HAVE A QUESTION FOR RICK? JUST CLICK Contact Rick & Mike


Why Are Short Sales So Troublesome?

Short sales seem like a win-win for everyone involved, but as real estate professionals know, short sales can be hard to pull off. It can take months for the mortgage company to respond to an offer, and the lender or lenders often balk at the price.

Why doesn’t the process go more smoothly when it seems like a much better deal for everyone than foreclosure?

Paperwork. Gathering all the information needed to evaluate a short-sale offer can take time, says Patrick Carey, an executive vice president with Wells Fargo. The loan servicer must first determine whether the homeowner really can't continue meeting the loan payments, then get an appraisal or broker's opinion of the home's value.
Many steps, approvals. Mortgage servicers also try to ensure that the proposed sale is an "arm's length" transaction between two parties rather than something like a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan and provide an analysis showing that the investor will be better off with a short sale than with another solution.
Complications often arise. There are additional complications if the borrower has a mortgage and a home-equity loan. In that case, both parties must approve the deal – which is a challenge when the sales price may not even be enough to cover the mortgage balance.
Minimize delays. Carey suggests that home owners contemplating a short sale immediately call the loan servicer to get the approval process started, rather than wait for an offer.

Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (04/17/2008)
________________________



What are the differences between a condominium, a townhouse and a co-op?

A townhouse is a style of construction, whereas condominium and co-op are types of ownership. A townhouse is basically a building or unit that shares a common wall with the building or unit next door. The walls are usually straight and entry is usually from the ground floor. Townhouses usually have two or more stories. A townhouse can be a style of condominium.

A condo is where you own the actual structure of the building jointly with the other members of the association, along with common areas such as swimming pools, tennis courts or other common areas. Individually, you own the airspace and interior of the structure, but not the building itself. You and the other members of the association own the structure together.

A co-op is where you own shares of a corporation or organization that owns the larger structure, and ownership of those shares gives you the right to occupy a specific unit or apartment.
__________________________



WHAT IS A 1031 EXCHANGE?

A 1031 Exchange is a transaction in which a taxpayer is allowed to sell one property and buy another without a tax consequence. This can be done through a Simultaneous or Delayed 1031 Exchange. The transaction is authorized by 1031 of the Internal Revenue Code. It is the best strategy for the deferral of capital gains tax that would ordinarily arise from the sale of real estate held for investment or business purposes.
A sucessful exchange results in the taxpayer being able to utilize 100% of the proceeds from the sale of property to purchase a new property, thereby deferring the capital gains taxes and sometimes even more importantly, avoiding the recapture of depreciation. Real Estate owners can accomplish virtually any investment objective with 1031 Exchanges including greater leverage, diversification, improved cash flow, geographic relocation, and/or property consolidation.
To avoid the payment of capital gain taxes, the Exchanger should follow three general rules:

1. Purchase replacement property that is the same or greater value as the relinquished property.
2. Reinvest all of the exchange equity into the replacement property.
3. Obtain the same or greater debt on the replacement property as on the relinquished property. The Exchanger can offset the amount of debt obtained on the replacement property by putting the equivalent amount of additional cash into the exchange.

Section 1031 offers a number of opportunitities because of its flexibility. Nevertheless, tax cases have consistently indicated that the required documentation (along with the procedures for implementing a deferred realty exchange) must be, in the words of the courts, "bulletproof" in order to avoid problems at an IRS audit.

- RealtorEdge, January 2007
_________________________



8 TIPS FOR HOUSE HUNTING ON VACATION

Lounging at the pool. Reading the novel of the summer. Maybe throwing back a few Mai Tais and...checking out the local real estate market? That's no way to spend a vacation, many will say, but it may not be such a crazy idea.

If you're considering buying a second home, do your homework before you ever pack your bags, then use your trip to decide if this corner of paradise is really for you. Your vacation costs won't be tax-deductible - house-hunting expenses were ruled out as a deduction years ago - but you'll save money by avoiding repeat visits and by making a more-educated buy.

Here are four things you should do before you leave for vacation this year, and four things to do when you're already there.

Before you go: Figure out your motivation. Most second-home buyers want a vacation spot, an investment property, a retirement home, or some combination of all three. Before you begin to scout sites, you need to figure out your vision and consider whether home No. 2 is a realistic fit for your lifestyle.

Find a real estate agent. For potential home buyers, connecting with a good agent is critical. But if you wait to set an appointment with an agent until after you're already on vacation, you may be out of luck. In such popular spots as South Florida, real estate agents often hesitate to spend time with vacationers for fear that they'll only serve as glorified tour guides. "Don't get annoyed when (agents) won't drop what they're doing and take you out on a sales call blindly," says Christine Hrib Karpinski, author. "Remember, she explains, "Thousands of other (tourists) had that same thought." To avoid hassles, begin a dialogue with a real estate agent ahead of time.

Get mortgage preapproval. By doing the paperwork to get lender preapproval, you'll get your financial house in order and decide on the down payment and monthly mortgage payment you can afford. Although you may be counting on rental income to pay for a sizable chunk of your mortgage, don't get in over your head, says Truett. "It's like any other investment: Make sure you're willing to take short-term loss in rentals."

Think about taxes. How you use your second home will determine its impact on your taxes.

While you're there, scout out the hospitals, the restaurants and the grocery stores, too, and make sure that the place offers enough of what you love to keep your interest over the long haul. Another factor is proximity to tourist attractions.

Talk to locals. You may have been vacationing in the same place since you were a kid, but you still probably have no idea what it's like off-season - a particularly relevant point if you're hoping to rent your place. Strike up conversations or ask your real estate agent for real-people referrals.

Ask your real estate agent about the vacation rental market in addition to local home values.

Crunch the numbers again. Visit a few on-the-market homes to see what is available in your price range, keeping in mind how you intend to use the home. For example, if you want to rent it our, granite countertops may pale in importance next to a pool.

When you find something you like, think about big-picture numbers: Beyond the down payment, monthly mortgage payments and taxes, you'll need to factor in about 2 percent of the price of your home for for yearly maintenance costs, such as repairs for a recalcitrant water heater, lawn care (in Florida it's year round) plus another $5,000 to $15,000 for furnishings (costs may be less for condos).

You may also find that insurance is pricier than what you're used to. For instance, hurricane insurance for a beachfront home in Florida could run up to $4,000 a year. "Do the numbers work," says Hehman. "The last thing you want to do is sweat about how much it's costing you to own this property."

Although you don't want to spend your whole vacation thinking about real estate, doing a little legwork can pay off. And if all goes well, you'll be seeing a lot more of your piece of paradise in the future. Source: 2005 Bankrate.com.
________________________


CREDIT SCORE FACTS & FALLACIES

Fallacy: My score determines whether or not I get credit.

Fact: Lenders use a number of facts to make credit decisions, including your income, your employment history and your credit history. Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request for credit although your score is high.

Fallacy: A poor score will haunt me forever.

Fact: Just the opposite is true. A score is a "snapshot" of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve your score, you can qualify for more favorable interest rates.

Fallacy: Credit scoring is unfair to minorities.

Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. in fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.

Fallacy: Credit scoring infringes on my privacy.

Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.

Fallacy: My score will drop if I apply for new credit.

Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

What to know about "rate shopping."

Looking for a mortgage or an auto loan may cause multiple lenders to request your credit report, even though you're only looking for one loan. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry. In addition, the score ignores all mortgage and auto inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping.