Lender Owned Properties

A huge inventory of properties owned by lenders is on the market as we enter 2010, and they will continue to flood the market for many months.

When lenders have finally completed the foreclosure process and they have clear title to a vacant home, they want to get it sold rapidly. They price it to sell and accept a buyer that will close quickly, even if it’s not at the top price. As a result they’re selling to investors who can pay cash, or at least have a significant down payment and a lender ready to go.

Pre-Foreclosure Sales

Many homeowners who owe more on their mortgages than their homes are worth try to sell their properties as a short sale to save their credit. This kind of sale needs approval of the bank that is going to forgive a portion of the loan. Lenders, however, often are not anxious to do this. Buyers often wait months for bank approval, and may never get it. Those who can afford to wait and don’t mind the uncertainty of not knowing whether they’ll get the house usually make low offers on short sales. Investors are much more likely to accept such a scenario than are people who need to find a home to live in.

New Homes

Home builders are not building nearly as many new houses as they once were. They can wait and not develop the land they own until prices rise. But they are building and selling some homes, and these are a great option for would be homeowners.

Regular Sales

Many people who can afford to continue making their house payments are not moving. They understand that values have plummetted since the peak of a few years ago. They expect prices to rise again after the market reaches the bottom and all the short sales and foreclosures have worked their way through the system. A few realize that it’s a good point in time to trade up to a more expensive home – if they have steady jobs and can qualify for a mortgage. They’ll come out ahead because values of more expensive homes have dropped more than values of less expensive homes There are also those few who have to sell due to a relocation.

Homes That Would-Be Homeowners Can Buy

Many people buying a home to occupy have to come up with a minimum down payment and apply for a home mortgage loan. This is time consuming, and occasionally deals don’t make it to the closing table. Recent alterations of appraisal rules have made things worse. Mortgage companies will loan a maximum of 80%, 90% or 96.5% of the appraised value, and recently appraisals have been coming in lower than the contract price. Many distressed owners do not have the opportunity to wait for a borrower to go through this process, especially when it’s a real possibility that they won’t qualify for the loan at the end. So, they are accepting offers from cash buyers. Some sellers take a very long time to get lender authorization on a sale. This doesn’t work well for a buyer who needs a place to live. This leaves a small number of equity listings and new construction as the only sensible options.

Which Areas Are Affected

The most affected communities are those that had overstated home prices before everything went south, including houses in Las Vegas or Las Cruces, new homes in Chula Vista and any homes in areas where sub-prime mortgages were widespread. Anyone trying to buy new homes in San Diego, Los Angeles or Riverside will soon learn that Southern California is one of the worst markets. Co-incidentally, it was one of those in desperate need of a return to affordable home prices.

Written by Hannah Valez San Diego New Homes

Real Estate Owned

There is a significant supply of bank owned properties on the market at the beginning of 2010, and their number will only grow in the months to come.

lenders want to sell homes as soon as possible once they’ve finally completed the prolonged forclosure process, obtained clear title and moved any residents out. They offer it at or below market value and accept a buyer that will close quickly, even if it’s not at the top price. This means that buyers who can pay cash, or at least have a large down payment and preapproval, get the house. These are usually investors.

Short Sales

Many homeowners who can’t sell their properties for more than they owe on them try to salvage their credit with a short sale. The lender must agree to accept less than the loan balance as payment in full for this type of sale to be accepted. Lenders would prefer not to do this, and often allow a home to be foreclosed before accepting a short sale. It often takes months and months to get approval – if ever. Buyers are making low offers on short sales, knowing that if they can hold out, they may eventually get the home. This is a sale that’s more suited to investors than to homeowners who need a place to live in a reasonable amount of time and with some predictability.

Brand New Homes

Home builders have slowed down production in these challenging economic times. They can wait and not develop the land they own until prices rise. There are some new homes available, and home builders are often very willing to work with buyers who are short on cash and need a lot of time.

Normal Sales

Most owners who are not upside down on their mortgage are sitting tight. They realize that prices have plummetted since the highs of a few years ago. They expect prices to rise again after the market hits bottom and all the distressed sales have worked their way through the system. A few know that it’s an ideal point in time to move up – if they have stable income. Values of larger homes have fallen more than their house has, so they come out ahead by selling and buying in a down market.

Homes Available to Would-Be Homeowners

A good number of consumers buying a home to occupy need to put together a down payment and qualify for a mortgage loan. This process is time consuming, and some deals fall through. Recent changes in appraisal rules have made things worse. Mortgage companies will only loan 80%, 90% or 96.5% of the appraised price, and in recent months appraisals have been coming in under the contract price. Many distressed owners don’t have the luxury of waiting for a buyer to go through this process, particularly when it’s a real possibility that the sale won’t close at the end. Consequently, they’re accepting offers from investors instead. Some sellers take an extremely long time to get bank approval for a proposed deal. This doesn’t work well for a buyer who needs a place to live. This leaves a few equity listings and new construction as the only realistic choices.

Which Areas are Seeing this Problem

The most affected real estate markets are those that experienced overblown values just before the troubles began, including properties in Tucson or Tampa, new homes in Chula Vista and any homes in areas where sub-prime home loans were prevalent. Anyone trying to buy Los Angeles, Riverside or San Diego new homes will quickly learn that California is one of the hardest hit markets. Co-incidentally, it was one of those in desperate need of a return to affordable home prices.

Written by Hannah Valez San Diego New Homes

In order to get both tax credits, you must sign a purchase agreement by April 30th, 2010 and close escrow by 6/30/10. Double check that you are eligible under both programs. Here are the general requirements.

Federal Home Buyer Tax Credit

A federal tax credit of $8,000 is available for first-time home buyers.. A first-time home buyer is defined as someone who has not held title to any real estate in the last three years. A tax credit of $6,500 is offered for home buyers who have previously held title to real estate. This is a credit, not a deduction. A tax credit permits you to simply subtract $6500 or $8000 from your final IRS bill. If you don’t pay that much in federal income tax, you’ll receive the full credit anyway in the form of a check. You receive it all in one year, so if you buy a residence prior to the deadline, the entire credit will apply to your 2010 federal income tax.

This federal tax credit applies if you buy a home to occupy, whether it’s an existing home or a new one But it’s about to end. You have to sign a purchase agreement by 4/30/10 and close escrow on or before 6/30/10.

California Home Buyer Tax Credit

The purchase of a primary residence in California also qualifies you for a $10,000 state tax credit. First time home buyers can get the tax credit whether they choose an existing home or new construction. A new home purchase is necessary for repeat buyers to get the credit.

This too, is a tax credit, not just a deduction, meaning you reduce your state income tax liability by $10,000. Unlike the federal credit, however, the California state credit is not refundable. This credit is taken over a three year period, starting the year you close escrow on the home. If your state tax liability is less than $3,3333 per year, you will not be able to take the full $10,000 credit. . Your yearly tax liability includes dollars withheld from your paycheck by your employer. The “tax owed” on your state tax return is the amount you’re looking for. This credit is available on homes closed after May 1, 2010 until funds are depleted.

Don’t Forget the Other Important Details

Does it look like you might qualify? Keep reading. You have a little more investigation to do before you can rely on these tax credits. These amounts are maximums. The federal credit is actually 10% of the home’s value, up to $8,000 or $6,500. The credit will be less than $8,000 if you find a house worth below $80,000. The credit only applied for the purchase of a home valued at $800,00 or less.

The California tax credit is five % of the home’s value, up to a maximum of $ten thousand dollars. Your tax credit will be capped at 5% of the value if you choose a home for below $200,000.

There are other criteria that you need to review, for example caps on income. If things look good so far, read the details of each tax credit. Better yet, call a tax professional to verify that you’ll qualify before you count on the money.

Banks are very busy and the window of time to take advantage of both federal and state tax credit programs is very limited. Find a bank and begin the loan application process as soon as you can. It can take a lot of time to collect bank statement, tax returns and other documentation.

We’re unlikely to see this combination of low interest rates and tax credits again any time soon. This is the perfect opportunity to buy a home if you’re in the position to do so.

Written by Hannah Valez New Homes Chula Vista San Marcos New Homes

How Things Got to Where They Were

Money for lending comes from the asset-backed securities market. Loans are bundled and sold to investors. When investors buy those bundles, more cash is available for making loans. Just as it always has, the financing pendulum swings back and forth. Lenders tighten up more than is reasonable when they get burned. Yes, car buyers were getting loans they could not afford – for cars, homes and a variety of other things. It was too easy to borrow. Anybody could see that terms like no down payments and qualifying based on stated income would result in more failed loans. The available cash available for auto loans dried up when the mortgage loan market crashed. Suddenly investors didn’t want to take a chance on consumer loans. The scarce loans went to consumers with super-prime credit – those with credit scores above 730. Buyers with credit problems or high credit card balances couldn’t get financing.

How It’s Getting Better

Two things have changed in recent months. Lenders and investors have become more willing to make loans to consumers with less than perfect credit, so more funds are available. Consumers’ expectations have changed, and they’ve altered their financial practices in ways that will help them obtain loans.

Recent months have seen the easing of borrowing practices. The pendulum has reached its top, stopped momentarily, and is now headed back the other way. Lenders are once again offering financing to prime and near-prime car shoppers – those with credit scores between 620 and 730. Lenders are also considering car buyers who have a foreclosure on their record but still have income.

Their newfound ability to get financing can also be credited to consumers’ actions. Their expectations are more reasonable, and they are doing what is required to qualify. They are improving their credit scores, saving for a sizable down payment and reducing the balances on their credit cards.

The easy credit of 2007 & 2008 is long gone, though. Consumers with large balances on their trade-ins or poor credit won’t get financed easily. And a healthy down payment is a must. Most finance companies will not allow customers to count factory rebates as downpayment funds, although GMAC permits it.

Dealerships can sell more cars when they see more buyers qualify. This creates more jobs, enabling more people to buy cars, homes and a variety of other products. Lending requirements will continue to ease as long as borrowers keep making their payments on time. If only they would stop at a sensible level. Years and years of data should show the ideal lending requirements – those terms at which the largest number of people can qualify and loan failures are relatively low, maximizing profit. But everyone knows that the pendulum can’t be easily stopped.

Written by Hannah Valez. Houston Infinity Auto Sales Chespeake