Real Estate Information

The other day I met with a first time home buyer who works in the city for an advertising agency and she asked me about REOs and if she should consider buying one.

The short answer is yes, but we are getting ahead of ourselves what exactly is an REO anyway?

REO is short for Real Estate Owned property. These properties are most often distressed properties that a bank has bought and has a free and clear title to sell in the real estate market. Most REOs have gone to sale at a public auction and were not bought and as a result the bank has the opportunity to re list the property for sale. Banks want to sell these properties as fast as they can so they can recoup their investment and as a result prices on these properties are tremendous opportunities. Typically the price of an REO vs. a regular sale property is 30% less or sometimes more, however these properties are not turn key ready and usually require some work.

These properties are sold as is but that doesn't mean you can't get an inspecition prior to closing and I absolutely advise my clients to get an inspection bfore the sale so they know what repairs or costs they will have to incur prior to owning the home or purchasing a similar property that is a regular sale. 

REOs are great opportunities provided you have a little bit of cash set aside for repairs and you don't mind the work. Most REOs unlike short sales close in 45 days or less because the price has already been set by the bank. The only hoops you will need to be ready to jump through are getting pre-qualified by the bank's preferred lender. This is usually just a formality and after you are pre- approved the buyer has the right to choose a a different lender if they would like.

If you would like to search for REO properties in Marin County you can go to my Websites for a list of REOs that are on MLS at www.marincountyreos.com or if you are looking for more information on REOs that are not on the market send me an email and I will get you a list. Additionally you can review www.marcobrienrealty.com for upcoming auctions, pre-foreclosure and REOs.

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

The Housing and Economic Recovery Act of 2008 was just signed by President Bush with some amazing benefits for first time homebuyers. Call everyone you know who wants to buy their first home (or who hasn't owned one in three years), this is too good to miss - it's a $7,500 tax CREDIT (not deduction but a credit).

If you have not owned a home in three years, you qualify as a first time home buyer. If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for this credit. Call your friends who just bought a home since April 9th and tell them they may take $7,500 off their tax bill if they qualify. It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500. This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit. In other words, you take $7,500 off your tax bill. But there is a catch; the credit you receive now is actually an interest-free loan that must be repaid.

The loan has no interest, and will be paid back over 15 years. You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment. You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year. If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house? You pay the balance back at the closing. So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house. What happens if you do not make enough money when you sell your house? They forgive the rest of the debt.

Other restrictions stipulate that you have to buy your first house in three years before July 1, 2009, not have super high income, not use bond financing and buy anywhere in the US.

If you'd like to learn more about this program, please call me!