Improve vs. Move

Dreaming of a gourmet kitchen, teenagers fighting over closet or bathroom space, tired of camping out at your kitchen table with your computer and wishing you had an office. If any of these things cross your mind you are probably asking yourself if its time to improve the house you live in or move to another.

If you are experiencing the delimma of moving vs. improving there are several questions you should ask yourself before making such an important decision. Additionally, homeowners who are happy with their current neighborhood and school district are especially wise to weigh answers to the following:

How long do you intend to keep the house?
This initial question has impact on several levels. First, it makes little financial sense to pour money into a house only to sell it. Second, if you've ever lived around and through a remodeling project, you know that the emotional upheaval you suffer during construction needs to be offset by enjoying the benefits once the improvements are complete.

Even if you aren't thinking of moving in the near future, be sure to do the math in the following question before wading knee-deep into a project.

Will you be able to recoup the cost of improvements when you sell?
A real estate agent can show you comparable properties (comps) of recent sales to determine how much if any the improvements will increase market value. If you make improvements that don't add to market value, be prepared to walk away from what you've spent especially if selling in a short period of time (less than five years on the average, depending on the type of improvement.)

Are the improvements you're considering logical given the age, size, and location of the house?
Just as you wouldn't install a new sunroof on a dilapidated car, making expensive additions to a house that's full of functional obsolescence makes little financial sense.

Many appraisers would tell you that it's much tougher to recoup the investment from home improvements if they aren't similar in style and design/era to the existing home. And before hammering the first nail, make sure you check the setback requirements for construction especially on rear and side lot lines. What a nightmare it would be to construct a room addition, only to have all or part of it in violation of zoning laws and/or owned in part by your neighbor!

Could additions/changes over-improve the house?
A house at the top of the market for the neighborhood can take longer to sell since buyers often purchase on the low side, hoping to maximize equity and improvements made over time. There are some additions that aren't welcomed by certain buyer segments.

For example, families with young children might shy away from owning a swimming pool since it's the number one cause of death for children under age five. A remodeled master suite in a third-floor loft could be undesirable if the prospective buyer/target was retirees. Even though you may want to make additions/changes based on your immediate needs and desires, it never hurts to look down stream at who a potential future buyer might be in order to avoid over-improvements you can't recoup.

By asking yourself these questions it is a great start in making a decision to move or improve!

Troubled Homeowner? New program to start in January 2011

The U.S. Treasury Department has approved CalHFA's plan to use nearly $2 billion in federal funding to help California families struggling to pay their mortgages.


The Keep Your Home California programs are focused on assisting low and moderate income families stay in their homes, when possible, and leveraging additional contributions from lenders and mortgage servicers.

Primary objectives for the Keep Your Home California programs include:

• Preserving homeownership for low and moderate income homeowners in California by reducing the number of delinquencies and preventing avoidable foreclosures
• Assisting in the stabilization of California communities
• Each of the Keep Your Home California programs is designed to address one or more aspects of the current housing crisis by doing the following:
• Helping low and moderate income homeowners retain their homes if they either have suffered a financial hardship such as unemployment, have experienced a change in household circumstance such as death, illness or disability, or are subject to a recent or upcoming increase in their monthly mortgage payment and are at risk of default because of this economic hardship when coupled with a severe decline in their home's value.
• Creating a simple, effective way to get federal funds to assist low and moderate income homeowners who meet one or all of the objective criteria described above. Speed of delivery will be balanced with fulfillment of the specific program's mission and purpose.
• Creating programs that have an immediate, direct economic and social impact on low and moderate income homeowners and their neighborhoods

Two articles have been published this month with additional information in the San Jose Mercury News and LA Times

You can also visit the "Keep Your Home California" website for more information about eligibility.

5 Foreclosure Myths - BUSTED!

Four years into the housing crisis, myths about foreclosure still litter the minds of even the smartest of real estate consumers. When it comes to matters as high stakes as your home, confusion can cost you thousands - or even your home. Whether you’re a buyer looking at foreclosures, a homeowner struggling to keep your home or a seller concerned making sure your home can compete with the foreclosed homes on your block, these foreclosure myths are prime for the busting, with no further ado.


Myth #1:
Foreclosure happens fast. With unemployment and underemployment still affecting nearly 1 in every 4 Americans, no one is immune from fears that a pink slip might quickly turn into a foreclosure notice. According to NeighborWorks America, nearly 60 percent of families seeking foreclosure counseling cited a lost job or cut wages as the reason they were facing foreclosure.

While the Obama Administration's Home Affordable Programs haven't been nearly as effective as predicted in actually preventing foreclosures, they have had the effect of extending the foreclosure process for many families. Even though the legal process of foreclosure can happen in as few as 6 months in most states, it is currently taking much longer for the average foreclosure to get to completion. Recently, JP Morgan Chase revealed that their average borrower who loses a home to foreclosure has not made any payments in 14 months nationwide; 22 months in FLorida and 26 months in New York.

To be sure, some see this as a good, others view it as unnecessarily dragging out the overall market's recovery. Many insiders will point out that these delays in foreclosure may be calculated to save the banks the costs of owning and maintaining foreclosed homes, not to help homeowners. In any event, the fact that foreclosure does not happen nearly as fast, in many cases, as expected does give families who are temporarily down on their luck some extra time to try to get back on their feet and save their homes.

Myth #2:
Buyers can’t get clear title or title insurance on foreclosed homes. When the foreclosure robo-signing scandal first hit, there was widespread concern that buyers would not be able to get clear title on foreclosed homes, because the former foreclosed owners might be able to come get their homes back when the improprieties in the bank's foreclosure documentation processes came fully to light. At the same time, several of the country's largest title insurance companies publicly balked at issuing policies on bank-owned homes until the issue was resolved. At this point, the banks claim they have revamped their processes, and all banks have stated that they have found not a single borrower whose home was repossessed without them having missed the requisite number of mortgage payments. Nevertheless, a number of governmental investigations are still in progress.

The fact is, buyers of bank-owned properties in nearly every jurisdiction are protected from later title attacks by foreclosed homeowners by the bona fide purchaser rule, under which courts would prefer to simply award cash damages to be paid by the culpable bank to a wrongfully foreclosed-on homeowner, rather than reversing the sale or ownership to the new, innocent buyer. Additionally, the title insurers have now changed their tune and restarted issuing insurance policies on bank-owned homes which protect buyers' interests, after working with the banks for them to take responsibility in the event a former homeowner prevails in a wrongful foreclosure suit.

While there are still many intricacies of title to be resolved for foreclosure buyers who purchase homes at trustee sales and auctions, or for cash buyers who often went without title insurance in the past, on the average, Trulia-listed, bank-owned property purchased with an average mortgage and title insurance, the chances a buyer's title will later be successfully challenged by the foreclosed homeowner on the basis of robo-signing? Exceedingly slim.

Myth #3:
Buyers should wait for the shadow inventory to be released. Many a buyer, discouraged with the homes they see on the the form in their price range, has decided to sit still and wait for the banks to release for sale what is called their "shadow inventory" - rumored to be anywhere from 4 to nearly 6 million homes that have already been foreclosed, but not listed for sale, or will be foreclosed in the near future. The fact is, to the extent that the banks have acknowledged the existence of a pool of homes they own but are not selling, they have expressed that their reasoning for holding the homes off the market is to avoid flooding the market and driving home values down any further. For that reason, buyers should not expect to see a massive influx of these shadow homes onto the market anytime soon - if ever.

The banks' current modus operandi is that as they sell a home, the replace it with another home in that market - if they sell 50 homes in a town that month, they'll put another 50 on the next. So, don't hold your breath waiting for a fabulous new flood of homes. Instead, set up a Trulia alert to notify you when homes that fit your search criteria come on the market, and be ready to call your agent and go visit any and every one that looks like it might be a good fit.

Myth #4:
If you’re looking for a deal, you’re looking for a foreclosure. Despite what they may say, no buyer’s heart's fondest desire is to buy a foreclosure. But almost every buyer dreams of buying a great home - and getting a great deal on it. Many people think that to get a great value on their home on today's market, it means they must buy a foreclosure. As a result, the value and other advantages of buying an individually-owned home on today's market are frequently overlooked. Individual sellers with homes on the market right now are generally quite motivated, and understand that their homes are competing with discounted short sales and foreclosed homes. Many of these sellers are slashing prices in an effort to get them sold - the most recent Trulia Price Reduction Report revealed that 27 percent of homes on the market across the country have had at least one price reduction. Now that's what I call a sale!

Further, individual owners are often much more negotiable on a wide range of contract terms than a bank which owns a foreclosed home. You can work with non-bank owners on things like repairs, closing dates, choice of escrow provider, closing costs and even included personal property much more flexibly than you can when the bank is on the other side of the bargaining table. On top of that, many individually-owned homes are in pristine, move-in condition; that is much rarer with foreclosures. So, don't underestimate the value of the deal you might be able to get on a non-foreclosed home. Just get clear on what you can afford and look at all the homes that are available in that price range, without discriminating against non-foreclosures.

Myth #5:
Having a foreclosure on your credit history means it'll take years and years before you can buy again. One of the most Frequently Asked Questions in the Trulia Voices Community by homeowners who are facing or have just lost a home through foreclosure is how long it will take before they'll be able to buy again. Until recently, the standard wisdom was that 5 years, minimum, would have to have elapsed between the foreclosure and the new home purchase. Now, though, borrowers can obtain an FHA loan with the low, 3.5 minimum down payment requirement as soon as 3 years following a foreclosure. To do so, though, all your other ducks must be in a row.

Post-foreclosure buyers need a credit score of 620-640 to qualify for an FHA loan; higher for a non-FHA loan - given that the foreclosure itself usually dings anywhere from 100-150 points off the credit score (not necessarily counting a full year or more of pre-foreclosure missed payments), former homeowners who want to buy again need to ensure they have no other late payments or credit dings after they lose thier home. You must have clean credit with no derogatory marks like late credit card payments following the foreclosure, and you may also be required to document 12 to 24 months straight of on-time rent payments after the foreclosure.

Further, the bank may impose a lower debt-to-income ratio on post-foreclosure borrowers than on borrowers who have not had a foreclosure, in an effort to keep your mortgage payments low, keep you from overextending yourself and boost the chances you'll be a successful homeowner over the long-term this time around. The bank will also need to see 2 years of continuous employment history in the same field, and documentation that you meet other loan qualification requirements.

Article courtesy of trulia.com

Questions You Should Ask About Property Taxes

Property taxes are a major expense, one which often totals thousands of dollars per year. But property taxes are not the same for like properties or for every owner.

Property taxes provide much of the revenue used to fund local and state governments. As property values go up, property tax collections also rise which means additional dollars are available for more public services -- and perhaps even for tax refunds. Alternatively, if property values decline, then government programs tend to be squeezed or there is pressure to raise income and sales taxes to make up for short-falls.

How much you pay for property taxes depends on the value of your home and also local tax policies. In the usual case, a property value is established by government assessors. Once a value is set the tax rate is then applied. For instance, if the rate is $1.50 for each $100 in value, then a home worth $100,000 would have an annual tax bill of $1,500 or $125 per month.

The road from the tax assessment to a bill for property taxes is rarely straight, however. There are often complications, so it pays to ask questions:

• What value is used to assess taxes? You might think that a home's current market worth would be used to establish a value for tax purposes, but that's not always the case. In many areas under circuit breaker programs annual tax increases are limited so the tax can be less than current market values might allow. Another approach is to apply the tax rate to a portion of the assessed value and not the full worth of the property.
• What are the current owners paying? Is their tax bill consistent with neighboring homes of equal size and condition? If different, why?
• How will property taxes impact your ability to borrow? Lenders use a number of measures to qualify borrowers and one of the most important is the percent of gross monthly income spent for mortgage principal, interest, property taxes, and insurance -- what loan officers call PITI. Low property tax bills can make it easier to qualify for a loan.
• Has the tax bill been appealed or is it being appealed? Values by tax assessors can be contested if owners think estimates are too high -- perhaps because the valuation did not consider certain factors, the math was wrong, or an incorrect schedule was applied. Local assessment offices can tell you how to appeal and in many areas there are services which will do the fighting for you.
• Are you or the current owners entitled to an exemption? Local rules vary extensively, but those over 65, veterans, individuals with limited incomes, and others may be entitled to a full or partial exemption. If, for example, the current owner has an exemption which will not apply to you, then current tax costs may be effectively understated. C
• Can property taxes be deferred? To ease cashflow burdens for retirees, it may be possible to have property taxes accrue as a lien against a home. Owners in such situations need not pay some or all of their property taxes: instead, when the home is sold, taxes are taken from the sale proceeds. One jurisdiction, Montgomery County, MD, actually allows qualified owners of all ages to defer property tax payments under this system.
• What are the income tax benefits of property tax payments? In the usual case, property taxes are deductible from federal and state income taxes. For details, speak with a tax professional.
• Will the sale of a property trigger a different tax bill? A sale may suggest a new and higher value to assessors, past exemptions may not apply, and circuit breakers may be re-started or even turned off.
• How often are assessments made? In some areas physical assessments are only made every two or three years. This means that property taxes may be based on values which are out of date, something that can be important in communities where property values are rapidly changing, either up or down.

If all of this seems fairly complex, it is. The local tax assessment office can tell you how the system works while real estate brokers can provide general information. In the end, of course, there are always taxes to pay, the only question is how much.

Article courtesy of realtytimes.com

Foreclosure Freeze Coming to Resolve – But What does it all Mean?

In the past week there have been various news announcements stating that banks have started moving forward on foreclosures in most states. Bank of America will lift foreclosure freeze in 23 states by next week, and GMAC has lifted its freeze in the 23 states where it halted foreclosures - Less than a month from when the freezes started. This is a far faster resolution than the months of delays some analysts had predicted for the nation's battered housing markets.

Now that we know that banks are getting back on track with moving through the foreclosure process on thousands and thousands of homes across the U.S., you still may be asking yourself what this all means. Here is some background on how the freeze started and its impact on the housing market:

After evidence surfaced that mistakes where made in foreclosure documents and in some instances foreclosure documents were signed by mortgage companies without anyone reading them the nations largest banks—JPMorgan Chase & Co., Ally Financial's GMAC Mortgage unit, PNC Financial and Bank of America Corp., put a freeze on processing foreclosures. These banks are in the process of checking to see if their employees made errors in loan documents needed to complete these foreclosures. Other large banks such as Wells Fargo & Co. and Citigroup Inc. say they have no plans to suspend foreclosures and they are confident they have complied with state laws.

It appears that mortgage companies may have felt overwhelmed by the paperwork involving millions of foreclosures and defaults. These companies took shortcuts to manage the onslaught rather than hiring more staff. One short-cut used is to “robo-sign” thousands of documents that were not actually read.

By halting foreclosures most banks are still initiating foreclosures but are no longer evicting people or selling foreclosed homes in the states that require judges’ approval. However, Bank of America had stopped seizing foreclosed homes but continued to sell homes that had already been foreclosed on and are still processing new foreclosures.

The foreclosure freeze should cause only a temporary slowdown in the number of homes seized by lenders. One reason is that four states hardest hit by foreclosures—Nevada, Arizona, California and Michigan—aren't among the 23 states where many lenders are halting foreclosures.

In home markets where foreclosures are on hold, prices could stop falling, at least for a while. That's because fewer foreclosed homes will be for sale. Agents who manage sales of foreclosed homes are already seeing some of those sales put on hold. These agents can't complete transactions involving mortgages handled by the lenders that have halted foreclosures. And a major title insurance company, Old Republic National, has said it won't insure foreclosed homes sold by JPMorgan and Ally Financial. It says it worries that flawed foreclosure paperwork could put the home's ownership in doubt. Another, Stewart Title, is clamping down on sales of foreclosed homes that may be linked to flawed documentation.

If you are a homeowner in the middle of foreclosure you may be curious if you can possibly get your home back. You can hire a lawyer or approach a housing counselor who will examine your mortgage and foreclosure paperwork. Lawyers for homeowners will look for errors and use them to pressure lenders to at least forgive a portion of the homeowners' loans. But most experts say people who have lost homes to foreclosure don't have much hope in the long run, especially if banks can show judges that they have corrected any errors.

If you have recently purchased a foreclosed property you may be worried that somebody can take it back. However, in most cases this cannot happen. Previous owners can use the lender that sold the property but that won’t be easy. Even if such lawsuits succeed, title insurance protects homebuyers from any claim on the property that surfaces after the deal is closed.

About a third of all home sales right now are foreclosure-based. As such, freezing these sales, as well as current and near-future foreclosures, will arrest approximately one-quarter of all home sales. Moreover, home sales will likely become further depressed as many would-be homebuyers wait for the “flood” of foreclosed homes that will inevitably follow the freeze. When this flood happens, it may actually serve to spur property values overall. Experts are predicting a false positive gain during the fourth quarter due to elimination of a large number of sales at the bottom of the market. This could lead to a distorted picture of what the nature of the market really is.

The good news is we are moving out of this foreclosure freeze quicker than anticipated, so the impact may not be as significant as experts once thought.

Fall Home Improvements

Although lately it doesn't feel like Fall, this time of year is an important time to weather-proof your home. Cooler air is working its way across the country, and that means some home maintenance is in order.

Here are a few items you should attend to this season.

1.  Trim back nonflowering bushes: These plants are headed into their dormant stage, and that means you can get in one last trim before cold weather. 
2. Mums the word: Chrysanthemums are a great way to keep your frontstep colorful and inviting. Find your favorite color at your local plant nursery!
3. Fall cleaning: Clean-up isn't just for Spring anymore. Fall is prime time to pick up and put away gardening tools, summer toys, and pool supplies. Take advantage of the beautiful and temperate weather by tidying up your yard.
4. Seasonal items: Welcome mats and wreaths are easy ways to add a warm and welcoming touch to your home. 
5. Storm windows. Champions of keeping in heat on cold days, storm windows are something you can install on your own. To install, remove and store your screens. Clean out the window tracks. And then use a little spray lubrication to make the storm windows slide more easily into place. 
6. Clean the gutters. Throughout the season, leaves will fill your gutters. Be sure to keep your gutters clear of debris so that rain water does not do damage to your home.
7. Chimneys: Have each chimney cleaned and checked for cracks and leaks. A chimney fire would put a real damper on your holidays! 
8. Change filters: This should be done every 3 months, if not more frequently. Filters cost just dollars, and clean ones mean fewer allergens in your air.
9. Heater servicing: After sitting for a year, your unit will need serviced. This will ensure it runs smoothly when you really need it.
10. Hot water heater: Use Fall as the time to drain your hot water heater and to remove sediment from the bottom. This will improve your unit's efficiency.

Enjoy the cooler weather and get that home in order!

How Mortgage Rates Compare

You’ve heard it all across the media. Interest rates are at historic lows. If you are new to the mortgage process, these figures and statements give you little frame of reference. Let's take a moment to look at where interest rates have been over the last few decades, and what today's rates really mean for homebuyers.


Interest rates are affected by a gamut of factors.

According to the Federal Reserve Bank of New York, "Lower interest rates make it easier for people to borrow in order to buy cars and homes. Purchases of homes, in turn, increase the demand for other items, such as furniture and appliances, thus providing an additional boost to the economy. Lower interest rates mean that consumers spend less on interest costs, leaving them with more of their income to spend on goods and services." And this is, after all, what you want people to do in a down economy. You want them to reinvigorate the economy with spending. The Fed continues, "If the rates that consumers and businesses have to pay to borrow rise too rapidly, however, spending may decline, leading to an economic slowdown." So, it is an intricate dance the powers that be must perform in order to steer the economy the best they can. They, namely the Federal Reserve and Banks, are seeking stable prices, high employment rates, and sustainable growth in the economy.

30 years ago, in 1980, when many first-time home buyers parents were making home purchases, Freddie Mac reports that the 30-year fixed rate mortgage hit a staggering 16.32 percent.

Let's compare that in relation to today's interest rate, averaging around 4.5 percent.

• In the most basic terms, a 30-year fixed-rate mortgage for $100,000 at 16.32% will cost you around $1,450 a month.

• For the same mortgage at a 4.5 percent rate, you'll be paying $580 a month.

The difference is astounding, and this is the main reason the media is shouting news about interest rates. If you are in the position to buy, now could very well be the time.