Buyers Shouldn't Wait on Falling Prices

Fear of overpaying for property is common in today's economic environment, especially in places like California where prices continue to be unstable.

If you find yourself on the fence, afraid to pull the trigger, or just down-right scared about jumping into today's real estate market, because you're concerned you'll pay too much, here are some factors to consider:

Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.

Financing is fickle. Some people who were highly qualified last year are unable to find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.

Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.

Don't be the last person on the bus. Educate yourself about your buying power and what options are available to you. With prices at an all time low, you don't want to find yourself chasing the market because you weren't prepared to play the game!

For a free Home Buyer's Information Packet, feel free to contact me anytime. Email all requests to thepropertysource@gmail.com.

Property Transfer

Recently questions about Property Transfer were asked on The Property Source group discussion board on Facebook. Just in case some of you are the few you don't frequent Facebook, I am reposting the Q&A here.

Questions:

I'm interested in transferring property into my company name. I don't have a complete understanding on how that's supposed to work. So here we are, looking for a little direction in this area. The title needs to be transferred into the company’s name. Would a Warranty deed be used for the transfer the property? Or would a quit claim deed be used? Once the transfer is complete, the company will now be listed as the grantee. Right? Would the property taxes, now be sent to the company? Would I be able to deduct any and all repair or upgrade cost as business expenses?Would I still be able to receive the various tax incentives for home ownership or would that be negated due to the home being listed under the company?If not would the company receive these benefits?How many properties can I transfer under the company name?No rush on this, great idea for this board. Always be selling. Korrey

Answers:

The first thing I’d recommend is consulting a real estate lawyer as well as a tax adviser. They’ll know the laws and can ensure everything is done properly and that title is actually being transferred.

Here are some suggestions though.

Quit Claim Deed-a deed that conveys any interest the grantor may have in the property at the time of the execution of the deed, without any warranty of title or interest.

Warranty Deed-a deed that expressly warrants that the grantor has good title; the grantor thus agrees to defend the premises against the lawful claims of third persons. The person who transfers the property is called the ‘Grantor’. The person/entity the property is transferred to is called the ‘Grantee’.

Though some say a quit claim is sufficient, you will probably want to do a warranty deed (vs. a quit claim deed) which will need to be prepared in the company’s name, filed and recorded in the appropriate office located in the jurisdiction in which the property(s) is located. This is usually at the county recorders office. The deed then must be signed by the person or entity transferring the property and will require notarization. You will be named the grantor, the company named the grantee.

Also, do you have a mortgage on your property? If the loan is not paid in full prior to or at the time of transfer, the deed will only transfer subject to the mortgage. You will need to look at your loan documents to see what conditions, restrictions and limitations it may have on your ability to transfer the property without having to pay the loan off. Almost all mortgages have “due on sale clauses”. Technically moving the property to an LLC, corporation, or limited partnership is considered a “sale.” You will need to negotiate with your lender to attempt to transfer the loan and the mortgage to the LLC. Sometimes they let this slide if you are the owner of the property and the sole owner of the company, but if not you made be made to refinance or acquire a new loan. Another thing to consider are the potential taxes you may have to pay. Any profit made on the “sale” of a house is subject to being taxed. Transfer can also trigger a property tax reassessment at the current market value. Consult your tax guy about this.

Now some people just make the title change and don’t tell the bank but there is a possibility that doing so may come back to bite you. The mortgage company will eventually figure out title to the property has been changed because the tax notices are now in the name of your company. You’ll also want to make sure you have your insurance in order. You’ll need to make sure you’re property is insured under the company name. In terms of deductions for any and all repairs/improvement costs as business expenses, and various tax incentives I would advice you to consult a tax adviser. They can provide the details of what you can deduct and how much. One thing to keep in mind that and incentive programs you look into as a personal homebuyer can be looked into under the company as well. The programs will probably have specific guidelines for companies applying for their incentives.

I believe you can transfer as many properties as you want into the company name. There is a such thing as a Series LLC's which are generally of interest to individuals who have several large assets (such as multiple properties) for which they desire to maintain separate liability protection. I do not think this is allowed in California though.

Hope this helps...

Homebuyer Incentives

In an earlier post (The First Steps-Plan Ahead-March 5, 2009) I mentioned first time homebuyer incentives. I was asked a few questions about how these work and want to answer those questions.

Question: So what are Homebuyer Incentives?

Homebuyer incentives come in many shapes and forms. Incentives that assist potential homebuyers can be provided by city, state and federal agencies, the property developer, the lender or even the seller of the home in the form of discounts, credits or renovation allowances, just to name a few.

Many times these agencies offer seminars or classes where you pay a small fee to learn about the available programs. They outline the application process, guidelines and requirements needed to qualify for the incentive. If you meet the program requirements, you can utilize the applicable incentives toward the purchase of a new or existing home.

Question: So once you get qualified for the program, is there an expiration? Do you have to purchase a home within a year or certain time period?

Well that depends on the program. Programs vary as do the requirements and qualifying guidelines. There can be time restrictions or programs based on availability. For example a Federal Housing Tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Question: Are those incentive programs only good for those particular areas or can the classes be transferred to another program/area?

Most incentive programs have very specific areas in which you must purchase your home, and though the transfer of incentives to other areas is limited by the guidelines of each program, many time you are able to use one program in conjunction with other programs you qualify for.

If you are a law enforcement officer, teacher or firefighters/emergency medical technician you can take advantage of HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. Now there is a catch! In return you must commit to live in the property for 36 months as your sole residence and many of the homes available are in communities that the city is trying to redevelop or revitalize. If you don't like any of the homes in the revitalization areas then you can't apply the incentive to non-HUD homes!

In another example, The Long Beach Housing Development Company, offers a second mortgage program for low to moderate-income homebuyers, but the homes for sale are in 4 distinct redevelopment areas. You are able to use CalHFA low interest rate programs with the LBHDC Home Buying Programs.

Every month the LBHDC provides Home Ownership Education seminars that will provide information on all the first-time home buying programs in the City of Long Beach. These seminars also educate you on how to select a home, find a realtor, choose a lender, and understand the financial issues involved with securing an affordable mortgage. The seminar is required in order to take advantage of the homebuyer incentives. It's worth the nominal fee (~$25) to learn about how these programs can be used by you to get into your first home!

There are many first time homebuyer incentives out there. It just takes a little time and effort to learn about and research which ones may be right for you. I have provided a list of key agencies you can research below.(I'll also list these in the sidebar under Reference Websites for Young Homebuyers) Find out about the available programs and what steps need to be taken to qualify for them. Understand the rules and guidelines...some programs require repayment of the initial incentive amount or a portion of the profits from the sell of the home.

California Housing Finance Agency (CalHFA)-
Offers low interest rate first mortgage programs and a variety of down payment assistance programs to eligible first-time homebuyers. CalHFA programs can be used with LBHDC Home Buying Programs.

• U.S. Department of Housing and Urban Development (HUD)
• The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.
• Veteran’s Administration (VA) Home Loan Program-Low interest Home Loans for eligible Veterans.
• Housing Development and Preservation (Mortgage Credit Certificate)

Hope this answers some of your questions. Feel free to post comments or additional questions if anything is unclear!