I had a friend ask me the other day, "If you had a pile of money to invest and you weren’t going to invest into real estate, what would you invest in?"

I pondered ever so briefly then with a little research replied, "Let’s see, in 1973 the Dow Jones Industrial Average climbed to a high of 1051.7, the value of gold was $112.50 per ounce and the average home in Pierce County sold for $24,788. Today the Dow is at 8073.82 (668% change), Gold is over $900 per ounce (700% change) and the average price of a home in Pierce County is $258,775 (944% change)… And you don’t want to consider Real Estate? Clearly during this time period real estate has been the hands down winner; and real estate certainly has not been as volatile as the Dow Jones, which has lost over 25% of its value 6 times in this time period! Additionally, these numbers don’t account for the fact that you can live in "it", rent "it", and mortgage "it"! The next time you buy a stock or gold, try living in "it"; or, ask someone to rent "it" to help you pay for "it"; or, try getting a mortgage for the gold you buy… I don’t think so!

This mortgaging of real estate which we all take for granted is actually an investment strategy called leveraging, which is available to homeowners and investors alike. Over time, leveraging will typically enhance your return by 5, 6 even 10 times over a typical cash purchase as shown above. And that doesn’t even include the benefits of living in your investment, renting it, or best of all, having Uncle Sam help you pay for it with tax write-offs and incentives. The returns available to the average citizen clearly demonstrate: real estate is your best investment!

Indeed, I think it is easy to show that over time, real estate has added more personal wealth to more individuals than has any other commodity.

If you are in the market for a home, you undoubtedly have come across the term-so what does it really mean?

The term “As Is” in Washington State simply means that the seller does not intend to make any repairs. Often sellers will misuse this phrase thinking that it means the buyer is obligated to purchase the property in spite of any issues that are discovered and/or disclosed. Not so.

The buyer retains the right to include an inspection addendum with any offer. Whereas the seller could counter offer the inclusion of an inspection addendum, more often than not, it remains part of the transaction. It’s actually better protection for the seller when a buyer conducts their own inspection. Although it does not remove (most) sellers’ obligation to disclose material defects, it allows the buyer to exercise their own due diligence in evaluating the condition of the property.

Even if the seller is adamant that he/she will not perform any repairs, it’s still prudent for the buyer to conduct an inspection so he/she will know what they are really buying. In most cases, the buyer is able to terminate the purchase if the buyer is not satisfied with the inspection. Some buyer’s are reticent to spend the money on an inspection. I encourage buyers to think of it as insurance; it’s better to buy your new home with as much information as possible rather than with eyes closed and fingers crossed.

First time homebuyers in Puyallup, do I have your attention?  Your free money comes in the form of the 2009 First Time Homebuyer Tax Credit; you can receive up to $8,000.

Here are some of the first time homebuyers qualification criteria:

In order to be a recipient of this first time homebuyer tax credit, you may not have owned a Puyallup home within the last three years.  If you owned a Puyallup home prior to three years ago, you are considered a Puyallup first time homebuyer under the definition of this credit.
If you file your income taxes as a “single” filer, the income limit is $95,000 and for married purchasers, the income limit is $170,000.

The Puyallup home that you are purchasing must be bought in 2009 and has to be your principal residence; the residence that you occupy more than 50% of your time. You must keep the Puyallup home for a minimum of three years or the credit must be repaid.

The formula for the $8,000 first time homebuyer credit is based on 10% of the purchase price up to $8,000.  If you purchase a home for $400,000, 10% would be $40,000.  You would receive the maximum credit of $8,000. This tax credit is applied towards your total 2009 tax liability. If your 2009 tax due to the IRS is less than the $8,000 earned credit, you would receive a refund for the difference.

Let’s see; reduce Puyallup home prices, unbelievably low interest rates, and now there is free money just waiting for you first time homebuyers!

A short sale is when a property sells for less than the seller owes. For example, seller owes $450,000 on a home and cannot sell it for more than $425,000. Seller and Purchaser can agree upon a sale, instructing the REALTOR® to write the transaction subject to the lien holder’s acceptance of a final payment for $25,000 less than what the seller owes.

There are significant challenges with this scenario.

Time is an issue; the Seller and Purchaser may readily agree to a short sale only to be left waiting for the lien holder’s representative to agree to the sale. Often the lien holder wants to hold off on making an immediate decision; instead waiting for any other offers that would come closer to fulfilling the seller’s debt. In addition, there may be more than one lien holder for the same property and all would need to be in agreement to reduce and/or waive the amount of the mortgage owed to them. It’s not uncommon for a short sale to take 90 to 120 days. Often, if the lien holder(s) do agree to the sale, the Seller will be required to sign a note promising to pay the lien holder, at a later date, the difference owed.

Whether you are a Seller or a Purchaser, if you are considering a short sale, you are strongly encouraged to seek the advice of a real estate attorney and a CPA or accountant.

First, determine how much home you can afford. In general, you can afford to buy a home equal in price to three times your gross annual income. More precisely, however, the price you can afford to pay for a home will depend on six factors: 1) Your income; 2) The amount of cash you have available for down payment, closing costs, and cash reserves required by the lender; 3) Your outstanding debts; 4) Your credit history; 5) The type of mortgage you select; and 6) Current interest rates.

The process of buying a home is much easier if you start out by getting pre-qualified or even pre-approved with your lender for a home loan. This amount will let you know how much home you can buy, and makes you a more credible buyer.

Years ago, buyers didn’t worry about financing their home purchase until after they found the home they wanted to buy. Once they had an accepted offer, they’d shop around for a week or so and then submit a loan application.

The recent low inventory of homes for sale (in general) has made home buying highly competitive in some areas. To compete, many buyers are now getting pre-approved for a mortgage. This way, the buyer is seen as more stable, has greater influence in negotiating a purchase price, and can act quickly when they find a home they really love. A pre-approved home buyer is considered almost as strong as a cash buyer.

There are two parts to mortgage approval: 1) approval of the borrower, and 2) approval of the property. Mortgage pre-approval is a process whereby the borrower is approved for a specific mortgage amount. The approval is usually good for a period of time. A property approval is one with satisfactory appraisal and a clear title report. Final mortgage approval also requires a purchase agreement that is signed by the buyer and the seller.

There’s nothing wrong with helping a family member or close friend with buying a home. However, co-signing on a loan should be done with great care and knowledge of the consequences. Co-signing means that you are extending your personal credit for the benefit of someone else. Problem is, if the borrower defaults, the lender will look to you for full repayment. So you’re not really a co-signer, you’re a co-debtor. Here are a few tips that may prove helpful when co-signing:

Although you’re co-signing, make sure your co-borrower is putting cash into the transaction. The more they put in, the lower your risk.

Obtain a credit report on the person you’re co-signing for, even if it’s another family member. If they’ve defaulted on other debts, there’s a good chance they’ll default on the debt you’re co-signing.

Ask the lender to release you from the loan when the principal balance is reduced to a certain amount.

Examine how your credit rating and ability to borrow will be impacted. Co-signing on a loan can sometimes impact your ability to get financing if you need it.

Make sure you’re name is listed on the deed as a co-owner. If you’re on the deed, and if you make any cash contributions, you may be able to deduct mortgage insurance, property taxes, and a pro-rata portion of interest you pay. Ask your accountant or tax planner.

If the home is sold, will you share in any appreciation or gain in value?

Do you remember the old riddle, “What do you call the person who graduated dead last in his/her medical school class?” Answer: DOCTOR! Well, the same is true for real estate agents. Just because someone passed a state licensing examination doesn’t mean they are qualified to handle your needs. All agents are not the same. Here are a few things you should look for in a qualified agent.
First, determine if he/she specializes either in your area or type of home. Second, ask them how they helped clients overcome specific problems they encountered in a past transaction. Third, ask them specifically what they will do for you if they represent you. They should have a step-by-step plan of action. Fourth, ask them how long they’ve practiced real estate, and how many transactions they have under their belt. Fifth, ask them about their marketing skills. Most agents are trained to handle transactions and understand the law, but not all of them are trained in effective marketing. A poor marketer will cost you thousands of dollars in wasted time and energy. And finally, ask them for a reference list of past clients they’ve helped. Call those references and ask questions about how they handled the transaction.

Buyers for homes I list come from a number of sources. Many come from referrals, either through my office or through previous clients of mine. Some come from company advertising, open houses, and “For Sale” signs. And others come from the enormous exposure created through my exclusive home marketing plan. But that’s not the only way buyers are exposed to a home listed for sale. As a member of Multiple Listing Service (MLS), I cooperate with over 6,0000 other agents. I have an agreement that any agent who has an offer accepted on a property I have listed will receive a share of the commission. This is an excellent incentive for them to show and sell your home.

When prospective buyers come to me directly, I have to know if they’re qualified to afford your home. The last thing I want is to waste your time with buyers who are not qualified. Here is the key question I ask them when they call: How much home have they been pre-qualified or pre-approved to purchase? If they haven’t been pre-qualified, I require them to do so, and ask even more questions in the process: How much cash do you have to put down on a home? What is your annual income? What kinds of debts do you have? How long have you worked at the same job or in the same industry? How good is your credit status? Do you have a home you need to sell before you can buy another? When do you need to move?

By screening potential buyers, I save time for both you and me, resulting in the most qualified, ready-to-buy buyers for your home.

Well, that depends on a number of factors. If your current home is owned outright, and you’re not making payments on it, then you can look for your next home at your leisure. In this case, I would advise you to find your new home and move into it, then fix up the old home and offer it for sale vacant. This increases the ease of marketing it since agents and prospective buyers can inspect it at any time without fear of disturbing a family. You might also consider “staging” your home with some well-placed furniture and accessories to give buyers an idea of how good the rooms can look.

If, on the other hand, you are making a payment on your present home, you should be careful not to become financially burdened by having two payments. The best plan is to have the old home sold before you make an offer on another one.

However, if you absolutely fall in love with another home and simply have to have it, or if it’s a tight market with lower than usual home inventories, you might be able to negotiate a “bridge loan” or “swing loan” to cover your interim expenses. This is a temporary loan made to allow you to buy your next home while your existing home is on the market. This sometimes requires more equity in both homes, or a stronger financial position, but many homeowners opt for this route. Often the security for the loan can be attained through the equity from either your old or new home, or both.