Short Sale Buyers Face Difficulty Closing Deals Quickly

RISMEDIA, February 19, 2010—(MCT)—Rachel Nacion-Ograyensek and her husband are getting nervous. The house that the two apartment dwellers want to buy—the one with the double oven, pool and tiled patio—may slip away from them.

It’s on the market as a short sale, so the owner can’t act until the mortgage holder approves the discount price. But the Altamonte Springs, Fla. couple insists on buying their first home in time to take advantage of the federal government’s home buyer tax credit, which now expires April 30, 2010.

“The house is our dream house—it’s perfect for us,” Nacion-Ograyensek said. “We are trying to get in on the tax credit, but it’s done in April, and it’s already February. We’ve gotten to the point where we’re passively looking for other houses, but none are quite right.”

Under pressure from the real estate industry, Congress extended and expanded the tax credit last fall. It was to have ended November 30, 2009 and benefit only buyers who had not purchased a home in the past three years. Like the original, the latest version is worth as much as $8,000, but it gives both first-time buyers and qualified existing homeowners until April 30 to secure a contract on a home, and until June 30 to close the deal.

Though real estate agents and home builders hope the measure boosts sales, as the previous version was credited with doing, some fear that buyer’s intent on getting a short sale bargain will not make the new deadlines.

In the Orlando area, 67% of Realtors’ existing-home sales in December 2009 were distressed sales—and about half of those were short sales, known for taking at least three months to complete. Even buyers who nail down a contract with the seller by the April 30 deadline can’t be sure the purchase will close within the required two months. “That’s where you get into that riverboat-gambling mentality,” said Jim Ruddy, the longtime real estate agent representing Nacion-Ograyensek and her husband. “Is it worth gambling that $8,000?” At this point in the tax credit countdown, buyers interested in purchasing a short sale must decide whether they are really committed to that property—enough that they would still want to purchase it if they miss the June 30 tax credit deadline, Ruddy said.

Nacion-Ograyensek said she and her husband recently revisited the short sale house in Altamonte Springs and decided it was worth the gamble. The kitchen is ideal for cooking, and the backyard is large enough if they have children or adopt a dog. They have decided to stick with their plan; still, each day that passes makes them more anxious.

In hopes of capturing tax credit-motivated buyers who aren’t focused on distressed properties, Florida’s real estate agents have scheduled an unprecedented statewide open house of properties listed for sale. The event, organized by the Florida Association of Realtors, is set for April 10-11—just two weeks before the tax credit deadline.

Kathleen McIver-Gallagher, chairman of the Orlando Regional Realtor Association, said buyers intent on getting the tax credit should be concerned if they are trying to purchase a short sale through lenders known for slow responses to short sale offers.

As the April tax credit deadline nears, buyers will probably become more interested in homes other than distressed sales, McIver-Gallagher said. “There are plenty of regular homes out there,” she added.

Compounding the delays are new reporting rules that lenders must now follow. Nate Morris, vice president of Thomas Mortgage and Financial Services, said the new requirements involve good faith estimates and HUD closing documents. “It certainly could further complicate things,” said Morris, a board member of the Mortgage Bankers Association of Florida. “I don’t see this working out till the middle of the year. Everyone in the mortgage business talks about it on a daily basis.”

By Mary Shanklin

(c) 2010, The Orlando Sentinel (Fla.).

Distributed by McClatchy-Tribune Information Services.

Home Buyers Rush to Take Advantage of Tax Credit Before It’s Gone

RISMEDIA, February 12, 2010—(MCT)—Liv Mansfield is racing the clock, hoping to find and settle, or at least sign a purchase agreement, on a townhouse before the $6,500 tax credit for qualified repeat home buyers expires April 30, 2010.

While the credit is not as important as staying in the Wallingford school district, where her younger daughter will enter sixth grade next fall, Mansfield says it will help make expenses associated with the move ‘a wash.’ “It will help with moving costs, and with getting this house ready for sale,” said Mansfield, who has lived in the five-bedroom split-level Colonial she bought with her former husband nine years ago.

The house, which she says is far larger than what “two people and a small dog need,” will list for under $525,000 and heads for the market Feb. 15, 2010.

Current homeowners buying a house between Nov. 7, 2009, and April 30 and who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight can qualify for the $6,500. It seems less is known about the repeat buyer credit. This incentive was added when the original $8,000 tax credit for qualified first-time buyers, which expired Nov. 30, was extended.

Houses purchased for $800,000 or less are eligible for repeat buyers. Single buyers with incomes up to $125,000 and married couples up to $225,000 may receive the maximum tax credit for both repeat and first-time purchases. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Buyers earning more than the maximum are not eligible for the credit. If a binding written contract to purchase is in effect April 30, the purchaser will have until July 1, 2010 to close.

The 2009 credit for first-timers helped jump-start the sagging home market in the summer and fall, data show. Walt Molony, a National Association of Realtors (NAR) spokesman, said two million existing-home sales in 2009 could be attributed to the $8,000 first-time buyer credit. Although it is too early to measure the credit’s effect on sales so far this year, Molony said NAR chief economist Lawrence Yun believes it will add 1.5 million sales to the tally.

The repeat-buyer credit was added to appease builders, who said the original did not offer enough time to purchasers of new houses, which take at least six months to build, to close on them. New homes accounted for only 7% of the tax-credit-based sales, Molony said.

The National Association of Homebuilders’ Donna Reichle said, “We hear builders saying they are getting inquiries, but that’s all so far. According to our economists, it’s way too early,” Reichle said. “If you look back at the passage of the original $8,000 credit and impact on housing starts, it took a couple of months, and that was in the spring as well.”

Moody’s Economy.com chief economist Mark Zandi says the credit will boost sales “modestly,” however, by 300,000, with one-third trade-up buyers. “I don’t expect the credit to be extended again,” Zandi said. “Each time it is extended, it becomes less effective and thus more costly.”

David Krieger, senior vice president and general manager of Coldwell Banker Preferred in Philadelphia, says he believes that “a very large increase in our listing inventory in January is a result of the $6,500 credit.” Still, the $8,000 first-time credit remains the chief reason his company’s home sales were 33% higher last month than in January 2009, he said.

Typically, repeat buyers are better off financially than first-timers, so a lot of repeat buyers realize from the start they don’t qualify for the credit, Weichert Realtors agent Alec Schwartz said. “What they do realize, and what is getting more sellers to list, is that they understand that there are plenty of first-time buyers who qualify for the $8,000 credit out there, and they have a much better chance of selling their house and buying a new one than before,” said Schwartz, Liv Mansfield’s agent.

This is also true in the region’s new-home market, said Wayne Norris, regional sales manager for Hanley Wood Market Intelligence. “Builders have experienced increased activity in recent months” attributable to the $6,500 credit and “the fact that many potential buyers were able to sell their houses” to those taking advantage of the first-time buyer credit,” he said. The sense of urgency to make the tax-credit deadline and fears of rising interest rates will push new-home sales higher in the spring, Norris said.

By Alan J. Heavens

(c) 2010, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

Twenty Common Mistakes People Make When Finishing a Basement

Realtors often see finished basements that are poorly done. These types of basements take away from a home's value. When thinking about finishing a basement, a property owner should read this article first, contributed to our Blog by Bill Richards of ProTech Home Inspection

1. Not addressing water problems first – The first step in any basement remodel should be identifying and preventing any and all possible sources of moisture. This can include cracks in the walls, openings around utility lines, high humidity, poor grading around the house, downspouts that direct water against the house, leaking gutters, leaking pipes, or sewer backups.

2. Not making necessary repairs/upgrades beforehand - One of the advantages of an unfinished basement is you still have easy access to your HVAC system, wiring, plumbing, cable lines, etc. So it only makes sense to perform any repairs or upgrades to these systems before you start covering them up with ceilings and walls.

3. Finishing a basement too soon – It can be difficult to anticipate the above two items in a house you’ve never lived in. That’s why I recommend living in a house for a while before you start finishing the basement.

4. Making too many small rooms – A few, large multipurpose rooms generally work better than a lot of smaller rooms. Not only does a large space offer more flexibility, but basement rooms tend to feel smaller than they actually are due to lower ceilings and less natural light.

5. Not understanding code requirements for bathrooms & bedrooms – If your plans include adding a bathroom or bedroom in your basement, you first need to find out what your local building codes require. Beyond the obvious, a bathroom will require venting and GFCI outlets while a bedroom usually requires a heat source in the room, emergency egress, a smoke detector, and AFCI protected outlets.

6. Covering up important access points – Plumbing clean outs, floor drains, water shutoffs, electrical panels, furnaces, humidifiers, and sump pumps all need to be accessible after the basement is finished. Water valves, electrical panels, and sump pumps in particular need to be readily accessible without the use of any tools in case of an emergency.

7. Not installing HVAC ducts into the rooms – Simply put, every room in the basement should have at least one HVAC register.

8. Not adding enough electrical outlets – When it comes to electrical outlets, it’s better to have too many than not enough.

9. Not sealing & insulating properly – Sealing air leaks and insulating the walls can make your basement more comfortable and more energy efficient. Make sure to include these steps as part of your project.

10. Using untreated lumber against concrete – Any wood that comes in direct contact with concrete should be treated. The reason for this is water can seep through concrete and then into any wood touching it, which can then lead to wood rot and mold growth over time. Treated lumber is also termite resistant as well.

11. Not installing overhead lighting –Add overhead lights controlled by a switch to every room in your basement, you’ll be glad you did.

12. Only using can lighting for large basements - Can lights are very popular in basements because they are recessed into the ceiling. The downside of can lights is they only illuminate the area directly below them. This may not be an issue for a small basement, but it can take a large number of can lights to properly light a large basement. This increases both your initial material costs and electricity costs later on. One alternative to consider is adding wall sconces in larger rooms. They take up little space but since they reflect light off the ceiling and walls, they illuminate a larger space than a can light of the same wattage will.

13. Not performing a Radon test – If your house has never been tested for Radon, you should have it done before you finish the basement. This is important since you will be spending more time in your basement once it’s finished. It’s also best to do this early on so you will know if you need to include a radon mitigation system as part of your remodeling project.

14. Blocking off the combustion make-up air – Gas and oil burning appliances such as furnaces and water heaters require fresh make-up air to use for combustion. While many modern furnaces have dedicated intake ducts to supply them with outside air, many older furnaces and water heaters simply use the air from inside the basement. In that case, you may need to add a intake duct next to your furnace and/or water heater to supply enough fresh air for them to burn properly.

15. Using the sump pit as a drain – Sinks, washing machines, etc. should never drain into a sump pit. Condensation drain lines from dehumidifiers and HVAC equipment can empty into a sump pit.

16. Using a floor drain as a sewer line – Likewise, sinks, washing machines, etc. should never discharge into a floor drain. However, it is okay for HVAC equipment and dehumidifiers to use a floor drain.

17. Not getting help when needed – Finishing a basement is a great opportunity to learn new skills and flex you DIY muscles, but chances are even the most experienced do-it-yourselfer is going to need some help. Don’t be afraid to consult professionals for advice, many will gladly share their expertise if you simply ask. Just be upfront with them if you have no intention of using their services.

18. Not having it inspected – It’s always good to have someone double check your work. Especially if you’re doing most or all of the work yourself. Consider having a professional inspection of the basement done before you start work to identify likely problem spots. It is also recommended to have all the wiring, plumbing, and HVAC inspected before the drywall is installed.

19. Overestimating its value – If your primary motivation for finishing the basement is to increase the value of your house, you should proceed cautiously. Many people overestimate the value a finished basement will add to their home. Of course, this varies from house to house, so do your homework first or talk to a realtor who is familiar with the home values in your neighborhood.

20. Not insuring the basement properly – Once your basement is done, it’s time to update your home owners insurance to make sure it is fully covered. You may also want to add or increase your sewer backup coverage. This is usually an additional rider and is not standard on most policies.

Written By Brian Scarth.

You can reach Bill at:
ProTech Home Inspection
4354 Smith Rd
Marion, NY
(585) 377-3876