Philadelphia's Plan to Suspend Foreclosure Auctions

Recently, the local government in Philadelphia, Pennsylvania has made the decision to suspend sheriff sales of foreclosed properties. No more foreclosure auctions will be connected for homeowners who have adjustable rate, subprime mortgages, and the suspension will last all through the month of April. This remarkable measure may provide relief to thousands of homeowners, and is one of the very small victories for individuals in the foreclosure crisis.

From Ohio judges throwing foreclosure lawssuits out of court to this latest suspension of sheriff sales, local Governments have been able to act much more forcefully to combat the rising foreclosures than the federal government. Anyway, no one can really tell which companies, hedge funds, investors, or banks own the paperwork and have the legal right to collect on the loan. The marketing of subprime loans was just a scheme to generate as much money as possible in loan origination fees and sell toxic loans to investors. This has been completed and now the fallout must be deal with.

But banks are getting their bailout courtesy of the American public, through generous loans and packages provided by the Federal Reserve. It seems that it is only just for people, through their community leaders, to come up with their own solutions. In fact, perhaps the entire foreclosure crisis will reach some sort of perverse equilibrium with the Fed stealing money from the public to bail out the banks, creating massive inflation and taking the banking industry completely away from all government regulation, while homeowners find ways to void out their mortgage contracts complete and suspend the auctioning of their properties and the financial destruction of their communities.

Another question that should be raised is if the banks are suffering any actual damages from the foreclosing mortgages. They are receiving hundreds of billions of dollars from the Federal Reserve, which essentially pays off many of these mortgages. So where is their standing to sue? The people who pay taxes have already paid off the default mortgages through the Fed's granting of US Treasury securities to the banks. If the banks no longer own the mortgages, and have had paid off nonetheless, it would seem that they have little reason to keep going after homeowners to steal properties.

Ending the incessant whining about subprime mortgages going bad and the danger of the survival of the banking industry, though, would mean the banks would not be able to ask for more bailouts. The banks already made a killing on the way up by packaging what they knew were bad loans and selling them to unsuspecting investors, who were fooled by the bond-rating agencies into purchasing what they believed were prime-rated securities. Now that the loans are going bad, the banks' reserves are drying up (on paper), so they need generous loans and free money from the Fed to ensure that they can make more money on the resulting crash of the market.

The people of Philadelphia, by suspending foreclosure auctions, may be on to something important. Hopefully, the suspension will last longer than just one month and the banks will have no choice but to deal with homeowners as negotiating partners, rather than as hosts for their parasitic lending practices. The banks have put themselves into a situation where the only logical reaction for local Governments is to realize the invalidity of the mortgage loans. With the decrease in property taxes to local governments, the banks' ability to manipulate local communities into preventing invalid foreclosure lawsuits to go forward may also be evaporating.

Source by Nick Heeringa

Short Sale 101

This occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner's commission. The seller is unwilling or unable to cover the difference.

Some – although by no means all – short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owed more than the home is currently worth when closing costs are factored in.

Other sellers simply do not understand that if they have assets, such as stocks or a high-salaried job, a lender is not going to let them just walk away from a short sale without signing a note to repay what they owe.

How do I know it's short?

A CMA will be your first indicator, but you also need to ask the seller what their outstanding debt is and calculate the cost associated with a sale – from transfer taxes to your commission. This will give you an estimate of the net performed that will be realized, often called the net sheet. This information can then be entered into a HUD-1 Settlement Statement to calculate out the final, negative result at closing. Some lenders also have their own forms.

Check with the title company and the lender to get exact figures on closing costs and loan balances and to find out what procedures they have in place. If they can afford it, sellers should also consider getting a home inspection to determine what repairs are needed on a home and how this might affect its value.

Who do I and the seller need to talk to about the problem?

If there are a first and second mortgage or a home equity line of credit, you may have to talk to more than one lender to get approval for a short sale. In addition, you may also need approval from the entity that holds the pool of loans if the mortgage has been securitized.

The presence of two lenders makes a short sale more complicated since it's often the lender holding the second, or junior, mortgage that has to absorb most of the loss.

Opinions differ, but most experts suggest that you let the lender involved know as soon as possible of the potential short sale. Others say you should wait until you have an offer because you'll get no action until then. "Without a viable purchase offer, your deal will not be considered by mortgagees," says Margot Cole-Murphy, broker with RE / MAX Equity Group, Portland, Ore.

Tip: Be sure you contact the bank's loss mitigation department, which will be the group to decide whether to accept a short sale, rather than the collection or customer service department, which is only interested in recouping past due loan payments. Finding the decision maker is often one of the largest initial challenges in a short sales.

What information will the bank need to decide where to accept a short sale?

The sellers' submission package should include W-2 forms from employers (or a letter explaining the seller is unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also need comps or a broker's price opinion showing your estimate of value.

In addition, the sellers should submit a "hardship letter," explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is illegally to be considered, say most interviewees.

Thanks to programs such as those proposed by Fannie Mae and Freddie Mac to assist subprime borrowers, many lenders are more willing to offer loan modification options. This option can extend the term of the loan, add on delinquent payments to the loan principal, and / or reduce the interest rate to make the loan more manageable for the home owner.

Another option is a repayment plan that requires home owners to increase their monthly payments until the loan is current. It may be possible to refinance an adjustable rate loan with a Federal Housing Authority or conventional fixed loan. Note that lenders will not postpone a foreclosure just because a property is listed, although they may postpone if you have a reasonable offer in the works.

How should I price a short sale property?

In general, most short sale experts say to price the property at or near fair market value, although a few will begin with the total payoff amount owned by the seller. How frequently prices are dropped will depend in part on whether the property is in preforeclosure. Most banks have a formula for what percentage under market value they will accept, say interviewees. Figures cited vary from 8 percent under to almost 20 percent under.Most lenders will want to get a broker's price opinion or even an appraisal to see what the property is worth before you and seller set a list price. One way to help ensure that the bank's estimate of value is realistic is to offer comps of recent sales – both traditional and REO.

What and how should I disqualify about the short-sale property to prospective buyers?

Opinions vary on this topic, although most experts favor disclosure that a property is a short sale in the comments section of the MLS listing. Others suggest waiting to distribute the need for lender approval of the sale until a buyer is ready to make an offer.

How long does it take to complete a short sale?

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That's why it's critical that buyers and their representative understand and accept that time frame before they make an offer.

An addendum to the California Association of REALTORS purchase contract includes a provision prohibiting either party to cancel a short-sale contract within a set period if the seller has not gotten the deal approved, says White. Properties with securitized loans (which are the majority these days) may require a longer time to get an approval of a short sale because of the possible need for approval from the entity holding the pool of securities.

What can the seller and I do to make a short sale more attractive to a lender?

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property as an REO.

A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $ 58,759 and took 18 months. Other factors that can influence a bank's decision include the liability risk it asserts by owning the property after foreclosures, the money tied up during the holding period for a foreclosure and REO resale, additional costs associated with an REO such as attorneys' fees, and the additional reserves it will need if REOs rise in the bank's portfolio.

However, to avoid unnecessary costs, buyers should wait on having a home inspection and an appraisal for the loan until after the bank has accepted the short sale proposal, such as a lost job or high medical bills from an illness may also have an influence.

What are the seller's options if a short sale is returned by the lender?

There are a variety of reasons a bank will reject a short sale – from too low a price to too many files on the loss mitigator's desk. You can look for another buyer or even try resubmitting the same contract. Banks do not want to take properties back in foreclosure, so they are going to do everything they can to make it work. You also need to prepare your seller in advance for the possibility of foreclosure if a short sale fails.

What financial or credit liabilities will a seller have as a result of a short sale?

Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It's particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage. In such states, the lender can not pursue a deficiency sentence against a seller for any violations after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale may be better off letting the lender foreclose, he says. If you are working in a state in which mortgage loans are nonrecourse, be sure and alert your seller-clients to this distinction.

What tax liabilities will a seller have as a result of a short sale?

One often overlooked aspect of short sales is that a seller must count any amount forgiven by the lender as income and pay taxes on that income, even if no actual money was received. The IRS requires lenders to submit a Form 1099 stating the forgiven amount. Sellers who meet the Internal Revenue Service definition of insolvency (either in bankruptcy or with debts exceeding assets) will not have to pay taxes on the forgiven amount.

Tip: The US House of Representatives has introduced the Mortgage Cancellation Tax Relief Act (HR 1876), which would eliminate taxes on any debt forgiven on a principal residence through either short sale or foreclosure. The NATIONAL ASSOCIATION OF REALTORS has been working to support this bill.

What compensation will I receive as the real estate salesperson or broker in a short sale?

Banks are going to want you to discount your commission. It's the first place they'll look to save on closing costs. Rates offered can vary, but are typically 1 percent to 2 percent below rates in the market. More lenders now seem willing to pay a full commission on sales.

Where can I find clients if I'm interested in specializing in short sales?

Word of mouth remains the largest source of new business, experts say, but you can also promote your services to individuals attending credit counseling classes (now required prior to filing bankruptcy), to people who receive state notices of loan defaults, and to home owners named on lists of ARMs that will be resetting in the next few months. To find buyer clients, creativity is a plus.

Tip: FSBOs are another good source since many upside-down sellers think they can not afford to pay a commission and so try to sell on their own. Many do not realize that in a short sale, the lender pays the broker's contracts.

Are short sales for me?

With many more adjustable rate mortgages ready to reset to higher loan amounts in the next couple of years, short sales represent a growing sector of the market. However, because sales are time consuming, they are not for everyone. I always say that if you're going to succeed in short sales, you need the 3 Ps – patience, persistence, and problem solving.

Source by Rick Saroukhanian

Why the Del Val Lease Is Pro-Owner Versus Pro-Tenant

One of the questions I get asked a lot from owners and potential owners is about our lease. We have a lease we’ve been using for over 15 years and have been constantly improving and fine tuning it to protect our owners. We have used our lease for over 4,000 lease signings over this time period. I get asked about the difference between our lease and why it is so “pro owner” versus pro tenant. Here are a couple of reasons why our lease is “pro owner” and why it will benefit you to use our lease as opposed to another lease.

All Persons Over 18 Must Sign the Lease

We require all persons over the age of 18 to sign the lease. Seems simple right? But you would be surprised how many property management companies do not require it. The reason we require all persons over 18 to sign the lease is if we must evict the tenants and all parties over 18 have not signed that lease, we have a problem. We can evict the parties that have signed the lease, but it is hard to evict people that have not signed the lease if they are 18 or older.

Tenants will come to us and say my spouse or partner does not work so I don’t want them on the lease. This is not a good policy and do not allow this to happen. Or they may come to you and say my partner or spouse has a very poor credit score so I don’t want them on the lease. Again, we want all parties over 18 years old to sign the lease so we know exactly who’s living in the property and if we must do an eviction, we can get that done.

Automatic Rent Increase after the Initial Term Ends

Within our lease is a clause that when the initial term is over in one year or two years, the rent goes up automatically 10% if they want to go month-to-month. This incentivizes the tenants to either accept the 10% premium if they want the flexibility of month-to-month or negotiate a new one or two-year lease. This new lease will probably increase the rent by 3 to 5%, which is a much more reasonable increase than a 10% increase. And that way we’ve locked them in for another year, or maybe two years, and this benefits the owner. But again, the tenant does have the flexibility but the 10% is already pre-authorized.

Waive Their “Notice to Quit” Rights

In the State of Pennsylvania, and maybe other states, the tenant has what is called a 10-day “Notice to Quit” right. If we need to do an eviction, we must give the tenant 10 days’ notice to tell them we are about to evict them. In our lease, we make the tenants waive that right, so they have signed that right away, and we can begin eviction proceedings right away. We could evict a tenant on the first day of the month. I am not saying we do that, but we have the right to do that because we require our tenants to waive that 10-day Notice to Quit right.

Tenants Must Initial Several Sections of the Lease

Tenants must initial certain sections of our lease. There are areas of the lease that are very important including the Notice -of Quit we spoke about in the last paragraph. Another important section is Renter’s Insurance, so we make the tenants initial these sections. This way the tenant cannot claim later that they were not aware because we make them initial each of these important sections in the lease.

Tenants Must Sign Several Addendums Designed to Protect the Owner

Tenants are required to sign several addendums including Lead Paint, Security Deposit Escrow, Rules and Regulations and several other addendums. These addendums are designed to protect the owner so it’s very clear what’s going to happen at the end of the lease or under other various scenarios. So we make sure that these addendums are signed to protect the owner.

Our Lease has been Reviewed by 100’s of Judges and Attorneys over the Last 10 Years

Del Val has probably signed 4000 to 5000 leases over the last 15 years. As part of this process our lease has been reviewed by hundreds of attorneys. We have also been in front of hundreds of Judges during eviction hearings. As result we have refined and improved our lease based upon this feedback. Our lease is well tested and any weaknesses have long since been removed.

We Include the “Extra” Paperwork that is Required in Philadelphia

The City of Philadelphia requires a lot of extra paperwork that is not required outside of Philadelphia. So, it is important that we get those documents signed at the time that the tenant moves in. If we do not get these documents signed and go to evict down the road we could potentially have a hard time doing an eviction. That’s not the position we want our owners to be in so we want to make sure all the paperwork is done properly.

Source by Mike Lautensack

Selling to an Investor – Tips to Choose The Buyer For You

Selling your house can be a significant challenge, even in the best of economic times. When the housing market is in some sort of downturn, it can be especially difficult to find home buyers. But there are plenty of home buyers in Philadelphia and plenty of folks who buy houses in NJ. If you want to sell a house fast, one of the best ways to get this done is by selling to an investor. The economic downturn has made it so many people can not qualify for a mortgage right now, even if they wanted to purchase and move into a new home. The people who buy houses in Pennsylvania right now are investors, because they still have capital to work with.

Selling to an investor is not all peaches and ice cream, though. If you want to sell your house now in Philadelphia, you have to be willing to put in the hard work to find the right investor. You will want to find the perfect person to purchase your home because that will make the process much easier for you. There are some really serious pitfalls that people can fall victim to when they sell a house for cash in Philadelphia. What are these problems? It all starts with not doing your homework when picking out an investor. There are some questions you have to ask of these people when they come to buy your house.

The desire to sell your house now can sometimes force you to make hasty decisions. First and foremost, you need to find out who exactly you are dealing with. One of the major problems that home sellers run into is that they do not ever get enough information out of the investor that's looking at their home. Is this person the principal investor or are they just acting as an agent for other investors? These things are very important, because they will absolutely have an impact on the time frame for selling your home and any discussions that you have with the seller.

Likewise, you need to find out exactly where they stand in terms of financing. Many real estate investors have the cash on hand to make a quick purchase, and that can be especially beneficial if you are looking to sell a house fast. You should understand their position as a local company or if they are a national investment company. The bigger companies will have more red tape when it comes to getting a deal done and there will be more people in on the decision making process. Smaller companies will be able to work more directly with you in order to get a deal done.

When people advertise that "We buy homes in Philadelphia", you need to know if they are going to work with you to sell the home on your terms. As a home seller, you have a price in mind and you have a time frame in mind. If one buyer does not work out, you have to be able to act quickly to find another potential buyer. You need to ask the hard questions and figure out where you stand with potential investors, because they will have to get on board with your plan if things are going to work. Otherwise, you might be wasting your time and hurting your chances for a successful sale down the road.

Source by Joshua Weidman

Building Wealth Rehabing Properties – A Great Investment Option

Rehabing properties is an attractive proposition to build long-term wealth with limited time and less money. The money you will be able to make depend upon the amount of money and the time you are willing to invest and your exit strategy. For example, if you are interested in building wealth rehabbing properties by buying a property, rehab it and sell it immediately, you might have a tax hit.

How Much Can You Earn
As mentioned earlier, time and money are the major factors deciding your income potential. If you buy a property rehab it and hold it for some time, your profit potential will depend upon your refinance options and the appreciation potential of the property in your area.

The price at which you buy the property is a major factor in determining your profits. It is often said that you make money while you are buying the property. If you want to hold the property you will make at least $ 10000 for $ 100,000 worth of repaired property, since you retain ownership of the property you will enjoy tax benefits.

How Much Time You Have To Invest
Building wealth rehabbing properties is a scalable business proposition. You can either do the business yourself or hire a team. You can buy and sell one property in a year or you can sell 50 properties in a year if you have a team. Approximately you can sell around 5-10 properties in a year if you are involved full time.

How Much Money To Invest
You may need not to make huge investment upfront for building wealth rehabing properties. Again it depends upon how you are funding the purchase. You may gain more profit when you fund the purchase yourself since borrowing money for a rehabber is an expensive proposition. However, you can make decent profit even if you fund the deal. Although your poor credit history, if you may have any, can make your borrowings costlier, you can use this situation to repair your credit. Yes, you can fix your credit and make money too.

How To Find The Property
The most useful source is a local real estate expert. As you are a first time rehabber, your local Realtor can offer you great projects. The Realtor who helps you finding the property would not charge you a dime since he normally gets his commission from the seller of the property.

Crunch The Numbers
Once you have inspected the property, it is time to work out the numbers. Work out the estimated costs very quickly because good rehab projects often sell quickly. You will not afford to wait for days. When you estimate the costs, you should pay close attention to big ticket expenses like a foundation repair or a roof tear. These sorts of expenses can really put you in a tight spot. You should have the real estimate of costs involved in the rehab work you are supposed to take. Once you have these numbers, you will know the profit you are going to make through rehabing properties. You can make an offer once you feel it is a sound investment option and determined to go with it.

Finally …
Sure, building wealth rehabbing properties is a great option. However, you must learn to enter into the trade. You can begin with the basic through lots of information available online. Once you learn the basics of rehabing properties, you can jump in to the profession and continue to learn. That is learning through experience for you.

Source by Jearl Yates

Do I Qualify For A Mortgage Refinance?

In today's uncertain lending environment, it is often unclear to potential mortgage applicants if they qualify for a refinance. Ever since the recent financial crisis, there has been a great deal of media exposure regarding how banks are not lending. Many people believe that only the very rich or most qualified borrowers are successful when applying for a mortgage. The truth is, the mortgage crisis did more good then harm when it comes to correcting underwriting guidelines that for many years were too lenient and extremely led our country to a disaster real estate bubble. Today, guidelines are more stringent but at the same time they are better in determining if a borrower can comfortably cover their monthly payments.

The first step in determining whether or not an applicant will qualify for a mortgage is to calculate their debt to income ratio. The definition of a "DTI" ratio is the total gross income for the borrower (s) divided by the total monthly obligations. When considering income, borrowers should always take their gross pay, or the amount paid to them prior to any deductions for taxes, IRA, etc. Monthly obligations would typically be any payment that shows up on the borrowers' credit report. These payments are usually credit cards, student loans, car payments, 2nd mortgages, home equity lines of credit, and store charge cards. The total monthly payments for these items are then added to the monthly tax and homeowner's insurance payments and the principal and interest payment of the proposed mortgage. The following is an example of how to calculate a debt to income ratio.

Mr. and Mrs. Jones both make a combined annual salary of $ 96,000. They have minimum monthly payments on credit cards of $ 350, student loan payments of $ 250, two car payment of $ 250 each, annual taxes of $ 5,000 and an annual homeowner's insurance premium of $ 700.

In this example, Mr. and Mrs. Jones would there before have a gross monthly income of $ 8,000 and gross monthly obligations of $ 1,575. If they were applying for a $ 200,000 mortgage at 5%, and a 30 year amortization, the principal and interest payment would be $ 1,073.64. Therefore, total monthly obligations jump to $ 2,648.64 and their debt to income ratio would be 33 percent ($ 2,648.64 total debt / $ 8,000 gross income).

Today, Fannie Mae guidelines dictate that borrowers do not have over a 45 percent DTI ratio. Therefore, in the above example, the borrower would have satisfied this requirement. Of course, there are many guidelines that a borrower must satisfy in order to qualify for a refinance, but calculating one's debt to income ratio should be one of the first. It can be very helpful to determine if it makes sense to move forward with a mortgage application and the probability of a successful loan commitment.

Source by Joe Jesuele

The Psychology of Real Estate Pricing

In 1987, the Journal of Real Estate Research published an article entitled “Pricing Strategies and Residential Property Selling Prices,” which presented evidence showing that the pricing strategies used for residential properties actually colored the perceptions of buyers regarding the quality and the worth of the property in question. This effect, called price influence, is based on the idea that consumers often base their assumptions about quality and worth on the listed price of an object. For instance, consumers exhibit a trait consumer researchers call “price reliance.” This is the tendency to believe that things that cost more are worth more, and that the reverse is true as well. Even for informed buyers, price is an indicator of quality. The article cited evidence that this is especially true for less frequent purchases and high-value items, like automobiles and real estate, and stated that within certain “latitudes of acceptance” price increases correlated with consumer perceptions of higher quality. This was partially attributed to a dearth of applicable knowledge on the part of buyers, who often lack specific knowledge of home values and comparable pricing for similar homes. Due to their lack of knowledge, price becomes an important indicator of worth for both parties.

When pricing real estate for sale, homeowners can employ one of three basic strategies. They can price their home higher than its expected sale price, and plan to negotiate a lower price with buyers from a favorable first position. They can price their home at about its estimated value, and hope to sell it for approximately what it is worth, bearing in mind that sellers and buyers alike often suffer from the same lack of specific knowledge of the home’s worth on the market. Sellers can opt to price their home lower than the typical market value of comparable homes in hopes of eliciting a bidding war and selling their home for more than the original asking price.

A more recent article from the New York Times called “The Psychology of Pricing” argues that there are specific pricing break points. For lower-priced homes, these break points come every $20,000 or so, and at each $50,000 or $100,000 for higher-priced properties. If your home is priced just under or just over one of these break points, it can have serious effects on your ability to sell your home quickly and for the amount you want. For instance, the article postulates that it’s better to price your home at $299,000 than $301,000, because $301,000 seems much higher than $299,000 from a psychological standpoint. Additionally, pricing your house just under one of the break points ($99,000 rather than $100,000, for example) will likely attract more potential buyers, since nearly every real estate buyer has a specific price they are not willing to exceed, and they usually inform their real estate agents of this maximum price. The difference between specific numbers and rounded off numbers is significant as well, since the latter seem to give the impression that the price is negotiable far more than an oddly precise amount might do.

Generally speaking, the more attention and foot traffic your home receives, the faster it will sell and the more likely it is that you’ll receive close to your asking price for it. It is obviously better to be in the position of choosing between a number of bids on your home than to have received none at all. Therefore, it’s important to carefully assess the true worth of your home, then price it slightly above that, but just under one of the pricing break points. If your estimate of your home’s value is correct, then you should be able to benefit from your knowledge of price reliance and the financial break points to sell your home quickly and for the best possible price.

Source by Joe Cline

How the Ontario HST Will Impact You in 2010

The Ontario Government recently enacted legislation which will implement the much-dreaded HST Tax. This new tax will take effect on July 1, 2010.

The HST tax will effectively combine the Provincial Sales Tax of 8% percent with the Federal GST Tax of 5% percent, to create a new "harmonized" total tax of 13% percent. This new tax will be applicable to many real estate services which hitherto only had one or the other tax applied.

The HST will result in a 13% tax on new home construction, but my post today will concern those ancillary costs relating to the buying and selling of residential real estate properties in Ontario …

First, the good news …. there is no HST tax payable on the sale of a resale home (residential). So the single largest dollar amount is not taxable under HST.

However, under the harmonized sales tax (HST), home buyers and sellers will have to pay extra tax on a range of services associated with the real estate transaction: services such as legal fees, moving costs, real estate contracts and home inspection fees. Currently, consumers only pay the 5% Goods and Services Tax (GST) on these services.

In a nutshell, after July 1, 2010, if you are a seller , there will be a 13% percent tax payable on the real estate commission you pay – currently there is only the 5% percent GST payable on this fee. Your lawyer's fee will also be subject to the 13% percent HST. One bit of good news – the cost of a Condominium Status Certificate will remain the same; while there will be HST at 13% instead of GST at 5%, there can not be an increase in the legislated maximum total amount of $ 100.

If you are a buyer , any Home Inspection you pay for will be subject to the 13% percent HST. And so will the cost of movers hired. In addition, the cost of the CMHC premium for "high-ratio" mortgages has traditionally been taxable for PST – this amount will now be taxable for the full 13% percent HST.

So one can see that, with the introduction of the HST, whether you are buying or selling a Resale Home in Ontario, costs will be going up.

A press release from the Ontario Real Estate Association earlier this year summarized some of these changes which will take place – the example that they used was for a resale house priced at $ 360,000, and it was determined that the HST would add over two thousand dollars in new taxes to closing costs. Please note, these taxes are in addition to the Land Transfer Taxes which exist for both the Province and the City of Toronto. OREA calculated that, in total, the HST would add $ 313 million annually in new taxes to resale home transactions.


Current Tax | New Tax | Total HST Payable

Mortgage Insurance Premiums (1) $ 752.40 | $ 470.25 (2) $ 1222.65

Legal Costs $ 50.00 | $ 80.00 | $ 130.00

Real Estate Commission (3) $ 900.00 | $ 1,440.00 | $ 2,340.00

Home Inpection $ 20.00 | $ 32.00 | $ 52.00

Title Insurance $ 24.00 | $ 15.00 | $ 39.00

Total New Tax: $ 2,037.25

(1) CMHC premium of 2.75% for mortgage with a 5% down payment on a $ 300,000 + home.

(2) Consumers currently pay the 8% PST on mortgage insurance premiums.

(3) Real estate contracts are negotiable – 5% used in this example.

[4] Ministry of Finance, Public Accounts, 2007/2008.

5 Altus Group, "Economic Impact of MLS (R) Home Sales," June 12, 2007.

The HST Ontario Tax will add to the cost of buying and selling a resale home. Many market watchers are predicting a flurry of activity leading up to the July 1, 2010 implementation date, as buyers and sellers both try to avoid paying the tax.

Source by Randy Selzer

Private Lending For Real Estate Investors – Credibility Kit Marketing Tips

One of the things about private lending and all marketing, if you’ve done a lot of marketing, you know half of marketing is waste. Half of the people that inquire or raise their hand are probably never going to lend with you. All they want is some free information. They’re wasting your time and you need to cull through those and get rid of those individuals and get to the real serious players.

Identify the Serious Players


You might have to have those people call you back once or twice in terms of trying to make sure that you identified they’re real serious players. The other thing you can do with your credibility kit and I’ve not done this – I have a little bit, I guess. I do have a very well defined file on my website but I’ve been thinking about this whole process of putting almost a full credibility kit on the website.


Post Your Credibility Kit

I don’t know if somebody’s done that or if somebody would think about doing it. At some point, I wouldn’t mind working with somebody to try and develop that. It would be an interesting concept. You could send somebody to a page on your website and there would be maybe one or two or three pages that would have basically your credibility kit in a web-based format and that might be something, as time goes by, more and more that will be the format which you do.


Build a Trust Relationship

I think we talked about a number of these elements and that private lending is a trust relationship. That trust has got to be developed. With real estate investing there is a significant hurdle which you must overcome. If somebody walks into a bank, they walk into a lobby of a very expensive bank, there’s all this fancy furniture and marble and all that stuff. You walk in and you just instantly have that sense of credibility of that organization.


 As all of us know that doesn’t mean much because the bank is probably broke anyway and we all know that half the banks are going out of business anyway. It doesn’t mean very much, but the reality is the individual walking into that bank will get a sense of instant credibility because they’ve bought all this fancy furniture and a fancy office. Maybe it’s downtown. They get credibility by that respect.


Say with even to a certain extent mortgage companies, if you go into a WAMU office, they’re usually pretty nice in shopping centers things like that. They have credibility as part of that process. The average guy like you and me, we’re real estate investors. I work out of my home office and maybe many of you do too. How do we develop credibility? Nobody knows my name or your name. We’ve got to overcome that basic mistrust type of thing between a potential lender and yourself.


Credibility Kit Builds a Trust Relationship


That is something that the credibility kit is designed to do. A well-done credibility kit will do a lot of that for you. It’s not going to do it all. Believe me, you still have to sell yourself through a lot of other means, but it will help quite a bit and it will push the ball down the track a little bit. It’s very important that you understand that the credibility kit’s primary job is to overcome that lack of trust that is between the potential lender and you.


That is a natural process by which that person is going to not trust you, but the credibility kit’s job is to try to start to overcome that process. I think I’ve already spoken about this. Nothing speaks louder than a well-done credibility kit, well-done, polished, well thought out. It brings out the real power in you and your background and experience.

Source by Mike Lautensack

Real Estate Investors – How to Use Flyers to Get Motivated Sellers Calling You

Flyers are fairly standard stuff. I think it's just a matter of doing flyers the right way, getting flyers out and getting them out fairly often. It's the same principle – you have the headline, the call to action with a strong, attention-getting headline.

Deliver Your Message

You deliver your message about what you're doing and why you're in real estate investing – if you're in foreclosures, if you want to do short sales, or whatever the situation you might want to hint at.

Call to Action

You want to have a call to action, "Please call me immediately to resolve your short sale situation or your foreclosure action. schedule a 15 minute consultation, "some call to action that elicits a response from this individual. They will then call you and the process starts again.

Methods of Distribution

The key to flyers, again like everything, is getting them out and then getting them out over and over again. You can have kids go out to grocery stores. Most grocery stores have bulletin boards.

What happens on a bulletin board in the grocery stores is you put yours up and it's there for about three days and the next guy comes along and puts their flyer right over top of yours. You have to send somebody back a week later and put yours back on top. It becomes a bit of a cycle.

Laundromats, convenience stores, drug stores – you can put them up really anywhere there's going to be people. Bus stations particularly work well. You can put flyers up on poles because they're not going to distract everyone, but obviously if it rains or something they're not going to last very long.

You can also leave them like on a newspaper stand. Put them off to the side and just leave a stack of them, two or three of them there. People will pick them up. Just get them out all the different ways that you can think of. Frankly, if you hire some kids and they're reasonably good, they will come up with innovative ways to get them out themselves. Just pay them.

Say, "Every one you put out, you get a buck or something." Let them find some ways or find some interesting things. You can get them into bars. A lot of bars will have places that you can post flyers. Again, neighborhood bars, things like that. They work very well. It's just a matter of getting them out, getting the message out on a fairly regular basis and just keep doing it repetitively.

If you do all five of these, there is no question your phone's going to ring. You are going to get motivated sellers to call you, motivated sellers that hopefully have not gone to a realtor at this point, or have gone to a realtor and the realtor could not sell it and it's the post stage.

Source by Mike Lautensack