Utah Real Estate & Mortgage Blog

Check out this opportunity for an investor. I just went under contract on this home with a client.

$80,000 – Purchase Price
$16,000 – 20% down (required for investment)
5% – 30 year fixed rate
$394 – Monthly payment including principal, interest, taxes, insurance (estimate)

The 4 bedroom home easily rents for $1100 a month.

$706 monthly residual income.

WOW – There are some incredible deals out there right now. If you are looking to take advantage of this market and buy some investment homes, give me a call at 801-792-5040. There are plenty of other opportunities out there. Call me!

Regards,
Kris

Starting in 2012, Fannie Mae and Freddie Mac are expected to increase their fees, which could impact homebuyers depending on the risk of their loan or the location of their home.

Here’s what you need to know – including what’s really happening and what it means to homebuyers.

What fee is being increased?

First, it’s important to remember that Fannie Mae and Freddie Mac do not actually make home loans. Instead, they provide financing to lenders by purchasing mortgages from those lenders. Then, Fannie and Freddie either keep those mortgages on their books or they package them (in the form of securities) for sale to investors.

That means, Fannie and Freddie don’t actually charge direct fees to homebuyers. But they do charge fees to lenders when they purchase home loans from those lenders. The lenders, in turn, build those fees into the home loans they offer. So the bottom line is that any increase in the fee that Fannie and Freddie charge lenders will essentially be passed on to consumers.

However, the fees likely won’t be increased the same amount across the board. For example, Fannie and Freddie may charge higher fees when purchasing riskier loans or they may vary the fees based on which part of the country the home is located in (taking into account things like the foreclosure rate of the location).

Why is this happening?

Fannie and Freddie were seized by the government three years ago to help protect them from failing. That’s important because Fannie and Freddie (along with other government agencies) actually guarantee about 9 out of every 10 new home loans—and with the challenges that the housing market has seen recently, those guarantees have been extremely important. However, Fannie and Freddie have also cost the taxpayers more than $140 Billion.

So Fannie and Freddie will gradually increase their guarantee fees next year and reduce the size of the home loans they purchase in an effort to:

1. Save taxpayers money and
2. Reduce the amount of government involvement (by attracting more private funding to the mortgage market)

What does this mean to homebuyers?

As stated above, the fees likely won’t be increased exactly the same across the board—so the impact will vary depending on the location of the home, risk of the loan, etc.

But we can look at one example to get an idea of the potential impact. For example, as the Wall Street Journal reported, if we calculate an increase of 0.1 percentage point (which is a number the White House proposed), we can see that a home loan for $220,000 would be increased by about $15 per month.

So the increase may not be very noticeable for many homebuyers. And, if people purchase a home while affordability is still high and home loan rates are still historically low, they’ll still benefit significantly compared to other times throughout history.

What should people do?

The fees are expected to begin increasing in 2012 and gradually rising thereafter. If someone you know is thinking about purchasing or refinancing, there’s still time to examine the options and make a move before the fee increase becomes much of an issue.

The best advice is to explore all options now. Call or email today at 801-792-5040 and I’ll be happy to answer any questions you may have.

I wanted to pass along a great audio clip from my CPA – Mark J. Kohler with KKO Lawyers. He hosts a weekly radio show online and some of them relate to Real Estate. This weeks clip focuses on the tax consequences to you as a seller when involved in a short sale or foreclosure.

I hope you enjoy it!

Some interesting statistics for the week I thought I’d share with all of our readers!

The following are last week’s market statistics:

I found this report rather interesting and thought I’d share this with the readers. It’s incredible to see the growth that Wasatch and Utah counties have had in the last 10 years.

Enjoy!

>> Load PDF Report

By Inman News, Friday, June 3, 2011

Real estate investors are finding opportunity in depressed home prices, sluggish sales and the expanding pool of renters.

Inman News examined housing, demographic and economic data for hundreds of metropolitan areas nationwide in developing a list of 10 markets that may be best suited for house-hunting investors.

The analysis considered markets with high affordability, low and dropping prices, a high market share of foreclosure sales, high population growth, an improving unemployment rate that is close to or better than the national average, high projected return on investment (ROI) over the next decade, and a low total cost of ownership-to-rent ratio.

The analysis also considered InvestorScores from investment analytics firm SmartZip. InvestorScores are risk-adjusted financial assessments generated for individual properties that are based on projected cash flow and annual investment yield over 10 years.

On a scale of 1 to 100, properties that score above 50 are expected to outperform the market while those that score below 50 are expected to underperform. The analysis considered only those markets with scores of 50 or above.

After the final 10 markets were chosen, they were ranked according to InvestorScore. Where InvestorScore was the same, the markets were ranked by projected return on investment, another metric created by SmartZip.

Projected ROI is the percentage of money expected to be gained or lost by owning a property in this market relative to the amount of money invested. In its ROI calculation, SmartZip considers total first-year investment (down payment and closing costs), annual net cash flow, 10-year estimated appreciated value of the property, and closing costs associated with the eventual sale of the property.

The 10 markets are, in order: Indianapolis-Carmel, Ind.; Winchester, Va.-W.Va.; Gainesville, Fla.; Tucson, Ariz.; Tallahassee, Fla.; Hagerstown-Martinsburg, Md.-W.Va.; Salt Lake City; Richmond, Va.; Gainesville, Ga.; and Winston-Salem, N.C.

Seven out of the 10 markets are in the South, two are in the West, and one is in the Midwest. None of the markets are in the Northeast.

The results of the analysis mirror two major economic trends: population growth and improving employment. In the past decade, the South has seen the biggest jump in population, up 14.3 percent to about 114 million people, according to the U.S. Census Bureau. The nation’s second most populated region, the West, saw its population jump 13.8 percent to nearly 72 million.

The Midwest and the Northeast registered much smaller population increases — up 3.9 percent and 3.2 percent to about 67 million and 55 million, respectively. Those smaller growth rates eliminated many of the markets in those regions from consideration in this report.

Nationally, unemployment stood at 9.2 percent (not seasonally adjusted) in March. The Midwest and the Northeast had the lowest unemployment rates among the four regions: 8.7 and 8.3 percent, respectively. The South was not far behind, however, at a rate of 8.9 percent.

The West was the only region to see an unemployment rate higher than the national rate: 10.9 percent. The two markets on the list from this region — Tucson and Salt Lake City — had considerably lower unemployment rates compared to major metro areas nearby, such as Phoenix and Las Vegas.

Four of the chosen markets are state capitals (Indianapolis, Tallahassee, Richmond, and Salt Lake City) and at least three others benefit from proximity to either a state capital (Gainesville, Ga., to Atlanta) or the national capital (Winchester and Hagerstown-Martinsburg).

Riding the rental upswing
Despite recent job growth, unemployment is still high across the country and foreclosures continue to plague many markets, turning many former homeowners into renters. Affordability has hit a record high, with home prices continuing to fall in many markets, leaving some buyers skittish and waiting for the proverbial market bottom. Those who do attempt to buy a home may find their desires thwarted by higher credit standards and down payment requirements.
In such an environment, investors, especially those with ready cash, see a chance to put their money in an asset with income potential for years to come.

“Everyone has to have a place to live. Because people are not able to afford their mortgages and are selling — usually short sale — or just walking away, the rental market is strong,” said Betty Armbrust, broker-owner at Southridge Realty Co. in Denver.

“As an investor in a lowering price market, I look for deals with either a fix-and-flip or rental (potential). I know that if a property won’t sell, it will rent.”

A recent report from property search site HotPads found that rental listing prices on the site climbed 7.4 percent between April 2010 and April 2011, while for-sale listing prices dropped 8.8 percent.

“We predict investors looking to ride the rental upswing will continue renting properties and will wait for home values to appreciate,” the report said.

“Increasing demand for rental properties is an indicator of a growing preference for low-risk housing options, which is closely linked to the broader economic uncertainty.”

A rise in rental interest among consumers has also manifested itself in real estate search traffic. Visits to sites that specialize in home and apartment rentals climbed 33 percent in February compared to February 2010, according to Web metrics firm Hitwise.

Investors accounted for an average of 21 percent of transactions in first-quarter 2011, about the same share as in first-quarter 2009, according to NAR survey data. Cash buyers made up an average 33 percent of transactions in first-quarter 2011 — the highest share of any quarter since NAR began keeping track in fourth-quarter 2008. NAR’s data does not separate out investors from cash buyers, though the association does say that most cash buyers are investors.

By contrast, first-time homebuyers have accounted for an average 32 percent of purchases for the past two quarters, which is the lowest share since fourth-quarter 2008.

In March, total distressed property sales, including foreclosures and short sales, trended upward to 40 percent of total sales, NAR said. Investors snapped up 54 percent of those distressed sales, according to economic research firm Capital Economics.

“Investors, looking for diversification and an inflation hedge, are looking at deeply discounted homes to generate rental income. The median price of an investor-purchased home in 2010 was cheap — at $94,000,” said Lawrence Yun, NAR’s chief economist, in the survey report.

“One thing that was lacking for the second-home market in the past two years was mortgages to buy … non-primary-occupant homes — because government-backed mortgages are not there for these properties. An eye-popping 59 percent of investor home purchases were made with cash in 2010.”

Only 39 percent of investors used a mortgage to finance their purchase in 2010, compared with 80 percent of primary-home buyers, according to NAR’s 2011 Investment and Vacation Home Buyers Survey.

Buyers of investment properties had higher median household incomes than buyers of primary residences — $87,600 compared with $69,600, the survey said. Investors also tended to be older than buyers of primary residences — 45 compared with 37.

Like buyers of primary homes, investors favored purchases in suburbs or subdivisions — 33 percent bought in that type of location. A quarter of investors chose to buy in small towns, compared with 16 percent of primary-home buyers. Both types of buyers bought rural and urban properties at the same rates in 2010 — 17 and 18 percent, respectively.

Also similar to primary-home buyers, investors favored the South (32 percent) and the West (24 percent). Investors lived a median 19 miles from the home they purchased in 2010.

“Having chased ‘markets,’ the thing I now value most is proximity,” said Sean O’Toole, a real estate investor and founder of ForeclosureRadar.

“I truly believe that a good investor should be able to find value in any market, so we believe investors are better off focusing on the market(s) they know, and properties they can easily and regularly visit.” Most investors (63 percent) bought detached, single-family homes, followed by condos or duplexes, in buildings with two to four units (16 percent).

The biggest proportion of investors bought their property through a real estate agent (44 percent), while 20 percent bought directly from an owner they knew, and 17 percent bought through a foreclosure or trustee sale. “To rent to others” was the most popular reason to buy among investors, according to the survey. The second most popular reason cited was “to diversify investments/good investment opportunity.”

The median length of time investors planned to own their purchase was 10 years. More than half of investor buyers (52 percent) said it was at least “somewhat likely” that they would buy another vacation or investment property in the next two years.

Investors tended to be more confident about the housing market than primary homebuyers: 77 percent of investors said “now is a good time to purchase real estate,” compared with 68 percent of primary-home buyers. “Historically speaking, whenever economics favored buying rather than renting, or … were about even, people favored buying because of the perceived benefits of homeownership,” said Rick Sharga, senior vice president of foreclosure data site RealtyTrac.

But now a “psychological hangover” is preventing potential buyers from entering the market, Sharga said. “Nobody wants to wind up on our foreclosure list.”

I speak to home owners every day that are under some type of financial distress but not sure what to do in regards to their home. Most of them bought their home at the peak of the market or have an Adjustable Rate Mortgage (ARM) that is about to reset. Some have lost their jobs or taken a hit in income and others can’t afford an increase in their mortgage payment. Everybody has a story and I enjoy learning about their situation and coming up with solutions.

Most home owners in this situation are usually stressed out to the max and keep pondering “Should I short sale my home?”

Anytime a home owner can no longer afford to make their house payments and the home’s value is less than what is owed, a short sale should be considered.  You do not always have to be behind on your payments to request a lender to approve a short sale.   For a home owner to qualify for a short sale there are three basic burdens of proof the lender will require.

1. The owner must have a negative debt to income balance.  Simply stated, the home owner’s income is  not enough to pay their monthly bills. There are many reasons why monthly incomes change.  Job loss, reduction in hours/salary, divorce, disability, and death.
2. The owner must be insolvent.  Meaning the home owner does not have any assets that can be sold to supplement their income or pay off the debt.
3. There must be a documented hardship.  The owner must be able to demonstrate that something has changed  preventing them from being able to afford the home.  There are many reasons for hardship.  Common reasons are job loss, health issues, and divorce.  Adjusting interest rates which increase the mortgage payment suddenly can also be a reason for a short sale hardship.

You should have answers to the following questions before you decide what direction to go:

• Will the bank(s) sue me or come after my assets if I short sale/foreclosure?
• What tax consequences are there if I short sale/foreclose on my home?
• Will I ever be able to buy another home again?
• Should I short sale my home or let it foreclose? What are the benefits of short selling versus foreclosing?
• How will my credit be impacted?
• I have two lien holders, a first and a home equity line of credit (HELOC) – Does the 2nd lien holder have more/less rights to come after me?
• What is the Mortgage Forgiveness Act and do I qualify?
• Is Utah a Recourse or Non-Recourse state and what does that mean to me?

Short selling your home can reduce the amount of negative credit reporting on a borrower versus foreclosing.  If the borrower is not behind on payments and the short sale approval wording states the debt is settled completely, it is possible no credit hit will be recognized by the borrower.  The credit hit comes from missing or late payments and settlement of debt with a statement of “less than balance owed” reported.  Generally speaking, the credit hit from a short sale is less than a credit hit from a foreclosure or bankruptcy. A foreclosure and/or bankruptcy can affect a borrower’s credit for up to 7 years.

If you have a legitimate hardship and are struggling to make your mortgage payment then you probably have a lot of questions.  Don’t wait until you are late on your mortgage payments before you call for assistance. Short sales require a unique set of skills for a real estate agent and the short sale approval can very much depend on how your agent negotiates with the lender and buyer. I have the training, resources, and experience necessary to serve as your short sale agent.

If you would like to discuss your options with no obligation, contact me by calling 801-683-9666.

If you are considering making improvements to your home to lower energy bills or fix comfort problems, you should learn about the Utah Home Performance with ENERGY STAR program – a comprehensive, whole house approach to improving energy efficiency and comfort at home, while helping to protect the environment. This program gives Utah homeowners up to $2,000 in cash rebate for making energy related improvements to their homes.

Energy Conservation Initiative is the starting point for this program. We are a neutral entity whose purpose is to perform a complete unbiased comprehensive home energy audit and evaluation on your home. The  information that we gather is the result of a number of different tests that we perform on the systems that are within your home. We are also equipped with the latest in industry technology. Probably the most telling of the  testing that we perform involves actually decompressing your home and while that is happening, walking through it with an infrared camera that identifies exactly where energy loss is taking place. All of this data is entered  into a modeling software program that generates a report that is specific to your property and identifies the most cost effective way for you to accomplish a 20% improvement to your homes energy usage. This audit and report is normally done at a cost of $300.00 to $500.00. Under the Utah Home Performance with ENERGY STAR program, the cost for this process is $100.00!

So, rather than focusing on a single problem, like an old heating or cooling system, not enough insulation in the attic, or leaky windows, Energy Conservation Initiative looks at how improvements throughout your home can  work together to give you the best results. We also walk you through the program requirements that allow you to receive up to $2,000 cash rebate to help you pay for these energy related improvements to your home.

To learn more about this great program call 435-214-3647 and mention zoomUTAH.com sent you!

zoomUTAH.com now allows members to search and filter different types of properties that are currently on the market. We hope this helps you with your search for Utah Real Estate!

Resale/New Construction – These homes are traditional listings that are being sold with a home owner and Real Estate Brokerage. These homes are not short sales or foreclosures.

Foreclosures/Bank Owned – Foreclosed bank owned properties (REO), government foreclosures, HUD homes and auction homes.

HUD Homes – A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. Although HUD homes will show up under the Foreclosures/Bank Owned list, if you are specifically looking for only HUD homes, our site allows you to filter these type of listings.

Short Sales (Subject to 3rd Party Approval) – A pre-foreclosure where the home is being marketed at a lower price than what is owed, therefore the bank or lender of the Seller has to approve any offer. You must be patient as short sales subject to 3rd party approval can take weeks to many months before you get an answer on your offer.

Short Sales (Approved Price) – The bank has received an offer and has responded with either an acceptance OR with a “We won’t take this offer price, but we will take $XXX,XXX”. If the original offer was not accepted or the original buyer got impatient and moved on,  the listing agent will seek another buyer at the approved price. If you put in a lower offer than the approved price, you probably will need to start the process over and wait for the bank to review the lower offer.

Auction Date: Saturday, March 26th, 2:00pm

If you are looking to buy a home at auction, then you may not want to miss this opportunity.

119 Residential Lots, 10 Homes, 8 Commercial Properties are going to auction this day to the highest bidders. This is a public auction so all are welcome to attend! Most have no starting bid and are being sold at absolute auction, regardless of price!

Bidders must bring a $2500 earnest money deposit to bid on a home. You must close on the home within 30 days and be pre-approved for the loan. Home inspections must be done prior to bidding and can be done March 19th and 20th only.

A sampling of the homes that will be auctioned off:

http://www.zoomutah.com/906244

http://www.zoomutah.com/1016900

http://www.zoomutah.com/977311

http://www.zoomutah.com/976248

If you are interested in learning more, give us a call at 801-792-5040.

Other restrictions and terms & conditions do apply.