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Last Updated on March 29, 2023 by Mark Ferguson

HUD homes are a great opportunity to get a great deal, but HUD has very different rules for investors and owner-occupants. HUD homes are foreclosures that had FHA loans, which are now owned by the United States government. I used to sell HUD homes as a real estate agent and was a part of hundreds of transactions involving HUD (I mostly invest in real estate now). HUD can be very confusing to those are not familiar with there system, but it makes sense once you know all the rules. There are different rules for investors and owner-occupants. There are also special programs for HUD homes like the good neighbor next door, and the $1 down payment program. We will go over everything in this article!

What are HUD homes?

HUD homes are government-owned foreclosures. HUD stands for the Department of Housing and Urban Development. HUD oversees the FHA loan program, which stands for Federal Housing Administration. FHA loans are low-down-payment loans that are only owner-occupied buyers are eligible for. The loans are obtained from banks, but the government insures them. If the loans go through foreclosure the government will sometimes take over the loan and the property from the bank. The bank has the option to keep the property, and HUD does not approve every FHA insurance claim so not all FHA foreclosures go back to HUD. When HUD takes back an FHA foreclosure they will use their own online bidding system to sell the homes in most cases. They will also use bulk sales (hundreds of millions of dollars of homes) to sell packages of properties.

Where can you find HUD homes?

The most important thing to know about HUD homes is HUDHOMESTORE.COM. HUD lists every house they have for sale on this website and anyone can view it. To search for HUD homes, simply enter the state you are looking in and any other criteria you want to narrow it down with; city, zip code, address, etc. Once HUD accepts a bid they remove the property from Hudhomestore.com. If you see a sign in the yard or property in MLS but can’t find it on Hudhomestore.com they may have already accepted a bid. There are a few other reasons the property may not be on the site including price changes or new appraisals.

Check out the video below to see how to look up and bid on HUD homes:

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How can you submit a bid to buy a HUD home?

HUD has very strict bid periods on who can bid and when. When HUD homes are first listed there is a bid period for owner-occupants, non-profits or government agencies. Investors cannot bid during this bid period, and the length of the bid period varies depending on the home. HUD homes have an appraisal done before they are listed and homes that will go FHA are listed as insured and the properties that won’t go FHA are listed as uninsured. If a property is insured, investors cannot bid for the first 15 days! If a property is uninsured, investors cannot bid for the first 5 days.

When you are looking at a listing on Hudhomestore.com look for the period deadline, it will give the last day owner-occupants, non-profits and government agencies can bid. Investors can place a bid the next day after the period deadline expires. If a property is still on Hudhomestore.com the day after the period deadline expired, it does not mean HUD did not receive an acceptable bid. HUD reviews bids the first business day after the period deadline, and the property could be on the website for a short time in the morning while they review bids.

This can be very confusing the first time you try to process the information, but it gets easier the more you use Hudhomestore.com. The thing to remember is investors can bid on the first day after the period deadline. If you are unsure who can bid, HUD will list who the eligible bidders are on Hudhomestore.com. When investors can bid it will say “All bidders.” A good real estate agent who knows the HUD system can walk you through the process as well.

In fact, you have to use a real estate agent who is approved and registered in the HUD system to bid on HUD homes.

What does FHA insured with repair escrow mean on HUD homes?

HUD does not allow any repairs to be made to properties and typically does not repair any of their properties. However, HUD wants to sell homes to owner-occupied buyers and many HUD homes need some repairs that would not allow them to qualify for FHA financing. HUD uses an FHA repair escrow to help owner-occupied buyers get into these homes. The amount on Hudhomestore.com under FHA repair escrow is the amount that a HUD appraiser has determined it will take for the home meet FHA guidelines. The escrow could be $0, in which case the home does not need any repairs in order to go FHA. If there is any other amount, the home will have to have some work done to qualify for an FHA loan.

The escrow repair amount is added to the buyer’s loan at closing, it is not a gift from HUD. The work is to be done after closing by licensed contractors within 90 days, and the lender will pay out the escrow amount directly to the contractors.

The details of each item that needs repair are listed under the addendum on Hudhomestore.com. The total repairs cannot exceed $5,000 for the FHA repair escrow. HUD adds a ten percent cushion if the repairs cost more than expected, so technically there could be $5,000 in repairs and a $500 cushion for a total escrow amount of $5,500.

If the buyer gets a new appraisal that shows more work is needed, that must be added to the FHA repair escrow.

If the home is marked as uninsured a buyer cannot get a typical FHA loan, but they can use an FHA 203k loan.

Can I use the HUD repair escrow on other types of loans?

No, the repair escrow can only be used on FHA loans.

Can you use FHA 203k rehab loans on HUD homes?

If a home needs more than $5,000 in repairs to qualify for FHA, there is still an FHA option. The FHA 203k rehab loan is a great program that allows a buyer to make repairs after closing and finance them into their loan. There is no limit to the dollar amount of repairs that can be made, but it can be a complicated process. This program can be used on a house with less than $5,000 in repairs as well if the buyer wants to make more repairs than FHA requires. The loan can also be used on uninsurable homes as long as it is marked on Hudhomesore.com that an FHA 203k is being used.

A 203k loan requires two appraisals, one for the as-is value and one for the after repaired value. The loan also takes longer to close and has a few more fees than a normal loan, but it is a great option for those looking to make major repairs.

What is the Good Neighbor Next Door Program?

The Good Neighbor Next Door Program (GNND) is a HUD specific program geared towards EMTs, teachers, firefighters, and law enforcement. HUD designates certain houses for this program and they will give a 50% discount to qualified buyers! In order to find these properties, go to Hudhomestore.com and click on Good Neighbor Next Door Program in the blue box. Then click on your state on the map to the right of the blue box. This will pull up all GNND properties in your state. Do not be surprised if there are not many properties available as HUD designates very few properties for this program.

HUD also has very strict policies regarding who can bid on GNND properties. The buyer must be a full-time employee in their field, work within a certain mileage of the property, and live in the property for three years. Bidding on a GNND is very simple. Your agent submits the full price in the GNND bid period and if HUD accepts your bid, they automatically discount the property 50%. These properties are not always in MLS, so check Hudhomestore.com frequently to find these listings.

HUD does not pay a commission on these properties to the listing or selling agent. Many times the agent representing the buyer will require the buyer to pay a commission directly to the buyer’s agent. If more than one buyer bids on these properties, HUD will randomly select the winner.

HUD bidding timelines

For insured homes:

  • 15-day owner occupant, government agencies, and non-profit only bid period. The first ten days of this bid period HUD collects all the bids and subsequently review them on the next business day. Thereafter for the next five days, HUD reviews any bids received the following day. (not sure if they review them the same day or the day after the bid is received during this time)
  • Investors can bid on the 16th day the home has been actively for sale. You can see this date by looking at the period deadline. Investors can bid on the next day after this deadline.
  • If the price is lowered, the owner-occupant period does not start over. Investors can bid right away.

For uninsured homes:

  • 7-day lottery bid period. Government agencies and non-profits only can bid. The home is listed on HUDhomestore, but not on the MLS.
  • 5-day owner occupant, government agency and non-profit only bid period. HUD accepts bids the first five days and opens them the next business day. Investors can bid on the 6th day.
  • If the price is lowered, the owner-occupant period does not start over. Investors can bid right away.

Are HUD homes listed for sale on the MLS?

HUD will list some properties differently depending on the repairs needed and potential buyers’ qualifications. On uninsured properties, HUD will list them on Hudhomestore for 7 days, but the only eligible bidders are non-profits and government agencies. During this 7 day period called the lottery period, some asset management companies will list the home in MLS and others will not.

Another program HUD uses is the Good Neighbor Next Door Program(GNND). They sell designated houses to firefighters, police officers, teachers, and EMT workers. There are many special requirements that must be met to purchase a home in this program, one of them is you have to occupy the home for three years. Since the property is not eligible for all buyers, some asset management companies list them in MLS and some do not. If you see a property in Hudhomestore, but it is not in MLS, check to see who the eligible bidders are.

How can you submit a bid?

A buyer must use a real estate agent registered with HUD to submit a bid on a HUD home. If you are shopping for an agent and you are interested in HUD homes, ask your agent if their company has a NAID number. If they don’t have a NAID number, then they can’t submit a bid for you. Any office can get a NAID, but it can take up to 6 weeks to get a NAID number from HUD. If your agent’s office has a NAID, they can register on Hudhomestore and submit a bid for you very easily. The bid is submitted online and no documents are uploaded with the bid. HUD does require the social security, tax id or EIN number for the purchaser to submit the bid.

What happens after a bid is submitted?

HUD will only respond to your agent through email if your bid is accepted. If your bid is not accepted, HUD will not notify your agent, but your agent can look up the bid status. Your agent has to log in to HUDHOMESTORE.COM and go to bidder functions. They can search for bids they submitted, and HUD will list the bid status. It may say reviewing bids, accepted, canceled or other bid accepted. If your bid was not accepted and no other bids were accepted you can bid again as many times as you like. In some cases, HUD may counter your offer, but their counter is only a notification informing you of what net price HUD will accept. If you enter a bid that nets HUD the counter price or more, they will accept it as long as no one else submits a higher bid.

How low of a bid will HUD accept?

A buyer can submit any bid amount they want on a HUD home, but HUD has certain guidelines they will accept. Those guidelines change in different areas of the country and for different properties. The asset management companies are given guidelines from HUD on what bid amount they can accept. Usually, they are allowed to accept a net amount of around 10 to 12 percent less than asking price (in my area). The net amount is what HUD will receive after commissions and closing costs are paid.

HUD always pays the listing broker a 3% commission and the selling broker can get up to a 3% commission. If HUD is paying a 6% commission total, then that net amount they will accept has dropped to 4 to 6%t less than the list price. If the buyer wants closing costs, then that amount drops even further.  If a property becomes an aged asset, meaning it has been on the market for more than 60 days, HUD may accept lower bids. In different parts of the country, HUD may also accept 20% less than asking price at the beginning of a listing period.

Here is a breakdown of what HUD may typically accept:

  • Asking Price:               $100,000
  • Commissions:                  $6,000
  • Buyer Closing Costs:      $3,000
  • Net to HUD:                    $91,000 or 91% of the list price

In the scenario above HUD would most likely accept a bid slightly lower than the list price of $100,000 like $98,000. If the buyer did not need closing costs paid, the bid could be lowered by $3,000 and HUD would still accept it because the net money going to them is still the same.

There are also occasions when a low bid that does not meet HUD guidelines is accepted. This usually happens on aged assets that have been on the market over 90 days. The asset management company can ask for special approval from HUD on these low bids. When this happens your agent may receive a counter from HUD in the morning and then an acceptance later in the day. This is because the asset management company could not accept the bid right away, but they sent it to HUD and it was approved later in the day.

Does HUD prefer cash offers?

Many buyers assume a cash offer will get accepted over a financed offer since cash offers have a better chance of closing. However, HUD does not care. They treat all offers the same whether they are cash, FHA, conventional, USDA, VA or even a 203k FHA rehab loan. HUD will pick the highest net offer to them, that is all they care about.

How soon should investors submit a bid to HUD?

The key to an investor getting a HUD home is speed. There are many investors waiting for HUD homes to make it to the investor bid period, and most good deals will get bid on the first day an investor can bid. On uninsured homes, there is a trick investors can use to gain an advantage over other investors. HUD opens bids on the next business day after the 5-day owner occupant bid period is over. HUD does not open bids first thing in the morning, they usually open them mid-morning or later depending on how busy they are. At the beginning of the 6th day, an uninsured HUD home will be available for investors to bid on, even though HUD may be accepting an owner occupant bid later in the day.

Investors should always try to get their bid into the system on that 6th day because HUD homes tend to fall out of contract more than other properties. If an owner-occupant cancels their contract, HUD will move on to any backup offers in their system that are an acceptable price before they put the home back on the market. If the house comes back on the market, an investor who bid on the 6th day could have their bid accepted, before any other investors get a chance to bid on the home.

Should you mark hold as a backup offer?

YES! HUD asks all bidders if they can hold their offer in a backup position. This means if an accepted offer cancels, they will automatically accept the next highest bid as long as it is an acceptable amount. It does not hurt to mark this box as you are under no obligation to continue with the contract if HUD accepts your bid. If HUD lowers the price on a property, they will review bids they have already received to see if they are now an acceptable amount after the price change. Your bid could be accepted before anyone else gets a chance to submit a new bid after the price change.

How to send in a contract after your bid is accepted

If HUD accepts your bid, they will notify your agent by email and give your agent instructions on how to send the paperwork to HUD. Your agent will have 48 hours to send the original documents to HUD (HUD may be allowing electronic signatures in some areas now). That 48 hours is extended for weekends and holidays. HUD has its own sales contract, addendum, and disclosures. They will require a pre-qualification letter or proof of funds letter if you are paying cash, and your earnest money must be sent with the package.

HUD requires certified funds for your earnest money. Your agent should be able to help you out with the package and explain all the details. There are a couple of very important documents to pay attention to that I will go over in the next sections. If your package is going to be late, make sure your agent contacts HUD and tells them it will be late and HUD may give you a little extra time. If your package requires corrections, HUD will email your agent and usually, corrections are due within 24 hours.

Buyer Select title company update

HUD has switched to a buyer agent select system where buyers now choose the title company. Buyers choose the title company for the entire transaction and can choose any title company they want. HUD will get the title company registered with HUD, once a bid is accepted and a title company is chosen. The asset management companies are handling things differently with some having the listing agent hold the earnest money and some requiring the buyer to send in the earnest money to HUD. Make sure you read the instructions thoroughly for what HUD requires.

How to complete an inspection on a HUD home

HUD has a different inspection policy than most REO sellers. When HUD has a property listed, they do not turn on any of the utilities. When HUD signs your purchase contract, they will email your agent a signed copy with the appraisal and a utility turn-on request form. You have 15 days from the time HUD signs the contract to do your inspection, and they allow you a three-day window to turn on the utilities. It is usually best to make your three-day inspection window as late into the 15 day inspection period as possible. The reason is you have to send in the form to HUD’s property preservation company, wait for them to approve it and then get utilities on in your name. It can easily take over a week to get the form back and get utilities on so make sure your agent turns in the request form as soon as possible.

HUD does not pay for the utilities or any turn on fees and they do not de-winterize the property. In fact, if you live in an area that requires winterization, you will have to send in $150 with your turn on request form if you want to turn on the water during the winter season. Most areas require the winterizations from 10/1 to 4/30. This fee is for the property preservation company to re-winterize the property after you complete your inspections. If HUD found the property’s plumbing system did not hold pressure during an air test, they will not allow you to turn on the water.

If you find issues during your inspection, you have two choices; cancel the contract or proceed with your contract knowing HUD won’t repair anything. They are very clear HUD homes are sold in as-is condition, and they will not make any repairs, even if the lender requires it. They are also very clear that they will not return your earnest money if you find inspection issues that cause you to cancel your contract. As I said earlier, HUD does an inspection before listing each property, and the basic results are listed on HUDHOMESTORE.COM. To find the inspection, look under addendum on HUDHOMESTORE and you will see a document called PCR. This will list the general condition of the plumbing, electric, HVAC and roof. Do not depend on these inspections to be perfect! Many times the HUD inspectors are only able to do a visual check since the utilities are not on.

How to do an appraisal

HUD does an appraisal on every home before they list it. HUD used to list every home at the appraised value, but that changed recently. Owner-occupants used to be able to use this appraisal if they are going FHA, but now all buyers must get a new appraisal. If your appraiser requires the utilities to be on for the appraisal, you have to follow the same procedure to turn on utilities as you did for the inspection. The best practice is to schedule the appraisal at the same time as the inspection if possible. The biggest issue I see with appraisals is the plumbing. HUD’s inspector will do a pressure check on the plumbing system before the home is listed. If the pressure test fails, it means there is a leak somewhere in the system.

That also means HUD will not let you turn on the water for your inspection or appraisal. If the system fails the pressure test and your appraiser requires the water to be on, you are out of luck. HUD won’t repair the lines and no repairs can be made before closing. Please pay attention to the HUD inspection before bidding and talk to your lender about the appraisal process. I have seen many deals fail because the water could not be turned on for appraisals on HUD homes. If you have already had your bid accepted and you have run into this issue, there are a few solutions. Many times a lender can escrow for plumbing repairs or a portfolio lender may be able to do the loan without utilities being on.

The other issue that may come up is an appraisal comes in low on a HUD home. This is rare, as usually HUD homes are priced low enough that an appraisal value is not an issue. If the appraisal does come in low or the appraisal requires repairs, HUD does not make repairs or price adjustments. Again the only choice will be to cancel or continue with the original bid price and terms.

Closing

Different asset management companies give different time frames for closing. Some allow cash buyers 30 days to close and financed buyers 45 days to close. Other companies allow 45 days for cash and financed buyers. If you must have an extension due to your lender or other fault of the buyer, then HUD will charge you for an extension. Typically the fee is $375 for a 15 day extension day but can be lower for lower-priced properties. The exact fee schedule is listed on one of the HUD forms you will sign. HUD will grant two extensions, but if a third is needed HUD will need proof that closing is eminent or they may not approve the extension.

Another difference with HUD is they do not pay for the buyer’s title insurance. Make sure you factor that into your figures when bidding on a HUD home. HUD does not require title insurance, but I highly recommend you get it. HUD does the best they can, but they are dealing with other lender’s homes that were foreclosed on and had FHA financing. Sometimes a title issue will slip through the cracks, and if you don’t have title insurance it can be a nightmare to get it cleared up. I sold a HUD home a few years ago that was owned by a large bank. 6 months after the sale, we learned the bank did not have clear title. The title company was able to clear it up, but if the buyers did not buy the insurance it would have been on them to figure out how to get a clear title.

Can investors get their earnest money back?

HUD is very clear that they treat investors differently than owner-occupant buyers. They feel investors are more experienced in real estate and should do their due diligence before making an offer. HUD makes investors sign a document saying their earnest money will not be refunded for inspection issues.

HUD may return half of an investor’s earnest money if their loan is denied, but remember it is very difficult for an investor to get their earnest money back from HUD if they cancel the contract. The earnest money amounts are $500 for contracts under $50,000 and $1,000 for contracts over $50,000.

Can owner-occupied buyers get their earnest money back?

HUD has very strict policies on earnest money returns and forfeitures. Investors have a very difficult time getting their earnest money back, but it is a little easier for owner-occupied buyers. HUD lists many reasons why they will return owner-occupants earnest money, the most common being loan denial. When you sign your contract, there will be a form called earnest money forfeiture policy. Make sure you read this carefully and understand exactly under what conditions HUD will return earnest money to buyers.

If an owner-occupant wants to get their earnest money back due to an inspection issue, make sure the inspeciton issue was not already listed on the HUD PCR (property condition report). If HUD already disclosed a problem with the house, HUD will not return the earnest money because of that problem.

How does HUD define owner-occupied?

The only way a buyer can be considered an owner-occupant is if the person living in the home will be on the deed when HUD sells the home. That occupant has to live in the home for at least a year and cannot buy any more HUD homes as an owner occupant in that first year. They must live in the home more than 50% of the time. You cannot simply leave the home vacant or leave a unit vacant. You must live there.

What happens to investors who commit fraud?

HUD makes owner-occupants sign a document confirming they are an owner occupant and if they are found to be an investor, HUD can fine them $250,000 with prison time. It is a federal crime to misrepresent yourself as an owner occupant when your true intention is as an investor. Not only can the buyer be fined and sent to prison, but the buyer’s agent and their entire office can also lose their ability to sell HUD homes. If you think you won’t get caught, remember there are many investors who would love to bid on HUD homes but can’t because of owner occupant rules, and they have no problem turning in other investors they see breaking the rules. Listing agents are also encouraged to keep an eye out for investors posing as owner-occupants.

Can repairs be made prior to closing on HUD homes?

HUD is very clear that they will not make any repairs prior to closing and the buyer is not allowed to alter the home in any way before closing. Some buyers may think it is not a big deal to fix a small plumbing leak or do some painting before closing. It is a very big deal! HUD homes are federal property and it is a felony to make any alterations before you own the home. If HUD finds out any repairs were made, they usually cancel the contract on the spot, take the buyer’s earnest money, investigate the buyer’s agent to see if they knew about it and then consider charges depending on the severity. Do not make any repairs, change the locks, remove signs or anything from the home before closing!

Owner-occupants have a distinct advantage when bidding on HUD homes. HUD allows owner-occupants to bid on HUD homes before investors can bid on HUD homes. On FHA-insured HUD homes, there is a 15-day owner occupant only bid period. Without going into the detail that I do in my other articles, FHA-insured HUD homes can get an FHA loan if the property needs less than $5,000 in repairs. On FHA-uninsured HUD homes, there is a 5-day owner occupant bid period. FHA-uninsured HUD homes have more than $5,000 in repairs needed and cannot go FHA unless you use an FHA 203K loan.

Under what circumstances can an owner-occupant sell a HUD home prior to living in it a year?

HUD allows owner-occupants to move out of a HUD home prior to living in the home for a year if they meet certain guidelines. It is always best to call HUD if you have to move out of a HUD home early as an owner occupant. If an owner-occupant has a change in location for a job, a death in the family, divorce, loss of a job or other extenuating circumstances, HUD may ease the owner-occupancy requirement.

How does the $1 HUD home and $100 down payment program work?

HUD will sell some of their homes for $1. Yes, that is not a typo, but do not expect to get a HUD home for that price. HUD only sells certain homes for $1 and they only sell them to non-profits or government agencies after the home has been for sale for an extended period of time. I never saw a home sell for $1 in my market the entire time I was listing HUD homes.

HUD also has a $100 down payment program that they occasionally offer. It is not available in every state and it is very rare that a buyer only needs $100 to buy the home. There are almost always other costs.

Conclusion

HUD homes can be complicated, but if you have a knowledgeable agent and lender they can be an amazing opportunity. If you happen to be eligible for the good neighbor next door program you may be able to buy a HUD home for 50% off! Just be careful pretending to be an owner-occupant when you are not, and make sure you understand the inspeciton and earnest money riles with HUD homes!

In my course The Complete Blueprint, I go even more in-depth on how to buy HUD homes. The Complete Blueprint is my most extensive course it covers every single aspect of my real estate business and how to replicate it yourself, including a 300-page guide, videos, call to actions, live coaching directly from me, an much, much more.

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Source: investfourmore.com

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You’re great, smart, and people just love you. A little praise has already taken you far in life, and now it’s time to apply it in pricing your home for sale.

What’s wrong with a little self-confidence when attracting a buyer, anyway? Nothing. But watch out.

Here are six things that overconfident home sellers do when pricing their home, and some helpful tips on how to avoid them.

#1: Trust themselves more than they trust the market

If you’ve been on social media sites ever in the past ten years, you might have seen messages to the effect of: “Your worth depends on how much you value yourself,” and “Speak about yourself the way you would about a prized possession.” This advice certainly has merit, but sadly, little value in the pricing of your home.

Houses have value only in the amount that a buyer is willing to pay for them. You can tell yourself your home is worth a million dollars, but statements of self-affirmation will do little to attract a buyer.

#2: They ignore the endowment effect

Studies show that when a person owns something, they mentally set its value at a price much higher than what they personally would be willing to pay for it. This is called the Endowment Effect. Say you have your eye on a carbon frame road bike which sells for $2000, but wait to purchase until you see a sale price of $1800. A year later, you want to sell this bike, which is worth—to you—$2000. But is it worth that? Of course not.

1) You weren’t willing to pay $2000 for it.

2) You got to own it new (or newer) than it is currently.

3) The experience you give the buyer—a garage sales-location versus a brick-and-mortar store—matter.

Homes are similar. Homeowners often value their own home at a price that is substantially higher than what they themselves—let alone the market—would be willing to pay for it. The reasons are the same as the three mentioned above. 1) Sellers want to feel like they are getting a good deal. (But so do buyers.) 2) Every home is older when it goes on sale than it was when it was purchased. 3) The experience of the sale matters, and current homeowners are not necessarily more talented than previous-owners at showing off the home.

#3: Misunderstand that Homes Don’t Go Up in Value, Property Does

Homes are like bikes. The older they are, the more wear-and tear they have. In fact, should you happen to own a rental home, you know that you can write-off the depreciation of the rental annually. This is because, as years goes by, the units which you rent out will eventually need to be remodeled extensively, just to keep them at the same value to renters. It’s even possible for a building to lose so much value that it is a complete loss, like a car that is worth less than the money needed to repair it. A building like this is generally torn down and replaced.

Property, on the other hand, tends to go up in value at a rate that reflects inflation, with the big wild-card being location. If the location in which you purchased becomes more desirable, you will gain equity. If the location becomes less desirable, you will lose equity.

#4: Price Your Home Based on What’s For Sale

Okay, so you’re ready to set your home value based on the market. Good for you. You look at homes on sale similar to yours and set your price to match.

Here’s the problem: The houses staying on the market longest—many of which you noticed specifically because of the lengthy time you’ve had to process that they were on sale—are overpriced.

House, like other retail items, do not always sell at asking price, as you may have noticed when you waited for a sale on the bike.  You need to see what homes are selling for, not what over-confident homeowners are asking for. Appropriately-priced home sell quickly in a seller’s market like the one Utah is experiencing, often going under contract in days.

Getting data on purchase prices is trickier glancing at home sale prices, but certainly not impossible. Start with a desktop appraisal, like the one Homie provides free to all its clients. Once you’ve got purchase price info from comparable homes, check out our step-by-step details on setting your price.

#5: They over emphasize the value of their net on the home.

Imagine you fall in love with a house you can only purchase if the home you currently own sells for not a penny under $300,000. So you set that price as your asking price and won’t budge.

Whoa, not so fast. Consider the opposite scenario. A lovely couple wants to buy your property but can only afford to pay $270,000 it, not a penny over. Will you sell it at that? Not if a second family offers $290,000. Just as more than one buyer exists, more than one house is for sale. Buyers will bite on your house if it’s a reasonable deal compared to others. They will not pay an extra $10,000 to do you a favor.

#6: Expect 100% Return on Upgrades

Just as road bikes lose value the instant they’re used, so do flagstone patios, granite countertops and spring maple laminate floors. Even if your upgrades are perfectly marketable, they still depreciate in value over time. In valuing your home, you shouldn’t expect to retrieve more than 80% of your investment.

Bottom line

Setting your price is giving your best guess at what the market will pay, with helpful tools like Homie’s desktop appraisal to guide your thinking. If you set low, you are likely to get multiple offers that may drive up the price of your home as it goes to auction. If you set high, your home will languish on the market without offers until you adjust the price. React to the market and you have a high chance of selling your home in a reasonable amount of time.

If you really want to make more money on the sale of your home, visit Homie to check out our services and technology, which replace real estate agents and don’t come with commissions. Happy home-selling!

Source: homie.com

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I recently came across an interesting statistic. According to a poll from Harris Interactive, 41 percent of people rarely or never redeem their credit card rewards. It almost hurts to know all of those rewards are going to waste. A more recent study found that 73 percent of Americans are enrolled in rewards programs but have no idea how many points they have.

That used to be me. I discovered the magic of rewards points sometime right after college, when I finally started to take an interest in my financial situation. I wondered what the large number looming above my account number was, and, next thing I knew, years of unknowingly accumulating rewards points turned into a $100 statement credit.

Since then, I’ve been taking full advantage. I use my credit card like a debit card, budgeting and paying off everything I spend. My card doesn’t carry a fee, and I don’t rack up consumer debt — I just earn points. And as modest an amount as it may be, I always get a little excited when I periodically redeem my rewards.

How do you use your rewards?

Mad money

Here’s something about me a lot of people don’t know: I like buying clothes. This may seem uncharacteristic for a couple of reasons, one being that I call myself frugal, and, second, I dress like crap. Still, I love buying clothes. Mostly cardigans.

But I also don’t like spending money right now, because I’m trying to save up for something that I deem more important than fashion. There’s certainly nothing wrong with spending your money on cardigans. But for someone who’s trying to save, cardigans have become a weakness.

To make myself feel a little better, I automatically categorize my cash rewards as “shopping money.” This gives me a small budget to occasionally indulge a temptation.

Obviously, I could just as easily budget for this using my income, and the numbers would be the same. Maybe this is a silly psychological mind game I play with myself, but hey, it works, as it satisfies my nagging inner consumer.

Goals

After college, my goal was paying off my student loan debt. I used any and all extra cash I’d earn from anything, including rewards points, to accomplish that goal.

But again, that was student loan debt. If you’ve got consumer debt, you probably don’t want to put out a fire by playing with one. In fact, I’d be careful about using a credit card altogether.

Travel

I have a cash back card now, but even when I had a points-based rewards card, I never redeemed my points for travel.

With my old card, the travel deals were really terrible — I could always find cheaper flights without them — so I’d just redeem my points for cash, because they were worth more that way. If I can get more in cash than the trip is worth, I’m going with cash.

But this doesn’t take into consideration luxury travel — fancy hotels and first-class flights. Instead of comparing value using the cheapest travel option, some people might prefer to use their rewards points to pay for things they couldn’t otherwise afford. Guest writer Hilary Stockton wrote about her own experiences with luxury travel using a travel rewards card. She makes a compelling argument, and the photos don’t hurt, either.

I’m not experienced in this area, so feel free to elaborate on how you determine the value of your rewards travel.

Stuff

There’s also the option of trading your rewards points in for Stuff, but according to this report, that’s a terrible idea:

“Merchandise awards typically return only one cent in value for each point or mile spent, and that is only if you consider the product’s full retail price. In fact, cardholders are getting less than one cent in value for their points…when they likely could have purchased the items at a discount and received additional rewards from using their credit card for the transaction.”

Donate

Some people feel a little guilty about getting free money, even if it is, ultimately, part of a sales promotion from a large credit card company. Redeeming your rewards for a cash donation to a charity might be a good option for those feeling a little guilt-stricken or those who just want to do a good thing. Just make sure the amount they donate is the equal of or greater than the value in cash; otherwise, you might as well just give cash.

(I understand there are other ethical concerns about using credit cards, namely dealing with small businesses and transaction fees. That’s perhaps a topic for another post, but yeah, I understand that donating to a charity doesn’t assuage those larger concerns.)

Set and forget

There’s also the option of simply redeeming your points for statement credit and not putting too much thought into it, which is just fine, too. I also used to do that. It’s not as fun, but your budget is the same either way. I have Capital One’s Cash Rewards card now, and they even offer an option for auto-redemption.

Other Fun Hacks:

Combining With Other Programs

A few times now, I’ve booked travel on Priceline or Expedia using Mypoints.com. I log onto the site, go to Priceline, then use my credit card to pay for the ticket and also use my frequent flier number. Thus, I rack up airline miles, rewards points and Mypoints (which I later redeem for gift cards).

Churning

Holly wrote about this a while back, and while I lack the stamina for churning, she was able to take advantage of several credit card offers. She did warn about the possibility of this affecting one’s credit score, but churning has really worked for her.

My Rewards Work for Me, Not the Other Way Around

I earn points on things I already buy; I don’t buy things just to earn rewards.

Here’s an example. When I wrote about revisiting the envelope system, a couple of readers were concerned about losing rewards by paying with cash. But the thing is, earning rewards doesn’t dictate my spending or my budget. Sure, I use my rewards for mad money, but I’m not going to make significant decisions about my budget based on earning more rewards. So if the envelope system helps me to save hundreds of dollars a month, well, then, I’m just going to have to stand to lose the $3.56 I’d earn in rewards by using my card for groceries.

Rewards are awesome, but they’re an ancillary bonus, not something I consider a steady profit.

My rewards card also offers higher percentages of cash back at certain stores. I’m careful not to get so caught up in the coolness of rewards points that I spend money at places I wouldn’t otherwise spend money.

However, I love Trader Joe’s. Unfortunately, the store by my house is almost always packed, and I hate looking for parking, so I usually shop a little farther up the road at Ralph’s. But when I discovered I could earn a significantly higher cash back percentage at Trader Joe’s, I dealt with the parking headache.

As I mentioned, I use my rewards card like a debit card. I used to actually be able to put money on my card so that it would carry a credit. From there, I’d simply use up that credit until my balance reached $0.00. I’d still rack up points, but I was never carrying a balance on the card. But when I switched to the Capital One card, this was no longer possible; they don’t allow me to pay anything more than my balance. So I have to be a bit more careful, but hey, that’s what a budget is for.

At any rate, these are my experiences in dealing with rewards programs. Like couponing or any other frugal tactic, I don’t spend a whole lot of time analyzing the many ways I could save, because, at some point, my time is more valuable. But I still enjoy taking advantage of the rewards. So what are your experiences? How do you redeem your rewards, and what frugal tricks have you learned along the way?

Source: getrichslowly.org

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Inside: This free printable 100 Envelope Challenge is a great way to start saving money. At the end of the 100 days, you will have saved a total of $5000!

Today, I received an email from a reader, who said, “I struggle with controlling my spending and being able to save.”

That is something I hear over and over. Honestly, we spend because we truly don’t know what to do with our money.

Thus, enter the 100 envelope challenge.

A simple way to save over $5000 in a mere 100 days or about 3.5 months!

For most of us, we realized our spending habits needed work. Like every other month, I would spend money on unnecessary things like clothing and shoes (check!) or expensive meals out for one person (double check!). This way of life is no good if you have anywhere in your budget left over at the end of each month; it’s barely enough to make rent.

The solution? Challenge yourself with a 100 envelope challenge.

I know it sounds like a bit of a stretch, but hear me out: you’ll save $1 to $100 each day. The amount you save in the first month is random, but you can expect to save over $1,000 in just the first month! That’s enough to be excited about, right?!?!

Here are some tips on how to start this awesome money saving journey with my free printable below:

How much money do you save doing the 100 envelope challenge?

The 100 envelope challenge is a great way to save money.

By the end of the challenge, you can expect to save $5050.

That’s because you put away a good chunk of money each and every day. Depending on your budget and spending habits, you may be able to save even more!

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Right now, you are wanting a100 envelope challenge box to keep your cash stuffed envelopes.

Here are some great options to make sure you reach your goal.

Photo Credit:
www.etsy.com

This extremely popular handmade item on Etsy is for you!

You get to choose which theme you want your kit to be made from! This extra customization will keep you motivated. All envelopes are laminated and cut by hand. 

Don’t want the full kid – just the cute envelopes!

This option is perfect for you! These envelopes are high quality as they are made of superior paper. They will last for use over and over with outstanding durability and sealing.

Plus it won’t expose the content inside.

Make saving money an interesting game! Do the 100 Envelopes Saving Challenge with your spouse or best friend. You can set a goal together, for example, to go someplace or buy something. 

Commes with a complete kit and everything you need. Plus each envelope has a motivational quote to keep you going.

Photo Credit:
www.etsy.com

This homemade 100 envelope challenge kit has that personal touch you wanted.

This is a highly rated small and compact box to help you reach your goals!

100 Envelope Challenge Free Printable PDF

The 100 Day Envelope Challenge is a great way to save money over a short period of time. This fun and easy money saving challenge is popular thanks to Tiktok.

The challenge is simple: put a set amount of money into an envelope each day and don’t touch it.

This 100 envelope challenge pdf provides a visual way to track your progress during the 100 envelope challenge.

This will help you stay disciplined with your spending and save more money over time. You can print the PDF template for free, and it’s easy to use. It is simple to use and helps you stay motivated throughout the year.

100 Day Envelope Challenge PDF Template to Print

Here is how you can grab the free printable!

Simply click on the image, which will direct you to our free resource library. Enter your email and you will get a unique password. Check your email and come back and download your free template to print!

FREE PRINTABLE 100 ENVELOPE CHALLENGE PDF

Why You Will Love Saving Money with the 100 Envelope Challenge

The 100 Envelope Challenge is a fun, simple, and stress-free way to start saving more cash.

It is an easier way to save cash than ever before and a great way to learn about budgeting and saving techniques.

Download the 100 envelope challenge free printable today as a way to learn about how to save for short and long-term goals.

You will love saving money with the 100 Envelope Challenge because of the simplicity of this money saving challenge!

More Envelope Saving Challenges:

Additionally, there are many different variations of the challenge that you can do in order to save the money that you need.

  • 50 Envelope Challenge – For those who are beginner savers or with low income, this money saving challenge is perfect to teach yourself how to save money.
  • 100 Envelope Challenge – The most popular envelope challenge. Learn how to complete this 100 envelope challenge and save $5000.
  • 200 Envelope Challenge – This is a spin on the traditional challenge that is easier for many of my readers to complete. Each day you will put between $1 to $50 in an envelope.

Know someone else that needs this, too? Then, please share!!

Source: moneybliss.org

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What Happens If the Executor of a Will Dies?

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When someone passes away, it’s up to their executor to handle the probate process. But what happens if the executor of a will dies? While that’s a rarity, it can create complications as someone else will need to fill the executor role. Naming a successor executor is one way to avoid that scenario and other contingencies that might affect the settlement of an estate.

Talking to a financial advisor can be helpful for planning ahead for any obstacles that may arise during probate.

An Executor Plays a Pivotal Role in the Estate Settlement Process

In estate planning, an executor is someone who is charged with settling the estate of a deceased person. When someone writes a will, they can name a person of their choosing to act as executor. If someone dies without a will in place or did not name an executor, any interested party may petition the probate court to become the executor.

What does the executor of a will do? Broadly speaking, they settle the estate during the probate process. The duties and responsibilities of an executor include:

  • Creating an inventory of the deceased person’s estates
  • Notifying creditors of the person’s passing
  • Liquidating estate assets to pay creditors if necessary
  • Distributing remaining assets among the decedent’s heirs, according to the terms of their will

Executors are obligated to follow a fiduciary standard when settling estates. That means they must act in the best interest of the decedent’s heirs at all times. If they fail to do so, an executor can be removed.

What Happens If the Executor of a Will Dies Before the Testator?

The testator is the person who makes the will and the person on whose behalf an executor acts during probate. If the executor of a will passes away before the testator, then a new one can be named. That may require the testator to amend an existing will or nullify it and draft an entirely new one to change the executor.

If the testator takes no action and doesn’t amend their will or write a new one, then it’ll be up to the court to name an executor once they pass away. Again, any interested person can petition the court to become the executor.

That takes the burden of naming an executor off of the testator. However, it leaves the door open for someone who may not be qualified to step into the role, or who might not have the wishes of the testator in mind when executing the will.

What Happens If the Executor Dies During the Probate Process?

If the executor dies during the probate process, a successor executor can step in to finish the estate settlement. That assumes, however, that the testator was forward-thinking enough to name one or more successor executors to prevent the estate from being left without one.

When there is no successor executor named in the decedent’s will, then the court will have to name one. If only one person has submitted a petition to become the executor, the job might go to them. However, if there have been multiple petitions submitted the probate court can weigh the merits of each one before deciding.

How to Avoid Complications If an Executor Dies

If you’re the person who’s making a will, the easiest way to avoid complications that may result from the death of an executor is to name one or more individuals to succeed them. That way, if the executor passes away before you do or during the probate process, there will be someone else waiting in the wings to take up the reins.

You could also consider putting some of your assets into a trust, which would allow them to bypass probate altogether. With a trust, a trustee is in charge of managing assets on behalf of the beneficiaries that you name. You’ll have to name a trustee in this case, which could be the same person as your executor but does not have to be.

Placing certain assets in trust could avoid complications following the death of an executor since the trustee would be responsible for distributing them anyway. Instead of waiting for probate to conclude, the trust beneficiaries would be able to access their inheritance according to the terms you set in the trust document.

The Executor’s Guide to Probate Bond

As mentioned, acting as an executor entails certain responsibilities and you’re obligated to follow a fiduciary code of conduct. Before someone can be appointed as an executor, the court may require a probate bond to be issued.

Probate bonds are designed to ensure that estate executors act in good faith and do not abuse their privileges. The bond protects the estate’s beneficiaries, not the executor, but the executor is the one responsible for purchasing it.

A probate bond is essentially an insurance policy against any financial losses that might occur if the executor abuses their power or otherwise mismanages the estate. The amount of the bond can correspond to the amount of the estate in question.

If all the parties involved in the settlement of an estate agree, then a waiver of bond can be submitted to the court. However, that can leave the beneficiaries of the estate open to losses if the executor fails to do their job properly.

How to Transfer Vehicle Ownership of the Deceased

One common question executors may have to deal with is how to transfer a car title after the owner dies. The answer can depend on several factors, including whether the car was owned by one person or multiple persons and whether any provision was made in a will for its transfer.

If the title to the vehicle has more than one name on it, then the surviving owner may inherit the vehicle automatically. They can change the title to put in their name only, without any further intervention from the executor.

When the title is in the name of the deceased owner only, the title will have to be changed to whoever is going to assume ownership. If the car is included in probate because it hasn’t been transferred to a trust, then you likely won’t be able to do that until probate ends and ownership of the car is assigned to one of the decedent’s heirs.

There are a few documents you’ll typically need to transfer a vehicle title after death:

  • A copy of the owner’s death certificate
  • The original title
  • Probate court documents allowing the transfer

The process for transferring vehicle ownership after someone passes away can vary from state to state. It may be a good idea to consult probate rules and the local DMV to determine what’s needed to complete the transfer.

How Much Does It Cost to Probate a Will?

The amount of money required to probate a will can vary by state. It’s common, however, for the cost to range anywhere from 3% to 8% of the estate’s value. In terms of what’s involved, the various costs can include:

  • Court filing fees
  • Attorney’s fees
  • Fees paid to accountants
  • Certificate fees for official documents
  • Notification fees if you’re required to publish a public notice for creditors
  • Probate bond fees
  • Appraisal fees if you need to determine the value of estate assets
  • Postage and mailing fees
  • Storage fees if you have to keep assets in storage before probate ends
  • Notary fees, if necessary
  • Fees paid to the administrator of an estate sale, if applicable

It’s the executor’s job to keep track of fees associated with probate and pay them out of estate assets. There is one exception, as executors who are required to purchase a probate bond must typically pay the fee for that themselves.

Also, keep in mind that the executor is entitled to collect a fee for their services. The fee can vary from state to state but it’s not uncommon for an executor to receive anywhere from 2% to 5% of the estate’s value for their time.

The Bottom Line

Knowing what happens if the executor of a will dies can help you to avoid headaches if you find yourself dealing with that situation when a loved one passes away. Taking care to build some protections into your own estate plan by naming successor executors or setting up a trust for certain assets can allow for a smoother probate process after you’re gone.

Estate Planning Tips

  • If you’re named as the executor to a will, it’s important to know what obligations you have and how to avoid any breach of fiduciary duty. Talking to a financial advisor can give you a better understanding of what’s expected of you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you don’t have a will in place yet, you might want to consider drafting one. You could hire an estate planning attorney but it’s easy to draft a will online if you have a fairly simple estate. You may also consider adding a trust, power of attorney and advance health care directive to your estate plan to cover all the bases.

Photo credit: ©iStock.com/PeopleImages, ©iStock.com/shapecharge, ©iStock.com/kate_sept2004

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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Source: smartasset.com

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How Does an Inheritance Advance Work? – SmartAsset

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Taking an inheritance advance is something you might consider if you expect to receive money from an estate, but don’t want to wait for probate to conclude. An inheritance advance, also called a probate advance or probate cash advance, allows you to receive a lump sum of money upfront.

In exchange, you agree to allow the advance company to purchase part of the inheritance. An inheritance advance can put money in your hands quickly, but there are some drawbacks to keep in mind. We will go over the details.

Talking to your financial advisor can help you create a plan for managing an inheritance.

Understanding Inheritance Advances

An inheritance advance is an advance against assets you stand to inherit. It’s similar to a payday advance loan in that you’re getting access to money now that you would otherwise have to wait until later to receive.

An inheritance advance is not a loan since you don’t pay anything back to the lender directly. Instead, you’re allowing the advance company to make a claim against part of the inherited assets you expect to receive. Once probate ends, the estate can pay out the agreed-upon amount to the advance company and forward any remaining assets to you.

Here’s an example of how an inheritance advance might work. Let’s say that your parents leave you $100,000 in their will when they pass away. After probate fees and expenses are paid, you expect to inherit $90,000. But you need $25,000 right now to pay for your child’s college tuition expenses.

You decide to work with an inheritance advance company that requests to purchase 30% of the inheritance or $27,000. In the meantime, the company agrees to pay the $25,000 you need to you in a lump sum. Once probate ends, the advance company collects the $27,000 it purchased and the $25,000 that was advanced to you from the estate, along with its fee. The remaining inheritance money would then be paid out to you.

Benefits of Inheritance Advances

There are several advantages associated with inheritance advances, starting with fast and convenient access to cash. While a probate loan may take several days or weeks to get approved and funded, it may be possible to get an inheritance advance in as little as 24 hours after approval.

Inheritance advances typically don’t require any credit checks, which could make them a good option for borrowers with poor credit. You won’t pay interest on an advance, though again, the lender can charge a flat fee.

An inheritance advance is a flexible way to borrow since you can use the money to cover just about any type of expense. You don’t have to offer any collateral for the advance.

And you don’t have to worry about making payments either since the advance company collects the amount owed to it directly from the estate.

Drawbacks of Inheritance Advances

Taking an advance against an inheritance can have some downsides. And they may not be right for everyone. The obvious drawback is you’re sacrificing part of your inheritance for the convenience of being able to get cash today.

Going back to the previous example, you’d have to consider carefully whether handing over $27,000 plus fees to the advance company is worth getting the $25,000 you need now to pay for education expenses. You might find that another funding option may be preferable.

For instance, taking out a Parent PLUS loan or even a private student loan might be a better alternative. Or you might decide to get a home equity loan instead if you’re comfortable using your home as collateral.

When to Consider an Inheritance Advance

The best time to consider an inheritance advance is when you need money and you’re certain that an inheritance is coming your way. Inheritance advance companies may not advance money to you if there are any doubts about how much you’ll receive or whether you’ll inherit from someone at all.

You might get an advance against your inheritance if you need money urgently and you’ve considered all other borrowing options. Other possibilities for borrowing can include home equity loans, a home equity line of credit or a personal loan. For smaller expenses, you might consider a credit card instead.

If you’re considering an inheritance advance, it can be helpful to estimate how much money you’ll need. You can then shop around to compare inheritance advance companies to see what you might be able to get upfront. Talking to a financial advisor can help you weigh the pros and cons if you’re on the fence about whether an advance is the right move.

How to Get an Inheritance Advance

To get an inheritance advance, you’ll first need to find a company that offers them. You can search online for inheritance advance companies, as this type of funding usually isn’t available at banks or credit unions.

Next, you can look at the advance company’s requirements to see if you’re eligible for an advance. If you’re not sure whether you qualify, you can contact the company for a consultation. If you are eligible, you’ll need to share some details about the inheritance and provide certain documents, including:

  • Copy of the death certificate
  • Copy of the will if one is available to you
  • Probate petition and letters of administration
  • Valid ID

You’ll also need to give the advance company the name of the executor or trustee who’s handling the estate settlement. You won’t need to provide information about your income or credit scores.

Once the inheritance advance company has everything it needs, it will review your case and make an advance offer. If you accept the offer, the inheritance advance company will pay the money to you, sometimes as quickly as 24 hours later.

Choosing the Right Inheritance Advance Company

An internet search will turn up a number of results for inheritance advance companies, like inheritancefunding.com for example. But it’s important to find the right one to work with. When comparing inheritance advance options, it’s helpful to consider:

  • How much you can get from an advance
  • What percentage the advance company purchases
  • Any fees you might pay and when those are due
  • Funding speed

It’s also important to look at the company’s overall reputation. Reading customer testimonials and online reviews can give you a better idea of how easy an inheritance advance company is to work with and how satisfied its customers are.

Bottom Line

An inheritance advance can provide financial relief if you expect to inherit money. But time is of the essence. Taking an advance against inherited money does come at a cost, which is important to remember. Looking at all of the pros and cons, and considering other funding options, can help you decide whether an advance makes sense for you.

Estate Planning Tips

  • Planning out your entire estate can seem overwhelming and difficult. But a financial advisor who specializes in estate planning can help. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.

Photo credit: ©iStock.com/shapecharge, ©iStock.com/PeopleImages, ©iStock.com/Drazen Zigic

Rebecca Lake, CEPF®
Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

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Source: smartasset.com

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Gone are the days of option arms and stated income.

Going forward, the Federal Reserve wants a minimum set of mortgage underwriting standards implemented on most consumer home loans to avoid another housing crisis.

Today, they unveiled the “ability-to-repay requirement,” tied to the Dodd-Frank bill, which can be met in four different ways.

First, a bank or mortgage lender can meet the requirement by considering and verifying eight underwriting factors, including:

– income and assets
– current employment status
– monthly mortgage payment
– monthly payment on any simultaneous mortgage
– monthly payment for mortgage-related obligations
– current debt obligations
– debt-to-income ratio
– credit history

And if it’s an adjustable-rate mortgage, payment must be based on the fully indexed rate, not a start rate or teaser rate.

The second option allows a creditor to originate a so-called “qualified mortgage,” which provides the lender with special protections from liability.

There are currently two definitions of a qualified mortgage, but both wouldn’t allow amortization beyond 30 years, negative amortization, interest-only options, or balloon mortgages.

Additionally, each would limit mortgage points and fees to three percent of the loan amount, while verifying income and assets.

Option three allows a balloon-payment qualified mortgage if the creditor operates in a predominantly rural or underserved area.

Finally, option four allows for the refinancing of a non-standard mortgage into a “standard mortgage,” which has limits on loan fees and doesn’t contain any risky features such as negative amortization or interest-only features.

The proposal also prohibits prepayment penalties unless the mortgage is a prime, fixed-rate qualified mortgage.

All consumer mortgages are covered by these underwriting rules except home equity lines of credit, timeshare plans, reverse mortgages, and temporary loans.

While the rules aren’t yet finalized, it’s going to get a lot more difficult qualifying for a mortgage…

Source: thetruthaboutmortgage.com

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Should we worry? Home sellers are hitting it out of the park, a potentially ominous sign we’ve gotten a little too house happy again, this according to a new report from RealtyTrac.

The company’s data revealed that U.S. home sellers chalked an average gain of 17% in March, the highest of any month since December 2007.

Back then, home prices were quite lofty and it wasn’t long before the market nosedived. Yes, things are a lot different this time around, thanks mainly to a cleaner stable of mortgages, but it’s still somewhat worrisome.

I don’t think this housing rally is over yet, but we might be getting closer to the end of the positive portion of the current cycle.

RealtyTrac noted that home sellers on average sold their homes for $30,500 more than what they purchased them for. The largest gains were seen in San Francisco (72%); San Jose (60%); Boulder (53%); Prescott (51%); and Los Angeles (48%).

Many other markets saw gains at twice the national average, including Denver (42%); Portland (40%); Austin (40%); Seattle (38%); Baltimore (38%); Riverside-San Bernardino (37%); San Diego (36%); and Sacramento (35%).

More Than a Third of Housing Markets Have Hit New All-Time Highs

RealtyTrac senior vice president Daren Blomquist said home sellers in many parts of the country are seeing average gains “close to or above” those experienced in the prior boom.

And the median sales price has reached a new all-time high in 36% of markets nationwide, including Boulder, Denver, Portland, Fort Collins, Austin, Greeley, and Cincinnati. Four of those markets are in the state of Colorado.

Nationwide, the median sales price was $210,000 in March, a nine percent increase from February and an 11% rise from a year earlier. March was also the 49th consecutive month of year-over-year home price increases. I’m guessing we’ll hit 50 next month…

After all, we are still eight percent below the $228,000 peak seen in July 2005, and chances are we’ll pass that and then some. Factor in inflation and maybe home prices aren’t as high as they appear.

The biggest year-over-year winners included Philadelphia (+29%); Rockford, Illinois (+22%); Jacksonville (+22); Cincinnati (+19%); and Deltona-Daytona Beach-Ormond Beach, Florida (+18%).

It’s Not All Rosy

Despite an overall uptrend in much of the nation, some 17% of housing markets from coast to coast actually lost value in the past 12 months.

This bad list includes Washington, D.C. (down 7%); San Francisco (-2%); Baltimore, Maryland (-6%); Pittsburgh (-4%); Virginia Beach (-2%); Birmingham, Alabama (-5%); and Tulsa, Oklahoma (-1%).

In San Francisco, a 47-month winning streak has been broken, and in Pittsburgh a 21-month streak has come to an end. You can blame affordability concerns for that, along with an increase in distressed sales.

Sellers were cutting their losses in another 15% of housing markets, with Rockford, Illinois (11% average loss relative to purchase price) the leader in that department. Interestingly, homeowners there have seen some of the biggest gains in the nation over the past year. But sellers still decided to move on.

Other losers included Winston-Salem, North Carolina (10% loss); Cleveland, Ohio (8% loss); Columbia, South Carolina (7% loss); and Wilmington, North Carolina (5% loss).

Smaller losses were seen in bigger metros such as Milwaukee, Chicago, Cincinnati, Birmingham, and Flint.

Those who sold last month had owned their properties for an average of 7.67 years, up four percent from the 7.37-year average seen a year earlier.

Remember, most folks don’t hold onto their homes very long so you can make an argument for a 7/1 ARM instead of a fixed product. Of course, everyone always thinks they’ll stay longer.

Where We’re At Now

It appears as if a lot of homeowners are happy to either break even or sell for a small loss after so many years of being underwater on the mortgage.

There are probably lots of investors cashing out as well after holding for just a few years. And of course we’ve got the flippers buying, renovating, and cashing in.

But I don’t think we’re at another market peak just yet. Yes, there are affordability concerns and hearing about new all-time highs gives me shivers down my spine.

Just because we’re hitting new highs doesn’t mean prices can’t go any higher. And as mentioned, you have to factor in inflation to the numbers. If they’re adjusted for inflation they’re still far off the real all-time highs.

Of course, you could argue that the previous all-time highs were absurd, driven by crappy mortgages, and completely unsustainable.

So where does that leave us? Well, my personal opinion is that with rents so high and unattractive, and many would-be homeowners still getting back on their feet (and Millennials beginning to believe in housing again), we’ve got more home price growth to come.

However, the bulk of the gains have already been realized. I think the gains will continue to defy estimates for a little while, kind of like how mortgage rates continue to stay low despite wrong forecast after wrong forecast.

But like rates, there will come a time soon when things finally shift. Even if home prices do kind of plateau, as some have said, buying is still a better deal than renting in many areas of the country. That tells me there’s more upside for a while, though as the data shows, it will vary widely by market.

Source: thetruthaboutmortgage.com

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Save more, spend smarter, and make your money go further

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