Excerpt From: Profile of Home Buyers and Sellers 2010

By: National Association of Realtors® /Research Division

When starting the home buying process, the Internet plays an ever increasing role. Thirty-six percent of buyers looked online for properties for sale as their first step. An additional 11 percent began by finding information online about the home buying process and 19 percent started by talking to an agent.

About one-third of first-time buyers first went online to look at properties for sale when starting their home search. First-time buyers were more likely than repeat buyers to look online for information about the home buying process and talk with a friend or relative about the process. Repeat buyers were more likely than first-time buyers to contact a real estate agent and drive by homes and neighborhoods as a first step. 

Buyers in each age group between 18 to 64 were all most likely to look online for properties for sale as a first step in the home buying process. Buyers who were 65 or older were most likely to contact a real estate agent as their first step. In 2010, the percent of buyers ages 18 to 44 that contacted a real estate agent as their first step agent increased from 2009.

Exhibit 3-1   First step taken during the home buying process, first-time and repeat buyers (percentage distribution).

Exhibit 3-2   First step taken during the home buying process, by age (percentage distribution).

Article From HouseLogic.com

By: Dona DeZube
Published: October 29, 2010

The home mortgage interest deduction saves the average home owner thousands of dollars at tax time, supports home values at the community level, and helps American home buyers get into their first house.

Having a tax deduction for mortgage interest makes owning a home more affordable because the deduction lowers the amount of tax you pay. U.S. Census data shows 37% of home owners with mortgages spend more than 30% of their income for housing. Paying less for housing means having more disposable income for savings and other household expenses.

Increasing housing affordability increases the number of renters who can afford to buy a home of their own responsibly; increasing the number of home buyers helps keep home prices stable for those who already own homes by ensuring a steady stream of new buyers.

How the deduction works

In general, any home owners who pay U.S. taxes and who itemize their taxes can deduct mortgage interest attributable to primary residence and second-home debt totaling $1 million, and interest paid on home equity debt of as much as $100,000.

Mortgage interest deduction threatened

In recent years, the mortgage interest deduction has come under attack. Among the suggestions for cutting it back to deal with the deficit:

          •Reduce the mortgage interest deduction for upper-income taxpayers-they’d only receive 28 cents on the dollar, even if they’re in a 33% or 35% tax bracket and can now deduct 33 or 35 cents on the dollar. ?

          •Reduce the $1 million cap by $100,000 a year.

          •Change the mortgage interest deduction to a 15% tax credit.

In the past, members of Congress have suggested other mechanisms for eliminating or limiting the mortgage interest deduction. None of those has ever gained traction.

Arguments against mortgage interest deduction

Arguments against the mortgage interest deduction center on who benefits and whether the government should support home ownership. They say:

          •It primarily helps the wealthy, since high-income taxpayers are more likely to itemize their deductions and to own homes. About 90% of taxpayers earning more than $100,000 itemize, while only 18% of those earning less than $50,000 follow suit, the Tax Foundation estimates.

          •Taxpayers who don’t itemize deductions get to use the “standard deduction.” They do that because it gives them a bigger tax break than itemizing to use the mortgage interest deduction.

          •Ending or reducing the mortgage interest deduction would create a deep source of money for reducing the budget deficit.

          •In the aftermath of the mortgage crisis, the U.S. needs to rethink its favored tax treatment of home ownership.

Arguments for mortgage interest deduction

Those who favor keeping the mortgage interest deduction say it helps middle-income families, who already pay nearly all U.S. income taxes. Plus, getting rid of the mortgage interest deduction would hurt home prices.

          •More than 60% of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000, estimates the NATIONAL ASSOCIATION OF REALTORS®.

          •A disproportionate number of those high-income taxpayers live in areas where housing is especially expensive, such as California and New York. In high-cost housing markets, lowering the $1 million cap would add a tax burden on families who already must pay high prices for homes.

          •Home owners already pay 80% to 90% of the income tax in our country, and among those who claim the mortgage interest deduction, almost two-thirds are middle-income earners, says NAR Chief Economist Lawrence Yun. So home owners, who are the pillars of federal income tax revenue, would have to shoulder a bigger tax burden.

          •Home values could fall 15%, says Yun, as buyers discount the value of the mortgage interest deduction in their purchase offers.

          •It’s faulty to link the mortgage meltdown to the country’s support for home ownership. The meltdown is rooted in lax underwriting and faulty ratings by credit rating agencies of the securities backed by the mortgage, says Yun.

Protecting the deduction promotes housing. In supporting the mortgage interest deduction, you help ensure that tomorrow’s families can follow the same path to home ownership that so many of us have already traveled.

Dona DeZube, HouseLogic’s News Editor, has been writing about real estate for over two decades. She lives in a suburban Baltimore 1970s rancher on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound.

By: Bob Sallee

Published: September 16, 2010

For the past few months, national news media have focused on what’s been going on in the housing market, and predicting what may happen in regarding federal tax breaks and subsidies for homeowners.  Opinions range from the elimination of mortgage interest deductions on your federal tax return to new programs helping homeowners refinance mortgages which remain larger than the depreciated value of their homes, to subsidized housing for the unemployed or under-employed, and to increased rent subsidies for low income families.

Are some of these measures in our future?  Or, are they just pre-election rhetoric?  What’s likely to change?  What’s likely to remain?  Should we be concerned?  Since two-thirds of Americans own their own homes, whatever happens can have a big impact on housing costs and accessibility.  Will policies regarding finances change the American dream of owning their own home?

Paul Wiseman, writing for USA Today, reports that Australia, Ireland, Spain and Britain have a higher home ownership rate than the U.S., although “these countries provide far less government support for homeownership,” according to Michael Lea of San Diego State University.  > source

Wiseman says the experts believe the “U.S. can no longer afford housing tax breaks.”  Citing research by the Tax Policy Center of the Brookings Institute, he reports that families with households under $40,000 do not benefit from the mortgage interest deduction, gaining a tax benefit averaging just $91 a year.  The average deduction jumps to $5,459 for those earning more than $250,000.

Although Wiseman says “The government… is unlikely to touch the politically sacrosanct deduction anytime soon,” he goes on to say “But analysts suggested that the government’s debt- $8.8 trillion and growing- meant that housing subsidies might one day face the knife.”

Wiseman hits head-on the question “Just how much should Uncle Sam do to help Americans buy their own homes?”  He believes the re-examination of federal mortgage guarantees and subsidies “could mean a shake-up for (the) mortgage market.” > source

Nin-Hai Tseng, a reporter to CNNMoney, echos the concern asking “Housing Quagmire:  Is It Time to Remove Relief?” > source

Tseng says “Not even record low (mortgage) rates have boosted home sales or enticed a debt-weary public….So why try to prop up prices any longer with federal programs?  Is it time to simply let prices freefall, clearing the way for a genuine correction of the real estate market?”

“…Evidence is mounting that government interference in the housing market might be doing the broader economy more harm than good, at least for the long-term.”

Citing a recommendation of Dean Baker, co-director of the Washington DC-based Center for Economic and Policy Research, Tseng writes “Let the market dictate where prices should fall.  As for the many homeowners who would likely face foreclosure, give them the option to stay in their homes by letting them rent their homes for up to five years.”

Article From HouseLogic.com

By: Dona DeZube
Published: September 08, 2009

Helping others become homeowners protects your home’s value and builds stronger communities.

Doing your part to help other Americans gain a foothold on the homeownership ladder doesn’t just help them. You’ll benefit both your community and your own pocketbook.

When people move from renting to owning a home, they’re more likely to vote, get involved in community groups, and care about their home’s appearance. The children of homeowners do 23% better in school, according to a 2001 study by Harvard’s Joint Center for Housing Studies (http://www.Jchs.harvard.edu). And a steady flow of first-time homebuyers makes it easier to sell your own starter home when you’re ready to move up to a larger property.

Make housing affordable

One way to make more people homeowners is to make housing more affordable. All U.S. homeowners benefit from policies like the mortgage interest tax deduction. Many use government-backed mortgage insurance to lower loan costs. A variety of public and private programs offer low-cost loans and downpayment assistance to help Americans become homeowners. Help prospective homeowners save a downpayment by donating to sites like EARN (http://www.earn.org), a non-profit that uses donations to match funds saved by low-wage earners.

Reduce foreclosures and preserve home value

Foreclosure matters because it hurts all homeowners. In 2009, foreclosures will cause property values to decline an average of $7,200 for about 70 million homeowners, resulting in a $502 billion loss in home equity, the Center for Responsible Lending (http://www.responsiblelending.org) estimates. Each foreclosure within 1/8th of a mile of your home lowers your property value about 0.744 percent, CRL says.

“One of the sad lessons of the [recent past] is that we aren’t alone,” says Nicolas P. Retsinas, director of the JCHS. “It’s clear that if the family next door loses their home to foreclosure, my home’s value will go down. Therefore, I have a vested interest in ensuring that people become homeowners and that homeownership is sustained over time.”

One effective tool against foreclosure is educating homeowners before they buy. The Joint Center found that loan delinquencies fell 13% with homeownership counseling. People who go through pre-purchase and post-purchase counseling and learn about mortgages, family budgeting, and home maintenance are less apt to face foreclosure, says Michael Berti, senior homeownership specialist at the Rural Ulster Preservation Company (http://www.rupco.org) in Kingston, N.Y.

Support groups that help homeowners

One way to do your part to help other homeowners is by donating your time or money to some of the many non-profits that promote responsible homeownership.

Habitat for Humanity (http://www.habitat.org) partners with new homeowners to build affordable housing. Habitat homes aren’t free. Homeowners work hundreds of hours, get homeownership counseling, and make mortgage payments.

The United Way (http://www.liveunited.org/) supports many local programs that build affordable housing, help families build financial assets, and teach financial management skills. If you donate to United Way, you can direct your contribution to those causes.

HomeownershipSF (http://www.homeownershipsf.org), in San Francisco, tries to intervene where people facing foreclosure have the resources to catch up on their loan. If “the home can’t be saved, we try to get a first-time homebuyer we’ve worked with into the home as quickly as possible to stabilize the neighborhood,” says Interim Director Christi Baker.

 Government programs support homeownership

Supporting federal state, and local programs that help create homeowners is another way you can expand responsible and affordable homeownership.

The U.S. Department of Veterans Affairs (http://www.homeloans.va.gov/index.htm) and the Federal Housing Authority (http://www.fha.com/) provide mortgage loan insurance or guarantees that let people buy homes with only a small downpayment and borrow at lower interest rates.

 Government-sponsored groups Fannie Mae (http://www.fanniemae.com), Freddie Mac (http://www.freddiemac.com), and government-run Ginnie Mae (http://www.ginniemae.gov) buy and securitize mortgage loans made by banks, freeing up money, so banks can keep lending.

Sites like Govtrack (http://www.govtrack.us/) and RollCall (http://www.congress.org/congressorg/home/) help you stay on top of laws that affect homeowners.

HUD’s HOME program (http://www.hud.gov/offices/cpd/affordablehousing/programs/home) provides financial support to state and local housing authorities to build and renovate for-sale and rental housing for lower-income Americans.

In U.S. cities of all sizes, the HOPE VI http://www.nls.gov/offices/pih/programs/ph/hope6/index.cfm) program has funded plans to replace deteriorating public housing with new low-rise, mixed-income homes. These developments sell most homes at market rates, but designate a percentage for use by low-income homeowners.

How to get involved

You can support responsible homeownership in many ways. Retired construction contractors France and Bill Moriarity travel the country in their RV managing Habitat construction projects. “We like it because it’s a hand up, not a hand out,” France Moriarity says. Habitat volunteers don’t need construction skills and can sign up to work as little as one day at a time. Groups can volunteer together. Organizations like Rebuilding Together (http://www.rebuildingtogether.org/) and NeighborWorks America (http://www.nwconsumer.org) sponsor once yearly volunteer events that help lower-income homeowners repair their homes.

In San Francisco, Gregg Lynn convinced 150 people from his professional network to donate a percentage of their income to EARN. Follow his lead by asking your professional network, trade association, or social group to contribute.

Dona DeZube has been writing about real estate for over two decades. She lives a suburban Baltimore 1970s rancher on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound.

By: Bob Sallee

Published: July 30, 2919

It seems like every day there’s another article on the U.S. housing market.  Mortgage interest rates hit historic low (for those who qualify).  Foreclosures may have hit a peak.  Building slump worsens (depending on home type) as federal homebuyer incentives end.

What’s really of interest is where the local housing market is, and where it’s heading in the Pikes Peak region.  People want to know how the local market is doing in terms of home construction, financing and sales.

What the housing market is doing now may not reflect where it will be in one, three or six months.  But trends do help us to gauge our expectations.

Let’s look at mortgage rates, which are at 50-year lows nationwide, according to Alan Zibel of The Associated Press [USA Today, p. 3B, June 25, 2010:]

Zibel says rates are at the lowest point since the 1950s, but “almost no one expects falling rates to energize the economy.”

“As long as prospective home buyers are still concerned about their jobs and financial well-being, many will be reluctant to take the plunge, even though affordability has never been better,’ says Greg McBride, senior financial analyst at Bankrate.com.” Zibel reports.

For the Pikes Peak Region, we can expect a tougher housing market for the second half of the year, according to Rich Laden [as reported on page BUSINESS 4 in The Gazette, July 25, 2010.]

This is because the federal government ended its homebuyer tax credits [except for military members returning from overseas deployments], Laden says.

He also provides some good news:

-    Home sales and building permits increased by double digits for the first half of 2010 compared to the same period in 2009.
-    Foreclosures in the Pikes Peak Region fell 10% for the same period.

On the down side, he reports:

-    Foreclosures create distressed property sales which have lowered appraised values below purchase prices/mortgage balances, discouraging sales listings.
-    Declining household incomes have prevented many homeowners from qualifying to refinance their current homes.

He concludes:

-    It’s a buyer’s market: house prices, while recovering, are still below prices of a few years ago.
-    Low interest rates are still attracting buyers.
-    Lenders are more diligent about qualifying potential buyers, reducing the number who qualify for new loans, but… the market always comes back”

Article From BuyAndSell.HouseLogic.com
By: Marcie Geffner
Published: June 10, 2010

Consider before you ignore or outright refuse a very low purchase offer for your home. A counteroffer and negotiation could turn that low purchase offer into a sale.

You just received a purchase offer from someone who wants to buy your home. You’re excited and relieved, until you realize the purchase offer is much lower than your asking price. How should you respond? Set aside your emotions, focus on the facts, and prepare a counteroffer that keeps the buyers involved in the deal.

Check your emotions

A purchase offer, even a very low one, means someone wants to purchase your home. Unless the offer is laughably low, it deserves a cordial response, whether that’s a counteroffer or an outright rejection. Remain calm and discuss with your real estate agent the many ways you can respond to a lowball purchase offer.

Counter the purchase offer

Unless you’ve received multiple purchase offers, the best response is to counter the low offer with a price and terms you’re willing to accept. Some buyers make a low offer because they think that’s customary, they’re afraid they’ll overpay, or they want to test your limits.

A counteroffer signals that you’re willing to negotiate. One strategy for your counteroffer is to lower your price, but remove any concessions such as seller assistance with closing costs, or features such as kitchen appliances that you’d like to take with you.

Consider the terms

Price is paramount for most buyers and sellers, but it’s not the only deal point. A low purchase offer might make sense if the contingencies are reasonable, the closing date meets your needs, and the buyer is preapproved for a mortgage. Consider what terms you might change in a counteroffer to make the deal work.

Review your comps

Ask your REALTOR® whether any homes that are comparable to yours (known as “comps”) have been sold or put on the market since your home was listed for sale. If those new comps are at lower prices, you might have to lower your price to match them if you want to sell.

Consider the buyer’s comps

Buyers sometimes attach comps to a low offer to try to convince the seller to accept a lower purchase offer. Take a look at those comps. Are the homes similar to yours? If so, your asking price might be unrealistic. If not, you might want to include in your counteroffer information about those homes and your own comps that justify your asking price.

If the buyers don’t include comps to justify their low purchase offer, have your real estate agent ask the buyers’ agent for those comps.

Get the agents together

If the purchase offer is too low to counter, but you don’t have a better option, ask your real estate agent to call the buyer’s agent and try to narrow the price gap so that a counteroffer would make sense. Also, ask your real estate agent whether the buyer (or buyer’s agent) has a reputation for lowball purchase offers. If that’s the case, you might feel freer to reject the offer.

Don’t signal desperation

Buyers are sensitive to signs that a seller may be receptive to a low purchase offer. If your home is vacant or your home’s listing describes you as a “motivated” seller, you’re signaling you’re open to a low offer.

If you can remedy the situation, maybe by renting furniture or asking your agent not to mention in your home listing that you’re motivated, the next purchase offer you get might be more to your liking.

Marcie Geffner is a freelance reporter who has been writing about real estate, homeownership and mortgages for 20 years. She owns a ranch-style house built in 1941 and updated in the 1990s, in Los Angeles.

Article From BuyAndSell.HouseLogic.com

By: G. M. Filisko
Published: February 10, 2010

Have a plan for reviewing purchase offers so you don’t let the best slip through your fingers.

You’ve worked hard to get your home ready for sale and to price it properly. With any luck, offers will come quickly. You’ll need to review each carefully to determine its strengths and drawbacks and pick one to accept. Here’s a plan for evaluating offers.

1. Understand the process

All offers are negotiable, as your agent will tell you. When you receive an offer, you can accept it, reject it, or respond by asking that terms be modified, which is called making a counteroffer.

2. Set baselines

Decide in advance what terms are most important to you. For instance, if price is most important, you may need to be flexible on your closing date. Or if you want certainty that the transaction won’t fall apart because the buyer can’t get a mortgage, require a prequalified or cash buyer.

3. Create an offer review process

If you think your home will receive multiple offers, work with your agent to establish a time frame during which buyers must submit offers. That gives your agent time to market your home to as many potential buyers as possible, and you time to review all the offers you receive.

4. Don’t take offers personally

Selling your home can be emotional. But it’s simply a business transaction, and you should treat it that way. If your agent tells you a buyer complained that your kitchen is horribly outdated, justifying a lowball offer, don’t be offended. Consider it a sign the buyer is interested and understand that those comments are a negotiating tactic. Negotiate in kind.

5. Review every term

Carefully evaluate all the terms of each offer. Price is important, but so are other terms. Is the buyer asking for property or fixtures-such as appliances, furniture, or window treatments-to be included in the sale that you plan to take with you?

Is the amount of earnest money the buyer proposes to deposit toward the downpayment sufficient? The lower the earnest money, the less painful it will be for the buyer to forfeit those funds by walking away from the purchase if problems arise.

Have the buyers attached a prequalification or pre-approval letter, which means they’ve already been approved for financing? Or does the offer include a financing or other contingency? If so, the buyers can walk away from the deal if they can’t get a mortgage, and they’ll take their earnest money back, too. Are you comfortable with that uncertainty?

Is the buyer asking you to make concessions, like covering some closing costs? Are you willing, and can you afford to do that? Does the buyer’s proposed closing date mesh with your timeline?

With each factor, ask yourself: Is this a deal breaker, or can I compromise to achieve my ultimate goal of closing the sale?

6. Be creative

If you’ve received an unacceptable offer through your agent, ask questions to determine what’s most important to the buyer and see if you can meet that need. You may learn the buyer has to move quickly. That may allow you to stand firm on price but offer to close quickly. The key to successfully negotiating the sale is to remain flexible.

G.M. Filisko is an attorney and award-winning writer who has survived several closings. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.