Home Buyers Tax Credit, Part II

Last Summer I blogged about a new $7,500 tax credit available for first-time home buyers. One of the provisions to the tax credit, however, was that it would have to be repaid over a 15 year period. This prompted most tax experts to call it more of a loan, and I agree.

Flash forward to today. The $819 billion economic stimulus package that is being debated in Washington, DC, right now includes legislation that would remove the "repayment" provision to the $7,500 tax credit.

The change would apply to any home purchased between Jan. 1 and the end of August, so people who bought (yours truly included) when the tax credit was first enacted last summer would still have to pay back the tax credit.

Why not include first-time home buyers who bought the last half of 2008, you might ask? Well, the removal of the "repayment" provision is being pushed by the National Association of Realtors to drum up future sales & commissions for their Realtor membership. Do you think that NAR really cares about people who already bought?

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My Favorite Mortgage Blog

Unless you're one of the lucky few who have the means to buy a home with cash, you're gonna need a mortgage to buy real estate.

As I am in the midst of refinancing to take advantage of today's low mortgage interest rates, I'm again following the Mortgage Matters blog on BankRate.com. Holden Lewis puts great advice and the latest mortgage news on the blog, and is probably the best destination if you want to quickly stay atop of rate changes. The Federal government today kept its interest rates near zero, which should help keep the average 30 year mortgage rate at around 5 percent. It'll be interested to hear Holden's take on the government's actions.

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Myths on Buying & Selling Your Home

On NBC's Today show, Barbara Corcoran offered her "Five Biggest Real Estate Myths." As she normally does, she gave some very sound advice that I thought I'd pass along.

Barbara Corcoran's "Five Biggest Real Estate Myths"

1. Sellers Today Are Desparate
2. Dont's Buy Before Prices Have Bottomed
3. You Can't Buy a Home With Less than 20% Down
4. Now's the Absolute Worst Time to Sell
5. Before You Refinance, Shop Around

Watch the Complete Video Here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

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Thoughts on the Commission Escrow Act

A new law has gone into affect in the State of New York (that's NY's Capitol building at left) that protects the commissions of real estate brokers. Known as the Commission Escrow Act, the law ensures that brokers will be paid the commission that the seller & broker both agreed to when they signed a contract known as a listing agreement.

Seems logical that a seller should pay a previously agreed to commission amount, right? Well, not in all cases. Many times a buyer learns of the property because of the word-of-mouth spread by the owners or due to their networking skills. Telling fellow parents at P.T.A. meetings or at your son's Little League games is a great way to find a buyer. Why should a seller have to fork over a 6% commission ($18,000 on a $300,000 home) if it was them who found a buyer in the first place?

There are plenty of other legitimate reasons why a seller doesn't feel that the broker has earned the commission. The number of Realtors in the U.S. has increased from 756,000 at the beginning of the decade to nearly 1.2 million today and, as many agents will be the first to admit, the industry is chock-full of people who act in a less than professional manner. The Commission Escrow Act protects even these people at the expense of the seller.

At the recent Inman Connect real estate conference in New York City, there were calls for tougher standards in the licensing of real estate agents. Let's hope that the industry moves in this direction in order to safeguard the financial interests of real estate sellers and buyers.

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President Obama and Real Estate

"Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered." - Barack Obama, Jan. 20, 2009

During today's inauguration speech, President Obama referred to the foreclosures that continue to strike so many American families. Now that he is charge of the economy, the country will be watching closely to see what policies he will implement to help fix the housing crisis.

There's been talk about the U.S. Treasury Department buying mortgage backed securities, which would allow Fannie Mae and Freddie Mac to offer mortgages as low as 4.5 percent. The idea is that such low mortgage rates would prompt more people to buy real estate. But there's been questions about this proposal, such as who exactly would qualify for these low rates and whether the rates would be available for mortgage refinancing.

Obama also supports a moratorium on foreclosures. Now that he has taken the presidential oath and foreclosures had a record increase in 2008, we can expect that he will release details in the coming days or weeks.

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Foreclosure Filings Increased Record Amount in 2008

RealtyTrac, a firm that tracks real estate foreclosures, today issued figures that show that foreclosure filings (default notices, auction sale notices and bank repossessions) —were reported on 2.33 million U.S. properties in 2008, an depressing 81 percent increase from 2007 and a whopping 225 percent increase from 2006.

California had the 523,624 foreclosure filings, the most of any state, which amounted to a nearly 110 percent increase from 2007. Florida had the second most with 385,309 foreclosure filings, while Arizona had the third most with 116,911 filings.

Not all filings result in an actual foreclosure but, as this CNN article reports, more than 860,000 families in the U.S. did lose their home due to foreclosure last year. For these folks, especially those who own more on their mortgage than the home is worth, should consult with an attorney as bankruptcy may loom loom in their future.

For those that have not been foreclosed, but have received any sort of default notice or are unable to keep up with their mortgage payments, the absolute worst thing to do is sit idle and do nothing. Mortgage lenders don't want you to go into foreclosure, as they are in the business of lending money and do not want your house sitting on their books.

My advice is to seek out help. The sooner the better. Call your mortgage company and tell them your situation, explaining any financial hardship that has made it difficult to keep up with payments. They might be able to do a loan modification, whereby they readjust your mortgage to fit with your budget.

Or, contact Help Now, which is an alliance between HUD and the mortgage industry that provides free foreclosure prevention assistance. Their website is HopeNow.com to learn more or speak with a live counseler by calling 888-995-HOPE.

Hope Now is a great organization that will help you negiotate a loan modification, or work out a repayment plan to help you get current on missed payments.

I'd like to reiterate that the worst action you can take is inaction. If you received a foreclosure filing, you're not alone (2.3 million properties are in the same shoes as you!) and you shouldn't feel ashamed of asking for help. Contact your lender or Hope Now.

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Top Tales Spun By Realtors Revealed

Considering that real estate agents and brokers make make money whenever a client sells or buys a home or piece of property, it stands to reason that it is in the industry's best interests to motivate the American public to buy and sell as much as possible.

Enter the National Association of Realtors, which is a lobbying organization whose stated purpose is to "help its members become more profitable and successful."

I suspect that the average American doesn't realize the true motivations behind NAR's numerous marketing campaigns and statements to the press. Indeed, the lobbying group frames their crafty work with references to "the American dream" and "financial security" so that people continue to engage in real estate transactions. As the housing market started to cool and slow down, NAR stepped up its public relations efforts to thwart the public's perception that home sales and prices were declining.

A new series of print and online articles by the Wall Street Journal shines the spotlight on the half-truths and falsehoods spread by former NAR Chief Economist David Lereah. Here's some of the Top Tales that Mr. Lereah spun while to help NAR push its agenda of helping Realtors become "more profitable and successful."

January 2006
Lereah’s forecast: “The market is in the process of normalization.”
Actual sales: Fourth-quarter sales fell at an annual rate of 12.6% to 6.94 million annualized.
Lereah’s post-mortem: “The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead.”

April 2006
Lereah’s forecast: “Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau.”
Actual sales: First-quarter sales fell at an annual rate of 8.6% to 6.79 million.
Lereah’s post-mortem: “This is additional evidence that we’re experiencing a soft landing.”

July 2006
Lereah’s forecast: “The market should even out just below present levels.”
Actual sales: Second-quarter sales fell at an annual rate of 6% to 6.69 million.
Lereah’s post-mortem: “The market is stabilizing.”

October 2006
Lereah’s forecast: “We expect sales activity to pick up early next year.”
Actual sales: Third-quarter sales fell at an annual rate of 22.2% to 6.28 million.
Lereah’s post-mortem: “This is likely the trough in sales.”

January 2007
Lereah’s forecast: “The good news is that the steady improvement in sales will support price appreciation moving forward.”
Actual sales: Fourth-quarter sales fell at an annual rate of 2.3% to 6.24 million.
Lereah’s post-mortem: “It appears we have established a bottom.”

NAR's new Chief Economist has continued the practice of issuing overly rosy statements, and the organization has launched a new print and television campaign. So the next time you see one of these ads or hear a Realtor speak, remember that their mission is to be "profitable and successful."

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Taking Advantage of Low Rates

Continued unrest in the Middle East, unemployment rates at the highest level in recent memory, and a bad housing market that hasn't been able to get out of the starting gates. The silver lining, if there even is one, is the low mortgage rates that are available for new home purchases and refinancing.

My current 30 year mortgage is in the low 6 percent range which, when I got it back in August, was considered low because the average 30 year was around 6.5%. I'm back talking with my mortgage broker now, as the average 30 year is now around 5.5%. I'm fortunate enough to have a high credit score and a favorable loan-to-value ratio on my house, which will allow me to get the lowest rates around. I'm hoping for a 4.75% mortgage with no points and no closing costs, which I'm getting lock-in for as we speak.

Mortgage rates are at the lowest levels in literally decades, and those that don't take advantage are squandering a golden opportunity. My monthly mortgage payment is going to decrease by nearly 20 percent. That's hundreds of dollars each month I'll be saving and, over the life of the loan, it's literally well into the six figures that I'll be saving.

For those out there that are shopping for a new home or are thinking of buying a home, use this mortgage calculator to see how a monthly payment will be at today's rates. You'll get the best rates if you have a high credit score and are making a 20% down payment. Visit this page to see what mortgage you will qualify for.

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