Interest Rates still at historically low levels!!!!!!!!!!!! But for how much longer?


photoAnother week of strong economic data would normally push mortgage rates a little higher, however, rates recovered some ground instead and ended the week slightly lower. The big report this week was a very strong Retail Sales report. This report is always watched very closely as a major economic indicator due to Retail Sales accounting for about 70% of 
all economic activity in the US. This kind of strong economic growth should support continued improvement in the housing market.
Regarding some day-to-day stuff…it is normal this time of year to see pending closing dates on agreements of sale going into the summer. Often the pending close date is outside the free 60 day rate-lock period Trident honors. (which is nice considering most banks/lenders/brokers will only lock for 30 days for free) In these extended closing date cases we can lock the rate for longer than the standard 60 days, but there are costs associated with this option. Typically the cost is about .5% of the loan amount for every extra 30 days needed in the rate-lock period. While the buyer will always have this option to pay to lock-in we’ll also track the rates closely for your clients if they choose not to lock-in and patiently wait until they’re within the 60 day free rate lock period.cropped-2.jpg

Good news for Home Flippers! FHA loosens Guidelines! www.PhillyRealEstateInvestorDeals.com

FHA says flip away — within limits

Temporary waiver of 90-day ‘anti-flipping’ rule extended through 2014

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=50051356" target="_blank">Foreclosure sale</a> image via Shutterstock.Foreclosure sale image via Shutterstock.

Good news for single-family home investors, rehabbers and buyers seeking to use low down payment FHA financing: The temporary waiver of FHA’s 90-day “anti-flipping” rule was extended last week through 2014.

The waiver, which facilitates purchases of homes from sellers who have held title to their properties for less than 90 days, continues a policy first adopted by the Obama administration in 2010.

Starting in 2003, FHA had imposed the 90-day standard as part of an effort to rein in rampant quick-flips of houses where investors made minimal or no improvements to rundown, foreclosed or abandoned houses, then sold them days or weeks later at high price markups with the help of inflated appraisals to purchasers using FHA loans.

Those flips frequently involved collusion and fraud by teams of mortgage loan officers, realty agents and appraisers — even straw buyers who defaulted and disappeared without making a single payment — and racked up significant losses to FHA’s insurance fund. Neighborhoods suffered because the properties remained empty and in bad physical condition, depressing values of houses in the immediate vicinity.

Since 2011, FHA has made annual extensions of its waiver. This year, an FHA official told me Friday, the agency opted for a two-year term in order “to provide greater levels of certainty” for lenders and buyers, removing questions about whether, and for how long, the waiver would be continued. Since the first waiver in 2010, according to the official, FHA has successfully insured $11 billion worth of mortgages on 65,250 homes where the seller had held title for less than 90 days.

In a Federal Register notice Nov. 29 announcing the extension, Acting FHA Commissioner Carol J. Galante said the objective is to increase “the availability of affordable homes for first-time and other purchasers, helping stabilize real estate prices as well as neighborhoods and communities where foreclosureactivity has been high.”

Among the key requirements that will continue during the latest waiver:

  • All transactions must be arm’s-length, with no identity of interest between the buyer and seller or other participants. Lenders are required to ensure that the seller actually holds title to the property. (In earlier flipping schemes, buy-sell transactions sometimes moved so fast that the seller never acquired legal title.) There should be no “pattern” of previous flips of the property during the 12 months preceding the transaction.
  • In cases where the sales price of the resold property is more than 20 percent more than what the seller paid for it, there must be documentation showing the renovations and repairs that justify the markedly higher resale price. A second appraisal may be used to substantiate the increase in value, but the second appraiser must be selected from FHA’s roster. When no significant renovations occur and the price is 20 percent higher than acquisition, the appraiser must provide “appropriate explanation” for the sudden increase.
  • Inspections are required of all the key components of the building structure and systems when price jumps exceed 20 percent. The inspection report must be provided to the purchaser before closing. If the inspection reveals structural or “health and safety” defects, repairs must be completed before the closing and a final inspection performed to ensure that the repairs have been made.

Real estate professionals and others involved in single-family investment activities welcomed the latest extension and its two-year time span. Kevin Kim, an agent with Windermere Preferred Living in Brea, Calif., said “this definitely benefits my investors, but it’s also good for communities” where high rates of foreclosure have left properties sitting around in deteriorating conditions.

Kim said most of his investor clients do not exceed the 20 percent price-increase threshold — “typically it’s more like 10 to 12 percent” — but they virtually all try to acquire, renovate and resell in less than 90 days.

Cathy Bureau, broker-owner of Green Home Realty in San Antonio, Texas, who specializes in the central areas of the city, says FHA’s two-year extension assures investors that there will be takeout financing for buyers, thereby cutting costs on the “hard money” line of credit financing they use to acquire their houses. At interest rates of 14 to 16 percent, “every day costs money,” she said, so for investors the ability to sell quickly after completing repairs is crucial.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

 

Pro’s and Cons of Refinancing… www.PhillyRealEstateInvestorDeals.com

2Up in the air about refinancing your mortgage?

That’s okay. Refinancing, which is essentially the process of paying off your existing mortgage with a new one, isn’t the right option for everyone. And for this reason, it’s important to weigh out the pros and cons.

By doing so, you can determine if you’ll actually benefit from refinancing.

For example, you could be lowering your interest rate by 25 percent, but if that comes with thousands of dollars in closing costs, it could take a long time to break even, says Shashank Shekhar, a loan originator with Arcus Lending in San Jose, California.

Not an easy decision is it? To help, we’ve hashed out the pluses and minuses of refinancing to see if it makes sense for you and your financial situation.

[Think refinancing is right for you? Click to compare rates from multiple lenders now.]

Keep reading to learn more…

Pro #1: You Could Score a Lower Interest Rate

This is perhaps the biggest pro of refinancing your mortgage: a lower interest rate.

Of course, you’ll need to first qualify for the lower rate, but if you do – you could be saving a lot of money. In fact, even an interest rate that’s a half percent less could garner a good chunk of savings.

Just consider this example from the Federal Reserve, which compares the monthly payments on a 30-year fixed-rate loan of $200,000 at 5.5 and 6 percent interest.

Monthly payment @ 6 percent: $1,199
Monthly payment @ 5.5 percent: $1,136
The difference each month is: $63
Over 10 years, you will save: $7,560

Now, imagine the savings if you could lower your interest rate by 1 or 2 percent…

[Want to lower your interest rate? Click to compare rates from multiple lenders now.]

Con #1: Refinancing fees

Getting a lower interest rate sounds great, right? Of course it does. But like most things in life, there are costs that come with refinancing  – and these costs could really add up.

“It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees,” according to the Federal Reserve, which adds that fees could include an application fee, loan origination fee, an appraisal fee, and more. “These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages you might have.”

A prepayment penalty, in case you’re wondering “is a fee that lenders might charge if you pay off your mortgage loan early, including for refinancing,” according to the Federal Reserve.

So, before you refinance, you’ll want to do some research and make sure that the refinancing savings will outweigh any and all fees.

Pro #2: You Can Shorten the Length of Your Mortgage

What exactly is the benefit of refinancing to a shorter term mortgage, you ask?

For starters, shorter-term mortgages – like a 15-year mortgage versus a 30-year mortgage – generally has lower interest rates, according to the Federal Reserve.

What’s more, the shorter your mortgage term, the sooner you’ll be out of debt and the less interest you’ll have to pay in the long run.

For example, the Federal Reserve says to compare the total interest costs for a fixed-rate loan of $200,000 at 6 percent for 30 years with a fixed-rate loan at 5.5 percent for 15 years.

Monthly payment Total interest
30-year loan @ 6 percent $1,199 $231,640
15-year loan @ 5 percent $1,634 $94,120

While the total interest savings are indeed significant, “The trade-off is that your monthly payments usually are higher because you are paying more of the principal each month,” says the Federal Reserve.

[Ready to switch to a 15-year loan? Click to compare rates from multiple lenders now.]

Con #2: If You Move Out of Your Home Soon, Refinancing Could Cost You

Planning to move out of your home in the next few years? If so, it may not be the right time to refinance.

Why? Because if you move soon after you refinance, “The monthly savings gained from lower monthly payments may not exceed the costs of refinancing,” the Federal Reserve says.

If you will be moving – and you still want to refinance – the Federal Reserve suggests using a break-even calculation, which could help you figure out whether it’s a smart decision.

Unfortunately, sudden changes like job relocation or a divorce may be out of your hands.

But if you do sense that the future in your home is a bit unstable, you may want to hold off on refinancing.

Pro #3: You Could Switch to a Fixed Rate Mortgage (FRM)

Cheat sheet: an interest rate on a fixed-rate mortgage (FRM) remains the same for the life of the loan, while an interest rate on an adjustable-rate mortgage (ARM) adjusts periodically based on an index.

And if you currently have an ARM, now is a great time to refinance to an FRM.

In fact, with rates at historic lows, an average of 3.39 percent on a 30-year fixed-rate mortgage as of November 1, according to federal lender, Freddie Mac, there may not be a better time to refinance.

“Given the uncertainty in the real estate market and the historical low rates on offer now, I always advise my clients to go with a FRM wherever possible,” explains Shekhar.

So, to avoid any uncertainty with your mortgage payments, you may want to refinance and lock in today’s record-low rates.

If you’re still unsure, then consider this: If you stick with an ARM and rates go up in the next few years, will you be in utter regret?

[Think a fixed-rate mortgage is right for you? Click to compare refinance mortgage rates now.]

Con #3: If Your Credit Score is Bad, Refinancing May Yield a Higher Rate

Have you struggled to make your last few credit card payments? Has your credit score suffered as a result?

If so, refinancing may not be in your best interest, especially since a bad credit score often means having a higher rate when you refinance, explains Shekhar.

“For every 20 point drop in credit from 740, you pay higher in closing cost, interest rate, or both,” says Shekhar. “In some cases, your closing cost can increase by 2 percent or more.”

As you can see, a bad credit score could definitely work against you during the refinancing process.

So, before you refinance, it might be a good idea to try and improve your score by paying credit card bills on time and keeping balances low on your credit cards, according to myFICO, the consumer division of the Fair Isaac Corporation, which provides a global standard for measuring credit risk.

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We have $20,000,000 to spread around! We need inventory- Do you have any??

We have clients who need to buy $20,000,000 worth of single family homes in the Philadelphia area before the end of 2012. They pay cash, settle in 15-25 days, no contingencies,as-is. I dont have enough inventory to sell them!!

The properties can be vacant or rented, shell condition or newly renovated. NO Section 8 rentals please.

Please contact me asap if you have inventory you need to sell.

Jim Onesti, Prudential Fox & Roach Realtors, jonesti@mccannteam.com, 215-440-2052

Insurance for Investment properties, Reconstruction cost VS. Builder’s sale price

One common point of disagreement between an insured property owner and his or her insurance company is that of the reconstruction cost of a property being a great deal more than the actual purchase price of a new home that was only recently built. From the customer’s perspective, he or she may have only paid $200,000 for the property, which includes the builder’s construction cost as well as the equity, land and everything else involved, but the insurance company determines that the replacement cost is actually $225,000. The customer often can’t understand why the reconstruction cost for the insurance company is so much more than for the builder and he or she often argues that the property is being over insured.  This is a logical point of view; however, there is a simple explanation.

 

When a tract builder constructs a new home, their cost of construction is far less than that of a custom builder.  The reason for this is simple.  When a tract builder constructs a new home, he or she is usually building a great many more at the same time and in the same subdivision or geographic area.  This means that the builder is often purchasing millions, if not tens of millions of dollars, of supplies and materials in bulk. This allows the builder to obtain huge volume discounts on pricing which greatly reduces his or her construction overhead.  In addition, the builder may use the same labor crews for framing, concrete work, and all other phases of construction.  Because the builder is supplying a steady flow of repeatable work to his subcontractors and these subcontractors are working for extended periods of time in the same areas, the labor rate is also greatly reduced.

 

This is not the case with regard to custom builders.  Rebuilding a property is always more expensive than first-time new construction.

 

If your two-year home that you purchased from the original builder for $200,000 is destroyed in a fire, the contractor or builder that you hire to rebuild the home will not have the same deep discounts on his labor and material costs.  In addition, he will have the added expense of obtaining new blueprints, architectural and permitting fees, debris removal, etc. which the original builder either did not have or which was also greatly reduced.  This means that your $200,000 home may cost more to be completely rebuilt.

 

If you should ever have any questions or would like to discuss in further detail, please feel free to contact me at any time!  Enjoy the rest of your day, everyone!

 

The REAL, Real Estate Recovery is in full swing!!!

Great article from Prudential Fox & Roach Realtors CEO, Larry Flick  http://blog.prufoxroach.com/2012/10/26/fall-winter-2012-chairmans-report-its-real-its-now/

It’s Real…It’s Now!

It’s real.  Our real estate market has definitely turned the corner. Year over year pended sales have been ahead each month since April 2011, and home prices leveled out at the end of that year as well.

Data aside, the activity we’ve seen in 2012 shows that the pent-up housing demand from those five challenging years is now being unleashed. As we move forward, I believe our economy and real estate market will continue to grow at a slow and steady pace. Why?

  • Over the past five years, many potential buyers experienced life events, both good and bad, that would have prompted them to buy a new home. They held off because they were concerned about the economy and how it might affect their employment or future earnings. Now, homebuyers are overcoming these hesitations, gaining confidence, and deciding it’s time to find the house that meets their present needs.
  • Consumers are now confident that prices have stabilized.
  • Interest rates are unbelievably low, and will rise as the economy improves.

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Buy Investment Real Estate with the funds in your IRA !!!!!!

Your not limited to buying stocks, Bonds and Mutual funds in your IRA. you can open a Self Directed IRA. continue to contribute to your IRA for the tax benefits but unlock those funds and buy a Triplex or a property to fix up and flip!!!!!

A self-directed IRA is the lesser known of IRA options and requires account owners to make active investments on behalf of the plan. To open one, an owner must hire a trustee or custodian to hold the IRA assets and be responsible for administering the account and filing required documents with the IRS.

Similar to other IRA accounts, owners can invest in stocks, bonds and mutual funds, but they can also invest in things that investment houses like Charles Schwabb, Fidelity and Vanguard don’t offer, like small businesses, boat slips, storage units, parking lots, land and homes.

Investors may still be leery of investing in the housing market, but real estate investor Scott FladHammer, says real estate can be a good long-term investment and generate higher returns than the stock market.

Investing in real-estate also provides a lot of options. “Owning real estate can be very rewarding, especially for people who are investing in what they know,” says Amy Gates, an independent advisor offering investment for Trust Advisory Group.

But the process of using a self-directed IRA to jump into investing in real estate requires preparation and caution.

“The move can make sense in certain circumstances, but only when the investor fully understands both the positives and negatives and the requirements involved,” cautions Ken Himmler, president of Los Angeles-based wealth management firm Integrated Asset Management.

Interested investors should seek legal advice, as well as input from an accountant and real estate agent for a well-rounded picture. They should also be familiar with the rules for the type of IRA they’re using. Whether it is a Simple IRA, Roth or Traditional IRA, SEP or Solo 401(k), contribution limits still apply, and there are penalties for early withdrawals.

Here are five things to keep in mind when considering investing in real estate through a self-directed IRA.

It takes time. Gates advises devising a timeline based on the account-opening process, transferring or rollover of assets and finding the actual investment.

It normally takes two to three weeks to open an account at a typical brokerage firm, and you’ll need to find a custodian who will hold real estate inside an IRA. The down payment must come from IRA funds, so rollovers may be required.

When a real estate investment is contracted, the IRA account holder reviews and signs the purchase agreement and then the custodian must approve it and release of funds to the title company. All of this takes time, so it’s prudent to learn as much as you can before jumping into a decision.

You cannot take advantage of IRA investments until you retire. You can’t use the fund to pay off your mortgage or live in or use the property you buy as an investment in the self-directed IRA.

“You buy it because it is anticipated to appreciate in value, plain and simple,” Gates says. You also lose the depreciation tax deduction that you would otherwise receive on an investment property.

Your spouse, immediate families or companies you have a 50% interest in cannot be involved. While it is possible for the property to be held as tenants in common, an IRA is an individual account—and you must avoid any conflicts of interest.

Self-dealing or enabling a transaction that is beneficial to you on the other end is strictly prohibited. You also cannot use the IRA as collateral for a loan; it should be treated like other retirement accounts.

It’s a lot of work. “While late-night infomercials highlight the potential benefits, many investors don’t fully appreciate or understand the reporting and administrative requirements involved in using a self-directed IRA to buy real estate,” according to Himmler. For example, the investor should not be doing the work on the property, especially because he can’t get reimbursed.

All expenses, maintenance, taxes and insurance are paid from the IRA. If there are association dues or golf memberships, those all must be withdrawn from the IRA. Finding tenants and contractors may take time, and every penny in and out must be approved by the custodian. FladHammer recommends having a reputable property management company in place to navigate the day-to-day duties.

All income from the property is tax deferred. That includes rental income and capital gains, Gates says. If you plan to be in a lower tax bracket at retirement, this is quite beneficial. You can also make tax deductible contributions to the IRA.

Fixer Upper NOT in The MLS !!! In the HOT Fishtown area…

2525 E. Dauphin Street, 3-Story home, 4 bedrooms, sitting on a STREET to STREET lot which perfect for 2-car PARKING at the rear of the home!!  home is in decent condition, rehab it and flip it or rent it. Huge comps in the are between 300k -400k.

Asking $199,900

Dont Miss out!!

 

Jim Onesti

Prudential Fox & Roach Realtors

Mccann Team

Jonesti@MccanntEam.com