Ricke Realty Blog

Skilled & Trustworthy Realtors serving Elmhurst and beyond


Would you like to start saving money on your home energy useage, while simultaneously helping the environment? 

 

Following is a great program our company heard about through an Elmhurst Cool Cities Coalition presentation:

The Home Energy Savings Program is a joint program of Nicor Gas and ComEd that makes it easy for you to improve the energy efficiency and comfort of your home.

They provide comprehensive Home Energy Assessments to identify promising energy-efficiency upgrades, and then provide instant rebates and prequalified contractors to help you complete the recommendations.

They'll even install some simple energy-saving products during the assessment. Currently assessments are only $49 and offer services that could cost as much as $500* elsewhere (promotional price valid while funds last).

Benefits include:

  • Instant rebates of 70% up to $1,750 when you complete recommended energy-efficiency improvements such as insulation and air sealing.
  • Free installation of up to 10 CFLs, high efficiency faucet aerators and showerheads, hot water and cold water pipe wrap
  • Installation of a programmable thermostat, if desired, at a discounted price of $22.62.
  • A customized Home Energy Savings report detailing ways to save up to 20%† on your energy usage.

To sign up:  click here

*If you sign up, please let them know that you were referred by:  Energy Impact Illinois!*

Please Note:  You will be under NO obligation to complete all (or any) of the recommended improvements.

If you are looking to buy or sell in the Elmhurst or surrounding areas, one of Ricke Realty's trustworthy, knowledgable & experienced Realtors can assist you. Call 630.782.0100.

 

 

 

 


Health-care law’s 3.8 percent surtax will not affect many home sellers

When the U.S. Supreme Court upheld the health-care law in June, it restoked an issue that had been relativelyquiet for the past year: the 3.8 percent “real estate tax” on home salesbeginning in 2013 that is said to be buried away in the legislation.

 

Immediately following enactment of the law in 2010, waves of e-mails hit the Internet with ominous messages aimedat homeowners. A sample: “Did you know that if you sell your house after 2012you will pay a 3.8 percent sales tax on it? When did this happen? It’s in thehealth-care bill. Just thought you should know.”

 

 

Once challenges to the law’s constitutionality reached federal courts, the e-mail warnings subsided. But with major portions of the law scheduled to take effect less than six monthsfrom now, questions are being raised again: Is there really a 3.8 percenttransfer tax on real estate coming in 2013? Does it preempt the existing capital gains exclusions for home sellers, as some e-mails have claimed?

In case you’ve heard rumors or received worrisome e-mails about any of this, here’s a quick primer.

Yes, upper-income individuals face anew 3.8 percent surtax that takes effect Jan. 1 on certain investment income,including some of their real estate transactions. But it’s not a transfer tax and it’s not likely to affect the vast majority of homeowners who sell their primary residences next year. In fact, unless you have an adjusted gross incomeof more than $200,000 as a single-filing taxpayer or $250,000 for a couplefiling jointly ($125,000 if you’re married filing singly), you probably won’t be touched by the surtax at all. (You might, however, be affected by otherchanges in the tax code if Congress fails to extend the Bush-era tax cutsscheduled to expire at the end of this year.)

Even if you have income above thesethresholds, you might not be hit with the 3.8 percent tax unless you havecertain types of investment income, specifically dividends, interest, netcapital gains and net rental income. If your income is solely “earned” — salary and other compensation derived from active participation in a business — youhave nothing to lose from the new surtax.

Where things can get a littlecomplicated, however, is when you sell your home for a substantial profit andyour adjusted gross income for the year exceeds the $200,000 or $250,000thresholds. The good news: The surtax does not interfere with the currenttax-free exclusion on the first $500,000 (for joint filers) or $250,000 (for single filers) of gain you make on the sale of your principal home. Thoseexclusions have not changed. But any profits above those limits are subject tofederal capital gains taxation and possibly to the new surtax.

Julian Block, a tax attorney in Larchmont,N.Y., and author of “Julian Block’s Home Seller’s Guide to Tax Savings,” saysit will be more important than ever to document the capital improvements you  made to the property and the expenses connected with the house — including settlement or closing costs — because these items increase your tax “basis” and thereby lower your capital gains.

The National Association of Realtors’ tax staff provided this example of how the 3.8 percent levy mightaffect you next year:

Say you and your spouse have adjustablegross income (AGI) of $325,000 and you sell your home at a $525,000 profit.Assuming you qualify, $500,000 of that gain is wiped off the slate for taxpurposes. The $25,000 additional gain qualifies as net investment income underthe health-care law, giving you a revised AGI of $350,000. Since the lawimposes the 3.8 percent surtax on the lesser of either the amount that yourrevised AGI exceeds the $250,000 threshold for joint filers ($100,000 in thiscase) or the amount of your taxable gain ($25,000), you end up owing a surtaxof $950 ($25,000 times .038).

The 3.8 percent levy can beconfusing, and it can bite deeper when your taxable capital gains are farlarger or you sell a vacation home or a piece of rental real estate, where allthe profits could subject you to the investment surtax. Definitely talk to a tax professional for advice on your specific situation.

Article from: http://www.washingtonpost.com/realestate/health-care-laws-38-percent-surtax-will-not-affect-many-home-sellers/2012/07/12/gJQATidFgW_story.html

If you are looking to buy or sell inthe Elmhurst or surrounding areas, one of Ricke Realty's trustworthy, knowledgable & experienced Realtors can assist you. Call 630.782.0100.

 


The top 6 mortgage mistakes

During the 2007-2009 financial crisis, the United States economy crumbled because of a problem with mortgage foreclosures. Borrowers all over the nation had trouble paying their mortgages. At the time, eight out of 10 borrowers were trying to refinance their mortgages. Even high-end homeowners were having trouble with foreclosures. Why were so many citizens having trouble with their mortgages? Let's take a look at the biggest mortgage mistakes that homeowners make.

 

1. Adjustable Rate Mortgages

Adjustable rate mortgages seem like a homeowners dream. An adjustable rate mortgage starts you off with a low interest rate for the first two to five years. They allow you to buy a larger house than you can normally qualify for and have lower payments that you can afford. After two to five years the interest rate resets to a higher market rate. That's no problem because borrowers can just take the equity out of their homes and refinance to a lower rate once it resets.

Well, it doesn't always work out that way. When housing prices drop, borrowers tend to find that they are unable to refinance their existing loans. This leaves many borrowers facing high mortgage payments that are two to three times their original payments. The dream of home ownership quickly becomes a nightmare.

2. No Down Payment

During the subprime crisis, many companies were offering borrowers no-down-payment loans to borrowers. The purpose of a down payment is twofold. First, it increases the amount of equity that you have in your home and reduces the amount of money that you owe on a home. Second, a down payment makes sure that you have some skin in the game. Borrowers who place down a large down payment are much more likely to try everything possible to make their mortgage payments since they do not want to lose their investment. Many borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away.

3. Liar Loans

The phrase "liar loans" leaves a bad taste in your mouth. Liar loans were incredibly popular during the real estate boom prior to the subprime meltdown that began in 2007. Mortgage lenders were quick to hand them out and borrowers were quick to accept them. A liar loan is a loan that requires little to no documentation. Liar loans do not require verification. The loan is based on the borrower's stated income, stated assets and stated expenses.

They are called liar loans because borrowers have a tendency to lie and inflate their income so that they can buy a larger house. Some individuals that received a liar loan did not even have a job! The trouble starts once the buyer gets in the home. Since the mortgage payments have to be paid with actual income and not stated income, the borrower is unable to consistently make their mortgage payments. They fall behind on the payments and find themselves facing bankruptcy and foreclosure.

4. Reverse Mortgages

If you watch television, you have probably seen a reverse mortgage advertised as the solution to all of your income problems. Are reverse mortgages the godsend that people claim that they are? A reverse mortgage is a loan available to senior citizens age 62 and up that uses the equity out of your home to provide you with an income stream. The available equity is paid out to you in a steady stream of payments or in a lump sum like an annuity.

There are many drawbacks to getting a reverse mortgage. There are high upfront costs. Origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and miscellaneous fees can quickly eat up your equity. The borrower loses full ownership of their home. Since all of the equity will be gone from your home, the bank now owns the home. The family is only entitled to any equity that is left after all of the cash from the deceased's estate has been used to pay off the mortgage, fees, and interest. The family will have to try to work out an agreement with the bank and make mortgage payments to keep the family home.

5. Longer Amortization

You may have thought that 30 years was the longest time frame that you could get on a mortgage. Are you aware that some mortgage companies are offering loans that run 40 years now? Thirty five and forty year mortgages are slowly rising in popularity. They allow individuals to buy a larger house for much lower payments. A 40-year mortgage may make sense for a young 20-year-old who plans to stay in their home for the next 20 years but it doesn't make sense for a lot of people. The interest rate on a 40-year mortgage will be slightly higher than a 30 year. This amounts to a whole lot more interest over a 40-year time period, because banks aren't going to give borrowers 10 extra years to pay off their mortgage without making it up on the back end.

Borrowers will also have less equity in their homes. The bulk of payments for the first 10 to 20 years will primarily pay down interest making it nearly impossible for the borrower to move. Besides, do you really want to be making mortgage payments in your 70s?

6. Exotic Mortgage Products

Some homeowners simply did not understand what they were getting themselves into. Lenders came up with all sorts of exotic products that made the dream of home ownership a reality. Products like interest only loans which can lower payments 20-30%. These loans let borrowers live in a home for a few years and only make interest payments. Name your payment loans let borrowers decide exactly how much they want to pay on their mortgage each month.

The catch is that a big balloon principal payment would come due after a certain time period. All of these products are known as negative amortization products. Instead of building up equity, borrowers are building negative equity. They are increasing the amount that they owe every month until their debt comes crashing down on them like a pile of bricks. Exotic mortgage products have led to many borrowers being underwater on their loans.

The Bottom Line

As you can see, the road to homeownership is riddled with traps. If you can avoid the traps that many borrowers fell into, then you can keep yourself from financial ruin.

Article from: http://homes.yahoo.com/news/the-top-6-mortgage-mistakes.html

Copyright (c) <a href='http://www.123rf.com'>123RF Stock Photos</a> 
 
If you are looking to buy or sell in the Elmhurst or surrounding areas, one of Ricke Realty's trustworthy, knowledgable & experienced Realtors can assist you. Call 630.782.0100.

Short Sale vs Foreclosure – 10 Common Myths Busted

It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

  • Your house must be worth less than you owe on it.
  • You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate. The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.

Here is an example of how a deficiency balance works

If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.

Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Hard to believe? Well, believe it or not, the IRS counts the difference between the sale and the charged off debt as a “gain” on your taxes. That’s right-you lost money and it’s counted as a gain! (I didn’t make that rule, that’s a wonderful brainchild of the IRS). Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.

Guess What? A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.

2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale. Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentive to participate in short sales.

4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2012 we will have more short sales than any other year, to date. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area. {PLEASE NOTE: RICKE REALTY REAL ESTATE BROKERS ARE SKILLED WITH SHORT-SALE TRANSACTIONS - BOTH SELLING & BUYING SIDES - & OUR OFFICE UTILIZES THE SERVICES OF LOCAL REAL ESTATE ATTORNEYS WHO ARE ALSO EXTREMELY KNOWLEDGABLE OF & EXPERIENCED IN THIS PROCESS}

6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.

8.) I have already been sent a foreclosure notice so I can’t perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.

9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.

10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 12-24 months. There are even a few FHA programs that allow for a purchase sooner than that. I have worked with clients who went through a short sale and bought another house in less than 12 months.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.

Article from the The KCM Blog: http://www.kcmblog.com/2012/05/09/short-sale-vs-foreclosure-10-common-myths-busted/

If you are looking to buy or sell in the Elmhurst or surrounding areas, one of Ricke Realty's trustworthy, knowledgable & experienced Realtors can assist you. Call 630.782.0100.