Columbus HUD Homes

Yesterday I stumbled across a tax break, I could not believe even existed.

It is strange that nobody talks about this tax break, although it is extremely beneficial for real estate investors.

Did you know that you can sell an investment property for capital gains of $67,900 and don’t pay a penny in taxes?

Yes, that’s true. Thanks to the tax cuts enacted by the previous administration there is a ZERO tax rate for capital gains, such as investment properties you owned for more than a year.

There are only 2 caveats.

1. Your federal income tax bracket has to be 10% or 15%. This means your taxable income cannot be more than $67,900, if you are filing a join return.
2. You still have to pay State taxes on the capital gains. For a taxable income of $67,900 the taxes in the State of Ohio add up to approximately $2,300.

The good news is that this tax break will still be available for the 2010 tax year.

Real Estate Investors Could Save up to $10,000

This is a wonderful opportunity for real estate investors. If your income consists mostly of rents you can probably claim a good amount of deductions. The depreciation of rental properties is one of the best ways to reduce your earned income, because it is only a “paper” expense. If you don’t make a killing flipping properties, you probably keep your earned income in the 15% tax bracket.

Let’s say you sell a rental property you owned for more than a year.  The sale of investment real estate is considered capital gains by the IRS. Your profit of the sale may be $20K. However, your gain is more than the cash you receive at closing, because you have to recapture depreciation you took in previous years. So you may have to claim $30K in capital gains on your tax return, even if you only received $20K at closing.

In this case you would have to pay taxes for your earned income (less than 15%), but the profit you made from the sale of the investment property is completely tax free.

Disclaimer: This was just an example. I am not an accountant and I can’t give you tax advice. So, please call your CPA or accountant and develop your tax strategy for 2010.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

This week the number of HUD listings available to all bidders hit a new high with 69 homes. We begin to see the impact of the loss of incentives for owner occupants.
 
The larger selection of Columbus HUD homes spells opportunity for investors. It has been a while since so many nice, suburban residences were available to all bidders, including homes in Reynoldsburg, Grove City, Blacklick and Canal Winchester.
 
Here’s a perfect example of a HUD home in Delaware that may be perfect for investors or owner occupants that want to play the HUD homes bidding game. This specific house is located at 233 Niatross Pl in Delware. It is currently listed for $150,000. It may not be the best deal at that price, but HUD will certainly accept lower offers.

So, how can you determine the lowest offer HUD will accept?

Obviously, nobody knows for sure what HUD will accept. Sometimes they even surprise us on the low end. So here’s a strategy you can use for HUD homes have a daily bid deadline. All homes on our weekly bargain hunters list are in daily bidding and available to anybody. 

The daily deadline means that you may submit an offer on one or more HUD homes every day. You will know the next morning, if your offer was accepted. If HUD did not take your bid, you can make a small adjustment, maybe increase your offer by 1% or so.  I will resubmit this new offer on the same day, and by the next morning we will have an answer.

Using this strategy you will ensure that you get the lowest possible price on a HUD home. It may take a few days or even weeks and somebody else may steal the deal away from you.

Keep this in mind! There is less competition on homes with daily deadlines, so your chances of getting a low offer accepted are very good.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

Some of the benefits of buying Columbus HUD homes is the fact that HUD publishes a property condition report (PCR) and provides an FHA appraisal for their HUD listings. But, here’s the question: Should you trust these Reports?

Recently, I was really surprised about the poor quality of some of the PCR reports. Here are 2 examples:

The gigantic home I featured in my last post on 5090 Shellbark Ct in Groveport is listed as insurable (IN) by HUD. Per definition, insurable means that the property is in good enough condition to be a collateral for the “regular” FHA 203(b) loan. No repairs needed. However, if you take a closer look at the 18 pictures on our property website, you will see that there is no kitchen. It is missing. No FHA lender will approve a loan on this deal without a repair escrow.

Here’s an example of another home whose property condition report was completely wrong – until my buyer canceled the contract and HUD changed the report before it was relisted. The free standing condo on 4258 Shortleaf Ln in Grove City was originally listed as insurable with a repair escrow (IE) for plumbing repairs. However, the PCR stated in several places that the plumbing passed the pressure test and held air. The report also indicated that the electric panel was in the basement – which definitely can’t be the case, since the house is on a slab and does not have a basement.

You may wonder why I discovered that these property condition reports were wrong?

First of all, I preview many homes for you, the readers of this blog. I actually visit these HUD homes personally and try to see what’s wrong with them. I certainly understand that a house on a slab can’t have the breaker box in the basement?!

Secondly, I also represent many HUD home buyers. More than once did an underwriter request a repair escrow for homes that HUD rated as insurable (IN) with no repairs needed. I also know that a HUD home rated as insurable needs to have a space to prepare food.

So, here’s the bottom line: definitely read the reports provided by HUD, since they will give you an indication of the general condition of the property. Call me, especially if you are looking at a HUD home we featured on this blog. Even if it was not featured on this blog, I may have been inside it to show it to one of my customers.

Hire a professional property inspector. By watching an inspection you will not only learn a lot about the condition of the HUD house, but also get useful tips about how to maintain the different systems of your home.

By the way, I will attend your home inspection, too, if I represent you as a buyer. This gives us an extra edge when it comes to getting a final approval from the bank’s underwriter. I was able to save numerous contracts that would not have been approved otherwise by the lender.

Give me a call and learn more about the ins and outs of inspecting a HUD property.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

I am sorry to be the messenger of bad news. But this is very important for all owner occupants who planned to buy a HUD home in 2010. 
 
HUD announced that effective February 12, 2010 – that’s a Friday – HUD homes sold with FHA financing will no longer be eligible for the $100 down payment incentive.
 
In addition, the sales allowance of $2,500 for owner occupant purchasers will also be discontinued.
 
The deadline when both programs end is Friday, Feb. 12, 2010. Here are the dates you have to beat, in order to get your contract accepted by Feb. 12, 2010:

• HUD homes listed last Friday (1/29/10): submit your offer on Sunday 2/7/10
• HUD homes relisted this coming Friday (2/6/10): Submit your offer on Tuesday 2/9/10
• Homes available to all bidders are on a daily deadline – the last day you can submit an offer will be Wednesday, February 10, 2010.

Please keep in mind that there are no guarantees that HUD will approve the offers within 2 days, but this has been our experience in the past. 
 
What’s the impact of this drastic reduction of incentives? If you are an owner occupant buyer, it certainly means that you will have to bring more cash to closing and somehow come up with the minimum downpayment required by FHA. Currently, this is still 3.5%, but it may go up to 5% in the near future.
 
My recommendation: hurry up, if you don’t have a downpayment!

For investors and owner occupant buyers with cash this will open up the doors for even better deals. I truly expect the HUD homes inventory to rise after this deadline, fewer homes will be purchased by owner occupants and HUD will be eager to accept lower offers from investors.

Important!  Call me immediately, if you plan to buy a HUD home with these incentives. I will try to do my best to accommodate as many of my subscribers as possible. Once we loose these incentives, your out of pocket costs of buying HUD homes will increase dramatically!

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

Did you ever wonder how many HUD contracts never close?
Do you know why HUD homes fall out of contract?

These are two common questions many of my customers ask. So I did a little bit of research, compiled some numbers and found an explanation for you.

Let’s first look at new HUD listings – that’s the new listings we present every Friday on our HUD homes map in red. Last year (2009) HUD listed a total of 1,049 homes in Central Ohio – approximately 20 new HUD homes per week. These homes were never listed as HUD homes before. They represent the total inventory of HUD houses in the Columbus area.

Over the same time period 910 HUD homes got relisted. That comes to around 18 per week. This number includes homes that were relisted 2 or 3 times. Basically, this means that for 90% of all homes HUD has to either lower the price or put them back on the market before a home gets sold.

There are the 3 reasons why HUD contracts fail.

1. Missed Deadline: If a HUD home is out of contract 2 or 3 days after the offer was accepted, it usually indicates that the paper work was not submitted correctly within the 48 hour deadline. Either the buyer did not sign the contract and deposit an earnest money check with the brokerage, or the real estate agent did not submit the contract in the alloted time period.
   Tip: Your agent needs to overnight the contract within 24 hours of contract acceptance and all documents must be signed in blue ink.
   
2. Property Condition: When a HUD home is relisted 2 to 3 weeks after the offer was accepted, it indicates that the buyer completed a home inspection and was not satisfied with the result. The home inspector may have detected problems that were not disclosed in HUD’s property condition report or the appraisal.
   Tip: If this happens, HUD will often relist the property as uninsured and accept lower offers.
   
3. No Financing: If a HUD home falls out of contract after 4 to 8 weeks, most likely the buyers did not get their financing approved. There could be different reasons for this: maybe the underwriter required certain repairs before final approval or the borrower could not provide all documentation requested by the lender. Lenders are very picky these days and sometimes minor damage to the house may result in a loan denial.
   Tip: Only work with lenders that are experienced with closing HUD properties. Call me for a list!

How do you avoid these problems? Work with me. I am closing on numerous HUD homes every month, so I will help you anticipate potential problems, resolve them for you, or avoid them altogether. 

If I notice that a property fell out of contract, I will let you know immediately, because it gives you an opportunity to get an even bigger discount once it gets relisted.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

You probably saw it in the news. The home buyer tax credit will be around for another 6 months. If you felt that you missed out on the $8,000 gift from your government, you have another chance.

Buy one of the wonderful Columbus HUD homes we see listed each week! Not only will you get a great residence below market value, but you will also receive cash back  after closing, complements of the IRS. Time to double your benefits!

Here are the new rules for the home buyer tax credit and how the program was enhanced:

• The tax credit for first time home buyers is still $8,000 (up to 10% of the purchase price).
• There’s a new tax credit for move-up/repeat home buyers. It’s $6,500 (up to 10% of the purchase price) for existing home owners who want to move up or buy a new home. You basically must have owned and lived in your home for 5 years (out of the past 8 years).
• The deadline has been extended until April 30, 2010. You may even close as late as June 30, 2010, as long as you signed a binding purchase contract by April 30, 2010.
• The purchase price must be under $800,000 and the buyer’s income must be less than $125,000 for single taxpayers and less than $225,000 for married couples.

You can read more about the Home Buyer Tax Credit Here.

I believe this is an incredible incentive. I also believe that this will be your last chance to claim the tax credit. Most likely it will not be extended a second time, as we see continued improvement in the housing market. According to a survey by Move.com 5% of Americans plan to buy a home in 2010, because they believe that the market has bottomed out and home prices will increase next year.

Here’s my advice. Take advantage of the winter buying season. The coming months – November, December and January – are usually very slow. There will be plenty of good Columbus houses on the market at even lower prices than we saw last summer.

Keep your eyes open and follow our blog for the best HUD homes in Central Ohio. I can help you find a great deal in the next couple of months, so you can take full advantage of this once in a life time gift from your government.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

Getting financing for HUD homes is a big concern for many buyers. I get the following question quite frequently: “We need to know how to go about getting financed for this HUD program. Could you possibly help us out?”   So, let me try to clarify what’s actually involved in financing your Columbus HUD Homes purchase. You will be suprised that it’s much easier than you thought!
 
First, I need to clarify that HUD owned properties are offered for sale only, not for rent or lease. Many people confuse the HUD resale program which deals with foreclosed homes owned by the Federal Government with Section 8 Housing, which is designed to provide rental housing or rental assistance for low income families.
 
HUD does not finance the purchase of a HUD owned property. Just like with any other home purchase, you either have to be pre-approved for a mortgage by a bank or lender, or you need to have cash on hand.
 
Per HUD guidelines, the pre-approval has to come from a “direct lender”, which is a bank or mortgage banker that writes their own loans, not a broker that refers loans. HUD accepts all types of loans for financing your purchase: FHA, VA, USDA, conventional or construction loans. As you can see this includes loans that are backed by the Feds, such as FHA loans, VA (Veterans Administration) and USDA (Dept of Agriculture) loans.

Feel free to contact me for a list of experienced lenders.
 
For a cash purchase, you need a proof of funds in your name. A copy of your savings or checking account statement will do. Other options are CDs or a letter from your banking institution on business letterhead. Personal letters from family members promising to loan you the money for the purchase are not acceptable. If your parents plan to loan you money, they have to transfer the funds into your account.
 
Once we have the financing squared away, you will need an earnest money deposit of $500, $1,000 or $1,500 depending on the amount of your purchase. Now you are ready to start looking at Columbus houses. You will get the earnest money deposit back, if we don’t find a house. If you go into contract, you’ll get the earnest money deposit refunded at closing.

HUD offers special incentives for owner occupants, if you use FHA financing. This includes a down payment of only $100 and $2,500 for closing costs. 
 
It’s really simple to finance your HUD Homes purchase, if you have all your ducks in a row. I can help you with every aspect of the transaction!

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

Columbus HUD homes offer great potential for real estate investors and land lords. Unfortunately, there are not too many around. If you follow our blog you know that the number of HUD homes available to all bidders (investors) has shrunk considerably since the beginning of this year. Only 15% of all Columbus HUD homes listed each Friday are available to investors.

So what are the best strategies for investors to win one of the few remaining deals?

I want to offer you four tips to increase your chance of success when you are looking to buy a HUD home as an investor or landlord. Combined with the great information you find on this blog you will surely hit a winner!

Tip 1: Be Ready

You need to be prepared to submit an offer within 24 hours and act immediately, when a deal becomes available. Once the exclusive 10 or 5 day period for owner occupants is over, HUD will accept bids every single day. You can submit your offer in the afternoon and you will know the  next morning, if you are the winner.

The best way to prepare for submitting offers quickly, is to have all your HUD documents signed and ready to go with your real estate agent. With active investors I usually have an earnest money check deposited with our brokerage and the contract documents pre-signed. You can simply call me and I will submit the offer for you before midnight. If you are the winning bidder, we can simply finish the paperwork and overnight it to HUD.

Less experienced agents often lose deals, because they did not submit the original paperwork to HUD within 48 hours of notification!

Tip 2: Focus on Re-Lists

As an investor your best chance to win a low ball offer is when you focus on properties that have been relisted. This means that a previous contract fell through and HUD has to start from scratch. With relists there is a 5 day exclusive for owner occupants, so investor can submit their bids on Wednesdays. 

HUD is more motivated to sell relists to investors at a discount. If we notice that a property has been relisted a number of times we notify our customers. These are the best opportunities for investors, because occasionally HUD accepts discounts from the list price of 50% or more.

Tip 3: Look for HUD Homes that need Work

Owner occupants buy up all Columbus HUD homes that are listed as ”Insured” for FHA purposes. This simply means they don’t need any repairs. A large majority of HUD homes is listed as “Insured with Repair Escrow”.  Again, owner occupants buy many of these homes, but when the repair escrow exceeds $5,000, these Columbus houses become more difficult to finance and most owner occupants don’t want to deal with them.

If you find a home that is “Uninsured” you should take a closer look. It is very likely that a owner occupant won’t get financing for this home. FHA requirements are pretty tough right now. It is best to make a cash offer when HUD notices that they can’t sell a home with FHA financing. We also see that the insured status of properties changes when they get relisted, because a buyer may have discovered problems during the inspection.

The disclosures for most HUD homes indicate that there is mold in the house. Do not automatically reject these homes. Inspect them before you make an offer to decide for yourself what level of mold remediation is necessary.

Tip 4: Bid on Wednesdays

I suggest you submit your offer on Wednesday. Why? Because the HUD homes that were relisted on the previous Friday are reserved for owner occupants for 5 days – until Tuesday midnight. These relists offer a great opportunity for real estate investors to get a lower offer accepted. You probably know that we call these homes boomerangs, because some of them have been coming back every month as one contract after the other falls through.

Here’s One Final Bonus Tip!

When you make an offer on a relisted home, do not offer more than the previously accepted bid. This may sound obvious, but you won’t believe how many buyers and agents submit offers that are substantially higher than previously accepted contracts.

Although HUD publishes bidding results, these numbers are no longer available on their website when a property is relisted. Except for our customers! We keep a database of HUD bidding statistics exclusively for our clients. If you work with us, you will know what HUD accepted previously, and we will submit an offer that is competitive, but not too high.

Call me at (614) 975-9650! I’d like to help you develop a customized bidding strategy to win all your HUD Home offers!

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650

We just received this new announcement from HUD: Buyers who want to purchase an Ohio HUD home using the $100 down FHA program may now bid ABOVE the HUD as-is appraised value and get a second appraisal to justify the higher value.  Initially, HUD insisted on lenders using their existing appraisal. This created problems for buyers who offered more than the HUD appraisal, as they had to pay the difference to the contract amount in cash.

Here is the news release from HUD:

UPDATE OHIO $100 DOWN PAYMENT INCENTIVE PROGRAM FOR FHA FINANCING 

8/20/09: The $100 down payment financing is available on most properties through FHA approved lenders. Please note that the $100 down offer applies if the purchase price is over $25,000 and is less than or equal to the appraised value of the property. If the purchase price is greater than the appraised value, the purchaser may obtain a new FHA appraisal to support the higher mortgage amount or must pay cash in the amount of the difference between the appraisal and the purchase price less $100. For a copy of the flyer please click here . Buyer is responsible to secure an approved lender who will accept a new appraisal. 

Please Note: Not all lenders offer the $100 down FHA program, and not all lenders will allow you to order a second appraisal. BEFORE you submit a bid above HUD’s as-is value, you should confirm with your preferred lender, that they will order a new appraisal!

I am working with a HUD approved lender who will offer both, the $100 down FHA program and the second appraisal. Call me for details!

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650