Since Visalia is now more of a buyer's market because of the many foreclosures, also known as REOs and bank-owned properties, buyers have opportunities that have not been available to them for several years. Low prices, low interest rates, and lots of properties to choose from - it's a buyer's dream.

When looking to purchase a property that will meet your short-term and long-term goals while staying within your budget, it is important to determine if purchasing a foreclosure is right for you. Some buyers I have worked with asked to look at foreclosures because they wanted "the best deal." After taking the time to learn their needs, goals, and financial situation, I would then help them look for the best deal that would also be the "best fit." Sometimes the better deal was a foreclosure, and sometimes it was a well-cared for, non-foreclosure residence.

THINGS TO CONSIDER WHEN DECIDING IF A FORECLOSURE IS THE BEST FIT FOR YOU

1.   Look before you leap.
      Examine your financial situation before you start looking. How much money do
      you have to invest in improvements for a home? Where will the money come
      from? Savings, credit, or your monthly budget? Determine if you can afford to
      buy a foreclosure. 

2.  Show me the money.
     The bank selling the home requires evidence of your ability to pay for the home:
     A pre-approval letter for the amount financed and evidence of funds for the
     down payment and closing costs, or for the full amount if you are paying cash
     for the property. 

     The banks love cash buyers because that often means they won't be asked for
     as many concessions and because there is no loan involved and no property
     conditions required by the loan or the appraiser. 

     Buyers who are getting home financing must restrict their purchase to
     properties that conform to the loan guidelines and that pass the appraiser's
     inspection. This means that certain properties may not be in a condition good
     enough to be purchased with certain loans - or possibly any loan. Keep in
     mind, the bank is selling the property in an as-is condition and may not be
     willing to pay for - or even allow you, the buyer, to pay for - repairs to be
     done to conform the property to meet the requirements. 

     Don't let this discourage you though. In our current market their are many
     foreclosures that are in good enough condition for you to purchase with a
     loan.

3.  Count the cost.
     Once you find the property you want, make sure you calculate the costs of
     repairs, especially for any big-ticket items such as a new roof or A/C and
     heating.

4.  Avoid buying the money pit.
     The bank, unlike a "regular seller," has never resided in the property and
     cannot tell you anything about it. Inspections help to eliminate the element of
     surprise when it comes to making home improvements, so you don't end up
     owning a money pit. 

5.  When average is no longer average.
     Average homes in average condition make better rentals than luxury homes
     when factoring in maintenance costs. So if you are handy, you could pick up
     a good property that just needs a little sweat equity, yielding you better cash
     flow.   

6.  Out of time.
     Many people live very busy lives and just don't have the time to make
     necessary home repairs. This applies not only to foreclosures but to other
     fixer-uppers as well. It is better to know your limitations before you buy.

7.  Let's Make A Deal!
     Often foreclosures/REOs are left in need of repair, which can mean more
     leverage when negotiating price. Of course, the banks are not giving homes
     away, so keep that in mind when making offers. 

     Often buyers are surprised to find that some foreclosures are priced very
     aggressively - under market value - generating a lot of buyer interest and
     therefore getting multiple above-price offers.  

8.  For rent.
     There are plenty of potential renters out there who have been displaced
     after losing their homes as a result of short sales and foreclosures. These
     folks need affordable homes to live in. Investors have a great opportunity to
     partake in win-win situations for themselves, the bank, and the renter.

If you are interested in learning more about purchasing a bank-owned property, or you are ready to start looking at foreclosure homes, please contact me. In addition to our traditional listings, RE/MAX Visalia has a large market share of the foreclosure properties in Visalia. We know what makes for a successful purchase of a foreclosure, whether it is one of our listings or one of another agency's. 

Homebuyers who qualify for the Federal Tax Credit are breathing a sigh of relief. Originally homebuyers needed to have a written contract by April 30th and complete their transaction by June 30th. The House and the Senate have both approved the measure to extend the tax credit until September 30th, giving homebuyers an addtional three months to complete their purchase and receive the tax credit. Now Congress has sent President Obama the plan to give homebuyers an addtional three months to qualify. I hope to be able to share the good news with you soon that the President has approved the measure.

On tax day it seemed fitting to post information on how you can save money on taxes! Here is an article from C.A.R. (California Association of Realtors®) Legal Update that I received today about the California State Tax Credit. As always, I encourage you to seek specific advice from an accountant or tax professional regarding qualifying for this tax credit and other real estate related tax issues.

The $100 million allocated for California's first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.'s Economics team.  California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.'s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes. The FTB will update its website when the 2010 application form and other information become available.

For more information, please refer to C.A.R.'s Homebuyer Tax Credit Chart 2010.

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits.  To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive.  Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010.  Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied.  The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)).  California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)).  Other terms and restrictions apply to both tax credits.

For more information, C.A.R. offers a Homebuyer Tax Credit Chart with a side-by-side summary of the federal and California laws.  C.A.R. also offers a legal article entitled Homebuyer Tax Credit Update.

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

Now is not the time to raise the downpayment requirement on a Federal Housing Administration loan, warns FHA Commissioner David Stevens.

Stevens, testifying before a committee of the U.S. House, said his agency would probably insure 300,000 fewer home loans per year if the mandatory down payment was raised from 3.5 percent to 5 percent — a 40 percent increase.

Congress has been considering various ways to put FHA on a sounder financial footing. Besides increasing the downpayment requirement, another suggestion under discussion is raising the upfront mortgage insurance premium to 2.25 percent of the loan amount, up from 1.75 percent currently.

The National Association of REALTORS® also opposes the proposal to raise the mandatory down payment for an FHA loan. The FHA remains financially strong because it has taken steps to ensure solid underwriting standards and responsible lending practices, said Charles McMillan, NAR immediate past president, in testimony before the House Subcommittee on Housing and Community Opportunity.

"As the leading advocate for housing issues, NAR believes that one of the best ways Congress can help strengthen FHA is to quickly consider and pass legislation that would make current loan limits permanent," McMillan said. “It’s important to note that higher balance FHA loans perform better than lower balance ones. While some argue that higher balance loans put taxpayers at risk, such loans actually strengthen the program and reduce risk to the fund."

Explaining that FHA has played an important role in the recent housing and economic crisis by filing the gap left by private lenders, McMillan said FHA insured almost 30 percent of single-family mortgages in 2009 and more than 50 percent of first-time buyer loans. “Historically, FHA’s market share has hovered between 10 and 15 percent of all loans. And when the private market is strong enough to return, we welcome a reduced FHA market share,” he said.

McMillan said NAR was also concerned that FHA wanted to decrease seller concessions to 3 percent. Reducing seller concessions could put homeownership out of reach for many buyers, he said, because it could require buyers to pay more at closing.

SOURCE: Associated Press, Alan Zibel, and NAR (03/11/2010)