Thursday, June 24, 2010
Tuesday, June 22, 2010
Extension of Home Buyer Tax Credit Until September? H.R. 4213 Provision Would Extend the Deadline For Closing
The home buyer tax credit is set to expire at the end of this month. In reality, that train has come and gone for many people with the passing of the April 30, 2010 deadline. That was the date by which qualifying buyers had to have their home purchase under contract with a second deadline for the closing of that transaction by June 30, 2010.
Last Wednesday the Senate approved a three-month extension, giving buyers until Sept. 30 to close. However, it is attached to another bill (HR4213 - American Jobs and Closing LoopholesAct of 2010....how's that for a name?) that still has to be passed by the House. The extension would apply only to buyers who met the April 30deadline to have signed purchase contracts in hand.
The current status as of June 17th according to Govtrack.us is: Cloture on the motion to concur in the House amendment to the Senate amendment with an amendment (SA 4369) not invoked in Senate by Yea-Nay Vote. 56 - 40. Record Vote Number: 194. ("Cloture" refers to Senate Rule 22 and is the procedure by which Senate can vote to end a filibuster. In plainspeak Senate voted not to end debate on the bill.
So while the proposed bill is being debated the clock is ticking. This could get mighty interesting depending upon how badly a home buyer was counting on the tax credit for the purchase of their home. Especially for short sales and some new construction it would appear that these deals might not close in time for the current June 30th deadline. So what's a buyer to do? Blow off the deal and forget about home ownership for now or go ahead and hope for the best?
On the one hand, we have to congratulate the architects of the current version over past versions which never considered the idea that it might take some time after a contract was written to actually close (what a novel concept) which caused buyers to quit looking about six to eight week before previous deadlines. On the other hand, it is clear that even the two month post contract deadline is not enough as lenders struggle to deal with the volume of properties and the changing loan underwriting
I'll be watching this one day by day.
Last Wednesday the Senate approved a three-month extension, giving buyers until Sept. 30 to close. However, it is attached to another bill (HR4213 - American Jobs and Closing LoopholesAct of 2010....how's that for a name?) that still has to be passed by the House. The extension would apply only to buyers who met the April 30deadline to have signed purchase contracts in hand.
The current status as of June 17th according to Govtrack.us is: Cloture on the motion to concur in the House amendment to the Senate amendment with an amendment (SA 4369) not invoked in Senate by Yea-Nay Vote. 56 - 40. Record Vote Number: 194. ("Cloture" refers to Senate Rule 22 and is the procedure by which Senate can vote to end a filibuster. In plainspeak Senate voted not to end debate on the bill.
So while the proposed bill is being debated the clock is ticking. This could get mighty interesting depending upon how badly a home buyer was counting on the tax credit for the purchase of their home. Especially for short sales and some new construction it would appear that these deals might not close in time for the current June 30th deadline. So what's a buyer to do? Blow off the deal and forget about home ownership for now or go ahead and hope for the best?
On the one hand, we have to congratulate the architects of the current version over past versions which never considered the idea that it might take some time after a contract was written to actually close (what a novel concept) which caused buyers to quit looking about six to eight week before previous deadlines. On the other hand, it is clear that even the two month post contract deadline is not enough as lenders struggle to deal with the volume of properties and the changing loan underwriting
I'll be watching this one day by day.
Sunday, June 20, 2010
European spa home for sale in hinsdale il
Check out this SlideShare Presentation:
European spa home for sale in hinsdale il
View more presentations from Steve Wagner.
Relocating To Chicago? Pick Hinsdale
Check out this SlideShare Presentation:
Relocating To Chicago? Pick Hinsdale
View more presentations from Steve Wagner.
Stop foreclosure
Check out this SlideShare Presentation:
Stop foreclosure
View more presentations from Steve Wagner.
Friday, June 18, 2010
Capitalization Rates - What Are They, Why Are They Important and Where Are They Heading
If you are planning to be a real estate investor, you need to understand capitalization rates (cap rates), how they are calculated and why they are important. In order to understand cap rates you also need to understand the concept of net operating income (NOI).
If you are a seasoned real estate investor, you already know that the amount of money generated by a property after deduction of expenses and before debt payment is the Net Operating Income. To calculate the cap rate of a property offered for sale, you divide NOI by the Sales Price the result of which is expressed in percent. Here is an example:
NOI = $20,000 and Sales Price = $250,000
$20,000/$250,000 = 8% or an "8 Cap"
You can also calculate what a selling price should be if you want to achieve a certain cap rate and you know the NOI. From the example above:
$20,000/.08 = $250,000
Why is this important? It is a way of looking at relative value in real estate investments (and other alternative investments for that matter). Think of it sort of in the way that you think of the Price/Earnings Ratio of a stock which is the stock's Share Price/Earnings Per Share. This is one way to look at the relative value of stocks (there are a whole bunch of other ways, but that's a different topic).
Say I want to buy an income property and it has the assumptions from above. Let's say there is another property for sale for a 9 cap. The price of that property if it produces the same NOI will be $222,222 ($20,000/.09). So a higher cap means a lower price and a lower cap means a higher price. Until an investor gets used to making this calculation, there is a natural tendency to get the answer backwards so if you are investing in real estate you should practice these calculations until they come naturally.
On to the next reason why this is important. A major advantage of investing in real estate is that debt can be used for leverage. As a real estate investor, I want my cap rate to be above my cost of money. Using the example from above again, if I can finance my real estate purchase for 7% then I have a positive spread. If I have to borrow money at 10%, I am counting mostly on appreciation to make money. This happened a lot in the previous years during the real estate bubble. I can't tell you how many times I had to talk people out of buying properties in Chicago three or four years ago for cap rates of 4.5 when their cost of money was 6.5%.
Where are cap rates heading? My view is that they have turned the corner and are heading down. This seems to be particularly true for multi-family investment properties. During the recession, cap rates for all real estate asset classes headed North (meaning prices dropped) and now that they are turning the corner and starting to go South, the prices are going up. See what I mean about the tendency to get this concept backwards? Cap rates are heading South (going down) so prices are heading North.
If you want to learn more about this or have questions about the concept, feel free to contact me. For more real estate news and tips, visit and subscribe at http://chicagolandrealtor.blogspot.com/
If you are a seasoned real estate investor, you already know that the amount of money generated by a property after deduction of expenses and before debt payment is the Net Operating Income. To calculate the cap rate of a property offered for sale, you divide NOI by the Sales Price the result of which is expressed in percent. Here is an example:
NOI = $20,000 and Sales Price = $250,000
$20,000/$250,000 = 8% or an "8 Cap"
You can also calculate what a selling price should be if you want to achieve a certain cap rate and you know the NOI. From the example above:
$20,000/.08 = $250,000
Why is this important? It is a way of looking at relative value in real estate investments (and other alternative investments for that matter). Think of it sort of in the way that you think of the Price/Earnings Ratio of a stock which is the stock's Share Price/Earnings Per Share. This is one way to look at the relative value of stocks (there are a whole bunch of other ways, but that's a different topic).
Say I want to buy an income property and it has the assumptions from above. Let's say there is another property for sale for a 9 cap. The price of that property if it produces the same NOI will be $222,222 ($20,000/.09). So a higher cap means a lower price and a lower cap means a higher price. Until an investor gets used to making this calculation, there is a natural tendency to get the answer backwards so if you are investing in real estate you should practice these calculations until they come naturally.
On to the next reason why this is important. A major advantage of investing in real estate is that debt can be used for leverage. As a real estate investor, I want my cap rate to be above my cost of money. Using the example from above again, if I can finance my real estate purchase for 7% then I have a positive spread. If I have to borrow money at 10%, I am counting mostly on appreciation to make money. This happened a lot in the previous years during the real estate bubble. I can't tell you how many times I had to talk people out of buying properties in Chicago three or four years ago for cap rates of 4.5 when their cost of money was 6.5%.
Where are cap rates heading? My view is that they have turned the corner and are heading down. This seems to be particularly true for multi-family investment properties. During the recession, cap rates for all real estate asset classes headed North (meaning prices dropped) and now that they are turning the corner and starting to go South, the prices are going up. See what I mean about the tendency to get this concept backwards? Cap rates are heading South (going down) so prices are heading North.
If you want to learn more about this or have questions about the concept, feel free to contact me. For more real estate news and tips, visit and subscribe at http://chicagolandrealtor.blogspot.com/
Saturday, June 12, 2010
Loan Quality Initiative - One More Thing to Keep in Mind if You Are Getting a Mortgage
As of June 1, 2010 Fannie Mae is implementing the Loan Quality Initiative, LQI, to help "capture critical loan data earlier in the process and validating it before, during and immediately after loan delivery." Because Fannie Mae has had to buy back many of the mortgages they have underwritten and then sold in the past, they have implemented the LQI to improve the process for documenting information in order to reduce the risk that they will have to buy back new loans in the future.
What does this mean? If a person is planning to get a mortgage (new or refinance) it means that the lenders will require that the borrower meet guidelines from the time of application through loan closing and even beyond. It is expected to discover if the borrower has or is making other purchases that would affect them qualifying for the mortgage by increasing their debt-to-income ratio.
The lender will be monitoring the borrower's credit up until closing. Since they are not restricted from doing it immediately prior to closing, it could even delay the settlement. In addition to rerunning the credit report, lenders can verify that the borrower is still employed, monies in the bank, direct verifications with existing creditors, occupancy plans, social security numbers and individual taxpayer ID numbers.
So if you are planning to buy remember that you must not buy anything like furniture, cars, appliances or anything else that is financed until the home has closed and you've moved into it.
I understand what a buyer is going through to get a loan approved and closed and by working with me and my trusted mortgage loan officers we’ll make sure that you are in the best possible position to get your loan closed
You can get more real estate news and tips by subscribing to http://chicagolandrealtor.blogspot.com/
What does this mean? If a person is planning to get a mortgage (new or refinance) it means that the lenders will require that the borrower meet guidelines from the time of application through loan closing and even beyond. It is expected to discover if the borrower has or is making other purchases that would affect them qualifying for the mortgage by increasing their debt-to-income ratio.
The lender will be monitoring the borrower's credit up until closing. Since they are not restricted from doing it immediately prior to closing, it could even delay the settlement. In addition to rerunning the credit report, lenders can verify that the borrower is still employed, monies in the bank, direct verifications with existing creditors, occupancy plans, social security numbers and individual taxpayer ID numbers.
So if you are planning to buy remember that you must not buy anything like furniture, cars, appliances or anything else that is financed until the home has closed and you've moved into it.
I understand what a buyer is going through to get a loan approved and closed and by working with me and my trusted mortgage loan officers we’ll make sure that you are in the best possible position to get your loan closed
You can get more real estate news and tips by subscribing to http://chicagolandrealtor.blogspot.com/
Tuesday, June 1, 2010
Stop foreclosure
There are a number of options to prevent home foreclosure. Some of these include loan modifications and short sales. Today w explore the Home Affordable Modification Program (HAMP) which has already assisted over 4 million homeowners to get relief on their mortgage payments. Illinois homeowners make up more than 5% of all permanent mortgage modifications which have been made under the HAMP. The attached presentation outlines the program and shows a process flow and links to information.
Stop foreclosure
View more presentations from Steve Wagner.
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