Why CMAs and Appraisals Aren't The Same

As part of the homebuying process, your real estate agent may create a comprehensive market analysis or CMA. Later, when you apply for a mortgage, a bank appraisal is conducted by a licensed appraiser. Are CMAs and appraisals the same thing?

While both CMAs and appraisals help determine a home's market value, their purposes are not the same. The CMA is a sales tool to help you find an offer price for the home you want to buy. The homes in the CMA include the home you want to buy plus similar nearby homes. This helps you see how the home you want compares to other homes so you have an idea what to offer.

A real estate professional may prepare a CMA for their sellers to help them choose a listing price. The CMA includes recently sold homes and homes for sale in the seller's neighborhood that are most similar to the seller's home in appearance, features, and general price range.

Although the CMA is used to help determine current market value, the seller's home is typically not even featured in the CMA. The CMA is merely a guide to help the seller learn what's happening in their local market, so they can better understand where their home fits in term of price ranges, based on location, features, size, condition and other factors.

The CMA offers the same advantages to you as a buyer. They help you better understand the local market. You can expand the search and get different results in a CMA simply by changing the zip code or the price range or the number of bedrooms and baths.

Appraisals are all about risk retention for banks and their customers. If the buyer is receiving financing through a bank, the bank will order an appraisal.

Unlike the CMA, a bank appraisal is a professional determination of a home's value. It's performed by a licensed appraiser, using guidelines established by the Federal Housing Finance Agency, which regulates federal housing loan guarantors such as FHA, VA and housing loan purchasers Fannie Mae and Freddie Mac.

An appraisal is a comprehensive look at a home's location, condition, and eligibility for federal guarantees. For example, the home you want may have porch steps but no handrail. If you want to buy the home with an FHA or VA-insured loan, your seller will have to repair or install a handrail. The FHA or VA appraiser will look at the home a second time to make sure the steps were made safe.

Appraisers use the same data in their market research to find comparable homes as Realtors do. They are also members of the MLS, but they have additional guidelines from the bank to follow to minimize risk to the bank and to the borrower. If home prices are falling, the appraiser takes the number of days a home has been on the market far more seriously.

When the appraisal is finished, the bank makes the decision to fund the loan, or it may require the seller to fix certain items and show proof that the repairs have been made before letting the loan proceed. If the loan doesn't meet federal lending guidelines, the bank will decline the loan.

Despite stricter lending and appraisal standards, most buyers' loan applications go through to closing. One reason the system works so well is that real estate agents are preparing CMAs that are better tuned to lending standards as well as market conditions. As a buyer, it's in your best interest to understand how lenders approach risk and to learn what the market is doing.

Simply put, you need both a CMA and an appraisal to determine market value. A CMA helps you decide what you should offer the seller. An appraisal determines what the lender is willing to lend to help you purchase a home.

Original Article From: www.RealtyTimes.com | Written by: Blanche Evans

4 Tips For Paring Down Your Stuff Prior to Moving

There’s no better time to get rid of unnecessary stuff than right before a move. You’re in the right mindset—you’re open to change.

If you’re planning a move, you may have an overwhelming urge to throw all your possessions into cardboard boxes, tape them shut and think, “I’ll deal with this after moving!”

We get it. But before you start dumping drawers into boxes willy-nilly, we implore you:Declutter first.

Plus, you have to go though everything already, and if you follow through, you’ll start life at your new home with less junk and a stronger connection to the items you decided to hold onto before moving.

Sounds great, but how do you do it? We recently gave a best-selling book—“The Life-Changing Magic of Tidying Up,” by Marie Kondo—a read.

The book isn’t necessarily about moving; it’s more about how to live a less cluttered, happier life. But many of the suggestions Kondo offers are invaluable to those brave souls about to pack up their possessions and begin anew.

Here are four tips from Kondo’s book we found for downsizing before a move.

1. Category by Category

Think about your past attempts to tidy up or simplify your physical space. Odds are you went about it room by room. Rookie mistake!

Kondo subscribes to the theory you should instead go category by category. For example, if you keep some dinner plates in the kitchen and others in the dining room, put them all together in one place before going through them and deciding what to keep. Same for clothes, books, athletic equipment and so on throughout the house.

Don’t focus on what you’re discarding. Rather, focus on the things you are choosing to keep: This makes the process feel more positive.

2. Handle Everything

Kondo suggests touching everything you own in order to determine if you truly want and need it.

Take clothes, for example. Kondo believes it best to remove all your clothes from your closet and dresser, physically hold them and decide one-by-one if you want to keep each item.

You might be tempted to just flip through your shirts as they hang in your closet. According to Kondo, that’s a no-no. You have to get everything out of its place to determine if you want it—and if it truly brings you joy.

3. Find the Joy

This is a little touchy feely, but bear with us: Kondo believes that a possession either “sparks joy,” or it doesn’t.

It’s all about keeping the items that do offer that spark and getting rid of everything that doesn’t. Kondo uses books as an example: Does being surrounded by books you’ve never read bring you joy? Maybe not.

Of course, the standard doesn’t work for each and every item in a household. A plunger isn’t likely to “spark joy”—but having one around is still a good idea.

4. Make Moving an Event

Most people believe tidying is something you need to work at, something that requires upkeep. However, Kondo writes that if you’re constantly tidying up, you’re probably doing it wrong.

Instead of doing a little tidying up here and a little there whenever you have time, make your clean-up an event—something you spend a weekend doing with friends and family.

Painful? Maybe. But you’re more likely to experience a significant and long-lasting change. Of course, you’ll still need to put stuff away (unless you have a butler), but the effort will be minimal.

In short, think of Kondo’s method as a marathon that ends rather than daily sprints that go on and on and on.

Again, Kondo’s techniques aren’t specifically written for people undergoing moves. But there are few better times to assess whether you really need that old two-prong extension cord than when you’re holding it in your hand and have the option of packing it or chucking it.

Original Article From: www.realtor.com | Written By: Mike Krumboltz

Homeowners: Fall Planning Brings Spring Tax Savings

Before the first snowflakes of winter, homeowners should think about spring savings. Steps taken today could reduce the tax hit on April 15.

Most homeowners who itemize their taxes can deduct the interest paid on their first and second mortgages of up to $1.1 million in debt. That total reflects up to $1 million for home loans and another $100,000 for home-equity loans.

The deductions add up for homeowners with jumbo mortgages—those above $417,000 in most places and $625,500 in high-price areas. A hypothetical example looks at a couple in the 30% tax bracket who files jointly. Assuming their income is under $300,000, the $24,000 they paid toward mortgage interest could see a benefit of up to $7,200 in tax savings, according to Mary Canning, dean emeritus and professor at Golden Gate University’s Braden School of Taxation and Accounting in San Francisco.

Some homeowners don’t realize they can deduct the mortgage interest paid on second homes, Ms. Canning says. Some of her clients, many of whom are approaching retirement age, have paid off the mortgage on their primary home and are buying a vacation home in nearby scenic towns like Sonoma or Carmel, she adds. With the deduction, “they are finding it’s quite affordable as opposed to putting up children and their families in hotels for a vacation,” Ms. Canning says.

That second home can even be a boat, mobile home or any structure, as long as it has plumbing, such as toilets and showers. However, an empty lot being held to build a future retirement home doesn’t qualify.

One mistake Ms. Canning often sees: Homeowners who try to deduct mortgage interest on a second home that was purchased using a margin loan on their brokerage account. “Sometimes people are surprised that they cannot make the deduction,” she says. It isn’t allowed, however, because the loan “has to be secured against the home.”

Beyond mortgage interest, documenting other home-related expenses can help further reduce tax bills. For example, self-employed taxpayers and business owners can write off some expenses if part of their home qualifies as a home office, says Robert Winton, a partner at White Plains, N.Y.-based Citrin Cooperman & Co.

Qualified taxpayers with second homes can also rent out the property and deduct some of their expenses, Mr. Winton adds. Deductions can include “maintenance, insurance and property taxes,” he adds.

Because the IRS doesn’t require reporting of rental income for 14 days or less a year, some business owners rent their home to their business for a meeting or retreat and then deduct the rental fee as a business expense on their company’s tax return, says Robert Walsh, founder and president of Red Bank, N.J.-based Lighthouse Financial Advisors.

Homeowners can take a few steps now to prepare for tax time. Diagram and measure home office space and total square footage, take pictures and save utility, security and real-estate tax bills, Mr. Walsh says. “If you paint your home office, it’s a 100% expense to office,” he adds.

Those who rent a second home regularly may wish to set up a separate bank account for rental earnings and keep a calendar for days of personal use, Mr. Walsh says.

Of course, with interest rates so low, tax savings may not be the highest priority for many high-end home buyers. “For people who are buying a big home and have a $1.5 million mortgage and it’s your dream home, you don’t mind not [being able to deduct] all of that interest,” Mr. Walsh adds.

Here are a few more tips to consider when looking for tax savings. Be sure to consult a tax professional or financial adviser for more specifics.

• Income limits. The Internal Revenue Service limits and phases out Schedule A itemized deductions if the taxpayer’s adjusted gross income exceeds $250,000 for a single individual or $300,000 for a married couple, says Mr. Walsh. Common Schedule A deductions include mortgage interest, state and local income taxes, sales taxes, and medical expenses and charitable donations.

The so-called “Pease Limitation,” named after former Rep. Donald Pease, was enacted by Congress in 1990. During the Bush tax cuts, the limits went away, but they kicked back in for 2013.

• Equity means everything. That $100,000 home-equity loan doesn’t have to be used to improve the home.

• Status matters. Unmarried couples who file separate tax returns and own their own homes will each get up to $1.1 million. Conversely, married couples filing separate returns can only deduct mortgage interest on up to $500,000 of home debt.

This article was originally published October 29, 2014, in The Wall Street Journal

Latest Fannie Mae Housing Survey Says: Good Time To Sell

Consumer attitudes toward housing and the economy in general continued the slow improvement that has become the norm according to results from the October National Housing Survey.  Fannie Mae which sponsors the survey said the share of respondent households voicing confidence that their personal financial situation would improve over the next 12 months climbed to 45 percent.  This was only a one point gain from the September survey but was seven points higher than one year ago and the highest it has been since June 2013.  At the same time the percentage of those who expected personal finances would worsen over that time frame dropped 2 points to 10 percent compared to 22 percent in October 2013. 

Those who say it is a good time to buy a house fell three points to 65 percent but those who view it as a good time to sell a home increased to 44 percent-a new all-time survey high.  It was also the narrowest the gap has been between the two indicators since Fannie Mae began the survey in June 2010.

The share of respondents who say home prices will go up in the next 12 months eased back one point to 44 percent, staying within the narrow mid-40's range where the response has floated since June.  The share who say home prices will go down decreased by one point to 7 percent.   Among those who expect home prices to rise the average expectation for that increase over the next 12 months was 2.8 percent compared to 2.2 percent in September.

In September the share of those expecting higher mortgages rates dropped by five percentage points while the share expecting rates to stabilize rose 5, each response representing 45 percent of respondents. The optimism was short lived and in October 48 percent expected rates to rise while 38 percent thought they would stay the same.  Half of respondents said they thought it would be difficult for them to even get a mortgage today, a 2 percentage point increase from September.

The percentage of respondents who expect home rental prices to go up in the next 12 months decreased by six percentage points to 49 percent while the average expectation for rental increases rose to 3.7 percent. 

When asked their choice if they were to move 65 percent said they would buy their next home, down one point from the previous survey while 30 percent said they would rent, a 2 point increase.  One year ago 70 percent of respondents indicated a preference for home ownership. 

Forty percent of respondents said the economy was on the right track, unchanged from the previous survey, while 53 percent say it is on the wrong track, a one point decline.  In October 2013 the wrong track answer was given by 67 percent and the right track by 27 percent.

"Consumers are growing more optimistic about the housing market in the face of broader improvement in economic sentiment," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The share of consumers who expect their personal finances to get better is near its highest level since the survey's inception, while those expecting their finances to get worse reached a survey low. Home price expectations rose significantly this month, largely reversing the dip witnessed over the past four months, and the share of consumers who think it's a good time to sell a home reached another survey high. The narrowing gap between home buying and home selling sentiment may foreshadow increased housing inventory levels and a better balance of housing supply and demand. These results may help drive a healthier housing market in 2015."

The Fannie Mae National Housing Survey polls 1,000 Americans, both homeowners and renters, by phone.  Respondents are asked over 100 questions about owning and renting a home, home and rental price changes, their personal financial situation, and homeownership and the economy in general.  For the current survey the cell phone dialing rate was increased to 60 percent to reflect the growing share of households without a landline.  The October survey was conducted between October 1 and October 25, 2014.

Original Article From: Mortgage News Daily ? Written By: Jann Swanson

7 Ways To Keep Your Place Safe While You're Away

But with a few simple tips, you can boost your rental security and worry less if you’re hitting the road by keeping your place safe in your absence.

Whether you’re lying on a beach in the Caribbean for a week, touring the country on a road trip or spending the holidays back home, the last thing you want to worry about is coming back to a ransacked apartment.

1. Check the Locks

A few weeks before you leave, inspect the locks on all of your windows and doors. Make sure deadbolts slide into place, window locks aren’t easy to pry open, and sliding glass doors have a security bar in place.

If anything is missing or doesn’t work, contact your landlord. By law, your landlord has tomake repairs to keep your place safe.

2. Stop Your Mail

As soon as you know when you’ll be traveling, fill out the United States Postal Service’sonline form to stop your mail. Even if you live in a secure building, a thief might slip into the lobby, spot your overflowing mailbox and take it as a surefire sign you’re away from home.

3. Don’t Stand Out

While closing your curtains may seem like the obvious choice, it can backfire. A burglar casing your rental might notice the change and realize you’re away from home. Instead, leave a curtain or two open like you normally would—and move your stuff out of view.

And if you’re traveling during the holidays, don’t leave presents under the tree in plain sight. Ask a neighbor to pick up any packages left at your door.

4. Make It Look Like You’re Home

Affordable automatic timers can make it seem like someone is home while you’re away. Add timers to lamps in different rooms and stagger the on/off times.

Hooking timers up to a television or radio can also make it seem like someone’s home.

5. Keep Your Landlord in the Loop

Let your landlord know your travel plans, including your departure and arrival times. A landlord should be happy to come by and scope out the place while you’re away, which will go a long way to keeping your home safe.

6. Hire a House Sitter

Ask a trusted neighbor or friend to visit your apartment while you’re away to collect delivery menus from the front door and check on the space.

If a thief watching your rental sees people going in and out, he’ll think someone is home and move on to an easier target.

7. Beef Up Security

If you don’t have an alarm installed—and your landlord doesn’t want to pay to install a system—there are some cheaper, temporary alternatives you can use while you’re on vacation. Wireless alarms and sensors can be attached to doors and windows. If a door or window is opened, an alarm will sound.

If you want an even cheaper option, buy a set of window decals and yard signs from an alarm company. Even if you don’t actually have an alarm, thieves might not bother to test it.

Original Article From: www.Realtor.com | Written By: Craig Donofrio