Welcome to the "Z" Team! Douglas and Bud Zeller

Affordable home prices and historically low interest rates have created an ideal situation for many qualified first-time home buyers to purchase a house. Despite this opportunity, some buyers may be overconfident and make mistakes during the home-buying process.

KEEP THIS IN MIND

• Some first-time buyers are unaware of the vast amount of paperwork and negotiations that go into purchasing a home. As a result, buyers may think they can save money by forgoing the use of a REALTOR®. However, managing the nuances of offers, inspections, financing, and other pivotal steps when buying a home often causes confusion and anxiety for buyers. Working with a REALTOR®–who is obligated to put the buyer’s best interests first–will help to alleviate buyer concerns during this process.

• Online mortgage calculators can help buyers estimate the amount of house they can afford, but calculators should not be the sole source for mortgage-approval information. Buyers are advised to meet with a mortgage broker or banker prior to beginning the home search to help determine the loan amount for which they are most likely to be approved.

• Although there is a large selection of homes available for sale, home buyers should not assume they can make low offers or unreasonable demands. Even in hard-hit housing markets, homes in desirable neighborhoods are receiving multiple offers.

To read the full story, please click here: http://online.wsj.com/article/SB10001424052748703579804575441472748516734.html?mod=WSJ_hpp_sections_realestate       

U.S. homebuyers are less likely to purchase a foreclosed property today than they were a year ago, according to a new survey conducted by Trulia and RealtyTrac. Some 45 percent of U.S. homebuyers say they are at least somewhat likely to purchase a foreclosure today compared with 55 percent who said the same a year ago.

Only 1 percent of homeowners with a mortgage say walking away from their home would be their first option if they are unable to pay their mortgage, while 59 percent say they would not consider walking away no matter how much their mortgage was underwater. More than two-thirds of homeowners (69 percent) say modifying their loan terms is their first choice if they aren’t able to pay their mortgage.

The survey also finds that fewer homeowners have a negative view toward foreclosure properties this year (78 percent) compared to last year (85 percent). Homeowners who believe there are negative aspects to purchasing a foreclosed home say they are most concerned that there will be hidden costs (68 percent), that the process is risky (49 percent) and that the home could lose value (35 percent).

Great analysis, provided by our  good  friend and economic advisor for the  Placerville, California area;  Steve Cockerell, President of Western Foothill Mortgage, Inc.

As the Federal $8,000 tax credit ends, it would seem that here, nothing is lost as the first time buyer can trade that credit for a $10,000 State tax credit.  However, they are far from similar. 

The key differences between the two credits are…

1. The Federal credit comes in one chunk $8,000 if you qualify – and relatively soon after which helps the home buyer recoup perhaps up to 100% of his move-in on the deal.
2. The Federal tax credit was not conditioned on a tax liability, thus even if you did not owe once cent in taxes, you could still receive the $8k – SWEEEEET! 

The State credit is paid out in 3 increments of maximum $3,333 each over tax years 2010, 2011 & 2012.  This is a lot less up front.  Secondly, and more important is this…you can only get the credit against actual state income taxes owed in those tax years.  

Here is a typical example on a first time buyer purchasing an average home at $275,000. 

On a USDA 100% loan (or FHA 96.5%) the payments (PITI) are about $2,000.  If the borrower meets guideline ratios of 31/41 for this purchase (assuming about 10% of income goes to other debts like auto, credit cards, etc) Annual income to qualify is $77,400. 

The tax writeoff for owning this home is about $11,000 so this tax payer itemizing his deductions will take off about $15,000 for taxable calculations.  A family of 4 on this income will have a State tax liability of $1,640 so that is the maximum tax benefit he car reap from the State credit.  Multiply this by 3 years and his $10,000 is diminished to actual credit benefit of $4,920 or less than ½ of the limit. 

What happens to the other $5,080?  Absolutely nothing!  The State of California is off the hook.  This means that the $100 Million designated to the first time buyer program is likely diminished to about $50 Million – pretty clever of your lawmakers.  This extra money will not be designated to go out to more first time buyers unless they re-write the law.  And they cannot compute the leftovers until 2013! 

A recent study of more than 22,000 homeowners who bought their homes within the last nine years found that current homeowners plan to be “more practical” in their next purchase, focusing on livable space rather than unnecessary upgrades. KEEP THIS IN MIND:

• Many of the luxury amenities once considered necessities among home buyers, such as community clubhouses, dog parks, golf courses, and 24-hour security, are no longer priorities, according to the survey. Repeat buyers also said a swimming pool isn’t a must, but a children’s playground with walking paths are essential.

• One of the takeaways from the survey, according to an architect firm, is that buyers nowadays should rethink space. For example, buyers should look for kitchen cabinets that go all the way to the ceiling for added space and efficiency. They also should pass on high-priced focal stairways, opting instead of steps that are tucked away and out of sight.

• Buyers also should be on the lookout for dead space. If the dining room or media room is eliminated, at least some of the square footage should be dedicated to secondary bedrooms. The once-standard 10-by-10 bedroom no longer is acceptable to most buyers.

• The survey also found that many buyers have transitioned toward green features, such as high-efficiency appliances, insulation, and windows that are not large areas of glass. However, many buyers did not report the use of recycled materials as a necessity.

• Other findings from the survey show that large kitchens, with islands, are desirable, as are main-floor master bedrooms, and two-car garages.

Full story at:  http://www.latimes.com/classified/realestate/news/la-fi-lew4-2010apr04,0,2602030.story

Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state home buyer tax credits.  To take advantage of both tax credits, a first-time home buyer 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 home buyers may use the same time frames 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 home buyer 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 home buyer may receive up to $10,000 in tax credits as a first-time home buyer 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.