As I was reviewing my business over the past year, I noticed a trend. Single women are buying houses. Whether they have never been married, or are newly divorced or widowed, it's important to single women that they own their own home.
Buying a home is a big deal, and for some of these single women it can be almost overwhelming. I know - I did it myself several years ago. So as I work with these single women who are buying houses, I like to play “20 Questions”, which really turns into more like 100 questions, but 20 is a good starting point.
How much can you afford?
This is the biggie. Keep in mind all the things you spend money on – hairstyling, manicures, medications, entertainment, gifts, decorating, clothing, auto and travel expenses, etc. and add them to your other bills such as utilities, taxes, insurances, cell phone, credit cards, cable TV and internet. You'll need to budget for repairs and maintenance as well. Another factor to consider is interest rate. For every 1% increase in interest rates, your buying power diminishes by 10%. In other words, your payment will be about the same on a $300,000 house at 3% as it will for a $270,000 house at 4%. My suggestion is to get a referral from a friend or Realtor for a trusted lender who will take the time to discuss the details of your loan with you.
Is the home and are the appliances energy efficient?
Does the property require a lawn care or landscaping service?
Are there Homeowner's dues?
Will you need to do any major repairs or remodeling?
How much space do you need?
Another important question...divorced and widowed women generally are used to having larger homes than they may now need, but struggle with the thought of over-downsizing.
Do you have children, grandchildren or elderly parents who will be living with you – or visiting often?
Do you work from home?
Do you have hobbies that require additional space?
Do you have a lot of furniture and “stuff” that you'll be moving into the house?
Do you like to entertain?
How much maintenance do you want to do?
Maybe your husband did a lot of the exterior work and you're just not sure what's all involved. Lawn-mowing, weed-eating, trimming shrubs, painting, gutter-cleaning...factor in either your time and energy to do it, or the cost of hiring it out. If you buy a condo, they'll take care of most of these items for you, but you'll be paying for it in your monthly dues.
Do you have pets? (Will Fido tear up the lovely gardens?)
Will you feel comfortable and safe here?
Only you know how private, peaceful and quiet your home should be for your enjoyment. And it's always a good idea to check out local crime statistics or talk to neighbors before buying a home.
Do you like to take walks in the neighborhood?
How do the nearby homes and businesses look?
Is the property fenced, well-lit and have a security system?
Is it convenient to work, friends, and family?
Is it in a good school district?
How do the Homeowner's regulations (if any) fit your lifestyle?
You can see how these 20 questions are just a tip of the iceberg. Depending on your situation and experience, the questions will vary. It's a big decision – and one you don't want to make without some level of guidance.
I'm proud of my great team of lenders, inspectors, title and escrow agents, attorneys, lawn-care and pest-control providers, electricians, plumbers, painters, etc. who help my clients settle in their new home with a high level of confidence that they've made a good decision.
I'm also proud of all those single women who are out there buying homes – you go girls!
It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?
A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.
To be eligible for a short sale you first have to qualify!
To qualify for a short sale:
Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!
1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate. The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.
Here is an example of how a deficiency balance works
If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.
Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Hard to believe? Well, believe it or not, the IRS counts the difference between the sale and the charged off debt as a "gain" on your taxes. That's right-you lost money and it's counted as a gain! (I didn't make that rule, that’s a wonderful brainchild of the IRS). Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.
Guess What? A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.
2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.
3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale. Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentive to participate in short sales.
4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2012 we will have more short sales than any other year, to date. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.
5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area.
6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.
7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.
8.) I have already been sent a foreclosure notice so I can’t perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.
9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.
10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 12-24 months. There are even a few FHA programs that allow for a purchase sooner than that. I have worked with clients who went through a short sale and bought another house in less than 12 months.
Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying:
With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy.
Prices were expected to bounce along the bottom this winter. However, many pricing indices (examples: CoreLogic, FHFA, LPS, Case Shiller) are reporting that prices are continuing to rise.
Rents historically increase by 3.2% on an annual basis. A study issued earlier this year projects rent increases of 4% for the next two years. Trulia recently reported that rents this year have actually shot up by 5.4%.
The Mortgage Bankers Association has projected that the 30-year mortgage interest rate will be 4.4% by the end of 2013. That is an increase of approximately one full point over current rates.
We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’. It’s time to buy.