12/24/09

Wishing you and yours a joyous holiday!

On Monday morning I asked my husband if he had taken the trash can out to the street, as I heard the garbage truck outside. He went out and when he returned he told me that it wasn't the garbage truck that I had heard, but the house across the street coming down.

Of course, I immediately went to look and, sure enough, the big equipment was out there knocking away at what was once not just a house, but a home... a place of refuge and comfort; a family home, where kids once did their homework and holidays were celebrated with family and friends.

Over the next three days I watched, as truck after truck hauled away pieces of the house... pieces of the shell that used to be a home. But, the truth is, in the end it really was just block and mortar. What gave the house life was all the people we got to share some time with over the past 33 years.

It won't be long before a new house will be built where "the Alamo" used to be. Undoubtedly, it will be bigger and more beautiful than the one that came down this week, but it won't be the fabulous kitchen, the high ceilings, the travertine floors, the Venetian plaster, or any of the other amenities that will make it a home... it will be the new residents that find refuge and comfort there that will bring it to life.

May your holidays be filled with good friends and good times, and may your home be filled with joy all through the year!

Warmly,
Pook

11/7/09

Today's Topics:

• Tax Credit for Homebuyers
  
• Phoenix Metro Market: The Cromford Report - 11/3/09

Tax Credit for Homebuyers

Information below courtesy of Sue Lechman, Senior Mortgage Consultant at OnQFinancial and info links courtesy of the National Association of Home Builders.

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

First-time Homebuyers can find more detailed information at:

Frequently Asked Questions about the First-Time Home Buyer Tax Credit

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current homeowners looking to move up can find more detailed information at:

Frequently Asked Questions About the Move-Up/Repeat Home Buyer Tax Credit

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction

It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

The above information is being passed on without claims to its accuracy and with the understanding that anyone interested in taking advantage of the current Homebuyers Tax Credit program will consult with their personal financial adviser to verify the information and to see if they qualify.

Cromford Report
Thanks to Mike Orr for providing this update on the Phoenix Metro real estate market:

We are seeing a substantial rise in active listings, particularly in the more affordable price ranges. However, sales and pending sales remain very strong for the time of year, and we need to remember that it is quite normal for inventory to rise during October and November. To underscore this, the Cromford Market Index continues to rise, telling us that demand is still growing faster than supply.

Overall pricing has been fairly flat for the last three months, and there are early indications that REO pricing may have stopped rising while normal sales may have stopped falling. This may only be temporary, but the combined effect means there will probably be a moderate increase in average price per square foot in sales recorded during November. The market between $300,000 and $600,000 has improved recently while that under $300,000 is not looking as strong as it was during the first 10 months of the year. Over $800,000, inventory remains too high for pricing to really show any major strength, but it is possible that market improvements will extend to the $800,000 level now that tax credits are expected to apply up to this price point for move-up buyers.

New foreclosure notices were lower in October but trustee sales were higher. The inventory of pending foreclosures has stabilized at just over 50,000 and is no longer showing upward momentum.

- Mike Orr

10/30/09

Today's Topics:

• Phoenix Metro Market: The Cromford Report - 10/27/09
• First-Time Home Buyer Tax Credit Gets Obama Nod
• Things Condo Buyers Should Consider

Cromford Report
Thanks to Mike Orr for providing this update on the Phoenix Metro real estate market:

In line with normal seasonal trends, active listings are increasing while sales fall. What is very unusual is that pending listings continue to rise and all indicators of demand remain very strong except for the luxury sector.

The number of new foreclosure notices is slightly up from the relatively low level of September. Trustee sales have been running at high daily rates in October, though not as high as in June and July. So this is a mixed picture with no clear message for us. We have noticed that the first month of each quarter tends to have higher foreclosure numbers than the subsequent two months.

Overall pricing remains little changed over the last two months, and as prices were falling precipitously twelve months ago, the annual rate of price appreciation is improving very fast. Notice how it has risen from -29.2% to -17.9% in the last 3 months. It appears likely that appreciation will show positive readings by the time we get to April 2010.

- Mike Orr

First-Time Home Buyer Tax Credit Gets Obama Nod
Courtesy of U.S. World and News Report

By Luke Mullins

Posted: October 29, 2009

An extension of the $8,000 first-time home buyer tax credit appears all but certain after the Obama administration called on Congress to give house hunters more time to claim the popular tax perk. The move comes shortly after Senate lawmakers stuck an agreement to not only push back the measure's looming deadline but expand it to allow current homeowners and more affluent buyers to claim the credit. "We welcome efforts taken by Congress to extend the first-time home buyers tax credit for a limited period," Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan said in a joint statement today. "This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide." Here are five things you need to know about the development:

[See New Home Buyer Tax Credit: 7 Things You Need to Know.]

1. Roots and impact: A tax credit of as much as $8,000 for certain qualified first-time home buyers was included in the Obama administration's sweeping economic stimulus package, which the president signed in mid-February. The measure was designed to stimulate additional demand for residential real estate and help absorb the overhang of unsold properties that was putting downward pressure on home prices. Along with cheaper home prices and attractive mortgage rates, the perk has helped reduce the glut of unsold properties. Mark Zandi, the chief economist at Moody's Economy.com, expects the tax credit to result in as many as 400,000 additional home sales by the time of its scheduled expiration at the end of November. But trade groups—like the National Association of Home Builders and the National Association of Realtors—have been lobbying Congress to push the deadline back, arguing that failing to do so would jeopardize recent signs of stability in the housing market. The NAHB, for example, blamed yesterday's weaker-than-expected new home sales report on the tax credit's impending expiration.

[See Weak Home Sales Suggest a Slog of a Recovery.]

2. Extending the deadline: Although various proposals to extend and expand the credit have circulated in Congress for weeks, Senate lawmakers finally reached a deal in recent days. Under the terms of the agreement, the deadline for first-time home buyers to claim the $8,000 credit would be pushed back to April 30, 2010. But the term "deadline" doesn't mean the same thing as it does in the current credit. The Senate agreement stipulates that buyers must have a sales contract on a house by April 30 to be eligible, but it gives them an additional 60 days to close the purchase. That's much different from the current credit, in which transactions must be closed by November 30. Looked at one way, the effective deadline of the credit under this agreement is actually the end of June.

3. Existing buyers: But perhaps the most significant change is that current homeowners would become eligible for the tax perk as well. The current credit prevents home buyers who have owned a primary residence within the past three years from claiming the credit. The agreement, however, would allow current homeowners to claim up to $6,500 as long as the property they are vacating has been their primary residence for at least five years. Expanding the credit beyond first-time buyers is intended to boost home sales to "move up" buyers—those moving from one house to another—which some lawmakers, most notably Georgia Republican Sen. Johnny Isakson, argue is essential to a housing recovery.

4. More-affluent home buyers: The agreement also enables more affluent Americans to claim the tax credit. Senators moved to increase its annual income limits from $75,000 to $125,000 for single buyers and from $150,000 to $225,000 for married couples. These limits apply to both first-time and move-up buyers, although neither can purchase a home for more than $800,000 and still get the credit. Anyone taking the credit on a 2010 purchase can claim it on his or her 2009 tax return. And as long as home buyers live in the property they purchased via the credit for three years or more, the tax credit does not have to be repaid.

5. Credit controversy: Zandi estimates that the Senate agreement would generate more home sales than the current credit would. "It's broader, [and] the industry is geared up to take advantage of it now," he says. But first-time home buyer tax credits have already cost the government more than $10 billion in lost revenue, and Zandi expects that the Senate agreement would cost at least as much. And although it's been popular with those purchasing homes, some economists have called the credit an inefficient use of federal resources. Calculated Risk, a financial blog, has estimated that Uncle Sam has paid $43,000 for every additional home sale. And the Senate agreement—which enables households making more than $200,000 a year to claim the credit—could certainly appear overly generous in a time of trillion-dollar budget deficits.

At the same time, the credit has recently been linked to widespread abuse. Russell George, the Treasury Department's inspector general for tax administration, told a congressional panel last week that 19,300 taxpayers had claimed the first-time home buyer credit before they had even purchased a home. In another 74,000 cases—totaling more than $500 million—taxpayers claimed the credit despite evidence that they had owned a home within the past three years. And in at least one case, a 4-year-old claimed the credit, George said.

[See First-Time Home Buyer Tax Credit: All Sorts of Sketchy Claims.]

Although the agreement appears to have broad bipartisan support, it still has to get out of the chamber. Along the way, it could be stripped of certain generous provisions. But in light of the White House support, it appears all but certain that at the very least, the first-time home buyer tax credit will be extended beyond its November 30 deadline.

Things Condo Buyers Should Consider
Reprinted from REALTOR® Magazine, October 19, 2009 with permission of the
NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.

Buyers who are considering the purchase of a condominium should inspect the health of the home owner’s association before they close.

The seller should provide the buyer all financial documents relating to the association in time for an attorney for the buyer to review them before closing.

Here’s some advice from Leonard Baron, professor of finance at San Diego State University, about the information that the seller should consider:

• Does the association budget include money for operating expenses such as water, lights, elevator maintenance, and landscaping?
• Is there extra money set aside in a reserve fund for long-term maintenance? If there is an outside reserve study, that should be provided. If not, there should be adequate money in the reserves right now to cover 50 percent of the estimated cost of repairs over the next 30 years.
• Do the condo’s expenses exceed revenues due to a high foreclosure rate or other reasons that owners’ debts go unpaid?
• If there is a shortfall, does the association have a plan besides cutting back on services for making it up?

Source: The Wall Street Journal, June Fletcher (10/17/2009)

9/22/09

Today's Topics:

• Phoenix Metro Market: The Cromford Report - 9/22/09
• Deadline Nears For First-Time Home-Buyer Tax Credit
• Credit Reports Under Extra Scrutiny
• Unemployed Home Owners May Get Assistance

Cromford Report
Thanks to Mike Orr for providing this update on the Phoenix Metro real estate market:

We see sales continuing to fall while pending sales rise. There are a total of 19,566 listings under contract, even more than last week. Given that dollar volume is well down from August, it would be encouraging if we saw more of these homes under contract closing escrow before the end of the quarter.

Overall pricing has recovered from the brief downward trend that prevailed in August and is starting to move higher. Note that average price, median price and average $/SF are all up slightly over the August 22 reading. However pricing for luxury homes and normal sales is still moving downwards. Demand for affordable homes is very strong indeed, especially for the time of year.

- Mike Orr

Deadline Nears For First-Time Home-Buyer Tax Credit

Courtesy of USA TODAY

By Stephanie Armour, USA TODAY

Time is fast running out for first-time buyers hoping to get a tax credit of up to $8,000, and Realtors say they're seeing a marked upswing in interest as the deadline looms.

Real estate groups also are urging Congress to extend the credit beyond its current deadline and expand the tax credit to up to $15,000. Now, buyers must close on their purchase by Nov. 30 to be eligible for the credit.

HOME BUYING: Mortgages agan flirt with 5%

ECONOMY: Jobless claims down, housing starts up

Home builders and real estate organizations are concerned that letting the tax credit expire could knock the wind out of the current housing recovery. And failing to expand the credit could imperil efforts to get more move-up buyers into the market.

"Right now, the recovery is in the first stage and getting entry-level buyers in, but it's having no impact on the move-up buyer," says Richard Smith, CEO of Realogy, the parent company of Century 21, Coldwell Banker and others. "If we can expand the credit to go after that move-up buyer, we'll be home free."

The tax credit available to first-time home buyers is already linked with an uptick in sales. For the first time in five years, existing home sales have increased for four months in a row, according to an August report by the National Association of Realtors (NAR).

Sales rose 7.2% in July from June, and pending sales are 5% above the pace seen in July of 2008

Many of those using the tax credit, however, are buying up foreclosed homes that are vacant. That does little to stimulate sales by homeowners looking to move up to more expensive properties. Getting more move-up buyers into the market is considered the second stage of the housing recovery.

And even though the tax credit doesn't expire until Nov. 30, today's home purchases take 45-60 days to close as the underwriting and appraisal process is taking longer because lenders are being more cautious. That means offers that will benefit from the tax credit really need to be in this or early next month.

"Buyers have more of a sense of urgency," says Tony Middleton, a Realtor in Los Angeles with ZipRealty, of the expiring tax credit. "They're serious about shopping for a home."

There is legislation in both the Senate and the House that would expand the tax credit. A proposal by Sen. Johnny Isakson, R-Ga., would raise the credit amount to a maximum of $15,000 for any buyer of any home over the next year. It would remove the income caps that currently apply (those limits are now $75,000 for an individual and $150,000 on couples).

"I think we've got a realistic chance of doing this," Isakson says. "Our problem is not with the first-time home buyer, it's the move-up buyer."

Lawrence Yun, chief economist at NAR, says extending or raising the tax credit would spur the housing recovery, which in turn would help bolster the economy.

Credit Reports Under Extra Scrutiny
Courtesy of REALTOR® magazine, the official magazine of the NATIONAL ASSOCIATION OF REALTORS®

Buyers who are under contract and hoping to close before Nov. 30 when the first-time home buyer credit expires should refrain from buying furniture and other things on credit.

Lenders are running credit checks prior to closing day and any increase in credit card or other debt can jeopardize the loan, says Lew Reich, an associate with Keller Williams Realty in Plano, Texas.

Reich warns buyers to even refrain from checking out a new large purchase because even an inquiry on a credit report could scare a lender.

Reich tells borrowers: “If someone’s squeaking by and, all of a sudden, they may be looking at increasing debt, the lenders will have a keener eye in looking at your loan,” he says.

“Don’t look until you’ve closed is basically what it comes down to. That’s the safest way. Stay out of the stores,” he adds.

Source: The Associated Press, Dawn Wotapka (09/18/2009)

Unemployed Home Owners May Get Assistance
Courtesy of REALTOR® magazine, the official magazine of the NATIONAL ASSOCIATION OF REALTORS®

The Obama administration has opened a dialogue with major lenders, economists, and government officials over the possibility of extending a financial lifeline to home owners who no longer can afford their mortgages because of job losses.

Possible strategies range from encouraging loan servicers to allow unemployed borrowers to skip some payments to providing grants or loans to temporarily cover mortgage obligations for home owners who become unemployed.

The talks have drawn praise from some real estate groups and other interests, who say that without aid to this subset of homeowners, the housing recovery could lose momentum.

Source: USA Today, Stephanie Armour (09/18/09)

© Copyright 2009 Information Inc.

7/28/09

Today's Topics:

• Market Update: The Cromford Report - 7/28/09
• Home Buyer Tax Credit
  
• Mortgage Disclosure Improvement Act (MDIA)
  

CROMFORD REPORT
Thanks to Mike Orr for providing this update on the Phoenix Metro real estate market:
When reading the chart, remember that GREEN is GOOD!

Modest declines can be seen in active listings, sales and pending listings as the second quarter frenzy dies down a little.

Buying activity is still strong for lender owned properties although we see some easing in the rate of price increases.

The supply situation is unchanged - extremely tight under $350,000 and over-abundant above $500,000.

No big changes are appearing on the foreclosure front. It looks as though July’s counts of Trustee Sales and Foreclosure Notices will both come in close to the June numbers.

All told, July is proving to be a relatively uneventful month compared with the fireworks in the second quarter.

- Mike Orr

HOME BUYER TAX CREDIT

The following information regarding The American Recovery and Reinvestment Act of 2009, which authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009, comes from the National Association of Home Builders. The link below provides basic information about the tax credit. If you have more specific questions, you are encouraged to consult a qualified tax advisor or legal professional about your unique situation.

http://www.federalhousingtaxcredit.com/2009/faq.php#12

It is important to note that there may be a change coming in the current Home Buyer Tax Credit which could increase the amount of the credit, extend the time for applying, and make it available to more people, not just "first-time" buyers. The following article (dated 6/10/09) regarding the proposed changes comes from Bloomberg.com.

Senators Want Homebuyer Tax Credit to Rise to $15,000 (Update2)

By Dawn Kopecki

June 10 (Bloomberg) -- Lawmakers are pushing to revive legislation in the Senate that would almost double an $8,000 tax credit for first-time homebuyers and expand the program to all borrowers.

Senator Johnny Isakson, a Georgia Republican, introduced a bill today that would increase the tax credit to $15,000 and remove income and other restrictions on who can qualify, according to his spokeswoman, Sheridan Watson. The Treasury Department declined to comment on the proposal.

The legislation, co-sponsored by Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, would extend the homebuyer credit to multifamily properties used as the borrower’s primary residence. It would also eliminate income caps of $75,000 and $150,000 on individuals and couples seeking to claim the credit.

“The housing market continues to be a drag on the economy, John Castellani, president of the Washington-based Business Roundtable, said in a telephone interview today. “We believe that if we don’t stabilize this vital sector, we can’t turn the tide on the recession.”

The Business Roundtable represents more than 100 chief executive officers including General Electric Co.’s Jeffrey Immelt and Exxon Mobil Corp.’s Rex Tillerson. The group and the National Association of Realtors are pushing to expand the tax credit and to lower mortgage rates to revive the housing market.

For All Borrowers

“One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can,” Isakson said in a statement. Isakson said his legislation would spur demand in the housing market by giving homeowners the incentive to trade up to a more expensive home.

The bill would extend the tax credit, which now applies to homes purchased from Jan. 1 to Dec. 1, 2009, to one year after the new measure is signed into law, according to Watson. Isakson’s bill would make the credit available to all borrowers, not only borrowers who haven’t owned a home in the previous three years as is the case under current law. It would also let borrowers divide the credit over two years. The legislation wouldn’t be applied retroactively to purchases completed before the date of enactment, Watson said.

The bill is co-sponsored by Republican Senators Lamar Alexander of Tennessee, Saxby Chambliss of Georgia, David Vitter of Louisiana, James Risch of Idaho, Lisa Murkowski of Alaska, John Ensign of Nevada and Jim Bunning of Kentucky, according to a statement from Isakson.

Senator Joseph Lieberman, a Connecticut independent, has also signed on to the bill, according to the statement.

(The section of the article regarding mortgage rates has been removed, as it is no longer current.)

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.

Last Updated: June 10, 2009 18:09 EDT

MORTGAGE DISCLOSURE IMPROVEMENT ACT (MDIA)

Thanks to Rob Kanyur of NOVA HOME LOANS - SCOTTSDALE for sharing the following information regarding the new Mortgage Disclosure Improvement Act (MDIA) that became effective July 30, 2009.

• The new MDIA rules apply to both purchase and refinance loans.
• A lender must provide a borrower with an "early" Good Faith Estimate / TIL within three business days of receiving the borrower's loan application.
• A lender cannot collect upfront fees from the borrower until the borrower has received the "early" disclosures in person or, if mailed, three business days after the early disclosures are mailed.
• A lender must wait seven business days after providing the early disclosures before the borrower can sign closing documents.
• If the final Annual Percentage Rate (APR) on the closing documents varies more than 0.125% (up or down) from the initial APR on the "early" disclosures, the lender must provide the borrower with a corrected disclosure and wait three business days before the borrower can sign the closing documents. Clarification - the borrower cannot sign closing documents until three business days after the borrower receives the corrected disclosure in person. If the corrected disclosure is mailed, the borrower is deemed to have received it three business days after it is placed in the mail.

For these rules, a "business day" is defined as all calendar days except Sundays and legal public holidays as specified.

5/1/09

Today's Topics:

• Market Update: The Cromford Report 4/28/09
• How to Size Up an Investment Property

CROMFORD REPORT 4/28/09

We have added 392 Pending Listings and lost 1,033 Active Listings in the last seven days. There are 3,432 AWC (active with contingecy) listings among the actives, of which 2,724 are short sales or pre-foreclosures.

The average $/SF (price per square foot) for pending listings is $88.87, which is one cent lower than last week and $1.77 higher than last month. The lowest reading of average $/SF for monthly sales was recorded on April 6. The lowest reading for monthly median sales price was recorded on April 21. Both of these are now moving sideways. We currently see a slower rate of trustee sales than at any time in the last 12 months. The 7,574 REO listings on ARMLS (Arizona Regional Multiple Listing Service) represent just 1.4 months supply at the current monthly REO sales rate.

Activity is increasing in the middle price ranges, but there is still an over-abundance of supply of luxury homes. In the price range under $150,000 demand now comfortably exceeds the supply.

- Mike Orr, The Cromford Report

Remember: GREEN is good!!

How to Size Up an Investment Property

When you're evaluating a potential property investment, it's important to consider the cash flow and ROI. Here's how.

By Chris Lombardi | May 2009

If you're thinking about buying your first real estate investment, there's good news. There are lots of good deals out there. But even if a deal looks to good to resist, you need to be sure you have a firm understanding of the two significant elements that determine profitability: cash flow and return on investment (ROI). Otherwise, it's very easy to misjudge just how profitable the property will be.

Expenses vs. Revenues

Cash flow is extremely important because it dictates whether the investment will cost you out-of-pocket money or put money back in your pocket on a monthly basis. To determine monthly cash flow, you must consider all expenses related to the property and then subtract this from the revenue being generated.

Finding the obvious expenses is pretty easy, but you may have to do some digging to uncover the not-so-obvious expenses. These line items are real and can significantly impact your monthly cash flow, so don’t leave anything out. They can include:

• Vacancy-rate impact
• Replacement equipment
• Maintenance
• Advertising
• Tenant repairs
• Payment delinquencies

After you subtract all expenses from the revenue, you’ll know whether you’ll be making money or paying money. You may ask yourself: Why would I involve myself in an investment that is going to cost me out-of-pocket money? This brings us to the next important variable when evaluating your real estate investment decision: return on investment (ROI).

What Is ROI, Anyway?

First, the technical definition: the rate of return based on an initial investment that generates a cash annuity for a specified time period. Now, in plain English: ROI is basically the money going out (including your initial investment) banked against the cash flow that the property will generate in a given amount of time. This creates a net cash flow stream, and your return percent is calculated off of this figure.

Keep in mind that when compiling these cash flows, you must include all expenses related to the property, and the revenue stream must include all monetary benefits derived from it as well. ROI is heavily determined by the initial investment, because that is most likely the largest cash outlay related to the investment. All other variables held constant within the same scenario dictate that the bigger the down payment, the less return you will have on the investment.

So a new question emerges: If my return is less, why would I put a larger amount down? You must consider the trade-off between the amount of the down payment and the monthly cash flow. The more you put down, the more likely you are to have a positive cash flow — the investment paying you dividends. There is a fine balance between cash flow and ROI. Depending on your current and future financial goals, you can determine the best scenario that suits your needs. In order to attain this balance, you must have the knowledge and skills to determine the best scenario.

Whether your goal is to generate an annuity stream, prepare for retirement or create a college fund, real estate investments can be an excellent place for your money, if you do it right. With interest rates at record lows, profitable inventory and opportunities throughout the nation, it may be time for you to invest in property.

Reprinted from REALTOR® Magazine, May 2009 with permission of the
NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.

4/23/09

Today's Topics:

• Lost Our Home Pet Foundation http://www.lostourhome.org/
• Market Update: The Cromford Report 4/21/09
  

LOST OUR HOME PET FOUNDATION

Dear Friends,

Nothing tugs at our hearts more than stories about families in trouble and, sadly, today we are hearing way too many of those sad stories. As families face the incredibly difficult trials of financial disaster, they often face the added emotional strains of being unable to care for their family pets. Unfortunately, as many families lose their homes to foreclosure and eviction, they are no longer able to deal with their family pets and some just leave their pets behind as they walk away from their homes.

Lost Our Homes Pet Foundation is a nonprofit group of real estate professionals who rescue pets left behind due to foreclosures or other financial hardship. I first learned about this organization when I read a recent article in the Arizona Republic. I was deeply touched by the commitment of these pet-loving volunteers.

My intent in sharing information about this wonderful organization was to let you know how you can help. But, a funny thing happened on my way to send this to you... I decided that I should put my money where my mouth is, and I stopped in the middle of writing to fill out an application to volunteer myself. I hope you will visit Lost Our Home's website to see what they do and to see what you, too, can do to help. Below are some suggestions for you...

How You Can Help Us

Volunteer:	This organization wouldn’t be possible without the help of our loyal and dedicated volunteers. If you’d like to lend a hand please click here to see how you can help.
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CROMFORD REPORT - 4/21/09

We have added about 500 Pending (Contracts in Escrow) Listings and lost 1,200 Active Listings in the last seven days. There are about 3,100 AWC (Active With Contingency) listings among the actives, of which some 2,500 are short sales.

The average $/SF (Price Per Square Foot) for pending listings is $88.88, which is higher than both last week and last month. The lowest reading of average $/SF for monthly sales was recorded on April 6. This measurement is now moving sideways to slightly higher.

We continue to see a slower rate of trustee sales. The 7,878 REO (Bank Owned) listings on ARMLS represent just 1.6 months supply at the current monthly sales rate.

- Mike Orr, The Cromford Report

Remember: GREEN is good!!

4/15/09

The number of residential home sales in March 2009 was the greatest since October 2005! In the first quarter of 2009, Arizona Regional Multiple Listing Service (ARMLS) residential home sales were up and, if sales continue at the current rate, could possibly go over 70,000 for the year. That's a significant jump from the 60,108 sales in 2008. While sales remain sluggish for higher end homes, the greater Phoenix housing market appears to be recovering for homes at the lower end of the price continuum.

Traditionally, the housing market is considered NORMAL when there is a six month supply of homes. When there is less than a six month supply, the market generally tilts towards a SELLER'S MARKET. As the supply of homes goes beyond six months, the market becomes more of a BUYER'S MARKET. Today, there is less than a six month supply for homes under $200,000 and homes in that price range are selling quickly and often at above list price. The supply of higher priced homes, on the other hand, continues to be high (especially in the luxury range of over $1,000,000). There are great opportunities out there for those looking to buy homes where there is the greatest supply.

While the news remains good for Buyers, sadly many homeowners are finding themselves in financial distress. The article below called Buying "TIME" gives excellent advice for those facing foreclosure. The most important thing to remember if you are in this difficult situation is to be pro-active, don't stick your head in the sand! There is help out there... just be cautious in your search for help, as there are many unscrupulous folks looking to take advantage of your situation. If you are in need of advice, I would be happy to help you find someone to help you address your foreclosure and loan modification options.

Warmest Regards,
Pook


Today's Topics:

• Market Update: The Cromford Report 4/14/09
  
• Buying "TIME" (Advice for the Seller who is facing foreclosure) - Article by Mildred Wilkins

Market Update: The Cromford Report - 4/14/09
We have over 13,000 Pending Listings in mid-April – over 1,000 higher than the largest number seen in 2005. There are another 2,803 AWC (Active With Contingency) listings, included in the active number above which continues to fall at an unprecedented rate. Many transactions are in escrow, as the sales figure struggles to catch up.

Average $/SF for pending listings is $88.32, which is higher than March 14’s reading of $87.75. This suggests that average $/SF pricing will not fall over the coming 30 days and may actually start to move higher. We see very little downward pricing pressure on properties under $150,000 and as these form the bulk of sales, the overall average $/SF for sales seems very unlikely to drop below $80.

We have seen a marked slowdown in trustee sales in the first half of April, although foreclosure notices still climb. The 9.083 REO listings on ARMLS represent just 1.7 months supply at the current monthly sales rate.

Buying "TIME"

By Mildred Wilkins, founder and president of Home Ownership Matters, LLC. She is the trainer for the (FIS) Foreclosure Intervention Specialist certification program.

Never before has the expression “If I could just buy some time” meant so much to people. When you are facing foreclosure you need time to discover your options, analyze your situation and implement an action plan. Your most precious commodity is time…And it’s running out.

When your money is running out…

You don’t have time to wait for the trickle down effect of the stimulus package to make a difference in your personal situation. While the package will make a significant difference over the long haul for thousands of Americans, anyone who thinks it is going to quickly make a difference for EVERY American is kidding themselves. Facing reality is hard, but necessary. As a country, we have ignored hard truths with disastrous consequences for too long. Nothing will be gained by continuing to point fingers. However, we must immediately recognize that each of us has a role to play in correcting the serious housing problem we face as a country. (Even if your home is paid off, FREE and CLEAR). The housing market holds the key to stabilizing our country, so anything we can do to keep people in their homes is a step in the right direction.

First things first...

DO NOT ABANDON YOUR HOME. Even when you are behind on your mortgage, no matter how far behind you are, DO NOT abandon your home until the entire legal process has been played out. You can stay in YOUR house until your right to possession has ended. Exactly when that time is will be determined by three (3) factors:

1. Type of foreclosure in your state: judicial or non-judicial
2. Whether you have a mortgage or a deed of trust
3. State statutes regarding sheriff or trustee sale and possession timeframes

Find out the answers to items 1, 2 and 3, and then abide by them. Make sure your lender abides by them as well. Things could improve while you are holding out. Hold on.

Things are changing radically and very quickly because of the magnitude of the housing problem. Your local courts could dramatically change the way they process pending foreclosures so that you have a chance to work things out with the lender. Stay in our home and fight for the chance to work things out. More banks are willing to work with borrowers today simply because they really can’t manage the huge backlog of homes which have already been lost to foreclosure. If you can present a viable plan, your chances of retaining home ownership are pretty good.

Second things second…

I know you know that, but I needed to get your attention. Probably the second most valuable thing anyone will ever tell you to do to save your home from foreclosure is to:

1. Demand the lender or servicer who is threatening to sue you for foreclosure produce the original note/deed of trust which says you owe them. In legal terms you are asking them to demonstrate that they are the “real party of interest.” In common language that means, prove I owe you. Prove you have the right to demand payments from me.

2. The most effective way to demand this documentation is with a “qualified written request.” You are entitled to request that and any other information you want which is related to servicing on your loan (any mortgage loan in the United States) under federal RESPA regulations.

What Choices do I have?

Let’s consider the answer to that question. It is critical that you start with an honest inventory of your situation. How far behind are you? Do you have the resources to resume payments? If not now, when will you be able to do so? What do you want to do? What are you ABLE to do? Why should the bank consider your proposal? You’ll need to able to defend it as being reasonable, based on your current circumstances.

Space in this article will not allow me to go into detail but I will provide you with the options you can consider. Do further research on each of them, online, in the library, on websites such as HomeOwnershipMatters.com Or at the blog: HomeOwnershipMatters.blogspot.com.

a. Options to keep the house—special forbearance, loan modification or a partial claim. You need to learn what each of these means and how it works

b. Options to let the house go—short sale, assumption or deed-in-lieu. All of these options are better than foreclosure but you need to know exactly how they work to avoid creating yet another problem for yourself down the road.

c. Reverse mortgage could be considered, it could be your solution. Be sure to use a government backed reverse mortgage if you decide to use this option.

d. Receiving disability payments (if you have a claim pending) could make the difference. Hold on until you know what you will be receiving

e. Acquiring a roommate could change your finances—get started working on it (I mean a roommate who will PAY—not one who will add to your expenses)

f. Selling unnecessary items in order to cover the gap until you get a permanent solution. Ebay or Craigslist could bring in some immediate cash. (Stop crying—we are trying to save your home and Buy “T I M E”).

g. Some other solution which has not even occurred to me

“Answer” the summons

The summons is your official notification that the lender has moved to legal action. The court notifies you via the “summons”. Your response should be to the clerk of the courts, the lender/servicer and their attorney. It is critical that your answer be received within the legally stipulated timeframe in your state. It is strongly recommended that the answer be sent by certified mail, with a signature required. This is a task which you can handle on your own, with a little coaching.

Basically, an answer should acknowledge that you are aware of your situation and that you are working with the lender on a plan. Specify what that plan entails. If you are challenging whether or not the lender has the legal right to foreclose (due to failure to produce the original note or demonstrate that they are the “real party of interest”) this is your time to say so. The foreclosure is likely to be stalled based on the quality of a timely, well prepared “answer.”

3/25/09

Today's Topics:

• Market Update: The Cromford Report 3/24/09

• 5 Steps to a Successful Refinance
  

Properties are selling! Whether you're ready to make a purchase or planning on staying right where you are, the news is good. Pending sales are up, as first-time buyers, people planning to move up or down-size, and investors are taking advantage of low prices and low interest rates. And, for those who want to stay where they are, this is a great time to refinance.


Market Update: The Cromford Report 3/24/09

The number of Pending Listings is now higher than at any time since June 30, 2005. The highest number ever was 12,137, seen on April 25, 2005. We are within 1,000 of this record. The Sales per Month figure is also building nicely and the listing success rate is also climbing. The listing success rate for REOs is now over 75%.

According to the affidavits filed with Maricopa County, over 21% of single family and condo purchases are currently being made by investors, up from 18% a month ago and much higher than the 9% we saw in September 2008.

All this demand growth must have an effect and we are seeing signs of a slow-down in price declines in a few parts of the valley, particularly in the last two weeks.

5 Steps to a Successful Refinance
Click above to read this informative article from Bankrate.com.

Highlights

• Finding the right lender crucial to keeping closing costs down.
• Documentation of finances more important than it used to be.
• Many borrowers limited to FHA-backed mortgages.

This is a great time to refinance, but know that there are many, many people doing it right now and it might take you a while to even get through to your lender. Be patient, be prepared, and go for it!

3/3/09

Today's Topics:

• Market Update: The Cromford Report 3/3/09
• $8,000 Tax Credit for New Home Purchases
  
• Getting Pre-Qualified for a Mortgage
  

Market Update: The Cromford Report 3/3/09
The current greater Phoenix market is doing much better than media reports would lead you to believe. For example, if you look at the chart below, you will see that there are less Active Listings and more Pending Listings (homes with contracts) and Closed Contracts than last month, the previous month, and last year. Currently, there is an 8.8 month supply of homes, compared to an 11 month supply last month and a 16.6 month supply a year ago.

The green arrows indicate good news... the red, not so good.

Sales volume rebounded as expected in February and is now nearly 70% higher than at the same time last year. Pending listings are extremely high, with the year-on-year growth setting an all time record of 89.8%. Active listings are falling steadily. What’s not to like about this picture? Surprisingly, Market Distress peaked in February and is now starting to fall. All these indicate the market is improving and is now very much in recovery mode. However pricing will almost certainly be the last indicator to turn round, and there is no trace of a bottom to be found in the monthly sales $/SF or median sales price numbers, with both of these showing 50% drop in the last 2 years. However average asking price $/SF has dropped less than 20%.

The main positive action is concentrated in the very low and low priced segments of the market. The higher priced sections of the market are still suffering from low demand and high inventory with only small signs of improvement. The number of active REO listings is falling quite sharply and normal active listings are also down, but short sales and pre-foreclosures are up slightly.

$8,000 Tax Credit for New Home Purchases
In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers. "First-time" doesn't necessarily mean you've never owned a house before. In fact, for the purpose of this tax credit, you are considered a first-time buyer if you (or your spouse) haven't owned your own home during the three-year period prior to the purchase. In brief,

• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

While there are income and other restrictions on who can receive this tax credit, it's a GREAT DEAL if you qualify and you should take the time to check it out. Visit the site below for in-depth information on the tax credit.

http://www.federalhousingtaxcredit.com/2009/home2.html


Getting Pre-Qualified for a Mortgage
If you're starting to think that this is the right time to buy a home, the first thing you want to do is contact a lender to get pre-qualified for a loan. This will give you an idea of how much of a loan you can afford and what price range you should be considering. If you don't have a lender that you are currently working with, you can find the names of several great loan officers at my website.

Today it is common practice to present a Loan Status Report (LSR) with an offer. The LSR is the document you will receive when you get pre-qualified for a loan.

If you are one of those lucky folks who wants to buy a home with cash, remember that you will need to show "proof of funds" when making an offer.

2/27/09

Today's Topics:

• $75 Billion Plan to Fight Home Foreclosure
• The New Stimulus Bill

NY TIMES:
Obama Unveils $75 Billion Plan to fight Foreclosure
http://www.nytimes.com/2009/02/19/business/19housing.html?_r=1&nl=pol&emc=pola1

CNN:
Republicans, analysts question Obama's foreclosure plan...
http://www.cnn.com/2009/POLITICS/02/18/foreclosure.plan/index.html?iref=mpstoryview

Track your tax dollars on stimulus bill Web site...
http://www.cnn.com/2009/TECH/02/18/stimulus.web.site/index.html

MSNBC:
How the stimulus bill affects you.
http://articles.moneycentral.msn.com/Investing/Extra/how-the-stimulus-bill-could-affect-you.aspx

1/15/09

Today's Topics:

• FHA Loans
• An Optimistic Investing Approach in 2009

As I have been saying for quite some time now, this is a great time to buy a home. Dropping prices, a large inventory of homes, and low interest rates have created a unique opportunity for those who are ready to buy. And, for those who are staying in their current homes, now is the perfect time to refinance. Read on for valuable information for the New Year...

FHA LOANS
Thanks to Sandy Richards of The Richland Group at CFS Mortgage for the following information regarding
FHA loans:

FHA (Federal Housing Administration) is a part of HUD (Housing and Urban Development) and insures home loans for lenders so that borrowers can get better rates, low down payment, low closing costs and easy credit qualifying.

Currently, FHA loans require 3.5% down for a purchase and 1.75% of the loan amount for Up Front Mortgage Insurance. In addition, there is a factor of .55 per month for monthly mortgage insurance.
Here is an example:

Purchase price: $200,000
Down Payment: -7000
Base loan amount $193,000
Up Front MIP 3377
Total loan amount: $196,377 5.25% rate Principal & Interest payment: $1084
5.964% APR includes mortgage insurance in calculation, no points

Some of the great aspects of FHA are the acceptance of gift funds from a relative for down payment and/or closing costs and they allow 6% of the purchase price as seller contribution towards settlement costs.

FHA wants to see a two year consistent job history in the same line of work. They will allow college to serve as part of that as long as borrower can provide degree that is related to current employment.

FHA will also allow lower FICO scores, usually down to a 620 mid score. Bankruptcy needs to have been discharged at least three years prior to obtaining a new FHA loan. This also applies to foreclosure, short sale and a Deed in Lieu of Foreclosure. Borrower will need to have re-established credit after any of these events listed.

There are also FHA loans that will help borrowers who are purchasing homes that need to be rehabilitated. The first type will allow for small items such as paint, appliances and flooring. If there is anything beyond this sort of rehab, there is a loan available but is quite extensive, similar to a construction loan so contact an experience FHA loan consultant for more details on this loan.

FHA also allows for refinances of many sorts, but he most popular for borrowers is the Streamline Refinance which does not require an appraisal. The costs are capped are minimal to borrower and the loan is very easy to do. There may be circumstances that prevent this loan from being done, in which a Streamline with appraisal and credit can be done, or if the borrower has equity and wants to take cash out to pay debt, there is a full FHA refinance loan that is available.

The best way to see if an FHA loan is right for you or someone you know is to speak to an experience FHA loan consultant. For more information, you can contact me, Sandy Richards at 602.999.2406.


AN OPTIMISTIC INVESTING APPROACH IN 2009
RISMEDIA, January 12, 2009-If you're like most folks, you're entering 2009 clutching your wallet, keeping an anxious eye on your stock portfolio, and bracing yourself for the next dose of economic bad news that's surely coming down the pike. Yes, if you believe everything you hear and read, we're heading straight for financial apocalypse. But what if you decided to opt out of the doom & gloom club? What if, instead, you decided to look for treasure hidden amid the ruins? Choose the latter approach in 2009, says financial expert Eric Tyson, and you'll open yourself up to some great investment opportunities.

"Unfortunately, most often, you can find only the worst case scenario in the nightly news," says Tyson, author of Investing For Dummies®, 5th Edition (Wiley, 2008, ISBN: 978-0-470-28965-5, $21.99) and coauthor along with Robert Griswold of the upcoming Real Estate Investing For Dummies®, 2nd Edition (Wiley, March 2009, ISBN: 978-0-470-28966-2, $21.99). "That's because bad news sells. What you aren't hearing or seeing is that 2009 will bring some great investment opportunities in two areas you might not expect-real estate and the stock market. You simply need to change your perspective a bit."

In other words, by taking an optimistic investing approach during the upcoming year, you can actually profit from the sluggish economy.

Tyson explains how:

1. Take advantage of low prices… Instead of looking at deflated housing and stock values as a bad thing, look at them as opportunity makers. Because prices have fallen, these investments are more affordable and you can buy now and watch current values increase over time. Take real estate, for example. Recent data out from the National Association of Realtors (NAR) shows that their home affordability index (HAI) is at the best level in more than three decades. The current HAI value of 141.8 means that a family earning the national median family income has 141.8% of the income necessary to qualify for a conventional loan covering 80% of a median-priced existing single-family home. So if you have good credit and can put down at least 10-20% of the price, investing in real estate is actually more viable an investment than it has been in years.

"The same is true of stock prices," says Tyson. "Because of the downturn, many strong companies have stocks that are undervalued. If you buy these stocks now, as the market stabilizes and things improve, values will increase and your portfolio will be the benefactor."

2. …But look before you leap. In other words, do your due diligence before you plunk down the cash, says Tyson. Some companies' stocks are low for a reason. Before choosing which companies you would like to invest in, you have to do the research and make sure that they are fundamentally strong. Where real estate is concerned, there are still areas where properties are overvalued-parts of the Pacific Northwest, for example-so you'll have to do the research to make sure you buy in an area where prices have already fallen in line with market fundamentals.

"These caveats are just reminders that you shouldn't go into any investment without doing your homework first," says Tyson. "Making irresponsible investment decisions is what created the problems we are having. By researching your options, you will be able to make sounder, more profitable decisions."

3. Be careful where you get your advice. Misinformation abounds. There are a lot of pundits and so-called financial experts out there who are giving questionable advice and are making terrible predictions, says Tyson. What's more, their past track records indicate that we should take their words with a substantial grain of salt.

"Financial pundits are a dime a dozen right now," says Tyson. "Be very careful about whose advice you follow and whose economic predictions you buy into. For what it's worth, two experts I do respect are professors Burton Malkiel, author of the classic A Random Walk Down Wall Street, and Jeremy Siegel, author of the excellent Stocks for the Long Run. Their work and books have stood the test of time-decades, not months or years-and I know I've profited handsomely from things I've learned from them."

4. Keep thinking long-term. If you make investments thinking you are going to see quick returns, you will be disappointed. Where real estate is concerned, the days of buy it, flip it, and sell it quickly for a huge profit are over. What you can do is buy property now-particularly in areas where it's now properly valued and even undervalued-and watch its value accrue over time as the market stabilizes and improves. You should take the same approach to any stock investments you make.

"It might be tempting to want to time the markets, but just because you get one market turn right doesn't mean you'll see the next one coming," notes Tyson. "Even the best investors make mistakes, some of them huge ones, regarding future timing moves. When it comes to stock investments, slow and steady wins the race."

"It's true that 2008 was a sobering year," admits Tyson. "And now we hear from many pundits and experts that the upcoming one could be as bad or even worse. But if you invest calmly and rationally, rather than reacting emotionally, 2009 can be remembered as the year you made some smart, long-term financial decisions. I think if you take advantage of what's going on in the real estate and stock markets right now, you could be setting yourself up for a very profitable future."

Eric Tyson, MBA, is one of the nation's best-selling personal finance book authors and has penned five national bestsellers (he is also the only author to have four of his books simultaneously on BusinessWeek's business book bestseller list).

For more information, visit www.erictyson.com.

If you haven't visited pookbellini.com lately, please do! In addition to great real estate information, you'll find some helpful links there:

* Arizona Department of Education
* Arizona Golf
* Arizona Guide
* Arizona Hiking
* Cactus League Baseball
* Community Links
* Current Gasoline Prices
* Current Road Conditions

***** GO CARDS!! *****
Game time: Sunday, January 18th at 1:00

Warmest Regards,
Pook