Tuesday, April 23, 2013

Bidding for homes is changing

In hot market, bid first, see house later

As soon as it hit the market, the home inspired a bidding war, with the top two prospective buyers both offering well above the listing price, in cash. In today's fevered real estate market, that's no longer unusual.

"At first, I was really, really surprised and kind of suspicious," said Nina Hatvany of Pacific Union, the listing agent. "I was concerned that they hadn't seen the property. After all, they might not like it when they saw it." But since both offers looked serious and included proof of funds, "I said to the sellers, 'This seems like a new buyer profile. You might as well take it.' "
 
Buying homes sight unseen is a small but growing trend in the Bay Area, fueled by the over-competitive market and burgeoning interest by international buyers - and enabled by technological advances.  Buyers might make offers without seeing a house for several reasons: They live elsewhere or are away for business or personal reasons; they had scheduling conflicts and couldn't visit before bids were due; they're investors accustomed to buying just based on property characteristics; or they're taking a scattershot approach of making lots of offers and seeing which get accepted.

Not completely blind

 
 
Today's array of tech tools means they're never truly buying in the dark, however. Besides extensive photos and video tours of homes for sale, plenty of websites offer the chance to learn about neighborhoods and schools, and research comparable sales.

Often, those who bid sight unseen have a chance to tour the house during escrow and can still back out. But sometimes they're willing to pay huge amounts based on photos, videos and their agent's recommendation. (The bidder may also had a family member visit.)

Professional investor Paul Livson of Danville has been buying and selling properties for 30 years, both for rental income and to resell. Bidding before visiting is a tactic he and others increasingly adopt, he said.  "Lots of people are doing it now because they know they need to get their offer in quickly," he said. "The market conditions are such that if you wait to see it, if it's any kind of decent deal, there are already five to 10 offers on their way, and yours will be at the back of the pack. I need to be at the front of the pack." And while he bids blind, he never buys blind.  "The risk is limited because you have an inspection period, so there's always an opportunity to see it and walk away" if it's not up to snuff, he said.

Riskier deals

 
 
Some sales, such as courthouse auctions that are the final stage in the foreclosure process, don't offer a chance to see properties in advance, nor is there an inspection period. While many investors bid at those auctions, "that's much more risky to me," Livson said. "I don't like to buy without having at least a day or two to inspect it. You could have a property that looks great on the outside but has $50,000 worth of termite damage."   His agent, Cindi Hagley, broker at the Hagley Group at Prudential California Realty in San Ramon, said she's increasingly representing investors who want to bid sight unseen for efficiency, and she has created a "buyer concierge" program in response. "We hunt the properties for them," she said.

Some agents worry that such bidders muddy the waters. "I am concerned about buyers feeling that this is a viable option in competition," said Bebe McRae of the Grubb Co., who has sold some properties to people who bid blind. "I heard seven offers yesterday on (a property) and the deciding factor for the sellers in choosing the winner was all about the confidence they felt in the buyers being able and willing to close successfully. The buyers went to the property on several occasions and also did their inspections prior to writing the offers."

 

 

 


Wednesday, April 17, 2013

Selling your home? The cards are in your favor


homesellers
Catch buyers' attention, and get multiple offers, by pricing your home in line with comparable sales.
 
Six years after prices collapsed, housing has begun to climb out of its hole. So what are the best moves to make now?
 
Selling your home? In most parts of the country, you have finally regained the upper hand.

To get your best price, though, you need to finesse your timing, list competitively and match your marketing strategy to local conditions.

Lower your sights to make more money. 

Rising prices breed rising hopes: In a recent poll, brokers complained that 75% of homeowners think their agent's recommended listing price is too low. Pricing your property above recent sales to cash in on the momentum may slow down deals, and sitting on the market too long can stigmatize a house.

Catch buyers' attention -- and get multiple offers -- by pricing your home in line with comparable sales, says Rick Turley, president of Coldwell Banker San Francisco: "Then let the market take it higher."

Trading up? Move fast. Downsizing? Go slow. 

It's tempting to postpone selling to hold out for a better price. But if you want to move to a larger place, act sooner rather than later. True, higher-end homes aren't rising as quickly, but the gap is small. So while you'll be able to sell your home for more if you wait, the appreciation on the trade-up home will be greater.

When you're downsizing, the math works the other way, so it pays to wait.
The case for these strategies should strengthen as gains slow for cheaper homes. "Investors are driving the lower end of the market, and there is a point when the investor opportunity becomes less attractive," says Richard Green, director of the University of Southern California's Lusk Center for Real Estate.

Smooth out your home's rough patches. 

Repair that leaky roof and address other obvious structural problems, or you'll have to subtract the cost of doing so from your price. "In today's economy, many buyers don't have as much savings left over after their down payment for improvements," says Teri Herrera, a broker in Bellevue, Wash.

Smaller fixes that pay off the most, according to a HomeGain poll of real estate professionals and consumers: cleaning and decluttering, brightening (adding lamps and clearing window obstructions), and solving electrical and plumbing problems.

Get ready for your home's close-up. 

Sellers who stage their homes -- rearranging or replacing furniture to bolster appearance -- usually do so just before an open house. The better time to glamorize: right before you post your listing online, where 90% of buyers look first. Says Realtor.com president Errol Samuelson: "Web appeal is the new curb appeal."

Guard against low appraisals. 

While rapidly rising prices may attract more buyers, the upswing can make it harder to close a deal. One-third of realtors polled in December reported setbacks from low appraisals, including delays in closing, lowered prices, and cancellations.

The problem: Appraisals can come in low because they're based on transactions as old as six months -- out of date, perhaps, in today's market.

Solution: Have your agent personally oversee the process, accompanying the appraiser to point out improvements and supplying data about the latest comparable sales.

-----New York Money Magazine

Monday, April 1, 2013

The 9 Best Homeowner Tax Deductions

Real estate tax deductions for homeowners have experienced significant scrutiny, proposals, extensions, modifications and extensions throughout a tumultuous real estate cycle over the past decade.  As federal income tax season approaches, it is useful to take a closer look at the current state of the nine real estate tax deductions most frequently used by homeowners.
 
 
 
 
 
1. The Mortgage Interest Deduction

The mortgage interest deduction is widely popular since homeowners’ monthly mortgage payments are almost entirely composed of interest for the first few years of a loan.  Homeowners can deduct the interest paid on a mortgage with a balance of up to $1 million.
 
2. Energy Efficiency Upgrades Deduction
 
10% of the total cost of materials to make energy efficient upgrades to a home can also be deducted up to a maximum amount of $1,500.  Actually this is a tax credit that directly reduces of how much tax is owed, rather than just a reduction in taxable income. 
 
 

3. The Private Mortgage Insurance (PMI) Deduction
 
Homeowners who pay less than 20% as a downpayment to purchase a home are required to pay Private Mortgage Insurance.  PMI, also referred to as MIP, can represent a significant amount of a borrower's monthly payment.
 
 

Borrowers with an adjusted gross income under $109,000 that are paying PMI on loans originated after January 1, 2007 can deduct the PMI at 10% per $1,000 of loan principal borrowed.
 
4. Home Improvement Loan Interest Deduction
 
The interest on home equity loans of up to $100,000 used to make “capital improvements” to a home are also tax deductable.  Capital improvements include upgrading features, installing new components or making additons that increase the home's useable square footage.  Upkeep and maintenance repairs like painting and installing new carpet are not deductible.
 
5. Mortgage Points/Origination Deduction
 
Homeowners who have paid origination fees or "points" when they purchased or refinanced their home can deduct the amount paid.  These fees are customarily charged by a lender on a percentage basis, so a one percent fee on a $200,000 loan would amount to one point or $2,000.
 
6. Property Tax Deduction
 
Although it may sound strange, property taxes are a tax deductible tax. Property taxes paid to local governments can be deducted on federal income tax returns. 
 
7. Loan Forgiveness Deduction
 
The Mortgage Debt Forgiveness Relief Act of 2007 has been extended through December 31, 2013 for underwater homeowners that sell their homes for a price "short" of what is owed against the property.  The Debt Foregiveness Act prevents the homeowner from having to pay tax on the amount forgiven by the lender. 
For example, a family sells their home for $150,000 even though the principal balance of their mortgage is $250,000.  The $100,000 difference forgiven by the bank would have been considered taxable income prior to the Mortgage Debt Forgiveness Relief Act. 
 
8. Profit on Sale of Real Estate Deduction
 
On the sale of a primary residence, individuals can claim up to $250,000 of profit from the sale  without paying tax.  Married couples can claim up to $500,000 tax-free.
 
9. Real Estate Selling Cost Deduction
 
Many of the costs associated with selling a home can also be claimed as tax deductions.  These costs are effectively added to the price initially paid for the home by effectively raising the tax "basis" to an amount that reduces the taxable profit when compared to the new selling price. Some deductable selling costs include: fees and commissions paid at closing, marketing costs to advertise the home for sale, and the cost of most repairs or upgrades needed to sell the property.