Top 10 Reasons It's a Great Time To Buy

1. Selection, selection, selection.
Regardless of price range, there are plenty of houses from which to choose. There's a great selection of attached homes, condos and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. You have many options. When resale inventories are low, buyers are forced to make compromises. Not today.

2. No bidding wars.
In 2005, we knew one family who made offers on 10 homes. They lost the first nine to the feeding frenzy that existed in the market - other buyers bid the properties up substantially from the original listing prices. There were even escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There's no competitive bidding in the buyer's market of today.

3. You can make an offer.
A few years ago when you made an offer, the only question was how high above the list price you should reach in hopes of being the best offer on the table. Today the sell price vs. list price ratio is about 96 percent. Sellers won't be insulted if you "make them an offer they can't refuse."

4. Patience is tolerated.
In the hot seller's market, everything was rushed. You had to find a house before other buyers did, then hurry up and make the offer. Today, buyers can take their time. They can look at several homes and think about their decision for a while.

5. Due diligence is welcomed.
In this market, a buyer is encouraged to obtain a home inspection, termite inspection and appraisal. In 2005, many buyers waived these contingencies in order to gain an advantage.

6. Plenty of specs.
Buyers sometimes had to play games if they wanted a newly built home. There were lotteries and waiting lists. Some buyers even slept in their cars in order to get to the head of the line.

7. Repair requests are accepted.
After buyers complete a home inspection, they're allowed to submit a repair request to the sellers. But in the past, sellers often insisted the home be sold as-is. Many times, there were back-up buyers waiting for the primary buyers to upset the sellers, whose home was increasing in value almost daily.

8. Few, if any investors.
It's estimated that one third of all sales in 2005 were to investors. These buyers caused the market to inflate and affordability to decline. Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.

9. Location, location, location.
Today's buyers can find homes closer to work. In this market, reasonably priced homes are within biking or walking distance to schools, rapid transit lines and relatives.

10. Real financing is available.
The "wink, wink" zero-down, no-doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first-time homeowner bond programs, and special loans for teachers or police officers are back in business. The bottom line: It's a great time to buy real estate!

NATIONAL ASSOCIATION OF REALTORS COMMENDS FEDERAL RESERVE BOARD ON TIMELY INTEREST RATE CUT

WASHINGTON, January 22, 2008 - The following is a statement by Lawrence Yun, chief economist of the National Association of Realtors®, on today’s action by the Federal Reserve Board:

"Today’s 75-basis-point cut in the Fed funds rate to 3.50 percent is a very good step in the right direction to boost the economy and send a clear message to both the market and to consumers. This strong rate cut will help lower mortgage interest rates and lessen the burden of adjustable-rate loans that are resetting in the current environment. It also could help stimulate business investment in the wake of market uncertainties. We commend the Federal Reserve Board on its bold action, but at the same time we urge it to keep a close watch to see if additional action is needed.

New Law Helps Ease Pain for Some Facing Foreclosures or Short Sales

On December 20 President Bush signed into law H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. While this piece of legislation is far from being a cure for all the ills caused by the recent and on-going meltdown in the real estate mortgage sector, it will certainly provide relief for some who are caught between declining home values and rising mortgage payments.

It has been widely noted lately that, in certain circumstances, parties undergoing foreclosure or short sales may also face tax bills on the "phantom income" generated by debt forgiveness. Here is a brief example: Suppose you had refinanced your home for $550,000 and that, now, when you have to sell, its value is only $500,000. Your lender might agree to a short sale, and discharge your mortgage debt even though the payoff was $50,000 short. The catch for you is that you might receive a 1099 from the lender, and be taxed on the $50,000 of debt forgiveness. You see why it is called "phantom income." (There are, in fact, generally good reasons for taxing debt forgiveness, but that is a whole other discussion.)

H.R. 3648 will provide relief from that kind of tax bite in certain specified situations. Beginning January 1, 2007 and lasting until January 1, 2010, certain discharges of mortgage indebtedness on a principal residence will be excluded from a taxpayer's gross income. As always, though, certain restrictions apply.

For one thing, the amount of indebtedness is limited to $2 million. For most of us folks, this will not present a problem.

Of greater relevance is the fact that, to be excluded, the debt discharged must be acquisition debt. That is, the mortgage must have been used to purchase the home. Suppose, for example, that you have lived in your home for twenty years, that you bought it back when it was "only" $200,000, and that, by now, you have refinanced it up to $650,000. Suppose, also, that your neighbor purchased his home just last year, and that he took out a $650,000 mortgage to finance the transaction. Now, both of you need to sell and your homes have decreased in value to $600,000. If you both are granted short sales by the lender, you will both have mortgage debt forgiveness of $50,000. Under H.R. 3648, his debt forgiveness will not be taxed because it was acquisition debt. Yours, however, will be. Bummer.

H.R. 3648 will also have relevance in situations where there is not a sale, but where the borrower and lender have restructured the loan and, along with other possibilities such as interest rate and/or payment reductions, the loan balance has been reduced. In such cases the debt forgiveness will not be taxed as ordinary income, but the amount of debt forgiveness will be applied to a reduction in the borrower's cost basis in the property. This way, it may subsequently be at least partially recaptured by the IRS in the form of capital gain tax.

Finally, we note that this tax exclusion only applies in situations where the debt forgiveness resulted from a situation related to a decline in the value of the property or to the financial condition of the borrower. You wouldn't benefit from it if your mortgage was reduced as a form of payment for services rendered to the lender (suppose you were the bank president).

H.R. 3648 won't solve all the problems out there, but it will certainly be of help to some. That is probably a good thing.