Dane Hahn's Blog

Money for nothing. Keep your eye on the prize.

Dane Hahn (The Gove Group) — Tue, 30 Jun 2009 10:07:07 -0700

Wow, the government will be giving away an $8000 prize to first time home buyers this year. Sounds like the Main Street version of Who Wants to be a Millionaire doesn't it?

Can you (or your customer) qualify for this prize? Well maybe, but there are a ton of "ifs" that go along with the prize money.

I'll call it prize money because a first time homebuyer who can follow all the rules and regulations has a pretty good chance of getting the money. But as with anything run by the government, there are hidden disqualifers all along the way.

Did anyone tell you that there is no real check? The prize money comes from a tax credit that you can use next time you file. (Oh, and if you make too much money, the prize will be smaller).

So how does it work? Right now, if you go to a MAJOR lender, think Wells Fargo or Bank of America, they will prequalify you for your home loan. They have IRS forms that you will also fill out, which is the application for the prize money. These forms may also be available in the IRS site, but it's hard to tell which one to use.

If it appears that you will qualify, these MAJOR lenders will lend you the $8,000 prize money when you sign over your right to the prize (tax credit) to them. You may use the $8,000 as additional but partial down payment in the purchase of the house--after you have put down 3.5% of your own money (FHA requirement).

First to qualify for the money you need to be a first time homebuyer--meaning that you have not owned y residence (home) for the last three years.

Then, you have to be married, filing jointly. (Sorry, if you are married but file seperately, or are single, the prize goes to $4,000).

Then you have to find a house that you want to buy, and actually close the transaction BEFORE December 1, 2009, meaning that you should schedule the closing on or before Thanksgiving week. So, since in most areas this closing is likely to take a month--you need to have an accepted offer by Halloween. That means you can shop 'til you drop from now until October--basically 3 months. Then make your deal. Then go to closing.

Then you have to not owe taxes, or make too much money so the prize will not be melted by your errors in finances. Oh, and be sure your student, loans are up to date. If the prize melts, you may be on the hook to repay the loan given by your lender.

Of course you need the 3.5% down payment of your own funds to buy the house. Which oddly you would need whether or not you were trying to win the $8,000 prize as well.

Good news/bad news: If you get the prize, but then sell the house within the next 36 months, you'll owe it back. If you stay longer than that, you got the money for nothin'.

So here's my question, since the $8,000 really just lowers the mortgaged amount, not the down payment--and may have to be repaid, will this actually help first time homebuyers?

Dane Hahn, Broker

NH and FL

Reverse Mortgages--Too Good to Be True? Maybe Not!

Dane Hahn (The Gove Group) — Sun, 28 Jun 2009 11:37:15 -0700

As a Realtor and a Yankee (no baseball reference here) I have always been suspect of things that seemed too good to be true. I have been especially suspect of mortgage agents who offered no interest loans, or loans that started off cheap and then grew over time until some huge balloon amount was due--but with their promise, "Of course I'll be able to refinance you before that ever happens..."

And so I have been suspect of "reverse mortgages" because the press has always stressed that they were "new" and "not for everyone". Not for everyone and new are two topics that generally turn off the Yankee mentality. But the NH Real Estate Commission has approved the "learning aspect" of the reverse mortgage concept for continuing education credits and so I signed up to learn a bit more. The couple of hours I spent in a classroom with an originator from Wells Fargo and their class on reverse mortgages was really very interesting.

Not for everyone...but for people over 62 with some equity in their home, this is an excellent way to raid that piggy bank (meaning the equity in their house) without ever having a mortgage payment until either the house is sold or it is no longer their principle residence. And it provides some interesting other possibilities as well. You never make a mortgage payment. And if the house value tanks, you never have to make up the difference. If you sell one house and move to another, you will pay off the 1st, but can have the reverse on the next one.

New? Well they've been available for over 20 years, but with the upset in the mortgage market they now have a higher profile and may make even more sense--oddly to be approved they only look at the house value and your age, they don't look at your credit scores!

See if this doesn't sound too good to be true: You bought your house with a 30 year mortgage 15 years ago, Back then you paid $100,000 for a nice house, today it's worth $250,000 and you still owe 15 more years for which you are paying your monthly mortgage of $700. The reverse mortgage can 1.) pay off the balance of your mortgage. 2.) Eliminate that $700 monthly payment and 3.) Provide you cash to spend anyway you see fit--even to buy a house in Florida for retirement.

Even of you don't spend the difference right away, you'll get a line of credit and you can spend it as you wish.

Potential customers need to go through a councelling program to be certain they understand how all this works--too bad that wasn't required for the ARM mortgages and the "no-doc" loans.

The "Dead Market"

Dane Hahn (The Gove Group) — Sat, 20 Dec 2008 14:18:33 -0800

I place the blame for the current "dead market" on all parties--and principally because it has become appropriate in the US to be greedy. Sellers are greedy--they have bloated ideas of their home's value. Unlike the stock market where ups and downs are reported daily, and the world has a handle on the value of a particular sector, they often just sit stupidly and hope a dope will come along and buy their home.

And usually regardless of what the Realtor says, the sellers control the price asked. Realtors can advise sellers as to an acceptable price, but Realtors know which side of the bread has their butter, so they are often reluctantly willing to go along with the greedy sellers higher than realistic asking price.

Sellers who don't get their way in a discussion of the right asking price will find another Realtor or just go it alone as a FSBO.

NAR has been quick to point out that 80%+ of the homes sold are sold by Realtors. But the more we deal with greedy sellers, the more likely they are to become a FSBO.

And the bottom line is the BUYER actually sets the price. In 2000-2006 we had greedy buyers, ones who were anxious to get the next good deal and who COULD AFFORD to drive up the price in a bidding war. Remember those? Five offers on one of my listings on the first day it was listed. Wow.

But what of the future? I am hoping that somewhere near the middle of the 2nd quarter of 2009, say April/May, a well known economist will say that based on the restated data just released, the bottom of the current market appears to have been in November 2008, and that we have nearly six months of history of stability and slow growth.

That coupled with the availability of ready credit (maybe we can see if the VA program can be expanded to all Obama's subjects) will bring a rapid end to the debacle we are currently experiencing.

12/20/2008 02:04 PM

by Dane Hahn

Who's responsible for the dead market?

Dane Hahn (The Gove Group) — Sat, 20 Dec 2008 14:11:11 -0800

Sellers who don't get their way in a discussion of the right asking price will find another Realtor or just go it alone as a FSBO.

NAR has been quick to point out that 80%+ of the homes sold are sold by Realtors. But the more we deal with greedy sellers, the more likely they are to become a FSBO.

That coupled with the availability of ready credit (maybe we can see if the VA program can be expanded to all Obama's subjects) will bring a rapid end to the debacle we are currently experiencing.

12/20/2008 02:04 PM

by Dane Hahn