Oct

20

WSJ’s Top 10 Advantages of Home Ownership And My Two Sense…

Filed Under Buyers, Sellers, Sellers & Buyers | Comments Off





The Wall Street Journal recently wrote an article calling for the end of the “doom and gloom” when it comes to the real estate market. Of course, being a real estate agent, I couldn’t agree more! But the Wall Street Journal backed it up with some great points and featured 10 advantages to owning your own home and I’d like to go over them with you here.

Top 10 Reasons To Buy

You Can Get A Good Deal

This is basically self-explanatory. This is a buyers market and everyone knows it. However, I always caution buyers to not play too much hardball and I advise all my buyers to to be realistic. If a home is priced at $300,000, it’s important to work with an agent who can tell you how much that home has come down in price since 2006 or use a tool like HomeValuesNY.com to decipher for yourself where prices are at in a given neighborhood.

If the home is fresh on the market and it’s $300,000 and you and your agent go to an open house and there’s 20 people running around the house looking at it…that’s a very good chance that it’s priced right. So playing “hardball” and offering $250,000 isn’t going to get you the home (if you like it). I can’t tell you how many times first-time buyers have come to my homes working with an agent who isn’t advising them accurately on the values of homes, and they make an offer that just has no chance of making it.

Yes, in this market, there can be and there are bidding wars on homes…when they’re priced “right” (which means they’re priced low enough to get multiple offers).

That’s why it’s so important to use the right tools and agent to make the best choices. Just throwing out low offers doesn’t cut it. Using outdated information from Zillow.com isn’t going to give you accurate information. Yes it’s a buyers market, but remember, most prices on homes have already come down over 30%. Play hardball, but make sure you’re doing it with all the information to make the best offer you can for yourself especially, but also for the seller (so that they take your offer).

Mortgages Are Cheap

This is a no-brainer that I believe needs no commentary. If you’re not on board with enough information about how a 4.5% mortgage rate, fixed for 30 years can save you a ton of cash, then click here to see how cheap it can be.

You Can Save On Taxes

Write-offs. They are the best tax deductions that average tax payer has and taking advantage of them is smart. How does the mortgage interest deduction work? Well, look at it this way, you get paid $3,000 a month and after taxes you take home $2,300. Now you’ve paid income taxes so the state and federal government got theirs already (and they’ll get even more when you go out and buy things – sales taxes). So now you pay your rent of $1,400. You’re down to $900 to buy groceries, pay bills, etc.

Let’s take the same scenario but only this time, you’re paying a mortgage of $1,700, of which $1100 of that goes toward mortgage interest. Yes you have less money for paying bills and groceries, but there’s a big difference. One, you’re paying off your own mortgage (not your landlord’s). Two, that $1,100 in mortgage interest provides you with $13,200 over the course of the year and at a tax bracket of 20%, you’ll be able to write off $2,640 and at this bracket, you’re probably going to get that back at the end of the year, depending on how you file your taxes.

The third difference (advantage) brings us to our next point. But before we get there, you can also deduct your mortgage taxes.

It Will Be Yours

Now owning the real estate does a few things. First of all, to wrap up the last point of the previous paragraph, owning the real estate gives you the appreciation on the property. Of course right now, many homeowners saw a great deal of their home values decline, but much like life, there are cycles. Many people bought homes that couldn’t afford them and that’s causing a lot of short sales and other problems, but many homeowners across Long Island, even the ones selling right now, are benefiting from massive appreciation and with the capital gains rules currently, homeowners who’ve lived in their homes for certain amount of years will pay no capital gains.

The upside of owning and the increase in the value of your home also works to your advantage to offset the “expense” of owning as opposed to simply renting (which is the equivalent of tossing money into a fire – you don’t get it back at all).

Of course, you own it so you do what you want with it. Renting and owning will do only one thing similar, they both provide you a place to live. The difference is here, that owning allows you the satisfaction of owning the dirt under your feet. That’s a good feeling and it’s only one you get when you own it. Enough said.

You’ll Get A Better Home

This is probably the greatest of all the advantages to buying now. You’ve heard of the saying, “Get the biggest bang for your buck.” Well, this saying couldn’t explain this real estate market any better.

Depending on the town you live in or the town you’re looking to buy in, the differences in what you get for what you pay for are tremendously different than 4 years ago. Instead of 2 bedrooms in Suffolk county for $280,000, you can now have 4 bedrooms and 2 baths. I can go on here, but there really is no need to. You’re getting more for your money now (and remember it’s a lot cheaper to borrow as well) than you could, even before the big boom years of 2003 through 2006.

It Offers Some Inflation Protection

This is the least impressive item, but if you’re into this type of stuff, studies by experts in the financial and housing industries have determined that home ownership as an investment is a great way to shield yourself from inflation. And now, with bonds and other investments yielding so little, owning a home, at an incredibly low rate, makes home ownership investment, a fantastic strategy.

It’s Risk Capital

In english, (not Wall Street Journal lingo), this simply refers to having your money going into a lower-risk investment. Think of the stock market. With the ups and downs and complexities of equity trading, the comfort or peace of mind you get is minimal. Even those who are gurus at investing get the “smack-down”. That’s a tough business and investing in stocks is completely out of your control.

A home you put the key in, turn it, walk into it, close the door and it’s yours. Change it. Improve it. Whatever capital improvements you make, you own. Choose wisely on your updating and when it’s time for you to sell, if you take care of your investment, a home will take care of you.

It’s Forced Savings

Okay, how many people have you talked to (perhaps yourself in the mirror) and they say, “I can’t save money, that’s why I have a 401k or IRA…I don’t even look at the statements…It just helps me save!”

Well if this is your friend and they don’t own a home, tell them to call me! Likewise, if this is you, let’s get started on your home search today! Why? Because when you put money into your home in the form of your down payment, your monthly mortgage payments and any improvements to the home (i.e. painting it, redoing the floors, updating it, etc), this all is forced savings. Home ownership forces you to put your money into something that will someday give you a great return on your investment.

Remember though, for the average home buyer, real estate is a long-term investment. This is important to remember.

There’s A Lot To Choose From

This is an understatement. In Suffolk county, there are 11,684 homes available right now. There are 2,244 short sales available and 216 foreclosures.

I really don’t think I need to elaborate.

Sooner Or Later The Market Will Clear

Yes, eventually, the market will bottom out. Some think we are skimming along the bottom (I share this opinion). Experts from across the country have given their opinion on this and I will of course demonstrate the numbers in my next article.

When the market clears, rates could be higher, prices will certainly begin to appreciate. Less inventory will be on the market (less to choose from). This will happen eventually.

Buy low. Sell High. Two distinct sentences that when you put them right next to each other, spell the secret to (investment) life. So the question is, do you think the Wall Street Journal, the ultimate money investment resource is right or wrong?

I want to make it clear that I elaborated myself on much of the content of this article with the exception of using the 10 headlines from the WSJ. I hope my English and plain-speak came across effectively.

Please share this article with your friends if you’re on facebook or twitter and if you have any questions, drop me a line at 631-831-9048.

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Oct

15

Foreclosure-Gate: Update

Filed Under Foreclosure Info, Sellers, Sellers & Buyers | Comments Off





This video features Rick Sharga, Senior Vice President of RealtyTrac, talking about the effect of “foreclosure-gate”.

Interesting to note that most of the homeowners who this may impact have not paid their mortgage and deserve to be foreclosed on. “Foreclosure-gate”, as it’s being referred to, is about paperwork screw-ups and not about any larger issue like the wrong people being foreclosed on.

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Oct

7

New Foreclosure Crisis And What It Means For The ‘Double Dip’

Filed Under Foreclosure Info, Sellers | Comments Off





Just when you thought the real estate industry could not possibly become more surreal, IT HAS! The controlled flow of foreclosures to the market has been the number one concern of every housing analyst. There could be a ‘double dip’ in house values if they were released too quickly. The recovery could take years if they were released too slowly. Getting it just right was crucial. We posted on this issue last month. Both the private sector and the administration have been working the last eighteen months trying to get the release rate just right.

It seemed as though all the effort was paying off as there were a manageable number of distressed properties coming to the market and selling. Enter the ‘robo-signers’.

What is a ‘robo-signer’?

Because of the flood of foreclosures needing to be processed, there were employees who signed off on thousands of foreclosures attesting to the accuracy of the documents without having much personal knowledge of what they contained. These employees became known as ‘robo-signers’. It now appears that hundreds, many thousands of homes might have been foreclosed on without the proper procedures being followed.

What has this created?

Banks, servicing companies and even state governments are now putting a halt to the sale of tens of thousands of foreclosures. Below, is a partial list of the actions taken and we may have only seen the tip of the iceberg so far.

GMAC has suspended foreclosures in 23 states.
JP Morgan halted 56,000 foreclosures.
Bank of America has frozen the process on ‘tens of thousands’ of foreclosures.
States are considering foreclosure moratoriums.
Maryland governor calls for banks to temporarily stop foreclosures.

What will this mean to the housing market?

The market has been covered in a fog of confusion for over a year. The fog is about to get a lot thicker. A monkey wrench has just been thrown into what was hoped to be a well thought out process for releasing foreclosures in a timely fashion.

The New York Times reported on some of the challenges being created:

Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks. Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction.

As more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.

Radar Logic posted an opinion on the overall impact of the problem:

In most cases, however, distressed loans will not be restructured and delinquent borrowers will not become current on their mortgages. The delay in the foreclosure process will simply be a delay and will not result in a cure. A delay in foreclosures could have a lasting positive effect on housing markets if sales of foreclosed homes are put off to a point in the future when the overall economy is healthier, housing demand is greater, and housing markets are better able to absorb the new inventory. But this outcome is far from certain. It is equally possible that delaying foreclosures will simply push the economic reckoning further into the future, and any relief in the short term will be offset by pain in the middle- or long-term, with no net benefit to housing markets or the national economy.

Bottom Line

If this challenge proves to be significant in scope, the process of foreclosing may grind to a screeching halt for some companies. Fewer foreclosures coming to the market right now will mean prices will be less impacted. However, these properties will eventually come to market; if not now, than later. That will delay the housing recovery – perhaps for years.

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