February 2012

Have you seen this interview-is now a good time to buy a home or investment property?

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FHA is INCREASING the upfront mortgage insurance premium in April

I just got the news flash. It is going from 1% to 1.75%. Also, the allowed seller contribution to a buyer’s closing costs MAY decrease to 3% from 6%. The closing cost contribution change is still up for discussion. FHA loans have kept this market moving along. Now, with these changes, it is yet another obstacle getting in the way of a housing recovery. Why don’t they ask me? I’d be happy to tell them how to fix the housing crisis from a “boots on the ground” perspective.

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Fix It Anyway-Take my Advice

“If it isn’t broke, don’t fix it” is certainly popular advice, but if you’ve ever had a serious plumbing leak, you certainly wished you had taken care of the problem earlier.

Washing machines, like all appliances, are supposed to work and when they don’t, it’s time to have them fixed or replaced. However, there is a critical connection from your water supply that may even be older than your washing machine itself.

Ask someone whose hose broke while they were asleep or out of town and you’ll hear stories of how quickly the water can damage walls, flooring and furniture. Almost anyone can replace the hoses with a pair of pliers for under $30.00 to avoid this potential catastrophe.

As you’re shopping for the replacement hoses, consider the braided stainless steel connectors. The advantage is that the stainless steel offers additional protection should a soft spot develop in the hose beneath. They’ll cost a little more but offer considerably more protection for a nominal price.

In my previous home, I did have the rubber hose leak from the washer I promptly replaced the hoses with the braided steel. Luckily I was home at the time. Imagine if I had been gone and it had leaked/sprayed for hours. What a mess it could have become!

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See the local Housing data from Minnesota Association Of Realtors-February

This is from the report called “The Skinny” Check it out. You can get more data from http://www.MplsRealtor.com

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Client Letter-unsolicited Thank You letter

I recently opened my mail and received this client testimonial letter. We were very touched that they took the time to write an unsolicited letter. We try and make every client transaction as smooth as possible. Happy clients lead to referrals which lead to longevity in the business. That’s why we’re still here after 26 years in real estate and 17 years in mortgage. We thought we’d share this one with you. We have others on file for you to view as well. If you’d like to meet and see how we can help you with your real estate and mortgage needs, please give us a call.

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Client Letter-unsolicited Thank You letter

I recently opened my mail and received this client testimonial letter. We were very touched that they took the time to write an unsolicited letter. We try and make every client transaction as smooth as possible. Happy clients lead to referrals which lead to longevity in the business. That’s why we’re still here after 26 years in real estate and 17 years in mortgage. We thought we’d share this one with you. We have others on file for you to view as well. If you’d like to meet and see how we can help you with your real estate and mortgage needs, please give us a call.

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Twin Cities Rental Property-Consider becoming a landlord

Rental homes can be the IDEAL investment in today’s market.

IDEAL serves as an acronym to identify the advantages of rental properties:

• Income from the monthly rent contributes to paying the expenses and a return on the investment
• Depreciation is a non-cash deduction that contributes a tax shelter
• Equity grows monthly as the mortgage amortizes due to some of each payment being applied to the principal
• Appreciation is achieved as the value of the property goes up
• Leverage can increase the return on investment by using borrowed funds to control a larger asset

The combination of these characteristics working together makes rental real estate a very good investment for today’s economy and years to come. Increased rents, high rental demand, good values and low non-owner-occupied mortgage rates contribute to positive cash flows and very favorable rates of return.

Contact me for more information about actual opportunities in our local market.

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Have you ever wondered “Why Minnesota?”

Other than this year, with the fantastic mild winter, many people why we would want to call Minnesota our home. I personally wouldn’t live anywhere else. I enjoy the four seasons and all the activities that come with each. Next time some one asks-”why Minnesota?” send them the link to this site.

http://www.positivelyminnesota.com/Business/Locating_in_Minnesota/Why_Minnesota/index.aspx

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Get a copy of the National Foreclosure Report-Corelogic

Corelogic is an awesome data compiler. Their December report is available here: http://www.corelogic.com/about-us/researchtrends/national-foreclosure-report.aspx?WT.mc_id=A038%20%E2%20Foreclosure%20Report_crlg_1e_frc_1_120214

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State Of MN Press Release Regarding The Billion Dollar Mortgage Settlement

WOW-big stuff in this release. We are also doing HARP 2.0 loans for eligible borrowers. Things will get BETTER in March. If have an “underwater conventional loan” call us to see what might be able to be done.

http://www.ag.state.mn.us/Consumer/PressRelease/120209NatMtgSltmnt.asp

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See what RE/MAX thinks about the 2012 market

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What The World Needs Now-what a fantastic tune-how true it is today

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Keep Track of Improvements

People are staying longer in their homes according to the National Association of Realtors and the U.S. Census. Over time, even a modest appreciation could result in a significant gain and homeowners should have a strategy to minimize possible taxes.

Maintenance on a principal residence is not deductible but improvements can add to the basis which can reduce the gain in the sale. Improvements are easily identified if they add to the value of a home, prolong its useful life or adapt it to new uses.

Receipts and other proof, such as pictures, should be kept during ownership and for several years after the sale of the home. They can include the closing statements from the purchase and sale of the home and all receipts for improvements, additions or other items that affect the home’s adjusted basis or cost.
For a principal residence, basis includes the price paid, plus certain acquisition costs and capital improvements made. When the property is sold for more than the basis, there is a gain. Currently, homeowners that meet the requirements can exclude up to $250,000 of gain if single or up to $500,000 if married filing jointly.

A simple strategy is to put documents that affect the basis of the home in one envelope. Any receipt for money spent on the home that isn’t the house payment or utilities, goes into the envelope. Your tax advisor will be able to sort through them to determine the capital improvements.

For more information on determining basis or capital improvements, see IRS publication 523, Selling Your Home.

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The “Right Size” Home

Work hard, buy a home, start a family and continue to upgrade your home until everyone has enough room. This has been the blueprint for lots of homeowners for the last fifty years but there is certainly a shift in thinking that could change all of that.

Interestingly, Americans live in much larger homes than most people in other countries throughout the world. The U.S. Census reported in 2006 that the average single family home completed had 2,469 square feet which was 769 feet more than in 1976.

Once the children are grown and have moved out, homeowners are finding they have too much room. Even if their home is paid for, they have higher property taxes, insurance, utilities and maintenance on the larger home than they’d have if they were living in the “right size” home.

Some homeowners state thaty they’re keeping their larger home because it has luxury features that smaller homes don’t have. There’s a movement that seems to have started in the United States to find the “right size” home with the amenities and convenience that homeowners want.

This philosophy has been expressed by Sarah Susanka in her book Creating the Not So Big House. It proposes a house that “values quality over quantity with an emphasis on comfort and beauty, a high level of detail, and a floor plan designed for today’s informal lifestyle.”

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Forced Savings…Really?

Part of the American Dream is to own a home. A home is a place to call your own; a place to raise your family and share with your friends. A home is a place to feel safe and secure. A home is a good investment?In a recent report* by Beracha and Johnson, it is suggested that buying a home is the right thing to do but not necessarily for the reason that people expect. A home is, in many instances, the largest investment that homeowners have and it accounts for the majority of their net worth.

The report suggests that the self-imposed savings due to amortization has a significant contribution to a person’s net worth. The premise was determined by comparing the net worth of buyers to renters over a 31 year period of time.

When the savings in rent and down payment were reinvested, renters had a greater net worth than buyers after each 8-year cycle by a margin of 91% to 9%. On the other hand, when the requirement to reinvest the savings was dropped and renters were allowed to spend the savings on consumption, the Buyers had a greater net worth 84% compared to 16% for renters.

Appreciation, tax savings and amortization contribute to lowering the cost of housing and help homeowners build equity. The forced savings due to amortization benefits the individuals who may not be disciplined enough to invest the savings otherwise. Regardless of which benefits apply in different situations, owning a home can be a satisfying investment both emotionally and financially.

*Factor Sensitivities in the Making of Buy vs. Rent Decisions: Do Homeowners Make the Right Decision for the Wrong Reason by Eli Berach and Ken J. Johnson of Florida International University writing for the Journal of Housing Research.

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