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Fire Prevention week October 7-13

There is an old saying that states, “If you fail to plan you plan to fail.”

So now is the time to get your plan ready so that if it is ever needed it will be in place. Every family needs a plan on how to survive a house fire.

Fires are scary for adults, so imagine how frightening they are to children. This is why it is so important to get the kids involved in the plan also. The National Fire Protection Agency (NFPA) has given us their 2012 theme “Have 2 ways out”  They are encouraging parents to have family members work together to draw a floor plan of their home.

The drawing should show every room, window and door with arrows indicating possible exits. And they should note a safe meeting place outside.

A fire escape plan should:

–show two exits from every room.

–Include a family meeting place.

–Be practiced several times a year.

If you have a plan and haven’t practiced, you may sit there trying to decide what to do, losing valuable time .

After you develop your fire escape strategy, practice during daylight hours, using equipment such as fire safety ladders. Then try a surprise drill. Remind kids of the basics–stay low, test doors, use planned exits and never go back into a burning structure.

Mark the location of fire extinguishers in the house . Have them inspected annually and contact your fire department to learn how to use them. Remember to change the batteries in you smoke detector twice a year. I do mine when we change the clocks for daylight savings.

Three minutes is the amount of time it can take a fire to consume a room says Tom Harned, Liberty mutual engineer manager.

Most of this material comes out of the Liberty Mutual magazine. I think it is definitely worth thinking about. Be safe and Be prepared.

If you are needing assistance with real estate, please feel free to contact me at 405-213-2992 or visit my website http://www.sandiwalker.com

 

 

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A new 3.8% tax on Real Estate beginning January 2013

A lot of people are worried about paying the new sales tax on property beginning January 1, 2013. But before you panic, be aware that this new health care law imposes the the 3.8% tax on PROFITS from selling your home for only a very small minority.

The first $250,000 in profit for a single person or $500,000 for a married is not taxed. Only the profit above these amounts are taxed. So if you are living in Oklahoma selling a home for $150,000, there is no way that this tax is going to apply to you.

Second your AGI (adjusted gross income) must be above $200,000 for a single person or over $250,000 for a married couple.  Now the Taxable gain will add into your overall AGI but all the same if you are not making a profit on the house above the amounts listed above you do not have to worry.

Third the tax is only on the Profit above the amounts listed above. This would be in addition to any capital gains taxes that would already be required on these profits.

In my opinion, the people who are going to be taxed are either the very wealthy who have high end properties, or people who bought the house a long time ago and saw a huge gain on the property and are now downsizing. However, the majority of the home sellers will simply not meet the criteria to be taxed.

The following was an example given by Gary Keller at Family Reunion.

Capital Gain: Sale of a Principal Residence

John and Mary sold their principal residence and realized a gain of $525,000. They have $325,000 Adjusted Gross Income (before adding taxable gain). The tax applies as follows:

AGI Before tax Gain                                     $325,000

Gain on Sale of Residence                              $525,000

Taxable Gain                                                   $25,000   ($525K-500K)

New AGI                                                        $350,000

Excess of AGI over $250,000                                    $100,000  ($350K-$250K)

Lesser Amount                                                $25,000

Tax Due                                                          $950  ($25,000 x 3.8%)

If John and Mary had a gain of less than $500,000 on the sale of their residence, none of that gain would be subject to the 3.8% tax.

This is not a sales tax on the amount of the sale of the property, ONLY THE PROFIT over the $250,000 for single filers or $500,000 for married filers.  I hope this puts your minds at ease. As for most of us we will not pay this tax.

The IRS says that to qualify for the $250,000/$500,000 exclusion, a seller must have owned the home and lived there as the seller’s main home for at least two years out of the last five years prior to the sale.

I am not a CPA, so if you have other questions or need further clarification, please contact your CPA.

If you have questions regarding real estate please feel free to contact me at 405-213-2992 or visit my website http://www.sandiwalker.com

 

 

 

 

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Can I get 100% financing?

The days of 100% financing are mostly gone, with the exception of those who have VA eligibility or are applying for a USDA loan.

In addition to the down payment, a buyer will be required to pay closing costs and prepaids. Buyers who are getting a VA loan still have closing costs and prepaids. This is the cost of the loan including title fee and government recording fees. These are generally 3-4% of the loan value or a minimum of $2500-$3500. The seller can agree to pay some or all of the buyer’s closing costs up to a certain dollar amount. FHA will allow up to 6% while some conventional loans only allow up to 3%. But remember that the seller can only pay up to the actual amount of closing costs. So if you ask for $6000 in closing costs and only need $4000 in closing costs, you can only get $4000 thereby giving the seller an additional $2000 that could have been negotiated elsewhere.

Today most consumers are turning to FHA when they require a low down payment. The down payment is only 3-1/2%. In Oklahoma we have down payment assistance for those who qualify. Depending on the program this can be $3500-$5000 in grant money or state bond which is 3-1/2%. The down payment assistance alleviates the issue of a buyer having to save the down payment money. But there are income requirements. In addition, if you are getting grant money the property will have to be inspected and have all necessary repairs made prior to closing. You will have to have a minimum investment in the home usually 1% and take a home buyer education class.  Both grant money and bond money require the purchaser to remain in the home for a minimum of 5 years or pay back the down payment assistance in a proration.

So while the bank is not offering a lot of possibilities for 100% financing, there are ways to still get into a home of your own with little money out of your pocket. If you have questions regarding down payment assistance or other real estate questions, please call me at 405-213-2992 or visit my website at www.sandiwalker.com

 

 

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Pay your mortgage off early

When you pay your mortgage as scheduled you pay a very small amount to the principle amount each month. The rest goes to interest, taxes, insurance and most likely mortgage insurance. You can accelerate the payoff by simply paying a little extra on your mortgage each month.

If you look at an amortization schedule for your loan, you will see that the first several years very little goes to principle reduction. If for example the principle is reduced at approximately $80 a month and you add even an extra $20 a month to your payment, then you are making a full extra principle payment approximately every four months. That is like reducing the loan by 3 payments in a year. Can you see how over time this could shorten the length of the loan and give you more equity when you sell. If you can pay more, then it is going to get paid off even faster.

I always suggest to my clients to round-up the mortgage to the next hundred dollars. So if the mortgage payment is $762, go ahead and pay $800 a month. Just make sure you mark the extra payment to principle only. If you are paying online, there is usually a box to mark and add the extra dollars. If you are writing a check, you might consider 2 separate checks–one for the monthly required payment and one marked principle only.

By paying off your mortgage faster you will actually own your own home and not the lender, pay less interest, and have equity faster in the home.

I guess the downside of paying off the house is that you will have to forego the mortgage interest deduction. But personally in an economy of uncertainty I would rather know that my house is paid for and I have a place to love. I like knowing that the house is mine and I just have to pay the taxes and insurance. In addition, the mortgage interest deduction is only a percentage of the interest, therefore you keep more cash in your pocket by not paying the interest.

If you would like more information regarding homeownership, buying or selling real estate please feel free to call me at 405-213-2992 or visit my website www.sandiwalker.com

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What is a Short Sale?

A short sale is when the lender accepts a payoff less than what is owed on the property. It avoids foreclosure and the worry that the lender will sue the borrower for a deficit judgement.

In our current market, not all homes are worth what is owed on them. We sometimes refer to these homes as being under water or with negative equity. While property typically appreciates in time, during the past several years we have seen properties devalue. In Oklahoma, we have been very fortunate that most of our values have remained flat or had a minor adjustment in value. This is frustrating and scary to the homeowner but if you’re able to make the current mortgage payment then I suggest that you continue to do so. The likelihood is that the economy will improve at some point and the value of these homes will increase.

The bigger problem occurs when life changes–people lose jobs, get divorced or have a serious medical condition –and you cannot continue to make your current mortgage payment.   At that point the borrower has a few options: Contact their lender and try to work out a payment plan, do a deed in lieu, allow the house to go to foreclosure, or attempt to do a short sale.

In order to do a short sale, the lender is going to want to know why you can’t make the mortgage payment. They will want to see your bank statements for the past two months, pay stubs, and a hardship letter explaining why you cannot pay the mortgage. In addition, they are going to want to see your tax returns.  They are verifying that you truly cannot make the payment.

Short sales do have a negative effect on your credit. The hope is the lender will forgive the deficit and mark the file paid. This does not always happen. I have had a file where the lender wanted the borrower to sign a promissory note for a small amount of money to be paid after the closing. This is a possibility. There could be tax liability issues. Most of the time though the lender accepts the short sale as payment in full and does not pursue the borrower for additional money.

In a future blog, I will discuss in more detail about short sales and what a buyer and seller should expect.

In the meantime, if you have questions about short sales, or other real estate questions, please feel free to contact me at 405-213-2992 or visit my website  http://www.sandiwalker.com

Real Estate

Why would you rent when you could buy?

People rent property rather than buying a home for various reasons. They may not be in a financial position to purchaseat this time,  they may be in an area for a short period of time, or they may not want to be responsible  for maintaining a home.

1. In order to purchase a home you need to have acceptable credit and have a down payment.  There are some down payment assistance programs available for people who qualify.  These programs are generally aimed at first time homeowners (someone who has not owned a house within the past 3 years) and makes less than a certain dollar amount.  If you are able to save and put a larger down payment down then you may qualify for a loan without MI and save a lot of money on mortgage insurance.  In addition, it is advised to have a little savings incase you need to repair items in the home.

2. If you are only planning on staying in the home for a short period of time usually less than 3-5 years, it may not be advantageous for you to purchase. Unfortunately, during the first years on a standard 30 year note the borrower only pays a small amount to principle reduction. The rest goes to interest, taxes, insurance and often MI. It cost money to sell the property. Not only in commissions but other closing costs. The property will most likely not appreciate enough in a short amount of time to cover all the costs of selling.

3. Some people do not want the responsiblity of maintaining a home. There are always maintenance items to consider when purchasing a home. The house needs to be properly maintained or it will become dilapidated and most likely lose value. If not properly maintained you could have roof issues, water issues, mold issues, heat or cooling issues and so on. Maintenance is probably the number one con to homeownership.

Now with all that being said, Homeownership is still the American Dream. It is still a great adventure and the wealthiest people in this country own property. I think that it is a great investment. Sometimes values do go down, but over time we have seen appreciation. In addition, you have to live somewhere so it might as well be in something that you own. I do think that there is a time and place for everything. Sometimes it makes sense to rent for a season until you are ready to buy.

When you are ready to buy, I will be happy to help you. I want my buyers to be successful and happy. If you want more information regarding real estate, please call me at 405-213-2992 or visit my website at www.sandiwalker.com.

Real Estate

Things to look for when buying a Remodel from an investor

Buying a home to renovate in order to resell for a profit in a short period of time is called “Flipping”

These homes are usually remodeled by an investor looking to make a quick profit. Often times these homes were in major disarray when the investor purchased them. Some of the investors purchasing homes and making improvements are very skilled at their craft. They completely go through the property and make sure the roof and foundation are in good condition as well as the plumbing, electrical and hvac systems. I currently work with an investor who only uses licensed professionals and always gets the proper permits. But not all investors do that.

Some investors will cut corners. They may use low-grade materials or do substandard work. There are several ways to hide problems which may later become issues for the new owners. Some investors tend to cover up problems rather than repair problems.

So how does the buyer know what they are buying?

1. Ask the seller for a list of all repairs that they made and verify that all necessary permits were pulled.

2. Make sure you get a complete inspection, remember this seller has not lived in the property and done laundry or showered while running the dishwasher, etc. so verify that the systems work fully.

3. Call the water department and see how many gallons of water have been used since the investor owned the property. Since the investor has not lived there, the usage should be low. If it is high, you might have a leak.

4. Turn all the water and gas off to the property and check the meter to see if it is running. Recheck after 15 minutes. Nothing should be on including the water heater or furnace (sometimes people forget the gas on at the pilot). If the meter is running you may have a leak.

5. If it looks like they tried to cover something up, they probably did.

There are a lot of honest people making a living repairing dilapidated properties and reselling them at a profit. The repairs on these properties are not cheap if they are done correctly. The investor should be able to make a reasonable profit.  In order to correctly repair the properties and make a profit, this often means the investor must have purchased the property for less than half the price they are selling the house.; especially when the house resells for $125,000 or less.  When a seller buys a property and resells it within a 12 month period to a buyer obtaining a FHA loan, the new lender will require a second appraisal.  In addition, unless the property was a repo, the investor must wait 90 days before a contract can be written where a buyer is obtaining a FHA loan.

For more questions regarding real estate in Oklahoma City/ Moore please call me at 405-213-2992 or visit my website www.sandiwalker.com