A New Resource for First Time Homebuyers

Coldwell Banker Corporation has just added a new resource for First Time Homebuyers to its web site ColdwellBanker.com.  The First-Time Home Buyer Resource Center includes videos, articles and tools to answer questions and guide new home buyers through the real estate search process.  If you’re thinking about buying a home for the first time in Corvallis, Albany, Philomath or for that matter, anywhere in Oregon or the U.S., this site would be worth a visit.

If you want to ask questions or need help buying your first home, Contact Dava.

My clients that are buying and selling homes in the Corvallis and Albany areas frequently, ask  ”What is escrow?

In general, “escrow” is the neutral third party that holds instruments (deeds or other documents that convey ownership); funds (or other items of value); or evidence of title for real or personal property.  In Oregon, the escrow agent is typcially a Title Insurance Company (but this does not always have to be the case).

In a real estate transaction, “escrow” is the neutral third party that holds the deeds, collects and disburses the funds and follows instructions on behalf of the parties to the transaction.

It is the function of escrow in a real estate purchase transaction to make sure that all the instructions (which are really the terms of the sales agreement and the lend, er instructions) are followed; that all bills are paid (through the instruction of the buyer, the seller or the lender) and that funds are disbursed (lender loan proceeds, seller’s proceeds and any excess monies deposited by the buyer to the buyer).

Escrow follows the instructions of the parties to the transaction to determine how proration of taxes and other re-occuring charges such as homeowner association fees are handled. Escrow also makes sure that appropriate parties such as taxing authorities, homeowners associations, water districts and so forth are notified when there is a change of ownership. Escrow does not typically notifiy public utilites of changes of ownership.  An owner that is selling should notify their hazard/homeowners insurance of the sale (but not until the sale is completed and the sellers proceeds are disbursed.)

Escrow is also responsible by law for the collecting of information and reporting of sales information to the state and federal government in the event of a possible income tax liability on the part of the seller of real estate.  It’s important that sellers and buyers understand the tax ramifications of their transactions prior to closing.  Escrow will send out questionnaires to be completed early in the process to help alleviate problems that can arise from tax consequences of a sale (such as FIRPTA and State and Federal witholding requirements), if for some reason you do not receive paperwork from the escrow company early in your transaction, you will want to check on it.

Escrow is not allowed to act independently.  In general, once a buyer’s earnest money deposit is “in escrow” escrow cannot release those funds without express instructions from all parties.  Escrow is not allowed to proceed with finalizing or cancelling a transaction without instructions from all parties.  If there is a dispute that arises from disagreements from any of the parties to the transaction, escrow must wait for instructions between the parties that are consistent before they act upon them.

It’s important the that escrow agent: be finanacially responsible (and have financial strength); have expertise in handing complex transactions; act in a manner to assure that payment of liens and other encumbrances is accomplished; provide single point of contact for coordination of flow of documents and funds; remains an impartial third party.

If you need more information or have specific questions I can answer, please get in touch. Contact Dava

Every so often I am asked if a property I represent is a short-sale or a foreclosure. 

I’m always curious about why they ask…

Typically, it’s for one of two reasons

1) The interested party doesn’t want to invest the time and energy in a “distressed” property

or

2) The interested party is interested in getting a “really good deal”.

Both positions have some very valid points and are reasonable positions to take.

A few points to consider:

• It can take months to get the lender to respond to a “short sale” proposal. (Which can take the buyer out of the market (passing up other potential properties while waiting, but there are ways to work around this issue).
• Some lenders are taking a pro-active position and getting their “short-sales” pre-approved during the listing period.
• Some “short sale” offers sit and the property goes to foreclosure anyway.
• The condition of the short sale property can change during the wait.
• Distressed properties are often not as well maintained as non-distressed properties due to the economic constraints of the owners and/or other issues during the period between default and the lender take over.
• Some lender owned properties deteriorate during the vacant period between the time the former owner moves out and the time of sale.
• Some lender owned properties may be conditioned on an “as-is” sale.
• Some lender owned properties were never owner occupied. Leaving a question mark as to maintenance and care.
• Some lender owned properties are not financeable.
• Some lender owned properties are offered to the market with incentives.
• Lenders have an obligation to their share-holders to recover as much as the market will bear when they sell their REOs, which may make it difficult to get that “great deal”.
• Some lender owned properties that are aggressively priced are seeing multiple offers, limiting the “good deal” factor considerably.
• Some short-sale and/or Lender owned properties are a great fit and/or investment for buyer and the transactions work out fine.

I know that there are a million good and bad stories (which in turn can create a million more points to consider…) Anyone considering buying a distressed property would be well served to get some good advice, do their homework and go into the process with eyes-wide-open.

The Oregon Association of Realtors Reports the Following as of Today (07-01-2010):

Congress Extends Closing Deadline for Homebuyer Tax Credit 
After a close encounter with the deadline, the United States Senate passed an extension of the Homebuyer Tax Credit closing deadline last night. The extension applies only to transactions that have approved contracts in place as of April 30, 2010 and have not yet closed. The legislation should create a seamless extension and the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30, 2010 and the date the President signs the bill into law.

It’s important to note that this does not extend in any way the time frame for buyer’s to make a contract or get into one. It helps the approximately 180,000 individuals that have already entered into binding agreements as of April 30th and have not been able to finalize their transactions–this is espeically true for those that are involved in Short Sale transactions or are bogged down in the lending process.

National Flood Insurance Extended

Last night, the Senate also passed the National Flood Insurance Program Extension Act of 2010, which extends flood insurance until September 30, 2010, and will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date the extension is enacted.

Hopefully, before September 30th, they’ll come up with a more permanent solution. The lack of flood insurance creates instablility in the market and is potentially damaging to many homeowners.

Here’s some basic advice from CBS MoneyWatch.com that will help buyers in the Corvallis, Albany, Philomath or other markets in the mid-Willamette Valley.  Most buyers are starting their research process on the Internet, and there’s a ton of data out there.  Not all of it accurate, so it takes some time and experience to filter out the good from the bad. I think this is great advice. What do you think?

Don’t Miss Out!

Some existing homeowners who purchase a replacement personal residence may qualify for a tax credit as well.  Here’s a link to a guide that can help you determine if you qualify or not. Timing is crucial and of course, check with your tax advisor for complete details. This eligibility test works for either existing homeowners or first time homebuyers.

Tax credit timing:  You must be in a contract by 4/30/2010 and close by 6/30/2010 to qualify.  We are not anticipating this credit to be extended.  The industry leaders that worked so hard to accomplish getting this credit passed, have publicly stated that they will not be asking for more.

If you’re interested in buying, time is running out; you need to get into the market sooner rather than later.  I specialize in residential real estate in Corvallis, Albany, Philomath, Lebanon and surrounding areas of the mid-Willamette Valley in Oregon.  I’d be happy to help you work your way through the process.

Check to see if you qualify for a home buyer tax credit (first time or current homeowner)

Note: Test provided by Alishia Jones, Mortgage Loan Officer, Bank of America, Corvallis, Oregon.

Money Matters

• Federal Housing Administration (FHA) is rolling out new guidelines soon (April) for their loan programs, increasing the up-front Mortgage Insurance Premium (MIP) to 2.25% (currently at 1.75%).  For every $10,000 in loan amount, this translates to a cost of $50.00 extra in closing costs.  For example, if you were to borrow $200,000 the additional cost would be $1,000.
• FHA is also reducing the amount that a seller can contribute toward closing costs from up to 6% of the purchase price to 3%.
• The first time homebuyer credit is expiring soon as well.  April 30th is the deadline for a written contract to be in place; June 30th is the last date for that contract to close.
• Attention existing homeowners; you too may be entitled to a tax credit.  There are many out there that are unaware that if you purchase a replacement primary residence (in contract by April 30th, Closed by June 30th) you may qualify for a $6,500 tax credit.

(Certain conditions apply for transactions to be eligible for tax credits—check this web site: http://www.homebuyertaxcredit.com/  and get advice from your professional tax advisor)

Questions and Answers from the Expert about the Expanded and Extended Tax Credit

Sellers and Buyers in and around the Corvallis and Albany, Oregon real estate markets can benefit from a clear understanding of the opportunities the Expanded/Extended Home Buyer Tax Credit provides.

An excellent source for answers to questions you may have about the expanded and extended tax credit for First Time Home Buyers and Long Time Home Owners that are thinking of making a change can be found at the Q & A page for the I.R.S.  The ultimate resource for information about taxes, tax credits and all other information that relates to the Expanded and Extended Tax Credit for buying a home.

It is possible to have parent (or other family members) assist in the purchase and still be eligible for credits.

If you are currently a homeowner and meet the other requirements, you do not have to sell your existing home (you could rent it out), but you do have to occupy the newly acquired home and meet all the other requirements.

You do not have to “buy up” or, in other words pay more for the new house.

Read the Questions and Answers about the tax credit for Home Buyers. This is truly a limited time opportunity.

I.R.S. Information about the Expanded and Extended Tax Credit

As always, seek the advice of a qualified tax advisor if you have questions about tax laws and how they pertain to personal circumstances.

I have a new listing coming on the market very shortly and just wanted to let everyone know about it before it gets here!

Spacious and clean Philomath home with amazing views of Mary’s Peak and the rest of the Coast Range.  Landscaped yard with underground automatic sprinklers and trickling stream water feature. Large open living area with westward facing balcony to take advantage of those wonderful views! 3 bedrooms, 2.5 baths, approximately 1843 sq. ft. on .38 acres.  Take advantage of the extended first time home buyer/expanded buyer tax credit.

Located just of west of Corvallis and easy commute to Corvallis employment, including Oregon State University)

The extended/expanded tax credit is getting a lot of press and a great deal of mis-information is being spread around.  Here’s a Questions and Answer Session provided by the National Association of REALTORS® that may help provide some clarity.

NAR Frequently Asked Questions Homebuyer Tax Credit Changes
National Association of REALTORS® Government Affairs Division
500 New Jersey Avenue, NW, Washington DC, 20001

The following are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit. 

Question: Existing homeowner credit: Must the new house cost more than the old house?
Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?
Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a first time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?
Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?
Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?
Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.
 
Question: I am an eligible first time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?
Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30. 

If you are thinking of buying or selling a home in Corvallis, Oregon or the surrounding cities of Albany, Philomath or Lebanon or anywhere in the Mid-Willamette Valley.  I’m here to help.

As I’ve said before and will no-doubt say again, if you want expert advice about the 2009 Tax Credit, or the Expanded/Extended Tax Credit, consult with a qualified, tax expert.  Typcially a real estate agent and/or mortgage lender do not have that expertise.