Real Estate Intro.com

Homeowners’ associations (HOAs) are legal entities that have been established to maintain common areas within a development.  Most condominiums and townhouses and new single-family subdivisions have HOAs.  They are created at the time the development is started.  Covenants, Conditions, and Restrictions (CC&Rs) are issued to each homeowner and the HOA is established to make sure everyone complies with the CC&Rs.

The following are common features of a HOA:

• Membership is mandatory
• There are mandatory fees that each homeowner pays
• HOAs have the ability to enact and enforce maintenance and design standards within the development
• A governing board usually hires a property manager to handle maintenance of the common areas and collect dues from the homeowners.

Some restrictions that can be enforced by an association include:

• Street parking
• Landscape designs
• Fencing styles
• Pool restrictions
• Storage of RVs
• Number of pets
• Age requirements of homeowners (over 55, etc.)
• Color of exterior house paint

The main value of an association is maintaining the quality and value of the neighborhood.  Streets and yards look much better when rules are enforced.  The down side of these associations is that they can be too restrictive and that they can increase the fees to an amount that is not affordable.

When purchasing a home you should investigate the rules and regulations of the association by reading the CC&Rs.  You should talk to current neighbors about how they feel about their current governing board and how they are performing their duties.  You would also want to know the history of those mandatory fees.  How often and how much have they increased over the past several years?

Homeowners associations perform a great service and are usually worth the fees you pay.  The appearance of your neighborhood has a lot to do with the value of your home.

 lower housing  

The silver lining in the current housing market is affordability.  There has never been a more affordable time for buyers.  The National Association of Realtors recently posted a record high housing affordability index of 173.5 for the country.  This is the highest rating since the Association began recording affordability in 1970.  The index is a relative index where a value of 100 means that a family with median income has exactly enough income to qualify for a mortgage on a median priced existing single-family house.  The higher the index the better housing affordability is for potential buyers.

Right now interest rates are at record lows and housing prices have dropped significantly.  This could change in the future however.  The key is inflation.

With the government printing money to cover war costs and the nation’s debt load, we could be headed for rampant inflation.  How will this affect the real estate market?  It will become more difficult for consumers to find affordable housing.  Wages rarely keep up with inflation.  The price of durable goods such as housing can rise dramatically.  While this may deter some buyers, for many others there will be a rush to buy during times of improved appreciation.  Those who have bought a home today will watch the value of that home go up.  That value will not be tied to speculation, but will be a result of the intrinsic value of the current dollar, which is a more stable situation.

If you have inclination to buy, buy now.  Take advantage of the low interest rates and lower housing prices.  It will be a wise investment.

In spite of the real estate market’s decline over the past couple of years, a recent analysis of Federal Reserve data by the National Association of Realtors shows that homeownership is still a smart financial decision.  For example, when comparing homeowner’s wealth to that of renter’s homeowner’s wealth exceeds by a 50 to 1 margin.  The main difference is home equity.

For those who have owned their homes since 2003, home equity gains are the rule rather than the exception.  Those in the Bay area of California who purchased five years ago average $105,000 in equity.  The tougher real estate markets such as Detroit are facing negative equity.  However, those who have owned their homes for more than five years have smaller negative equity.

In all 150 markets tracked by the National Association of Realtors, including the hard-hit markets, homeowners who’ve been in their homes for 10 to 20 years have enjoyed strong equity gains despite the decline in real estate.  For example, in Detroit the equity for a 10-year owner is more than $10,000.  For a 15 year homeowner the equity averages $60,000 and for 20 years it’s $78,000!

The data clearly shows that homeownership does pay and that it remains the largest store of wealth for the typical household.  Homeownership provides growth in personal wealth in spite of difficult economic times.

Interest rates are low and have been for some time.  These attractive rates maybe short lived however because they are being artificially created.  In an effort to keep the nation’s economy from going into a free fall, the government has made some incredible moves to stabilize and lower interest rates as much as possible.

So far, what they have done has been successful in creating an environment that has kept these rates low.  But, how long will it last?  It is difficult to predict when the economy and the housing industry will begin to turn around.  However, it’s inevitable that the basic rules that govern how markets respond will return.

If the current rates were being established under normal circumstance, it would be easier to see where they were going.  However, the window of opportunity could close quickly if the housing market begins to rebound this summer.  We are already seeing signs of an improvement in the entry-level real estate market.  The low rates, the lower housing prices, and the $8000 incentive that the government has provided has brought a lot of homebuyers out of the wood work.

If you are in the market to buy a home, do not wait.  The window of opportunity is now open.  The rates are fantastic.  Housing prices have dropped significantly since January.  The $8000 incentive is good until December 1st.   Get out there and find that great deal!

If you are considering the purchase of a new home or refinancing your current mortgage, your credit will be a major factor in not only qualifying, but also how high your interest rate will be.  Be aware of your current credit score.  You can get an update on your credit by visiting www.annualcreditreport.com.

Credit scores are determined by many factors: credit card debt, on time payments, applying for numerous credit cards, using credit frequently, and the kind of credit you have used.

Lenders look for a consistent pattern of on-time payments.  It’s important to be in the habit of paying your bills on time.

Credit is affected by your debt to income ratio.  It helps to either raise your income or lower your debt.  Pay down those credit cards that are maxed out.

Stability in where you live and your employment history also play a role in your credit.  The more you move and change jobs the greater the chance your credit will be negatively affected. 

When planning to purchase a new home or refinance, avoid making major purchases such as a car or an RV until after you have closed on either the purchase of the home or the refinancing of your current home.  Your lender will also give you advice on how to improve your credit.  Follow their counsel and your credit rating will improve.

Foreclosure is a legal proceeding in  which a lender obtains a court ordered termination of the borrower’s equitable right of redemption.  At the time the home is purchased the lender obtains from the borrower a security interest in the house to secure the loan (note).   The security for the note is an agreement between the lender and borrower usually called a deed of trust.  If  the borrower fails to make payments to the lender, he has broken the agreement and is in default.  The lender can then foreclose on the property.

The foreclosure process as applied in this case is the lender repossessing and eventually selling the property in order to get back some or all of the money loaned to the borrower.  The time frame to accomplish this varies from state to state.  It would be wise to consult an attorney if you know you will be unable to make your house payments.

If you are considering purchasing a foreclosed property, there are some cautions:

• Before bidding on a property, make sure you know which deed of trust is being foreclosed on.  Is it the first deed of trust or the second deed of trust?  Do your homework.
• The IRS has a 120 day redemption period so watch for federal tax liens.
• Things can change right up to the time of sale such as the borrower filing for bankruptcy.
• Assessments such as water, utilities, and sewer stay attached to the property after foreclosure.  You will be responsible as the owner for any delinquencies.
• Unpaid property taxes are not included.  Make sure these get paid.
• If you purchase a junior lien, you are taking it subject to the senior lien.  The lender for the senior deed of trust does not have to accept a pay off from you and can turn around and foreclose on you.

It would be important to consult with a real estate agent and a local title company if you are going to pursue these foreclosed properties.  There are some great deals right now and interest rates remain extremely low.

With interest rates between 4.75 and 5.25 percent and housing values dropping significantly in the last six months, you may want to consider buying now.  Recent reports indicate that tumbling interest rates are setting off a surge of refinancing and pulling undecided homebuyers into the real estate market.  Some lenders are quoting 30-year mortgage rates as low as 4.63 percent.   The government’s programs seem to be working.

Recently, home prices have dropped significantly with many of those homes being bank owned or in foreclosure.  Diligent searching and patience could lead you to a great deal on a home.  Homes that were priced at $240,000 last fall are selling for $180,000 to $200,000.  Some of those $750,000 homes from last summer are now selling for $500,000 or less.  Investors are starting to see the writing on the wall.  Where CD’s, money markets, and stocks are getting little or no returns, real estate is becoming a good investment.  Single-family homes are getting sufficient rents to even cash flow.

Talk with your account to learn the advantages of investing in a home or investment property.   Seek out a knowledgeable real estate agent to help you find the best bargains.  You may find that buying now is a smart idea and a good place to invest your money.

In 2008 Congress passed a $7500 tax credit designed to be an incentive for first time homebuyers.  The credit was designed as a mechanism to decrease the over supply of homes for sale.  For 2009, Congress has increased the credit to $8000 and made several improvements.  One significant change is that unlike the 2008 credit, the 2009 credit does not require repayment.

Only first homebuyers are eligible and you must purchase a home between January 1, 2009 and before December 1, 2009.  A person is considered a first time buyer if they have not had any ownership interest in a home in the three years previous to the date of the 2009 purchase.

Every dollar of a tax credit reduces income taxes by a dollar.  If you owe less than the $8000 tax credit, the government will send you a check for the difference.  If you only had a tax liability of $4000 you would receive a check from Uncle Sam for $4000.  If you don’t owe any income tax, you would be eligible for the whole $8000.

For more details and qualifying information please see your tax accountant.  It’s definitely worth looking into.