You may owe federal income taxes in 2013 if you have a short sale, foreclosure.

NEW YORK (CNNMoney) — Flippers, the real estate investors who buy homes on the cheap and quickly resell them at a profit, just got a reprieve from the Federal Housing Administration.
In an effort to help stabilize housing prices and unload some of the foreclosures that are flooding low-income communities, the mortgage insurer extended a waiver of its anti-flipping regulations through 2012.

The waiver, which was initially issued in 2010 and set to expire this month, suspends regulations that prohibit the agency from insuring mortgages used to purchase homes that are bought and resold in less than 90 days.
“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Acting Federal Housing Administration Commissioner Carol Galante.
Low-income neighborhoods are particularly plagued by foreclosed homes that lower property values and act as magnets for crime and other social ills. Real estate flippers often rehab these damaged homes before reselling them, improving conditions for neighborhoods.

The FHA, which does not issue mortgages but insures them, is a primary player when it comes to mortgage lending in low-income communities. Many loans in these communities could not be issued without FHA backing.
The ban against flipping was initially put in place to prevent predatory flipping, in which homes are quickly resold at inflated prices to unsuspecting borrowers.
In order to qualify for the waiver, certain conditions must be met. The transaction must be “arms length” with no other relationship between seller and buyer.

FHA says: It’s ok to flip that house – Dec. 29, 2011.

Word gets around.   There are great deals out there on foreclosed homes.   In many markets, there appears to be no shortage of foreclosed properties for sale.   Did you also know that buying a foreclosure could end up costing you thousands more than you expected to pay?   Read on to find out what you should expect when buying a foreclosed property and a few tips on how to protect your wallet!

Searching for Homes:

• Use a Realtor.   A Realtor who is familiar  with the foreclosure process, will cost you nothing and will provide you with invaluable guidance.

• Keep an open mind.   When you walk into a foreclosed home, it may smell bad, it may be dirty, and it may have unwanted critters scurrying about.   However, many of these things are inexpensive to correct and you could be missing its potential.

• Check the basics.   Is the a/c system present?  Are the appliances present?   Will the flooring need to be replaced?   Does it need new paint?   Are there structural deficiencies that are readily observable?   Keep in mind that all of these repairs will be at your expense.

• Know your loan requirements.   Are you approved for FHA or VA financing?   They both have requirements regarding the condition of the home.   Ask your Realtor and your loan officer about your specific requirements and be aware that the home you choose must pass FHA/VA appraisal inspection standards.        

Making an Offer:

• Be realistic.   If you™ve been approved for $150,000, you’re not going to negotiate a  foreclosure priced at $250,000 down to your number.   Banks will negotiate somewhat, but they typically price their properties well within competitive ranges.

• If the price seems too good to be true¦it might be!   A new foreclosure listing priced thousands below current market value?!    You’re probably not the only one that has noticed.   The result is a multiple offer situation.   You may be asked to submit your œhighest and best offer, which usually means you will be up against other Buyers™ offers.   This is not the time to try and negotiate the price because more often than not, there are Buyers that will go above asking price.   So offer what you feel is fair (ask your Realtor for sold comparables/statistics to help you make an informed decision) and only what you are willing to pay and can afford.

• Need closing cost assistance?   Ask for it!   But be prepared that the selling bank may require you increase your purchase amount above the asking price to make up for the extra expense you are asking them to incur on your behalf.

• Don™t expect the bank to make repairs.   Foreclosures are generally sold as-is.   Spend the money to have a home inspection so you are protected.   Make sure your Realtor has included an Inspection and Cancellation Clause in your offer to allow time to have inspections completed and allow you the option to cancel the contract if there are serious issues uncovered.  

• Expect additional closing costs.   Some foreclosure properties owned by Fannie Mae or Freddie Mac require the Buyer pay fees that, in any other transaction, would be Seller closing fees.   Things such as title insurance/fees (on a $100,000 home, this could range anywhere from $600 – $1000 extra) and doc stamps on the deed (.70 per $100 –     Example:   $100,000 purchase price Divided by $100 = $1000 – Multiply by .70 = $700 in additional fees) could put you over your closing costs budget.  

Once You Are Under Contract:

• Know your deadlines.   You only have a set time period to have inspections completed, financing approved, appraisal completed, etc.   Ask your Realtor to prepare a timeline for you to help keep track of important deadlines.

• Get  a home inspection.   Home inspections generally range in price from $250 – $300 for a moderate-sized single family home.   But this is money well spent if an inspector uncovers an issue that could cost you thousands more to correct.   Talk to your Realtor about the benefits of additional inspections:   termite (sometimes required by your lender), septic, well, mold, etc.

• Expect delays.   Selling banks tend to use closing agents that are not local to the property.   These closing agents, often times, only handle foreclosures and tend to be backed-up, sometimes difficult to reach and may not be ready to close by the agreed upon closing date.   Out of area closing agents may also charge the Buyer a fee for providing a local œcourtesy closer to go over your closing documents with you.   Ask your Realtor if he/she has a local closer than can help for a reduced fee or at no charge.

• Be diligent when your help is needed.   If your loan officer needs updated financial documentation or the closing agent needs your social security number for tax reporting purposes, get the information to them right away.   Many selling banks will charge the buyer a per diem rate (beyond the contracted closing date) for any extensions required due to Buyer delay.   These fees can range from $10 up to $150 or more per day.

It™s Closing Day!

• Be patient¦a little longer.   You™ve jumped through the foreclosure hoops; you™ve paid the extra fees and still got a great deal!   You™re ready to douse the kitchens and baths with bleach and paint those neon pink walls a nice, soothing taupe.   Not so fast.     Many banks will not release keys until a closing has funded.   Which means it could be the next day or if you™re closing on a Friday afternoon, it could even be Monday.   When selling banks use closing agents that are not local, closing documents must be overnighted to your location (many times, they can be emailed to your Realtor or a courtesy closer).   Once you sign, they must be overnighted back before funding can take place.

So, what have we learned?   Buying a foreclosure can be a royal pain.   But if you know what to expect, it doesn™t have to be stressful.    Arm yourself with a Realtor who is familiar with the process and can help guide you  and you could be in your new home sooner than you think!

Related Information:

Want a list of Central Florida foreclosure properties emailed to your inbox?   Just email me with your location preference:   ErinHarbuck@gmail.com.

Have additional questions?   Call or email me today!

If you’ve watched the news lately, then you’ve probably heard about President Obama’s “Making Home Affordable” plans.   But  do you know what  they are?   If you are a struggling homeowner, do you know if you may qualify?   Read on…education is power!

There are two main components to the Making  Home Affordable Plans: Refinance and Loan Modification.  

Refinance:    This  option is for homeowners who are current on their mortgage, but  have been unable to  refinance, by conventional means,  due to a decrease in their home’s value, for instance.   Many homeowners who purchased a home 5-7 years ago may have gotten a great interest rate at the time.   That rate, however, is possibly 2-3% higher than today’s rate.    Do you realize that on a $200,000 mortgage, a decrease of even 2% on your interest rate will reduce your mortgage payment by over $250 per month?

Are you eligible for a Home Affordable Refinance?

• Are you the owner of a one to four unit home?
• Are you current on your mortgage payments?
• Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?   Find out here:

                                        www.fanniemae.com/loanlookup  or 1-800-7FANNIE

                                        www.freddiemac.com/mymortgage  or 1-800-FREDDIE

If you can answer “yes” to all three of the above questions,  you may qualify for a refinance.   Talk to your mortgage company to find out your next step.

Loan Modification:   This option  is for homeowners who are struggling to make their  payments, perhaps  due to an increase in their interest rate or decrease in their  income.

Are you eligible for a Home Affordable Loan Modification?

• Did you obtain your mortgage prior to January 1, 2009?
• Is your home your primary residence?
• Do you owe less than $729,751 on your mortgage?
• Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowners association dues, if applicable) more than 31% of your gross income?

If you answered “yes” to the above questions, you may qualify for  a Home Affordable Modification.   The goal of a modification is to reduce your mortgage payments to 31% of your gross income by either reducing your interest rate, extending your mortgage term or even forgiving a portion of the principal balance (although the last option is  up to your mortgage company’s guidelines and generally, is not offered if the modification can be accomplished by other means).  

If you think you may qualify for either program, contact your mortgage company today.  

For more information on the Making Home Affordable program, visit:   www.makinghomeaffordable.gov

To find a HUD approved housing counselor (free), visit:   http://www.hud.gov/offices/hsg/sfh/hcc/fc/  

In closing, if your situation is such that you are unable to qualify for either program, due to extreme hardship, job loss, divorce, death in the family, etc., you still have options.   You do not have to face foreclosure.   Contact a Realtor, who is well versed & experienced in short sales, to see if this may be your best option.

As an agent that works with many first time homebuyers, I get this question all too infrequently.  

Part of my job is to help educate Buyers and Sellers and walk them through the buying/selling process, while trying to minimize the stress level to my clients.   However, that does not mean that purchasing a home with the assistance of a Realtor relieves a Buyer of  hardwork, dedication and lots of cooperation.

Here are a few key points that will help your transaction go smoothly, get closed quickly and help protect your interests, as a first time homebuyer:

• Communicate, communicate, communicate!   With your Realtor, your Lender, the closing agent, etc.
• Deliver ALL documents that your Lender requires  in a timely manner (W-2′s, bank statements, pay stubs, etc.)
• Be ready to schedule and pay for home inspections, pest inspections, septic inspections, etc.   Even if the Seller is assisting with closing costs, these are fees that generally must be paid up front, by you.
• Expect the unexpected.   Title delays, insurance issues, appraisal issues (especially with FHA financing),  etc. can all delay even the smoothest of transactions.   Be prepared and be cooperative if issues arise.
• Pay attention to deadlines!   Tip: Upon acceptance/execution of a purchase contract, ask your Realtor to prepare a written timeline outlining completion dates for important things like inspections, appraisal, etc.

My best advice is to ask questions!   Great Realtors will go out of their way to help educate you on the process and if it’s an answer they don’t have, they will go out of their way to find it for you.  

Buying your first  home can seem overwhelming once you begin the process, but lean on your Realtor to help guide you.   Make no mistake, you’ll have to do your part!   But your Realtor can be an invaluable resource that  can help you maintain your sanity  throughout the sometimes hectic process.  

The Government has decided to step in in an effort to assist homeowners who may be in mortgage trouble by offering mortgage refinance assistance to homeowners, which  would allow  homeowners to refinance into a lower cost FHA  mortgage:  

• Available to existing mortgage holders with mortgages originating on or before January 1, 2008
• Owner occupancy required
• Refinance cannot exceed 90% of the estimated property value
• Refinance must be for fixed rate 30 year mortgage

$7500 Tax credit for first time homebuyers (defined as one who has not owned a home in 3 years):

• Retro-active to April 1, 2008
• Expires July 1, 2009
• Tax credit is “refundable” meaning if a home buyer’s tax liability is $6000, they will receive a tax refund of $1500
• There are income restrictions ($75,000 single filer or $150,000 joint filer)

While the changes appear to lead us in a more positive direction, there is one change that will make it even more difficult for first time homebuyers.   The end of down payment assistance programs:

Effective October 1, 2008, down payment assistance programs (DPA’s) will no longer be an option for first time homebuyers utilizing an FHA loan  (In the past, a first time homebuyer could use any of several down payment assistance programs, in conjunction with their FHA loan and have a Seller contribute the required 3% down payment).    

Welcome to Erin Harbuck’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Polk County.