The Clock is Ticking!
Time is Running Out for Significant Savings!

Attention home buyers! Waiting to buy a home could cost you nearly $20,000 or more over a seven-year period if you time your purchase incorrectly. While the actual impact will vary depending on purchase price, the impact will certainly be significant because of stimulus programs scheduled to end in the coming months.

Economic turmoil and the real estate bubble have created significant opportunity for all those seeking to capitalize on the situation at hand. YOU Magazine will address the real estate purchase market and what people interested in both buying and selling a home need to know this month to take advantage of the current market conditions.

We also consulted with Michael J. Maher of “The Maher Team,” one of the busiest agents in the country who sold 216 homes in 2009. With a degree in mathematics, he knows his numbers and the impact on both buyers and sellers.

As little as a few years ago, it would have almost been incomprehensible to expect that actions from Washington would impact decisions involving the purchase and financing of real estate. Well, that was then and this is now and the decisions people make or don’t make stand to impact wallets across the country.

Before You Buy – Things to Consider
The pressure is on to buy in the first quarter of 2010, so what should buyers focus on before pulling the trigger? Maher recommends that buyers focus on three things that are either expensive to fix later or unable to change without buying another home. His three primary areas to focus on are what he calls the three Ls: “Location, Lot and Layout.”

When considering location, use technology like GoogleMaps™ before visiting a home to save both time and gas. Mapping allows you to view the property from different angles, see if the home is on a busy street, or if it offers the other requirements you need. For example, if you need a large yard where the kids or dogs can play, a tool like GoogleMaps™ will help you eliminate some homes immediately.

While it is relatively easy to get caught up in the aesthetics, don’t do it. Overlook items you can change later like paint, carpet and other cosmetic details. Narrow your focus down to two or three homes and “all things being equal, focus on location, lot and layout.”

Selling a Home?
If you are selling a home and want to make sure you can get it off the market for time crunched buyers, remember that today is what Maher calls a “price war beauty contest.” Sellers need to be focused on having their home priced competitively and making it most appealing upon inspection. Sellers also should consider paying for a home warranty to alleviate any concerns cash-strapped buyers may have about paying for repairs after closing.

More than anything else for both buyers and sellers this year, Maher suggests that people not let the money savings opportunities pass them by. “Anyone that qualifies is in a no-lose situation – they are buying at the bottom of the market, economically, historically, seasonally, market-wise and interest rate-wise. The perfect storm has arrived and the pearls and treasures have floated to the surface.”

Gifts from the Federal Reserve Are on the Clock

MBS Purchase Program
Mortgage rates have been artificially low the past fourteen months due to assistance from the Federal Reserve and their mortgage backed securities purchase program. Regardless of the expert, when asked what the impact has been to lowering rates, the range is from 0.50-1.00% or potentially more. The Federal Reserve reiterated in its January statement that they will be ending the program on March 31st.

While it is uncertain to what degree interest rates will immediately rise starting April 1st, the overwhelming trend will be higher. Many experts are predicting that rates will start to rise in advance of April 1st.

Tax Credit
Low mortgage rates are not the only stimulus program ending in less than three months. Credited for boosting a major share of home sales at entry level, first time home buyers have been taking advantage of a tax credit of up to $8,000 for over a year.

Repeat purchasers were also given incentive in November with the availability of up to $6,500 in post-closing cash. Tax credit qualifying buyers have until April 30th to get under contract and must close by June 30th. If home buyers miss either date, it will be a costly one.

HUD and the FHA Tighten Up
HUD announced in January that the upfront costs to obtain an FHA mortgage are going up for any applications received April 5th or later. The cost of the up-front mortgage insurance premium (MIP) will increase for all case numbers effective April 5th by 0.50%, from 1.75% to 2.25%.

What Waiting Will Cost You
The costs of missing out on the combined incentives add up quickly for those who fail to act by the deadlines. The first incentive scheduled to end will impact buyers on a monthly basis in the form of higher monthly payments. On a $200,000 mortgage, a 1.00% increase to interest rates could increase a monthly payment by $125 a month or $10,500 over a seven-year period. Obviously, the longer the loan remains in place, the greater the impact of the potential loss.

The second potential loss that will be incurred would be waiting to obtain a mortgage guaranteed by the FHA. In the same example of borrowing $200,000, the upfront cost would be an additional $1,000, or .50% of the amount borrowed. While this cost may be financed, the impact to a monthly payment would also be an increase of approximately $5 a month and have to be accounted for later upon the sale of the property.

Finally, the third potential cost in waiting will be the end of the tax credit for qualified buyers of a primary residence, up to $6,500 for repeat buyers and up to $8,000 for first time home buyers.

Add all this up and the cost of choosing to wait could run up to nearly $20,000 or more depending on the purchase price of a home and the type of mortgage applied for. So, even if someone believes that home prices may fall from where they are today, even with a modest decline in price, the cost of waiting could outstrip any benefit of finding a home for less.

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When we think of Valentine’s Day, we usually think of flowers, a box of chocolates and a romantic dinner with the one we love.  Those are very nice ways to show the special people in our lives just how much we love them.

But I want to share with you a way that you can show your love, perhaps one you’ve never thought of.  But before I do, let me share a couple of stories I have heard over the years from clients and other professionals.

“About a year ago, I received a call from a very dear friend of mine.  Her husband of 20+ years had suddenly and unexpectedly passed away.  I dropped everything to be at her side and help her through the agonizing weeks to follow.  Her husband loved her very dearly; there was no doubt about that.  But he had not taken the time to change the beneficiary of his life insurance policy from his ex-wife to the love of his life.   He always meant to, they had even discussed it many times.  But he just never got around to it.”

“Just two days before this past Christmas, I received a call from a loved one that his fiancé had passed unexpectedly in her sleep at the age of 56.  I flew out Christmas Day to be with him during his time of sorrow.  I stayed with him for about a week.  Our time together was spent crying and offering comfort in any way I could.  Together, we accepted the task of trying to find her will and other important paperwork.  But to no avail.  My loved one and his fiancé had co-mingled their finances but now those monies are inaccessible until the will and other important paperwork are found.  It’s been over a month now and nothing has been found.”

You may ask “What does this have to do with Valentine’s Day?”  I’m glad you asked.  I would like to share with you what my wife and I have done to show our love for each other and our families long after we are gone.

We have created what we call “Life Box”.  We took a couple of hours one Saturday morning and went to Staples and bought a small plastic box with lid that holds hanging file folders.  Together, we assembled the contents of the box with all the information one of us would need….leaving nothing to memory or chance.

This time together was very special to both of us. The hardest part of this was actually setting the appointment with the estate attorney. Very few people like to talk about death and taxes. But when done in a way to protect and provide for the future, it can have a lasting affect. But if it does, a lasting sign of our love will be found in “Life Box”.   

I would like to encourage each of you, my friends, my family and my clients, to take a couple of hours and put your “Life Box” together. 

Life Box Contents

• Copy of Will(s) with a note as to where the original can be found.  It is a good idea to provide a copy to the executor of your Will.  
• Provisions for Children:  be sure they are clearly identified.  It is especially helpful for a guardian to leave a note regarding younger children and any special needs or desires they may have.  Keep school info up to date, name, phone and location of doctors, etc. 
• Copy of Life Insurance Policies with a note as to where the originals can be found 
• Copy of Beneficiary page from Life Insurance Policies 
• List of all Banks with account numbers, location, phone number and name of personal contact at the bank.  (Note:  if you are only an account signer, you will not be authorized to sign after the account owner has passed.  Check into a “Payable on Death’ form at your bank. 
• List of Investment Accounts, name and phone number of personal contact 
• Copy of Beneficiary Page for Investment Accounts 
• Location of Safe Deposit Box and the location of the key (many states will lock you out of the safe deposit box once they are aware of the death.  In this situation, they generally will accompany you to the box and only allow the Will to be taken out of the box.  Ask your bank how this is handled and make appropriate plans.) 
• Copy of Health Directive (if you do not have one, go to your local hospital and obtain a blank one and complete it) 
• Copy of Durable Power Of Attorney (can be obtained at local hospital, please note that all Power of Attorney’s cease upon death) 
• Important papers for pets, vet info 
• A personal note that could eliminate stress about other things, for example:  where is the key to the lawn mower, how the gas and oil is mixed for the weed eater, where is the check book kept,
• Any other important info a loved one would need 
• Military Veterans:  please contact us for additional information you will need

Mr. Market seems to be wanting to move down for the second leg of the correction – I’d expect markets to continue to sell off here on the indexes, and with that will go a further drop in consumer confidence which could weigh heavily on housing in the months ahead.   To see the existing housing data, click on Market Trends above.  

Rebound in Existing-Home Sales Shows First-Time Buyer Momentum October 23, 2009 – Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months. House values seem to be turning around for our area. Check out the link below. http://www.realtor.org/research/research/ehsdata