THE ASHLEY LEIGH TEAM – MAKING HOME AFFORDABLE –

I am pleased to provide clarification about the new Federal government new information website. 

The Federal government has launched a new website allowing homeowners to conduct a self-assessment of their eligibility for participation in the “Making Home Affordable” loan modification and refinancing program. 

The Federal website shares information about how this program works and who is eligible for assistance.  This is the same $75 billion program you may have heard of recently in the media.

Presented below is a description of the eligibility requirements.

There are two programs being offered.  One focuses on refinancing and the other on loan modification.

REFINANCING

With interest rates at all time lows many homeowners wish to refinance.  However, the values of their homes have declined such that there is insufficient equity to get a new loan.

That’s where the refinance program kicks in.  But, there are some qualifying criteria.  ALL of the answers to four questions must be yes.  Otherwise, this Federal program will not provide assistance.

1. 1.    Is your home a one- to four-unit home?

The Federal website is not clear if your home must be your principal residence.  I am pretty sure that’s what they mean, however. 

1. 2.    Is your current loan owned by Fannie Mae or Freddie Mac?

Too keep money flowing lenders sell their loans to investors. If your loan has been acquired by an investor other than Fannie or Freddie, then this Federal program will not provide assistance.

You can learn if your loan has been acquired by Fannie Mae or Freddie Mac at their respective lookup websites.

• Visit Fannie Mae’s loan lookup website à

                                        http://loanlookup.fanniemae.com/loanlookup/

• Visit Freddie Mac’s loan lookup website à

                                          https://ww3.freddiemac.com/corporate/

1. 3.    Are you current on your home loan payments?

“Current” means you have not been more than 30 days late on any of your home loan payments in the last 12 months.  Tardy on just one payment and you are not eligible.

1. 4.    Do you believe the amount you owe on your first mortgage is about the same or less than the current value of your house?

Your loan coupon usually shows the current loan balance. Or you may have to call your lender or check on your lender’s website to learn the amount of your loan balance.

To learn the current value of your home, you’ll need to do some homework.  Many homeowners look to third -party websites where approximate values are sometimes available.  Or homeowners use their current tax assessment as an approximation technique.

This is way too important to use rough numbers.  I want you to be fully informed.  As a service to our community, I will provide you with free research as to a current estimated market value of your home.  No charge.  No obligation.

Call me at (703) 861-1920. Or send me an email message at HeidiL@aclteam.com and I can help you by providing you a current market value of your home.  I am here to help you!

Next Step:  If the answer to each of these four questions is Yes, then your next step is to contact your lender. 

According to the program guidelines, the lender may agree to refinance.  It is voluntary on their part.

Call them first before you begin collecting the backup information you may be requested to submit.  However, this is what you will eventually need to submit to your lender:

CHECKLIST FOR A REFINACE REQUEST

• Information about your mortgage from your monthly mortgage statement
• Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources
• Your most recent income tax return
• Information about any second mortgage or home equity line of credit on the house
• Account balances and minimum monthly payments due on all of your credit cards
• Account balances and monthly payments on all your other debts such as student loans and car loans

Don’t forget … if you have questions or simply need to talk about your situation … call me at 703-861-1920.

MODIFICATION

ALL of the answers to five questions below must be yes.  Otherwise, this Federal program will not provide assistance.

1. 1.    Is your home your primary residence?

This is an easy question!  Yes and proceed.  Or No and stop!

1. 2.    Is the amount you owe on your first mortgage equal to or less than $729,750?

Another easy question!  Yes and proceed.  Or No and stop!

1. 3.    Are you having trouble paying your mortgage?

The key element is a hardship.  A hardship can result from reduced hours at your job, loss of your job, unexpected or extraordinary medical bills, or even a sudden increase in your loan payments.  You will eventually have to write a hardship letter.

Right now, it is just a Yes or No response.

1. 4.    Did you get your current loan before January 1, 2009?

Yes and proceed.  Or No and stop.

1. 5.    Is your total payment on your first mortgage (including principal, interest, taxes, insurance, and, if applicable, homeowner’s association dues) more than 31% of your current gross income?

Use your gross monthly income BEFORE any deductions for taxes and adjustments such as health insurance.  Married couples should combine their monthly gross income.

Now divide your total loan payment by your gross monthly income.

If the result is greater than 31%, your response is Yes. 

If it is less than or equal to 31%, your response is No.

Next Step:  If the answer to each of these five questions is Yes, then your next step is to contact your lender. 

According to the program guidelines, the lender may agree to refinance your current loan.  It is voluntary on their part.  However, many lenders have made a commitment to delay foreclosure on all loans that meet the minimum eligibility criteria for a home affordable modification.

Again, call them first before you begin collecting the backup information you may be requested to submit.  However, this is what you will eventually need to submit to your lender:

CHECKLIST FOR LOAN MODIFICATION

• Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources
• Your most recent income tax return
• Information about your savings and other assets
• Information about your first mortgage from your monthly mortgage statement
• Information about any second mortgage or home equity line of credit on the house
• Account balances and minimum monthly payments due on all of your credit cards
• Account balances and monthly payments on all your other debts such as student loans and car loans
• A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable

Once again … if you have questions or simply need to talk about your situation … call me at 703-861-1920.

The Federal government website is www.makinghomeaffordable.gov

If these well-intended Federal programs are unable to help, don’t despair.  Doing nothing is the least desirable strategy you might choose.

Call me.  Email me.  I can help.  I know.  I’ve helped other homeowners in the same situation.

Do something … You are not alone.

I am available to help you with your real estate questions, answer your questions about financial stress, and to lend an ear if that’s all you need! I can help during these painful times.
Heidi Ludwig

When Trust and Experience Matter

(703) 861-1920

It’s a Buyers market — Or is it? – by Ashley Leigh

I continue to hear the same refrain from the same group … the news media, the neighbors at the local coffee shop, and especially potential buyers … “It’s a buyer’s market”. I am sure you hear the same thing.  Everyone seems to be saying it is a buyer’s market. 

What is a “buyer’s market”?

The general definition of a buyer’s market is that the number of houses on the market is greater than a six month supply. This means at the current rate homes are being purchased versus that number currently on the market it would take at least six months for them all to sell, without even considering the fact that more homes come on the market each day to help keep this delicate balance. 

The folks saying it’s a buyer’s market also say the benefits for buyers are rock bottom prices, a wide choice of homes, and besides, the seller will even pay closing costs. Wow, why isn’t everyone running out and buying if this is the case?

Well, actually, many people are buying at this time and making good purchases. Prices have come down a fair amount in the last two years and interest rates are still quite low. Yet, a number of potential buyers are playing the waiting game. What if prices drop more? They have heard (again from the sources above) that interest rates will go down as well. 

Things have been changing.  But, not quite as the potential buyers have been hoping. For example, interest rates went up 1% recently!  Will they go down again?  You and I know that if people really knew the answer to that question they would also be buying stock at the lowest point ever and always selling at the top.

Another recent change is that with many homes on the market at great prices already, we have been seeing a number of cases with multiple offers for the same property. These are good solid offers where those real buyers are not asking for help with closing costs. Buyers that have been waiting and thought they couldn’t lose now are finding out they can’t have the home they had their eye on. 

So, for those buyers, it is back to the streets with their Realtor® looking for a property to make an offer on. There are lots of homes to choose but sellers are starting to see that things have picked up and many aren’t willing to “give” so much outside of price.

Another thing buyers must consider is that if they are looking to take advantage of the First Time Home Buyer Tax Credit they need to close by December 1, 2009.  Keep in mind that if the property they want is a short sale this deadline may be in jeopardy due to the long buying cycle typical with short sales.  Or, the short sale may not get approved and then it is back to the streets again with their Realtor®. 

All this said and done, there are still some phenomenal buys out there and even if interest rates are 6%, that is better than most people alive have seen in their lifetime. 

So, now is the time for action.  Buyers, yes, YOU, its time to get off the fence and get in the game.

• Get pre-approved by your lender if you haven’t already
• Check out the down payment assistance programs such FHA loan programs
• Meet with your Realtor® and make sure your expectations have a dose of reality in them.
• And lastly, enjoy the journey. This is an exciting time and if you aren’t enjoying it you have the wrong people on your team. 

So, it may be a buyer’s market but its not a buyer-take-all market!

Call me today to get started.

Walking Alone in a Dark Forest – by Ashley Leigh

Walking in a forest, especially by yourself as dusk approaches, can become a bit freighting.  Where nature was a moment ago beautiful and serene, it now feels dangerous.

The same is true with our real estate market.  Where it was a sure thing money-maker, it now presents itself with doubt and uncertainty.  The triple-threat of the weakening dollar, rising energy costs, and tight credit has slowed the real estate market.  Buyers are cautious and sellers are nervous.

Some sellers, seeing sales prices erode, are considering the sale of their home “by owner”?

Some “by owners” believe they can perform the same functions as a real estate professional, eliminating the need for representation. They soon learn the value of “third-party negotiations.” One of the most vital services I provide is the ability to field buyer objections without bias, countering them with offsetting benefits. This eliminates the tendency to cut price to maintain buyer interest.

Other owners believe they can save the brokerage fee, yet attempt to ask the same price as an active, seven-days-a-week marketing specialist. They don’t realize that many buyers who approach a “by owner” plan to save the same brokerage fee. They are often bargain-hunters too, or individuals not committed enough to consider contacting an agent.

Still other sellers learn the value of staying home 24 hours a day. Seriously motivated buyers rarely leave messages, nor do they call back if they don’t get an answer. That leaves the “by owner” with a dilemma … continue working or take leave from work to answer the phone.

Before taking a single step toward becoming a “by owner,” consider learning more about the process. It could save you time, precious equity, and considerable frustration.

Advertise your home for sale and buyers will come . . . or will they? How can you tell a buyer from a prospect, or a prospect from a “tire-kicker”? All may respond to your ad.

Consider another of my vital services. I know how to “qualify” those who respond to ads, signs, and other marketing promotions. I perform a critical screening process that eliminates inconvenience and wasted time.

As a buffer between you and buyers, I ask questions about motivation to make a purchase, and the financial ability to complete it. I ask about the buyer’s financial resources and capacity, and reasons for making a purchase.  I do not want to take your home off the active market if the buyer might not be able to fulfill their contractual obligations.

So, amazing things happen when I represent you. Your home is shown only to qualified prospects. Unmotivated tire-kickers are virtually eliminated. Prospects tend to be serious and ready to make a decision. Homes sell more quickly with fewer frustrating delays.

Why is representation so important? The most motivated, ready-to-buy, financially capable buyers prefer working with professionals such as me who show them properly priced, suitable properties. The unmotivated and unqualified time-wasters avoid contact with sales agents. Which would you prefer as the buyer for your home?

For example, have you ever tried selling a car by placing a classified ad? How did you feel when prospective buyers said the car wasn’t worth the asking price, and needed extensive repairs? Were you offended, or feel defensive?

When selling your home, you may hear the same objections, albeit more politely spoken. Do those comments mean you will have to reduce your price to achieve a sale? Absolutely not … especially if I represent you!

As I mentioned, one of my vital services is to act as a buffer between you and buyers. Because buyers offer their objections to the agent, in a neutral atmosphere, feelings are not offended, nor are defenses raised. I simply listen, and then address the buyers’ concerns in an objective manner.

Recognizing that certain features of the home may be attractive to the prospects, the features may be presented as offsetting benefits, thus neutralizing buyers’ concerns. This eliminates the need to offer price reductions as the only solution to objections. Your precious equity is protected and preserved.

Therefore, protect your home investment. Reward yourself with the benefits of my representation.  Call me today to learn more.

Lazy Summer Days – by Ashley Leigh

Lemonade. Ice-tea. Or, my favorite . . . an “Arnold Palmer” – a 50/50 mix of lemonade and ice-tea. A hammock under a shady tree. Now, that is a Norman Rockwell picture of summer.

Well, sure . . .  unless you are contemplating selling your house.  Call me today to discuss what you have to do to get ready.  I’ll bring the refreshments!

In the mean time, review the notes below.  In this article, I review what you should do inside your house.  In a future article, I’ll tell you where to put your focus on its exterior.

Emotion vs. Reason

When speaking with real estate agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a “home”. Yet if you are selling property, they will often refer to it as a “house”. Here’s why. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.

You need to think of your house as a marketable commodity. Property. Real estate. Your goal is to get others to see it as their potential home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.

Therefore, you MUST do the following!

De-personalizing Your House

The reason you want to “de-personalize” your house is because you want buyers to view it as their potential home. When a potential homebuyer sees your family photos, it puts your own brand on the home and momentarily disrupts their image about owning it. Therefore, put away family photos, sports trophies, collectible items, knick-knacks, and souvenirs. Put them in a box. Rent a storage area for a few months and put the box in the storage unit.

Do not just put the box in the attic, basement, garage or a closet. Part of preparing a house for sale is to remove “clutter”.

Removing Clutter, Though You May Not Consider it Clutter

This is the most difficult thing for most people to do because they are emotionally attached to everything in the house. After years of living in the same home, clutter collects in such a way that may not be evident to the homeowner. However, it does affect the way buyers see the home, even if you do not realize it. “Stuff” collects on shelves, counter tops, drawers, closets, garages, attics, and basements.

Take a step back and pretend you are a buyer. Let a friend help point out areas of clutter, as long as you can accept their views without getting defensive. Let me help you, too.

You should focus your attention in the following areas.

      Kitchen Clutter

      Closet Clutter

      Furniture Clutter

      Storage Area Clutter

Or, best idea yet … have a garage sale!

Fixing Up the Interior

Let’s take a walk around the interior of your house. You want it to SHINE!

Plumbing and Fixtures

All your sink fixtures should look shiny and new. If this cannot be accomplished by cleaning, buy new ones where needed. If you don’t buy something fancy, this can be accomplished inexpensively and they are fairly easy to install. Make sure all the hot and cold water knobs are easy to turn and that the faucets do not leak. If they do, replace the washers. It is not difficult at all.

Check to make sure you have good water pressure and that there are no stains on any of the porcelain. If you have a difficult stain to remove, one trick is to hire a cleaning crew to go through and clean your home on a one-time basis. They seem to be wonderful at making stains go away.

Ceilings, Walls and Painting

Check all the ceilings for water stains. Sometimes old leaks leave stains, even after you have repaired the leak. Of course, if you do have a leak, you will have to get it repaired, whether it is a plumbing problem or the roof leaks.

You should do the same for walls, looking not only stains, but also areas where dirt has accumulated and you just may not have noticed. Plus, you may have an outdated color scheme.

Painting can be your best investment when selling your home. It is not a very expensive operation and often you can do it yourself. Do not choose colors based on your own preferences, but based on what would appeal to the widest possible number of buyers. You should almost always choose an off-white color because white helps your rooms appear bright and spacious.

Carpet and Flooring

Unless your carpet appears old and worn, or it is definitely an outdated style or color, you probably should do nothing more than hire a good carpet cleaner. If you do choose to replace it, do so with something inexpensive in a fairly neutral color.

Repair or replace broken floor tiles, but do not spend a lot of money on anything. Remember, you are not fixing up the place for yourself. You want to move. Your goal is simply to have as few negative impressions upon those who may want to purchase your property.

Windows and Doors

Check all of your windows to make sure they open and close easily. If not, a spray of WD40 often helps. Make sure there are no cracked or broken windowpanes. If there are, replace them before you place your home on the market.

Do the same things with the doors – make sure they open and close properly, without creaking. If they do, a shot of WD40 on the hinges usually makes the creak go away. Be sure the doorknobs turn easily, and that they are cleaned and polished to look sharp. As buyers go from room to room, someone opens each door and you want to do everything necessary to create a positive impression.

Odor Control

For those who smoke, you might want to minimize smoking indoors while trying to sell your home. You could also purchase an ozone spray that helps to remove odors without creating a masking odor.

Pets of all kinds create odors that you may have become used to, but are immediately noticeable to those with more finely tuned olfactory senses. For those with cats, be sure to empty kitty litter boxes daily. There are also products that you can sprinkle in a layer below the kitty litter that helps to control odor. For those with dogs, keep the dog outdoors as much as possible. You might also try sprinkling carpet freshener on the carpet on a periodic basis.

Costs of Repairs

Do not do anything expensive, such as remodeling. If possible, use savings to pay for any repairs and improvements – do not go charging up credit cards or obtaining new loans. Remember that part of selling a house is also preparing to buy your next home. You do not want to do anything that will affect your credit scores or hurt your ability to qualify for your next mortgage.

Whew!  That’s a lot to do.  And, it is only the inside!

Yet, based on my track record, it all pays huge dividends.  Call me before you start.  I can easily prioritize the particulars of your house.  So, not only will you reap greater rewards, but you will save countless hours of unnecessary work.  That will leave lots of time to enjoy your hammock!

Double Taxation is a Good Thing – by Ashley Leigh

People threw tea into the harbor over taxes.  Yet, I’m here to tell you there is way to double up on your tax saving. 

You home is probably harboring hidden tax savings.  You should do something about that!

With the right knowledge, information, and patience, you can make the taxable gain from the sale of your personal residence or a rental property completely disappear … stick the cash in your pocket and legally enjoy your tax savings.

There are two strategies you might consider.

As with all matters such as these, I strongly advise that you discuss this, and all tax matters, with your tax accountant.  I am extremely well-qualified to represent you as your Realtor®.  However, you should consult with tax experts on tax matters.  As initial steps, you will extend your knowledge simply by reading this article and by obtaining IRS Publication 523. 

With the legal caveats out the way, let’s move on!

Strategy 1   Convert a rental property to a primary residence, use it as such for the appropriate period of time, and then sell it for a tax-free gain.  As you might well imagine, there are a few more details involved which are explained in IRS Publication 523, “Selling Your Home” (See the notes at the end of this article to learn how to obtain this useful document.) 

The central point of this situation is that you are allowed to sell a principal residence once every two years and exclude up to $250,000 ($500,000 for a married couple) of the gain on the sale.

Here’s the simple formula:

¨      Own your home for two years

¨      Use it as your principal residence

Result … you can exclude any capital gain tax on the sale (up to the $250,000 or $500,000 limits mentioned earlier). So, to get the maximum bang for your buck, you’ll want to understand the rules and have the patience to wait out the two-year residence period. For those with substantially appreciated real estate in the form of investment properties or second homes, the tax savings could be worth the wait.

The details of how to perform this slight-of-hand is described in IRS Pub 523.  The IRS rules & regulations are not that complicated and easy-to-follow examples are provided in Pub 523.

If your tax-magic strategy involves a now-former rental property, make sure you ask your tax accountant about ‘recapture of depreciation’.  Simply put, depreciation already taken is subject to taxes, no matter what.  The ‘recaptured’ depreciation, however, is taxed at a 25% rate which is less than many of the personal income rates.

By the way, the law says that the property must be used as a principal residence for at least twenty-four months during the five-year period ending on the date of the sale of the residence.

What is cool about this part of the tax-magic law is the 24 months don’t have to be all in a row.  The property must simply be used as a principal residence for a total of 24 months over the 60 months (five years).  That’s may be useful if you have moved around a little and rented your house out for some of the months over the five years.

Strategy 2   Another option would be to convert your current home into a rental property by selling it at fair-market value into a business structure you own. A limited liability company (LLC) is a good choice in most states.   You would still be personally liable for the new mortgage.

The advantages to this option are huge. First, you still get the tax-free gain exclusion deduction when you sell (See Strategy 1 above). Second, your home becomes a source of monthly income. You can refinance your now-rental home to pull some equity out for the purchase of another home, and, depending on how much equity you pull out, you should still be able to keep your “new” rental property cash-flowing, meaning its rental price will still be more than the costs to maintain it (mortgage, insurance, utilities, etc.). You’ll still get the benefit of appreciation, even though the market isn’t appreciating as fast anymore.

Because your LLC paid fair-market value for the now-rental property, it gets the benefit of what is called the “stepped-up” basis, meaning that the sales price is the new basis. This is important, because an investment property can do something your personal residence can’t: Depreciate.

Depreciation is an important reason to get into real estate. The IRS looks at real estate (the buildings, not the land) as something that goes down in value. So every year the building is worth a little less than the year before. After  39 years for residential properties the building

has depreciated to zero.

In practical terms, this means your LLC can take a yearly depreciation deduction against the basis. That’s why being able to step-up the basis to current fair-market value is such a good thing — your LLC has a much larger basis to depreciate against. Depreciation doesn’t cost you a dime.  Yet, it is a legitimate expense which reduces your tax liability. 

As I mentioned earlier, please consult thoroughly with your tax advisor.  There are important considerations you need to clarify.  For example, some rental losses may be classified as passive losses.  And, as mentioned earlier, depreciation must be ‘recaptured’ when the rental property is sold.

So with Strategy 2 you get a huge tax break up front with the gain exclusion, a continuing source of passive income (from the rent) that is taxed at a lower rate than earned W-2 income, a great source of deductions, a potential paper loss that will further reduce your W-2 income (and taxes), and you get to keep control of the property and benefit from its continued appreciation. Good golly!  Let’s throw some more tea into the harbor!

These are but a few examples of how the gain exclusion rules can work for you. There are many others. Tax-saving opportunities exist for married people living apart in two separate homes, for people contemplating divorce, for the elderly who may have moved into an extended-care facility for a period of time, and any number of other different combinations. So, make sure that you can be the best magician that you can be. Understand the rules regarding the sale of a principal residence and help those gains disappear.

Finally, don’t forget …

Call your tax accountant for tax matters

Call me for what really matters … real estate!

NOTE

IRS Publication 523 may be obtained via the Internet:

Point your browser to www.irs.gov

On the welcome page, type ‘523’ in the search for field

Select ‘Forms & Publications’ in the within field

Click GO

Click on the title “2006 Publication 523”