Photo: 401K Calculator

If you’re a homeowner struggling with an underwater home, Bank of America’s settlement with government regulators may be very welcome news.  As part of the settlement, Bank of America will be giving approximately 200,000 homeowners principal reductions of up to $100,000.  If you’re one of the homeowners affected, this could very well save your home.

Of the five major lenders required to pay into the government’s $25 billion settlement, Bank of America is set to pay the largest portion, $8.58 billion, to borrowers.  It will be using this money to reduce principal for 200,000 borrowers to allow their homes to fall in line with current market values.  This could mean reductions of up to $100,000 for some homeowners.  Loans that originated between 2005 and 2007 are the most likely to be affected.

The principal reductions would likely be beneficial for Bank of America because they would allow it to avoid paying penalties.

Even if you don’t hold a loan from BofA, the government’s $25 billion settlement with the 5 major lenders in the country could spell good news if you’re deeply underwater on your loan.  The terms of the settlement give deep incentives for the lenders to help out mortgage holders who owe 40 to 75% more than the value of their homes (see article by LATimes).

Read more about BofA’s principal reductions at DSNews.com.

Photo: Dave Dugdale

I’m happy to see that one of the most popular emerging trends on the market today are eco-friendly “green” homes that actually give energy back to the grid.  Some homeowners are even seeing a profit from their home’s energy-generating capacity.  They’re paying $0 in energy costs, and even getting some money back.

A growing niche of new net-zero-energy homes are being built.  With a combination of efficient building practices such as dual-pane windows, air-tight ducts, and solar-voltaic panels, some homeowners are able to completely eliminate their energy costs, which run to over $2,200 a year for the average home.  Although in the winter, homeowners may have to buy some of their energy, they more than make up for it in the summer when typically energy generation greatly exceeds consumption.

I imagine that in our home state of California, such green homes would be all the more effective given the high number of sunny days we have throughout the year.  In fact, the building company Shea Homes has announced that it will make net-zero-energy or near net-zero-energy homes its standard model for new homes in its retirement communities in Nevada, Florida, Washington, Arizona, and California.  And the new net-zero-energy homes are affordable too.  Shea Homes’ solar-panel mounted model costs just $7,000 more than its previous base model.  Demand is rising for these new homes, leading some builders to consider them as the modern standard.

Recent real estate polls show that 50% of US adults list energy efficiency as among the top things they consider when buying a new home.

Even if you’re not considering buying a new green home, there are plenty of ways to make your home greener.  The EPA has a list of tips for sustainable-minded homeowners.

Read more about net-zero-energy homes at Inman.com’s original article here.

Photo: Nick Bastian

We can’t believe the amazing prices we’re seeing on bank owned (REO) and short sale properties. It’s the first time in the last five years that prices are looking good for real estate investment purposes.

Just to give you an idea, currently in the Old Town Tustin area there is a 3 bedroom home for sale for $350,000 and a 4 bedroom historic home for sale on a large lot for $535,000. Even one year ago these prices would have been unheard of. 

And we’ve seen great deals in Central Orange County and North Orange County as well. We just closed a deal in Ladera Ranch for a beautiful 3 bedroom/3 bath home that sold for $500,000. The appraisal came in at $525,000 so our clients have an instant $25,000 in equity at closing.

If you’re interested in real estate investment now is the time to do some research. Prices are coming down and we predict they will continue to come down for at least another year or so. Contact us if you would like a list of homes that are in default, short sales or bank owned properties (REO’s) in your area of interest. We have access to all of that information and will gladly share it with you.

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A very interesting article in the International Business Times today highlights legendary investor Warren Buffet’s advice for real estate investors: Buy, Baby, Buy (especially single-family homes)!

In particular, single-family homes are incredibly undervalued right now and are one of the best investments that you can make — in Buffett’s opinion, a better investment than stocks.  Buffett says that if there were an easy way for him to manage hundreds of thousands of single-family homes, he would buy them up immediately.  The reason he doesn’t is that it’s easier to buy and sell stocks with a simple click of a mouse.  Good news for home investors, however, is that this means there is far less competition in the market for single-family homes than in stocks.  Meanwhile, large real estate investors tend to buy up apartment complexes, further reducing competition for single-family homes.

For smaller investors with ready cash, buying a single-family home is the best investment of 2012.  Investors can take advantage of historically low rates (mortgage rates hovering at a record low of 4%), making the lifetime cost of the loan MUCH lower than it would have been a few years ago.  Additionally, the price-to-rent ratio of single-family homes is the lowest it has been since 2004 — this means that you’re paying less for the house, and getting more returns in rent.  And rents will continue to go up as the market recovers.  Buying a couple of properties at “distressed” prices, fixing them up, and renting them, is another great idea.

As Realtors in Orange County, we’re seeing more interested investors getting into the market and multiple offers on properties.  2012 is the time to buy!  Let us know if you are thinking of investing and we can work out a strategy with you.

Read the full article at International Business Times.

Photo: Mark Hunter

Owning a home is great – you get to build your own equity, have the satisfaction of owning your own property, get to customize it the way you like it, not to mention the tax breaks and other benefits.  But owning a home does come with responsibility: to keep your home maintained and repaired.  When your budget is tight, which repair jobs are the most important?

A recent article from CNN Money helps you to prioritize home repairs in order of importance.  Jobs that could potentially cause the most damage or harm should be tackled first.

1. Electrical System – A faulty electrical system can potentially cause fires or electrocution.  You don’t want to go there.

2. Structural Repairs – There’s not much point in fixing other things until the foundation of the house is secure.

3. Roof Leaks – Will create a host of other problems FAST.  Get this fixed pronto!

4. Gutters – Help to prevent damaging water leaks

5. Exterior Walls – Repair and repaint exterior walls to keep house sealed and protected from damage.

6. Aging Equipment – Such as a heating/cooling system, when you can.

Read the full article with more details here.

Photo: Jeff Turner

For those of you wanting to make a killing on today’s housing market, foreclosures and distressed homes are the way to go. But you’ll need good credit and ready cash if you’re going to make your move.

Searching for a foreclosures on your own can be frustrating. Your best bet is to work with a realtor that has experience in this sort of thing. Foreclosures and REO’s (bank owned properties) are listed in the MLS daily so working with an experienced realtor is really your best bet. We can help you locate foreclosures in your target neighborhood and we are very experienced at working with listing agents and the banks to get your offer accepted.

Call or email us today and let us know if you’re interested in foreclosures or REO’s. We’d love to talk with you about the process and help you get started.  We offer a completely free buyer consultation that answers questions such as:

• What’s the difference between a short sale and a foreclosure?
• What risks are there in buying a distressed property?
• How can you find the truth about the condition of a home?
• What are your financing options?

markus.brown@yahoo.com
heidi.brown@yahoo.com
DRE# 01441782, 01400625
714.299.3400
949.280.2912

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If you’re thinking of buying a home, getting approved for a loan is one of the first steps.  It’s getting more complicated to get approved for a loan these days, so make sure you have your paperwork in order.  It’s also important to find a loan agent who is competent and effective at navigating possible complications.  That being said, don’t be discouraged.  People ARE getting loans, and they are buying homes.  Contact us, and we can help to answer any questions you may have, and point you in the right direction.

Six Must-Haves for Mortgage Approval

By: Dian Hymer

Interest rates are hovering around historical lows, and low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to gain loan approval and home purchase transactions not closing on time due to lender’s strict underwriting are all too common.

Some buyers are turned down for illogical reasons. For instance, if you have investments — even if they’re performing well — an underwriter might deny the mortgage because your portfolio doesn’t fall into the underwriter’s risk assessment model.

One couple was turned down because the husband had worked at his current job for less than a year — even though he was making more money at the new job than he was before.

These buyers were well-qualified. The wife had worked several years for one employer and was able to qualify for the loan on her own. So, the transaction closed, although two months late.

Generally, it’s more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.

You could run into underwriting problems if you’re self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won’t lend to buyers who have more than three or four residential properties.

If you’re buying a new home before selling your current home, you’ll need to have 30 percent equity in your current home. This needs to be verified by the lender’s appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month’s rent to verify rental income if needed to qualify.

HOUSE HUNTING TIP: As soon as you’re serious about buying a home, find the best mortgage broker or loan agent you can to assist you. Don’t make your selection based on interest rates alone. A good track record counts for a lot.

Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you’re not turned down at the last minute, it’s worth it.

Be candid with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you’ll need to do to satisfy the underwriter.

Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won’t be included as livable square feet.

If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.

There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25 percent less than a 30-year fixed jumbo. A five-year fixed starts about 0.5 percent to 0.75 percent lower, but is riskier.

THE CLOSING: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement account counts toward this.

Dian Hymer is a real estate broker with more than 30 years’ experience and is a nationally syndicated real estate columnist and author.

Changing out dated brass fixtures can dramatically improve the overall look and feel of your home, and it is a small investment that may potentially impress buyers.

For instance, if your home has a builder-standard, cheap brass door handle, it is the first thing buyers see when they walk up to your front door, and it represents the first impression buyers have of your home.

Today, satin-nickel finishes or dark brown oil-rubbed bronze finishes are perceived as more up-to-date.  Often, brass light fixtures can be switched for inexpensive versions in satin-nickel or oil-rubbed bronze for the same cost as a brass model, but the change gives an instant update, sending the message that the house has been lovingly cared for.

The same goes for replacing other hardware such as hinges, yellowing switch plates, and other details.  Although they are small, easy, and cheap fixes, buyers notice them.

Carefully considering the details when staging your home for sale can make a huge difference in whether you sell the home at all, and in the amount buyers may offer.  We work closely with you in preparing your home for the market and in marketing it once it is ready.  Contact us for a free consultation!

Photo: Zillow.com

Just in time for the Superbowl, gentlemen, I give you…THE MAN CAVE!

Apparently, according to an article on Zillow.com, homes with man caves are surging in popularity these days.  You know what I’m talking about when I say “man cave”, right?  I’m talking cushy sofas, big-screen TVs, plenty of beer (or maybe even a wet bar), snacks, and a dart-board.  You might have one in your home.  But when it comes to tricked-out man caves, these properties have got it down.

Check out the man cave for car enthusiasts that has a car elevator, a billiard room, a full kitchen, and a workshop.  Or the one with four ceiling-mounted TVs, a two-lane bowling alley, a gym and spa.  Or how about a man cave with an indoor pool and slide, located conveniently next to a wet bar, basketball court, and arcade?  Sounds like the stuff of dreams, doesn’t it?

Check out the full article with listings at Zillow.com.

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California tax-payers will have to be extra-careful when filing their 2012 state income taxes in 2013, as the State Franchise Tax Board cracks down on homeowners who have been illegally writing off their Mello-Roos fees or taxes paid via the 1915 Bond Act.

Although Mello-Roos and 1915 Bond Act taxes have not been legal deductions in the past, many California homeowners routinely wrote them off their state income taxes because they were lumped in with their total property taxes.  However, new rules will require that taxpayers break down their property taxes into deductible and non-deductible portions.  A new computer system will track deductible and non-deductible property taxes, making it easier for the Franchise Tax Board to catch homeowners who are in non-compliance.

The FTB initially planned to enforce the new rules for the 2011 state taxes (due April 2012), but due to negative feedback, decided to hold off until next year to allow homeowners and tax preparers to get their paperwork in order.

If you live in a Mello-Roos community, you should check with your CPA before filing your state income taxes next year to ensure that you are not claiming an illegal deduction.

Read more about the new rules at the OC Register.