Archive for February, 2012
Could rising rents bump up home sales?
Wednesday, February 29th, 2012Home sales may get a boost from the rising prices occurring in the rental market, which is making it cheaper to own rather than rent in a growing number of cities.
“We might see a spring season better than the numbers are predicting,” Jay Brinkmann, the Mortgage Bankers Association’s chief economist, said during the MBA conference in Florida this week.
The number of renters in the country increased during the housing crisis, while homeownership dropped to a 14-year low. But with rental costs rising nationwide, more renters may be lured to buying a home, particularly with home prices falling and mortgage rates hovering at record lows.
Mike Fratantoni, MBA’s vice president of economics and research, is forecasting home sales to increase 10 percent in 2013. An improving employment picture also is expected to have a positive impact on housing, MBA economists noted.
Still, “everything is going to be based overall where the economy goes,” Brinkmann said. “This is going to be a slow year. There are a number of headwinds we’re facing in terms of economic growth.”
Source: Florida Realtors Reprinted with permission. Florida Realtors® All Rights Reserved
Six questions to ask when shopping for homeowners insurance
Wednesday, February 22nd, 2012Homeowners should work with experts to determine the type of homeowners insurance they need and the amount of coverage.
“Besides knowing the basics of what a standard homeowners insurance policy covers, consumers should ask a series of questions – and receive satisfactory answers to each of them – before buying a new policy or renewing an existing one,” says Michael Barry, vice president, media relations, Insurance Information Institute (I.I.I.). I.I.I. is a nonprofit, communications organization supported by the insurance industry.
According to I.I.I., there are six basic questions everyone should ask before buying or renewing a homeowners insurance policy:
1. How much would it cost to rebuild my home in its current location in the event of a total loss? Ideally, a homeowners insurance policy should cover the cost of building a new home from scratch. In general, homeowners policies cover partial or total damages caused by fire, hurricane, hail, lightning or any other disaster if it’s listed in the policy. Flood and earthquake-related losses must be insured separately because both perils are excluded in standard homeowners insurance policies.
2. How much is my personal property worth in the event of a total loss? A homeowners insurance policy should cover the cost of replacing all personal property (furniture, appliances, clothing) should it be stolen or destroyed by fire, hurricane or another insured disaster. Most companies provide personal property coverage equal to about 50 to 70 percent of the amount of insurance on the home’s structure. (A $100,000 policy for the structure would have perhaps $50,000 to $70,000 worth of personal property coverage.)
However, the best way to determine personal property coverage in a specific situation is to conduct a home inventory. I.I.I. provides online software to help homeowners catalog and value possessions (link underlined to: https://www.knowyourstuff.org/iii/login.html) as well as an iPhone app.
3. How much liability protection do I need? Liability covers homeowners against lawsuits for bodily injury or property damage caused to other people, including damage caused by pets. The liability portion of a policy pays legal defense costs and any court awards – but only up to the limit set in the policy. It’s effective not just inside the home but also anywhere in the world. Liability limits generally start at about $100,000, and many insurance agents will recommend at least $300,000. Homeowners with significant assets may want more; others may want less.
4. What level of additional living expense coverage do I need? The Additional Living Expenses (ALE) provision is found in standard homeowners insurance policies. It pays for the costs of living away from home if damage from an insured disaster makes the house uninhabitable. ALE covers hotel bills, meals and other expenses above customary living expenses.
ALE coverage differs from company to company. Many policies provide coverage equal to about 20 percent of dwelling protection. For example, if the structure of your home is insured for $100,000, you would have $20,000 of ALE coverage. Some companies impose a time limitation, such as 12 to 24 months.
5. Should I buy a separate flood and/or earthquake insurance policy? Flood coverage is available from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers. Earthquake coverage is usually available in the form of a supplemental policy.
6. Do I qualify for any discounts? Homes with smoke detectors, burglar alarms or dead-bolt locks often get a premium rate discount. Sophisticated sprinkler systems and alarms that ring at monitoring stations often reduce homeowners insurance premiums too. Ask an agent. If you are at least 55 years old and retired, for instance, you may qualify for a discount of up to 10 percent at some companies. If you have completely modernized your plumbing or electrical system recently, a few companies may provide a price break.
Source: Florida Realtors Reprinted with permission. Florida Realtors® All Rights Reserved
Banks offer more cash incentives for short sales
Thursday, February 16th, 2012More banks are offering homeowners incentives to sell their houses in a short sale to avoid costly foreclosure expenses for the bank. In fact, some banks are offering struggling homeowners as much as $35,000 to do a short sale, according to CNNMoney.
Many homeowners have been surprised at banks’ recent willingness to approve short sales.
“Initially, the homeowners are skeptical,” says Elizabeth Weintraub, a real estate professional in Sacramento, Calif. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”
For banks, the incentives have proven to be a smarter move than letting a property fall into foreclosure.
“The first choice is a modification, but if that’s impossible, then a short sale is a faster, more efficient solution,” says Tom Kelly, a spokesman for Chase Mortgage.
With a foreclosure, homeowners stop making their mortgage payments and usually property taxes as well. They also often put off maintenance issues, which can cause the home to lose value even more. Foreclosed homes sold, on average, for 22 percent less than homes not in foreclosure in December, according to National Association of Realtors®’ data. For comparison, discounts for short sales were about 14 percent.
“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” says John Hayton, a short sale specialist.
Source: Florida Realtors Reprinted with permission. Florida Realtors® All Rights Reserved
Tax audits aren’t as rare as you think
Wednesday, February 8th, 2012You’ve probably heard that the odds of being audited by the IRS are about the same as being struck by lightning. While holding a winning Powerball ticket. On your birthday.
Technically, that may be true. In 2010, the IRS audited 1.0 percent of taxpayers. For middle-income taxpayers, the percentage was even lower. Only 0.6 percent with adjusted gross income of $25,000 to $75,000 were audited, according to the IRS.
But traditional audits are just one way the IRS enforces the tax laws. Increasingly, the IRS is relying on what IRS Taxpayer Advocate Nina Olson calls “unreal” audits. These typically come in the form of a letter alerting you to errors or omissions on your return. While these audits are less intrusive than full-scale audits, they can still cost you real money.
In 2010, more than 9.2 million individual taxpayers were subjected to “unreal” audits, according to an analysis by the Taxpayer Advocate Service. When combined with full-scale examinations, that boosts the percentage of individual taxpayers audited to 7.4 percent.
Moreover, while real audits tend to target the wealthy, the majority of individuals who are subject to unreal audits are low- or middle-income taxpayers, Olson says. (For more details, go to taxpayeradvocate.irs.gov/blog.)
Unreal audits fall into three categories:
• Automated Underreporter (AUR). Income on a taxpayer’s return doesn’t match income reported to the IRS by third parties, such as financial institutions and employers.
• Math error notices. These inform the taxpayer that the IRS has corrected mathematical or inconsistent entries on his or her tax return.
• Automated Substitute for Returns. These are typically sent to taxpayers who didn’t file a return. The IRS uses information from third parties to create a return and calculate how much the taxpayer owes.
What to do
Typically, these IRS notices include a bill for unpaid taxes, which means you should never ignore them, says Edward Karl, vice president-taxation for the American Institute of Certified Public Accountants. But you shouldn’t automatically assume the IRS is right, either, he says.
For example, incorrect information provided to the IRS by your bank or other financial institution could trigger an AUR, says Benson Goldstein, senior technical manager for the AICPA.
Likewise, a substitute return may not include all of the deductions and credits you’re entitled to receive, Karl says. For example, a substitute return will typically use the standard deduction, even if the taxpayer has a mortgage.
You should file a return even if it won’t give you a better outcome than the one provided by the IRS, Goldstein says. Once you file, the IRS has 10 years to collect unpaid taxes, he says. If you don’t file your return, the IRS will be able to pursue you indefinitely, even if it files a return on your behalf.
Fighting an unreal audit requires perseverance, Olson says. Be prepared to provide documents supporting your case, and plan to spend a lot of time on the phone, she says. If you’re unable to resolve the issue, contact the IRS Taxpayer Advocate Service.
Avoiding trouble
How to avoid a notice from the IRS:
• Check Social Security numbers. If you provide an incorrect Social Security number for a dependent – or fail to provide one at all – the IRS will disallow the exemption. In tax year 2009, nearly 300,000 tax returns contained incorrect identification numbers for dependents, according to the Taxpayer Advocate’s Office.
• Don’t ignore third-party errors. If you receive a tax form with incorrect information from a financial institution or other third party, try to get it fixed before you file your taxes. If that’s not possible, report the amount on your tax return and make an adjustment to correct the error. Most tax software programs provide a way to explain the discrepancy
Source: Florida Realtors Reprinted with permission. Florida Realtors® All Rights Reserved
Obama details broader housing refinance plan
Thursday, February 2nd, 2012President Obama released more details today about a proposed housing plan first announced during his State of the Union address. The National Association of Realtors® (NAR) quickly backed the program, but it faces an uphill battle in Congress.
“As the nation’s leading advocate for homeownership and housing issues, NAR knows that stabilizing the housing market is key to the health of our economy and communities across the country,” says NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami and 2002 president of Florida Realtors. “We are pleased that the president released a plan to help America’s struggling housing market and homeowners. Improving access to simple, low-cost refinancing and streamlining the process will help hardworking families who have stayed current on their mortgage payments and will go a long way to helping keep more families in their homes.”
Obama’s plan would help eligible, underwater homeowners who are current on their mortgage payments to refinance or modify their loan into safer, more affordable mortgages at today’s historically low interest rates. Homeowners could potentially save hundreds of dollars each month, and it could reduce foreclosure rates.
The plan also announced a Federal Housing Finance Administration (FHFA) pilot program to transition Real Estate Owned (REO) properties into rental housing. However, NAR urged FHFA to proceed cautiously with any REO-to-rental program, pointing out that the nation’s housing markets are complex and varied. According to NAR, any REO-to-rental program should involve substantial participation of local market experts, especially licensed real estate professionals.
The plan needs Congress’ approval to move forward, however. To pay the $5 to $10 billion cost, Obama recommends a new fee on large banks that failed to pass when recommended earlier. Obama, though, says he’s also willing to consider other ways to pay for the program.
“Realtors are eager to work with Congress and the administration to put the plan into action,” said Veissi. “We hope that the president and Congress will work together to pass the necessary legislation.”
Source: Florida Realtors Reprinted with permission. Florida Realtors® All Rights Reserved