Brad's Real Estate Blog

Whether you are a buyer or seller, you should read "Real Estate and You: A Consumer's Guide." It is published by the Arizona Department of Real Estate (ADRE) whose role is protecting the rights of both sellers and buyers as it relates to Arizona real estate. The purpose of the above referenced guide is providing a basic explanation of the real estate transaction processes and setting forth guidelines that govern those processes. The intention is to make you a more informed Buyer or Seller to assist in making prudent decisions.

It is important to note however that the Arizona Department of Real Estate cannot offer legal advice and therefore nothing within the above mentioned guide should be construed as legal advice. Purchasers and Sellers of Arizona real estate should seek the expert advice of real estate lawyers and accountants before and during the course of real estate transactions. Arizona real estate law and guidelines are subject to change. Visit the ADRE website for any changes or up-to-date information.


Following is an overview of information you'll find in the Real Estate Consumer's Guide:

Chapter 1
An introduction to the contents of the guide.

Chapter 2
Gives a brief overview of the Arizona Department of Real Estate. Even though the Department cannot offer legal advice, it has dedicated professionals available to answer general questions about real estate transactions in Arizona.

Chapter 3
Discusses the role of the real estate professional in Arizona. Licensed real estate salespersons and brokers in Arizona have considerably more authority and responsibility than in many other states. It is important for you to know what they can and cannot do. Most real estate transactions in Arizona are conducted with the assistance of licensed real estate professionals.

Chapter 4
Describes the process of preparing a home for sale, determining the level of professional help needed to sell the home, and selecting an Arizona real estate agent.

Chapter 5
Covers a discussion of the types of real estate listings and preparation for listing the property.

Chapter 6
Covers some of the steps involved in buying a home, up to the point where an offer is made.

Chapter 7
Gives an overview of the negotiations, offers and possible counter offers that often take place in bringing a buyer and seller to the point where they can agree on a final price and on final terms.

Chapter 8
Discusses some of the common financing methods used in purchasing a home in Arizona.

Chapter 9
Reviews the steps that need to be taken by both buyer and seller during the time between acceptance of an offer and the closing of the transaction (the “escrow period”).

Chapter 10
Explains the real estate closing process.

Chapter 11
Deals with the post-closing period.

The guidelines apply to all real estate transactions within the State of Arizona.

I think the keys to success in this business are:

1. Communication Skills
2. Honesty
3. Hard work

When I am talking with a potential client to list their house I think its important to communicate what the current market conditions are and what I am prepared to do to help them sell their home.

If this is a new client, I am also asking myself why are they not using the agent that helped them buy their home? When they bought their home, they most likely used the services of a real estate agent. They probably found that agent through a recommendation from a friend or may be from a family member, or through some sort of the advertising or marketing. What did they like or not like about their past experience with an agent? What could that agent have done differently to make sure they are repeat clients and that they will recommend that agent to their friends and family?

For whatever reason, now it is time for them to sell their home and they need a real estate agent again. Many home sellers, particularly those selling their first home really tend to think all agents are quite similar to the one, which helped them buy their home. Do our clients know the differences between agents? Selling Agents vs. Buyers Agents?

Most people know real estate agents can work with both buyers and sellers, however many agentsa tend to focus more on one or the other. When they bought their home, they maybe worked with a "selling agent" - an agent that works typically with buyers. Because of the nature of real estate advertising and the marketing, the public's main image of the real estate profession is that of the selling agent (buyer's agent).

As a result, many homeowners wait for their listing agent to do the same things, which a selling agent does i.e., find someone to buy their home. After all, they do the things you normally expect if they were searching for buyers. A sign goes up to the front yard. Ads are placed in the local newspaper and then in real estate magazines. The agent actually holds an open house on the weekend. The house is then proudly displayed on the Internet.

How do we best educate our clients that this is just the "surface" marketing. More significant activity occurs behind the scenes. After the "for sale" sign goes up and flyer's are printed.

To be successful once we have the listing we must be a master of marketing the property. besides placing the sign in the yard and writing the ad for the property, what else do we need to do? I realize that I have to help with negotiations and manage the transaction to closing but what am I going to do to get a buyer to see the house?

I usually start by building a profile for a buyer that might be interested in the house. This will help me build a target market for the property. My philosophy is that the broker advertises to the entire public. It's my job to narrow it down. Here are some items I look at in building the profile:

What price range is the house in? - We know based on a NAR survey done in 2006 that first time home buyers pay around $165,000 for their first home. We also know from that same NAR survey that repeat buyers usually spend around $249,000 for a house. Depending on your market these figures may need to be adjusted but they give you a good idea on where to start. So, if the house falls in the $120's, I know that it might be a good fit for a first time home buyer. If the house is in the $250's, then I know it most likely will be a repeat buyer that will purchase this listing.

Location? - What are redeeming qualities of the neighborhood? If the house falls into a particular good school district then you can imagine that individual with kids would be interested in purchasing this home. If the property is close to a busy night life, then a younger person without kids might be the best fit for the home. The best way to figure out how to find this out are one of two questions that you can ask the seller.

• Why did you buy this home?
• What is your favorite part of the neighborhood?

It is a good rule of thumb that the person that is selling the home bought it for the same reason that someone else would buy the home.

The house? - The final thing I look at is the house and what attributes it has. For example if it is a 2 bedroom house. Then you can imagine it is less likely to be appealing to someone with kids than a 3 bedroom house. If the house sits on a big lot and is a 2 story house, then it is most likely not going to be appealing to an elder person that would have deal with the stairs and up keep of the lot. Again the best way to figure this out besides visually looking at the house is to ask the seller some questions.

Why did you buy this house?(You notice it is the same as above)

What is your favorite part of the neighborhood?

After I build a profile on the house then I am ready develop a marketing plan for the listing. The marketing plan will be specific for that particular house. It will set-up to attract buyers that fit the profile that I develop. Remember my brokerage is marketing to everyone else. This helps me save time and money in marketing the home. Plus it personalized my service to my client.

These are some of the things I do.

So, my questions to you is.....

What do you think makes a great Real Estate Agent GREAT?

What are the little differences in service and client relations that build life-long clients?

The National Association of Realtors just released the data for the existing home sales nationwide. I have a bias towards the "Existing" figures as opposed to the "New" home sales which were reported yesterday.

The Existing numbers are based on facts (Sales that have closed). They also account for 85% of all sales.

The new sales figures are based on contracts that have been signed. It's a fuzzy number as an estimated 40% of those contracts do not go to fruition.

Here's a quick view of the numbers:

Overall Existing Home Sales for April were down 2.6%

This represents a year over year decline of 10.7%!

Median Price for a home sold was $220,900 which is down marginally

But that decline in value is also the 9th straight on a row!

Inventory is up 10.4% (the number of homes for sale)

Inventory sits at an 8.4 month supply (the highest since 8/92)

The Northeast absorbed the biggest hit (8.8)

The West declined only 1.7%

Overall the report was negative and lower than what the experts were predicting.

While this is not always true, the general rule to remember is that weaker than expected economic data lowers rates, contrast this to better than expected generally causes rates to rise.

What You Need to Know

Housing enjoyed a boom in which sales of both new and existing homes set records for five straight years until 2006. Realtors are forecasting that existing home prices could decline by around 2 percent this year, which would be the first setback for an entire year on records that go back four decades.

Homes are still selling, even in Sierra Vista; don't let anyone else tell you otherwise. What is helping them sell, over the many others buyers have to choose from? I believe its Price.

I also believe its Condition. I also believe its Amenities. You want to sell your home? Let's focus on its condition and how little you may have to spend to make it appeal to a buyer over and above all the others out there.

A professional Realtor® (like myself!) can help you - but this is what I suggest as a first step: walk your house from room to room, look at your yard, and your garage. Use a critical eye. Pretend this is not your home, but a house for sale. Here are a few things you might notice that can be corrected inexpensively:

1. Wash your windows, inside and out. A cloudy window may make a buyer think your windows are in need of repair because they are so dirty. Sparkly windows increase your chances to sell.

2. Clean and uncluttered, that is how your house should be when someone walks through it. This is not expensive. Store things in one room of your home; Start packing things up and put things in the garage, in a POD, or if you really have a lot of things and it's making your rooms look smaller than they are, rent a storage space for a few months. As for cleaning? We need that critical eye of yours again! Do you always have the door to your extra bedroom open because you use it as an office? Has it been years since the door has been closed? Does that maybe also mean the dust bunnies behind the door have multiplied better than real bunnies? In each room, clean things that you don't normally clean. Moldings on doors, baseboards, window sills, closet floors, under beds, inside kitchen cabinets. Wash the curtains; keep your counter tops clean.

**The key is this; if a potential buyer walks through your house and the windows are dirty, the rooms unkempt, they may subconsciously think you have not cared for the home well enough and worry about repairs they might need to make that are unseen to them now.

Amenities. Should you remodel something? Can you recoup the costs? Can it help you sell your home? The National Association of Realtors (NAR) discusses this issue on their website. According to NAR and other experts, a bathroom remodel can give you a very high return. You might want to consider remodeling an average sized bathroom by replacing the flooring, installing a new sink, freshening up the paint with modern colors. Another thing you can add for under 5k in most any house, is a deck or air conditioning, or a fence. Are your funds limited? How about adding that disposal you always wanted but never got around to in your kitchen. Get an on line subscription to Angie's List and get an idea what repairs or upgrades might cost you. Find something you can do within your budget. The NAR site also offers you “How to Remodel Your Home on A Budget”.

At the very least, you can perform some easy steps like washing windows and replacing cracked outlet covers, getting rid of those growing dust bunnies behind the doors, little things that just might help sell your home.

Good luck and give me a call if I can answer any questions.

Regardless of how you feel about the G W Bush administration's performance in the last six years, please make the effort to tell as many elected federal officials you want them to support our men and women in military uniform.  Take the politics out of it.  To not support our troops in harm's way and their families is stupid, harmful, pathetic and UN-AMERICAN.  If you have a problem with what they are doing in Iraq, Afghanistan and elsewhere, take it out on the inept politicians in DC, not our troops. Take more than a moment during this holiday vacation you enjoy so much to thank God we have a volunteer military to keep us safe in this crazy world we live in.  Please ask yourself, "What would I do if these fine Americans were not doing their part to protect our country and its citizens.

God Bless Our Military and Country. Freedom is not FREE.

History

Memorial Day, originally called Decoration Day, is a day of remembrance for those who have died in our nation's service. There are many stories as to its actual beginnings, with over two dozen cities and towns laying claim to being the birthplace of Memorial Day. There is also evidence that organized women's groups in the South were decorating graves before the end of the Civil War: a hymn published in 1867, "Kneel Where Our Loves are Sleeping" by Nella L. Sweet carried the dedication "To The Ladies of the South who are Decorating the Graves of the Confederate Dead" (Source: Duke University's Historic American Sheet Music, 1850-1920). While Waterloo N.Y. was officially declared the birthplace of Memorial Day by President Lyndon Johnson in May 1966, it's difficult to prove conclusively the origins of the day. It is more likely that it had many separate beginnings; each of those towns and every planned or spontaneous gathering of people to honor the war dead in the 1860's tapped into the general human need to honor our dead, each contributed honorably to the growing movement that culminated in Gen Logan giving his official proclamation in 1868. It is not important who was the very first, what is important is that Memorial Day was established. Memorial Day is not about division. It is about reconciliation; it is about coming together to honor those who gave their all.

Memorial Day was officially proclaimed on 5 May 1868 by General John Logan, national commander of the Grand Army of the Republic, in his General Order No. 11, and was first observed on 30 May 1868, when flowers were placed on the graves of Union and Confederate soldiers at Arlington National Cemetery. The first state to officially recognize the holiday was New York in 1873. By 1890 it was recognized by all of the northern states. The South refused to acknowledge the day, honoring their dead on separate days until after World War I (when the holiday changed from honoring just those who died fighting in the Civil War to honoring Americans who died fighting in any war). It is now celebrated in almost every State on the last Monday in May (passed by Congress with the National Holiday Act of 1971 (P.L. 90 - 363) to ensure a three day weekend for Federal holidays), though several southern states have an additional separate day for honoring the Confederate war dead: January 19 in Texas, April 26 in Alabama, Florida, Georgia, and Mississippi; May 10 in South Carolina; and June 3 (Jefferson Davis' birthday) in Louisiana and Tennessee.

Source: http://www.usmemorialday.org/backgrnd.html

Your credit report is extremely important to you and can impact you financially. You should protect your credit as if it were real gold. The impact of a negative report can be very costly! Despise what you may hear on commercials; there is no way to remove negative items on your report if they are reported accurately. However, the current system is far from perfect and many times individuals find that a negative item is reported on their report that is inaccurate. If you think about the volume of transactions that are reported into the system each and every day, it is easy to see how mistakes can be made. Every time you use your credit of debit card to pay for a purchase, that information is sent to the recording bureaus. Literally billions of credit transactions are sent to the reporting agencies each and every month. The credit bureaus know the mistakes can happen and inaccuracies can appear on an individual's credit report. No one wants the credit reports to be inaccurate, not the individual nor the credit bureau. So, if you find a mistake on your credit report, try to keep this in mind when trying to correct the error.

Congress updated the Fair Credit Reporting Act in 2003 to include the Fair Credit Transaction Act. This is to protect you if transactions are reported inaccurately. Numbers can be transposed or data files can even be corrupted when reporting information to the bureau. The FCTA will protect you and make sure you credit report is corrected and reflected accurate information. So, what should you do if you find a mistake on your report?

First, start communicating with the collection agency in writing. Verbal communication is great, but when it comes to correcting your credit report you want a written trail of your attempts to correct the problem. Put it in writing! And put it in writing nicely! The address for the collection agency should be provided for you on your credit report. You should write a letter to the collection agency and state the item they are reporting is inaccurate and ask them to remove it from your report. It also helps to attach a copy of your credit report with their inaccurate item highlighted and attached to your written request. Ask the agency to send you a corrected copy of your credit report after they have removed the inaccurate item.

Second, make sure that your written communication is sent via certified mail with a return receipt requested. You not only want to have a copy of your written communication, but you want to have PROOF that it was delivered and received by the collection agency.

Third, if the agency fails to remove the item, try writing them a second time. State in your letter that this is your second request and attach copies of your first letter, inaccurate report, and return receipts showing the information was received. You can state in your letter that according to the FCRA it is illegal to report inaccurate information on an individual's credit report and request the item be removed immediately!

Fourth, if the company still refuses to remove the item you should contact the State of Arizona consumer protection agency and notify them of the problem.

Fifth, at this point if the item has still not been removed I would attempt verbal communication, but only with a manager. Call the company and insist on speaking with a manager. Inform the manager that you have written two letters and have signed return receipts showing proof of delivery. Make a written note in your records regarding the phone call and any comments that were made. You made to need to keep moving higher up the management chain with your phone call! If so, try to remain pleasant and professional but insist the item be removed.

Lastly, if all else fails and the company refuses to remove the incorrect item, you should seek the advice of an attorney and consider taking legal action. If the company cannot prove that the item they have reported on your credit report is accurate, they will be liable for reporting inaccurate information.

Most agencies are more than willing to correct inaccuracies that they may be reported in error. But, you must be patient and diligent in getting this corrected. Don't give up because having an accurate credit report, it critically important to you! Your credit score will determine the interest rate you will qualify for when obtaining a home mortgage, it can increase your annual premium for homeowners and car insurance, and also determine if you will qualify credit cards or equity lines. Take the time to check your credit report at least once a year and make sure it does not reflect in accuracies!

With access to information comes power. That is, if you know what to do with it. One of the most frequent questions we are asked about a property is, "how much did they pay for it?" It doesn't matter. We have no idea what the history of the sale is. Was it bought as distressed property from an anxious seller? Did the buyer pay top dollar because there were competing offers and they just HAD to have that home (or had been beat out on two or three before getting and accepted offer?). Even with a flip property, we can't tell if a coat of paint was slapped on the property or if every system was replaced by a master craftsman (though good marketing should make that apparent). Again, we can't tell what the circumstances of the purchase were.

The market is changing by the minute. While prices continue to fluctuate across the country, that trend is less dramatic here in Cochise County.  Depending on which part of the county you are in you have may have seen everything from a modest decline in prices to a substantial increase.  In an uncertain market like we have now, not even the experts know what is going to happen in the short term.  The great thing about real estate is that history does tell us with certainty what is going to happen long term.  Prices are going to go up.

The good news is that Sierra Vista(’s housing market) remains in a much better position than other parts of country, with encouraging signs that consumers are ready to take advantage of low mortgage rates and other very favorable conditions for buying a new home.  Most of those favorable conditions apply to all homes not only new homes.

The neighborhood you choose can have a big impact on your lifestyle—safety, available amenities, and convenience all play their part.

1. Make a list of the activities—movies, health club, church—you engage in regularly and stores you visit frequently. See how far you would have to travel from each neighborhood you’re considering to engaging in your most common activities.

2. Check out the school district. The Department of Education in your town can probably provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. If you have school-age children, also consider paying a visit to schools in the neighborhoods you’re considering. Even if you don’t have children, a house in a good school district will be easier to sell in the future.

3. Find out if the neighborhood is safe. Ask the police department for neighborhood crime statistics. Consider not only the number of crimes but also the type—burglaries, armed robberies—and the trend of increasing or decreasing crime. Also, is crime centered in only one part of the neighborhood, such as near a retail area?

4. Determine if the neighborhood is economically stable. Check with your local city economic development office to see if income and property values in the neighborhood are stable or rising. What is the percentage of homes to apartments? Apartments don’t necessarily diminish value, but they do mean a more transient population. Do you see vacant businesses or homes that have been for sale for months?

5. See if you’ll make money. Ask a local REALTOR or call the local REALTOR association to get information about price appreciation trends in the neighborhood. Although past performance is no guarantee of future results, this information may give you a sense of how good an investment your home will be. A REALTOR or the government planning agency also may be able to tell you about planned developments or other changes in the neighborhood—like a new school or highway—that might affect value.

6. See for yourself. Once you’ve narrowed your focus to two or three neighborhoods, go there, and walk around. Are homes tidy and well maintained? Are streets quiet? Pick a warm day if you can and chat with people working or playing outside. Are they friendly? Are their children to play with your family?

Getting your home ready & hiring an agent

Before searching for and setting an appointment with a real estate agent there are certain things you can do to get your home ready for sale. First, start by removing any clutter in the living areas and the bedrooms. Make sure that kitchen counters and clean and clear, pick up any toys, clear the walls of excessive frames, etc. Remember, the home must look as neutral as possible so it can appeal to a wide majority of people. For that reason, you should consider packing away personal effects for instance photo frames and refrigerator magnets. Finally, if there are any simple inexpensive repairs you can make, by any means, do them. After you follow these steps to get your home ready, you can now start to consider hiring a real estate agent to market your home properly without breaking your budget. Keep in mind that the majority of real estate agents will give a great presentation to get a listing, but after that they will stick a sign in the yard and hope for the best. You should consider hiring an agent that strikes you as competent, aggressive and most of all honest. There are certain elements you should keep in mind when discussing and negotiating with an agent. First, the listing contract usually will bind you for a specific period of time, thus not allowing you to fire your agent. Make sure that the listing agreement contains a clause that allows you to terminate if the agent does not perform according to standards. This will keep the agent on their toes and will ensure that he/she works hard for you. Next, make a judgment based on your gut feeling about the agent's integrity and honesty level. This is crucial because above all, you want your realtor to perform for you. Pay close attention and even make notes of the promises that the realtor makes and hold them accountable in due time. This is a business transaction and you should treat it like one. You can be sure that once you make a good decision on the agent you hire, you will make it a lot easier on yourself down the road of the transaction.

Marketing your home

In the previous part, we discussed getting your home ready for sale by doing simple repairs and hiring the right real estate agent to help you sell your home. The next natural step in the home selling process is quite crucial to its success: Marketing! In order for your home to sell it needs to be exposed to the wide audience of prospective buyers. This exposure is acquired by multiple steps. First and foremost, your realtor must post your home listing on the Multiple Listing Service (MLS) very promptly (within 3-5 days). The MLS is the primary marketplace for all licensed realtors and their prospective clients and you cannot afford to skip this step. Second, you and your realtor must work together and help each other and move the process along. Ask your realtor to make a standard email flyer (e-flyer) containing photos and information about your home. Then, forward that email to everyone on your email address book. They might not buy your home themselves but they might have a relative or friend that might. You should also kindly ask them to forward the email to anyone who might be interested. Also, take a few printed flyers and leave them with different neighborhood businesses you deal with such as the dry cleaners, nail shop, sandwich shop, coffee shop etc. These are very low cost ways to market your home that can be very effective. Last, your realtor must do a minimum of one open house per month in your home and don't let them tell you any different. Open houses are a powerful marketing tool because buyers feel at ease to look at the home on their time. However, don't be fooled by TV shows where open houses are always full of interested buyers. Usually open houses are quite slow and people flow is scarce but remember, all you need is one buyer. In summary, work with your realtor to market your property and you will see positive results.

Offer Negotiations

Your combined marketing efforts have finally yielded an offer. What do you do next? The most important thing to keep in mind before you even look at the actual offer is that different people have different negotiating styles and their offer is not necessarily related to their view of the home. Many times, sellers receive low offers, get offended, and appalled, they flatly reject the offer without giving it any room to develop into a considerable offer. Many buyers have a bargaining personality and will try to "steal" the property away, but if they don't succeed then they start to deal closer to a more achievable deal. This does not mean that there are no bad offers. Obviously, some offers will never yield an agreement simply because the parties are too far apart. But the biggest favor you can do to the transaction is to work with your realtor as a team and seek each others opinion on how to best handle an offer. Remember that to reach an agreement both parties have to make an effort in earnest to get closer to a middle ground. So keep the lines of communication open and make a deal happen!

8 Ways to Improve Your Credit

Credit scores, along with your overall income and debt, are a big factor in determining if you’ll qualify for a loan and what loan terms you’ll be able to qualify for.

1.      Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.

2.      Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.

3.      Don’t charge your credit cards to the maximum limit.

4.      Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.

5.      Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt.

6.      Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.

7.      Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8.      Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

This information is copyrighted by the Fannie Mae Foundation and is used with permission of the Fannie Mae Foundation. To obtain a complete copy of the publication, “Knowing and Understanding Your Credit,” visit http://www.homebuyingguide.org.

1. Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.

2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income.

3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.

4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.

5. Save for a downpayment. Although it’s possible to get a mortgage with only 5 percent down—or even less in some cases—you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.

6. Create a house fund. Don’t just plan on saving whatever’s left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.

7. Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.

8. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.

If your income doesn’t come from a paycheck or you don’t want to reveal all to a mortgage lender, you can still get a home loan. Here’s how.

Ethical mortgage lenders generally try to talk customers out of getting low-doc and no-doc loans because they cost more. Before applying for one, talk to a qualified mortgage lender and verbally give them all your information first. Most people who ask for stated or no doc mortgages don’t need it. A good mortgage lender can help you work through and document what you think is undocumentable.

Most homebuyers work for a steady paycheck and are willing to divulge details of their finances in exchange for the best available mortgage loan.

But a lot of buyers don’t draw a steady paycheck from a boss. They own businesses, make commissions, live off investments or get their income in cash. Others don’t want to give up their financial privacy. Limited-documentation mortgages are available for these people.

Depending on the mortgage product best for you the lender will still require at least a credit report and a property appraisal. Borrowers who require flexibility and privacy of these types of mortgages generally carry higher interest rates than conventional mortgages. Lenders want these borrowers to make down payments and to have excellent credit.

There are three main types of low-doc/no-doc mortgages.
• Stated-income mortgages tend to be for people who work but don’t draw regular wages or salary from an employer. That includes self-employed people or those who make a living off commissions or tips.
• No-ratio loans are often the right call for wealthy people with complex financial lives, retirees who live off investments and people whose lives are in flux because of divorce, recent death of a spouse, or career change.
• No-doc or NINA (no income/no asset verification) mortgages are for creditworthy people who want maximum privacy and can afford to pay for it.

What is a 1031 Exchange?

A 1031 Exchange accomplished two positive economic outcomes for the property owner:

1. Deferral of capital gains taxes that would normally be due upon sale.
2. Preservation of equity.

A properly structured exchange allows an investor to sell a property, to reinvest the proceeds in a new property and to defer all capital gain taxes. IRC §1031 (a)(1) states:

"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment."

1031 Exchange Information - If you are ready to make the next step as a real estate investor, using a 1031 tax-deferred exchange could be the best choice you will ever make. We have extensive 1031 Exchange experience and look forward to assisting you with your next investment purchase.

• Two requirements must be met to defer the capital gain tax: (a) the Exchanger must acquire "like kind" replacement property and (b) the Exchanger cannot receive cash or other benefits (unless the Exchanger pays capital gain taxes on this money).
• By completing an exchange, the exchanger can dispose of their investment property, use all of the equity to acquire replacement investment property, defer the capital gain tax that would ordinarily be paid, and leverage all of their equity into the replacement property.

Eligibility for a 1031 Exchange - Eligibility for a 1031 exchange is determined by the nature of the properties involved, not the status of the taxpayer. The property must be held for investment or productive use in trade or business, and exchanged for like-kind property.

Please call 520.227.6694 Brad Snyder to set-up a free 1031 Exchange consultation.

1031 Exchange Basics        

The rules for a 1031 Exchange are complex. This is a basic overview with the understanding that each transaction is different. When assembling your 1031 Exchange team, a CPA is a must to ensure your individual situation is accurately addressed. That being said, the basic rules are always the same. 

1. Only investment properties qualify for 1031 exchanges, not personal residences.
2. You have 45 days from the date of transfer of the relinquished property to identify replacement property. No exceptions. 
3.  The exchange must be completed within 180 days or the tax due date. For this reason, exchanges initiated after October 15 require exceptional vigilance. 

 Once you have decided to sell a qualified property, contact your CPA and a REALTOR with 1031 Exchange experience. Both are vital to a successful transaction. The CPA will be able to advise you of your current financial situation and help you chart a path for the future. The REALTOR will be able to assist you with the proper documentation and guide you through the steps involved. He or She can also help you select a 1031 Exchange Qualified Intermediary (QI).   Replacement PropertyThere are no limits on the value or number of properties that may be relinquished in an exchange.

There are limitations on how many replacement properties may be identified. One of the following three rules must be adhered to.   

Three Property Rule 

         A maximum of three properties may be identified without regard to the fair market value (FVM) of the replacement properties. 

200 Percent Rule 

         Any number of properties may be identified as long as the aggregate value does not exceed 200% of the relinquished property. 

95 Percent Rule 

         Any number of properties may be identified if, by the end of the exchange period (180 days), the aggregate market value of acquired property is at least 95% of the aggregate market value of all properties identified.  

Properties for replacement must be identified in writing on or before the end of the 45 day identification period.  I will discuss more about documenting your exchange and holding periods in the next post. 

How much effort should you put into listing your home for sale?

After the past 15 months, that's almost a silly question. There are more than  homes for sale in Cochise County, with an average time on market of almost four to six months.

How much effort should you expend to sell your home? Whatever it takes.

We tend to be very careful about the listings we'll take, because we want our homes sold in four days or four weeks, not four months.

But that leads us to the most important thing you can do to make sure your home sells while others languish: Price it to the market.

Home values in Sierra Vista are down 12 to 15 percent from the peak. If you're pricing to the peak market and not this one, your house will not sell.

I want to talk about some innovative marketing ideas, but no amount of marketing can overcome a too-high price. If you are unwilling to price your home to the market, you might as well spare yourself the agony of listing it.

Now let's go through the home and repair everything. You don't need to remodel -- unless you really do -- but everything should work as advertised.

Have your Realtor walk through your home. Anything that you feel the impulse to call attention to, or to divert attention from, should be repaired or replaced. Your most sales-worthy competition is in turnkey condition. So should you be.

Your Realtor should either be a home stager or have a relationship with one. Either way, an expert needs to go through your home with a critical eye, giving you room-by-room instructions on what to get rid of, what to pack away, what to move, what to emphasize.

The point is to enable buyers to move themselves in psychologically, without your own lives getting in the way.

Good luck!

Wouldn't you love to get a bargain on your next home?

That's still a high hurdle. You may have heard that the real estate market is cooling. So how can you pluck that rare bargain?

The place to start is with properties that have already missed their market window. When a house gets beyond a few weeks on the market, many buyers will view it as being shopworn. It's yours for the plucking, but you'll need to double up on due diligence: The home may be overpriced or may be in horrible condition.

Neither of these is insuperable, but you have to go in knowing what the house is really worth. And when you write a contract for a property that is overpriced or undermaintained, you should expect that your offer will be rejected. The problem may be an error by the listing Realtor, but the more common cause is an obstinate seller.

But time is on your side. Houses are not sold in a vacuum. Sellers have needs that they must satisfy: downsizing, a job transfer, a need for cash. Some can wait out the market forever, but most will eventually swallow hard and take an offer that is less than they had hoped for.

The trick to creative negotiation is to find out what the sellers really want and give them that. It may not be price. It may be a particular closing date, a waiver of all repairs or a six-month leaseback. If you can figure out why earlier contracts failed, you can tailor your offer to give the sellers what they want most, taking back concessions in other places.

And remember that your bargain need not come in the form of a lower price. You can pay the full market value, instead taking seller contributions to your down payment, closing costs and prepaid expenses. The few extra dollars in mortgage payments will be dwarfed by the money you'll save at the closing table.

Why do so many home sellers fail to get top dollar for their houses?

Often the cause is that the homes were priced too high to begin with. Sellers grab for more money but end up with less.

But wait . . . doesn't it make sense to list your home at a price higher than the current market?

Unfortunately, no. Buyers and their Realtors will come armed with accurate price information. They'll know what homes like yours have sold for and what comparable homes are selling for now. If you price your home too high, not only will it not sell, it will continue not selling after the price is reduced.

Even when it's clear that a house should be priced at $300,000, it's common for sellers to say, "Why not try it at $325,000 to see what happens?"

The listing Realtor may be too weak to point out the unhappy consequences of pursuing such a plan.

So the home doesn't get buyer traffic. Buyers go to the appropriately priced properties. No offers come in. The sellers glare at the lister, who silently kicks himself for agreeing to price the house too high. Finally, the price is reduced to the actual market value of the home. But there is still no buyer traffic - the home has been listed for so long that it seems shopworn.

Nevertheless, the sellers do get offers - low-ball offers from discounters looking for a shopped-over bargain. Finally, they give in, letting the home go for much less than they would have gotten had they priced it right in the first place.

Why not start lower than the market price, hoping for higher bids?

Except in the kind of frenzied seller's market we had a few months ago, buyers are just going to assume that you or your Realtor doesn't know what your property is really worth.

But what if you have time to wait? Don't list your home until you need to sell it. No house profits from an extended time on market.

Your best strategy is to price your home to the market. You'll get the highest price you can reasonably expect in a timely fashion.

Life Expectancy of Home Components

A home is expected to last many years and serve successive generations. But what about the indivdual components that comprise the house? How many years of service can a home owner reasonably expect from a roof or door, a window or a whirlpool tub?

A new study sponsored by Bank of America Home Equity and conducted by the National Association of Home Builders takes some of the mystery out of the subject with the caveat that numerous factors, including use, maintenance, climate, advances in technology and simple consumer preferences can have a dramatic effect on product longevity.

Some of the findings include:

Appliances- Gas ranges, 15 years; dryers and refrigerators 13

Cabinetry and storage- Kitchen cabinets, 50 years

Countertops- Natural stone, lifetime; cultured marble, 20 years

Faucets and fixtures- Acrylic sinks, 50 years; kitchen faucets, 15; showerheads, 20 years

Home technology- Built-in audio system, 20 years; security systems and heat/smoke detectors, 5-10 years

Windows and skylights- Aluminum windows, 15-20 years; wooden windows, 30 years

You can read the complete findings at www.nahb.org/fileUpload_details.aspx?contentID=72475

How To Prepare Your House For Sale