is very hot as many first-time homebuyers scramble to purchase a home by November 30 to receive the $8,000 tax credit. Just a few days ago, my client and I went on a rush to see a starter home with a pool in Chandler that was bought recently and fixed up by an investor. This home was 0 days on the market and cars of buyers and Realtors are lining up in front of the house to see it.

As a result of this “panic” buying, I see the sales in lower price range jump up tremendously. Once this incentive is over, home sales may decrease because the sense of “urgency” is gone and buyers can use their sweet time to find a house they like.

The panic buying is helping new construction homes to sell fast and homes next to a busy street is being built as well. First-time homebuyers looking to take advantage of the tax credit are pursuing traditional sales or spec homes more aggressively because these homes can close quicker than a short-sale. These properties are in better condition than short-sale, lender-owned or government owned homes where you typically find missing appliances, green pool and overgrown weeds.

8 Ways to Buy a House in Today’s Arizona Real Estate Market

Arizona’s real estate market may never have been better than it is right now. Homes are selling quickly. First-time home buyers rush to buy a home before November 30. In today’s real estate market, it is interesting to note that home buyers have many options. In a normal market, traditional sales are where majority of the sales come from. However, in the current market, a buyer looking to purchase a home has many choices.

1. Traditional Sales: A homeowner who has gained enough equity in the home is selling the house. The transaction is simple and quick. The buyer and seller agree on the price and then negotiate the repairs. Average time of closing is one month to a month-and-a-half on a buyer borrowing money; two to three weeks for a cash buyer. This is the most preferred way of buying a home.

2. Lender-Owned Property: The seller is the bank. The bank sells the home for an average of 20 percent below market value to generate multiple offers. The bank continues to ask for highest and best offer from participants until the bank decides on the lucky winner. Bank sells”Buyer Beware” and ” property as-is with no repairs. Banks provide an addendum overriding previous contracts to satisfy their conditions. The Bank Rules” and “Buyer Beware”are the credos to remember in this game. Chances of you winning the house among, say, 10 other buyers in a blind auction format is low. Recommended for buyers who have time and money to do repairs and can handle going through multiple rejections from the banks.

3. Short-Sale: The seller is the homeowner, who is upside down on his home and needs a lender approval to sell the house. The sale is subject to the seller agreeing to the terms set by his lenders and the lenders approving the sale. Close of escrow could take two to five months depending on the banks, listing agent, lender negotiator, deficiencies, and other factors. Every short sale is custom sale. The condition of the house will vary from a move-in ready home to a home that is neglected and needs work to varying degrees. Short sale approvals have increased significantly since last year. Recommended for people who have time to wait before moving in.

4. Maricopa County Trustee Sale: Foreclosed homes are auctioned to the public. The majority of these take place at the Maricopa County Courthouse Steps on Jefferson Street in downtown Phoenix. There are three sessions per day except weekends at 10 a.m., 12 noon and 2 p.m. More than 500 homes are auctioned each day. Bidders must have $10,000 to bid. If you win the house, the remaining balance is payable in 24 hours. A hard money loan should be arranged a day before the sale. Homes on the auction list may be canceled or postponed 20 minutes prior to bidding. Many homes are NOT available to show and buyer pays off any liens attached to the home. Recommended for those who have the ability to secure a $10,000 cashiers check and are knowledgeable about the bidding process. Also, you must be able to arrange a hard money loan or have cash arranged or available and have time to do research on the property of interest. You also must be willing to bid on a property site-unseen.

5. HUD Homes - HUD homes are government-acquired foreclosed homes whose original loan was an FHA loan. Bidding is done electronically and results are available online. Multiple bids are accepted until a certain deadline. Bidding dates are assigned on the HUD website. An inspection report is available online. Only $100 down payment is required on an FHA loan. The seller can pay up to 3 percent in buyer’s closing costs and a $1,000 bonus for a full-price offer. HUD homes are available only through HUD-certified brokers. Most HUD homes are in need of repairs and the inventory can be minimal in some areas. For more information go to www.mcbreo.com Recommended for those willing to do repairs and have little or no downpayment.

6. Privately-Run Auction: This type of auction is done usually at a hotel or convention center. Buyers outbid each other in an atmosphere that creates urgency and desire. The auction contract is designed to favor the auction company. Buyer is advised to bring a real estate agent with them to review the contract and research the recent comparable homes prior to bidding. The auction company requires $5,000 to $10,000 to bid and inspection is done prior to bidding. You can buy a house in less than a month in such an auction. Recommended for those who want to close on a home quickly and are willing to pay for inspection on a house that they are not sure of getting.

7. New Construction Homes: The builder is the seller and appoints a Real Estate Agent as their employee to process the transaction with the buyer. The employee works for the builder and has the builder’s interests in mind. Prospective buyers are advised to consult with a buyer’s real estate agent to review the contract, terms and research recent comparable sales. New construction homes provide a variety of options in terms of features and upgrades that are considered in the pricing. For that reason, final purchase price tend to be significantly higher than the advertised price. You may purchase a “spec home” that is ready to move in, or a home that will be built to fit your needs. Buyer chooses the color, upgrades, minor changes to the layout and other additions. Recommended for those who want to close quickly and don’t mind paying more for a brand new house — and also don’t mind spending additional money for landscaping, fencing, window treatments, etc.

8. FSBO - For Sale By Owner, as the name implies, are homes being sold by a homeowner to avoid paying a 3 percent commission to a Realtor. Statistics show that 85 percent of FSBOs eventually end up listing with an agent because they cannot sell the house themselves. Some FSBOs cooperate with buyers’ Realtors; others don’t. Buyers are advised to seek expert legal or real estate help to review the contract when entering into an agreement with a FSBO seller. Most FSBO homes are well-kept and clean, but can be priced above market value. Recommended for those who are willing to be unrepresented in the real estate sale and those who know enough about real estate transactions.

*Consider your needs, priorities and wants in determining which of these options will work best for you as a potential home buyer.
Maria Gonzales Hass is a licensed full-time Realtor with Realty Executives. She has great knowledge in any of these types of buying options. For more information, you may contact her at (480) 650.0075.

Front Page Arizona Republic Article “Time Running Out for Homebuying Rebate”

I was quoted in yesterday’s Arizona Republic in a front-page story on the 1st-time home buyers’ tax credit. Article: http://tinyurl.com/azrep919

When Does Arizona’s Anti-Deficiency Law Apply?

There’s been a lot of misinformation going around about the modified Anti-Deficiency Law in Arizona. Many homeowners are unsure whether their bank will sue them for deficiencies after a short sale or a foreclosure. Below are a few things to help clarify this law. These are general guidelines. It is best to seek legal and tax advise pertaining to your particular situation.

1. The Anti-Deficiency Law only kicks in at foreclosure not short sale. If the homeowner decides to short sale the home, the terms and conditions will be agreed upon by the seller and the seller’s creditors. Some lenders may forgive the entire debt. Some lenders may turnover a portion of your debt to a collection agency after the short sale. A homeowner may also refer to the promissory note signed by the borrower to determine the borrowers’ rights and the creditor’s recourse for non-payment.

2. The revised Anti- Deficiency Law applies to foreclosed homes under the following conditions
a. The loan was used to purchase the home called “purchase money loan”. Any loan used to buy a boat, pay off credit cards or other debts, or used as a downpayment for investment or something else is a “non-purchase loan” and is not covered by the Anti-Deficiency Law.

b. The home is a single family home and less than 21/2 acres.
c. The homeowner has lived in the property for at least six months since ownership of the home.

* If all these qualifications are present, the Anti-Deficiency Law applies

Seven Reasons For A Real Estate License Denial in Arizona

I attended a real estate class recently as part of my continuing education and received valuable information that is interesting for anyone to know.

Seven Reasons for Real Estate License Denial in Arizona

1. Unlawful possession of drugs.
2. Failure to disclose a previous adverse judgment
3. Prior conviction of theft
4. Continuing to sell real estate after suspension of license
5. Child molestation
6. Committed Felony
7. Payment from the recovery fund

Anti-Deficiency Law is Changing

The anti-deficiency law is changing. These changes are incoporated in SB 1271 and effective September 30, 2009. The National Board of Realtors (NAR) is making an effort to repeal this law.
The change was intended to limit the type of borrowers that will qualify for anti-deficiency treatment. A borrower may be subject to a deficiency action or sued on its note following a foreclosure or short sale under the following circumstances.

1. If the property is more than 21/2 acres.
2. If the property is not a single-family or two-family dwelling.
3. If the borrower or trustor has not lived in the property for at least six months.
4. In some cases, if the money loaned was not used to purchase the home (e.g. cash out refinance or HELOC).

Under the new law, a property that has not been used by the trustor as a dwelling for at least 6 consecutive months will no longer qualify for anti-deficiency treatment. The previous law states that – as long as the property was used as a dwelling by someone else. Therefore, many investment properties will be disqualified from getting the anti-deficiency treatment.

You may also read the terms of your lender’s promissory note and other documents. Every situation is different and there are exemptions to the general guidelines. Consult a tax accountant or real estate attorney to know your rights and consequences of a short sale or foreclosure.