Can we buy a house with funds in our IRA?

Apr 28th, 2011
by edsmith.
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Yes. A self directed IRA can purchase real estate. It must be strictly investment property though. No personal use allowed.  And, you cannot sell a property that you already own to your IRA. (Sorry)  You must purchase it through your IRA.

This can be a great way to not only diversify your IRA, but to add value as well. Example:  If you purchased a $ 100,000 house with your IRA funds and then leased the property to a tenant for $ 1,200 per month,  you would have a 14% cap rate. After taxes, management and insurance your likely  cash return would be  an impressive 10%  annually! 

Additionally, you still own the real estate. You can touch it, feel it, see it. And in ten years, factoring a mere 4% annual appreciation rate, your base investment would have grown to nearly $150,000!

So to recap: That would be a 10% annual return, plus a nearly 50% increase in value over a 10 year period. Restrictions apply, so check with your CPA or Financial Planner  or tax professional first. 

For information on short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com or email us at smith@realtor.com

Posted in: Buyers.
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Where are all the foreclosures?

Apr 27th, 2011
by edsmith.
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Many buyers are asking about the lack of inventory in the foreclosure arena today as compared to last year. Buyers are finding fewer foreclosure choices in the market to choose from.  So what’s causing the shift? 

A couple of factors are contributing to the lower inventory levels. First, the market activity in single family homes is up 20% Y-T-D over last year in Okaloosa County. Secondly, foreclosure (lis pendens) filings are way down. Through March, there have been 192 foreclosure filings this year as compared with 573 for the same period in 2010.

For information on short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com  or email us at smith@realtor.com

Posted in: Buyers.
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6 Reasons to Reduce Your Home Price

Apr 27th, 2011
by edsmith.
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6 Reasons to Reduce Your Home Price
By: G. M. Filisko
 
While you’d like to get the best price for your home, consider our six reasons to reduce your home price.
 
These six signs may be telling you it’s time to lower your price:
 
1. You’re drawing few lookers
You get the most interest in your home right after you put it on the market because buyers want to catch a great new home before anybody else takes it. If your real estate agent reports there have been fewer buyers calling about and asking to tour your home than there have been for other homes in your area, that may be a sign buyers think it’s overpriced and are waiting for the price to fall before viewing it.
 
2. You’re drawing lots of lookers but have no offers
If you’ve had 30 sets of potential buyers come through your home and not a single one has made an offer, something is off. What are other agents telling your agent about your home? An overly high price may be discouraging buyers from making an offer.
 
3. Your home’s been on the market longer than similar homes
Ask your real estate agent about the average number of days it takes to sell a home in your market. If the answer is 30 and you’re pushing 45, your price may be affecting buyer interest. When a home sits on the market, buyers can begin to wonder if there’s something wrong with it, which can delay a sale even further. At least consider lowering your asking price.
 
4. You have a deadline
If you’ve got to sell soon because of a job transfer or you’ve already purchased another home, it may be necessary to generate buyer interest by dropping your price so your home is a little lower priced than comparable homes in your area. Remember: It’s not how much money you need that determines the sale price of your home, it’s how much money a buyer is willing to spend.
 
5. You can’t make upgrades
Maybe you’re plum out of cash and don’t have the funds to put fresh paint on the walls, clean the carpets, and add curb appeal. But the feedback your agent is reporting from buyers is that your home isn’t as well-appointed as similarly priced homes. When your home has been on the market longer than comparable homes in better condition, it’s time to accept that buyers expect to pay less for a home that doesn’t show as well as others.
 
6. The competition has changed
If weeks go by with no offers, continue to check out the competition. What have comparable homes sold for and what’s still on the market? What new listings have been added since you listed your home for sale? If comparable home sales or new listings show your price is too steep, consider a price reduction.
 
G.M. Filisko is an attorney and award-winning writer who made strategic price reductions that led to the sale of a Wisconsin property. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Posted in: Sellers.
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What is the “due on sale clause” in my mortgage?”

Mar 30th, 2011
by edsmith.
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The due on sale clause in today’s mortgages basically states that if you sell or transfer all or any part of your interest in the property without your lender’s prior written consent, the lender (at lender’s option) may declare you in default and require immediate payment in full of your entire mortgage balance. Even a lease option is considered transfer of interest and would trigger the due on sale or acceleration clause. 

 
There have been recent cases in which property owners have sold their homes to a “holding company” for some paltry, insignificant sum (perhaps $10 or so) in which the holding company agrees to be responsible for the future mortgage payments. The holding company charges the owner a fee of several thousand dollars for the privilege and then fails to make the payments.
 
As there are few (if any) mortgages today that are freely assumable, owners in such situations are almost certainly in violation of their mortgage agreements and will face foreclosure.

Posted in: Foreclosure, Home Ownership.
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Can I do a deed in lieu of foreclosure instead of a short sale? How does that work?

Mar 6th, 2011
by edsmith.
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A deed-in-lieu is sometimes considered by a lender instead of a foreclosure if the lender believes that doing so would result in less financial loss to them. Such may be the case if the property’s value and mortgage balance are similar. Properties with second mortgages and/or large unpaid assessments and/or judgments are not typically good candidates. 

The good news is that in the case of a deed-in-lieu, the lender will likely agree to not pursue you for a deficiency later, regardless how much loss they eventually suffer on the deal. Otherwise, (at least in Florida) a lender would have up to five years to pursue you. Your credit score will of course be negatively impacted, and it will be extremely difficult for you to obtain a home loan for a minimum of two years after the fact.

Posted in: Foreclosure.
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I made an offer on a house asking the owner for a seller’s disclosure. The seller refuses to provide one. Isn’t this legally required?

Mar 6th, 2011
by edsmith.
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In Florida, a seller is not legally obliged to provide a real property disclosure to prospective buyers. However, a seller is legally required to disclose known facts that materially affect the value of the property. In some situations, a seller may be unable to provide disclosures, such as that of a trustee owned or bank owned property. Your sales contract should always provide for thorough home inspections prior to closing.

Posted in: Buyers.
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How long after a short sale can I qualify to buy a new home?

Feb 8th, 2011
by edsmith.
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The answer depends upon which type of financing you wish to pursue. After completing a short sale as a seller, for example, VA and Conventional (Fannie Mae and Freddie Mac) mandate a two year wait. Another arm of the federal government, FHA, mandates three years.Non-conforming products such as that for jumbo and condo loans can be almost anything, depending upon the individual investor. From what we are seeing in the market though, non-conforming loan investors are requiring waiting periods of somewhat longer than that of the government sponsored loans. We have seen waiting requirements for non-conforming loans of from five to seven years. You may also expect higher than average down payment requirements.

To be on the safe side, short sale sellers should be prepared to face greater levels of credit scrutiny for a period of up to seven years after the successful completion of a short sale.

Posted in: Credit, Short Sales.
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The Real Estate Prognosis for Florida’s Emerald Coast

Jan 14th, 2011
by edsmith.
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The prognosis for 2011 is good!  We expect actual closed sale transaction numbers to improve considerably in 2011. An increase in sales numbers is the precursor to appreciation. More demand equates to higher prices. It will take a while for the inventory levels to subside, but this market is on the way to seeing better days!

Posted in: Economy.
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Is it possible to do a short sale when there is a second mortgage on the property?

Dec 22nd, 2010
by edsmith.
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Yes it is possible, but there can be twice as much work to do and more time required to get the short sale approved. Additionally, it is very important that the second mortgage not go more than ninety days in arrears. That is because as a matter of policy, many lenders will assign their seconds to a collection agency after three months of missed payments. These collection companies can be extremely difficult to work with and have been known to kill many a short sale.

If the first mortgagee in a foreclosure sale is “upside down”, meaning the value is less than the first mortgage balance, then the mortgageee in second position gets absolutely nothing.  Even so, many of these collection companies will make insane and unreasonable demands. As a typical example, one such collection company recently demanded $30,000 on a $60,000 second mortgage from the short sale seller who was basically destitute. This seller had lost his job, had spent every dollar of savings trying to keep up his payments. He had nothing left. He could no more come up with $30,000 than the man in the moon.
 
In that case, the first mortgagee was already taking a huge hit, writing off nearly $100,000. The first offered the collection agency in second position $5,000 to settle. The collection company would not agree, the property went to foreclosure and the collection company received exactly what they deserved, which is nothing.
 
In another case … We recently sold a  short sale condo across from the Gulf of Mexico. A collection company was involved and hindered the sale for 26 months!  Yes, we had the property under contract on five separate occassions over a 26 month period of time. Even funnier? We originally had the property under contract for $325,000. 26 months later when the collection company finally agreed to the terms, we sold and closed the property for $209,000.  Effectively, the collection company cost the first mortgagee $116,000.  Even funnier still?  The first morgagee also owned the second mortgage and had assigned it to the collection company.  The collection company was negotiating against their own client!!
 
Some day we will look back at all this and laugh …??

Posted in: Foreclosure, Short Sales.
Tagged: ·

Are the holidays a good time to list our house for sale?

Dec 12th, 2010
by edsmith.
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Your personal need or motivation to sell should be the biggest determining factor as to timing. The Housing Affordability Index reached a new high this October at 184.2.  The index is based on several factors including average wages, real estate prices and interest rates. For comparison, an index of less than 100 means it is difficult to buy.
 
Simply put, homes are more affordable now than at any other time since the index was created. If you need to sell now, you need to list now.  You never know when that perfect buyer for your home may come knocking!

Posted in: Sellers.
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