"Stolen" article on Flipping Houses

So I stole this article from an email I received. With all the TV shows on Flipping, you'd think it was SO easy! In all honesty, I still have clients who are flipping but this trend has come and gone (Caveat--the 'simple' picks have come and gone by now; what's left are rough properties and many are in rough areas). In essence, the tone of the article (in my opinion) is 'be careful'. The pros are doing it still and having mixed success. Do you want to risk your entire nest egg as a 'newbie'? Perhaps not... Read on!

SEE BELOW FOR HEADINGS/TEXT OF EMAIL RECEIVED...

What's the Deal with Flipped Homes?
Americans love their home improvement and design shows. With entire channels dedicated to DIY, home decor and design, and everything related to U.S. real estate, we love the possibilities that lie within the real estate market in America. One popular aspect of many shows and publications is home or house flipping. We hear a lot about flipping homes, but what does that really mean? Is it feasible for everyone? Are there risks? Should you buy a flipped home, and what questions should you ask if your property search lands on a potentially flipped property?


What is Flipping?
Flipping is a predominately U.S. term used to describe purchasing a property with the intent of quickly reselling it for profit. Most of the time, properties that are purchased with the intent to flip are those that are distressed, abandoned, or otherwise in need of repairs that make the property less desirable to other potential buyers. Flipping has become increasingly popular throughout the U.S. in the last decade, and many people have become successful real estate flippers with the vast and varied real estate markets throughout the United States.


Can Anyone Flip a Property?
Many programs on television make house flipping look easily attainable to anyone and everyone. The fact remains that flipping a property is risky business that requires a large amount of work, experience, funding (preferably cash), excellent credit and a good understanding and almost intuitive knowledge of the real estate market. If you're interested in flipping properties, the best way to get started is by talking to someone who has experience and has had success in flipping real estate. There are many things to know about flipping real estate that should be addressed before the idea is even entertained.


What are the Risks of Flipping a Home?
There are risks with any kind of real estate investment, but inexperienced flippers can make a number of mistakes. There are a number of costs that come with flipping a property, and new flippers can make the mistake of not having enough money to cover the entire project – from the acquisition of the property, to the renovations, taxes, utilities and more. Another risk of flipping properties is time, or lack of time. Finding the right property can take months, and once you own the property there is a time commitment to renovations, commuting, inspections, and ultimately the marketing and selling of the property.

Other risks that new flippers run into are not having enough knowledge about the real estate market and failing to purchase the right property for a flip; a lack of skills when it comes to working on the property and putting in the sweat equity (hard work) required to get it up to market standards; and ultimately lacking patience when it comes to the entire project as a whole.


Should I Buy a Flipped Home?
Often, flipped homes have mostly cosmetic changes done in order to attract buyers and ultimately get the property sold. You might fall in love with fresh paint and brand new appliances, and generally speaking, most flipped homes attract many buyers because they have a smaller initial to-do list than other properties on the market. If you're looking at a property that could be a flip, be sure to ask these questions: What is the home's sale history? If the home recently sold for much less than its current asking price, it's possible it is a flip. Does the outside of the home match what's inside? If the exterior of the home is older, and the interior looks brand new, it's very possible someone is trying to flip the property. Information is your best friend when it comes to a flipped home, so getting the most information up front will help guide you toward pursuing the property or not.

If you believe you're looking at a flipped home, consider asking the seller what changes have been made to the property, and check to see if any permits were issued for the work. Also, some buyers might be blinded by all the new interior cosmetic updates that they forget about the bones and foundation of the home. Regardless of whether a home is old or new, always hire an experienced and licensed inspector to check over the home to make sure you're getting the most for your money when it comes to buying a property.

Want to shorten the length of your mortgage? Avoid Bi-Weekly payment plans!

Some of my standard closing table banter is chatting about paying down your mortgage WITHOUT using a bi-weekly payment plan. Why not? Well, as the article suggests, you typically are charged for that 'service' and at the end of the day you won't save as much interest over the life of the loan. In simple terms, most bi-weekly offers I've ever seen typically quote 5.5 to 6.5 years interest savings. If you paid ONE extra payment per year***, you'd save greater than SEVEN years worth of interest. Why choose a bi-weekly payment plan at all?

Click HERE for the article!

***As an example, if your principal and interest payment is $1200 per year, you would pay one extra payment towards principal per year OR pay an extra $100 monthly (principal/interest payment, divided by 12)

Mortgage Changes for 2014

I received the following info from a realtor friend's email newsletter; thought I'd share... Happy 2014! Bo

Mortgage Changes to Know in 2014


The New Year is almost here, and with it comes a bevy of legal and regulatory changes, especially for the mortgage industry. To help potential homebuyers understand how the changes will affect their mortgage processes, Don Frommeyer, CRMS, President of NAMB (The Association of Mortgage Professionals), outlines some of the regulations set to start in January 2014.

“Since 2009, the housing market has been working to create standards and regulations that minimize the risk of another mortgage industry fiasco,” says Frommeyer. “The ability-to-repay mandate is a perfect example of this and it exemplifies how mortgage professionals are taking extra caution with every customer.”

Upcoming mortgage industry changes include:

- Ability-to-Repay Mandate: The CFPB designed this regulation to set a gold-standard for lending to ensure each and every borrower is a qualified borrower. Lenders will follow a set of guidelines to establish a consumer’s income, assets and obligations before deeming them eligible. The CFPB rules establish a standard for what the government considers a “qualified mortgage.”

- Decrease in FHA Loan Limit: The Federal Housing Administration (FHA) announced that beginning January 1, 2014, mortgages will be limited to $625,000, down from $729,750. Homebuyers looking to obtain a larger loan will have to apply for a jumbo loan, which will most likely come with a higher down payment. “For many areas of the country this change won’t be a huge issue as average home prices fall below the established limit. However, borrowers in metropolitan areas with higher average housing prices may face challenges when applying for mortgages as the 20 percent down payment associated with jumbo loans will be an enormous increase from a traditional loan’s 3.5 percent down payment,” notes Frommeyer.

- Caps on Loan Origination Fees: January 10, 2014 brings a rule for the Qualified Mortgage that points and fees on mortgages cannot exceed 3%.

- Tighter Regulations for Self-Employed: As the rules to create a QM (qualified-mortgage) take effect, people without a W-2 will face difficulty when they apply for loans. It’s more of a task for individuals to prove their debt-to-income ratio without the proper documentation, even if they have a high net-worth and perfect credit. The income is calculated bringing into play the customer write offs to reduce taxable income.

For more information, visit www.namb.org

Owner's Title insurance; why or why not?

I'm always surprised when someone chooses to waive their optional owner's title. This typically happens with a buyer from out of state (who is not well-versed in title issues found in Georgia) or with someone who thinks that they are covered by the Lender's title policy. I guess the easiest way to ponder that is to look at the name... "Lender's" versus "Owner's". Who is actually protected???

So the recent cash buyer 'saved' around $900 on their new purchase but what if someone makes a claim against the $240,000 equity in their new home? Considering the price differential, I'd say the choice is clear!

Still not convinced? Check out these links for some light reading! Be safe out there!

PROTECT YOUR INVESTMENT

WHY OWNERS TITLE

Atlanta Closing Attorney

It's funny how people 'find' you on the web. Obviously you can do a Google search for "Bo Wagner", though you will not only find me, but a tap dancer and marimba player from the band "Starbuck" (remember the song "Moonlight, Feels Right"?). Choosing the search term "Harris Wagner Law Group" will point you right to our website (or my original 'fun' site at www.boknowsclosings.com that I created prior to having an official site). You might even try searching for "real estate attorney" and other terms that the web dudes put together for SEO (Search engine optimization) and find us. Regardless, I hope you CAN find us as a) we spent some money putting up www.harriswagnerlaw.com and b) we want to be YOUR firm of choice.

To continue with buzz words, what's our USP? Our "unique selling proposition" is actually no different than many other firms out there. We all offer 'service' and promise to take care of your customers. Likewise there are firms out there that are both cheaper or more expensive to work with. Ditto for some firms that may have a disco (my word, means a really 'trick' or 'cool') system for ordering titles or emails that keep you in the loop each time a document is received. All that is great, but our USP is really tied up in 5 things:

Bo, Susie, Jeff, and Will (Ellen too!)

WE are the USP and WE make this a 'family' affair. Every person working in a real estate firm gets paid for their efforts (well, maybe not last year : ) but do they have true ownership in the firm? Sure, the partners or owners actually have ownership, but how important is that title order or contract on the fax to them? Is it a paycheck or a person? Obviously we aren't in this as a charity; I do need to pay my own mortgage. However, I know that each person walking in the door is hugely important to us. YOU bring your friends/clients/co-workers/referrals to us; not only is it our JOB to take care of them, we are lucky enough that you are entrusting them to us! I've shared the tears of a widow selling her old home that's become too much for her to handle; I've laughed at the excitement of a first-time homebuyer overwhelmed at the stack of paperwork. From time to time we've even dealt with situations where the buyers and sellers aren't getting along. We've stayed late on a Friday to make sure that a transaction is closed so the movers can do their job for the 'homeless' buyers moving from out of state.

WHY? We LOVE our job! We LOVE the people! This is our job, this is our LIFE. Each time we sit at the closing table, the world revolves around the people sitting at that table--not me. Other closings may be blowing up or we may have issues behind the scenes but that closing table is a 'refuge' and we will take care of everyone there. Sometimes I feel 'evangelical' as this process can take the form of a ministry for me. In my life I am far from perfect--but at that closing table, I know that I have to take care of the people surrounding me. We are all home owners here, we have our own stories and problems we face. We all have had good experiences with firms and bad--that's why we opened our OWN firm. We understand how this process works and the way it feels when something does or doesn't work. The last thing I'll say is this: WE CARE. Give us a shot and you'll see that passion at work. Real Estate is what we do. It's ALL we do. Come see us soon!

Autographs here!

It's always nice to see your name in print--well, let me edit that... It's always nice to see your name in print for a POSITIVE story! Read THIS ARTICLE from the AJC and hear a bit of positive news about Real Estate. Plus, it's great to have a comment from our own Jeff Harris included! Cheers! Bo

Headline: "Not much impact from repeat buyer credit"

Saw this article on my startpage today; my response is a big DUH. The points made in this story are correct (that the 'carrot' may not be big enough, and you can't buy a home without a job). However, the main point is the one that was not stated: this tax credit was worthless from day one. Read the actual law--I'm in the middle of working on taxes right now (don't get me started, but all I can say is PASS the FAIR TAX!) so I will simply refer you to this prior post to explain the tax credit. In essence I believe that you had to be in the same house over 5 years (i.e. it had to be your principal residence for 5 of the last 8 years) to be eligible for that tax credit. Stop right there... How long have you lived in your current home? I have NEVER lived in one house for 5 consecutive years. SO I couldn't even get this tax credit if I wanted it! So we have a highly transient populace and the 'move up' market is definitely transient. Is this $6500 credit going anywhere? Not as it was written friends.... Our 'friends' in Congress didn't help us at all with that one.

What's it going to take? $8,000 + $1,800 tax credits are here!

If you are a first-time homebuyer, you can receive an $8,000 tax credit for your home purchase. Like the TV ads say, "But wait, there's more!" FHA is working on sorting out a way to allow buyers to use that tax credit as a loan/down-payment! Details aren't finalized, but keep that in mind as you get out there and look at houses. Likewise, eligible properties for sale in Georgia will allow you to take an $1,800 deduction on GA taxes as well!

So is $9,800 too small a sum for you? What's it going to take?