Since many of us have lost a home, lost their job and see nothing but bad news all around, how can Warren Buffett announce today that now is the time to buy residential real estate? Well, considering he is one of the smartest and wealthiest investors in the World, let's take a look and see what he sees. First, the large builders (Pulte, Lennar, DR Horton) have all posted small gains this quarter; the pending home sales were up in January; mortgage purchase applications increased in January and best of all, mortgage interest rates are at record lows. In other words, Buffet sees long term value in residential real estate because of low prices, low interest rates, shortage of inventory and long term equity growth. He even suggests to finance the home purchase to really take advantage of these economic factors.
What if you are a cash buyer or investor? An even better opportunity presents itself here. First, tenants. There are a lot of Americans out of work or who have lost their home, but still need a place to live and will now become renters. Also, with your cash sitting in the bank it is not actually working for you but for the financial institution where it sits. They are lending it out to other institutions, people, businesses and earning a small income from it everyday. In return, they pay you a small monthly dividend or interest return. Buying residential real estate using that cash now allows you to become the bank. It ensures that you earn that daily/monthly income, while paying a small percentage or fee back to someone else, like a landscaper, plumber, etc. Yes there are risks, but a long term hold right now looks like a solid investment.
So based on this analysis, I would say that Warren is correct, again! So everyone waiting to buy a home or those with money sitting on the sidelines, earning no interest, call your local realtor and see what is available in your area. You might find a gem that could earn you good short term income, long term equity growth or both.
Wednesday, February 29, 2012
Thursday, February 9, 2012
How much will my Short Sale cost?
So we have had a lot of inquiries recently regarding short sales, the costs, the tax consequences, etc. so we wanted to write a simple and quick tutorial for those who are considering it or even for those who already in contract on one.
In a traditional California sale, the seller (Mr. and Mrs. Smith) will be responsible for paying some closing costs, fees, commissions, etc. at the close of escrow. However, in a short sale transaction, the seller is actually a Bank/Investor like Bank of America, and they are the one's responsible for paying closing costs, fees, commissions, etc. In that scenario, Mr. and Mrs. Smith pay nothing, but lose their dream home and damage their credit. Bank of America takes a massive financial loss, but they send Mr. and Mrs. Smith a 1099 for that loss. The Smith's then become responsible for claiming the banks loss as income on their next years' tax returns. See your CPA for details as I am not a real CPA, I only play one on TV :-)
So bottom line, you will pay almost nothing to short sell your home, however there are some consequences to consider, like moving your family, the costs associated with moving, rent payments and of course, damaged credit. However, if you are a struggling home owner, who has a true financial hardship (job loss, death in family, job transfer, etc.) then you might be eligible for a short sale and it is an excellent start to getting back on your feet again!
In a traditional California sale, the seller (Mr. and Mrs. Smith) will be responsible for paying some closing costs, fees, commissions, etc. at the close of escrow. However, in a short sale transaction, the seller is actually a Bank/Investor like Bank of America, and they are the one's responsible for paying closing costs, fees, commissions, etc. In that scenario, Mr. and Mrs. Smith pay nothing, but lose their dream home and damage their credit. Bank of America takes a massive financial loss, but they send Mr. and Mrs. Smith a 1099 for that loss. The Smith's then become responsible for claiming the banks loss as income on their next years' tax returns. See your CPA for details as I am not a real CPA, I only play one on TV :-)
So bottom line, you will pay almost nothing to short sell your home, however there are some consequences to consider, like moving your family, the costs associated with moving, rent payments and of course, damaged credit. However, if you are a struggling home owner, who has a true financial hardship (job loss, death in family, job transfer, etc.) then you might be eligible for a short sale and it is an excellent start to getting back on your feet again!
Monday, February 6, 2012
USDA and first time home buyer success
Just closed another first time home buyer sale. This is an amazing time to buy, so renters and buyers, call your favorite local agent now! Our clients were able to trade their 800 sq. ft. apartment and it's $900 rent payment for a 1700 sq. ft. home with only a $1000 payment. They closed with a USDA loan. Yes I said USDA! It is an excellent and unknown loan, typically used for rural community growth, however it has 100% financing, low rates and doesn't have the red tape and delays that FHA loans have. Check with your local loan officer, both the buyer and home need to qualify for USDA approval, however it is well worth it.
Congratulations Boe and Holly on your new home!
Congratulations Boe and Holly on your new home!
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