Tax Credit Expanded For Move Up Buyers!
Yes, first time buyers can still qualify for an $8000 tax credit, but this blog is not for them. I am calling all you folks out there who have been sitting on your butts waiting for the market to get better before you move up! Congress passed an expanded tax credit last week to include move-up buyers who have lived in their homes for at least 5 years. Those who move up may qualify for a $6500 tax credit (there are some generous income restrictions) Let me put this in perspective for a Lansing area buyer. I was working with someone recently who is looking to sell their Lansing home which they bought for $130,000 in 2004. The house is now worth about $105-110,000. Total bummer. However, the area that they were looking to move into had an average sales price of $228,000 just 4 years ago and now sells on average for $169,000!!!! That’s $59,000 less folks…a lot more than the $20,000 hit they can expect to take on their current house. Add a $6500 tax credit to offset the loss on your current house and a new house starts to look like an attainable goal as long as you have the money you need to sell your current house. But you better get cracking because you must have a contract on your new house by April 30th and close by June 30th in order to qualify.
5 Home Buying Tips: Buying Your First Home
Thought you learned all you needed to know from “Property Virgins” on HGTV? Here are a few things to consider as you begin to look for you first home.
1) How much you get off the list price does not equal how good of a deal you get. In order to see what really is a fair deal have your agent pull up recent sales from the neighborhood. Make sure to look at only sales from the last few months for homes that are similar in size and condition.
2) Hire the right real estate agent. Ask family and friends for references. You may be able to find an agent online, but that doesn’t mean they will know they area/price range that you are interested in. You want someone who is actively working in the field every day so you can get the best deal possible. For example, if you are interested in purchasing a foreclosure, make sure to ask how many foreclosures your agent has sold in the last year. You don’t want to be the test subject.
2) Shop interest rates. It can be very confusing as you begin your search for a home loan. Remember that rates change every day and the rates different lenders charge may vary as well. In addition, the costs each lender charges to close the loan will vary. You should get at least 2 or 3 quotes. Ask each lender for a “good faith estimate” which will give you a break down in costs so you can compare.
3) Bring your parents if they are going to have input. I see it happen all the time. A young couple will spend months going through homes and when they find the perfect home they bring mom and dad through…and they tear it apart. If they haven’t seen anything else in your price range it will be hard for them to know how other homes in the price range compare. Sure, your $100,000 house has a few cosmetic issues compared to their $250,000 house.
5) Have a home inspection. This is a must for any buyer. Make sure you hire a professional, not just your dad’s cousin’s friend who used to build houses. If you find a major problem, you will be glad to have spent a few hundred dollars up front versus having thousands of dollars of cost down the road. There are no licensing laws for home inspectors in Michigan, so make sure to ask if your inspector is FHA certified.
June Statistics
Well June’s numbers are out and they again are a mixed sort of bag. Once again sales are up over the previous year…538 closed in June of 2009 as compared to 502 in June of 2008. The average sales price is down again over last year, $111,948 versus $129,390 for the same period last year. The good news is that this figure is well above the average sales price just a few months again, which was hovering in the low $90s. First time buyers and investors continue to drive the market. When will we hit bottom? I have no idea, but I know that in 15 or 20 years people will be saying, “I should have bought a rental house back in 2008 or 2009″
April Statistics
Well it seems like at least half of the homes that I have been writing offers on lately have been getting multiple offers and even getting bid up over the asking price. Certainly this must eventually translate into higher sales prices? Well finally our statistics are out for April and we saw the average sales price go up almost 4% over March. True we are still down year on year quite a bit from last year, but you have to start somewhere! Our closed sales are up as well, though just from 486 in 2008 to 490 in 2009 for April. This is still more than the 458 deals that closed in April of 2007. Is that a light at the end of the tunnel?
Average Sales Price (April)
1151 MITCHELL, LANSING, MICHIGAN 48917
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1151 MITCHELL, LANSING, MICHIGAN – WAVERLY SCHOOLS
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Investment Properties
There are lots of reasons that people decide to invest in real estate. I am going to highlight a few, including why I decided to get involved with rental property. This post will focus on 1 to 4 family homes.
1) Cash Flow – The current market in Lansing provides truely remarkable opportunities for you to create a monthly cash flow by owning real estate. In that last year I have sold clients (almost) move in ready homes for as low at $13,500. When you consider that these homes can be rented for about $550 per month you can see how the returns begin to look very nice. In fact, at the time this post was published there were 508 homes listed for sale for less than $50,000 in the Greater Lansing area.
2) Principal reduction – One thing that every landlord can thank their tenants for is paying the mortgage. If you have leveraged the property through financing, you will increase your overall return on investment and you tenants will pay the principal down each and every month.
3) Depreciation – You are allowed to depreciate residential real estate for tax purposes over 27.5 years. Check with your accountant for the details, but this can add up to big savings at tax time, especially for those in higher tax brackets.
4) Appreciation/Hedge against inflation – Okay, so clearly real estate appreciation has not been at the forefront of benefits to owing real estate in the last few years. For those looking for long term investment gains, however, the clouds begin to clear a bit. Historically, real estate over the long term appreciates between 3-4%. In addition, if inflation gets going in the next couple of years (due to certain governments printing large amounts of cash…I’m sure there are other blogs about this) durable goods tend to be a good way to hedge against inflation.
5) An investment you can see and touch – Sure, I have an IRA. We owe stocks. But the thing I like best about real estate is that I have total control over my investment, not some guy on Wall Street. I decided where to buy property. I decide who I rent the proeprty to. I decide what improvements to make, etc.
Lansing Market Update: February Stats
Anyone that knows me will tell you I love my statistics. I track everything from my google analytics website traffic to how many of you are reading this blog right now. I think that statistics can be a very helpful tool. Because of that I am going to start doing a market update every month so that you can get the same statistics that Realtors in Lansing are getting. So how was February for real estate in Lansing? Well from a sales standpoint it was great. The Greater Lansing Association of Realtors as a whole closed 327 transactions, up from 272 last year (a 20% increase!) However, the average sales price continues to decline. We fell from an average price of $106,855 in Feb. or 2008 to just $93,501 in 2009 (a 12.5% decrease) This is actually an increase over January’s average sales price of just $88,000. What can we deduce from all these numbers? Well, we can say for sure that properties are still selling if you get them to the right price. And for those you that are still clinging close to an appraisal you had done in the Fall of 2006, it is time to face the reality that prices are just not where they used to be. For a full list of our statistics check out this link.
Selling Your Upsidedown House
Owe more than your house is worth? If so, you join the ranks of 40% of homeowners in Michigan (not to mention 3 of this bloggers rental houses) So what is one to do when you owe more than your house is worth and it comes time to sell? Here are a few ideas.
1) Take out a personal line of credit to cover the deficit. A first step would be the check with your mortgage company to see if they could offer you an unsecured line of credit. If not, you may have more luck with smaller local banks so check with your local credit union to see what they can offer.
2) Savings – Of course you could always cover the deficit with money from your savings. This might be a hard pill to swallow, but if you are buying something is a higher price range just think about how much more you would have had to pay for that house a few years ago.
3) Rent your current house – You could become a landlord. If you aren’t into tenants and toilets you can always hire a local management company to cover the day to day issues.
4) Friends and Family – perhaps you could convince your friends or family for a personal loan.
5) Short Sale – A short sale is when the price you sell your house for is less than what you owe to your lender and your lender agrees to eat the defecit. A couple of quick notes on this. First, you MUST have a hardship in order to do a short sale. So if you have money in the bank, can continue to pay your mortgage, or any other options you are not a good candidate for a short sale. Second, a short sale is anything but short. Expect the process to take many many months. Finally, your credit will suffer if you pursue this option.
6) Trade – Perhaps you could find someone to trade with. Some builders are even considering trades to get their model homes occupied, so if you are moving from a smaller home into a much more expensive home you may check with local builders and Realtors to see if anyone would consider a trade.
7) Stay Put – Yes that’s right, a real estate agent telling you to stay put. If you can swing the payment and are not bursting at the seams, it may make sense to stay where you are for the time being.
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