Real Estate & Comunity Blog

By Amy Hoak

RISMEDIA, February 13, 2010—New homeowners oftentimes stretch themselves financially when having to pay the initial costs that come with purchasing a home. While it is important to focus on these preliminary expenses, homeowners must be aware of the financial requirements that come with maintaining the home. Here, Dan Steward, President, Pillar To Post discusses how homeowners can effectively budget for home maintenance.

Dan Steward
President
Pillar To Post
www.pillartopost.com

Enthusiastic new home buyers often stretch financially to cover a home’s initial deposit, closing costs and any cosmetic touchups.

However, buyers frequently focus only on those first costs, overlooking the financial requirements of maintaining the home over time. Providing some guidance to your clients regarding realistic maintenance costs will help them transition smoothly into ownership of that house.

According to industry standards, homeowners should have 1% of the purchase price of their home in savings for improvements and surprise expenses. While this minimum will help ease through maintenance costs, a 2-3% cushion is far more prudent.

A home inspection will help prospective buyers better understand the condition of the house, gaining insights and recommendations from the inspector during the inspection. At Pillar To Post, we also deliver a detailed, computerized inspection report onsite, so buyers have a printed guide available for future planning.

A home inspector will estimate the age of major structural components and systems, providing the buyer an indication of each item’s anticipated lifespan. A furnace, for example, often lasts between 12 and 15 years and a water heater lasts from ten to 12 years. Understanding the current age of any particular system will allow buyers to calculate approximately when they’ll be due for major repairs or replacement.

LivingWithMyHome.com offers a list of approximate life expectancies of home components as well as cost estimates, useful as a tool for financial planning of homeownership. Our company, Pillar To Post, sponsors this site in response to questions from prospective home buyers across North America regarding how much they should plan to spend on ongoing maintenance costs.

Once the buyer has completed the home inspection, negotiated the price according to information gained in the inspection and possibly had the sellers repair or pay for needed upgrades, it’s time to plan the maintenance budget for the future.

Home buyers should plan for big-ticket costs across a five-year timeline, budgeting for major expenses, such as roof repairs, new air conditioners or plumbing upgrades. The best plan is to sock away those funds, rather than relying on borrowing from banks. As the credit crunch has deepened, banks have nearly stopped offering home equity lines of credit, so counting on a loan for needed repairs is a risky strategy.

This brings us to timing of repairs—when small problems pop up, it’s important to address them before they become large-scale projects. A minor leak on a window frame can seem innocuous, but with repeated rains that leak can turn into window rot and even mold.

Again, this is where preparedness in budgeting can make all the difference—the ability to correct a minor problem immediately will likely mean a lower-cost repair and a less-demanding repair job.

Buying a home is one of the largest investments most people ever make. Helping your clients plan successfully to have a strong, positive home-buying experience will create the most beneficial outcome possible for them and for you.

Now, back to the monthly expenses. Estimating these regular costs often trip up new home buyers as well. Many people, particularly former renters, are accustomed to paying rent and likely utilities, phone, Internet service and cable.

As a homeowner, however, there will be other utility costs such as water, sewer and trash collection. Then there are property taxes, homeowner’s insurance and possible homeowner’s association dues.

Home buyers can also have seasonal, recurrent expenses such as snow removal and lawn service that should also go into that five-year budget. Helping your customers understand not only how to find and purchase their ideal home, but maintain it as well is the value-add service you can provide that will benefit them for the future.

RISMEDIA, February 11, 2010—Last year home staging skyrocketed to the top of the list of the fastest growing careers in America. In the decade ahead it is promising to be a rapidly evolving industry and looks to be one of the key solutions to solving the housing crisis.

“Sellers get the most they can for their property and buyers benefit from a move-in ready property.”

Showhomes, a nationally franchised home staging company with offices in 60 markets, polled 500 Realtors and brokers from all over the country at the National Association of Realtors Expo recently in San Diego. The survey uncovered some startling Realtor feedback about the value of home staging in today’s market:

-96% believed buyers react better to fully-stage homes than vacant ones
-94% believed vacant homes take longer to sell than fully-stage homes
-94% believed vacant homes sell for less money than fully-stage homes
-The majority of Realtors surveyed agreed that vacant homes take twice as long to sell and sell for at least 15% less than a fully-staged home.

“Home staging has become a necessity,” said Thomas Scott, VP of operations for Showhomes. “These numbers say it loud and clear. The home staging industry is at a tipping point. If you want sell a home quickly and for top dollar, there’s no other reasonable choice. In today’s market, if a home is not staged, it does not sell.”

Shell Brodnax, president and CEO of Real Estate Staging Association (RESA), said she’s not surprised by Showhomes’ findings. “Home staging provides economic stability to real estate by leveraging a property’s appeal to buyers,” Brodnax said. “Sellers get the most they can for their property and buyers benefit from a move-in ready property. Home stagers are doing a great job at getting the word out about the effectiveness of staging,” Brodnax added. “The home staging industry will continue to add to the recovery of the real estate industry.”

Statistics provided by RESA show staged properties consistently spend 78% less time on the market. “The decade ahead is a new era for home staging,” Scott said. “If your Realtor doesn’t educate you on how much you stand to lose by not staging your house, then they are doing you a disservice.”

By Danielle E. Gaines and Deborah Schoch

By Jim Gallagher

RISMEDIA, February 2, 2010—As real estate owners and investors do business throughout 2010, they will more than likely face many complex tax issues that could strain their resources and drain profits. They should keep in mind these tax tips that could help them save money in the long run:

1. Determine if your partnership qualifies for an income deferral for debt reacquisition transactions. Has your business had debt forgiven? There is a tax election available that will allow you to defer cancellation of debt (COD) income until 2014, when it will then be recognized ratably over five years. Carefully consider the options before making this irrevocable election as your COD income could be fully excluded under other provisions.

2. Color your building green. Take advantage of special deductions and credits for green, or environmentally friendly, buildings.

3. Determine if you are a dealer or an investor. Do you know if you are a real estate dealer or an investor with regard to taxes? Proper planning will ensure the desired treatment upon disposition of the property.

4. Allocate land costs to your benefit. To defer income upon the sale of parcels from a tract of purchased land, it is necessary to properly allocate the cost among the various parcels. The IRS requires that the cost be equitably apportioned, but how? Consider several methods when allocating costs.

5. Take advantage of lower property valuations. Have you considered gifting real estate property or partnership interest for estate planning purposes? You may want to consider converting a corporation into an LLC since built-in gains may be low due to depressed real estate values.

6. Properly account for your lease income. You may be accounting for your lease income based on the cash received or the terms of the lease agreement. However, an Internal Revenue Code section specifically addressing leases may require the income to be accounted for in a different manner.

“To learn how these tax tips may apply to your real estate business or investment, please contact your tax advisor,” said Jerry Williford, a Grant Thornton Real Estate Tax executive director.

For more information, visit www.GrantThornton.com.

By Tami Luhby, senior writer January 28, 2010: 6:59 PM ET

NEW YORK (CNNMoney.com) -- Under fire for the low number of people receiving long-term mortgage help, the Treasury Department on Thursday announced new guidelines that will require applicants to provide all paperwork before getting a trial modification.

The new policy will make it harder for troubled homeowners to start the process, but it should make it easier for them to qualify for permanent assistance under President's Obama foreclosure prevention plan.

Borrowers complain that their loan servicers constantly ask for additional documents and lose their forms. Servicers, meanwhile, say that borrowers are not handing in all that's needed.

The new rules, which start June 1, will effectively shift the paperwork burden to the start of the process.

"They aim to make it easier and quicker to provide permanent modifications," said Treasury Assistant Secretary Herb Allison. "These changes also will enable servicers to process more efficiently and handle more volume effectively so we can help more people more rapidly."

Distressed borrowers will have to fill out a three-page request form that asks them to explain their hardship and list their income and expenses. They will also have to sign an IRS 4506-T form that allows servicers to pull their tax returns. Both forms are available on the Making Home Affordable program's Web site.

Also, applicants will have to verify their income. For those earning a salary, two recent pay stubs will be sufficient. Other earnings, such as income from self-employment, benefits, or rental properties, must still be documented.

Servicers must acknowledge receipt within 10 business days and, if the file is complete, let the borrower know within 30 days if he or she is approved for the trial modification. If the documentation is incomplete, the servicer must tell the borrower what is outstanding.

Those who are approved for trial adjustments and make three timely payments will be automatically converted to long-term modifications.

Servicers and housing experts applauded the move, saying that borrowers will now have a better sense of their chances for permanent help.

"It will not lead to more modifications, but it will lead to more certainty," said Howard Glaser, head of The Glaser Group, a financial services analytics firm.

Wells Fargo, which initially required applicants to verify income ahead of the trial period, plans to adopt the new guidelines as early as March 1. While the new rules may lead initially to a drop in the number of borrowers entering the trial program, they will be more likely to attain a permanent modification, said Kevin Waetke, a bank spokesman.

Under the original plan, borrowers were supposed to submit their documents before entering a three-month trial period. The trial was a time that borrowers had to prove their could make the requirement payments.

The problem then shifted to converting those in the trial modifications to permanent assistance. Borrowers were relieved to have lower payments but frustrated to be stuck in the trial period for months on end.

"It set expectations that weren't realistic," said John Snyder, manager of foreclosure programs at NeighborWorks America.

Servicers attributed the slow pace to the fact that they didn't have all the needed forms. The Treasury Department responded by lengthening the trial period to five months and lightening the documentation requirements.

Coming under fire once again, the administration in late November ramped up pressure on servicers to convert borrowers to permanent modifications.

As for the end of the year, some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.

The administration also reiterated that servicers must review all those currently in trial modifications and determine whether they have been timely with their payments and have handed in their paperwork.

Those who haven't handed in any documents or have missed payments will be denied permanent modifications, according to the Treasury guidance. These borrowers must be considered for other foreclosure prevention alternatives, such as servicers' own programs or short sales.

In the case of those who are on time with their payments but have submitted only some documents, servicers must attempt to obtain the required paperwork. If they cannot, then the borrower will be kicked out of the program.

Borrowers have the right to appeal denials.

Treasury's directive should give servicers clearer directions about what to do with those borrowers still in their trial period, said Edward Pinto, former chief credit officer for Fannie Mae (FNM, Fortune 500) in the late 1980s. This will help clear the backlog of homeowners in the modification pipeline.

Still, some industry experts are concerned about those who are in limbo.

Some 450,000 people could be at risk of being denied permanent help because of paperwork problems, according to Richard Neiman, the New York banking superintendent who serves on the State Foreclosure Prevention Working Group. He urged Treasury officials last week to reduce the documents requirements and to make it easier for borrowers to submit forms.

Neiman said Thursday that he's pleased the Treasury Department is allowing servicers to conditionally approve people who haven't handed in their hardship affidavits or Form 4506-T tax forms. But he still thinks more should be done to make it easier for borrowers to get their paperwork in.

"I continue to be concerned that we are going to have a large number of borrowers who have demonstrated the ability to make timely payments but who will face the foreclosure process," Neiman said. 

By Alejandro Lazo

“Because so many Americans over the age of 62 are facing significant financial stress due to dropping retirement and savings account balances, as well as higher healthcare costs, many groups are targeting seniors under the guise of helping them,” said Scott Peters, CEO and President of Generation Mortgage. “HECM reverse mortgages are Federal Housing Administration-insured products and are heavily scrutinized by regulators and legislators looking to protect seniors’ best interests. As a result, more than 600,000 American seniors have obtained reverse mortgages that have enriched their lives by allowing them to stay in their homes and pay off their bills.”

The top 9 most common reverse mortgage myths include:

Myth: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. As long as the house is maintained and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth: My children will be responsible for the repayment of the loan.
Fact: False. Reverse mortgages are non-recourse loans. That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house. If the homeowner’s heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.

Myth: I can’t get a reverse mortgage if I have an existing mortgage.
Fact: False. With enough equity, you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason most seniors take out a reverse mortgage.

Myth: Only low-income seniors get reverse mortgages.
Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

Myth: If I outlive my life expectancy, the lender will evict me.
Fact: False. Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines.

Myth: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Fact: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth: There are restrictions on how reverse mortgage proceeds may be used.
Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

Myth: Reverse mortgage lenders take advantage of seniors.
Fact: False. Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations’ strict Code of Ethics and Standards for Trust.

Myth: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.
Fact: Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays you. Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.

For more information, visit www.generationmortgage.com.

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