With interest rates sitting just above 5 percent, now is a great time to crunch the numbers and see whether refinancing your mortgage can save you money. As a general rule, homeowners will probably come out ahead when they can shave about 2 percentage points off of their interest rate, says Marc Savitt, president of the National Association of Mortgage Brokers.

If you have an adjustable-rate mortgage (ARM) or an interest-only loan, you might also benefit from refinancing, even if you don’t save money on the monthly payments. That’s because you can lock in a 30-year fixed-rate mortgage at today’s historically low rates and never have to worry again about your payments increasing.

Think you’re a good candidate for refinancing? Despite reports of banks hoarding money, lenders are still making loans. But it has become harder to qualify for one. Here’s a road map to help you navigate the new and ever changing mortgage terrain.

The new criteria

Credit scores matter

“If you want access to the lowest interest rates, you need a credit score of 720 or higher,” says Keith Gumbinger, vice president at mortgage-information publisher HSH Associates. If you have a score of 620 or below, you might not qualify for a loan at all, he adds. Credit scores range from a low of 300 to a high of 850.

Equity is king

You’ll need at least a 10 percent equity stake in your property to refinance. And in some cases, you won’t be able to get a loan without a 20 percent stake if private mortgage insurance is hard to get in your region. That might be a problem if you live in an in area where property values are quickly falling. You might discover that your house is valued at less than you owe on your current mortgage, making refinancing difficult. The one exception is for people with mortgages that are owned and held by Fannie Mae or Freddie Mac. A new program will allow homeowners to refinance up to 105 percent of the home’s value.

Underwriting standards are tough

All homeowners will need to document their assets and income. “Right now you have to prove you are the borrower you say you are, sometimes repeatedly,” Gumbinger says. Lenders want to make sure that homeowners can realistically afford any debt obligations, and they’re reluctant to underwrite a mortgage if the homeowner’s overall debt load is more than 43 percent of the family’s income. At the height of the housing boom, acceptable debt ratios reached as high as 55 percent, Gumbinger says.

The jobless need not apply

Refinancing isn’t an option for the millions of Americans who need to lower their monthly payments the most those who have lost their jobs. Banks won’t make new loans to such people until they can show pay stubs from a new job for at least 30 days, says Savitt, of the National Association of Mortgage Brokers. A jobless homeowner’s only option might be one of the new government programs for distressed folks, but they are usually available only to those who are at least 90 days delinquent on their payments. And while it might be tempting to stop mailing in your check, know that your credit score will take a serious hit if you stop paying your mortgage.

The refi shopping experience

Expect higher fees

In the past, you might have been able to refinance without paying any points and fees, but today that’s often not the case. Now that Wall Street is no longer securitizing smaller mortgages, the vast majority of conforming loans (those valued at $417,000 or less in most areas and $625,500 in high-cost areas) are sold to government-sponsored entities Fannie Mae and Freddie Mac. About a year and a half ago, they started charging borrowers additional fees. The first one you’ll encounter is called an Adverse Market Delivery Charge, and it could add as much as a quarter of a percentage point to the loan.

Fannie Mae and Freddie Mac also charge a fee called the Loan Level Pricing Adjustment, which takes into consideration your credit score and loan-to-value ratio, or how much home equity you have. Someone with poor credit and very little equity could end up paying an additional 300 basis points in fees, says Gumbinger, of HSH Associates. So if you were borrowing $100,000 and had to pay 3.25 percentage points in fees, you’d owe the bank an additional $3,250 in closing costs. If you wrapped the fees into the mortgage itself, you’d end up paying a 6.25 percent rate over the life of the loan.

Small lenders might offer the best deals

Interest rates used to be fairly similar from one lender to another, but now they can vary by as much as a percentage point. And some of the most competitive interest rates are found at the smaller community banks and credit unions, which might be better funded than some of the larger players that got caught in the subprime debacle, according to Gumbinger.

Make sure you don’t limit your shopping to a single bank or mortgage broker. Some of the larger lenders, including Chase, no longer allow brokers to sell their products. So if you want to see all of the rates in your area, you’ll need to pick up the phone and do some calling around yourself.

If you want a few local mortgage sources that I have personally worked with contact me for a list of me vendors list of mortgage, title insurance, attorney’s, home inspectors, etc.

Ian Lazarus

The Lazarus Team

The Landis Co., Realtors

ian@mygo2realtor.com

609-457-0258 mobile

www.SJbeachhomes.com

With the project substantially completed, the City will be coordinating with representatives of FEMA to obtain reimbursement of 75% of the eligible costs of the project. The beach-fill and dune reconstruction from 1st to 15th and 40th to 52nd Street was previously determined to be eligible for FEMA reimbursement, based on the damages that had occurred in a November 2009 storm event, which was a federally declared disaster. The beach from 30th to 40th Street, while not eligible for FEMA funding, was 75% funded by the State of New Jersey, as the City was successful in its efforts to obtain available funds from the state’s dedicated shore protection funding source.

Please see photos below of Sea Isle’s beach replenishment efforts and new dune fencing…

Phase 2 of Excursion Park, Beach to Bay Corridor – This project involves streetscape improvements to the public corridor along JFK Boulevard from the Promenade to Landis Avenue, and widening of the sidewalks along each side of this corridor by 3 feet. The contractor, Fred M. Schiavone Construction, is in the process of placing the surface pavement, in efforts to open up the street for the coming weekend. The landscape planter walls, landscaping, sod and sidewalk pavers have been substantially completed for the entire project. New, relocated utility poles have been placed; and the electric, cable, and phone utilities are scheduled to relocate the overhead wires over the next two weeks. Delivery of the new, decorative light poles is scheduled for April, at which time the project will be able to be completed.

Please see photos below of Phase 2 construction, taken earlier this week…

Demolition of Existing Library / Beach Tag Facility and Conversion to Parking Lot – NO CHANGE FROM PREVIOUS UPDATE – Demolition of the old library facility will start in April. Construction of the parking lot will follow immediately afterwards. The completion of the parking lot will be prior to Skimmer Weekend (June 16 and 17).

Construction of Welcome Center Addition to the Community Lodge and Renovations of the Existing Lodge Facility and Site – The contractor, R. Wilkinson and Sons, has completed piling installation for the Welcome Center addition and the handicapped access ramps. Renovation work inside the Community Lodge is in progress, to completely rehabilitate the restrooms. The City has relocated the Lodge activities to the former Library Building; and the renovation work in the Lodge will be complete in order to allow re-entry into the Lodge at the end of March. The Welcome Center addition is scheduled for completion by mid-June. The project will provide for improved heating, ventilating and air conditioning in the existing lodge; improved restroom facilities that comply with handicapped accessibility requirements; improved access to the lodge that also complies with handicapped accessibility requirements; and a complete addition of a Welcome Center. The project is the culmination of several years of public discussion about the need for a Welcome Center, as well as the need for continued utilization of the current lodge facility.

Improvements to T.I. Park – The contractor, Axios, Inc., has completed framing for the new decks and ramps and is in the process of installing the deck on the access ramps. The project involves replacement of all the ramp and pavilion decking with Timbertech (plastic material similar to that used at the Marina); replacement of the wood railing with aluminum; addition of a handicapped ramp at the southern end of the park; and other various improvements to the facility to ensure compliance with the Americans with Disabilities Act. Given the magnitude of the work and the removal of existing ramps and accesses, in order to ensure public safety, the park will be closed to public access while the construction takes place. The project is expected to be completed by early April.

Please see photos below of T. I. Park, taken March 6…

Lagoon Dredging – On February 14, City Council authorized award of a contract to Wickberg Marine Contracting, of Belford, NJ, in the amount of $719,336. Letters have been issued to property owners adjacent to the lagoons, advising them of the particulars of the project, and providing contact information for the contractor, in the event the property owners wish to participate in the project.

The current status of the project is as follows:

*The contractor has mobilized his equipment on site and has started construction of dike walls in the dredged material disposal area, located west of the library, adjacent to Rio Grande lagoon (Rio Grande is along 47th Place). Dike construction will take approximately 6 weeks.
*Dredging of Rio Grande Lagoon and a portion of Rio Del Isole (along Venicean Road) will take place from about mid-April through May.
*Dredging work will cease over the summer and re-commence after Labor Day, when the remainder of the lagoons will be dredged.

The lagoons to be dredged are as follows:
Rio Grande (south side of 47th Place)
Rio Delle Stelle (between 46th and 47th Place)
Rio Delle Luna (between 45th and 46th Place)
Rio Del Amore (between 44th Street and 45th Place)
Rio Delle Isole (along the east side of Venicean Road)
Rio Del Barache (between 43rd Place and 44th Street)
Rio Del Affare (between 42nd and 43rd Place)
Rio Delle Ponte (along Park Road on either side of 43rd Place)

The project provides for the ability of private property owners adjacent to the project area to enter into an agreement with the successful dredging contractor to dredge their private slips (at the private owner’s expense).

Please see photos below of the preparation efforts at the dredge disposal area adjacent to Rio Grande Lagoon, taken March 7…

Sewer and Road Reconstruction on Central Avenue (49th to 69th Street) – The project has been contracted to the firm of Lewandowski Construction Industries, Inc., of Waterford, NJ, and will be performed in two phases. The first phase is from 49th to 63rd Street (prior to the 2012 summer season) and the second phase is from 63rd to 69th Street (following the 2012 summer season). The project will rehabilitate or replace the deteriorated underground sewer system, as well as provide for reconstruction of the entire one mile stretch of roadway. The contractor has mobilized on site, and is currently working between 60th and 63rd Streets (traffic is currently detoured between 60th and 63rd on Central Avenue). Work will proceed through the spring, then be halted for the summer. The current plan includes installation of the required manholes and sewer lines, along with reconstruction of the street surface from 63rd to 49th Street, prior to the summer season.

Please see photos below of the construction on Central Avenue near 63nd Street…

Utility Reconstruction on Landis Avenue (54th to 69th Street) – The project has been contracted to F.W. Shawl & Sons, of Marmora, NJ, and will provide for water and sewer line replacement in advance of the County project to resurface Landis Avenue from 54th to 69th Street. The contractor has started to mobilize on site and work will start this week. The project is scheduled to be completed around mid-May. The County is scheduled to resurface Landis Avenue, from 54th to 69th Street, either in the fall of 2012 or spring of 2013.

Inflow and Infiltration (I & I) Remediation –The firm of Video Pipe Services, Inc., of Newfield, NJ, is in the process of performing work associated with internal repairs of sewer pipelines and manholes throughout the City. The portion of the project involving sealing of sanitary sewer mains has been substantially completed. Repair and lining of sewer laterals identified as needing corrective work is in progress, and that work is now scheduled to be completed in April, which will complete this phase of the I & I remediation. The need for this project was identified over the past several years through a comprehensive investigation and analysis of the City’s sewer system. Sewer systems are prone to both inflow (overland water entering the sewer system through manhole covers and other surface openings in the system) and infiltration (entry of groundwater into pipelines through cracks, deteriorated pipe, and pipe joints). The effects of I & I are symptoms of deterioration of the sewer system that must be corrected to avoid more problematic maintenance issues and potential failure of the sewer system. I & I is also costly, in that the City must pay for the unnecessary treatment of water that enters the sanitary sewer system. This is the first phase of a multi-year citywide sewer maintenance and improvement project that will ensure the continued viability of the City’s vital sewer infrastructure. As indicated above, this project is expected to be completed by April. The next phase of I & I work will involve replacement of sewer lines that cannot be corrected through internal, “no-dig” repairs, as are being performed in this phase. As those projects are engineered and prepared for bidding and construction, we will provide updates on the specific details of the projects.

Utility Reconstruction, Various Streets – The City is in the process of preparing plans and specifications for a project to replace deteriorated underground utilities (water and sewer) in several streets as part of its comprehensive road and utility program. The following streets are currently being engineered for utility work in order to put the project out to bid; and the City expects to advertise for construction bids within the next three weeks. The work will be completed in the spring, with a summer hiatus and a fall completion. Following utility work, the streets will receive new surface paving. The following streets are included in this project:
1. 50th Street, Landis Avenue to Promenade
2. 51st Street, Landis Avenue to Promenade
3. 60th Street, Landis Avenue to Central Avenue
4. 43rd Place street-end with guide rail barrier
5. 42nd Street, Landis Avenue to Promenade
6. 79th Street, Landis Avenue to Central Avenue
7. 60th Street, Landis Avenue to Beach End
JFK Boulevard Reconstruction, Bridge to Landis Avenue – The County has been working with the City for design of the project to reconstruct and reconfigure JFK Boulevard from the Bridge to Landis Avenue. The project limits also include reconstruction of Landis Avenue from JFK Boulevard to 40th Street. The project scope will include the addition of widened sidewalks, decorative lighting, streetscape improvements and landscaping, drainage improvements, and elevation of the road surface, which will assist during times of flooding. The County Engineer and the design engineering firm of Urban Engineers (which is under contract to the County), along with the City Engineer, made a presentation on the JFK Boulevard project on March 7, 2012 in council chambers, at which those in attendance were informed of the project details and the proposed timing of the project. The meeting was attended by approximately 30 members of the public and the media, with the opportunity for questions and concerns to be raised. The engineers addressed issues relative to drainage, traffic, the proposed elevation of the road surface, changes to the road configuration, and the new streetscape. The project involves federal funding, and the next step is for the County to obtain authorization from federal and state agencies to proceed to bidding. If authorization is received, the County will put the project out to bid by July in order to award a contract for a fall 2012 construction start. In this event, construction will take place between October 2012 and May 2013.

Paving of 43rd Street from Landis Avenue to Park Road – The City will receive bids for construction of the project on March 14. The work will involve final re-surfacing of the street. This paving project will finalize a complete reconstruction of this section of 43rd Street, which previously received new water and sewer lines. The paving work will be completed prior to the summer season.

By JOEL LANDAU Staff Writer Press of Atlantic City

GALLOWAY TOWNSHIP — Joe and Stephanie Tucci spent a year and a half looking for the right house.

And six months after submitting a bid, they’re still waiting and waiting and waiting to find out whether it will work out.

Stephanie and Joe Tucci, of Mays Landing, stand in front of a Galloway Township home that they hope to buy in a short sale. They submitted a bid six months ago and have been waiting for bank approval.

The township home that the couple bid on is a short sale, which means the owner of the house could no longer afford to pay its mortgage and is working out a deal with the lender to sell at a price lower than what the owner owes. When a potential buyer makes a deal with the seller, the lender’s approval is required for the sale to take place.

Local real estate agents say short sales are becoming a larger part of the local market and can often translate into a lower price for a buyer willing to be patient.

“People walk away from short sales because they get tired of waiting,” said Robert Shamberg, owner of Prudential Diversified Realty in Galloway Township. “Everyone wants a deal. Everyone knows short sales are a good deal. But they may not realize it takes a lot of time.”

The home could have several lenders that all need to be satisfied, Shamberg said. The bank could take longer than expected to give an answer or make a counteroffer, he said.

Shamberg counseled Joe and Stephanie Tucci through the process and said they could get a good deal if they were willing to wait. The couple placed a bid at $200,000, which Shamberg said is about $50,000 less than a realistic market value.

But sellers and banks are often willing to accept less rather than go through the long and costly foreclosure process.

That’s the hope of the Tuccis, who fell in love with the home that was recently renovated and features an open kitchen and cathedral ceilings. The couple placed the bid in April and hope to hear within the next few weeks.

“You can get a really good deal but you have to have time,”Stephanie Tucci said.

The couple has continued renting in Mays Landing and have looked at some other homes as a potential backup plan.

“It’s just a waiting game,” Joe Tucci said. “Hopefully they’ll take our bid or they’ll lose out and have a vacant property.”

Brenda Lawn, a real estate agent for Prudential Fox & Roach in Northfield, said short sales are an “absolute roller coaster”that can take an emotional toll on the buyers.

“The first thing I do is educate them. I tell them it’s a long process and there will be a certain degree of frustration,” she said. “It’s hard to do that. The buyers are so enthusiastic. But it really is difficult because it doesn’t always have a happy ending.”

Lawn said short sales and foreclosures have taken up as much of a third of the housing market in most of the region.

She said she’s had buyers wait between three months and a year for the bank to approve a deal, but Jeff Quintin, of Prudential Fox& Roach in Ocean City, said he has had some recently that took only a few months.

Conducting a short sale “is a skill providing you know how to manage the lenders and structure the deal properly,” he said. “If you know what you’re doing and get it structured the right way, a short sale can be like a typical sale.”

Quintin said larger banks may not open the file on the property until the bid is submitted, so it’s impossible to know what the bank would accept.

“In most cases there is not a predetermined (price) for the short sale unless you have already gone through the process,” he said.

But a short sale is often worth it to the bank considering it can take more than two years to foreclose on a property owner, Quintin said.

“You never know what a bank will approve,” he said.

Short sales also benefit the seller because they avoid foreclosure and leave the seller in a better position than if they waited to get more money on the sale, Quintin said.

“Their credit may go down 100 points but they can improve it faster than the market can improve itself,” he said, adding many sellers are finding it too difficult to redo their loans.

And the program has had its results.

Quintin said he recently had a home valued at $4 million approved for a $1.425 million short sale in Ocean City. Another Ocean City property valued at $2.765 million closed at $780,000, he said.

“The buyer is always getting a property under market value,” he said. “It’s worth it many times to go through it.”

Florida Real Estate Agents:
Florida Enhanced Short Sale Relocation Assistance
Florida homeowners may receive $5,000 to $20,000
in relocation assistance.

Bank of America encourages distressed homeowners to explore a short sale as a viable option for avoiding foreclosure. To that end, for a limited time we are offering enhance relocation assistance to help motivate homeowners to engage with us on a pre-offer short sale. An additional benefit for these pre-offer programs – such as the Home Affordable Foreclosure Alternatives (HAFA) and Bank of America’s proprietary program – is that deficiency may be waived for the homeowner.

Eligibility:

• Homeowners with property in Florida
• Short sales initiated without an offer between September 26 and November 30
• The customer will have to be eligible for one of the without offer programs such as the HAFA program or our proprietary program (specific investor participation and eligibility criteria do apply to these programs)
• Successful closing of the eligible short sale by August 31, 2012
• Minimum relocation assistance is $5,000 and maximum is $20,000, with the specific amount calculated based on the unpaid principal balance

Exclusions:

• Ginnie Mae, FHA, VA and USDA loans are ineligible for participation
• Lot loans are ineligible for participation
• Properties outside the state of Florida are ineligible for participation
• Short sales initiated with an offer are not currently eligible for the enhanced relocation assistance

Frequently Asked Questions:

Q: How can I find out if my client/homeowner qualifies for this relocation assistance?

A: Call a Bank of America short sale specialist at 1-877-xxx-xxxx.
Monday – Friday 8 a.m. – 10 p.m.; Saturday 9 a.m. – 5:30 p.m. Eastern

Q: Do I have to do anything differently when initiating or completing the short sale?

A: No. As long as the homeowner’s short sale is initiated between September 26 and November 30, 2011, and the property closes by August 31, 2012, they will be eligible.

Q: Will the relocation assistance funds be reported on the HUD-1?

A: Yes, they will be documented on the HUD-1, and a 1099-MISC will be issued.

Q: Can the relocation assistance funds be used to pay off existing liens?

A: Yes, if the investor approves it.

Q: Is the relocation assistance added to any other incentives, such as the HAFA or Bank of America proprietary program incentives?

A: No. A homeowner will receive the $5,000 to $20,000 in place of the typical incentive paid out by these programs. The relocation assistance is essentially an enhancement to the standard payout offered on these programs.

Q: Is the enhanced relocation assistance available for other programs?

A: Currently, the enhanced relocation assistance is only available to short sale programs initiated without an offer. However, as we gauge the success we may extend this incentive to other programs.

Questions?

Homeowners and may call Ian Lazarus, Abraham and Associates, Davie, Florida. 609-457-0258 ian.lazarus@mygo2realtor.com

By JOEL LANDAU, Staff Writer Press of Atlantic City

A state bill could offer relief for developers who cannot finish proposed projects due to the economy.

Michele Wheaton, broker for the Riverfront Condominium complex, said removal of its restriction to seniors has opened the market for it. Ben Fogletto

But the bill has drawn criticism from residents and municipal officials who fear it undermines their planning-and-zoning process.

Under the bill S-2950/A4128, introduced in June, developers would be able to seek a modification to their previously approved housing projects from municipal planning and zoning boards. Under the bill, the developer must demonstrate the project would not work under the current economic conditions.

Specifically, the developer must show one of the following:

• The current zoning or existing approval does not provide the property with an economically viable use.

• No feasible market exists for development of the property based upon the property’s current zoning or existing approval.

• Financing for the development of the property under current zoning or the existing approval is not readily available.

This would affect properties whose original application was submitted prior to Jan. 1, 2006, or the property must be owned by a lender who took ownership through foreclosure.

The bill would require the municipality to grant the change if the developer meets the criteria, and the application can be granted “without substantial detriment to the public good, to the extent it is not incompatible with the use of adjoining properties,” the bill states.

State Sen. Jeff van Drew, D-Atlantic, Cape May, Cumberland, said the bill is intended to foster communication between towns, developers and banks to get the properties sold and have residents pay property taxes.

Van Drew said he does not expect the bill to move forward anytime soon and also expects amendments to be made.

“It is a problem,” he said. “We need to get these properties on the tax rolls but do it in a way that’s fair as well.”

But the bill has drawn concern from municipal officials, who fear the bill would undermine the local planning and zoning process.

Michael Cerra, senior legislative analyst for the New Jersey League of Municipalities, said the original approvals presumably had been madE on sound decisions by the planning and zoning boards.

“Whether there may have been a bad business decision five or six years ago does not mean the taxpayers should pay for it over the long term,” he said. “It’s a short-term solution that could create a long-term headache.”

Anthony Cappuccio, president of Boardwalk Design & Development Inc. in Margate, said he favors the bill and is keeping apprised of its process.

“The state we’re in right now, I don’t think it could hurt,” he said. “It does take away a bit of home rule but it could also put a lot of people back to work on projects that have not been finished.”

Cappuccio is already taking advantage of a similar law passed by the state last year that allows developers to remove the 55 and older restriction on approved senior homes. Cappuccio bought the Absecon Gardens development in Absecon last year and got the senior restriction removed in May.

The company wants to market the 76-unit property to young professionals, empty-nesters and those looking for a second home. But the change has brought a lawsuit from residents who want to keep the complex as is.

Other changes have been more warmly received. The Riverfront Condominium complex along the Maurice River in Millville was developed by Haffelfinger & Standeven Construction Co. and they also got the senior restriction removed last year.

Michele Wheaton, broker for the property, said the change has opened up the market, though they have yet to sell any properties as the developer continues to finalize its financing.

But Wheaton said interest is up even though the people contacting her are still predominantly senior citizens.

“When you open the market up, it brings up the value a whole lot more,” she said. “But it still has to fit with plans. The condos are two bedrooms, two baths. Not many families are going to want to live there.”

Washington, DC, September 20, 2011

Increased lending to creditworthy home buyers and more loan modifications and short sales are necessary to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry and economy, according to the National Association of Realtors®.

That was the message delivered today by Allan Dechert, 2011 president of the New Jersey Association of Realtors®, who testified on NAR’s behalf before the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development regarding new ideas to address foreclosures.

“As the leading advocate for homeownership, NAR knows that foreclosures don’t just affect the families that lose their homes – communities, the housing market and the economy all suffer,” said Dechert, broker-owner of Ferguson Dechert Real Estate in Avalon, N.J. “Ensuring credit availability to qualified buyers and helping more distressed homeowners with loan modifications and short sales will help reduce the growing inventory of foreclosed homes and ensure that housing leads the way out of today’s economic struggles.”

Dechert said that creditworthy consumers continue to have difficulties securing fair and affordable loans despite their proven ability to afford the monthly payment. He said that NAR supports responsible lending standards; however, unnecessarily tight credit restrictions are putting downward pressure on home values, increasing the number of homeowners whose mortgage exceeds the value of their home, and adding to the number of foreclosures.

“Increased fees, higher down payments and reduced loan limits are making it harder for borrowers to obtain safe and sound mortgage financing products. Greater access to financing for qualified borrowers and investors could help absorb the excess inventory of foreclosed properties,” said Dechert.

In testimony, NAR also urged the lending industry to take greater action to keep struggling families in their homes through loan modifications that reduce the probability of default and prevent further increases to the large inventory of foreclosed properties. Helping more families remain current on their mortgage by significantly reducing their monthly mortgage payment will allow them remain in the home that they worked so hard to obtain and reduce the impact of foreclosures on local home prices.

Dechert said that continued short sale delays are also contributing to foreclosures and urged lenders and servicers to quickly approve reasonable short sale offers that would allow home owners to avoid foreclosure. The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure.

“Loan modifications – and short sales for those unable to meet their mortgage obligations – help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers,” said Dechert. “More must be done to streamline short sale transactions, since many potential home buyers are simply choosing to walk away from transactions due to the length of time it takes for lenders to approve and complete these sales.”

Dechert also testified about the pooling and disposition of foreclosure inventories held by the Federal Housing Administration and Fannie Mae and Freddie Mac. NAR is concerned that, although bulk sales may quickly alleviate the large inventory of homes held by the agencies, those sales would likely result in larger losses than necessary. Realtors® strongly believe that every effort should be made to incentivize individual versus bulk sales because individual sales maximize asset recovery and minimize the impact on housing values.

Regarding another proposed option to combine foreclosure disposition with affordable rentals through lease-to-own programs, Dechert testified that the focus should be on keeping families in their homes whenever possible. He recommended that any lease-to-own programs be privately administered by local entities that understand the needs and challenges of their local communities.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

September 20, 2011

A rental property can generate “taxable losses” that can be used to reduce your normal salary income, hence the federal income taxes you pay. It’s difficult for most people to understand how taxes work, and even more confusing once we get into the realm of rental properties and taxes. Below are some of the basics to understanding rental properties and federal income taxes. (Note: Understanding how taxes impact personal residences are a completely different topic, as those are governed by totally separate tax codes and go elsewhere on your 1040 form.)

Often I hear people saying that they want to buy some real estate to save money on income taxes. However, depending on your tax situation, owning real estate might not save you a dime on taxes. It wholly depends on your specific tax picture and the IRS rules about Passive Activity Loss Limitations.

First and foremost you should never make real estate investment decisions based solely on tax considerations. The first order of business is do your due diligence and determine if an investment makes sense based on cash flows, cash on cash returns, renovation costs, rental income, financing, and the risk of any particular property. Once you believe it makes sense in every other sense, then you can contemplate the tax effects.

(Important note: Always have a CPA, attorney or licensed tax professional guide you through your individual tax picture – this article is an illustration of one scenario but your scenario can be very different based on your financial picture.)

To better understand, let’s first quickly discuss the IRS 1040 form (http://www.irs.gov/pub/irs-pdf/f1040.pdf).

Your 1040 form you fill out each year – the form that most people start about midnight in April 14 – does two things:

1. Calculates the amount of federal income taxes you owe for the year based on how much you earned in salary, income, wages, profits, distributions, etc. LESS all the deductions (tax “shields”/subtractions) to those totals in the form of losses, deductions, exemptions, etc., to get to your Taxable income on Line 43. Then, look at the IRS Tax Tables and determine how much you owe in taxes based on your tax filing status (Single, Married Filing Jointly, etc.) and your Taxable Income.
2. Second, it reconciles the amount you owe from #1 above against the amount you have already paid during the year. This is commonly called “withholdings” from your salary, or if you are self-employed, you probably paid quarterly estimated income tax amounts to the IRS during the year.

• If you paid more in #2 than you owe in #1, you get a tax refund!
• If you paid less in #2 than you owe in #1, you write the IRS an additional check!

Tax Considerations of Rental Properties

Rental properties generally show taxable losses for the first many years. That taxable loss is essentially another “deduction” that lowers your taxable income – noted in #1 above – and hence lowers your income taxes.

This chart below shows an example of how a loss would be calculated. For example, this property might show a ($7,500) loss. That loss would filter through your IRS 1040 form, reducing your taxable income, and hence reducing your taxes.

This is how you might save money on taxes by owning rental properties – using losses on your rental real estate to reduce your taxable income, which allows you to pay less in federal income taxes.

How much it reduces your taxes depends on your income and filing status. It is a little complicated and can get very complicated depending on your situation.

There are also limits on how much of a loss on rental property any particular taxpayer can use to “shield” their income. These limits are called Passive Activity Loss Limitations. If your losses are over $25,000 and/or your Adjusted Gross Income is over $100,000, you may not be able to use all of the losses. You may have losses, but you are not allowed to reduce your income with them based on the IRS rules. Consult a professional.

Because of the manner in which the law was written, the sale of single family homes from individual sellers was made subject to the requirements, resulting in home purchasers having to file paperwork and provide ten days notice to the Division of Taxation for every real estate transaction, or else risk being held liable by the State for the seller’s delinquent taxes. Under A-2748, the sale by individual sellers of any dwelling unit, primarily one- and two- family homes, will no longer be subject to the bulk sales notification requirements.

BILL SIGNED:

A-2748/S-2313 (Diegnan, Schaer, Lampitt, Conners/Van Drew, T. Kean) – Exempts sales of certain homes and seasonal rentals from the bulk sale notification requirements

By KEVIN POST Press of Atlantic City Business Editor

The real estate industry was gleeful this past week, especially in oceanfront towns, after Realtors succeeded in getting the state to ease a regulation that was interfering with home sales.

“This was huge. I can’t even begin to tell you how many deals it killed,” said Nicholas Marotta, president of the Ocean City Board of Realtors.

The rule, which will no longer apply to sales of single-family and duplex homes, requires businesses to give the state advance notice of unusual asset sales. That allows the state to seek any taxes owed by the business and to require an escrow account for possible payment of taxes before the sale is closed.

An inconvenience for real estate agents everywhere, the 2007 so-called bulk sales law was a serious problem along the Jersey Shore, where most properties are rented at some point during the year and therefore were business assets under the law.

This duplex home on Wesley Avenue in Ocean City, listed for $875,000, is an example of the kind of properties that sometimes ran into trouble from the state's bulk sales law but are now no longer subject to it.

Marotta said home sellers would have a deal lined up and notify the state, and then the state would tell purchasers they must set aside money in case it turned out past taxes hadn’t been paid.

“I had sellers on the bayfront with a buyer for $1 million, and it was their primary home, not a rental. They filed the form and the buyer got back a notice to escrow $100,000,” Marotta said.

That killed the deal, since the bulk-sales law makes the buyer responsible for any back taxes the state can’t collect from the seller.

“It didn’t matter that it was baseless because we knew it was a primary residence and not a business in any way,” he said. “Everything had to be filed, and we were supposed to wait until they sorted through everything.”

Buyers were often told they’d have to hold off until the back-tax issues were resolved at some point in the future, but many chose to walk away instead, he said.

As such horror stories spread, the Ocean City Realtors started working through the state Realtor organization and county government to get relief.

“God bless Ocean City because we were out in front on this thing. We were the first board to raise some flags and got the N.J. Association of Realtors involved,” Marotta said.

NJAR championed a bill through the state Legislature to exempt single- and two-family homes, including seasonal rentals, from the bulk sales notification process.

Jarrod Grasso, CEO of the state Realtors, said the exemption simply brought the 2007 law back to its original intent, clarifying an issue that had been left too broad.

Among 16 sponsors of the relief measure, which drew broad bipartisan support, were Sens. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, and Jim Whelan, D-Atlantic; and Assemblymen Nelson Albano and Matthew Milam, both D-Cape May, Cumberland, Atlantic, and Vincent Polistina, R-Atlantic.

Marotta also credited Cape May County Freeholder Susan Sheppard for discussing the need for relief with the Governor’s Office.

On Sept. 14, Gov. Christie signed the bill into law “to boost New Jersey’s real estate market and cut red tape in order to ease the individual sale of homes and seasonal rentals,” said a signing statement released by his office.

“Thank God. That’s one major thing that we don’t need to consider doing in a property transaction,” said Midge Grunstra, director of sales at Goldcoast Sotheby’s International Realty in Ocean City.

She said she never lost a sale to the bulk sales process. “Everybody I dealt with had paid their taxes.”

Marotta, however, said there was a point to the original law, and the state has found that some limited liability corporations selling properties have had back taxes due.

“We weren’t able to get LLCs exempt, and that’s OK, because the state was finding some LLCs were not paying their taxes,” he said. “The state was collecting — legitimately — a good amount of money.”

The work on the issue by the Realtors in Ocean City — which he called “the rental capital of New Jersey” — isn’t quite done.

Marotta said in early October the board’s contracts committee will meet to revise the basic property sales contract used by members to reflect the bulk-sales exemption of one- and two-unit dwellings.

Short Sale vs. Foreclosure

Give Yourself Plenty of Time to List and Sell That Short Sale

By Elizabeth Weintraub,

If you’re thinking about doing a short sale, it’s smart to try to time the listing of that short sale. People are always trying to time the real estate market, and it really can’t be done. But you can be strategic about when you list a short sale.

There is an absolute worst time to list a short sale. That time is a few weeks to a few days before the sheriff’s sale or trustee’s auction. Ideally, you want to be as far away from that date as possible. Because there are too many things that can go wrong in a short sale.

Basic Steps of a Short Sale

• First, you need to find a committed buyer.
• Your agent will send the accepted offer and all paperwork to the bank.
• The bank will screw around for a few months, ask for more paperwork, lose stuff, demand revisions, in general, make your life a living hell as the bank’s collection department continues to hound you.
• Finally, somewhere between 2 to 4 months, on average, you will receive a short sale approval letter from the bank.
• Elated, your agent will notify the buyer, who will have canceled without telling anybody.
• You start the short sale over.

You may think I am joking, and while I have firmly planted tongue in my cheek, this scenario is all too familiar to many of us in the short sale business. With any luck, you have hired a short sale agent who is prepared for disaster and will not give up on you, no matter what.

Because starting over on a short sale is not the end of the world. It only becomes scary if you are behind on your payments. Many short sale lenders will not consider a short sale for a borrower if the borrower is not in default. Whether you should stop making your mortgage payments depends entirely on your lender’s guidelines.

If you are doing a Fannie Mae short sale, for example, Fannie Mae says you must be in default at the time your short sale is granted. Yes, our government is telling homeowners to stop making mortgage payments. It’s disgusting, isn’t it? But Fannie Mae is a government-sponsored entity that is supposed to be making a profit. It is not a non-profit organization.

If you are too close to the auction date, closer to that date than to closing your short sale, the likelihood is Fannie Mae will direct the bank to foreclose and reject your short sale. Therefore, you don’t want to get too close to that auction date. It’s a matter of careful juggling.

On the one hand, you might need to be in default. On the other hand, you don’t want to be so far into default that the bank will seize your home. Every state’s default procedures are different. You should check with a lawyer to find out the default period in your state.

If you stop making your mortgage payments, you could lose your home. It might be wise to keep those payments in reserve in case you need to bring your loan current to stop the foreclosure. However, if you have a lot of money in the bank, you might have a difficult time writing your hardship letter to explain your financial hardship. Unless you are doing a Bank of America cooperative short sale, the likelihood is your bank will want you to prove some sort of hardship.

The Ideal Time to List a Short Sale

You need time to properly market your home for sale, receive offers and to select the best offer to present to the bank. You want a buyer who will wait for approval. Sometimes buyers write offers just to see which offer is accepted first by a short sale bank and that buyer might not be dedicated to buying your home. Not every real estate agent is an honest agent, and an agent might not disclose if the buyer is writing multiple offers.

The best time to list a short sale is to time the listing so the bank receives an offer at a few weeks prior to the official 30-day behind mark. For example, if your mortgage payment is due on June 1, it will be 30-days delinquent on July 1. Therefore, July 1 might be the target date for your bank to review the short sale. If the bank takes 10 days to process the paperwork prior to review, you will want the offer to arrive at the bank around June 18th.

Most banks take 10 days to 2 weeks to pull together the documentation and assign a negotiator to study the file. From that point forward, it can take a few more weeks or months to get approval. Some banks are faster than others. Ideally, you want to leave yourself enough time that if a buyer flaked out on you or a bank required that you perform some other action that eats time, that you have the time to resubmit an offer.

The best time to talk about listing a short sale is before you go into default. Talk to your agent about your bank’s guidelines. You might not need to be in default at all to do the short sale. But if you must in default, then put that home on the market as fast as can you can. Do not wait for a good time. When you’re in default, there’s no such thing as a good time to list a short sale. Just do it.

SEARCH JERSEY SHORE PROPERTY HERE

Brought to you by Ian Lazarus

The Lazarus Team

The Landis Co., Realtors

609-457-0258 direct cell

ian.lazarus@mygo2realtor.com