Four Factors Potential Buyers Should Consider
Is now a good time to purchase Smith Lake Property? After all it's a buyers market, right? Lending rates hover near historic lows, Smith Lake inventory is plentiful and many sellers are willing to negotiate. While we have experienced some improvement with the number of Smith Lake property sales of late, the recent activity cannot be attributed solely to the reasons mentioned above. Other factors have begun to influence many prospective buyers. There should be reason for concern; in the coming months several new regulatory mandates will affect almost everyone attempting to purchase Smith Lake property. We have listed below the top four factors which most prospective Smith Lake buyers will contend with during the next twelve months while transacting a waterfront purchase.
• New appraisal regulations (Replacing the HVCC)
• Health Care legislation - 3.8 percent sales tax -residential home sales
• Expiration of the "Bush Tax Cuts" - capital gains/dividends
• Lending requirements on second/vacation home properties
New appraisal regulations
There was much confusion surrounding the Federal Government's attempt to "reduce" appraisal fraud. The HVCC (Home Valuation Code of Conduct) was supposed to provide everyone with "fair" appraisal practices. Requiring most lenders to use an AMC (Appraisal Management Company) to select the appraiser eliminated any possibility that a beneficial relationship would blossom between area lenders and local appraisal practitioners. In actuality, the HVCC over time became cumbersome and ineffective. During October of this year, new appraisal guidelines were suggested by the Federal Reserve and will go into effect during December of this year, with full implementation expected by next spring. While these new regulations remain complex, lenders will now have some say so regarding the selection of qualified appraisers who are familiar with local valuations. This should help insure a fair and accurate valuation of your Smith Lake property.
Health Care Legislation - Sales Tax on a Residential Home Sale
While this mandate will not affect the vast majority of prospective Smith Lake Buyers, it could be a factor for some high income individuals selling pricey real estate. With personal exemptions, income ceilings and tax implications levied on just the net profit from the sale of your residence, the level of exposure for this tax will fall on a select few. For those with concerns, speak with your accountant before it's too late.
Expiration of the "Bush Tax Cuts"
Expiration of the "Bush Tax Cuts" will affect most of us. For prospective Smith Lake buyers who plan to liquidate a portion of their investment account(s) for the purpose of financing a lake home purchase, make your preparations now. Without a continuation of these "tax cuts", capital gains and dividend tax rates will spike in 2011. With the time remaining this year, put together a "game plan" with your financial planner so as to reduce your capital gain/dividend tax responsibility for 2011. No one can predict what will happen when Congress returns to work.
Lending Requirements for Second/Vacation Homes
With full implementation of the Dodd/Frank - Wall Street Reform and Consumer Protection Act, the business of securing a mortgage for second/vacation homes will provide buyers with a few new challenges. This law puts numerous additional requirements on mortgage lenders; as a consequence, the lending landscape is likely to change significantly. What is most likely to follow, a streamlined menu of products from your mortgage banker. At this juncture no one knows what will become of the independent mortgage broker, "the little guy down the street" who offers a variety of products with the ability to provide a mortgage to fit your needs. The loan qualification process under Dodd/Frank has changed as well. Since much of this legislation has yet to be implemented, check with a mortgage banker, or broker to keep abreast of what's breaking in this area. An appropriate loan to value ratio along with a significant down payment has now become SOP for mortgage lenders dealing with the second/vacation home segment of our market. For those planning to finance all or part of their Smith Lake purchase, get in the game early, securing a mortgage today is much more involved than what we experienced just a few years ago.
The best piece of advice that we can give you, maintain regular contact with a qualified realtor to keep abreast of our ever-changing market. What was the norm six months, a year ago, probably has changed. For those who have always wanted a place on Smith Lake, it doesn't get any better than right now!