Real estate Q&A: Lease option is convenient but risky
FORT LAUDERDALE, Fla. – Dec. 14, 2012 – Question: I am considering buying a property from a friend. I don’t have the credit score necessary to get a loan due to a recent foreclosure. The seller offered to lease the property to me with an option to buy it at the end of the lease. What do you think? Is this something I should do? –
Answer: It depends on how much risk you can stomach. This sort of transaction is known as a “lease option” contract. Basically, the seller will lease the property to the buyer for a monthly rent that’s higher than market rent, with the extra portion going toward a deposit if the tenant exercises the option to buy within a certain time frame. But here’s the rub: This extra “option money” you pay typically isn’t refundable for any reason.

The terms of the final contract, including the purchase price, are pre-negotiated when the initial lease option contract is made. This may be an ideal solution for both you and the seller. You get to secure the house at today’s prices while your credit heals, and the seller has the property rented for a little extra money in the interim.

Of course, the danger is that when the time comes to buy, you could change your mind or be denied financing, causing you to lose your money. For many people, that’s too scary. Because this sort of deal is more complicated than the normal lease or purchase, it’s extra important that a clear contract is prepared and you fully understand your rights and responsibilities.






Rate on 30-year mortgage dips to 3.32%
Mortgage Rate Trend Index

Only 16% of industry experts polled this week by expect a rate increase over the short term, but the rest are divided (42% each) on whether they’ll fall further or stay roughly the same.

WASHINGTON – Dec. 14, 2012 – Average U.S. rates on fixed mortgages fell this week near record lows, providing more incentive for Americans to buy homes and refinance.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan dipped to 3.32 percent. That’s below last week’s rate of 3.34 percent. And it’s just above the 3.31 percent, the lowest rate on records dating to 1971.

The average on the 15-year fixed mortgage declined to 2.66 percent from 2.67 percent last week. The record low is 2.63 percent.

The rate on the 30-year loan has remained below 4 percent all year, helping spark a modest housing recovery.

Sales of newly built and previously occupied homes are up from a year ago. Home prices have increased. And builders are more confident in the market and are responding by starting construction on more homes.

Rising prices encourage more people to sell their homes. And they lead to more buying, in part because some start to worry prices could eventually rise further.

 Consumer spending drives nearly 70 percLower mortgage rates also have persuaded more people to refinance. That typically leads to lower monthly mortgage payments and more spending.ent of economic activity.







 FHA eligibility OK 3 years post-foreclosure

WASHINGTON – Nov. 1, 2012 – The Federal Housing Administration (FHA) insures home loans so banks can offer loans with lower downpayments and more flexible income requirements. For many Florida residents who went through a foreclosure, an FHA loan might be their best option to buy a home while prices remain reasonable and mortgage rates are still low.

Here's what the FHA says about loans after foreclosures and short sales:

• Previous mortgage foreclosure: Borrowers are generally not eligible for a new FHA-insured mortgage if, during the previous three years, their previous principal residence or other real property was foreclosed, or they gave a deed-in-lieu of foreclosure.

Exception: The lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of a wage earner, and the borrower has re-established good credit since the foreclosure.

Divorce is not an extenuating circumstance. An exception may, however, be granted where a borrower’s loan was current at the time of the divorce, the ex-spouse received the property, and the loan was later foreclosed.

The inability to sell the property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance.

• Borrower current at the time of short sale: A borrower is considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage, all mortgage payments on the prior mortgage were made within the month due for the 12-month period preceding the short sale, and installment debt payments for the same time period were also made within the month due.

• Borrower in default at the time of short sale: A borrower in default on a mortgage at the time of the short sale (or pre-foreclosure sale) is not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale.

Exception: A lender may make an exception to this rule for a borrower in default on a mortgage at the time of the short sale if the default was due to circumstances beyond the borrower’s control, such as the death of a primary wage earner or long-term uninsured illness, and if a review of the credit report indicates satisfactory credit before the circumstances beyond the borrower’s control that caused the default.

On a short sale, long-term job loss or layoff would be considered an exception considered to be circumstances beyond the borrower's control.

Note: Borrowers are not eligible for a new FHA-insured mortgage if they pursued a short-sale agreement on their principal residence simply to take advantage of declining market conditions.

© 2012 Florida Realtors®

House flipping is back
MIAMI – Oct. 17, 2012 – Buying up homes, rehabbing and reselling them for a profit was big during the housing boom. But when the housing market started to slump, house flippers nearly vanished.

As the housing market recovers, house flipping may be showing signs of re-emerging, according to The Washington Post.

In the first half of 2012, house flips increased 25 percent compared to a year earlier, according to RealtyTrac. The average profit on each property is $29,342, according to the real estate research firm.

“There are flippers in any market, but a market where home prices are appreciating is much more forgiving for flippers than a market where prices are depreciating,” says Daren Blomquist, vice president of RealtyTrac. “We have turned that corner in a lot of places in the last six months, so that’s going to attract flippers.”

Areas hit hardest in the housing crash are seeing some of the largest increases in flipping as investors buy foreclosures and short sales at large discounts. Phoenix has had the highest number of reported flips, followed by Las Vegas, Los Angeles, Miami and Atlanta.

Source: “Flipping Houses Is Once Again a Booming Business,” The Washington Post (Oct. 14, 2012)



Have a question about The 3.8% Tax?

I was reading the brochure from The National Association of Realtors about the new 3.8 % tax on some investment income that is supposed to take effect Jan 1, 2013.  For Realtors, the biggest thing I got out of this article is that this tax will not be imposed on all real estate transactions.  As a matter of fact, it states that it may impose this tax on some, not all, but some income from dividends, income from interest, rents less expenses and capital gains less capital losses.  And, the big factor is that the tax will only be imposed on individuals with an AGI above 200k and couples filing jointly with an AGI of more than 250k.  If you are worried about how this tax may affect you, I would suggest doing a little research on the subject.  NAR has a great brochure you can download along with a FAQ sheet and a Top Ten Things You Need to Know About the 3.8% Tax.  Just go to Realtor.Org for more info.