Are you an Investor frustrated by lack of good deals around?

Just recently, one of the projects I managed for my investor clients gave 86% annualised ROI. Rolled into the New Year feeling pumped to continue the ROI streak. In January 2018, I wrote many offers for my Investor clients! All of them rejected, because of overbidding. Investor friendly houses are selling for such ridiculous amounts, that I almost wonder how the Investor Buyer will profit from it!

I started my real-estate career working for Investors. Some brilliant ones! That was also the time when the housing market had fallen; and not a lot of people had cash stocked-up to invest in properties!

Lately, every 1 in 3 people I meet wants to flip houses or get double digit returns on cash-flow properties. My survey could be biased because since many people know I have real-estate investment experience, they talk to me about it! Some novice Investors even ask me to show $ 200k houses in locations that house multi-million dollar homes; because they believe I can (miraculously) get them cheap houses! Only if I could pull-out such opportunities from the magicians hat!

The fact is: In today’s market, there are not a lot of steep discounts/deals to be availed. There is a shortage of housing inventory AND a multiplication of Real Estate Investors/Deal Seekers.

Past Results: Real Estate investors had a wonderful run when the house prices were still picking up after the crash in 2008. Many made great profits from flips and rental investment properties. Other people saw the prosperity in this business. And they started pouring into the investment market. Newbie investors have increased manifold and they are raising offers on the handful of investment properties. I’ve heard of flipping nightmares by such newbie investors.

Existing Builders: With more competition, our Builder community also comes ‘all-in’. They have workers and employees they have to pay and provide enough work around the year. Builders can buy a house $ 50k above market, blow it out into a mansion, and still make a profit, albeit $ 50k lower. But it’s still, something…

Better economy: Economy is getting better; unemployment is decreasing; Stock market is at an all-time high; people have more money! Anyone who wants to diversify their portfolio or does not want to enter in a record high market, will look into real-estate investments! Thus, adding fuel to existing shortgage of homes

New tax bill favorable to Landlords: The change provides a 20% deduction on taxable income for pass-through companies. While the tax cut is a boon for private real estate investors, it will likely make the inventory shortage worst and even more ludicrous offers! Not only will they pay lower taxes on their LLC (pass-through entity) created for their rental, but they will also hold on to them due to better returns! Though I’d believe the high procurement cost would subsidize the tax benefits!

Conclusion

One thing I have learned is: stick to the investing fundamentals. Don’t buy a property if it does not make financial sense. Work your numbers – Purchase, Cost estimates, Cash flows and ROI’s, ARV’s in the neighborhood etc. I’d rather spend time in doing something I love or where I can generate more money (like putting more hours at work) rather than investing and spending time in unsustainable investing models. Use that money to invest when the market cools down! Can’t get enough of Warren Buffet’s quote for Investors: Get Fearful when others are greedy and greedy when others are fearful

But hey, everyone is entitled to their Opinions and Conclusions! And I wish all Investors the very best in their endeavors! And, happy to help :-)

Renting VS Buying under the New Tax Law

Buying a home was not merely an American Dream.. It also came with attached tax benefits and deductions.

However, the new sweeping tax bill passed by President Trump in December 2017, may change the math for many homebuyers. The new law limits or eliminates several write-offs long favored by homeowners.

On one hand, standard deductions have doubled and tax rates have fallen, on the flip side, there is a $ 10,000 cap on state and local tax deduction and a lower $750,000 limit on loan principle for the mortgage interest deduction.

New Jerseyans, by most accounts, got the short end of the stick. But about 79 percent of residents in the Garden State should receive tax cuts, according to a study by the Institute of Taxation and Economic Policy, a research group.

But what changes is the homebuying vs renting equation! In other words, with certain homeowning tax breaks getting less generous, the financial advantage of owning rather than renting your own home could diminish for many Americans.

Then Why Buy?

  • Can still deduct interest and taxes below the threshold, provided it still makes sense to itemize
  • Protection against inflation
  • Stability
  • Possible appreciation – build equity and wealth over time
  • Modify the living space as wished
  • Most importantly, have a roof over the head

 

Tax Cuts and Jobs Act 2017 highlights that may affect homeowners

The sweeping tax bill signed into law just before the 2017 holidays brings changes for virtually all homeowners — but, for the most part, not until you file your 2018 tax return in 2019.

My previous blog came at a time when these bills were proposals with major differences between House and Senate. Below are highlights of Final Bill that passed as Law (Tax Cuts and Jobs Act 2017)

Highlights that may affect homeowners:

Tax Rate Reductions:

The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Apparently, it looks like most Americans will pay lower taxes. However, for those with high mortgages/ high taxes and high income; who itemized taxes in excess of $ 12k (single) and $ 24k (joint filers), I am not sure!!!

Capital gains exclusion on sale of primary residence:

Homeowner must live in the home for 2 out of past 5 years for capital gains exclusion. This has been unchanged from previous law.

This was a significant victory that NAR (National Association of Realtors) achieved in final bill. Senate Bill was trying to increase homeowner occupancy for 5 out of 8 years for capital gains exclusion.

Mortgage Interest Deduction

Mortgage interest deductible is limited to loans of $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.

Refinancing debts existing on 12/14/17 upto $ 1 million are interest deductible as long as new loan is not greater than loan being refinanced.

Interest on 2nd mortgages and second-homes is deductible but subject to 750,000/1,000,000 limits above. But interest is repealed for home equity debt.

The House-proposed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes in its entirety The final law, while less beneficial than old law, represents a significant improvement over the original proposals

The cap of $ 750,000 applies across all mortgages. Meaning if a buyer with a $500,000 mortgage borrows $300,000 for a second home, the interest on $50,000 worth of those mortgages is not deductible.

Even if both mortgages are less than $ 750,000, the $ 10,000 cap on state and local income tax deductions holds no matter how many homes you own.

Deduction for State and Local Taxes

Itemized deduction limited up to $10,000 for the total of state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers.

Original Senate proposal allowed Zero deductions. Again, new law is beneficial over the original proposals.

Standard Deduction

Standard deduction doubled to $12,000 for single individuals and $24,000 for joint returns.

By doubling the standard deduction, Congress has greatly reduced the value of the mortgage interest and property tax deductions as tax incentives for homeownership. Congressional estimates indicate that only 5-8% of filers will now be eligible to claim these deductions by itemizing, meaning it will also diminish financial incentives for renters to buy. More in another article of the newsletter.

Moving Expenses

Moving expense deduction repealed, except for members of the Armed Forces (which was originally proposed for all filers).

Like-kind exchanges:

The final bill retains the current Section 1031 Like Kind Exchange rules for real property.

Again, a major win for real-estate stakeholders as the proposals planned to repeal these

 

Conclusion:

I will let the economists and analysts debate on how above factors will affect the market and demography.

Do you have any inputs or real-life experience related to above? I would love to hear (and maybe include in a future blog)

Proposed Tax Bill 2018 and Real-Estate Repercussions

Are you planning to buy a primary or vacation home in 2018? Are your taxes higher than $ 10,000? Are you planning to sell your home and take advantage of tax exemption on gain? If you answered yes to any of these questions, the proposed tax bill may impact you.

Real-Estate impacting Tax Proposals

  • Mortgage Interest Deduction limit for NEW Buyers:

Presently, mortgage interest  ameduction is allowed on loans upto $ 1,000,000. This cap is reduced to $ 500,000 for new home loans from 2018.

  • Property tax Deduction limit:

Currently, entire property taxes are deductible. Bill proposes to limit this deduction only upto $ 10,000 taxes

  • Capital gains exemption timeline:

At present, gains on sale of primary resident are non-taxable ($ 250,000 for single filers and $ 500,000 for joint filers) IF owners owned and lived in the house for 2 out of 5 years. This timeline has increased to 5 out of 8 years- to claim tax exemption.

  • No mortgage interest deduction for Second and vacation homes:

Up until now, mortgage interest is 100% deductible on a second home (not more than 2 homes). Proposed bill eliminates this deduction completely.

  • Eliminates deduction for moving expenses:

Expenses incurred for moving for new job or transfer are deductible. But not under the proposed bill.

  • Investors gain, homeowners lose:

Real estate investors can still deduct the interest on their loans and property taxes without any cap. That’s because investment property deductions for interest or taxes are not itemized deductions. Rather, they’re deductions in computing net rental income.

As per Joe Rand- Chief creative officer at Better Homes and Gardens Real Estate – Rand Realty, the tax bill specifically exempts real estate investors from a new 30 percent limit on business interest deductibility, so it’s especially favoring them compared to other business owners.

Second, the bill preserves many other tax advantages for investment real estate: the deductibility of maintenance costs and depreciation, the like-kind exchanges and so on.

Third, one of the major tax changes in the bill — conferring a 25 percent tax rate on so-called “pass-through businesses” — could reduce the tax rate for passive real estate investors who buy and manage buildings through LLCs or partnerships, which is almost all of them.

 

Analysis

As a professional servicing New Jersey (esp. North Jersey), North Jersey will be my basis for discussion.

  1. Property tax burdens in New Jersey run the gamut, averaging more than $11,000 in some counties in northern New Jersey to just below $4,000 in counties down south. As per NJ.com, Bergen and Essex counties crossed the $ 11,000 threshold in 2015. The mortgage interest deduction limit to $ 10,000 will definitely impact many homeowners in the high tax rate areas.
  2. As of today, November 12, 2017, NJ MLS has the following statistics for Active listings in Bergen county. Total 812 active listings priced under $ 500,000 VS. 938 active listings priced above $ 501,000 – $ 1,000,000. (Mortgage interest deduction is based on actual mortgage amount and not the price of the house. Furthermore, actual mortgage amount depends on % of down payment. I am using listing price for simplicity sake for a high-level discussion). As can be seen, more than 50% of near future homeowners in Bergen county will be impacted by capping mortgage interest deductions to $ 500,000 loan.
  3. By increasing the timeline to stay in the house for 5 of 8 years to claim tax exemption on gains, homeowners will stay put for a longer time. This may depress the already tight housing inventory.
  4. Considering that many NYC metro areas in New Jersey are affluent, homeowners buy second and vacation homes. Total elimination of mortgage interest deduction on these houses will make the market for such 2nd and vacation homes more expensive. Though, for homeowners who can afford the luxury to buy these other homes, this elimination may only have a mild effect, if any.
  5. Also, while people will still move for new jobs and better opportunities, eliminating deduction of moving expenses is just a dampner to the existing mood :-)
  6. Some analysts believe that increase in standard deduction (almost doubling it) will nullify some effects of real-estate impact. However, accounting and financial planning is not my area of expertise; hence will leave that analysis to the pros.

I had started writing this article on November 7, 2017. In the meantime, Senate bill is out too. Senate Bill completely eliminates deduction of property taxes. Also, while the Senate Bill retains deduction on mortgage interest, it only eliminates deduction on home equity loans. And some differences in the pass-through businesses tax rates.

How a particular reform will impact you, is a subject to be discussed with your CPA/Financial Advisor. Also, these are “proposed” tax bills. Whether and when it becomes law, in its entirety or amendments, is yet to be seen.

 

Buying a Flipped House- Caveat Emptor

Buying a Flipped House – Caveat Emptor

The granite counter tops and brand new stainless steel appliances… The shiny hardwood floors… The newly tiled bathrooms with jacuzzi tub.. oh! That move-in ready home….

These flipped homes demand good value in a market with low supply of homes. Investors are flipping houses like its 2006 again!

However, with the flip frenzy, licensed contractors are sometimes not available on timely fashion. And some Flippers make do with the cheapest available contractors to push their project along – begets to horror stories abound of house flips that hid major problems, only to be revealed months after the new homeowners moved in.

Points to consider while buying a Flipped House

  • Every home has a history:

Check details like when the house was bought by the flipper and how much time did they take to finish the renovations. Submit the OPRA request form for current and prior permits on the house. The permits opened and closed will give an idea of what work was done on the house and when. It will also give an idea if any work was done without permits (which could be a headache later on). Was the house only cosmetically touched upon or whether major structural changes were made? Were the electrical wires and plumbing drains replaced with new ones?

  • Tour the house with a skeptical eye

Don’t focus entirely on your favorite details in the updated kitchen and bathrooms. Dig deeper.  Are cabinets of good quality? Are cabinets properly organized with good shelf space? Check cabinets beneath sinks to see for drains/wiring etc. Are they spray painted to hid aged out stuff?

Check the unfinished attic. It could reveal what could be lying behind the new drywall. Check the utility area. Are the furnace and hot water boiler newer? Check for rust on pipes to see if they are old!

I showed few flipped houses to my Buyers. First impressions were usually ‘wow’. We slowly started realizing that the flooring was merely fancy laminate that was soft at few places, the basement walls were painted white over cracks and mold, the main beam running across the basement was very old (would have required sister joists for additional support), dangling soffits, leaking faucets and shower enclosures etc.

  • Get yourself a Warranty

Request for warranty on new appliances. Negotiate a 1 year homeowners warranty OR buy your own. A lot of times, these homes are vacant and the homebuyer would be the first one to experience and correct every fault with the house. “No one has lived in a house with a brand new roof to tell whether it leaks or not”!!! It would be great to have a warranty

  • Hire an Inspector (or specialist)

Get a professional inspector to inspect the home for leaks or major problems.  Just because a home is new, doesn’t mean it is free from troubles.

However, even after the due diligence, anything can happen. I came across 2 instances where the sewer line connected to city main choked and backed-up. Depending on where the blockage occurred, clean-out may be paid by City or the homeowner. With today’s technology, a licensed plumber can do a video camera inspection of the main sewer line to see if there are mechanical defects in the pipe, which most home inspectors don’t see.

Conclusion:

Sometimes, structural problems, termite damage, water damage – could be just covered up by a new layer of drywall! A house that has been gutted to its studs and constructed, has a better chance of new wirings, drains, utilities, roof etc. City building inspectors, at least in areas I help Flip, are pretty picky about bringing all work to current code.

There are no rights or wrongs. Look around.. observe.. It could be a really nice home to move-in or it could be a nightmare.

Realtor Strategies in Hot Market

SOLD A HOUSE IN 3 DAYS, 10% ABOVE ASKING PRICE, WITH 20 OFFERS!!

Catchy? Wouldn’t you like to hire a Realtor’s service with above credentials?

As most of us in the real estate market know: Inventory is low and demand is high. This is especially true for lower priced homes in sought after areas.

Investors: Quite some real estate investors made good money during the recent housing bubble burst. This new wealth attracted scores of people with monetary savings to become real-estate investors. Instead of the conventional ‘hold and rent property’, they decided to flip’em for quicker gains. While there is nothing wrong in that, the influx of new investors has aggravated demand in an already limited supply of starter homes.

 

STRATEGY 1

Create Bidding Wars (Seller side):

Have you ever attended any auction and believed the winning bid was way too high for the value? Now imagine if these bids were to be ‘played blind’!

A bidding war basic is to: Price low to sell high.

Realtors are increasingly making use of this ‘economics law’ of demand and supply and the auction mentality to their advantage. The concept is not new. It’s again gaining moment given the market situation. In fact, it is becoming the new normal.

Properties are being priced at the lower end of the comparables- to garner interest and a bidding war. A deadline is set for highest and best offers. There is no indication of what offers are pouring in. Imagine you are the Buyer. You are playing a ‘blind game’! You come up with an inflated price to beat other hopefuls. A house listed at ‘$ 299,000’ just sold for ‘340,000!!!’ Congrats……. But was it worth it????? Depends..

And which Seller will not prefer cash over mortgage UNLESS the financed offer is reasonably higher than cash? Thus, Buyers who will finance their home have to bid even higher to have their offers considered.

I have seen lot of such deals fall through. One reason is: Properties do not get appraised at the inflated price. Cash buyers are something else. They too get cold feet wondering if the property is actually worth the price they bid!

Is this good business practice? While many serious Buyers stand to lose in the game, if done correctly, it ‘could’ benefit the Seller and ‘definitely’ benefit the Seller Agent Resume.

STRATEGY 2

Friend and Foe (Seller side)

Have you come across a sale where the Agent looks accommodating and shows lot of eagerness to work the deal, but every Buyer request is vetoed by the Seller and countered again?

Sometimes, all of that is genuine. All people are unique, and so are their temperaments. Some Sellers cannot digest the fact that anything could be wrong with their house. They feel any Buyer requests for corrections/credit are to nickel and dime them. And hence the defensive approach.

Other times, it could be a strategy! Playing the Good cop, bad cop… While the Seller plays the bad cop, his/her Realtor acts supportive and understanding.  The buyer may feel as though someone is on his or her side, that he or she is making progress, and giving up will not be an option when they have come so far.

STRATEGY 3

Justify a fake lower price (Buyer side)

It happened on 2 different properties that I had listed (notably during winter months when traffic is not very high). In my case, I encountered the same Realtor both the times.  After a listing crosses the 30 day mark (or a  price reduction), Realtor calls stating the Property is overpriced and that they have Buyers for a lower price. If the listing agent gets convinced and wants to unload the property, he/she may buy into the justified fake lower price.

Both times, I had done my research thoroughly and I knew what the property was really worth. I educated my Seller clients and left the decision to them. Thankfully, both times, my clients believed in me and my judgement and we closed with offers considerably higher than what was offered under this strategy.

Have I ever low-balled offers on behalf of my clients? Yes, as a Realtor, we are required to present offers our clients deem fit. Have I consistently called Realtors trying to convince them they are overpricing their homes? No

Is this a good business practice?  Sometimes, properties are truly overpriced. While other times, Realtors are just trying to test the waters. I personally, would use double caution when working with such Realtors.

STRATEGY 4

Nibbling (Buyers side)

Make a high offer and then find irrelevant issues to ask for credits (Buyer side)

To stay competitive in their offers, some buyers make high offers; and then find irrelevant issues to ask for credits.

A Funny bone from one of my previous blogs: “Home Inspection reveals doorbell doesn’t work! Better ask for all new wiring, new furnace, water softner and a Jacuzzi tub”

Essence is: Buyer nibbles a bite here and a bite there — slowly getting everything they desire from the seller.

Realtors have experienced this more often than not. This strategy is self-explanatory :-)

It is imperative for Sellers to stand their ground, be confident and willing to walk away if need be. Of course, all in all, in depends on the Sellers urgency to sell.

Conclusion:These are merely some of strategies Realtors are using today. If you have come across other tactics, please feel free to share them.

Tax Abatements and Buyer Opportunties

A few years ago, I came across a property in Wood Ridge, NJ. It was few of the lower priced properties in the area and was advertised as ‘very close to the site of the new train station’. Everything was in the works, and as such, a risky game. (After all, we are familiar with the fate of American Dream Meadowlands, which is still incomplete after more than 10 years of being originally proposed).

The Westmont Train station opened and started operating in May 2016. The next phase of Wesmont Station construction, 64 town houses and 15 single-family detached homes, is almost ready to break ground now that the mayor and council are set to approve a redevelopment amendment and tax agreement with Fleet Wood-Ridge, LLC.

The amendment is to add the 79 units of housing to the existing Wesmont properties under the developer agreement.

The agreement contains the details of a tax abatement program for Wesmont Station in which homeowners pay no taxes or less in taxes the first year. Taxes are then slowly increased over five years, and by the sixth year, the owner pays 100 percent of the taxes. (This only relates to taxes on property assessed value. Land portion of taxes have to be paid regardless).

I don’t plan to go into details about the 5-year tax formula. It certainly is an incentive to new home-buyers who want easy commute to NYC.

In the town’s defense, “These tax abatements provide a strong incentive for selling homes. Last year, Pulte [the company used by the developer to build] sold nearly 100 town houses, attributable to the tax abatement program,” said Borough Administrator Chris Eilert. “Since last year, Wesmont brings in around $1 million [in taxes] annually. It’s self-perpetuating.”

Source: NorthJersey.com

My questions are:

  1. EASY NYC commute in BERGEN county has been a great selling point. Historically, Buyers looking at the 2 criteria pay decent prices/rent for such properties. How does this abatement help the town? Is this considered a distressed area?
  2. Who will pay the burden of the share of these new Westmont homebuyers? (In terms of added infrastructure and schools). The existing residents of the town?
  3. It may increase revenue of the town; however is it shared with the schools? Do the schools and their budgeting benefit from it?
  4. Other towns have used the PILOT (Payment In Lieu Of Taxes) program successfully. EG: Montclair has lured commercial and businesses- by charging them (BUSINESS OWNERS) in a different manner as opposed to traditional tax computation. A lot of these come with clauses like ‘they employ 25% local residents on the project’ OR ‘fixed monetary payments equal to full property taxes that municipal tax assessors determine would ordinarily be due on developed property. These programs offer developers cost certainty and help get funding for project’. Does the current abatement in question provide any other benefits to the town similar to examples quoted?

 

Conclusively, home buying in these new communities near Westmont Station has gotten more lucrative right now. A lot of these questions can be answered once we know the exact nature of agreement.

Do you know any other town comparable to Wood Ridge that has given such freebies to Home Buyers? IF yes, please feel free to share.

Short-sales: What are they?

I worked with various Real Estate Investors before I decided to become a Realtor. Thus, I learnt all about short-sales; the processes, the negotiations; the marketing and sales; from the ‘real experts’.  I have seen short-sales evolve from a taboo to an accepted norm. I have heard people say ‘Everyone is short-selling their houses. So we should too’

What is a short-sale?

Markets slumped in 2008. Property values took a dip. In many instances, the depressed house value was lower than the mortgage on the property. People had to sell their homes for various reasons. But they could not get a price to cover their mortgage. They had to convince their lenders to accept less than the amount owed.

Example:

Outstanding mortgage balance:                $ 250,000

Depressed Property Value:                         $ 200,000

If Homeowner were to sell, he would only get $ 200,000, which is not enough to pay the outstanding mortgage of $ 250,000. Thus, he would have to convince the Lender to accept less than the outstanding obligation.

Thus, a real estate short sale is any sale of real estate that generates proceeds that are less than the amount owed on the property.

Who can short-sale:

There are 2 basic attributes to do a short-sale.

  • No/Less Equity
  • Seller Hardship
  • Sometimes, rich homeowners short-sale too. If the Lender determines there is no proof of sufficient hardship, they may still proceed with short-sale; BUT he seller may be asked to financially contribute to the deal, bring cash to closing or sign a promissory note to repay part of the shortfall after the closing. The bank may agree to cancel most of the shortfall but not all of it.

But mind you, every Bank… and even negotiator/underwriter within a Bank…. has their own opinions. Something that worked one time may not work with another and vice versa.

Short-sale Process:

This is the best case scenario process

– Seller lists the house with a Listing Agent.

– Seller readies the short-sale package for the Bank. This includes Seller financials, pay stubs, bank statements, hardship letter, 3rd party authorization and other forms as requested by Bank.

– Once an offer is received, Listing Agent or attorney or an outsourced short-sale processing company (Let’s call the short-sale negotiator as the 3rd party for simplification) sends the Listing agreement, Executed purchase offer, Buyers preapproval and earnest money copies, Sellers short-sale package.

– Bank acknowledges receipt of file.

– A home support specialist maybe assigned who is initially the intermediate between 3rd party and Bank negotiator. Support specialist checks for correctness of documents. In other cases, a Negotiator is assigned directly.

– BPO is ordered (Broker Price Opinion). Under this, Bank contacts BPO providers who send their sales agent to determine the potential selling price or estimated value of a real estate property.

– A 2nd negotiator maybe assigned.

– File is sent for review to investors (who own the mortgage)

– The Bank issues a short-sale approval letter.

Above is a fairy-tale process. Many obstacles like files getting lost,  couple of BPO’s and even formal appraisals, 3rd-4th-5th or more negotiators, high BPO’s and renegotiations, more than 1 lien-holder and further negotiations, buyers cancelling and restarting processes from scratch and much more into that mix.

How long does it take to get short-sale approval?

This is the million dollar question. Unfortunately, there is no guarantee of a short-sale approval. Most REO listings (foreclosed listings) have a history of being listed as a short-sale previously. Naturally, the short-sales didn’t go through; and hence the foreclosure.

However, for the sake of an answer, it can take anytime between 30 days to forever. ( Especially FHA mortgages take longer). I had one FHA short-sale that closed after 5 years! But the good part is: we did have a successful short-sale and a happy ending!

A lot of times, the compensation is not as much as the efforts involved in navigating the short-sale. This may lead to uninterested 3rd parties who do NOT do as much follow-up; thus delaying the process.

Is it simple?

Yes and No.

If you can prove hardship/no equity, it’s a conventional loan, offer price is around the market value AND you have a competent short-sale negotiator working for you; than answer is YES

Everything opposite to above; than answer is NO. Sometimes there are more than 1 mortgages involved (HELOC, other liens) which make the process more complicated.

Should you do a short-sale?

I get that often.

But as a Realtor, it does not fall under my prerogative and I advise anyone thinking such to take professional legal and tax advise on the matter.

Just some benefits of short-sale are:

  • You save yourself from the ‘F’ word stigma; foreclosure
  • Judgements can often be negotiated between seller and short-sale lender
  • Loan applications typically do not require you to include information about short-sales. However you are required to answer ‘Have you ever had a property foreclosed upon’?
  • Up until December 2016, the Mortgage Forgiveness Debt Relief Act was into play; which exempts homeowners from having to pay taxes on forgiven mortgage debt. As of today, the Act has expired and we do not know if it will be renewed in future.

Conclusion and Tips: 

I have to stress here that it is imperative to have a good short-sale negotiator (Whether it’s the Listing Agent, Attorney or the Outsourced servicer). Someone who knows how to operate the process and who will not give-up on the file even when its future looks blurry. A good short sale agent can help to speed up the short sale process by staying on top of the file and holding the bank accountable. Checking in with the bank at least once a week is imperative. Recognizing the behavior of incompetent negotiators and requesting a replacement is often necessary as well. Choose someone who is Never afraid to escalate.

Though the article is long, it is lacking the depth and width of what a short-sale may entail. If you know anyone who might need advice on short-sales, feel free to direct them to me. I may be able to help!

My recent Short-Sale experience 2016

I have worked with some real-estate investors in the past. I have learnt the short-sale tricks of the trade from the ‘Experts’. I have assisted Investors in about 9-10 short-sales till now. However, I’d like to share my current short-sale experience with you.

In 2010, I was assisting an investor. I stumbled upon this young lady (Let’s call her Ms. X) who wanted to short-sale her house. We (as a country) were going through the great recession and job losses. House values plummeted and short-sale was one of the few options a lot of people were left with!

I started her short-sale in end of 2010. I was NOT a Realtor then. We had to depend on other Realtors and Attorneys to communicate with Lender. I got my license in early 2014 and started working on the file myself- as the Realtor, with direct access to the Lender.

My observations:

Remember, a Short-Sale is NOT a very lucrative undertaking. My observations in majority cases: Realtors or Attorneys send required documents to Lender; then wait infinitely for Lender to come back with an acceptable sales price. This number (generally market or above market price) is communicated to potential Buyers with the hope that someone will buy at that price! If that doesn’t work, property ends up in foreclosure!

This file:

Call it our misfortune, the underlying mortgage was an FHA. Meaning, it would fall under HUD guidelines. FHA in itself is a wonderful opportunity for homebuyers. But for a short-sale, it is a nightmare, with bureaucratic hurdles galore. Lender didn’t have liberty to negotiate. They had to go through the FHA waterfall i.e With every new Buyer, the file would be first valued for loan modification; and only if it is rejected, will they consider a short-sale. Every 6 months, the old appraisal would become redundant. Every appraisal was a different value. All efforts geared towards selling at old value went down the drain with new appraisals.

Problems:

There were numerous issues. I will try to limit myself to few

  • Sometimes, appraisals came in exceptionally high (thanks to non-local appraisers)
  • Occassionally, when appraisals came on target, Lender would lose the file
  • Buyer could not wait too long
  • Buyer could not get a mortgage
  • File kept getting stuck in the Waterfall process time and again
  • Every so often, the Lender loss mitigation employees didn’t know the process themselves, causing confusion
  • Lender analyzed Ms. X’s financials and asked for $ 4000 to close account as ‘paid in full’.

Solution:

Patience and persistence, besides some ‘secret ingredients’ 😉 Entailed consistent follow-ups, negotiations, open communication and alertness. Attorney and I worked as a team. I only brought him in for Attorney Reviews and Closing Documents, while I bridged the gaps between the Seller, Lender and Buyer.

Results:

5 years (2.5 years under my wing), 7 buyers and 100’s of documents later (kudos to Ms. X), we closed on the short-sale (about $ 55k lower than what Lender was demanding earlier). I studied Ms. X’s financials myself and was able to convince the Lender of their misjudgment. Instead of putting $ 4000 out of pocket, Ms. X actually received $ 1000 from the Lender :-)

Conclusion:

This is the longest ever short-sale I have worked on. It was like an infinite roller coaster ride! Approvals and expiries and buyer short comings! But none other short-sale has left me as contended as this one! Ms. X’s gratification was priceless :-)

 

 

 

 

Is Granite Going Out of Style?

Rumor has it: Granite’s going out of style.

Is it true? Could granite’s 30 year reign be coming to an end?

I don’t think so. Granite still remains a solid choice. After all, it’s both durable and attractive and increasingly affordable too. Some Designers are booting it in favor of alternatives that are cheaper, varied, and lighter or just to please granite-tired clients,

HOTTEST CONTENDERS:

Quartz

Granite’s top competitor, engineered quartz offers the beauty of stone without the maintenance. Its tougher than granite, and highly resistant to scratching, cracking, staining and heat. Because it is non-porous, it doesn’t have to be sealed like natural stone.

Wood

Increasingly, homeowners appreciate natural wood countertops- particularly butcher blocks and those custom created by quality craftsmen. While wood countertops can add warmth, balance and beauty to any modern home, they also require a fair amount of maintenance- must be sealed about once every month. However, wood can be refinished in the event any damage from heat and moisture occurs.

Soapstone

Soapstone is durable and comes in two types: artistic and architectural. It doesn’t stain, and it’s heat-resistant. It’s also non-porous and doesn’t require regular sealing. It is a softer material that can be scratched or nicked with sharp objects. Light gray soapstone will weather and darken over time. Material comes in smaller slabs, so seams will be visible in soapstone countertops longer than 7 feet

Concrete

Concrete has evolved a lot since its countertop entry in the 80’s. Precast concrete countertops are available in a number of different colors. Generally they’re flat and smooth. Historically, concrete countertops have cracked and chipped easily, but recent innovations have made them less prone to damage. Strong and heat resistant concrete slabs can be sealed to prevent staining.

Stainless Steel

Its heat, rust and stain resistant, easy to clean and wont absorb the toughest of bacteria. It’s no surprise that restaurants use stainless steel countertops. Downside? They scratch easily- and show it too. For this reason, it is best to always use a cutting/chopping board anytime you are prepping food. A balance of stainless steel and wood can add warmth, timeless and uber-functional kitchen.

There are other options like Silestone, Corian, Marble and so on!

Thinking of kitchen remodeling? Go with what you like the best! However, if resale is your concern, stick with the more neutral and generally appealing countertops!

Source: Homeadvisor