The government isn’t in the habit of giving away money to the average citizen who doesn’t have exotic tax loopholes, but anyone thinking about purchasing a house should contact a Realtor and begin looking as soon as possible.  It could be worth up to $8,000 to you.  The tax credits expire April 30.

    First time home buyers are eligible for up to $8,000 or 10% of the market value of the home.  Qualified repeat homeowners are eligible for up to $6,500.  Contracts must be executed by April 30 and closed escrow by June 30, 2010.

   What does this mean to you?  Depending upon where you live and the laws governing real property of your state, the speed with which your lender can act, and the timeliness of your Realtor, purchasing a house from start to finish can be done in as little as a week for a cash buyer, to two months for a buyer using financing. 

   Sitting down with a Realtor should be priority one.  He or she can guide you to a lender who will be responsive to your needs, and a lender who knows and understands the area in which you plan to purchase a property.  Internet  lenders have no idea about the peculiarities of individual areas; using a local lender is always the best choice.  Any problem can usually be resolved fast and competently.

    The lender will ask for all types of documentation and the faster the buyer provides this, the sooner the loan commitment can be made.  While this is transpiring, the Realtor and the buyer can determine criteria  and begin looking.  Finding a property can be accomplished in a few days if buyer and Realtor work full time during that period.

    Once the property is identified and a contract written, the response from the seller may take a few hours to several days.  Because short sales often take months, purchasing a short sale and trying to come in under the April 30 deadline is self defeating.  Time must be allotted for counter offers, or possible rejection, at which point the buyer must determine whether to submit another higher offer, or begin looking again.

     Assuming the offer has been accepted, and one week has elapsed, all inspections must be done.  In Arizona, the buyer has ten days in which to complete all inspections for the property which includes any and all inspections desired by the buyer, but usually the home inspection and a termite inspection.  The request for repairs is then made to the seller who has five days in which to respond.  

     We are now more than two weeks into the process.  Be aware, the seller may opt to decline to do any repairs.  These small challenges along the way should be explained to the buyer by the Realtor.  If we began today, the process so far would take us to the first week of March. 

    The repair addendum has been negotiated and now we must tie up loose ends.  In Arizona, the Realtor will review the commitment for title and make sure there is clear title to the property, issues such as how to take title, disclaimer deeds if needed, must be completed and provided to the title company, and any special documents such as septic certifications, well certifications or Affidavits of Disclosure must be completed properly and submitted to title.

    At this point, we are probably into the end of the second week of March.  The loan officer is completing his paperwork, submitting information to underwriting, and the appraisal has been ordered.  Now it is a waiting game.  The property can probably close escrow by the end of March.  But the process has easily taken more than one month. 

     There are many people working to make sure a buyer is successful purchasing a property.  Many work behind the scenes and are an integral part of a successful transaction.  It is the Realtor’s job to make sure all function seamlessly and that the buyer understand what is transpiring every step of the way.

   Call your Realtor today so you can take advantage of the $8,000 and if you are purchasing a second home, look at the $6,500 tax credit!

     For further information or to find a Realtor near you, contact Terry at terry@terrybishop.com

Questions and Information about the Tax Credit:

http://www.federalhousingtaxcredit.com/faq1.php

    Potential sellers who do not have a financial hardship sometimes change their mind when they realize the types of paperwork the bank needs in order to have a successful short sale. Much of this documentation is required to justify to the lender(s)  why selling “short” is the only alternative.  People who have assets which could be used to pay the mortgage note, but just want to “walk”, may be denied a short sale or face a deficiency judgment if a short sale is successful.

    In addition to the hardship letter which details why the seller cannot pay the mortgage, the bank requires an authorization letter from the seller authorizing the lender to speak with the Realtor or attorney.  The Realtor then must assemble the “package” for the lender which includes; income tax returns, pay stubs, bank statements including savings and retirement accounts, copies of bills, a list of assets and liabilitieis, monthly expenditures, and documentation of other unusual expenses.  Other information may be requested by the lender to support the case for short sale. 

      Up to date information must be obtained about homeowner’s dues, other special assessments, any other liens on the property, and property tax status.  Sometimes the seller does not have current information about these items and the Realtor must track down this information.

   Working  with a reputable agent is paramount.   The sellers’ information requested is private and confidential, and contains all of the necessary ingredients fora successful identity theft; another reason that propels “foreclosure scammers”.

    All of this information is considered by the lender(s) when determining if an offer on a property will be accepted.  The lender(S) needs to know if the seller can contribute any amount of funds to the sale of the property.  The seller should determine if they are in a “deficiency judgment” state, or “non deficiency judgement” state.  A deficiency judgement permits the lender(s) to collect from the sellers the amount of a specified “deficiency” after closing on the house.  If the property is a second home, often a deficiency judgment will be granted.  Sometimes a judgment will be granted to the lender holding a HELOC (Home Equity Line of Credit) if the funds were not used for the home, such as improvement. 

    Working with a competent Realtor and/or attorney and exploring options is one of the best things an “underwater” seller can do to get answers and help himself/herself.  A Certified Public Accountant can also be included in the team to discuss income tax consequences of any action. 

    Going to a short sale is a far better option for the seller than foreclosure.  Unfortunately many people who have their homes sold in foreclosure never asked for professional help and as a result, will suffer the consequences of credit deterioration for a longer period of time. 

    If you or anyone you know is having problems, consult a Realtor, an attorney, or a CPA as soon as possible. The more time to solve the problem, the better for the seller.  If you need help, contact me at terry@terrybishop.com, and I can provide you with the name(s) of someone in your area who can help you.

   Short sale and foreclosure scammers come out of the woodwork when opportunity presents itself, and in today’s market, when as many as one in four homeowners are underwater in some areas, “foreclosure expert” scammers see the tree ripe for picking.

   Understandably homeowners will buy in when a person or “company” says they can make the problem disappear.  That is human nature.  The first red flag is when the “foreclosure consultant” asks for money up front.  If you, or someone you know,  has been victimized by such a “forclosure consultant”, gather as much information as possible and report that to the Better Business Bureau, a local and state Consumer Protection office,  and the Attorney General’s office.

   These “experts” prey on people who have little understanding of the law and are adept at presenting a believable case.  Always ask for credentials and write that information down in case you need it later.  Ask for as much information as possible and if that information is not forthcoming, cease dealing with that person. 

      Many of these people are high powered salespeople, and they may present information to you which you thought was confidential.  Remember, many documents relating to real estate are public information. Any liens, late taxes, the date the home was purchased,  quit claim deeds and other documents are in the public domain. 

    If the homeowner is going to pay up front money up, he/she is better off hiring a competent attorney for up to the minute legal advice.  Many attorneys will not charge an “upfront” fee, but will bill when the problem is resolved.  An attorney on board, can advise whether filing for bankruptcy is prudent, and can direct the homeowner and often postpone have any foreclosure action postponed.  

    Several states have laws on the books, or are passing laws, banning upfront fees.  Consumer fraud divisions are rift with complaints and are burdened by cumbersome consumer fraud laws when apprehending and bringing these people to justice.

    A CDPE (Certified Distressed Property Expert) or a Realtor with the National Association of Realtors Short Sale, Foreclosure Resource (SFR) designation will not ask for up front money.  They will present their credentials and lay out a plan.  These are people licensed by the state, and in many instances, fingerprinted, and they do not get paid unless the transaction is consumated.  It is easy to check with the State Department of Real Estate to make sure the person is licensed which can often be done on line.

    The HUD.gov site has information about non profit organizations which are approved by HUD to give information about loan modificaitons, short sales, and foreclosures. 

    Know with whom you are dealing.  That is your best defense against fraud.

Resources:

Department of Housing and Urban Development - housing counselorshud.gov/portal/page/portal/HUD/i_want_to/talk_to_a_housing_counselor

Certified Distressed Property Expert:  http://www.cdpe.com/find-cdpe-results.html

National Association Realtors:   http://www.realtor.org/home_buyers_and_sellers/

Arizona Foreclosure Workbook from the Arizona Attorney General’s Office:

http://www.azag.gov/consumer/foreclosure/documents/StateTaskForceWorkbook.pdf

   Additional options exist for homeowners who are facing financial difficulties and are, or believe, they will be unable to meet mortgage payment(s).  Gone are the days when the person who defaults on a mortgage is considered a “deadbeat”.  Most people today know a hard working person who has defaulted because the challenge of one situation causing financial hardship, was one too many.

    The hardship can be as simple as a relocation to keep a job.  When a person owns a home and is relocated and then must carry two properties;  a home in the old location, and a rental property in the new destination, the additional cost can be enough cause financial hardship.  Yet the person had to move to keep his/her job.   Properties may not be selling in the old location for the price of the loan amount.  A short sale may be the only option. Prior to the move, the anticipated hardship may be sufficient grounds for the lender to permit a short sale.

    Members of our Military face hardship when they are redeployed for longer periods of time than originally anticipated.  The Service Members Civil Relief Act (SMCRA) provides protections and caps all interest for active duty military personnel, incurred prior to their active status, at six per cent.  This includes credit card debt, automobile debt, and mortgage interest debt.  Proof of active duty must be provided.  All active duty military personnel should review all of their debt obligations and invoke SMCRA for any debt carrying more than a six per cent interest rate.

    If the value of the property is greater than the loan amount, the property can be sold at a realistic price. In areas which continue to face depressed pricing, this is a viable option.  The price offered on a property a year ago (often which sellers turned down), seem ridiculously high in today’s market in many areas.  Pricing must be ahead of the curve.

     A controversial solution, and one not advocated by Realtors is “Strategic Default”.   Homeowners begin thinking about strategic default when their property has decreased in value 20 to 25% .  Homeowners are able and  continue to make mortgage payments, but feel they are paying for something which garners no value.  In many areas of the country, property values have decreased 30% or more.  Residents do not see values coming back for ten years or more.  Homeowners   “Walking away” is a deliberate personal business oriented move. 

     Moral and ethical considerations of strategic default are debated, against the dilemma faced by people who can afford their mortgages, but see people who have been irresponsible in their money management, get cash for keys (a program where the lender pays up to $1500 to the homeowner to vacate after foreclosure). 

    Regardless of the path chosen by the homeowner, credit will be impacted.  Foreclosure will cause the most damage.   It is imperative that people who believe they will face a financial hardship contact a Realtor to discuss options, or seek the advice of a credit counselor who will not charge any upfront fees. 

    I am happy to provide additional information:  e mail me at terry@terrybishop.com and put BLOG in the subject area.  If you need to find a qualified Realtor to help you, I can help.

Resources:

Service Members Civil Relief Act:     http://www.military.com/benefits/legal-matters/scra/overview

 Strategic Default:  http://en.wikipedia.org/wiki/Strategic_default

 Department of Housing and Urban Development:  http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure

Note:  Hud.com is a commercial site and is not the Department of Housing and Urban Development…make sure you go to HUD.GOV

      Short sales and foreclosures are not always the best option for the homeowner.  If the situation which curtails income is temporary, the homeowner can ask for “forebearance”. 

     Forebearance involves negotiating a repayment plan for the amount of payments missed, usually with penalties and interest.  The missed payments can be put at the end of the mortgage amortization or an extra amount each month can be included in the regular mortgage payment.   The lender will want to be assured of the homeowner’s ability to repay the newly negotiated amount and will ask for evidence such as pay stubs.  The newly negotiated amount is in force until the deficiency is made current, and then  the payment will revert to the amount prior to the default. 

    Reinstatement can occur if the homeowner is expecting funds which can be used to bring the delinquent loan current.   An insurance settlement, an income tax refund, an inheritance, any anticipated source of funds which can be paid at one time to the lender to bring the loan current is called reinstatement.   The homeowner should talk with the lender and explain these funds are anticipated and will be used for the loan.  Reinstatement is a good option when one or two payments have been missed because of some extraordinary circumstance where restitution will be made.  Like all other plans, the lender will want documentation of the event. 

     If the homeowner has the funds available and can qualify in today’s market, a refinance can be a good option.  Rates are still very low and especially if there is an Arm (adjustable rate mortgage), very often a homeowner can cut the amount of payments.  Remember however, that if the homeowner has owned the property for six years and refinanced to another 30 year mortgage, the clock starts ticking again for another 30 year mortgage.  However, this option may provide the breathing room necessary but the homeowner should be sure to request a fixed rate mortgage to avoid further surprises.  Homeowners must provide all the documentation necessary to the lender including pay stubs, tax returns, assets and liabilities, divorce decrees, etc.

     A Deed in Lieu of Foreclosure also called deed in lieu, is another homeowner option.  The property must be worth more than the note on the property.  The homeowner negotiates with the lender and agrees to send the keys of the property and turn the property over to the lender so the lender will not foreclose on the property. 

    If you need additional information, contact me at terry@terrybishop.com.  If you are looking for a Realtor in your area who understands distressed properties, contact me and I will find you a competent, knowledgeable Realtor in your area.

Resources:

Department of Housing and Urban Development:   http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure

Freddie Mac:  http://www.freddiemac.com/singlefamily/makinghomeaffordable.html

Fannie Mae:   http://www.fanniemae.com/kb/index?page=home

    Short sales?  Many people mistakenly believe they must be delinquent on the mortgage payment prior to doing a short sale.  However, a short sale can be initiated by the homeowner if a hardship exists. 

     If hours or salary is cut, a medical expense, an extraordinary expenditure, a death, an incarceration, a job loss,  any number of life’s problems—these situations should spur the homeowner to request that the lender agree to a short sale if the homeowner believes there will be a problem making the mortgage payment(s).

   The fact that the property is no longer worth what it was when originally bought is not grounds for a  short sale. 

    Being proactive is the key to a successful short sale.  The credit rating will suffer, but not as much as with a foreclosure.  Contacting the lender(s) immediately to inform the lender(s) of the situation is paramount. 

    Working with a Realtor who understands short sales and foreclosures such as a CDPE (Certified Distressed Property Expert) or an SFR, the new National Association of Realtors designation for Short Sale and Foreclosure Resource, can help the homeowner immensely.  The Realtor should first try and do a loan modification for which there is generally no compensation.  Only after knowing this is not possible should the Realtor embark upon a short sale.

    Under no circumstances should a homeowner pay someone for a loan modification or sign up for a “rescue program”.  Scams abound, and many are illegal.  Often a homeowner is worse off, having spent precious funds on a bogus solution.

    Realtors trained in short sales know how to document and talk with lender negotiators, and in many instances, cut through the red tape by preparation and understanding of lender systems.   

     The lender(s) does not want to take back the property;  Lenders are not in the business of owning property and a successful short sale is beneficial to all parties involved.  Pricing properties accurately for a short sale is paramount.  The lender is looking for a fair market value, not a deal and a half for a buyer. 

     Sellers must be prepared to document their hardship, provide pay stubs, income tax returns, copies of savings and retirement accounts, as well as details of assets and liabilities.

    Tomorrow:  Options other than Short Sale

    Terry Bishop, a Realtor with RE/MAX Excalibur in Tucson, Arizona has earned her CDPE and her SFRas well as other designations.  She can be contacted at terry@terrybishop.com for further information.

Although Tucsonans enjoy all types of events throughout the year, January and February are the high note months for locals and winter visitors alike.  Several events take advantage of Tucson’s balmy climate and put Tucson on the international stage.

The Tucson Gem and Mineral Show, the largest gem and mineral show in the world, moves into Tucson at the end of January and runs until February 15.  Huge white tents dot areas of the city and the Gem and Mineral Show literally is throughout the city in most all hotels and motels, especially those along the I-10 corridor.   Unimaginable beautiful gems and minerals, muti facets in brilliant colors are on display for sale by vendors from six continents, just not Antarctica.

Not only are gems and minerals on sale, but beautiful beads for beading afficianados.  Middle Eastern rugs, African art and masks, artifacts indigenous to the areas dealers are from, beautiful weavings, and high quality “junk jewerly” line room after room of motels where courtyards are turned into international marketplaces. If you are a gem or mineral dealer- or a geologist - this is your show. 

The “Main Show” at the Convention Center is slated for February 11 through the 14th where fine specimens of minerals and gems are exhibited.  This is the show for collectors  and dealers from throughout the world and boasts a rare find to see so much quality in one area.

February 25 marks the Tucson Rodeo Parade, the beginning of “La Fiesta de los Vaqueros”, or in local parlance, Rodeo Days.  Rodeo is huge in Tucson, so huge that there is no school!  During  Rodeo day, people sport their cowboy hats, shirts, jeans, and of course, beautiful - often hand made - leather cowboy boots!  It’s tradition! 

The Rodeo Parade is the longest non motorized parade in the United States.  Rodeo draws riders from throughout the world and is a huge draw for locals as well as visitors.  The Rodeo Museum will be open where memorabilia, including old carriages, are on display. 

Spring training begins at the end of February and an afternoon in the ballpark with the sounds of cheering, the organ blaring the familiar tune cuing for home team cheering, plus the smell of hot dogs permeating the air add up to a grand afternoon.  The Colorado Rockies play at Hi Corbett Field and the Arizona Diamondbacks strut their stuff at Tucson Electric Park.

Golfing fans have Accenture Match Play which  starts February 15 and runs until February 21 at the Ritz Carlton Golf Course.  Again golfers from throughout the world compete for the “last man standing” championship.  This world class event will be televised and once again, Tucson will be on the international map.

Next week I will blog about each one of these events in depth.  Book your reservation and plane ticket to TUS and come to know and understand why we love Tucson!  Remember, each of these events is outdoor!

So what about the nasty little pesky association fees which can add anywhere from $20 to your monthly payment to upwards to $300 or more.  Most master planned communities have association fees as do many Active Adult communities, and of course gated communities.

When purchasing a property, remember that Association Fees go up, they very very rarely come down.  Every $6.00 at a 6% interest rate for 30 years can buy another $1,000 in property.  So if the Association fee is $180 a month, a home $30,000 more than the home being considered -without an association fee - costs the same amount.

People often want the convenience and ammenities of a home which has an Association fee.   But there are others, such as home owners who purchase to have a property to go to in the winter months, who may not want to pay an association fee year round.  For the price of the Association fee, a gardener can be hired, and remember, here in Tucson, we don’t mow grass, we rake rocks.  Hiring someone to come by once or twice a month to check on the property and trim up the landscaping may be less expensive. 

Checking the ammenities offered in a community with an Association fee is an easy task, especially with the help of a Realtor.  Some subdivisions are golf course communities, some have heated pools and other have pools, some subdivisions have a rec center and exercise room with new equipment, pool tables, card rooms, cooking classes, bocci, weekly get togethers, and common areas which allow for walking with one’s dog.  Take note of what is being offered and run cost comparisions about the different areas.

If there is an Associaiton, the Realtor should check the budget of the Association and determine there are no major capital improvements about to come due, such as a renovation of the Rec Center.  An assessment may be placed on all owners so funds are available for the project.  Ascertaining there are no lawsuits is also prudent.  A buyer doesn’t want to purchase in a new community and immediately get dunned  with addiitonal levies.

Some associations will tend to the landscape of the front yard but not the back yard.  Check to make sure what is included in the fees.  In Townhome communities or condos, often utilities  are included.  When computing the fee, estimate the dollar amount exterior insurance, water,  and electric would be , then deduct that from the fee to get a more realistic number. The homeowner has to pay utilities anyways; paying the fee may be beneficial.

Determine what is offered with the fee, and then judge the property accordingly.

When trying to decide whether or not to move to an active adult community, several personal behaviors should be considered.  Many people believe they should move to an Active Adult community because it means “immediate friends”. 

Moving from an established community where long term relationships had formed through neighborhoods, places of worship, or careers, to an area which is new and different, but where  the climate is beneficial can be daunting.   Many people feel the best option is an Active Adult Community,

Tucson and Pima County certainly have an abundance of Active Adult Communities; some are golf course communities, and some are not.  It is imporatnt for people who are retiring to think about what kind of life style they desire in their retirement years.

There is the classic view of retirement…sunshine, leisurely breakfasts, clubhouse, going to the green for a round of golf, a late lunch, jawing with new found friends, then home to do a few chores and get ready for friends and cocktail hour.   The brochures project this, bur rather than golf, there may be substituted an exercise room, exercise instructors, aerobic swimming classes.  

The question I pose to you…what is it that you want to do when you are retired? 

This is not an easy question to answer.  

The automatic reaction is “to do the things I’ve always wanted to do” and an active adult community, when reading the brochure, provides easy answers to thing you think you might want to do.

But let’s say you decide to live in town rather than an Active Adult Community on the outskirts, you are close to world class restarurants, many live theaters, The University of Arizona and classes offered to Senior Citizens, close to crafts and recreational programs offered by Pima County and the City of Tucson, close to a Pima College branch to take exercise classes, or classes in a foreign language, social sciences, science, mathematics, or an abundance of informational fun classes. 

Buyers should think about what they want in retirement community before they buy.  Buying the image will not satisfy.  Often buying the tried and true is the most satisfiying and can be kinder on the pocketbook because association fees may be much less.

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