Why Should I Buy Now?
All we hear right now is about unemployment, health care reform and bailouts. That doesn’t mean there has not been talk of the real estate market and what is happening in that part of the economy. The question I am hearing more each day is, why should I buy now? Depending on who you listen to the market may or may not be at its bottom and who in all reality can forecast it. Many of those so-called forecasters were the ones that missed all aspects of the economy as it was tumbling downward. And down is not always a bad place to be since the only other way is up. Whether we are at the bottom, close to the bottom or on our way up it is a good time to buy your home or condo.
Why should I buy now? There are several factors that are in your favor by acting now.
Pride of ownership is the number one reason people want to buy a home. Home ownership offers you and your family a sense of stability and security while making an investment in the future.
Home ownership is currently one of the best tax shelters available with the volatility of today’s stock market. Mortgage interest is fully deductible on your tax return which lessens your tax burden year after year.
Mortgage reduction builds equity in your home. Each month you make a payment the principal portion of your loan goes down and as the principal goes down and the price of your home goes up, you are building equity or more asset value.
Another reason to ask yourself why should I buy now is interest rates are lower than they have been in years. Do you realize that you may be able get a 30 year fixed rate for less than 5% which makes a purchase start to look very appealing and if you tie that with anticipated inflation you will be paying back the loan with devalued dollars meaning you are getting more for your money than when you started. That means you can afford more home or if you want you can buy a more reasonably priced home and keep the payments low, maybe even less than you are paying in rent. Would you have imagined several years ago that you could get free money and a great interest rate on buying a home? If you are like most of us you would have laughed us out of the place, but it is happening now. We would never have guessed it just like we are never going to guess the bottom of the housing market. So just do it!
Buying Foreclosures
There are a lot of great deals in the real estate market today but not all are as easy as it seems. Buying foreclosures can be a tricky business unless you know exactly what you are doing and know who can help. Right now foreclosures are dominating the market like no other time in history with well over a million homes in foreclosure and more are expected in the near term. These properties can offer great opportunities but are also rife with problems for so-called bargain hunters. Many people wrongly think that low prices means you should jump out there and start buying foreclosed properties but nothing is further from the truth.
Buying foreclosures can be a great way to purchase property but that doesn’t mean you should lose your head. Banks put foreclosed homes on the market at cut rate prices for a reason. They want quick sales to avoid the expense of upkeep and the related expenses with any home such as property taxes, utilities and insurance but due to the cut rate pricing everybody and their brother is trying to buy those homes. You ask why this would be a problem. The answer is the people trying to buy these homes keep bidding until the price is no longer a bargain. Good for the bank but not so good for the buyer because they get caught up in the bidding war and did not carefully calculate what the final costs may be with repairs that may be needed.
Don’t let some of these things keep you out of the foreclosure market. Buying foreclosures can still be a good deal if you take the proper steps and don’t get caught up in the excitement. Smart buyers establish a relationship with their local bank’s asset manager which can sometimes get them inside information and maybe the first offer of properties coming available. While you are talking with your lender about the properties that are available you want to get pre-approved by that same lender. Nothing warms a banker’s heart more than someone qualified for a loan and within their own bank. Next and perhaps most important is to hire a trusted real estate attorney, not your neighbor down the street who is a corporate lawyer for the mega corporation but the local attorney who handles a significant portion of the properties being transferred in your area. He can offer the expertise to handle any problems and the legal aspect of purchasing a home. Buying foreclosures can be challenging but the rewards can be quite significant.
Owning your own Home
No one knows what the future holds for you, your family, your job or your finances. But owning your own home is a part of the American dream. This concept of the American dream is so deeply ingrained in our psyche that we sometimes may not make the right decision at the right time in our lives. When making this all important decision to buy that first house or condo it is important that you know all you need to know to make an informed decision.
One of the first things you need to know before you start thinking of owning your own home is if it is the best choice for you. There was a time that very few Americans owned their own homes. It has only been relatively recent that home ownership was available to the masses and that availability is increasing every day. Financing has become must easier to obtain and potential home owners are becoming much more financially savvy than any other time in our history. With all of this it is still wise to look at owning your own home as a financial transaction. There are definitely economic differences in renting and owning. At one time you could get a better return in the stock market but nowadays with the uncertainty in the financial markets that may not a valid argument. On the other hand, Uncle Sam offers some tax deductions the stock market cannot duplicate. Each year as a homeowner you can deduct part of your mortgage interest and real estate taxes if you exceed the standard deduction which most homeowners do in the first few years of their mortgage. This can be a windfall for most first time home buyers because most will receive a tax refund for those first few years.
When you have decided that owning your own home may be a good decision look at some of the pluses in which a dollar value cannot be assigned. First of all there is the pride of ownership. It is by far the number one reason people ultimately buy their first home which gives you that sense of stability and security that you have made an investment in the future. By owning your own home you have the freedom to paint the walls whatever color you desire and crank up the stereo without fear of your neighbor pounding on the ceiling to be quiet. You can choose the decorating that best suits your tastes and change them whenever you like. Owning your own home is a part of the American dream and who doesn't like for dreams to come true.
Homebuyer Tax Credit
The program today is called the American Recovery and Reinvestment Act of 2009 and authorizes up to $8,000 tax credit for first-time home buyers purchasing a principal residence. Many people have questions about the homebuyer tax credit and below are some of the answers for our buyers. Remember you should consult a qualified tax advisor or legal professional about your unique situation.
As the program now stands, which is scheduled to end on December 1, 2009, first time homebuyers purchasing any kind of home - new or resale - are eligible for the homebuyer tax credit. The definition of a first time home or condo buyer is as follows; a buyer who has not owned a principal residence during the three year period prior to the purchase. For married buyers the test is of both home buyer and his/her spouse. This year's tax credit is different from last year's because it does not have to be paid back. This year's tax credit is a true credit, not an interest free loan. However, the home buyer must use the residence as their principal residence for at least three years or possibly face a recapture of the tax credit amount. Claiming the tax credit has also been made easier. All you have to do is complete the tax credit on IRS form 5405 to determine the amount and then claim the amount on line 69 of your 1040 income tax return. No other applications and forms are needed. This is what is now available but Congress is on the verge of modifying and extending the program to include more potential homeowners who can take advantage of the credit. The latest idea under consideration is a credit of $6,500 for homeowners looking to trade up to a bigger primary residence and who have already lived in their current home for five years. To qualify for the full credit homebuyers must have adjusted gross income of less than $125,000 or $225,000 for married couples filing jointly. The homebuyer tax credit will only apply to homes sold for $800,000 or less and contracts to buy a home must be signed by April 30, 2010 and must close by June 30, 2010.
Support of the changes is bipartisan which gives an extension a much better chance than ever before. Supporters maintain the current credit has helped boost existing home sales and more is needed going into 2010 to stabilize prices and generate jobs in a year when a rise in foreclosures is expected.
Should I buy now?
All we hear right now is about unemployment, health care reform and bailouts. That doesn't mean there has not been talk of the real estate market and what is happening in that part of the economy. What I am hearing a lot about is should I buy now or wait for the market to bottom out? Depending on who you listen to the market may or may not be at its bottom and who in all reality can forecast it. Many of those so-called forecasters were the ones that missed all aspects of the economy as it was tumbling downward. And down is not always a bad place to be since the only other way is up. Whether we are at the bottom, close to the bottom or on our way up it is a good time to buy your home or condo.
Should I buy now? Absolutely, and let me tell you several factors that are in your favor by acting now and not trying to guess at a target that may always keep moving.
We have a tax credit! Let me say that again since you probably did not get the full impact of what that statement means in today's economic climate. A tax credit means you do not have to pay it back. That's right, it is free money and when is the last time you received free money. It is not as perfect as it could be because there are several requirements but all in all they are not that difficult. First, you must be a first time home buyer or not owned your principle residence in the last three years. Second, if you are single your income cannot exceed $75,000 per year and married couple's income cannot exceed $150,000 per year. The last part might be a little trickier since the tax credit is only if you close your home or condo on or before November 30, 2009. That is less than 45 days away and if you don't get moving now you are not going to make the deadline.
Another reason to ask yourself if I should buy now is interest rates are lower than they have been in years. Do you realize that you can get a 30 fixed rate for less than 6% from many lenders. That means you can afford more home or if you want you can buy a more reasonably priced home and keep the payments low, maybe even less than you are paying in rent. Would you have imagined several years ago that you could get free money and a great interest rate on buying a home? If you are like most of us you would have laughed us out of the place, but it is happening now. We would never have guessed it just like we are never going to guess the bottom of the housing market. So just do it!
Short Sales
The real estate market has certainly seen its challenges over the past couple of years but for buyers there are opportunities available that have not been seen in decades, the short sale. Short sales are becoming more prevalent in the Chicago area and buyers are seeking them out as never before. It is not rocket science to understand the basics of a short sale. Short sales are when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of the loan. It used to be that lenders would not even consider short sales if your payments were current but with the changing real estate and mortgage markets more and more lenders are more agreeable to negotiate.
There are several areas you need to be aware of if you intend to pursue a short sale. First of all hire a real estate agent who has short sale experience. Not all agent even know what a short sales is or ever been involved in this type of transaction. An experienced agent can help expedite the transaction and protect your interests. It is important that you not miss any details that could affect the sale somewhere down the road. Next is to prepare the seller for demands made by the lender. Remember the seller has no equity and is unable to pay the difference between the sales price and existing loans. Your seller may need to provide a hardship letter indicating their inability to pay the difference as well as taxes they may owe. Another very important area to address is to make certain the lender is given a deadline in which to respond once the seller has accepted an offer. Some lenders submit short sales to committees but that does not mean a decision could be reached in two to three weeks which lessens the possibility of getting further behind. Remember the lender may not be under any pressure to make a decision and the paperwork could sit on someone's desk so a deadline can be beneficial to everyone involved. One last area to consider with short sales is commissions. The seller may agree to pay a commission but actually the lender is who ultimately will pay. The reason is the seller is not receiving any money in which to pay the commission. Since the lender is losing money they will likely negotiate the commission directly with the listing broker.
Short sales in Chicago can be the path to home ownership for many buyers which are expected enter the market in the next few months. It is not always an easy way to purchase your home or condo but the benefits can be enormous.
