What Canadians need to know about buying real estate in the US...

A recent survey conducted by the Bank of Montreal states 1 in 5 Canadians are interested in buying real estate in the United States. The National Association of Realtors reports that last year 23% of international buyers from Canada represented the largest portion of international buyers and have so for the past three years. Canadians are obviously taking advantage of the falling prices. Many of these buyers are "snowbirds" , trying to escape the harsh winters for the warm, sunny days of the southern states. Before YOU decide to take advantage, here are a few aspects to consider:

1. DETERMINE YOUR WANTS AND NEEDS
The first thing you need to ask yourself is “why do you want to buy a property in the U.S.?” Then, “Will the home be a vacation home, or do you plan on renting the property out?” Next, think about where you want to live. This is especially important if you intend to use this property as a vacation home. Think about the kinds of activities you and your family want to have: surf, ski, camping, etc. Do you want to live in a city, within a certain distance of the city, or do you want to be out in the country? What amenities does the property have to have? Think about everything you can possibly think of and determine what needs you’d like, but can live without.

2. LOCATION
Once you’ve determined your needs, it’s time to narrow down your search to a city and state. Ever hear that old real estate adage, "Location, location, location."? Aside from price, location is the most determining factor when purchasing a property. Every state looks completely different than each other so this is where the activities you decided you wanted will help narrow it down. More often than not if you are a "snowbird" you're probably wanting to be in warmer locals... try any of the southern states: Florida, Arizona, Nevada and California are the current Canadian favorites. When you've determined which states you are interested in go to sites like the city's chamber of commerce and contact a local real estate agent (like myself here in Las Vegas). The Chamber of Commerce site will have descriptions of all the city has to offer: schools, neighborhoods, amenities, etc. and in most cases will send you a booklet of their city for FREE. For more information about Las Vegas, Click on the Link on this blog located to the right of your screen under “Useful Links”.

3. SEE THE PROPERTIES
Be prepared to visit the city you are interested in and get to know the area first hand. Don't buy a property without visiting it in person, even if you don't intend to live in the property. It's important that you determine if the property is worth your investment. Find out if any repairs are needed, appliances need to be purchased, and make sure it's in an ideal location (i.e. no dogs barking, planes flying over head, not located near an airport, etc.). Drive around the area during both day and night. Check with your real estate agent to see if resale values are on the decline and look at local crime rates. Other questions to consider are "Do other investors report higher maintenance costs and repair bills than other neighborhoods? Is there a high rate of tenant turnover and a high vacancy rate? Are there any litigations going on within a development? Etc." Frankly your agent should be your main source of information. Either giving you this information, or directing you where it can be found. They should also give you an idea on the market as a whole, explaining what type of transactions you may encounter like Foreclosures, Short Sales, etc. This will help determine where to focus your efforts and keep you from wasting time and money.

4. TAXES- HIRE A LOCAL PROFESSIONAL
If you're a Canadian resident and spend less than 121 days in the U.S. in a given tax year, you are not considered a U.S. resident and do not have to file an income tax return. However, if you do stay longer and don't properly do some tax planning you risk having to pay tax in both countries. Property taxes may also vary as some states charge more if the purchaser resides outside of the U.S. The Bank of Montreal says its important to be aware of mortgage costs as interest rates also vary within the two countries. I suggest seeking professional help from an accountant within the state you are interested in buying property to answer any tax-related questions as tax laws vary both nationally and locally. Also, make sure to ask them how you’ll be affected if you decided to sell the property.

5. HIRE A PROPERTY MANAGER
If you plan to live in the property for part of the year, but plan to leave the property vacant or choose to rent out the property while you are gone, hire a property manager. This person will make sure the property is maintained, will make sure it doesn't get burglarized or vandalized, and will collect the rent from the tenant.

*If you're planning to rent the property out for all of the year, the U.S. IRS will consider you a "non-resident alien" and will require you to pay income tax on the rent that you collect. There is a 30% withholding tax on the rent you collect, and must be deducted by you or the property management firm you hire. In my experience, the property manager usually takes this out before sending you your check, but make sure you decide what you want to do before you hire the management company. This may help you determine the company you use.

6. FINANCING
For financing options, the Bank of Montreal suggests using a U.S. financial institution that has ties to a Canadian bank. "Staying within the family can save a lot of time and headache," says Laura Parsons, BMO mortgage specialist. "Alternatively, seek out Canadian banks that are already established in the U.S. and the area you are looking to purchase in." If you intend to pay for the property in cash you may need to open a U.S bank account. Ask the local real estate agent, or financial institution to advise if this is necessary.

7. INSURANCE
Insurance is another major consideration. Most Canadians may know that when traveling to the U.S. medical insurance is required but, may over look the need for home insurance. When insuring the property, be aware that some areas that often have hurricanes, flooding, or earthquakes often will have higher insurance costs. You'll also want to make your sure have adequate liability insurance. If you'll be hiring trades people to work on your property, make sure they are covered with workers compensation. Again, your real estate agent can help suggest insurance agents.

In summary, do a lot of research, ask a lot of questions, and when push comes to shove speak to local experts who can guide you step to step. Follow these steps, and you too can take advantage of these record lows and make a good investment.

New Foreclosure Bill looks to protect Nevadan Homeowners

In Carson City, a new bill focused on foreclosures looks to allow homeowners in Nevada the opportunity to walk away from a foreclosure or short sale without the threat of a lawsuit to pay back the deficiency. Under Senate Bill 346, discussed Tuesday in a Senate Judiciary Committee, loans would essentially be modified so single-family residences would be protected from judgments even after they no longer own the property.

Current law already provides some protection, but this bill would specifically target single-family homeowners whose property is their primary residence. Opponents argue the passage of this bill would result in a further plummet of prices and home values as there will be no consequences for the homeowners to simply walk away from their property.

Assemblyman Tick Segerblom, D-Las Vegas, feels this may be the only way to affect immediate mortgage issues and he dismisses concerns that the bill would have a significant impact on housing prices. His hope is that the homeowners will have leverage against the banks, and "if it's a choice between the bank suffering or the homeowner suffering, I'd rather it be the bank."

The other concern is that the passing of the bill would detract investors.
Showing that Nevada doesn't stay true to it's contracts. I disagree with this idea. Granted I have not read the bill, but the homeowners aren't the reason they can't pay their mortgages. They apply for mortgages with the intent to pay them back and I think ultimately they would prefer to stay in their homes. Unfortunately, the market tanked and jobs are scarce- they are simply unable to continue to pay their mortgages. Most people are trying to modify their loans, but to no avail. So their ONLY options are to either walk away from the property, or hope that the bank will forgive their deficiency with the use of a lawyer. To say homeowners are getting away scott free if the deficiency were waived is, I'm sorry to say, mistaken. Their credit is affected, they have to move out and find another home/job sometimes out of state, and unless the banks become more willing to work with homeowners this is the only "right" thing to do.

As for the idea that investors won't want to come to our state and invest?I disagree also. The only investors that would probably be affected by the passing of this bill are the ones that are buying up notes with the intent to go after the borrower. I'm sure these investors will be alright, they're smart people who can make money a different way.

As for the prices being affected, I would think that if the banks weren't allowed to go after the deficiency they would either hold out for more money at the time of purchase or would be more willing to work to modify the loan. Both good things for the economy, and homeowners. I guess time will only tell. Will this be the end of all problems? No, of course not, but personally, I think this is a step in the right direction. As of yet
no action was taken on the bill.

How to be competitive in a buyer's market:

Despite what is said on the news, you may be surprised to learn that not every market or even every zip code is distressed. Many areas, even here in Las Vegas, are finding a high percentage of multiple offer situations due to this very fact. So what can you do to be competitive?

First, come ready to buy. Before you head out on your search have a clear list of objectives which include your criteria. Know what amenities are must-haves, what you can live without, and what areas you are interested in.

Next, if you are planning to finance, get pre-qualified. This is probably the most crucial step in today's market. Many clients I've worked with miss out on their dream home because of hesitating on this fact alone. Pretend you are selling your home, if two offers are presented for the same amount of money, but one has already started the loan process and has documentation from the lender stating they are financed vs. a person who will get it to you when they get around to it... who are you more likely to want to do business with? The good news is that you only have to go through the process once, most people don't realize that the pre-qualification letter is "good" for thirty days. This comes in handy should interest rates go up in that time, you'll be guaranteed to keep the lower rate as you have "locked" it in.

Next, strategize with your agent . Your agent should be able to tell you if you'll be encountering a multiple offer situation as soon as the offer is submitted, so expect there to be some negotiations. Unfortunately, they won't be able to disclose how many buyers you are bidding against or what their offers may be, but together you can come up with a strategy that will give you the best opportunity to get your offer chosen. Your agent should discuss market stats that show what comparable homes have been selling for. This will be a good indication of where your offer should be at, above or a little less than list price. In this market, sellers, especially those that are "equity sellers", won't be as inclined to accept less than list in these situations. If paying over price isn't ideal Sellers may ask for certain concessions, such as closing costs, and requests regarding closing dates. Some of these requests may seem reasonable to you, but don't be afraid to stand your ground if others are too far-fetched.

And finally, stick to your guns. If the multiple offer situation goes back and forth, it's easy to get caught up in the excitement of a bidding war. Know what price you won't go above and stick to that price. I'm a firm believer in everything happens for a reason, and you should take the same approach when purchasing real estate. If the ideal home becomes unreasonably expensive or the seller/bank is asking for ridiculous concessions, don't be afraid to walk away. Don't let pride or ego take over. This is still a business transaction so maintain your composure, try to keep your emotions out of it. If it doesn't happen, you will find another... and sometimes it ends up being better than the original, so stay positive!

If you use these simple tips to help you navigate a tough market you'll be signing on the dotted line for your new dream home in no time.

Update on Fannie and Freddie

The government has agreed that Fannie and Freddie will be no longer. They plan to roll out the plan soon with the intention of completing the phase out in 5-7 years. The sole purpose of getting rid of Fannie and Freddie is to get government out of the mortgage industry and put the private sector back in. Right now, 9/10 mortgages are backed by the government. In addition to removing themselves, the government is also proposing changes to FHA loans in order to level the playing field. They still will require 10% down on conventional loans, but will raise monthly premiums another 25%, which will make qualifying for a loan a bit harder. The hope is that by raising FHA monthly premiums, it will be harder to qualify for the loan and buyers will be more inclined to go back to buying conventional loans which will be owned by private investors. The idea is that if private investors are ones setting the terms they will keep interest rates lower in order to compete with each other. Let's hope they're right. Guess we'll just have to wait and see.

Fannie Mae and Freddie Mac- no more?

For the past year, rumors have been swirling over the fate of Fannie and Freddie, especially with the talk that China may sell off their percentage of the Fannie and Freddie stocks and the recent announcement that Fannie and Freddie were "delisting" from the New York Stock Exchange. A decision by the Treasury was to be released on the future of the mortgage firms at the end of January, but has since been pushed back to mid-February. Reports are saying the statement could be released as soon as the 11th.

The talk seems to come down to the overall shut down, combination, or sale of the firms by the end of 2012. The reason for the drastic decision is that confidence is at an all time low and keeping them around would cost the US taxpayer another $73 billion, bringing the total bailout funding to $215 billion, a position that cannot be sustained in the long run.

Republican Scott Garett accuses the two mortgage companies of being the major cause of the financial crisis. He proposes that the two companies be overhauled, but did not say outright that the companies should cease to exist, privatize, or reduce in size.

The Obama Administrations has proposed the creation of a new federal subsidy, but Republicans don't feel that's the best solution. Since the elections, Republicans, in the House and Senate have been writing bills and amendments asking for the end of the bailouts or for an overhaul of Freddie and Fannie. Currently, Rep. Jeb Hensarling, the author of the sole bill in Congress (H.R. 4889), asks that any further bailout of the two mortgage companies be halted and for both companies to close. As of this moment, the bill is stuck in the House Committee on Financial Services and any action does not appear to be expected.

Many fears surround the topic, suggesting the housing recovery remains too fragile and feeble for the government to abandon Fannie and Freddie anytime soon and that the continued bailout is our only option at this moment. Needless to say, it's obvious something has to be done.

What would you like to see happen to Fannie and Freddie?

Cash is King in Las Vegas

Yesterday, the Greater Las Vegas Association of Realtors reported that in January more than half of the transactions were cash purchases. For the most part, these cash investors are looking to rent out their investment properties. Paul Bell, GLVAR's president, believes that the cash investors are crucial to our Las Vegas market, "without them, the homes would sit vacant and inventory would rise. With low rents and attractive single-family residences available, many tenants are opting to rent their own homes rather than live in complexes."

If you are looking to invest in Las Vegas real estate, or are perhaps looking to rent a single family residence, please don't hesitate to contact me.

Reverse Mortgage Loans, and what they can do for you...

Late this morning, agents in my office were introduced to a few reps from Wells Fargo, the topic they discussed referred to Reverse Mortgages and the great opportunities it has for our clients. I am so excited about what they shared that I had to let you know about it right away!

First let's start off with a little definition, what is a Reverse Mortgage?

The easiest way to describe a reverse mortgage is that rather than the traditional mortgages, where you pay a monthly mortgage payment, the reverse mortgage is just the opposite... the bank pays you!

I know what you're thinking- "That can't be right. Why would the bank pay me?"
First, in order to qualify for the FHA-insured loan, you need to be at least 62 years of age, and all parties involved in the transaction (specifically those placed on title) will need to be as well. The only thing you'll need to submit is documentation on your assets. There is no credit check or Loan to Value ratio necessary to qualify for the loan! You can choose to use the loan in 3 ways. You can take out the money as a lump sum, take out part of it as lump sum and use the rest as a line of credit, or you can draw out from the line of credit and pay yourself a monthly income. The line of credit can be expected to increase over time (as long as money remains in the line of credit). If you draw out any money and use it as income, the income is tax free.

To clarify, you must have equity in your house in order to qualify for this loan. But, if you've lived in the property for awhile you have probably accrued some equity. This is a great thing to do if you happen to be a homeowner over the age of 62 who finds they have equity in their property, but are finding it difficult to keep up with the payments of their current mortgage.

Let's discuss what property types are eligible for this loan...
you can purchase a Single Family residence, HUD-approved condo, Planned Unit Developement (PUDs), Two- to four-unit properties (one unit must be occupied as a primary residence), or a manufactured home built after June 15, 1976.

Requirements of the new home
The home must be the primary residence, must be occupied by the borrower within 60 days from close date, and construction must be complete, properly habitable, and a certificate of occupancy or its equivalent must be submitted prior to the loan application.

It is essential that if you receive a reverse mortgage that you pay your taxes, your insurance, your HOA dues, and is kept in good shape.

Wells Fargo wants to ensure you are not being pressured, so all seniors wanting to apply for a reverse mortgage must first attend a meeting with their local rep (which I can get you in touch with if you live in the Las Vegas/Henderson/North Las Vegas Valley), then a counseling session with a Hud-approved counselor. These counselors will send you a packet of information, and will then speak to you on the phone. The conversation typically lasts for about an hour, and is to ensure that no one is pressuring you into the application and you fully understand what this mortgage entails. Counseling is also required to be attended by all parties in the transaction, regardless if they will be on title or not.

Wells Fargo is the nation's leading originator of reverse mortgage loans. In December of 2010, here in Las Vegas, they closed 1,832 loans. Bank of America had only 837, which was the closest of their competitors. It is expected that more of these transactions will happen more frequently with the expected retirements of the baby boomers and the current economy we find ourselves in. They are here to help you and can answer any questions you have about the program, also known as the Home Equity Conversion Mortgage (HECM). If you would like more information about this loan, please contact me or contact your local Wells Fargo Home Mortgage rep.