Joel Dameral's South Lake Tahoe Real Estate Blog

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After more than a year of talking about it, actual change has finally arrived for the tens of millions of Americans who rely on credit cards.

Come February 22, 2010, card lenders will be barred from raising interest rates on most borrowers’ existing balances—a practice that increasingly irked consumers over the last decade and one of several that federal regulators and lawmakers finally barred as unfair and deceptive.

But the new law already requires banks to give cardholders 45 days’ notice of any change in terms. So if your bank didn’t mail you a rate-change notice by January 7, 2010, you no longer face a doubling or tripling of your interest rate on your current balance—as long as you keep paying and don’t fall 60 days late. The Federal Reserve recently issued more than 1,100 pages of rules telling card issuers how to implement that new prohibition and other elements of the nation’s new credit card law, whose main terms take effect February 22.

If you’re a “convenience user” of credit cards—one of the four in 10 cardholders who pay off your bill each month—you’ll be less affected than those who carry a balance. But pay attention, anyway, because the new rules are forcing the card industry to reevaluate business models that for too long relied on tricks and traps to generate revenue. It isn’t yet clear how the card market will evolve, especially since this is playing out during the middle of a deep and painful recession.

Still, many of last year’s dire warnings don’t seem to be coming true. “Rewards” programs haven’t vanished, nor have annual fees suddenly become the norm. Average rates even dipped in November 2009, which the bankers called evidence that “issuers are working to keep rates down even in these tough times.”

In short, good customers still seem able to enjoy the benefits of paying with plastic without shouldering much more of the costs. And that’s unlikely to change, because of competition and also because of one of the basic dynamics of the credit card business: Since they also get lucrative fees from the companies that accept plastic payments, the last thing card issuers want is to steer you to start paying with cash or checks.

Highlights of the new rules include
-No rate increases on existing balances. The dirty little secret of what card issuers called “risk-based pricing” was that some of the best prices were offered to some of the riskiest customers. The trick was that they knew they could profit by offering lucrative deals to these customers because they could predict that some portion would soon be paying much more—often “default” or “penalty” rates topping 30%—on big balances.

Sometimes the new rate was triggered by a late payment of a few hours. Sometimes it was triggered by a late payment to another creditor. Sometimes it was caused by nothing more than a dip in a consumer’s credit score and contract terms allowing rates to be changed “at any time for any reason.”

What’s changed: Except for introductory rates, which must last at least six months, interest rates cannot be raised on existing balances except in rare situations, such as if a cardholder falls 60 days late.

-Faster payoffs for some borrowers. The new law also ends a trap sprung on cardholders who were lured by low-interest or no-interest balance-transfer offers but didn’t read the fine print. If they subsequently used the card for purchases carrying a higher rate, they soon found that they were accumulating interest no matter how much they paid each month. Card issuers would not allow them to pay off the purchases until the low-rate or interest-free balances had been fully paid. What’s changed: Starting February 22, any payment over the monthly minimum must go toward paying down the portion of the balance carrying the highest interest rate.

-No increases for the first 12 months. When it comes to new purchases, less has changed. You may still face an interest-rate increase based on triggers in your card contract- even for tardiness paying another creditor, the trap that came to be known as the “universal default.” But there are two key differences. The first is that since August 2009, you’ve been entitled to 45 days’ notice and the right to say “no, thanks” to new terms. The second is that, as of February 22, a card issuer cannot raise your rate during the first year an account is open, unless an “introductory rate” is expiring and the “go to” rate was plainly disclosed at the start. Of course, since card issuers can no longer apply new rates to old balances, opting out may no longer be the best solution, in part because the law allows the issuer to double your monthly minimum. You’d be better off if you simply quit using the card. But if the issuer imposes a new annual fee, opting out may be your only alternative.

-New billing and payment terms. Starting in February, your card company must mail or deliver your bill at least three weeks before your payment is due, and give you a consistent monthly due date. Payments must be credited if they arrive by 5 p.m. on the due date. And if that day falls on a Sunday or holiday, you’ll be entitled to an extra day.

-Over-limit charges. As of February 22, a card company has to ask whether you want it to approve charges that push you over your credit limit. If you say yes, the issuer can only charge you one over-limit fee per month. And if you opt out, it can’t charge you a fee if it allows such a purchase.

-Young borrowers. If you’re under 21 and want a credit card, you’ll now need to show that you have the financial resources to make payments, or obtain a cosigner.

-Big changes still ahead. This isn’t the last of the new credit card rules. By August 2010, the Federal Reserve has to decide how to implement two of the trickiest parts of the new law: its requirements that penalty fees be “reasonable and proportional,” and that card issuers who have raised customers’ rates since Jan. 1, 2009, reevaluate those rates to see if they should be reduced, and to do so at least every six months.

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I have a unique Tahoe Keys duplex condo for sale.  It is in the middle of a remodel so it would have to be a cash offer- although the seller is open to any creative solution.  It has a 2 bedroom 1.5 bath unit that is currently rented and a studio with full bath and kitchen.  The studio is in the remodel stage.  The owner has the new kitchen cabinets, stove/oven, 40k BTU gas fireplace, and dishwasher uninstalled on site.  He is tired of the project and just wants out.  Not in the MLS yet-

It has one garage space, outside parking, keys amenities (pools, hot tubs, tennis courts, boat launching, private beach), a nice mountain and marina view, and 2 boat slips…… A legal duplex with one APN number….

Offered in the very low $300’s

When you finished with this project you could flip for a nice profit or keep it and rent one unit and keep one for yourself.

Call or email  me for more information.

Joel Dameral
530-545-8827
info@JoelDameral.com

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In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan recently announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration’s commitment to addressing foreclosure. Secretary Donovan recently announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential home buyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many home buyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

-All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
-In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
-The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

For more information, visit www.hud.gov.

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By now it is well documented that today’s affordable housing prices, historically low interest rates and federal home buyer tax credit have combined to create one of the most attractive first-time buyer markets in recent memory. What many Americans might not realize is that a recent expansion of the buyer tax credit has created an equally desirable opportunity for existing homeowners.

This past November, Congress elected to expand the home buyer tax credit to repeat buyers after seeing the success the temporary financial incentive had on the housing market and overall economy. As a result, current homeowners who will have lived in their home for 5 consecutive years out of the last 8 may now be eligible to receive a $6,500 tax credit.

“The expanded tax credit offers a great financial opportunity for existing homeowners, particularly those looking to trade up,” said James M. Weichert, president and founder of Weichert, Realtors, one of the nation’s largest independent real estate companies. “Not only can you receive a large sum of money from the government, you’ll also likely purchase your next home for less money and at a lower interest rate than you could have in years past or years to come.”

To qualify for the tax credit, the repeat buyer must have signed a binding contract by April 30, 2010 and close on the home by June 30, 2010. Tax credit eligibility is subject to income limits, $125,000 for single buyers and $225,000 for couples. In addition, the sale price of the home being purchased can not exceed $800,000.

There is no requirement that existing homeowners must have sold their home to be eligible for the $6,500 tax credit. However, Weichert encourages existing homeowners who want to benefit from this incentive to move quickly, particularly those who prefer to first sell their current home before purchasing a new one.

“Typically, it takes three months or longer to sell a home. That’s why it is critical repeat buyers put their home on the market right away. Otherwise they might not leave themselves enough time to both secure a buyer for their current house and find a new home by the April 30 deadline,” added Weichert.

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While the Internal Revenue Service is encouraging taxpayers to file their returns electronically, taxpayers who used the first-time home-buyer tax credit will have to send in their tax return by paper this year.

First-time home buyers who used the credit will have to go to the IRS Web site, www.irs.gov, to download a form claiming the tax credit. Taxpayers can still use tax filing programs to prepare their return, but will have to print it out and mail it in.

The IRS said paper filing will help prevent fraud and catch people who may have taken advantage of the $8,000 tax credit but didn’t use it to buy a home.

The IRS said it plans to start processing returns by mid-February, adding it may take an extra two to three weeks for taxpayers who used the home buyer tax credit to see refunds.

Among other documentation required for taxpayers who used the home buyer tax credit:

• A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase.

• For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.

• For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In November, Congress extended the federal home buyer tax credit program to June 30 for buyers to settle on a property.

Homeowners who have lived in their home for five of the last eight years can also qualify for a $6,500 tax credit if they close on a home.

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The Federal Housing Administration won’t raise the 3.5 percent minimum downpayment requirement for mortgages it guarantees as long as borrowers have FICO scores of 580 or better.

Beginning early this summer, however, borrowers with credit scores below 580 will be required to make downpayments of at least 10 percent in order to participate in FHA’s mortgage insurance program.

This spring, the Obama administration also plans to raise the upfront mortgage insurance premiums paid by all FHA borrowers to 2.25 percent, up from 1.75 percent now.

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Do you have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements to make your home stand out from the competition.

1. Tidy up kitchen cabinets.

“Potential buyers do open kitchen cabinets and look inside,” says Morrissey. “Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff.”

2. Add or replace tile.

“By retiling very inexpensively, you make a room look way cleaner that it was,” says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. “Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms.”

3. Add a breakfast bar.

When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. “In one home, there was a cutout in the wall between the kitchen and living room,” explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. “We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600.”

4. Install granite tile instead of a slab.

“Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade,” says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. “Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money.”

5. Freshen up a bathroom without retiling.

“With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300,” says Wilder. “And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000.”

6. Freshen up the basement.

“If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint,” recommends Wilder. “They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon.”

7. Add a room.

Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. “One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom,” says Quinn. “That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price.” Zuluaga has also added bedrooms inexpensively. “In a two-bedroom house, there was an archway that led to a third room that was used as a den,” he explains. “It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom.”

8. Spruce up cabinet fronts.

Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. “If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on,” explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. “With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes,” says Morrissey. “If they have oak cabinets today, they can have cherry the next day.”

9. Replace light fixtures.

“In a foyer and in bathrooms and kitchens,” says Wilder, “replacing overhead light fixtures provides a lot of pop for a little money.” If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.

10. Tech-up the garage.

“Sometimes we replace the garage door opener with a remote touchpad entry system,” says Zuluaga. “That costs about $425 and makes it look like a high-end system.”

Housing Market
New home sales lost momentum in October while the resale market continued to surge due to lower mortgage rates and the extended homebuyer tax credit. Seasonally-adjusted new home sales fell 11.3% from the previous month to an annual rate of 355,000 units. The seasonally-adjusted annual rate of new home sales in November is back down to its lowest levels since April. New home sales for the previous three months were also revised lower by 49,000 units. It is worrisome that lower rates and the extended housing tax credit were not enough to fuel demand for new homes in November.

While the new home affordability ratio remains at very high levels, it is still almost 10 percentage points higher than the existing home ratio. Median new home prices in November rose to $217,400 from a downwardly amount of $209,400 in October. Prices increased 3.8% from the previous month but are still 1.9% lower than they were this time last year. Median new home prices have now recorded 11 straight months of year-over-year declines. Further price cuts and use of incentives may be necessary to attract demand in the new homes market. However, the continued reduction in inventory levels is a positive sign for stabilization in the new homes market. In November, new home inventories declined to 234,00 units from an October figure of 241,000 on a non-seasonally adjusted basis. Seasonally-adjusted inventory of unsold homes have declined for 31 straight months to 235,000 units.

Sales in the existing home market remained strong in November. The seasonally-adjusted annual rate of all existing homes jumped 7.4% from October levels to 6,540,000 units. This is the highest the seasonally-adjusted annual rate of existing home sales since February 2007. Existing single-family home sales increased 8.5% from last month while condo and co-op sales remained flat from October levels at 770,000 units. Lower mortgage rates and the extended housing tax credit have kept buyers interested due to all-time high affordability.

In November, the median sales price for an existing home increased slightly to $172,600 from $172,200 in October. This was the first gain in median existing home prices since June although prices are still 4.3% lower than they were this time last year. Existing home inventory posted declines for the fourth consecutive month in November, easing 1.3% to 3,518,000 units from a revised 3,565,000 units in October. This is the lowest level of existing home inventory on the market since December 2006.

After rising for nine consecutive months, the National Association of Realtor’s pending home sales index in November fell for the first time since January. The Pending Home sales Index, which is a forward-looking indicator based on contracts signed in November, dropped 16.0% to a reading of 96.0 from an upwardly revised reading of 114.3 in October.

National average mortgage rates declined from the previous week to 5.09% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on January 7th. This was the first weekly decline for average fixed rates since the beginning of December. Rates had been steadily moving higher and increased for four straight weeks before this past week’s decline. In the week ending January 1st, the MBA’s seasonally-adjusted purchase index increased 3.6% from the previous week but was still down 36.33% compared to the same time last year. This was the first weekly gain for the purchase index in the past month while the year-over-year drop in the purchase index is the largest since February 2009.