Let's Talk About It

Congrats to the Steelers for their win, now some of them can afford the anger management classes they need.

I would have liked to have seen Warner win one before he hangs up his helmet for good.

As of today, home builder C.P. Morgan is ceasing operations in Indiana and North Carolina.

Since 1983 they have built over 20,000 homes in over 200 communities, mostly tract homes targeting first time home buyers. In the late 90's and earlier this decade, they were major players in the new home market amassing a market share of around 10%. They perfected a JIT delivery and construction schedule that allowed them to build "More square feet, (for) less money."

Their recent success was aided by the non profit organizations such as Nehemiah and Ameri Dream that would "gift" down payment money to potential home buyers. Morgan would then add this and closing costs to a home's initial purchase price. They worked with a few local lenders and capitalized on the very lax lending standards, thus putting many young buyers into homes that they really should not have bought.

The young, naive buyer usually did not understand the process and most did not comprehend tax assessments that would add considerably to their initial mortgage payments a few years down the road.

I did sell a few of these homes, but would take the extra time to educate my buyers of the pitfalls and explained to them of decreasing home value during and after construction in their chosen community. One thing I did emphasize to all of them was "Don't make this purchase unless you plan to stay in the home for at least 5 to 7 years after construction is complete in your community."

I did get to know a few of their sales associates and learned of the legal, but covert sales tactics they were taught and of the high pressures for them to perform.

I do feel that this company has been a major player in our extremely high foreclosure rates and the declining home values in our area. While I don't like to see anyone loose a job, I think this company has out lived it's welcome in the home building market

The strong and ethical will survive. Best wishes to the hundreds of employees and sales staff that is now competing for employment is our tough job market.

I watched the President address the joint Congress tonight and I am optimistic but still concerned.

As a Realtor, I see everyday what is happening to this country and our economy. I see families that are faced with loosing their homes and try my best to direct them to the help they need. I see families with dreams of owning a home, but are denied the credit they deserve by banks and lenders that are changing their lending standards almost on a daily basis. I see families that would like to buy a home but can't qualify because someone lost a job recently, or they had to rely on credit cards just to pay other bills.

I am not going to point a finger at any one administration for the problems this country faces today, I will just say that we are reaping what we have sown in recent years. There is too much of the "I want it now" syndrome without regard to the consequences later on.

I was in favor of the bank bailout with the understanding that there would be much more accountability than there has been about where our tax dollars went. I believe that this President will hold those accountable for any future dollars that are distributed.

I have been in favor of the Economic Recovery and Reinvestment Act that the President just signed into law. I do believe that there was far too much pork in the bill though. I will expect this administration to hold accountable any government agency or private industry that receives these funds to be totally transparent where they spend the money.

As for tonight's speech, I think he did a good job of outlining what he expects this Congress to do in the coming weeks and months. His wish list includes much needed reform, but is it too much to try to accomplish in a short period of time? Yes, we need education reform. Yes, health care has needed a complete overhaul for a decade or more. Yes, we need to push for alternative energy sources.

But should we not make the financial market first priority? If banks would play fair and loosen their credit requirements, everybody from the average person trying to hold on to their job to the large industries trying to make payroll and purchase inventory would have a much better outlook about economic future. We all would be more likely to buy the newer car we need, the larger home we need, or just be more at ease about making the trip to Wally World to "waste" a few bucks.

My response to President Obama is this: Crack down on the banks now, force them to loosen their credit standards and start lending the money that we tax payers have reluctantly given them. Continue to provide assistance to the currently unemployed or under employed. Force the auto makers to fast track retooling their factories to build more efficient and affordable cars, thus saving many jobs that are today in jeopardy. Provide all home buyers with a tax credit of $10,000. Add a bonus tax credit to any buyer who purchases a foreclosed property. Reward those individuals, businesses and industries that play by the rules and severely punish those who don't.

Once consumer confidence is restored to a more normal level, then, Mr. President, you can address education, health care and energy. You can't do it all in the first 100 days.

One final thought. If all Republicans are of the mindset that Governor Jindal is, President Obama has a major hill to climb to accomplish his bipartinship agenda. I thought the Governor was more about demeaning the President and all Democrats than about putting our current crisis as their (Republicans) priority. I'm sorry Mr. Jindal, if you were the Republican candidate for President and the election was tomorrow, you would not receive my vote.

While our housing prices did fall only 4% last year, the median income of Indianapolis area homes remained stable. This let's us remain the most affordable major metropolitan area to buy a home in.

Here is the CNN Money article.

I now have a printable FAQ sheet regarding the First Time Buyer Tax Credit that is available.

You can find it here.

I would like to take credit for the following, but my meager brain is not capable of the superior writing of others.

John Rainville with BrokersRealty.com in Harrisburg, PA is the author of this blog post. Give John a call or email if you know anyone interested in residential or commercial property in the Harrisburg area.

"I have been pondering almost daily this great financial debacle that we have gotten ourselves into and how it happened. Now I understand Barry Obama likes to point the finger at the GOP or George Bush, but it started way before "W" became Number 43.  It seems to me that this whole mess can be traced back to Post WWII America and the advent of the "walk in closet" to entice people to move to the new "burbs" outside of town.  WHAT? You say!  That's LUDICROUS!  Now hear me out...

Most of us real estate professionals have been through our share of homes built all different years.  So think about it...the 1800's and before we had armoires and PEGS for god sake to hang your clothes on---we only had a few shirts and pants IF we had more than one!   Around the turn of the century we start to see what most buyers perceive to be miniscule closets in homes---now you could hang maybe up to a dozen garments!  The next jump is post WWII and the advent of the @#$ walk in closet----WHAMO! the world changed!

Now we started to hoard clothes, etc that we could hide in our WALK IN closets.  Remember Lucy and Desi?  She was ALWAYS hiding outfits!  But now the "cow was outta the barn" and we haven’t' looked back----until now.  At the same time we went from no garage to a one car to a two car to a three car---the third bay just to hold all the crap that WON'T fit in our WALK IN CLOSETS! But WAIT WE DIDN' T STOP THERE!

Hell, I've seen homes with 1500 Bottle "wine cellars"!  We've got basements and attics and now we even RENT STORAGE UNITS for all the @$%# that won't fit in our @#$% WALK IN CLOSETS!  What are we NUTS! We're renting space to store stuff we should have given away or sold on E-bay!  In the rural areas where I live some of the folk who live in small houses or mobile homes have had to start storing their assets on the FRONT LAWN! 

Hellooooo, why not sell that old AMC Pacer or cherry Gremlin that you are saving from the junk yard to someone who might actually be able to use it?  Or at least scrap them gems and let us send it to China to be melted down and sold back to us.Ohhh, I can hear some of you already laughing out loud, but hey what's YOUR closet look like?  And I know I will hear from some Al Queda wannabe that this all goes back to a damn American Carpenter!

So Barry---back of George W. and the GOP and let America know where the blame outta be.

As always,  IMHO."

Here is the skinny on the tax credit now available for first time home buyers. I am offering this as information only and not as tax advice. I urge you to consult a tax advisor before making any decisions.

The tax credit equals ten percent of the purchase price up to a maximum of $8,000. Only first-time home buyers are eligible (defined as US citizens who have not owned a home for the preceding three years). The credit is based on the home buyers modified adjusted gross income (MAGI). For individuals, the full tax credit is available for MAGI below $75,000 and phased out from $75,000 to $95,000. For a married couple filing jointly, the full tax credit is available for MAGI below $150,000 and phased out from $150,000 to $170,000. The tax credit is applied against the home buyers tax bill or refunded in cash if the credit exceeds the home buyers tax liability. For more information, visit www.federalhousingtaxcredit.com. The foregoing is for informational purposes only and does not constitute tax advice. Please consult your tax advisor to determine if you qualify for the tax credit.

I just came across a great new start-up company located right here in the Indianapolis area. The name of the company is Know Loans Professional Mortgage Consulting, LLC.

They offer a tremendous service to today's home buyer, the real estate industry and loan originators and loan brokers.

For a small fee:

• They will meet with a home buyer one on one
• Pull the clients tri-merged credit history
• Review the credit history
• Determin whether the client will qualify for a mortgage
• Determin the amount of a mortgage the buyer qualifies for
• Recommend the best type of mortgage for the buyer
• Recommend mortgage lender(s) that offers the proper mortgage
• Help the buyer gather the proper documentation to present to the lender
• If the buyer does not qualify for a mortgage at this time, they will put in writing a 3, 6, or 12 month plan to put the buyer on the right track
• Once the buyer shops a few lenders for pricing, they will examin the Good Faith Estimates (GFE's) and help the buyer determin the best "deal" for them
• And much more

I believe that this will ease any potential buyer's mind about the mortgage process since they are not dealing directly with a mortgage company that is trying to sell only a few products. It will help the real estate practitioner help the buyer find the right priced home for them and it will allow the home buyer to carry a complete package into a mortgage lender's office that should help the approval process go as smoothly as possible.

Give me a call, 317-353-8470 or email for more information and their contact information.

*Disclaimer: I will not be compensated by, nor do I have any direct relationship with this company. I believe in supporting a start-up that is offering a good service and will make my job easier.

For what it is worth, the President is scheduled to sign the Economic Recovery and Reinvestment Bill into law on Tuesday.

My take; I don't think $13.00 a week is going to make or break me and my wife. We are both employed, don't have any children at home, and don't plan to by a new car or RV, so I don't see anything in the bill that will help us to contribute to improving our economy.

Here is what is in the bill.

Congress has passed the Economic Recovery and Reinvestment bill, more commonly known as the Stimulus package.

I blogged earlier that any home buyer may receive a $15,000 tax credit if they purchase a home in 2009.

It appears that the final version of the bill will raise the tax credit from $7,500 to $8,000 and will remain only for first time buyers. The biggest difference is the larger amount does not require repayment (unless the home is sold within 3 years). It still is a tax credit and not a check from the government to the home buyer. It applies to any home purchased in 2009; some news items I have read state January 1 to August 31.

If your tax liability is less than $8,000, you can roll the remainder into your 2010. If you still don't total $8,000 in tax liability, you just loose the difference.

Joe Leksich, A Realtor® in Fort Wayne, Indiana associated with #1 Advantage, Realtors posted some very good information regarding the short sale of a property versus letting the lender foreclose on the property on one of the blogs I frequent. The original question was how does each affect a consumers credit score. Joe sells a lot of bank owned property and has a good handle on short sales. I tend to avoid them because of the extreme amount of work I would have to do, the little if any pay I would receive and the typical lenders (lack) of responding to any offers. Here is Joe's easy to understand comparison.

You can email Joe or myself for more information.

"...why it is better to do a short sale

1:  It is the more responsible thing to do

2:  It has a less effect on your credit

3:  The owner has control over how much a loss the bank takes.  In turn that helps keep their tax liability down and if the bank does choose to sue it keeps the deficiency down.

4:  IT IS THE MORE RESPONSIBLE THING TO DO!

People need to learn to take responsibility for their actions and pay the consequences.  If everyone takes the easy way out (foreclosure) then the home owner does not learn the lesson and it creates a market of declining values.

In doing a short sale, you can ask the bank to turn the deficiency into an unsecured note at 0 or 1% interest over  5, 10 or 15 years.  This way they will not sue the homeowner and there will be no 1099c to the IRS.

Lets say they choose to foreclose:

House mortgage                      $350,000

House sells as foreclosure         $250,000

Bank pays commissions              $13,500

Trash out, winterize and rekey    $  1,500

Holding cost                             $ 5,000

Attorney fees          est             $5,000

Loss of interest and misc fees     $32,000  ($1750 interest x18mo)

Total deficiency                       $157,000  !!!!

So now the bank files suit against the home owner for $157,000 and wins.  They then file to garnish the home owners wages and levy their bank accounts.  AND to top it off, they turn a 1099c over to the IRS and the IRS bills them for unearned income at their income tax bracket (we will us 25%) and the former home owner gets a tax bill of:  $39,250

So because they thought they were taking the easy way out, they are now in debt for:   $196,250      

I don't know about you, but this does not look like an easy way out.  Unfortunately most people will then file bankruptcy to get away from this debt.  Which will mess their credit up even more

If we revisit this as a short sale:

House mortgage                      $350,000

House sells as short sale           $300,000

Bank pays commissions              $18,000

Trash out, winterize and rekey    $ 0

Holding cost                             $ 0

Attorney fees          est             $ 0

Loss of interest and misc fees     $14,000  ($1750 interest x8mo)

Total deficiency                        $82,000

You can negotiate in the short sale, that the deficiency will be forgiven without recourse.  A 1099c will still be turned over to the IRS.  Using the same 25% we end up with  $20,500 owed to the IRS

**Mortgage Forgiveness Debt Relief Act**

This act can help people in foreclosure of short sale avoid being issued a 1099c.  BUT it does NOT apply to everyone and all mortgages.  You can go to: www.irs.gov  to learn more about the ins and outs of it.

Sorry this is so long, but there is a lot to cover in this subject.  Hope this helps.  *By the way, I am not an attorney and this is just information I have come across in my many transactions in foreclosures and short sales.*"

This article was published in the NY Times on September 30, 1999. Some of the key phrases are all too familiar in today's economic crisis, although then they were used in a positive way.

http://tiny.cc/iNXs8

President Obama's Economic Stimulus bill that was passed by the House and is on the Senate floor for debate and a vote, possibly as early as the first of this week, has a tax credit for home buyers in it.

Keep in mind the bill being debated is not law and is subject to change. Here is my quick summary of the proposed tax credit.

• It is a tax credit of up to $15,000 or 10% of the purchase price of the home, whichever is less.
• This tax credit will not require repayment.
• This tax credit will be for ALL home buyers, not just first time buyers.
• It is a credit on your Federal Income tax bill. You will receive NO refund check. If your tax liability is less than $15,000, you can spread the credit over a two year period of time. If your tax liability is less than $15,000 total for the two years, you get the amount of your tax liability, not the full $15,000.

In my opinion, this type of credit would benefit the higher income taxpayer most and leave the middle income taxpayer still short changed.