Inman News is the leading source of news for the real estate industry.  I receive it’s news updates twice daily and this afternoon  there was a book review on a new book that I thought would be of great use to any home owner who is thinking of selling his home as a short sale.  

The book is titled “How to Use A Short Sale to Stop Home Foreclosure and Protect Your Finances” and what I liked about it was the clear way the material is presented.  The reviewer, Tara-Nicholle Nelson,emphasized that the author made everything involved in a short sale easily understandable.  Short sales can be a great solution to avoid foreclosure but what I’ve observed is that most homeowners and most real estate agents simply don’t understand them. 

I’d also recommend that any home buyer who is thinking about purchasing a short sale get this book.  From what Ms. Nelson wrote in her review, the material is very comprehensive and a lot of it would also help to educate a buyer.  You can get it at Amazon and the 2 reviews there were positive.

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 On January 15th the IRS released a new form for home buyers who want to claim the tax credit when they file their taxes this year.  This is Form 5405.  Form 5405 is a revision of the previous  2009 First Time Home Buyer Tax Credit so that the current 2010 Home Buyer Tax Credit program is covered. 

I would like to point out 2 important changes:  Along with Form 5405 you MUST include documentation such as your RESPA closing statement.  Because there is more documentation required to claim your tax credit for both a repeat and a first time home buyer, your tax return must be filed manually.  So remember – more documentation and manual filing is what you’ll have to do. 

For more information, just go to the IRS website .  It’s really not hard to take care of this and since you will have purchased your home recently, it shouldn’t be difficult to access your RESPA closing statement.  As always, I recommend that you consult with a tax professional.

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If you are a home buyer and you qualify for the first time home buyer tax credit, time is running out for you to find a home.  You must buy a home by November 30th and because getting a mortgage these days often takes 45 days, many buyers feel pressured to make a decision now.  As a result, a first time home buyer who qualifies for the $8000 Tax Credit may find himself scrambling to get into contract this week.  However, I’m wondering if some of you aren’t making a mistake.

$8000 is nothing to sneeze at but a buyer may be missing out on a home value that far exceeds the $8000 credit – short sale opportunities are still available.  There are many homes for sale with steep discounts because they are a short sale and you may find a house that is a better “fit” for you in a short sale than trying to buy a home that you really don’t love just because of the tax credit.

In the New Jersey MLS this morning, searching for short sale homes shows that of the 3,796 single family homes for sale, 352 are a short sale.  There are also many that are described as potential short sales.  For our purposes, let’s say that a bit more than 10% of the Bergen County housing market is a short sale.   This figure has been pretty constant this year.  The bottom line is that there are other opportunities out there.

Even if you can’t find a home that works in time for the tax credit, you shouldn’t go into contract on something that isn’t the right home for you and your family.  Opportunities come in many ways.

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When the Home Valuation Code of Conduct went into effect by Fannie Mae and Freddie Mac on May 1st, appraisal protocols for mortgage loans changed. To protect consumers, loan officers, mortgage brokers and real estate agents can no longer choose appraisers.

Why is this so important? Because the mortgage bank and the home buyer rely on an appraiser’s determination of value; a lot of abuse and fraud has been uncovered. If, for example, an appraiser sets a home value to fit the sales price, that’s obviously wrong.

I just had a short sale listing close; the bank took nearly a 50% loss on a $1.8 million loan. The homeowner had been building a new home for himself. When he gave me his loan amount, I was stunned. There was no way to justify that mortgage loan and yet it happened.

To comply, banks no longer have their own appraisers; they use real estate appraisal services with pools of appraisers from which appraisers are randomly selected. This creates an added expense for the mortgage process and increasingly results in appraisers valuing homes who’ve never been to the area before and aren’t members of the local MLS. Recently my office experienced this.

An office listing had an appraisal that was ridiculously low. Both buyer and seller knew this but the bank, which had to use the appraisal, could no longer justify the mortgage. The appraiser had never been to the area before and used the wrong MLS. Bergen County homes are listed in the New Jersey MLS; the appraiser used the Garden State MLS which has only a few Bergen County listings. Without expert knowledge of the local inventory and no access to all the data, he wasn’t able to do a correct valuation.

Eventually things will straighten out but until it does, there will be higher costs to obtaining a mortgage for home buyers and for both buyers and sellers, there will be appraisals that unfairly cancel mortgages.

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Crunching numbers to analyze the real estate market has taught me a lot. Over the years, I’ve found that the relationship between the number of homes for sale and under contract is a great indicator of how the housing market is doing. When that ratio is 2:1, the housing market is strong.

Ok, I know, it’s 2009 and the sky is supposed to be falling but it sure isn’t in Dumont. Right now Dumont has 50 homes for sale and 31 under contract which is way better than 2:1. Plus the time it takes to sell a home has improved dramatically – 72 days for under contract and 93 days for the 25 sales we’ve had over the past 4 months. No matter how you look at it, Dumont homes are rocking! There are several reasons for this.

Dumont is affordable. Property sizes are not too big and not too small which results in a moderate sized house. Dumont typically has what most of us would call a normal sized yard with a normal sized house. This means Dumont real estate works for most of us.

Dumont's school district is very good with a lot of parent participation and a broad range of programs. The town has excellent community services as well. The Borough of Dumont's Official Website is worth a look – it has a lot of information and shows you the strong community spirit that’s here.

The business district is very active with a good mix of retail stores, services and offices. Major retailers have invested in Dumont such as a CVS drug store, Wachovia Bank and Stop N Shop supermarket.

NYC transportation is great – there are plenty of express buses at rush hour and you don’t have to make any changes. Just grab a seat and read the newspaper on the way to work.

Dumont has everything that most people want, is affordable for first time buyers, can handle the more affluent move up market and is a great place to live. No wonder the real estate market is doing well. This does not, however, mean that prices are going up. They aren’t but they’re not sliding down either. If you’re thinking of making a move into Dumont, as a home buyer you’d be smart to do it sooner than later. Things here have turned positive.

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Great news for home buyers! U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced yesterday, May 29th, that the Federal Housing Administration (FHA) will allow home buyers to apply the Obama Administration’s new $8,000 first-time home buyer tax credit on FHA mortgage loans. Previously the tax credit only applied to conventional mortgages. The only catch is that the tax credit cannot be used towards the minimum 3.5% down payment. But, this is still terrific and a great help for people who need to use a FHA insured mortgage loan.

Secretary Donavan said that the FHA’s objective in doing this was to help stabilize the housing market by stimulating more home sales across the US and it certainly should do so. With the ability to apply the tax credit to purchase costs, buying a home now becomes affordable for thousands of people and affordable enough to get thousands to jump off the fence and into a house.

FHA loans are extremely popular with first time home buyers because qualifying for a FHA mortgage is a lot easier than qualifying for a conventional loan. The ratios are easier and the down payment can be as little as 3.5% although I must tell you that I do not approve of buying a home with such a low down payment. What I tell my home buyers is to wait until you’ve saved up at least a 10% down payment.

While interest rates went up this week, they also came down on Friday so we’re still in the 5-5.5% range for what most people really qualify for in a mortgage. This has been where it’s at for the past several months throughout the spring.

The reason the first time home buyer market is critical to the housing market is because this is where the housing domino chain begins – when a home buyer buys a house, he buys it from someone who often moves on to a bigger house and so on and so on. The entire chain of transactions begins with the first house that is sold and that’s your first time home buyer.

If you look at the real estate market the picture you see is a pyramid with the least expensive homes on the large bottom (mostly first time home buyers) and the most expensive at the very top. Without those large bottom rows of buyers, the real estate market will collapse. So the FHA, by accepting the $8,000 tax credit on its loans, has helped tremendously to maintain the strength and stability of real estate.

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There is a new thief who preys upon homeowners who must put their home on the market as a short sale. Simply put, a short sale occurs when a homeowner can no longer pay his mortgage, has no other assets and the loan amount is greater than the home is worth. As a result there is a shortage between what’s owed on the home and it’s market value. The only way a homeowner can sell his home is by getting the bank to accept this shortage, thus the term “short sale.”

These new thieves market themselves as having all the solutions to your problems because they have a “special” ability to negotiate a short sale with the bank. Nothing could be farther from the truth. What really happens is that a desperate homeowner is taken advantage of by these horrible people because the truth is that they are completely unnecessary.

Realtors do short sales all the time. If you must put your home on the market as a short sale, your listing agent can do the work and negotiate with the bank on your behalf. You can also ask your attorney to do this for you and many people do. What you don’t need is to encumber yourself with an unnecessary expense by hiring one of these charlatans. They are today’s version of the proverbial “snake oil salesman.”

I have worked on short sale transactions successfully. It is a tremendous amount of work and takes a long while. Everyone involved needs a lot of patience but eventually things do work out. Buying a home that is a short sale means a long wait for the buyer. Sometimes a buyer will cancel his contract out of frustration – it takes months and months to see if the mortgage bank will accept the buyer’s offer. But, hiring one of these thieves will not help you – it only wastes your money on these frauds. Every bank has it’s own unique process and no one can make a bank move any faster.

Don’t allow a predator to hurt you – if you have any questions, email me and if I don’t know the answer, I’ll find someone who does.

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Fannie Mae and Freddie Mac buy mortgages which means that they guarantee them. Without the backing of Fannie and Freddie, mortgage lenders have to find other investors to sell their mortgage loans to and those investors charge more so interest rates are higher. Fannie and Freddie backed mortgages are called conforming; the others are called jumbo. The limit on a conforming mortgage is $417,000 but that is about to change.

There’s also an intermediate level which is a special allowance for higher cost areas like Bergen County. Such mortage loans are at $417,000 – $625,000 with moderately higher interest rates than conforming loans. This is a super conforming loan but marketing folks have coined the phrases Jumbo and Super Jumbo. You’ll see a Jumbo Mortgage at $417-625,000 and Super Jumbo above $625,000.

OK, now you should have a good basic idea of how things work. Here’s where it gets interesting:

Fannie and Freddie are increasing the conforming mortgage loan limits to $729,750 on May 4th. This came about due to the economic stimulus package which was signed into law on February 17th. Wells Fargo will start taking applications for these loans on Monday, April 27th and I’m sure other banks will begin before May 4th too.

New Jersey MLS data shows that the 2008 average sales price for a single family home in Bergen County was $570,217. Even with a 20% down payment, this put a buyer into jumbo loan territory. In several towns it was often impossible for many buyers to qualify and is part of the reason that upper mid range homes have had such a hard time.

In the upper mid range market, it’s really been tough due to the restrictions on conforming loans. Loosening up lending for these homes creates more buyers for sellers. For real estate in Bergen County this is huge. Bergen County is the 18th most affluent county in the US; many of our towns have been severely impacted by the $417,000 limit and even $625,000 didn’t quite work.

For example, Tenafly had an average sales price last year of $915,581, Old Tappan was $1,147,159 and Woodcliff Lake was $838,309 plus many other Bergen County towns have scores of homes that will benefit. If you are a home buyer who’s looking at $850,000 homes, think of how this will help you! You won’t have to pay a point and your interest rate just dropped.

Think of the impact this will have on real estate in Bergen County and across the United States. Buying a home is never an isolated transaction. Real estate is a chain of events – there are homes sold above and below your own transaction so anything that happens in one price range affects it all. This is going to have quite an impact.

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Since the beginning of March the housing market for homes in Bergen County has really picked up and as we are now nearly through April, I thought that I would take a look at the MLS data to see if what I’ve been seeing is really happening. After all, most real estate agents are a pretty optimistic bunch so I just wanted to go into the New Jersey MLS and check.

Here’s what I found – things truly are picking up. Real estate is improving most definitely; it’s not dramatic but haven’t we had enough drama over the past 9 months? It’s steady and that’s good. Take a look at the figures below and you’ll see what I’m talking about. More buyers are coming out to look at homes and more homes are taking offers. Here are homes that came on the market for sale and which went under contract so far this year:

Jan – 1,232 Active/286 UC = 4.3 to 1 ratio
Feb -1,255 Active/335 UC = 3.8 to 1 ratio
Mar -1,693 Active/443 UC = 3.8 to 1 ratio
Apr -1,311 Active/413 UC = 3.2 to 1 ratio

The April figures are through today, April 23rd, and they certainly indicate continued improvement for Bergen County homes. What hasn’t been so clear are the Days on the Market figures but you really can’t get a sense of where that’s going until we’re further into the year because almost all sales in January and February originate from the previous year. But in March it took 110.64 days to sell a home and so far in April it’s been taking 103.59 days to sell a home which is a positive change.

The real estate market is always more active during the spring and early summer months and the pattern that is developing is quite normal which is excellent. For a home buyer, this is really a great time to buy a home and it seems that increasing numbers of people are sensing this and acting.

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Here’s the New Jersey Association of Realtors announcement for a free webinar on the tax credit for buying a home that expires on December 1st – sign up for this Friday’s free  webinar to find out how to qualify for up to a $8,000 tax credit whether you’re buying a home in Bergen County or elsewhere:

FREE Home Buyer Tax Credit Webinar – April 3 at Noon

The countdown to December 1, 2009 has begun. Learn how to take advantage of the tax credit during a free Get the Real StorySM webinar on Friday, April 3, 2009 at noon. Register for the webinar on Friday by visiting http://www.njar.com/rs_register.php. The website address for participating will be e-mailed to you in advance of the event. Please note, space for the live event is limited.

NJAR^® Executive Vice President Jarrod C. Grasso, RCE will officially kick off the new REAL Story website during the webinar, and then Linda Goold, tax counsel for the NATIONAL ASSOCIATION OF REALTORS^®, will discuss the detailed advantages of the first-time buyer tax credit and how purchasers can claim the credit

If you can’t make the webinar, you can find answers to questions about today’s market in New Jersey anytime at www.REALstoryNJ.com. The webinar will also be available on the site to view after it is presented live.

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