My New Blog

There has been a lot of hype on the news media that has undermined buyer confidence. How do you determine what is true, realistic, or contrary to your best interest? The hype could become a self fulfilling prophesy unless you analyze your position. If you are thinking about purchasing real estate please consider these points. Please keep in mind that the opinions expressed are my own as a homeowner and real estate sales associate.

1. Jacksonville, FL has experienced approximately 15% annual increase in property values from 1999-2005. There had to be a correction eventually or no one would be able to afford a home. While sales have been reduced over the last two years Jacksonville still seems to be experiencing a 3% increase in property values of the homes that have sold. 

2. The buyers market that we are experiencing in this area will probably come to an end in the spring of 2009. Home purchasers and investors have a window of opportunity to build equity that can be realized in as little as 2-3 years.

Some options to realize this gain would be to purchase a home now and refinance it in the spring of 2009 in order to consolidate your personal debt and pay cash for a needed family car. As you know, in most cases, interest you pay on a car is not tax deductible, whereas, interest you pay on your home is, in most cases. Can you imagine being in a position where the only debt you owe is your home mortgage?

Another way to realize your gain would be to sell the property in the spring of 2010 when the market has recovered. Meanwhile, you have the option of renting the property out and either making some income or sheltering part of your job income from taxation due to being able to depreciate your rental property. Depreciate is a deduction that does not come out of your pocket. However, depreciation is an expense that is suppose to allow you to set back monies for home maintenance and repairs.

3. Real estate has always been on about a 7 year cycle of highs and lows. If you average appreciation over a 7 cycle the normal range would be 6-7% annually. That is a pretty good return for an asset you get to use every day to house your family. The 6-7 % appreciation does not include the tax advantages of sheltering part of your job income from taxation. There are other investments you might like to consider like IRA's or stock, however, when the housing industry is negatively effected the value of your IRA's and stock are effected also.

4. There are several programs available to first time home buyers and repeat purchasers to assist with their down payment and closing costs. Contact me at bkgravitt@comcast.net for a list of who to contact. In addition, builders are offering to pay part of the purchasers closing cost whether you are a first time home buyer or not. The AmeriDream program and the Nehemiah program also offer down payment and closing cost assistance to anyone (seller participation is required). These programs usually meet FHA guidelines and apply to purchases of properties valued under $264500.00. FHA programs generally allow the purchaser to finance into their loan part of the closing costs and some prepaid items like the first years mortgage insurance premium. This reduces the amount of cash needed to close on the purchase of your new home. If you can qualify for the payment your down payment can be as low as 3-5% of the purchase price. 5% down payment of a $264500 home would be $13225.00. The Florida Bond Loan Program will loan you up to $10000.00 of that amount at 0% interest with 0 payments. You would have to pay this loan back if you refinance or sell the home. Meanwhile, it increases your leverage and reduces your expenses on the initial purchase.

5. There are a lot more homes on the market now to choose from. In the past buyers experienced a bidding war on almost every property up for sale. This process drives the price of the home up. At present, there is approximately a 17 month supply of homes available. Sellers are more negotiable and their are fewer buyers to compete with. Credit requirements are more stringent which also reduces buyer competition. This drives the prices downward (supply v.s. demand). Builders have lowered prices $10000-60000 per home on their existing inventory and foreclosures and short sales are increasing. For example, you can currently buy a home in the Argyle (westside) area for ~$179000 that has 4 bedrooms, 2 baths, a living room/dining room combo, eat in kitchen, and den with a fireplace.

6. Many homeowners and mortgage companies are experiencing difficulties because of poor investment strategy. This is being blamed on the subprime lending practice. However, their mistakes do not have to be your mistakes. Learn from their experience. Don't agree to loan requirements that you will not be able to afford 3 or 4 years in the future. The average home buyer purchases a home to live in for life but statistics prove they will move again in 5-7 years. Circumstances change that we can not always foresee (death, divorce, job transfer, birth, disability). Be prepared to sell while the market is high in relation to the ups and downs of the 7 year real estate cycle. At present, I foresee the next peak as being spring of 2010. The peak after that might not come until 2017. This means that if you purchase a home now, the best time to sell may be either 3 years from now or 10. Check your personal goals to determine how this relates.

Your primary residence will probably be your most expensive investment. It is also the one that can yield you the greatest overall return for your money. Individuals who choose to rent damage their financial stability in the long run. Check with your friends and you will probably find that the ones that invested in real estate when they were young are probably the ones that are more financially stable after a 20-30 year span of time.

If you would like more information or to discuss your personal situation you may contact me at bkgravitt@comcast.net. 

Many of you may not be familiar with this term, however, it will become a common term over the next year. With sale prices dropping, sometimes the homeowner does not have enough equity in the property to cover their expenses of sale. This means that the seller would have to bring additional monies with them to the closing table in order to complete the transaction. In some cases this is not possible. However, some homeowners need to sell their homes anyway because they have been transferred by their company, divorce, death, disability, and other unforeseen occurrences happen.

This is where a "short sale" may come into play. If the homeowner is getting behind on their payments, then the mortgage company may agree to take less money for the payoff of the mortgage than originally agreed to by the homeowner. This helps both parties by allowing the property to be sold instead of going through foreclosure proceedings. This reduces expenses of the mortgage company and, in most cases, saves the homeowners credit. However, it is extremely important for the homeowner to stay in contact with the mortgage company and let them know what is going on.

If you can foresee that you are going to have a problem paying your mortgage you should begin taking steps before you are 30 days late with your payment. I would recommend that your first step should be to contact a Realtor that is familiar with the "short sale" process. The Realtor can assist you in determining the "fair market value" of your home and provide you with the necessary paperwork and advice needed to keep this event from ruining your credit.

I executed my first "short sale" in the 1980's when it did not have a name or specific forms or processes. I recently attended a seminar at the NEFAR offices in order to refresh my memory, get familiar with the new processes, and obtain copies of the necessary forms. Please contact me to assist you if you think you may need to exercise this option in selling your home. In times of financial and emotional crisis you need a friend that is experienced to advise you on your options.

Brenda Gravitt CRS, GRI

904-573-9638  bkgravitt@comcast.net