Take the Mystery Out of Real Estate Appraisals

Appraisals are meant to help buyers avoid a potentially bad real estate investment. It’s meant to help the lender determine how much money they will lend (both for purchases and refinancing).



There are other types of appraisals, too—those that determine the assessed value of your home for property tax purposes or determine how much replacement coverage an insurance company will place on your home.

Arriving at an appraisal value is no easy task. For example, some of the major factors have more to do with the neighborhood, such as:

• Type of area-- housing development, acreage, condo, and or townhome
• Recent sales prices of other homes in the area
• The amount of time between when it’s listed and when it’s sold
• The distance to schools, shopping, fire and police services
• The condition of other homes in the neighborhood

Now, for the home itself. After determining if the home is in good condition (or not), here are some of the factors the appraiser will take into account:

• Total square footage of living space
• Other buildings such as garages, storage barns, etc.
• Age of the home
• Size of the lot or acreage
• Number of bedrooms & baths
• Unusual features (like 2 kitchens)
• Extras (like fireplaces, sound system, swimming pools, etc.)

And the final step is putting it all together by comparing your home, to other homes that have sold. Since no two homes are exactly alike, the appraiser makes “adjustments”. If your home has 2 bathrooms, and the home down the street has 2-1/2 baths, the appraiser will make a dollar adjustment because you have ½ a bath less than the other property.

That’s where local knowledge, understanding of value adjustments, and unbiased judgment by the appraiser makes the difference. And yes, tax assessors basically use the same criteria when determining the value for tax purposes.

5 Housing Predictions for 2011 from Freddie Mac

1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.
2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.
3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.
4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.
5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the "seriously delinquent rate" — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Who needs a Mortgage Deduction?

• Repealing the mortgage interest deduction (MID) is a form of tax increase.
• Families with children would bear more than half of the total increase.
• IRS data show that taxpayers in the 35 - 45 age group take the largest MID on average compared to any other age group of taxpayers.
• First time home buyers would be hurt the most if the MID is curtailed.
• Current data from the IRS show that 65% of the taxpayers who have claimed the MID made less than $100,000.
• The housing market has not emerged from the crisis that began in 2007.

Congress: The Facts Speak for Themselves


The 1.1 million members of the National Association of REALTORS® strongly oppose proposals to reduce the mortgage interest deduction (MID). Hard-working American families’ budgets are already stressed. Reducing or eliminating the mortgage interest deduction would pull even more money directly out of their wallets. If this crucial deduction is eliminated or reduced, home values will further erode. That’s something America simply can’t afford in this unstable housing market.

Carbon Monoxide Poisoning: What to Watch Out For!

Any appliance or device in your home or garage, that burns fuel, can produce carbon monoxide. Some causes of carbon monoxide poisoning are:

1. Dirty chimneys in fireplaces or wood stoves
2. Improper installation of gas stoves
3. Portable heaters
4. Appliances using gas or kerosene
5. Cracked furnace exchange
6. Cigarette smoke
7. Vehicle exhaust
8. Improper ventilation for gas dryers
9. Disconnected or damaged water heater flue

Carbon monoxide is referred to as a “silent killer” and if you feel strange or suddenly feel sleepy, get fresh air, open windows and doors and turn off all appliances and fuel-burning devices. While carbon monoxide detectors aren’t foolproof, they should help you before it’s too late.

What You Need to Know about the New Credit Card Laws!

The Credit Card Accountability, Responsibility and Disclosure Act 2009 went into effect February 22, 2010. Basically it improves customer disclosures but doesn’t help with those high interest rates.

What we are seeing now is credit card companies increasing rates on existing customers (they can do this with just a 15-day notice) even if you have never had any lates!


The credit card companies are also lowering your approved limit on cards regardless if you had a great payment record.


When the credit card companies lower your approved limit on your card(s) it lowers your ratio of open debt to available credit, known as the “Revolving Debt ratio”. This can affect 30% of your score so it has an impact if they are eliminating some of your credit line.


Here are some of the “wins” for consumers:

• Fee Restrictions – Starting on October 22, 2010 unless you give the credit card company permission they can’t charge you “over the limit fees” and if they do, they cannot exceed $25 or, if you are chronically late, $35. (This is a 50-80 billion dollar lose to the banks.)

       They also cannot charge you for making a payment over the
       phone or internet (they can, though, if you want the
       payment expedited).

       Limits fees on “subprime” cards, so always make sure you read
       all the terms and conditions.  (Less than 4% of consumers read
       terms and conditions).

• Bans Double Cycle Billing – some credit card companies were billing for current and previous balances.
• Credit Card Companies now has a mandatory 21-day grace period - statements must be sent 21 days before they are due – used to be 14 days.  If you were late you probably paid the high daily interest rates!  This took effect Aug 2009.  So make sure you pay by due date!
• Gift Card – You gift card won’t expire for 5 years, so if you got one for Christmas or you Birthday and you stuck it in a drawer, it still might be good. Also card issuers cannot charge inactivity fees unless the card has not been used for 12 months.
• Student Credit Cards – If you are under 21 you will have to provide a co-signer or be able to prove financial independence.  Otherwise, you will be unable to get a credit card.
• Your Payments will be applied to the balance with the highest interest rate first.
• You get a 45 day notice of interest rate hikes (used to be 15 days) – Any changes to terms and conditions must give a 45-day notice and if you don’t like the new terms you can “opt out”. Beware if you Opt-Out, they may be able to charge you 2-5%, up your rate to 29% and close your account!
• Retroactive Rate Increases – you will have to read your cards terms and conditions but basically rates can’t be raised until after the first year of issuance and if offered a promotional rate it’s good for 6 months. I want to add that there are a few exceptions to the rule- so read the fine print.

The bottom line?  Since the banks are losing big bucks with the new guidelines, the average rate on new cards is 14.4% plus higher fees! (Hey they have to make it up somewhere, right?) Watch for them to raise rates in other areas.  And of course the worse your credit score is the higher your rates and fees.

Should I Refinance Now?





Mortgage rates on 30-year, fixed rate loans are hovering near the lowest level on record since 1951. While some home buyers are putting their home purchases on hold hoping rates will go even lower, many industry experts are advising homeowners with rates in the upper 4 percent range to refinance.

MAKING SENSE FOR MY READERS

• Homeowners with rates in the upper four percent range are likely to benefit from refinancing, according to Peter Ogilvie, president of First Residential Mortgage Corp. in Santa Cruz, Calif. He says refinancing to a lower rate often produces monthly savings, as long as the borrower can qualify under today’s industry credit guidelines and loan-to-value underwriting standards.
• Some homeowners also may be good candidates for no-cost refinancing, where the title, escrow, and lender closing charges either are added to the mortgage principal balance or paid for over time with a slightly higher rate. The upsides to this option are reduced monthly payments, improved cash flow, and no outset of dollars at settlement.
• Borrowers who want to become debt-free faster and can afford it, ought to consider refinancing out of a 30-year term loan into a 15-year term. Fifteen-year mortgages carry lower rates than 30-year loans, but their faster amortization schedules require higher monthly payments.
• When considering whether refinancing is the best option, consumers are advised to take into account all of the fees associated with the refinance and decide if the money saved is worth the cost of the refinance.

The Largest Tax Increase in U.S. History Will Occur in less than 65 Days!

Will the White House and Congress take action between now and December 31, 2010 to prevent the biggest tax increase in US History? That is yet to be seen, but going into the November 2nd Mid-Term election the White House has reaffirmed its position that it will allow the automatic tax increase to occur for the “rich.” There is suggestion that the “rich” are not paying enough. Let’s see who is “rich” and what the “rich” are really paying. Odds are you are one of the “rich.” If you earned above $113,799 (Adjusted Gross Income) in 2008, you were in the top 10% of all income tax earners – you were “rich.” How much did the “rich” pay according to the latest IRS statistics (the 2008 numbers were just released):

• The top 10% of income tax payers are everyone that has an AGI above $113,799 – you paid 69.9% of all federal income taxes
• The top 5% of income tax payers are everyone that has an AGI above $159,610 – you paid 58.7% of all federal income taxes
• The top 1% of income tax payers are everyone that has an AGI above $380,354 – you paid 38% of all federal income taxes

The Tax Increases
The tax increase that will automatically come to pass on January 1, 2011 will hit you at virtually every level:

Increased Income Taxes

• The 10% bracket rises to an expanded 15%
• The 25% bracket rises to 28%
• The 28% bracket rises to 31%
• The 33% bracket rises to 36%
• The 35% bracket rises to 39.6%
• The child tax credit will be cut in half from $1000 to $500 per child.

Increased Capital Gains Taxes

• The 15% bracket becomes 20%

Increased Dividend Taxes

• The 15% bracket rises to 39.6%

Increased Estate/Death and Transfer Taxes

• The death tax goes from 0% to 55% for estates over $1 million
• The gift tax goes from 35% to 55%

Increased Alternative Minimum Tax

• Will jump from 4 million taxpayers to over 28 million taxpayers

WARNING – Tax Hikes Are Now 3 Months Away!

It is now virtually certain America will see a wave of tax hikes in just three short months. Congress can still take action between now and January 1st, 2011, to stop the automatic increase, but the odds of them doing so dwindle by the day. The following is what the current law dictates will happen on January 1st.

Income Taxes Climb

The existing 10% bracket is eliminated. The new low bracket will be 15%. The existing 25% bracket will be replaced by a new 28% bracket. The existing 28% bracket will be replaced by the new 31% bracket. The existing 33% bracket will be replaced by the new 36% bracket. The 35% bracket will jump to 39.6%.

Higher Capital Gains Taxes

Capital gains rates will increase on long term investments from 15% to 20%.

Extraordinary Increases in Dividend Taxes

The taxes on dividends will jump from 15% up to 39.6% as they are taxed as ordinary income.

Marriage Penalty Worsens

Married couples will once again pay a higher amount of tax than a single person.

Itemized Deduction and Personal Exemption Phase Out Roars Back to Life

Itemized deductions are those few precious deductions given to individuals on their personal tax return such as mortgage interest, state and local taxes, charitable deductions. Taxpayers will lose $1 of itemized deductions for every $3 of AGI in excess of the threshold. Taxpayers above the threshold amounts will also lose their personal exemptions.

Estate Taxes Return and Surge

Estate taxes will return from the “grave” of repeal where they are currently 0% and spike with a vengeance to 55% on all amounts above a $1 million exemption.

Gift Taxes Climb

The gift tax rate is currently 35% on all amounts above $1 million. The gift tax rate will climb to 55% and the exemption will stay at $1 million.

Despite the politics at play, the lower tax rates we currently have do not just help the “rich”; rather they help everyone who pays federal income taxes. Over 40% of the voters in the 2008 US general election did not pay any federal income tax into the system. It is estimated that in the 2010 mid term elections close to 50% of the voters will not be paying any federal income tax into the system. The White House’s proposals to “only” raise taxes on persons making above $200,000 single or $250,000 married are effectively tax increases on the very persons who are paying the vast majority of income taxes currently. That is you.

We encourage you to do something about this at the ballot box on November 2nd.