We are planning to buy some real estate this year as an
investment. We have been doing research on the web, but get confused
over terms like FHLMC, REO and ARM. Is there an easy way to decipher
all this information?
A
good real estate broker will be willing to spend time with you to help
educate you in the various aspects of real estate investment. He or she
should be able to suggest different types of property investments to
suit your particular goals.
As to definitions
for all the different acronyms used in real estate (and otherwise), you
may wish to visit a fun web site http://www.acronymfinder.com. Simply
enter any acronym in the search field and the answer is instantly displayed!
My husband and I were told that our credit scores were low
when we applied for a condo loan. Why do we have to pay a higher
interest rate when we always pay our bills on time?
Simply
put, the higher your credit (FICO) score, the smaller the risk is perceived
to be by the lender. Paying your bills on time is important, but is only
one aspect of the equation. While the exact formula for determining a
credit score is a closely guarded secret, the three credit reporting
agencies Equifax (www.equifax.com), Experian (www.experian.com) and TransUnion
(www.transunion.com) may report widely varying scores on you!
Most lenders prefer to use the middle of the three scores for qualification
purposes. According to www.myfico.com,
too much debt, too much available credit, too many credit inquires
and too much new credit can all contribute to a lower
score. Check your scores before applying for a loan.
Erroneous information is common and can take some
time to correct.
When is a contract a contract? Our supposed contract
was rejected for a better one because we were
told that everything wasn’t
initialed.
We
receive many questions like this each and every month. What commonly
seems to occur is that after a buyer and seller have agreed but not yet
signed off on an offer to purchase, the seller receives a better
offer. The seller will usually call his/her attorney, who usually
advises that the contract is not a contract until everything is signed
off and every change is initialed. The seller will then inform
the buyer that their offer to sell is withdrawn. The seller then enters
into an agreement with the subsequent buyer.
The bottom line is that if you are a buyer in this market, you should
move rapidly to ensure that your contract is fully executed as soon as
is humanly possible. And of course, feel free to consult your attorney.
We have been looking for a moderate priced home in Destin since January,
but the prices just keep going up. Will prices go down later after the
summer?
Prices should
continue to go up through the end of the year. (2005)
Is there really a real estate bubble? With rising interest
rates, won’t prices start going down now?
Our prices locally are still way behind those of many other resort areas.
The demographics that have been driving resort markets in general should
continue to do so for another 10 years, give or take. However,
with an average sales price in Destin last month of nearly $700,000,
many buyers are simply being priced out entirely.
As to the long term interest rates, they have remained steady. In
fact, they have remained virtually unchanged over the past two years. But
let’s face it, some prognosticators always believe the sky is falling,
whether the market is good or bad. Personally, we do not believe
that there is a real estate “bubble”. While the rates
of appreciation we have seen recently may slow eventually, real estate
should continue to be your best investment strategy.
How can we sell our predevelopment condo to a new buyer
before we have to close on it?
One common process would be to assign your contract to a new buyer.
This "new buyer" would pay you your profit, which is the difference
between your originally contracted price with the developer and the price
you are now willing to sell for. Additionally, the new buyer replaces
your deposit funds in escrow, then assumes your obligations to the developer.
However, some developer contracts are non-assignable, in which case
a simultaneous closing may be your next best option. This is less desirable
in that two closings must actually occur, and the overall closing costs
will be considerably greater.
We are having trouble finding an affordable home in Destin.
What is considered affordable housing now?
The average price for a single family home in Destin was more than $650,000
in the month of June. The median price for the same period last year
was $465,000. The
term “affordable housing” can become somewhat subjective. A
home in the upper $200’s is now considered a starter home. On the
bright side, we are well below the price ranges of places like Marco
Island and Key West where averages can run well over $1,000,000.
How will Hurricane Dennis affect real estate values this
year? Is the market slowing down?
The only “Dennis” effect will probably be positive. Demand
is still very strong for quality, properly priced homes and condos here
in our area. It is true that the number of homes and condos sold this
year is less than last year, but that number still exceeds the number
sold in 2003. And 2003 was a very, very good year! Also to consider is
the fact that despite slightly slower sales this year, the average sales
prices have continued to increase. In a nutshell, the current real estate
market looks slow when compared to 2004. By any other standard, it is
quite healthy!
Is this a good time to sell our home? We keep hearing
that prices are going down. Should we wait until next spring?
It is true that the market has slowed in terms of the number of homes
sold but average prices are still much higher than last year. Additionally,
properly priced homes in the Destin/Sandestin market last month averaged
a mere 83 days on the market. In Ft. Walton Beach the homes that sold
last month averaged only 50 days on the market. While there are many
more properties on the market today as opposed to last year, there are
not more properly priced ones.
In answer to your question though, if it suits your needs to sell now,
put your home on the market now. Price it right and the odds are in your
favor. If the market could speak, it would probably say "The rumors
of my demise have been greatly exaggerated!"
My husband and I are trying to buy investment properties.
Is it a good idea to set up a corporation to do this?
Generally speaking, a limited liability company, or LLC has become a
very popular method of investment property ownership. A LLC is
a simplified corporate structure that will allow some options as to how
you are taxed, as opposed to a partnership, C-Corp, S-Corp or sole proprietorship
which do not. Liability protection is another big reason that many
recommend this method of ownership.
There are a few things to consider though. You may have to pay a higher
rate of interest on a mortgage if buying in the name of a corporation. Additionally,
there are costs associated with setting up and maintaining a corporation,
including an annual corporate tax return. Consult your tax professional
first to determine if this would be the best option for you.
Condo prices seem to be going down now, but our recent offer
was rejected by the seller for being too low. How do we know what
to offer?
Since we do not know what you offered on which condo, we can’t
tell you how realistic your offer was. However, you need to consider
the comparable sales prices, not the comparable listings prices when
submitting an offer to purchase. Of the 1,636 condos on the market in
the Destin/Sandestin area, only 30 actually sold last month. These 30
condos were realistically priced and consequently averaged a mere 90
days on the market. These condos sold for 94.2% of list price which equates
to a 5.8% price reduction.
Let your REALTOR do the homework for you. He/she should be able to provide
all the data necessary to help you make an informed decision and a reasonable
offer.
We are selling our Destin condo in order to buy a predevelopment
condo in Panama City that’s supposed to be finished this coming
spring. Can we do a 1031 exchange to save the capital gains
taxes?
Yes, you should be able to, assuming that both condos are held for investment.
You will need to hire a qualified intermediary up front to handle all
the required paperwork and coordinate all the details for you. However, it
can be risky to identify new construction as the replacement property
in a 1031 exchange. Construction delays often occur and you could
easily end up beyond your 180 day window of opportunity to perform the
exchange. Additionally, you must file for an extension of your tax filing
deadline in order to take full advantage of the 180 day window. The exchange
deadline on 1031 exchanges is 180 days from the date of the sale of your
relinquished property or your tax filing deadline, whichever comes first. April
15th is less than 180 days away.
Is now a good time to sell our condo or should we wait until
spring?
As of the end of November there were 2,074 condos on the market from
the Sandestin area west to Okaloosa Island. A grand total of 45
actually sold and closed for the month. The good news is that the “days
on the market” averaged a mere 97 days, which is not really bad. Additionally,
these condos sold for 96.2% of their asking price, which equates to a
3.8% reduction off the asking price.
To answer your question, now is probably better. The odds of
it selling if NOT on the market are poor. The odds of it selling if placed
on the market are much greater. Average sales prices and the number
of days on the market are reasonable today. If it makes financial
sense for you to sell now, then don’t let market speculation alter
your plan!
When you make an offer to buy a property, what happens to
the earnest money that we submit? Is it just held until the closing?
Typically, the escrow agent must deposit your earnest money right away.
Once you reach an agreement with the seller and have fully executed a
sales contract, the deposit is generally not refundable without the seller’s
approval.
Offers are frequently written to allow for the deposit to be tendered
within 48 or so of contract acceptance. Otherwise, if negotiations
fall apart early on, you would probably not be able to get an immediate
refund. The escrow agent would need to allow enough time for your check
to clear before they can issue your refund. |
