According to MSNBC News on Sunday, July 27, 2008, “The number of households facing the foreclosure process more than doubled in the second quarter compared to a year ago.”

Statistics and statements like this one are broadcast by the media every day.  Ironically, they seem to suggest to potential home buyers that foreclosure properties must be a good deal.  In fact, quite a few of the people who contact us everyday to help them in their home search often introduce themselves to us by stating that they only want to look at foreclosure properties because they want a bargain.

The fact is properties that have been foreclosed on are very often not bargains at all and here’s why.  The lender wants to recoup the amount of money that was borrowed.  If the loan was made only a few years ago and if the amount of money borrowed was for 100% or nearly 100% of the purchase price, the lender needs to sell the house for full market value in order to recover the entire amount of the loan.  Since property values have not risen greatly within the last few years meaning that the home has not built equity in that way, the lender needs to sell the house at the retail price.  Furthermore, if the borrower was late on payments, the lender will also try to recover the late fees in addition to the loan amount through the sale of the home.

More often, bargains can be found through short sale situations.  A short sale occurs before a house is foreclosed on and results from the borrower making an agreement with the lender allowing the house to be sold for price that is less than the amount of the loan.  The difference between the sale price and the loan amount is not forgiven, but a short sale does not ruin the seller’s credit like a foreclosure.

The buyer of a foreclosure or short sale property cannot have the sale contingent upon the sale and/or settlement of another home, and a buyer can have a home inspection for informational purposes only, meaning he cannot request that repairs be made to the property.  Additionally, a buyer of one of these types of properties will usually have to exercise extreme patience because review of the contract and approval of the sale by the lender can take a long time (this is what is meant by “third party approval” in a listing’s description).

If you’re looking for a deal on a home, take a look at our Best Buys page.  Each week, we post good short sale opportunities or deals on “normal” sales, so check it out.

Wishing you peace, love, and the home of your dreams,
Jeri

TO APPLY for the HOMESTEAD CREDIT, click on this link: https://sdathtc.resiusa.org/homestead/

The information below comes directly from the Maryland State Department of Assessments and Taxation website.

What is the Homestead Credit?

To help homeowners deal with large assessment increases on their principal residence, state law has established the Homestead Property Tax Credit. The Homestead Credit limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10% or less each year.

Technically, the Homestead Credit does not limit the market value of the property as determined by the Department of Assessments and Taxation. Instead, it is actually a credit calculated on any assessment increase exceeding 10% (or the lower cap enacted by the local governments) from one year to the next. The credit is calculated based on the 10% limit for purposes of the State property tax, and 10% or less (as determined by local governments) for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit.

Example

Assume that your old assessment was $100,000 and that your new phased-in assessment for the 1st year is $120,000.  An increase of 10% would result in an assessment of $110,000.  The difference between $120,000 and $110,000 is $10,000.  The tax credit would apply to the taxes due on the $10,000.  If the tax rate was $1.04 per $100 of assessed value, the tax credit would be $104 ($10,000 ÷ 100 x $1.04).

New Application Requirement

To prevent improper granting of this credit on rented or multiple properties of a single owner, a new law was enacted in 2007 that requires all homeowners to submit a one-time application to establish eligibility for the credit.  The application form will be included in the assessment notice mailed to one-third of the homeowners at the end of December for the next three years.  It also will be mailed to new purchasers of residential property.

Conditions

 The tax credit will be granted if the following conditions are met during the previous tax year:

·         The property was not transferred to new ownership.

·         There was no change in the zoning classification requested by the homeowner resulting in an increase value of the property.

·         A substantial change did not occur in the use of the property.

·         The previous assessment was not clearly erroneous.

A further condition is that the dwelling must be the owner’s principal residence and the owner must have lived in it for at least six months of the year, including July 1 of the year for which the credit is applicable, unless the owner was temporarily unable to do so by reason of illness or need of special care.  An owner can receive a credit only on one property---the principal residence.

Appeal Rights

If you have been denied a Homestead Tax Credit and you believe that you are eligible, contact the Central Office for the Homestead Tax Credit Program at the telephone numbers listed below.  A final denial of a Homestead Tax Credit by the Central Office may be appealed within 30 days to the Property Tax Assessment Appeal Board in the jurisdiction where the property is located.

Further Information

For questions about the Homestead Tax Credit, you may telephone 410-767-2165 in the Baltimore metropolitan area or at 1-866-650-8783 toll free elsewhere in Maryland or visit the Department’s website at www.dat.state.md.us.

Wishing you peace, love, and sunshine everyday,
Jeri

It’s obviously a Sunday afternoon in Maryland because Open House signs (some of which are decorated with balloons, flags, and reflectors) are posted on all of the street corners.

With all of the hoopla made about holding an open house, does anyone ask if that is really the way homes are sold?  If you watch HGTV on Sunday evening, you would certainly think so.  In fact, the program, Designed to Sell, is all about fixing up the home in time for the Open House.

The truth is that the odds of selling your home through an open house are similar to your odds of winning the lottery; however, it seems that many sellers believe that holding the house open is the key to getting it sold.

Before the advent of the internet, this method of attracting buyers to a home was somewhat effective.  Potential home buyers who were not working with a realtor had to drive through neighborhoods looking for an open house in order to determine whether or not they had any interest in it.  Now that detailed home descriptions and photos of the home’s interior and exterior can be seen on-line, serious buyers are working with agents who make appointments to view the home.  Furthermore, buyers eliminate homes from their list and choose homes to see by looking at the listings on the internet.

Knowing this, why are realtors still holding open houses?  Two reasons: 1) the realtor wants to prove that he is doing everything possible to sell the house even though he knows that this isn’t a highly effective method, and 2) the realtor will use the open house as a prospecting tool to obtain new clients.

This doesn’t mean that a house never sells because of an open house; it just doesn’t happen very often.

Homeowners who decide to hold an open house should also be alerted to the fact that the people coming into the home are usually not pre-approved or qualified in any way and  may not be potential buyers at all, but rather neighbors, or thieves.

So, is holding an open house worth it?  We still buy lottery tickets every once in a while.  If you decide that you want your realtor to hold an open house, be sure to discuss the procedures and safeguards that will be in place to reduce your level of risk.

Wishing you peace, love, and sunshine everyday!
Jeri

A few months ago, Jesse and I were working with a young couple who were considering buying a house and even though they found the house of their dreams – and for a very good price – they decided to not buy because they were going to “wait for the bottom” of this market cycle thinking that property values were going to fall further.

And here is the real blunder.  The media outlets report on national level real estate conditions and some people are relying on that information to make decisions about buying or selling properties in our area when the data shows that property values at the local level are not falling.  Take a look at the chart below from the Metropolitan Regional Information Systems regarding the average sale price in Baltimore County from 2003 to present.

As you can see, property values in Baltimore County are holding steady for the most part and homes are selling for more money today than they did during the boom years.  We are not seeing significant gains in the short-term, but prices certainly aren’t going down.

Now, we certainly have to address other factors that affect the market.  Each month this year, the total number of homes sold in Baltimore County tends to be about 200 less than the number sold during the same time last year.  Homes are on the market an average of 35 days longer than they were last year before going under contract.

So clearly, we are in a buyers’ market, but the sky is not falling and buying real estate, in this area, is still a good investment.

Wishing you peace, love, and sunshine everyday!
Jeri