6 Factors to Consider When Pricing Your Home

Source:  Steve Harney / Keeping Current Matters (5/11/10)

If you currently have your house on the market or you are considering selling it in the near future, make sure you find a local real estate professional. Request them to explain each of the following points and how they apply to your region or neighborhood. You will be better prepared to determine the best option for you and your family once you have this information.

1. Demand for a Particular Type of House

We realize each home has a unique value based on its amenities; however, buyers look at certain basic requirements (ex. style, number of bedrooms, school district, and proximity to mass transit). You should look at your home and see which category it would fall into. For example, you might have a 4 bedroom colonial in a certain school district. Ask the real estate person you are working with to give you a list of the homes in this category that have sold in the last six months. This will give you an accurate depiction of what homes like yours are actually selling for.

But don’t stop there. Take the six month number and divide it by six. That will help you determine the approximate number of buyers that will purchase a home like yours each month.  Then go to the next step.

2. Supply of a Particular Type of House

Have the agent prepare a list of all houses like yours currently on the market. Divide that number by the number of monthly buyers you determined above. That will give you the month’s supply of inventory of available homes like yours. (Example: 24 buyers in the last six months divided by 6 months equals 4 buyers a month. There are currently 40 homes like yours for sale so divide that number by the 4 buyers per month that buy which equals 10 months supply.)

Once you have that number, you can put the principle of supply and demand into play. In real estate:

• 1-4 month’s supply constitutes a seller’s market where prices have a good chance to appreciate
• 5-6 month’s supply constitutes a normal market with stable prices.
• 7+ month’s supply constitutes a buyer’s market where prices have a good chance to depreciate

Now take the average price of houses like yours that sold in the last six months and adjust that price depending on which market you are selling in.

• If it is a normal market, list your home at the average price.
• If it is a seller’s market, add 10% to the average price and start there.
• If it is a buyer’s market, deduct 10% from the average price. (Remember, in a buyer’s market there is an excess of inventory supply. That will mean homes will depreciate.)

All of the information above should be readily available to your local real estate professional. They will be ready to share this with you if you ask them to prepare a Comparable Market Analysis (CMA) on your home.

You now have a good idea regarding today’s value of your home. However, do not allow your agent to stop there. Other factors will impact the price at which your home will sell. Let’s go over them now.

3. Interest Rates

The interest environment has a major impact on home values. The demand for housing increases when rates are low or falling. The demand for housing weakens when rates are high or rising.

Rates are at historic lows today. However, most experts expect rates to climb steadily throughout 2010. As they rise, buyers will be eliminated because they will be priced out of the market. Others will have to buy a home for a lesser price in order to keep the mortgage payment within their monthly budget.

Simply put, there will be a downward pressure on prices as rates increase.

4. Employment Rates

Regional unemployment rates are an interesting dynamic when pricing residential real estate. A person without a job obviously can’t buy a home, so areas with high unemployment have less potential purchasers.

There is also another interesting effect the local job situation can have. If the unemployment rate is rising quickly, many people refrain from making big ticket purchasers out of a fear that they might be next. If you are in an area where the unemployment rate has risen lately, the demand for housing will have fallen. That change in demand will impact prices in a negative way.

5. Foreclosures In the Area

We believe that this factor will impact housing values the most in 2010. We define this ‘shadow inventory’ as the number of foreclosures currently held in banks’ inventories, the number of homeowners seriously delinquent on their mortgage payments (potential foreclosures), and the number of borrowers willing to ‘walk away’ from their mortgage obligations.

There will be a dramatic effect on home prices. When and to what degree these discounted properties will be released to the market will determine the severity of the impact.

6. Consumer Confidence

All of the above factors combined will determine whether the American people have an appetite for real estate. The factors will also determine at what price points purchasers will enter the market. If the real estate market seems to be gaining traction, people will buy. If it seems to be about to take a ‘double-dip’, the purchasers will retreat to the sidelines. The next couple of months will shed light on this factor.

First Time Home Buyer Tax Credit is Still Available... For Veterans

Source:  Michael McDermott, Mortgage Planner

PrimeLending, a PlainsCapital Company

While the Homebuyer Tax Credit has officially come to an end for most, there is an exception that most are unaware of.  For some veterans, the $8,000 tax credit is still very much alive.  Members that have been deployed for at least 90 days between January 1st of 2009 and May 1st of 2010 have been granted an extension until April 30th of 2011 to sign a purchase contract.  The tax credit is identical to the one we are all familiar with.  The tax credit is equal to 10% of the purchase price with a max credit of $8,000 and the buyer must close by June 30th of 2011.

New HAFA Program for Homeowners Hoping to Avoid Foreclosure

Back in February, I wrote about Short Sales and covered the following topics: 

• Are you underwater? 
• What is a Short Sale?
• New Arizona Short Sale Seller's Advisory.

Today I am providing information on the new HAFA (Home Affordable Foreclosure Alternatives) program that began on April 5, 2010 as a follow-up to that previous posting.  The new HAFA program is intended to make the Short Sale process easier, for those who qualify.  If you would like to revisit my earlier information about Short Sales, it is available at my blog, Pook's E-News.  Here is a direct link to that posting:  http://pook-enews.blogspot.com/2010/02/todays-topics-are-you-underwaterwhat-is.html

The following is offered for informational purposes only.  It is not offered as legal advice.  

New HAFA Program for Homeowners Hoping to Avoid Foreclosure

Source:   http://makinghomeaffordable.gov/hafa.html

Home Affordable Foreclosure Alternatives (HAFA) Program

Many homeowners may feel that they can no longer afford their home, but want to avoid the negative effects of foreclosure. The Home Affordable Foreclosure Alternatives (HAFA) Program offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure. With these options, under HAFA, a homeowner leaves their home to transition to more affordable housing and alleviate the mortgage debt they owe. These options are available for homeowners who: 1. do not qualify for a trial mortgage modification under the Making Home Affordable Program; 2. do not successfully complete the trial period for their modification; 3. miss at least two consecutive payments during their modification period; or 4. request a short sale or deed-in-lieu of foreclosure.  Short Sale In a short sale, the servicer allows the homeowner to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage.   Deed-in-Lieu of Foreclosure Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a deed-in-lieu of foreclosure. With a deed-in-lieu, the borrower voluntarily transfers ownership of the property to the servicer— provided the title is free and clear of mortgages, liens, and encumbrances. The HAFA Program streamlines both of these options to make them easier for a homeowner to work with their servicer. Under the program, a homeowner can receive $3,000 to help with relocation costs. Mortgage servicers and investors write their own guidelines under the Federal requirements to determine how to implement the program. For more information about your options, you should contact your mortgage servicer. If you have questions about the program, or want guidance about how these options may impact your personal situation, you may wish to speak to a HUD-approved housing counselor for free. Your Graceful Exit Watch a video to learn more about the Home Affordable Foreclosure Alternatives Program. Making Home Affordable and Other Options to Remain in Your Home Mortgage servicers who participate in the Making Home Affordable Program are required to evaluate homeowners for a Home Affordable Modification before evaluating them for other options.  If you request a modification from your mortgage servicer, and are determined to be eligible, you will enter into a trial period plan.  If it is determined that you are not eligible for a Home Affordable Modification, your mortgage servicer will evaluate you for other alternatives they offer to keep you in your home, such as their own modification programs or a forbearance. A HUD-approved housing counselor can work with you for free to help you understand your options. Avoid Foreclosure: Know Your Options Watch a video to learn more about the Making Home Affordable Program and other options your mortgage servicer may provide. › Frequently Asked Questions

Beware of Foreclosure Rescue Scams - Help Is Free!

• There is never a fee to get assistance or information about Making Home Affordable from your lender or a HUD-approved housing counselor.
• Beware of any person or organization that asks you to pay a fee in exchange for housing counseling services or modification of a delinquent loan. Do not pay - walk away!
• Beware of anyone who says they can “save” your home if you sign or transfer over the deed to your house. Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.
• Never submit your mortgage payments to anyone other than your mortgage company without their approval.

The Obama Administration has launched a coordinated effort across federal and state government and the private sector to target mortgage loan modification fraud and foreclosure rescue scams that threaten to hurt American homeowners and prevent them from getting the help they need during these challenging times.  Click here for more information.

If you are facing foreclosure and are considering a Short Sale or Deed-in-Lieu of foreclosure, it is extremely important that you get professional legal and tax advice.

Understanding Capital Gains in Real Estate

Source:  REALTOR®Mag (National Association of REALTORS®)

When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:

1. Purchase price: _______________________

The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.


2. Total adjustments: _ ______________________

To calculate this, add the following:

• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. Your home’s adjusted cost basis: _______________________

The total of your purchase price and adjustments is the adjusted cost basis of your home.

4. Your capital gain: _______________________

Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.

A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

You have lived in the home as your principal residence for two out of the last five years.

You have not sold or exchanged another home during the two years preceding the sale.

You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

Website Update

I'm very excited about the newest additions to my website, pookbellini.com, and hope you will take a moment to visit and discover all of the features that make it a one-stop portal for local information.

IDX Property Search - Allows you to search the entire inventory of properties available on ARMLS (Arizona Regional Multiple Listing Service) right from my website.  It's quick and easy to do.  Simply enter a City, Zip or an MLS # to start your search.  Select property type, price range, and the features you want to search for. 

Community Happenings - Links to your favorite Arizona sports teams and information about special events (festivals, car shows, art fairs, and more).  Feel free to contact me with news of an event you would like to see posted.

Community Information - Links to...

• Arizona Department of Education
• Arizona Golf
• Arizona Guide
• Arizona Hiking
• Cactus League Baseball
• Current Gasoline Prices
• Current Road Conditions
• Movie Theaters
  
• Phoenix Convention and Visitors Bureau
• Scottsdale Convention and Visitors Bureau

Seller Information
Buyer Information

Arizona Appliance Credit Begins April 12th

The State of Arizona will implement a mail-in rebate program to help residents replace older, inefficient appliances with ENERGY STAR^® qualified appliances. The program begins Monday, April 12th and will last until funds are depleted.  There are an estimated 35,000 rebates available in Arizona's $6.2 million program. You must register for the rebate (starting at 6:00 a.m. on Monday) before making your purchase.  You can call (877-307-5336) or sign up online (www.arizonarebates.com).  Based on what has happened in other states, it is expected that all rebate funds will be exhausted before the day is over.  Although on the news they are saying that stores are having big sales and expect people to be lined up to make purchases, many folks may not be aware that they need to have the rebate before shopping.  According the a report in the Arizona Republic, a purchase must be made within a couple of weeks of getting the rebate or the rebate opportunity will be turned over to someone else. 

Eligible products include:

• Clothes washers
• Dishwashers
• Water heaters

New appliances must replace older existing appliances and must be bought in a store in Arizona.  Rebates vary based on the appliances' efficiency levels. Rebate claims must be made within 14 days of purchase. Arizona encourages residents to recycle the old appliances.

Before purchasing a product, check to ensure rebates are available, and to confirm product eligibility and program requirements. Products purchased must meet efficiency criteria as established by the state.

Deadline Nearing for First-Time Homebuyer Tax Credit

Time is running out to take advantage of the First-Time Homebuyer Tax Credit. New homebuyers (anyone who hasn't owned a home in the past 3 years) may qualify for a tax credit of up to $8,000. Current homeowners may qualify for a tax credit of up to $6,500. Purchases must be made by April 30, 2010 and must close by June 30, 2010. Click HERE for more information.