Larry Kaduce's Blog

We are down to just weeks left to take advantage of a free 8 grand, just for being a first time homebuyer, or for not owning a home for the past three years and have an adjusted gross income of less than $75,000 or $150,000 for married couples. The program phases out for individuals that make between $75,000 and $95,000 and married couples that make between $150,000 and $170,000.

The credit applies to first-time homebuyers that will be using the property as their primary residence. It works as a true credit on your taxes filed for 2009 for 10% of the purchase price, not to exceed $8,000.  For example, if you normally receive a $2,000 refund, now you will receive $10,000.  If you usually pay in $2,000 each year, then now you will get a $6,000 refund.

These homes must be closed no later than November 30, 2009 to receive the credit. If you close on December 1st, sorry no credit. With November 30th falling on the Monday after Thanksgiving, plan to close no later than the week of the 23rd to allow for last minute delays and issues. It is now taking lenders between 30 and 45 days to process loans, so we are running out of time.

Many people have called or emailed me on the prospects of extending the credit. At this time, I know there are talks of it, but I'm afraid by the time they decide and vote, it will be too late. What I do know is that you can get it for sure NOW, we have historically low interest rates NOW, and great deals on homes NOW. Even if it does get extended, having all these other benefits are questionable, so the time to buy is NOW!

I plan on working evenings and weekends to help my clients find the home of their dreams and receive the credit. If you need help finding a home, please call my cell at (507) 351-6292 or email me at Larry@Kaduce.com and I'll get you in the schedule.

Nashville, TN-Larry A. Kaduce, RE/MAX Dynamic Associates, is among the top-performing Realtors® in the country to attend Accelerate '08.  This exclusive program by personal finance expert, Dave Ramsey, inspired and motivated real estate professionals to even higher levels of outstanding customer service and achievements.  The two day event in Nashville, Tennessee was held on December 2 and 3.  As part of Accelerate '08, the realtors took part in a live broadcast of The Dave Ramsey Show, focusing on real estate topics.  The invited participants are part of Dave Ramsey's Endorsed Local Provider Program, which connects local realtors, brokers, CPA's and health insurance agents with Dave Ramsey fans across the country. 

For more information on Dave Ramsey's Endorsed Local Providers go to www.daveramsey.com.

Visit Larry's website at www.LarryKaduce.com.

About Dave Ramsey:

A personal money management expert, Dave Ramsey is an extremely popular national radio personality and best-selling author of The Total Money Makeover, Financial Peace and More Than Enough.  He is also host of "The Dave Ramsey Show on Fox Business Network." Ramsey knows first-hand what financial peace means in his own life - living a true rags to riches to rags to riches story. By age twenty-six he had established a four-million-dollar real estate portfolio, only to lose it by age thirty. He has since rebuilt his financial life and now devotes himself full-time to helping ordinary people understand the forces behind their financial distress and how to set things right. Through his proven plan, Ramsey helps people eliminate debt and credit cards, learn to budget, avoid bankruptcy, build wealth and find financial peace.   

Ramsey founded The Lampo Group, Inc. to provide financial counseling, through various means, to the public. More than 750,000 families have completed Financial Peace University with the typical family saving $2,700 and paying off $5,300 of debt during the 13-week course. More than 500,000 people have attended a Dave Ramsey LIVE event. Ramsey created Financial Peace Jr. and authored six children's books designed to help parents teach sound financial principles to their children. Active in more than 3,000 schools in all 50 states, "Financial Peace for the Next Generation" educates High School students on the importance of financial planning and the dangers of debt. Ramsey's syndicated newspaper column, "Dave Says" is read by nearly 6 million readers weekly.  "The Dave Ramsey Show" is syndicated to more than 350 radio stations nationwide with more than 3.5 million weekly listeners. "The Dave Ramsey Show" on Fox Business Network launched October 15, 2007.

With home foreclosures at an all-time high, the government bailing out subprime mortgages and many homeowners falling further behind on mortgage payments each month, it's no doubt that there are many housing bargains in this market.

The most misunderstood aspect of housing deals is the "short sale". This occurs when a home is sold for less than what is owed to the mortgage holder, thus coming up "short". The lender signs off on the note as a complete payoff.  Then everyone ends up happy, right?  Well, if it's done right then that's the outcome. Unfortunately, many short sale transactions are frustrating and never get processed.

Short sales are more popular than ever, largely in part of the recent subprime market.  Homes were over-valued in anticipation of high appreciation. Home buyers were sold on the theory that they could refinance a high-interest-rate loan in a short period of time and lock a better rate when their home was worth more than they paid. What happened, unfortunately, is that home values peaked and even started to decline leaving these people with bad loans they couldn't afford.

Lenders will likely consider a short sale if the home is several months behind in payments or if the sheriff's auction has already occurred and it's in the redemption period.  Redemption periods vary by state and are usually around six months.

The department of the lender that handles short sales is called the "loss mitigation department." In other words, these people are hired to prevent the lender from incurring any further loss.  If the home goes to foreclosure, lenders' losses can be anywhere from 10% to 50% of the home's value, depending on amount of neglect, weather damage and/or disrepair. By accepting a short sale, they are minimizing their loss by cutting a deal with the borrower.  Lenders may have the right to sue the borrower for the difference between what they have against it and what they receive, so the most important feature of the agreement should be a "non-recourse release," which simply means that the bank will accept the terms of the sale and write-off the difference.

Having a successful short sale depends on key items, starting with a complete short sale package, prepared by a realtor or other professional experienced in processing short sales.  The package will include a hardship letter by the borrower explaining why they can no longer afford the home, recent pay stubs, bank statements, tax returns, market analysis of the home, list of repairs needed and financial statements. FHA-guaranteed loans have several more necessary requirements that must be included in the package.  Bank staff in loss mitigation departments can each have up to 250 files on their desk at any  given time. They will process the most complete packages and the sales packages that come closest in price to their value first.

To have an acceptable short sale, the bank must be convinced that the home has been properly marketed and it is the highest they can expect to receive from the proceeds. They will often hire an appraisal or Broker's Price Opinion (BPO) to confirm this.

A short sale approval can take anywhere from 2 weeks to several months from the time they receive the short sale package.  The more complete the package is, the better the chances are that it will be processed quickly.

Despite reports to the contrary, a short sale will still damage a credit score, but not to the extent of what a foreclosure could do. Usually, the credit score is affected by about 50 points, which for most people, can take about 2 years to recover.  A foreclosure will be reported on a credit report for 7 years, which can take several more years to re-establish credit.

This is a brief overview of the short sale process. If you need more information on short sales, please contact me at LarryKaduce@Remax.net or visit my website at www.LarryKaduce.com.

Many of you can remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books. Because of it, the Sarbanes-Oxley law required mark-to-market accounting and prevent these companies from having loaded balance sheets.

This is all well and good except for the sub prime mortgage market. Merrill Lynch was sitting with $30 billion tied up in sub-prime loans with houses. Those houses didn't become worthless all of a sudden because those people couldn't sell their bonds. Since they couldn't sell them, they basically gave them away for 22 cents on the dollar. That doesn't mean the homes lost 78% of their value--it just means there was no market for the bonds. Nobody wants to buy sub-prime bonds because they're junk bonds.

Because of the mark-to-market accounting rule, the bonds are now unmarketable so something needs to change. If you change the mark-to-market accounting law (just for sub prime loans--and just temporarily) this will free up the market and has the potential to solve 60% of the problem and cost the taxpayers NOTHING! It's well worth a try and won't get us totally out of the woods, but will sure help.

Another idea is to make the bonds marketable again, we could extend FHA insurance to subprime mortgages but extend no loans. I am not in love with the idea of guaranteeing thse loans, but it's sure better than buying them. This could be done for less than $40 billion, a 95% savings and would immediately free up the bonds to stimulate the economy.

Why don't we hear about these ideas from our senators and representatives?  Good question.  So I invite you to ask them directly and see if we can fix this mess without another loan from China.

Email them here:

US Senate Committee

Your Representative

Your Senator

www.LarryKaduce.com

Effective August 1, 2008, all single family homes in Minnesota must have an operational carbon monoxide alarm within 10 feet of all sleeping areas. This requirement was previously for only new single family homes, but not includes all existing homes.

Buyers and sellers should be aware that this requirement should be met by the sellers before transferring the property.  If the seller fails to provide the alarms, the buyer will be responsible to have them installed at their expense.

For the complete statute, click here.

www.LarryKaduce.com

You can't always judge a home buying opportunity by its cover. Distressed properties, those with owners whose mortgages are higher than the value of the house or who are being foreclosed upon, may not be pretty, but they could be just right for the right buyer, advises the REALTOR® Association of Southern Minnesota.

As many as four out of 10 home sales today involve distressed properties, according to figures from the National Association of Realtors®. The term distressed can mean homes that are in some stage of the foreclosure process. It can also refer to short sales, where the home is sold for less than what the seller owes on the mortgage.

"While there are buying opportunities in foreclosures and short sales, the process can be very complex," says Chris Thomas, Association President.

Because distressed property owners are often burdened with debt, many of these homes are abandoned or in disrepair. "The key to buying a distressed property is working with professionals - beginning with a Realtor® who understands where to find distressed properties and how to navigate the purchase," Thomas said.

"You'll also need a good home inspector and perhaps a real estate lawyer to work through the legal tangle that can occur when owners have walked away from their property or have sunk into unbearable debt," she said.

The foreclosure process includes three different stages - pre-foreclosure, auctions and bank-owned or (real estate-owned - REO).

Pre-foreclosures

Foreclosure auctions

Successful bidders receive the property in "as is" condition, which may include someone still living in the property. There may also be liens against the property.

REO properties

In this stage, the bank will handle the eviction, if necessary, and may do some repairs. It will negotiate with the IRS for removal of tax liens and pay off any homeowner's association dues.

At this point, Realtors® who know the foreclosure process are crucial in not only identifying opportunities for buyers, but also in attending to all of the baggage that comes with such properties.

A number of Realtors® across the country today specialize in distressed sales and foreclosure properties. Those Realtors® can help guide potential buyers through the process - from identifying the right property to negotiating the transaction.

"When the unthinkable happens, selling a distressed home can help the owner alleviate an unfortunate financial situation," Thomas said. "The community also benefits as the new owners assume responsibility for the home's upkeep."

Foreclosed Properties

With foreclosed homes being more prevalent in the market today, the City of North Mankato has run into a situation with the Disclosure Statements. The foreclosure companies, such as Fannie Mae, are refusing to sign as the Seller on the I & I form.

In cases where the foreclosure company refuses to sign the I & I form, the City will accept the form without their signature; however, we ask that the listing agent note on the form that the property is a foreclosure. This situation does NOT make the Buyer exempt from signing BOTH the I & I form AND the Property Line form. As always, the City is available upon request to conduct an I & I inspection or attempt a property line locate.