Scottsdale Arizona Real Estate Blog

by Sandra Block – Aug. 25, 2009 08:14 AM
USA Today

Your friend Walter is a real estate agent, and every time you run into him at the grocery store he suggests that this is an excellent time to buy a house. That’s not surprising, because Walter, like most real estate agents, is an eternal optimist. This time, though, he may be on to something.

While some economists believe home prices will remain low for the foreseeable future, other buyer-friendly incentives could disappear soon. If you’ve been on the fence about buying a home, here are some reasons to explore the other side:

•Record low interest rates. The average rate for a 30-year fixed mortgage was 5.12% last week, the lowest level since the end of May, according to mortgage giant Freddie Mac.

The average rate for a 5/1 hybrid adjustable-rate mortgage — which offers a fixed rate for five years and then adjusts — was 4.57%, the lowest since January 2005, according to Freddie Mac.

While the credit crisis exposed the risk of short-term ARMs, a 5/1 hybrid is still a good option for borrowers who don’t expect to stay in their home longer than five years, says Bob Walters, chief economist for Quicken Loans, an online mortgage lender based in Livonia, Mich.

“If you’re a young couple purchasing a home, and in the next five years you’ll need a larger place, or it’s highly likely you’ll be moving, it makes all the sense in the world” to use a five-year hybrid ARM, he says.

These low interest rates are unlikely to last, says Lawrence Yun, chief economist for the National Association of Realtors. Rising budget deficits will likely push rates higher over the next few years, he says.

•The first-time home buyer’s tax credit. The economic stimulus package signed into law provides a tax credit of up to $8,000 for first-time buyers who purchase a home before Dec. 1. Unlike an earlier tax credit, this one doesn’t have to be repaid. The credit phases out for taxpayers whose adjusted gross income exceeds $75,000, or $150,000 for married couples.

The term “first-time home buyer” is a bit of a misnomer. If you haven’t owned a home in the past three years, you qualify. If your spouse has owned a home in the past three years, however, you’re not eligible.

The credit is refundable, which means that even if you owe less than $8,000 when you file your 2009 tax return, you’ll receive a refund for the balance. This feature makes the credit a valuable tax break for middle- or low-income families who pay little or no federal income tax.

To qualify for this tax break, you must close on the home by Dec. 1.

That may seem like a long way away, but the wheels of real estate transactions grind slowly these days, says Steven Fischer, president of the Georgia Association of Realtors.

In the wake of the credit crunch, lenders have tightened lending standards, which means it takes longer to get a loan approved, Fischer says. In addition, “There’s always that chance you will have that extra week or couple of weeks going back and forth trying to get documents at the last minute,” he says.

In the past, home buyers could usually close on the deal within 45 days after signing a contract to buy, Yun says. But these days, buyers should give themselves at least 60 days, he says.

You’ll need to give yourself even more time if you’re interested in buying a home that’s in foreclosure or is a “real estate owned” property (REO) — a home the bank repossessed after failing to sell it at a foreclosure auction.

“The window of opportunity is closing fast unless the tax credit is extended,” Yun says.

The NAR and other real estate trade groups are lobbying hard to get lawmakers to extend the credit into 2010. However, Congress has a busy schedule when it returns from the August recess, so there’s no guarantee the credit will be extended.

One downside to the tax credit is that you can’t claim it until you’ve closed on your home, which means you can’t use the money for your down payment. However, some state housing finance agencies are offering bridge loans to home buyers who qualify for the credit.

Some of these loans are interest-free; others charge a modest interest rate. Borrowers repay the money when they receive the tax credit. Some states require borrowers to contribute some funds toward the down payment.

The National Council of State Housing Agencies offers a list of agencies that offer loans at www.ncsha.org. Click on the link for “HFA First-Time Homebuyer Tax Credit Loan Programs.”

www.theholmgroupaz.com

by J. Craig Anderson – Aug. 26, 2009 12:00 AM
The Arizona Republic

The Valley’s commercial real-estate crisis isn’t just about buildings, it’s about everything and everyone inside.

The impact isn’t as easy to see as the fallout from the home-mortgage mess, with its sea of empty homes and for-sale signs, but it’s likely to become more noticeable to Valley consumers as the commercial crisis worsens this year, predicts Scottsdale consultant Robert Kline.

“It will affect them when they start to see their favorite hotel, restaurant or store go out of business,” said Kline, owner of R.W. Kline LLC. “This is also about jobs.” modifications as it does for home loans, but there is money in the Troubled Asset Relief Program to offset losses from bad commercial loans.

Kline, a former vice president at Pulte Homes, is doing his best to help as many property owners as possible avoid foreclosure. He formed the company in May 2008 to assist commercial-property owners at risk of defaulting on their mortgages and has become a national expert on the subject.

Preventing commercial foreclosure benefits the people and businesses leasing space inside. The foreclosure process takes months and can result in temporary maintenance, security and insurance problems while the property changes hands.

Kline’s firm, which represents more than 300 commercial-property owners nationwide, attempts to negotiate better repayment terms and extend the length of a loan if it makes sense.

The government doesn’t have formal help for commercial-loan

Kline’s company represents 27 Arizona commercial-property owners seeking loan modifications on about $960 million in debt.

Nationally, the country’s total outstanding commercial-mortgage debt exceeds $3.5 trillion, according to the Mortgage Bankers Association.

Two-thirds of the mortgages Kline is attempting to modify had been sold to the investment market as commercial mortgage-backed securities, effectively scattering ownership of those loans to the wind.

Nationally, about 20 percent of commercial mortgages are securitized, the Mortgage Bankers Association said.

“A CMBS loan is a much, much harder type of loan to work out,” Kline said, in part because the negotiator must track down all investors in the loan and get their approval.

An unprecedented number of securitized commercial mortgages will reach maturity in the fourth quarter, Kline said, forcing borrowers to pay off the loans or turn over the properties they bought or built on credit.

When times were good, developers and building owners would refinance or sell, but today many buildings are worth less than the loan balance, and refinancing options are scarce.

The current universe of lending capital only contains 1 dollar for every 3 dollars owed, Kline said, which means two-thirds of securitized mortgages due today have no hope of being repaid in the near term.

Companies like Kline’s are wheeling, dealing and pleading with commercial lenders to negotiate with owners until the economic recovery arrives.

For a commercial-loan modification to work, it must adequately address the problems of affordability, negative equity and maturity, Kline said.

In other words, the monthly payment must be doable, the loan has got to be worth repaying, and there can’t be a balloon payment due within the next three years, during which time the lending situation is not expected to improve.

“The commercial market is going to be on its heels next year, and it’s going to be virtually impossible to get a loan,” he said.

More than anything, Kline said commercial-property owners need to seek help from a commercial-loan negotiator or attorney as soon as they start having financial trouble.

“We’re the lifeguard, and we’ll throw you a life ring,” he said, “but if you’re already 2 feet under water, you’re not going to be able to grab it.”

www.theholmgroupaz.com