The Shift In Phoenix Real Estate!

Excerpt from: Greater Phoenix trends and statistics

The Shift In Phoenix Real Estate From Bank Owned Foreclosures To Short Sales
NOVEMBER 11, 2009

All sectors, active, pending and sold have an increasing percentage and number of short sales and those numbers will continue to grow.

Let's start of by noting the foreclosures are not going anywhere. There are plenty of them and they will keep on coming. There is a large supply (the size of which is greatly disputed) of lender owned properties that are not on the market, that at some point will.

Foreclosures are not disappearing completely, but they are slowly taking a smaller role.

That role is increasingly being filled by short sales. Get ready for at least 2 years of a major role for short sales and a playing role for some 5-7 years.
Let's take a look at the charts.

A look at the active properties reveals an increasing role of the short sale. At time of writing there were 14,648 active residential properties. This is up from 12,569 in August. In fact about 40% of active properties are now short sales and buyers do have to contend with them. It's difficult not.

Active listing are important but the more important numbers are the actual sales of short sale properties. Not surprisingly these are up as well. There are 3,877 pending properties up about 20% over last quarter.
The chart is also very clear about the trend. I don't show it here, but the chart with AWC-I are under contract with a contingency is heavily skewed with a very quick and large rise in such properties.

The pendings are more telling as most are approved at that point. In the AWC mode they are awaiting approval from the lender and then they go pending once it's approved: that's in most cases, but not all.

Finally sales. Just over the last 6 months actual short sales that have closed have increased from 10% of the market share to 20% and that trend will continue.
Of the short sales that go off the market last months numbers are encouraging because the success rate was 48.3% vs about 12% last year. That means that out of all the properties that went off the market 48% actually sold vs. being expired or canceled.

It's a signal of things to come and a result of the improving, though still difficult, short sale process.
Why is this happening? These change have come about for several reasons.

1. Lenders see the value in doing short sales.

2. Short sales are less destructive on the property then foreclosures which when done are at much more risk of being vandalized and un-kept, not necessarily buy the owner as much as a consequence of being an unoccupied target.

3. Short sales must give more money to the banks or they would not do them, because that's what it's really about - the money.

4. The government agencies are pushing short sales. The worst thing is putting people out of a home or doing it abruptly and negatively.

5. Fannie Mae and Freddie Mac want short sales or modifications vs. foreclosures and they have over 70% of the loans out there and the others usually follow suite.

6. There is some legislation ahead that will help, apparently, with the process.

7. There is more acceptance of short sale. More buyers are willing to take on the process of purchasing a short sale them before. This is because the banks and the Realtors are now better at it.

8. The process come into it's own, matured to something that actually works. Though still probably a teenager the process has matured away from the very prolonged terrible twos.

We went over some of the benefits for doing a short sale for owners, lenders, investors. It is of greater benefits to all parties vs. letting the foreclosure process take place.
These changes affect both buyers and seller and both need to be more aware and educated about the process.

As a buyer there is no reason to fear or discard short sales as long as you are a-tune to and fully aware of the process of buying a short sale and you have competent representation to protect your interests and to make sure that the transaction is put together well and managed well. There are many details to be aware of in the process and the contract.

First Time Homebuyers Tax Credit Extended Into 2010!!

First Time Homebuyer Tax Credit Extended Into 2010! Plus...A New Tax Credit for Certain Existing Home Owners!

It's official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What? The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price Qualifying buyers may purchase a property with a maximum sales price of $800,000. First-Time Homebuyer Tax Credit – Frequently Asked QuestionsHere are answers to some commonly asked questions about the tax credit.
What is a tax credit? A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.

What is the tax credit for first-time homebuyers (FTHBs)? An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is eligible for the FTHB tax credit? Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit? For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property? No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property? Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit? Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

You do not use the home as your principal residence.

You sell your home before the end of the year.

You are a nonresident alien.

You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)

Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit? Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.
Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit? Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years? No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.