Tag Archives: investment

Wayback Wednesday… Title Insurance…

Wednesday, 14 September 2011 08:00

Written by Lane Bailey

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Abraham Lincoln, the sixteenth President of th...

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A couple of years ago I wrote a quick little primer on Title Insurance. (Check out the link for more details…) Title Insurance is one of the subjects I am questioned about regularly… even by buyers that have previously purchased 3 or 4 homes.

It can be confusing… there are two distinct flavors of Title Insurance, Owner’s and Lender’s. And while sitting at the closing table, buyers are usually paying for a pant-load of other items. Sometimes they draw a line and decide that skipping the Owner’s policy is a way to avoid spending another few hundred dollars. Other times, they just give in and spend the money without knowing what they are buying.

Neither of those situations are good for the buyer. Some buyers ABSOLUTELY need to have Owner’s Title Insurance. For others, it is a luxury, or even a waste. (Sorry, but if you have a loan, you WILL be paying for Lender’s Title Insurance… they will require it, and despite the fact that you won’t benefit, you get to pay for it).

Of course, I would be remiss if I didn’t remind you that I am not a lawyer, and I don’t even play one on TV. You should always ask your attorney about the legal ramifications of a decision like this. But keep in mind, the closing attorney is selling the insurance product, and they DO make money from it. Some of the closing attorneys I have worked with have flat out told buyers that they would NOT answer questions about the suitability of the insurance product because of their conflict of interest.

Wayback Wednesday… Dirty Little Secrets… (lanebailey.com)
Wayback Wednesday… Buyers and Sellers, Same Advice… (lanebailey.com)
Wayback Wednesday… The Dirty Little Secret… (lanebailey.com)

Wayback Wednesday… An Oldy, but a Moldy

Wednesday, 07 September 2011 08:58

Written by Lane Bailey

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Poor mold. People are trying to save the whales and bring back the Dodo Bird, but most everyone would be happy is mold were extinct. But it isn’t… Mold is alive and kicking, and more of a problem than ever. And it usually hangs out with some other unsavory characters, Rot and Termites (that are all followers of Moisture).

A couple of years ago I was involved with a moldy property and I learned a few things. I posted up some good information about Mold, where to find it and how big of an issue it can be. And it can be a REALLY BIG problem.

Of course, it wasn’t my first run in with the stuff. Back when I was a reasonably new real estate agent in Gwinnett County, GA, I worked with one of my investor clients on a property that had some pretty significant mold issues.

Real estate prices were crashing around it. The previous owner had custom built the house, and it was pretty obvious that either they really didn’t have “builder” experience (as opposed to “building” experience), or they ran out of money partway through the project. The whole “builder v building” experience thing is another post someday, though.

The homes was large and had wonderful high ceilings, a large garage, nice flow patterns and was well sited on the lot. But, in this luxury home in a subdivision that had homes worth as much as a million dollars, there were no crown mouldings, no granite counters and cabinets that looked like stockers from Home Depot (not knocking HD, but the house deserved at least semi-custom cabinetry).

But the basement was where our story was… It was nasty. The home had been unoccupied for at least 9 months and was loaded with mold. We knew that the HVAC was going to have to be changed… it would be cheaper than cleaning it out. But the basement was almost beyond salvation. The solution was to gut it and leave it unfinished. It had been finished, and was pretty well finished, but was going to have to be “unfinished” in order to remediate the mold problems. All of the drywall was junk… and we also knew that some of the structural wood would need to be replaced. Most importantly, we knew that it would need to spend a good long time with proper airflow.

The bank that repossessed the house had DESTROYED their collateral by turning off the power. Because the HVAC wasn’t running for those 9 months, the bank likely saved about $3000. But in saving that $3000, the value of the home likely dropped by $200,000. Not a good trade… The house should have been able to sell for $500,000, but instead barely managed to bring $300,000. Of course, the bank wasn’t real bright anyway… they turned down our offer at one point, and then lowered the price to our offer less than two weeks later.

Gwinnett County Homestretch… Again…

Friday, 26 August 2011 08:00

Written by Lane Bailey

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I wrote a post a few months ago about the Gwinnett County Homestretch Program. It is a REALLY cool program for buyers with qualified incomes. The actual caps change regularly, but follow HUD limits. Buyers also have to go through a financial counseling class.

But the end result is that buyers get $7,500 in Down Payment Assistance. This is money that does NOT need to be repaid, as long as the buyer stays in the home at least 5 years.

Earlier in the year, when I wrote the post, funds were available even for existing home owners, not just first time home buyers. Since that time, Gwinnett County has changed that… they ran out of funds for existing home owners. But they still have plenty of funds available for first time home buyers (remember, to qualify as a first time home buyer, you can’t have owned a home for the last three years). BTW, please don’t think that there is a way around that by not having a spouse on the title or something. It doesn’t work…

In order to qualify, the buyer needs to have $1000 in the deal. I recently was asked what qualified as part of the $1000… Did the inspection count? Did the earnest money count? I wasn’t asked about the appraisal… Here are the short answers.

The inspection doesn’t count. I ALWAYS recommend that buyers get an inspection, but it isn’t part of the $1000 that the buyer has “in the deal.”
The appraisal DOES count. It is a requirement, and it is a closing cost. The funds CAN be used to pay closing costs.
The earnest money is actually like a security deposit. It is money credited toward the closing and/or down payment, so therefore it DOES count.

One thing to keep in mind… money can NOT flow back to the buyer at closing. Even if they overpay closing costs, they can’t be refunded at closing. Ken Cook (of America Home Key) and I have been through the rules and know how the program works. If you want to see if YOU qualify, contact us.

Form Progreat free widgetsWidgetboxMore info

We’d love to help you buy a home. There are great deals on the market right now, and interest rates are exceptional. For more info, click here. There are other Down Payment Assistance programs available around the Metro Atlanta area.

Here is my video from the original post.

Mortgage Rates Lowest in 50 Years… according to Freddie Mac

Friday, 19 August 2011 08:00

Written by Lane Bailey

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Freddie Mac issued their Primary Mortgage Market Survey yesterday, and the rates are unbelievable. Let me click off a few quotes from the Press Release.

30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending August 18, 2011, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.42 percent.

15-year FRM this week averaged 3.36 percent with an average 0.6 point, down from last week when it averaged 3.50 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08 percent this week, with an average 0.5 point, down from last week when it averaged 3.13 percent. A year ago, the 5-year ARM averaged 3.56 percent.

1-year Treasury-indexed ARMaveraged 2.86 percent this week with an average 0.6 point, down from last week when it averaged 2.89 percent. At this time last year, the 1-year ARM averaged 3.53 percent.

I guess that is the upside of economic stagnation. And when combined with the amazing prices on homes in the market right now, it makes for a GREAT time to buy property. Assuming that you don’t have to sell first.

And that is the flip side. Many would be buyers are sidelined because they can’t afford to sell their current home. The best they can hope for is to re-finance with the low rates… of course, that isn’t helping those that have a need to relocate.

4.15% mortgage rate lowest ever for Freddie Mac survey (seattletimes.nwsource.com)
Mortgage rates fall to record lows, Freddie Mac says (oregonlive.com)
Mortgages: Mortgage rates hit record lows: Freddie Mac (marketwatch.com)
Freddie Mac: 30-Yr Fix Rate Mtg Hits All-Time Low;Spurs Refis (forexlive.com)
Mortgage rates drop to record lows (marketwatch.com)

Mortgage Interest Deduction… Good or Bad?

Monday, 15 August 2011 10:16

Written by Lane Bailey

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The NAR building and the U.S. Capitol in the b...

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There is a lot of discussion in the real estate world about the Mortgage Interest Deduction (MID) on Income Taxes. The National Association of REALTORS® (NAR) is virtually flipping out with just the thought that it could be eliminated by Congress as they look for more “revenue enhancements” (they are unwilling to say “tax increases”).

The NAR position is that with a weak housing market, and the fact that homeowners have benefited form the MID for decades, this is NOT the time to eliminate it, increasing taxes on mostly middle class taxpayers/homeowners. I can’t argue against that position very forcefully. It isn’t that I want to agree with the NAR, because I don’t. And, in fact, my reasoning is much different from theirs.

Opponents of the MID argue that homeowners shouldn’t get special treatment v. renters in getting a tax credit for a portion of their mortgage. And that IS a strong argument, but there is one HUGE flaw…

Renters might not get a tax credit, but Landlords DO. They may or may not pass that savings along to the renter (depending on the competitiveness of their rental market), but as a business, interest is a deductible interest expense. So, in effect, a homeowner would be penalized for occupying a home that they own. And with all of the talk of “fairness” coming out of Washington, DC, taxing the Mortgage Interest for Owner/Occupants, while not taxing it for investors seems kind of dumb.

Also, this would be going after the heart of the middle class. Many opponents argue that upper middle class families benefit more from the MID than those with lower incomes… although, the truth is that income isn’t as much of a determinant as is mortgage debt. BUT, those with higher incomes might have a tool available that those with lower incomes may not. Many are already business owners. And, it wouldn’t be that tough for them to incorporate, transfer the ownership of their home to their business, and rent the house.

This would give them the tax deduction for the mortgage interest as a business expense. Homeowners with smaller mortgages and/or smaller incomes might not be able to swing the same deal… meaning that they would be more adversely impacted by the change than higher income and/or higher debt homeowners.

One other thing, which I personally think is important, but a back burner aspect of the debate, is the benefit of a home-ownership society. Simply put, home owners are a more stable group than renters. They have a stake in their neighborhoods, schools and communities. Renters want nice neighborhoods, schools and communities, but have a much easier time escaping if things go sour. They won’t pay a financial penalty for getting out… in fact, if demand increases for a specific area, they might actually end up having to pay more.

BTW, I DO consider business deduction of interest to be something that should NOT be taxed. It is a legitimate business expense. And since I don’t think businesses should have to pay taxes on the interest THEY pay, I don’t think it would be right to force owner/occupants to pay interest for the exact same thing.

What do YOU think? I’d love to hear your thoughts. Add a comment.

Chart of the day: Where does the mortgage-interest deduction go? (blogs.reuters.com)
Still No Justification for the Mortgage Interest Deduction (fool.com)
The mortgage interest deduction is back on the chopping block (hsh.com)
Home write-offs: endangered species? (seattletimes.nwsource.com)
Limits on mortgage-interest deduction worth considering (seattletimes.nwsource.com)
TPC Hosts Rethinking the Mortgage Interest Deduction (taxprof.typepad.com)
Casey Mulligan’s weird defense of the mortgage-interest deduction (blogs.reuters.com)
FiveThirtyEight: Despite Benefit Disparities, Middle Class Supports Mortgage Deduction (fivethirtyeight.blogs.nytimes.com)
Time for limiting mortgage deductions (seattletimes.nwsource.com)
Joyce’s Voice….Homeownership Tax Benefits Must Be Preserved, Say Realtors (joycerealtor.wordpress.com)
All REALTORS do not Agree with NAR on the Mortgage Interest Deduction (prweb.com)
Natalie Pace: When Will Real Estate Recover? (huffingtonpost.com)

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Tag Archives: investment

Wayback Wednesday… Title Insurance…

Wayback Wednesday… An Oldy, but a Moldy

Gwinnett County Homestretch… Again…

Mortgage Rates Lowest in 50 Years… according to Freddie Mac

Mortgage Interest Deduction… Good or Bad?

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Tag Archives: investment

Wayback Wednesday… Title Insurance…

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