HOME START

The State of Illinois has finally caught up with many of our neighbors. The Home Start Loan Program is now available through Illinois Housing Development Authority. Home Start features two different programs. While this is good news, there are no Vermilion County lenders appearing on the site's data base of participating institutions.

For our purposes we will be focusing only on the Tax Credit Advance Loan, today. You must first qualify for the 30 Year Fix Rate Loan. You may borrow 3.5% of the loan amount not to exceed $6000. This is an interest free loan if it is repaid by June 30, 2010. Failure to do so will lead to the loan becoming a 10 fixed rate loan. You will be required to attend a homebuyer education program. And finally, if you close on or before 11/30/2009, you will earn the First Time Home Buyer tax credit. So don't forget to file form 5405 with your taxes. For complete details please besure to read the plan overview provided by IHDA.

On a related note HR 2801 currently in committee is a promising piece of legislation. Hear are the high lights:

1. Extend the eligibility for the tax credit to all who are purchasing their primary residence.
2. Extending the purchase date through 12/31/2010.
3. To take effect upon passage of the bill.

There are rumors the top rebate will go up from the $8000 offered in the current legislation. This is in Ways and Means at the moment. But I will keep tracking it and keep you posted.

Referrals

I am writing this post for strictly mercenary reasons. I have two daughters in college. And some day, I will be paying for three weddings. So you see, being mercenary is almost a necessity.

Did you know that as a licensed real estate practitioner, your friend or relative can be paid for a referral on your transaction? It's true. Whether you live in FL, CA, NY or any where in between your long lost cousin or the old classmate can make a few dollars and not cost you any more than the typical commission you would pay.

I have a friend in ID who is a licensed. I am buying property in TN. I can have my friend send my contact information to my agent in TN and when we close, my friend in ID will earn a portion of the commission. The rules will vary a little from state to state. But it is pretty much the same general situation where ever you live. So, why not share the blessings.

The second scenario is only slightly different. Many agents now have vast referral networks. I was recently approached by an agent from AZ to establish a referral network. If I have a client moving from Danville to AZ, I send a referral to my new contact. He will take care of the client, and I can still earn a reward for the relationship.

So friends and family, the next time you are buying or selling a home, please remember me.

Tax Credit Update

I have promised to keep you updated on the changes in the tax credit. Seems I am a little behind. The new wrinkle isn't really applicable to our market. The Feds authorized that the tax credit be "monitized". That is, you could borrow against it, and use it for a down payment. Here is the problem. As often happens in IL our legislature has been caught napping. There is no program in effect for IL home buyers to monetize the tax credit. At the glacial pace Springfield moves, the credit will expire before the program is monetized in IL.

But the good news of the credit remains, any one who hasn't owned a home in the last three years can qualify to get a tax credit on a new home purchase. One point of clarification: The credit is good for 10% of home purchase prices up to $8000. It is not a flat $8000 credit. It means if you buy a home for $50,000, your credit will be 10 % or $5000. If you buy a $100,000 home, you credit will be for the $8000 max.

One other piece of good news to go with that. The IRS has worked it out so we don't have to wait until we file this years taxes next Feb, to get the credit. You can file a 1040X and get your refund in about 12 weeks after closing. You can get additional details at IRS.gov, or by calling your tax preparer. I am also available for other general questions, but I am not a tax pro, so I will still refer you to them for the accounting questions.

Prophets of Doom

I read article that is really quite scary. But I want to reiterate, Danville and Vermilion County are not seeing the same effects as the national numbers. Will the slow market continue? I am not a fortune tell nor do I aspire to the job. But but when you read articles like this, I ask you to think and not accept everything at face value.

We are seeing a modest gain in transactions, but that doesn't necessarily mean, the end is at hand for the slump in our area. As jobs are added to the area, we will see even more improvement. May and the early days of June have been seeing homes sell at a much brisker pace than last year for the same time. But, we are still down for the year to date (a little over 14%). While the last six weeks are a nice change, it's still to early to say the end is at hand.

The picture with selling price is a little different. We continue to see price declines of less than 1%. Our year to date figure is around 3/4% compared with last year.

Days on market continue to be high. The bankers told us in March and April that stricter guidelines on a lot of fronts are adding to processing and underwriting times. One lender suggested the net effect early on might be adding 30 days to the time to close. Averages seem to be running closer to 45 day for conventional mortgage and 60 Days for FHA. These figures are about 2 weeks longer than we have seen in recent years. My personal experience is that I am seeing more FHA buyers than in the past couple of years as well. Both then, have the net effect of increasing our days on market.

But the increase is more than these changes would predict. The reason: homes are still being priced too high. When we examine the selling price verses the listing price at time of sale, we are see 3-4% lower ratios than in past years. It gets worse when we compare the original list prices.

A couple of other considerations. The numbers I cited are averages. The market is more variable than we might expect for the small area we cover. But sales trends vary significantly from Hoopeston to Georgetown. Other variations can be seen based on the value of your home.
Months of inventory on hand is higher as the home value goes up. There just are the number of high end buyers out there that there were two years ago. If you want to know about specific school district and price ranges, ask your Realtor(r), or give me a call. I will be happy to research the specifics and let you know.

Any one who claims to tell you what is happening in Danville while they sit behind a desk in New York, is lying. Any one who tells you what tomorrow will bring, is trying to make headlines.
When we allow the mass media to control what we believe is the truth, then their doom and gloom stories become self-fulfilling prophesies. Remember, if you want to know about Danville real estate trends, check out our blog page.

New Wrinkls to the Tax Credit

Things are slowly moving on the First Time Buyers' Tax Credit. The revision will not help you if you use a conventional mortgage. It will not help you if you still have $0 down. There are organizations that might be able to help you in that situation. Details of the revision were released Friday.

Let's recap the basics of the credit:

1. You are entitled to a tax credit of 10% of the purchase price of your home up to $8000.
2. You cannot have owned a home in the last 3 years.
3. Your income cannot exceed $75,000 ($150,000 for couples.)
4. You must purchase your home before 1 Dec, 2009.
5. Your can file an amended return for 2008 or take the credit on your 2009 taxes when you file next year.
6. The sale must have closed before you do #5.

The new updates:

1. You may get "an advance" on the credit.
2. Your mortgage must be FHA underwritten.
3. You must still have the FHA required minimum 3.5% down payment.

How does this really help?
You may be able to reduce your mortgage amount.
You may be able to buy without the seller assistance with closing costs.
You might be able to buy a slightly better home.

For example, In our market the average selling price is about $65,000 (rounded off to make a simple example). You have a pre-approval from your FHA lender ($55,000). You found a home that you love but the best counter offer you receive is $60,000. Since all you have is the 3.5% down, under the old rules you would have to walk away unless you could raise the down payment. Under the new rules, you would now be able to buy.

Selling Price: $60000.
Required Down Payment: $2275.
Pre-paids and closing costs: $1800.
Mortgage: $55,000.
Shortfall: $4525.
10% Tax Credit: $6000.
Surplus: $1425.

The surplus can be added to the down payment to lower your monthly payment a little.

I read several articles today warning of scams. You can be sure that once the programs role out fully, some one will devise some a way of twisting it to turn a profit. Just be careful. After all these scam artists took advantage of people who were facing foreclosure. They have no shame.

Just to be safe if you have specific questions about the tax implications of this program speak to your tax preparer or accountant. This is not intended to be legal or financial advice.

The details have not yet reached local lenders. In fact, one told me today she hadn't heard this revision is in the works. I will keep you posted.

Real Estate News and Trends

I just read an article about buying foreclosures "on the court house steps". WHOA there buddy. They are off the mark. Here is a good example of an article that has no basis in reality. When a property is sold "on the court house steps", the initial bid is the judgment amount. So if the person was upside down, under water or any of those other words bandied about, then the minimum bid will likely be more than the actual value of the home. The mortgage balance, unpaid interest assessed, and legal fees are all part of that amount.

Initial listing prices are typically near the judgment amount when the property does go onto the market. Because many of these homes have challenges, the prices fall to far below market values. Some people being removed from their homes vandalize them as they are moving out.

An analysis I did for our MLS showed that for all foreclosures sold in DABR MLS for 2008, the eventual selling price was 2/3 of the initial list price. Lest you think the Realtors(r) are setting the inflated prices to fatten their commissions, rest assured, we are not setting the prices on foreclosures.

The article does mention a couple of pitfalls you may encounter when buying on the court house steps. Properties are often kept under lock and key until the sale. You are usually buying them sight unseen. The second major draw back the article mentions is the sale price is due in a short period. In IL you must pay the total sale price within 24 hours.

WCIA news aired a good story tonight. Two interesting bits of information I was able to glean: Champaign County's average home prices are almost double those of Vermilion County. The second interesting stat: home prices in Champaign County have declined by 19% compared with last year. Contrast that to the nearly flat pricing in Vermilion County. The one thing both markets have in common is that about 23% fewer homes have sold this year.

Want to buy a new home, but don't have a decent down payment? The NAR (National Association of Realtors (r)) announced that there has been a modification to the $8,000 tax credit, for 1st time home buyers. Stay tuned for further details as they unfold. I spoke with a local mortgage broker who indicated they don't have details, yet. But, I will let you know as soon as we know how the new program will work.

Three D's for Preparing your Home

Here are three simple steps in getting your home showing ready:

De-clutter, (Furniture, photos, nicknack's should be thinned out),
De-personalize (the photos to remove should be of the family),
Deodorize (my wife is a good example of some one who will walk away from an other wise nice home because of smell).

This is a simple thing people often forget in selling their home. Next to price, eye (or nose) appeal are almost as important as price. This article in Realtor (R) Magazine is aimed at agents; but, there are numerous tips for doing the little things to help your home show better. It's really worth a look.

One point from the article I thought was interesting and takes very little time is the letter about the home. I saw that in a home once and found it extremely interesting and helpful. In the home in question, the seller told about the history of the brick used on the patio. They were part of an old downtown building. She also high-lighted the refinishing project they had done on the maple floors by letting us know they were the original floors from the early 1900's. My buyer was impressed by the detail and love the sellers had put into the letter and the home.

The second point,one not mentioned in the article, is aroma, or more particularly, odor. If there are pets or smokers in the home there are a couple of things that can help neutralize the scents in stead of masking them (which sometimes creates even more pungent odors). You can pick up an ionizing are purifier. They leave a fresh scent reminiscent of the air after a thunder storm. (Some communities may have outlets where they can be rented.) The other is odor eliminating sprays and candles. We used to call them "odor eating" candles.

Your agent can market the home in every available venue, but if it isn't ready to show, all the fancy marketing in the world won't help. As Hillary reminded us during her presidential campaign, you can put lipstick on a pig, but ...

April Trends

The preliminary numbers for April in the Danville area are promising. I will have a more complete report on Monday. The initial numbers show our year to date (YTD) sales verses last year are still slow. But we are improving. The scary average selling values in March look like one of those one time blips. Our YTD average selling price is essentially flat (-.45%) as compared with last year.

Knowing What You Want

Ok, so you are prequalified or pre-approved for a new home. You know what your interest rate is going to be. You know what you can afford. What next? My first suggestion here is that you decide what you want. It seems like such a no-brainer. But, I have spent countless hours with buyer who said they would know the right house when they saw it. Two years later we're still looking.

I am not trying to denigrate any one here, but an agent can't truly help you unless you know what you're looking for. Make a list of wants and needs. Be as detailed as you can be. This will become helpful as we move on. Some things to consider in that list include geography (or school district) and condition you are willing to accept. Think about how the home will serve you for the next 5 years.

The five major considerations aer:
I Location
II Size
III Condition
IV Features
V Price

I Location: There are a few obvious considerations here. What is the school district? How far from work are you? There are some don't an agent can't get involved in. Some won't even talk about items that are public record for fear of getting into Equal Housing areas of concern. The best bet when it come to "that neighborhood", whatever that means for you, is to check the local news paper, the local crime stats, etc. It will help you identify the area and you won't scare your agent because he (she) is afraid of being accused of "steering".

A couple of other items to consider: Is there something nearby that might cause stress in your life? A high traffic area, railroad tracks, a manufacturing facility, etc. While on the surface it may seem like a little thing, if you are a day sleeper because of work, a school playground too close, might keep you from getting the rest you want. You hang outs: do you think you must buy your groceries daily from only one source. Is church important in your schedule and your congregation like family? Again, if you're a creature of habit, it might bring stress into your life when your new home is farther away than you would like.

A TIP: Visit the neighborhood during a variety of times on different days. Look for the traffic patterns, unusual activity, etc. If you think you like the neighborhood because it's quiet. Driving through on Friday @ 9PM, might reveal whether your hard working neighbors are party animals that will be keeping you up all night and trashing your yard with their empties. Or an after school drive by may reveal what looks like a nice place to raise the kids has no one for them to play with.

II Size Size will encompass a lot of things. In the preliminary investigation, try to make it as general as you can. While room sizes, number of rooms, SF, etc all play a roll, making the criteria too rigid may cut out places that could work. Floor plans may make home with 2400 square feet (SF) less functional than some some with 2000 SF. A finishable basement or attic may make a cute little home one in which a family has room to grow. So this are ways around some of those standards.

III Condition: Some time ago, I would have said that foreclosures or "fixer-uppers" would be a deal breaker for my family because I don't have the time or skill set to do many types of renovations. But there are some possibilities here. With a good contractor and the right starting price a house in need of work might get you a beautiful home. If it's a Fannie Mae you can check into whether it qualifies for Home Path Renovation financing. For Owner occupied or other foreclosures the 203 K loans previous mentioned might be a viable alternative. So that home that needs a new roof and carpet through out may work after all.

A quick example: I recently sold a listing in need of significant repair. Floors were shot and the casement (cranking) windows wouldn't seal. The home was in the most sought after school district in our county. Selling price:$28,500. Repairs: $15000 Total cost: $43000. As repaired appraisal: $71,000. This young single mom with no one to help repair a project house will be moving in to her new home in just a few weeks after closing. The catch: do you have time to wait? If so, this is definitely worth considering.

IV Features: Too me this is something I can do with out. Most features can be modified to achieve what I want. But I have known of buyers who didn't want to waste time on homes without fireplaces. The husband said his wife had always dreamed of having a fireplace where she could curl up with a good book and drink coco. He wanted their retirement home to fulfill that wish. The type of heating or air units may also be flexible because they can be changed in time.

V Price I drop this down this list because it had its own day.

By prioritizing wants and needs you can reduce the time it takes to find the right home. It will also help you know the trade offs your willing to make. Can we double the kids up for a little while since there small, knowing we have room and to finish their rooms in the attic? The other benefit of prioritizing wants and needs is it will reduce the stress involved in getting into your new home.

News in Review

Looks like the Feds are letting go of some of the repair money. For mortgages with an 80% 20% split CNN is reporting the Obama administration will be release funds to have the secondary lenders recover what they are losing. The net effect should lower mortgage payments for a few million borrowers.

Here's a story that highlights the importance of knowing what's happening locally. CNN reported prices continue to fall. But remember they are using data from 20 metro markets. The numbers are not a fair reflection of our numbers. And then there's this jewel. If you're as tired of doom and gloom as I am don't read this. It's another reminder of why I encourae people to look closer to home for their news and trends.

I spoke with a mortgage lender today who said they are as busy as they where in 2005. This article talks about the high number of mortgage apps. So why are home sales so soft? What these headlines and the lenders are telling is that most of the activity is from refinancing.

Helpful Links

Here's a summary of useful links featured in my blogs over the past week:

Preparing for home ownership

Buying guide lines

203K Loans

FHA Resource Center

Illinois Association of Realtors Assistance

Central Illinois Debt Management & Credit Education

Free Credit Reports

Declined? Now What? Buying 101 D

I called this 101 D because you have been "declined". It's a serious thing. And I am not trying to make light of the situation. But, this is also not a time for self-pity and withdrawal. Instead, this is a time to take on the problem head on. I found an interesting and helpful article. Here's a quick summary:

1. Ask Why. Can't fix what you don't diagnose.


2. Find a fix ... may be easier than you think ... if not most can be repaired within 1 year.


3. Don't give up ... try some one else. Some times differnt types of lenders, ie a credit union, vs a bank, can make the difference.


4. Try again. Or, as the adage says, "If at first you don't succeed, try, try again." ... recaps the above three points.

For help contact Central Illinois Debt Management and Credit Education, INC. or try e-mailing Mrs Leary directly.

A quick word of warning, do not fall for quick fix credit repair scams. That is a full post of it's own. You can often accomplish the same results for free if you will exert a little effort. Order your free credit report, and then work on eliminating the issues.

An alternative you can pursue at this point is a Contract for Deed ... Caveat emptor: Buyer beware. You will find many of these homes are over priced, in ill-repair, are in less popular areas, or have limited terms. It is this last point that will require you fix your credit, anyway.

Don't go it alone. Get an attorney to help. I can say from personal experience, I will never do another without referring buyers and sellers to different attorneys. Better safe, than sorry.

Home Buying 101 or Three Reasons to Get Pre-qualified

A young couple wants to buy their first home together. They call a Realtor (r) only to be told they need to be pre-qualified at a minimum. But they haven't even seen the first home. What gives?

First things first. Most people think the answer is finding the home. Truly I recommend that be the last step. Prior steps in the process are speaking to a lender, choosing an agent, and, making a wants and needs list.

A good place to start is a home buyers course ... What? School? Are you kidding? Not every one needs this step. But for 1st time buyers or credit challenged buyers a class conducted by a debt management organization, can be a big help. It will give you a neutral starting point and help you get your "ducks in a row". It also helps get FHA approval.
Why find a lender first... three basic concepts to deal with here:

1. What can you afford?
2. How much will you need out of pocket?
3. What terms will be included in the offer?

Question 1: How much can you afford? Getting a pre-qualification will help you discover exactly how much the bank is will to loan. I have seen couple disappointed after finding the perfect house only to be told it was more than they could qualify for. Banks will require certain debt to income (DTI) ratios or loan to value ratios (LTV). Some loan officers (the good ones) will even let you do a pre-approval. In this scenario, you will actually complete the mortgage application before you go out to look.

If you are limited to homes that qualify for a traditional FHA loan, there will be homes that do not meet the FHA specs, you can avoid. Or, if you find a great value in a wonderful neighborhood, you'll know if you can afford a 203 K mortgage that will allow you to buy a home that normally wouldn't qualify for FHA and will include renovation costs in your mortgage.

Question 2: How much will you need out of pocket? That is a question I am asked often. The answer is, "it depends." At a minimum, you should count on a down payment of 3.5% if the house qualifies for FHA. If you are getting a conventional loan it will be between 5 & 20% depending on the lender and the program. This information will also help you determine the closing costs, and other expenses you might need to pay ... Once done, you will know how much of the inheritance you have just received will be left over for furniture.

Question 3: What terms will be included in the offer? In IL and IN we include mortgage terms in the offer. When you submit the offer, it is contingent upon loan approval under certain terms. Things you will need to know are: What interest rate? What LTV % you need? What the length of the loan term will be. (A side note here: if you can afford the higher monthly payment of a 10 or 15 year fixed rate mortgage, it will yield a tremendous savings over the course of the mortgage. If you haven't looked at the options check out good

mortgage calculator. Be sure you look at the amortization schedule to see your total investment in your home.) If you cannot find a home under the terms in the agreed upon contract, you will be able to terminate the contract without penalty.

Now that you know the answers to the three questions, it's time to take the next step: finding the right agent. Will help you with some tips, next time. For more information, check out the helpful HUD guide or this one from the National Association of Realtors.

Number, Numbers, and More Numbers

If you missed last months stats you can follow along by looking in the archive or visiting http://activerain.com/blogs/rohall59.

Numbers, numbers, and more numbers; but, what do they all mean. Over the coming days and weeks, we will look @ Danville area real estate trends, and what they mean.

This post will focus primarily on the general trends for the 1st quarter of 2009. Stay tuned for Information on the impact of foreclosures on the local market, as well as, price range comparisons.

I am writing this to shed light on the local real estate market. We constantly hear the major media stories filled with gloom and doom. It’s my goal to help you sort through all the hype and to dispel some of the myths out there.

Danville has not seen some of the steep declines we hear so much about. Just as we didn’t see run-away price inflation, we have not seem the “bubble burst.” That’s not to say the foreclosure market hasn’t had an impact. It has. But pricing is really a problem too.

Here's how we compared with 1st quarter last year.

1. Average selling value declined by 4.4% or about $2800.
2. Average Days on Market went up by almost 1 month.
3. Average % of list price to selling price went down.
4. Average listing price went up. An average increase of over $8000
5. Total number of transactions declined by 25.6%.
   

So what does it all mean. As a group we are listing homes for more than they're worth. Have your agent prepare a market analysis. If is looks overly optimistic, ask questions. As a seller be realistic. Look at the numbers carefully. And above all, don't close your mind if some one shows you the facts in black and white.

Februrary Stats

After a short down turn in prices, things seem to have leveled off. Prices so far in 2009 are down less than 1%. As i have said all along, we never had the steep increases. MLS average home selling price is just under $63K.

On the down side total homes sales in the MLS are down 25% as compared with the first 2 months of 2008. Market times have increased to an average of 155 days. While the market feels saturated, the numbers are encouraging. Current inventory is approximately 9.5 months. But, a word of caution here: this figure is much more influenced by price. For homes over $200K, the months of inventory grows to 20 months.

The other discouraging thing is home prices. Many homes are going on the market priced too high, period. Our average active list price is about $92,500. The current list to sale ratio is about 88%. Based on the averages, we should see a selling value of just over $81k.

For my local friends: If you feel led to list your home, please be sure to ask an agent for a comparative analysis to show you what appropriate pricing would be.

If you are a friend across the nation and are considering a sale, be sure the agent can give you specifics of your market, and ask for a comparative analysis of your home. If an agent comes to your home and has already made up his/her mind about the homes projected selling price and they have no comps to share, thank them for their time. Then, call another agent.

Remember real estate agents work for you. Conduct the listing appointment as if you were hiring for a company owned. Be sure they have a grasp of the market and have done their due diligence in preparing for their meeting with you. If they haven't done their home work, do you really believe they will do what ever they must to sell you home; even, if it means telling you the cold hard facts that you're asking for too much?.