Loss of the Mortgage Interest Deduction Removes a Benefit of Homeownership

I consider the Mortgage Interest Deduction to be one of the primary, and most important benefits for homeowners in the current tax laws.  This article by the National Association of Realtors covers the issue of what the recent proposal to eliminate or alter the MID by the Obama Deficit Reduction Committee would do to home owners in the long term, so I am including this in my blog:

December 7, 2010

By Danielle Hale, Research Economist
In recent weeks, many proposals, suggesting a variety of changes to the tax system, have been discussed. The estimates below are for the complete elimination of these two tax benefits at current marginal tax rates, one of the most extreme possible changes.
Mortgage Interest Deduction Facts:
• 51 million—or 68 percent—of the approximately 75 million owner-occupied houses in the United States in 2009 had a mortgage.
• 38.5 million taxpayers claimed a deduction for mortgage interest, deducting a total of $470 billion, in 2008.
• The average taxpayer claiming the MID deducted $12,200 from taxable income in 2008.
• Therefore, the average taxpayer saved $3,050 in taxes by claiming the mortgage interest deduction¹ .
• The total tax savings from the MID in the United States in 2008 was $117 billion.
Real Estate Tax Deductions Facts:
• 42 million taxpayers in the United States claimed a deduction for real estate taxes in 2008, deducting a total of $172 billion.
• The average taxpayer claiming the real estate tax deduction subtracted $4,090 from taxable income in 2008.
• Therefore the average taxpayer saved $1,020 in taxes as a result of the real estate tax deduction² .
• The total savings from the real estate tax deduction in the United States in 2008 was $43 billion.
Eliminating Deductions: Losses for Home Owners and the Nation
If the mortgage interest and real estate tax deductions were eliminated, the loss would not be a one-year event; homeowners lose out on these potential savings each and every year. The present value³ of these lost savings could total $3.2 trillion. The value of all owner-occupied real estate in the United States in 2009 was $19.3 trillion⁴ . If the lost tax savings are fully capitalized into the price of houses, the average decline in value in the United States would be 17 percent. From the individual perspective, the median priced home in the United States in the third quarter 2010 was $177,800. A decline in value of 17 percent, as projected, would mean a loss in home value of $29,500 for the typical home owner.
These estimates, because they are based on a complete elimination of these deductions, can be viewed as a high-end estimate. Other changes will result in smaller losses to home owners. Additionally, national results are computed by looking at national averages. A very different picture can result when looking at the state level depending on the characteristics of the housing market, tax payers, and homeowners. For state information, contact data@realtors.org.
¹Marginal rates range from 10 to 35 percent. A 25 percent rate was used to calculate the tax savings.
²Ibid.
³Present value calculation assumes 5 percent discount rate and 1000 year time horizon.
⁴As measured by the American Community Survey. The Federal Reserve Flow of Funds for 2009 estimated the market value of household real estate to be $17 trillion which would raise the estimate of the decline in value to 19 percent.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.

The Role of a Real Estate Agent

The role of a real estate agent is to guide you through the buying or selling process, taking the time to make sure you understand every step of the transaction. As a Realtor, I am absolutely committed to fulfilling your needs with the highest level of professionalism, expertise and service.



The Role of a Realtor is more than showing houses.

 My commitment to your satisfaction is the foundation from which a solid business relationship is built. Working with all kinds of people on a daily basis, and selling all kinds of homes over the years have enabled me to be able to really define my role as an agent for a client.

I realize that people do business with people they trust. I am interested in helping you as my client to achieve your goals.  Through this I am committed to establishing a long-term relationship based on trust. I pride myself on being knowledgeable and staying current with changes in the industry that will affect the success of your transaction. You have worked hard to be able to purchase the home of your dreams. I feel the responsibility to make those dreams a reality and pursue the right solution enthusiastically.

Every year I typically many times over the continuing education requirements for the State of Michigan as a Realtor.  In that way I can stay on top of trends, new technology and changes in the Real Estate industry.  Over the last 5 years alone there have been numerous changes in lending practices, and loan programs and hurdles are more challenging for buyers to get into a home because of that.  I have had to learn a great deal about credit repair, and connecting with terminals that can help my clients overcome these barriers. 

So the role of a real estate agent is much more than just showing and selling houses.  It is keeping current with the real estate industry, and passing along the advantages and strategies to helping your clients take advantage of those changes.  That is what I specialize in.  If you are interested in getting started with buying a home, or perhaps you need to sell your home, give me a call at 269-441-8182 or visit my website at: www.michaeldelaware.com.


Staying on top of changes in the industry makes it possible for me to better serve my clients.



FHA Gains Increased Stability

The National Association of REALTORS® recently issued this press release concerning FHA, and I thought it was a compelling article to include in my blogspot:

Washington, November 16, 2010

The latest independent audit of the Federal Housing Administration shows the agency’s financial condition has improved from last year, when it announced its capital reserve fund had fallen below the 2 percent level mandated by Congress. The annual audit shows that the capital ratio for the single-family portfolio rose from 0.42 percent to 0.79 percent over the past year.



FHA Makes changes to become more stable.

 The audit, which calculates the financial condition of the agency’s insurance fund, also showed the mortgage insurance fund grew more than $1 billion in 2010 and reserves are expected to remain above $9.9 billion even if home prices were to fall further. The audit indicates that FHA will most likely not require a bailout now or in the future.

“As the leading advocate for home ownership, the National Association of Realtors® strongly supports FHA’s mortgage insurance programs,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “FHA announced major changes earlier this year and took critical steps to strengthen and ensure its long-term financial soundness, and those efforts have paid off.”



FHA Total reserves have grown to $33 Billion.

 FHA’s audit reflected a change in home values and was not tied to excessive increases in defaults or unsound underwriting practices. In fact, the credit quality of FHA borrowers has increased significantly in the last several years; the average credit score for FHA customers has grown to 693, and less than 8 percent of the agency’s purchase borrowers this year had FICO scores below 620. The capital reserves are not FHA’s only reserve fund; FHA also has a cash reserve account separate from the capital reserve – and actual total reserves have grown to $33 billion.

“The future health of FHA’s reserve funds depends heavily on the direction of home values in the coming years. Home values have shown patterns of stabilization over the past 18 months, and in a recent independent survey, most economists expect modest home price gains over the next 3 years, so FHA’s reserves should steadily improve,” said Phipps.

FHA has played a key role in providing mortgage liquidity to qualified home buyers in recent years and has greatly increased its market share; according to the agency, FHA guaranteed nearly 40 percent of home purchases in the past year.

NAR is working closely with FHA to reassess and amend their lending policies so even more qualified home buyers can become home owners.

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

For information on Real Estate in Battle Creek or Calhoun County, Michigan, give me a call at: 269-441-8182 or contact me through my website at: http://www.michaeldelaware.com/.

The Basics of Buying a Home in Battle Creek, Michigan

The basics of buying a home in Battle Creek, Michigan are consistent with most any area of the country.  The first thing that a buyer should do above any other step is to contact an experienced and knowledgeable local Realtor. 

Using a local Realtor is your first most important step.

A Realtor is a valuable asset to helping you through the step of the process of buying a home, and can also help you find local lenders that specialize in loan programs that would best suite your needs. 

The basics of buying a home in Battle Creek, Michigan or anywhere in the financing part require a credit score currently above 620 for most programs, verifiable income, meeting the income requirement guidelines for the given program, and other details such as job tenure.  Sometimes a buyer will have a 620 credit score, but will have overcome a challenging period on their credit history such as bankruptcy or foreclosure in the last few years. 

Some loan programs will not approve a loan if the bankruptcy has been discharged less than 3 years, or the foreclosure less than 2 years.  Other things on the credit report can require explanations, or settlement such as judgments or recent non-medical collections.

 



Proof of funds or 'Proof Financing' are requirements to
submit with any offer along with a copy of the earnest deposit.



Once you have overcome what is needed to gain an approval letter from a lender, you then can begin looking at houses with your Realtor.  After you have selected the home you want to make an offer on, note that not only a copy of the pre-approval letter is required to submit with an offer, but also an earnest deposit along with the signed contract and other documents related to the house prepared by your Realtor. 

Many first time home buyers do not realize they will need to provide an earnest deposit, which is a sum of money down (usually $500 on most houses under $75000, but can be anywhere from $1000 to $2500).  The earnest deposit is held by your Realtor, and deposited into an escrow account once an offer is accepted and it is held until closing, where you are credited for it on the final sale of the home.  This money down makes it a legally binding contract in Michigan.

 

To learn more about the basics of buying a home in Battle Creek, Michigan, give me a call at: 269-441-8182 or visit my website at: www.michaeldelaware.com and fill out a contact form there in the left column that best describes your situation.  I look forward to working with you.



Contact Michael Delaware, Realtor for more on the basics of buying
a home in Battle Creek, Michigan at 269-441-8182 or his email.



The Quest for the Purpose of Battle Creek's Rental Housing Ordinance 1463

Recently I attended a public hearing to allow the community to voice opinions about the Rental Property Ordinance #1463 which is due to expire on January 1, 2011.  Approximately 50 people attended this public meeting.

 

During the course of this meeting, it occurred to me that some vital questions remain to be answered.  What was the purpose of this Ordinance?  Was it to improve quality of life for the community?  Was it to reduce neighborhood blight?  Was it to provide an additional source of revenue for a City Department?  Was it to improve safety for the tenants?  Lower crime in neighborhoods?

Throughout the course of this evening, these questions kept running through my mind, and my quest for the purpose of 1463 was still out of reach.  No one in attendance seemed to know the answer.  If it were any of the above questions, then it is clear that this ordinance has accomplished none of the above.

Historically, there was a rental property ordinance on the books prior to the introduction of this new one a little over two years ago.  That was numbered 1460.  It covered the registering of rental property, as does 1463, and many other points.  However, 1460 was never enforced.  Thus someone along the line seemed to come up with the idea that instead of enforcing what was in existence, they should just write a new one and apply more force to landlords as a solution for the prior lack of enforcement.  It would seem the conclusion of the lack of enforcement of 1460 was the responsibility of the landlords themselves, thus 1463 needed to be drafted with stiffer penalties for landlords. 

Do you follow the logic?  It still does nothing for my quest for the purpose of 1463, but it does perhaps shed some light as to why it came into existence to begin with.  The basic flaw of 1463 is its approach of placing exclusive responsibility for the condition of a rented property on the shoulders of the landlord. 

Yes, the landlord does own the property, thus they share a responsibility inherently with property ownership for its condition, but because it is a rented property occupied by a person other than the landlord, there is also another party that shares a responsibility as well. 

This person is called the ‘Tenant’.  Their conduct and behavior affects the quality of life of neighborhoods. To deny them any responsibility in the condition places them squarely on the other side of the fence called ‘no-responsibility’.  If you do this, then properties naturally continue to be damaged, neglected, and in some cases outright destroyed. 

The ordinance gives them a golden crown of ‘no-responsibility’ and thus blight, disturbed neighbors, and crime continues.  Having been a landlord for a few years, and having worked with landlords for several more, I can personally testify to the fact that tenants do not always treat your property as you would wish it to be treated.  Nor do they always conduct themselves with courtesy to neighbors, or have a general regard for the curb appeal of the place they are living in.

In fact, there are percentages that strictly speaking do not know how to live in houses.  It is a sad situation, but it is even a sadder situation when a city government seeks to blindly solve a problem by addressing only one side of the problem they are trying to solve.  Resolving the proper treatment of rental property by tenants also needs to be a part of the equation.  That is what has been lacking from 1463, and thus it never resolves the problem of blight in the neighborhoods, reduction of crime or improvement of the quality of life. 

At the meeting I suggested the idea that tenants too need to be required to be certified if this ordinance were going to improve the quality of life in our community.  Why should this be considered such a radical idea?  Couldn’t a basic course be developed that all tenants are required to pass?   It could cover curb appeal, courtesy to neighbors, noise ordinance regulations, the definition of blight, how to operate appliances, electrical fixtures and plumbing correctly, house cleaning, healthy living environments, etc.   

If this cannot be addressed in the ordinance, then the entire ordinance as it stands needs to be done away with and just let it expire.  To place the sole responsibility of the tenant’s conduct on the shoulders of the landlord is not practical and never was.  It may have sounded like a good theory on paper, but after a two year test, it has only resulted in driving property investors out of the city, unjustly penalized existing landlords, and the conduct of tenants have not improved. 

It was stated by some in attendance the other night that 1463 is a failure.  I would tend to agree with that statement.  Creating a ordinance that seeks to regulate the lives of individuals and business owners that does not include everyone involved in the relationship is too one sided and doomed to failure. 

Some also argued that if the City it to require property improvements for safety of the occupants, what about the single family homes in the same neighborhood?  Do they not also pose the same risk to the occupants?  Being a Realtor in Battle Creek, I have been in many homes that had hazardous conditions, and this potential situation involves all homes, not just rentals. 

Timing the Residential Investment Market in Battle Creek

I have spoken to a few investors as of late about the subject of timing the residential investment market in Battle Creek.  There are always those that believe that the market can still go lower, and that they should wait. 

Perhaps there is truth to this; however I tend to take a different tactic on my approach to an investment property and timing the residential investment market in Battle Creek.  I look at available property, and I examine them thoroughly to determine if they will be profitable.  I factor in the purchase price, repairs needed to make it a marketable rental, and the expected rental rates in the area.  I also factor in an annual vacancy rate, and repair costs that might come up. 

In taking all of these factors into account, will this prospective residential investment property return my original investment in 3 years, 5 years or will it take longer.  So whenever I hear an investor talking about timing the residential investment market in Battle Creek, I recommend that they still continue looking and run the numbers thoroughly on anything they are interested in. 

There really is no magic crystal ball to look into to tell anyone whether this is the lowest that Real Estate in the area will go.  However, I will tell you from examining many homes on a daily basis for investors, there are some changes occurring in certain areas of Battle Creek that indicate to me that property values are leveling out and may even begin to rise. 

In high demand rental areas, bank owned properties are starting to see more and more competition in the bidding process.  The result is it is not uncommon to see foreclosure homes being sold for higher than the list price in certain areas, and as this activity increases, it will eventually drive values up. 

Banks and mortgage companies base the price they are listing a foreclosure on comparable bank owned sales in the area.  So when the sale prices start to climb, even on a gradient, it will begin to turn the values around in an area.  So timing the residential investment market in Battle Creek is best done by working with an experienced Realtor, and evaluating prospective investment homes on a case by case basis.  If you take this approach, you will find some great deals. 

For more information on Battle Creek Area investment properties, call me at: 269-441-8182 or visit my website and contact me through there: http://www.michaeldelaware.com/.

Solutions for Getting Debt Under Control

Today, everyone is looking for some solutions for getting debt under control.  We live in decade that bad economic times were created by bad habits adopted in earlier decades.  The ‘charge it and pay for it later’ generation is now looking for some solutions for getting debt under control. 

There are many solutions for getting debt under control offered in the marketplace now, and all over the internet.  One cannot go a week without hearing or seeing an ad for ‘credit monitoring services’ and ‘identity protection services’ and ‘debt solutions’ etc. 

All of these services offer indirectly or directly some solutions for getting debt under control, in one way or another, but some just do not work.  However, I have come across a service that I think offers extraordinary solutions for getting debt under control.  In addition to being a licensed Realtor, I am also a licensed Life Insurance agent in Michigan. 

The company I represent for insurance (Primerica) just came out with a new product called ‘Debt Watchers’ and having looked over all aspects of it, I think it works well as a consumer interactive program for managing and organizing their debt in order to pay the debt off in the fastest amount of time.  The Debt Watchers program is linked to one of the three credit bureaus called Equifax, and it provides a strategy for the consumer to get their debt under control.  

  

It is easy to understand, and it offers an effective solution for getting debt under control.  The program links with Equifax and allows one to use the information reported on the credit report to put together a simple plan to pay off the debt faster.  The software uses a method called ‘debt-stacking’ which helps one pay off the debt in a systematic order to take maximum advantage of paying off the debt faster. 

One can also access their own Equifax credit report up to 4 times a year at no charge.  They can also dispute items on their Equifax credit report, as well as see a simulated FICO score as the progressively pay down their debt, which is a great way to encourage one to continue.  

It is easier understood by visiting the Primerica website: https://my.primerica.com.  On the main web page, go to the bottom left hand corner and click on the links about the Debt Watchers program.  It explains all the details.  The Debt Watchers program costs $14.95 per month, and consumers can go on the website and sign up themselves.  If they like what they see on the website, and want to sign up, they will need to enter my 5 digit solution number* to do this: URSA4. 

If they know their own Primerica representative in their area, they can use their solution number as well.  The program is cheaper than a lot of credit monitoring services, and offers so much more in terms of debt reduction guided by the consumer, and is available in all 50 States except the District of Columbia. 

I also usually recommend people take advantage of the website: annualcreditreport.com where they can once a year obtain a free copy of their credit report.  At this website they can take a look at their credit report, and dispute negative and incorrect items on all three bureaus.  This combined with the debt watchers program allows them to monitor and improve their credit, as well as reduce their debt at the same time.   I consider this one of the better solutions for getting debt under control.

The ultimate way to get ones debt under control is also to change ones spending habits, and move away from a dependency on credit cards. 

*Primerica does compensate agents when people sign up for this program, as with any of their products.  I am recommending this program because I have reviewed it, and I feel it is a very useful tool for consumers to effectively manage and reduce their debt, but it may not be the right thing for everyone, so I suggest they look at the website themselves and read up on it.

Michael Delaware wins 'Realtor of the Year' 2010 for Battle Creek Area Association of REALTORS®



Here I am with MAR 2010 President Bob Taylor at a special
luncheon held at the MAR State Convention & Expo on
September 29th, 2010 in Mt. Pleasant, Michigan.



I, Michael Delaware was honored with the 2010 ‘Realtor of the Year’ award from the Battle Creek Area Association of Realtors last week.  The announcement was made known to me a month earlier, so that I could be acknowledged alongside all the other Realtors of the Year from 43 other associations across Michigan at the State Convention and Expo in late September.

   

This achievement is not the first award I have received as a Realtor, but it is the most prestigious award my local association bestows.  It is given for ‘Outstanding service and contributions to the Real Estate Profession’ and is given to only one member each year.  I am proud and honored to have been selected to receive this award from my peers, and will endeavor to be live up to it. 



I was presented with the local award by the 2008 recipient
Mark Brown on October 13, 2010.



When I attended the State Convention, I had the honor of be photographed with the President of the Michigan Association of Realtors at a special luncheon.  I have included this photo here.  So this is truly a milestone for me to become the 2010 Realtor of the Year Award recipient for my Board of Realtors, and I really want to not only thank my colleagues for choosing me, but also my clients whom make my job so much fun.  I love my profession, and I love selling homes. 

Most importantly, I enjoy helping people become homeowners.  It is the constant fulfillment of the American Dream, and it is something I am proud to be a part of on a daily basis.  I hope that if you are reading this and are considering moving to the Battle Creek area, or if you live here and want to upgrade to becoming a homeowner, that you will give me a call.  I would love to work with you and help you achieve your dreams. 

I can be reached at: 269-441-8182 or through my website at: www.michaeldelaware.com.  I am Michael Delaware the 2010 ‘Realtor of the Year’ award recipient, for the Battle Creek Area Association of Realtors, and I like to help you find your home.

Selling Your Home in Battle Creek

When it comes time for selling your home in Battle Creek, it is important that you choose a Realtor that not only is experienced, but one who also has an effective online marketing plan. 



Selling homes today requires the use of online marketing.



In today’s global internet based market place, many prospective homebuyers are looking for information online.  As someone who may be on the verge of selling your home in Battle Creek, you might ask the question ‘How many buyers are searching online for real estate?’  The numbers would stagger you. 

At the recent Michigan Association of Realtor Convention and Expo which I attended, statistics were covered in a presentation from the National Association of Realtors.  In 2005 the number of buyers looking for homes online was around 40%, today in 2010 that number has climbed to 90%. 



Working with a Realtor that has an online marketing plan is
the modern approach to selling your home in Battle Creek.



This is a vital piece of information to understand before you jump into the market selling your home in Battle Creek.  Not only are we dealing with a new generation of internet users, and seekers of information, you online presentation has to be effective. 

When I as a Realtor am working with you as a seller on selling your home in Battle Creek, my marketing plan includes not just placing it in printed media ads and on the Multiple Listing Service (MLS).  It also includes additional online marketing on my various blogs, social media and websites. 

My online marketing plan is comprehensive, and it creates additional exposure for your home online in places that new buyers are looking. 



Keep the inside clean and clutter-free, even if the home is
vacant.  This is vital when listing the home on the market.



Some other key tips that go hand in hand with a marketing plan include two basic areas, when selling your home in Battle Creek.  One, making sure you keep your home presentable at all times, and sometimes this involves hiring a professional ‘Stager’ to help you create the strongest presentation of the home. 

The number two item in selling your home in Battle Creek is making your home available for showings as often as possible, and even on short notice.  This would include making it available for open houses. 

Realize that a buyer who is coming to your home with a Realtor these days has already seen the information online.  They know the approximate room sizes, they have seen the photos, and they most likely have driven through the neighborhood. 

So for them to ask for a showing, they are truthfully 80% of the way there towards making an offer if they like the house once they tour it.  So this is important information to remember when selling your home in Battle Creek, as it is a new market these days. 

If you would like to reach me for a personal appointment on selling your home in Battle Creek, contact me through my website at: http://www.michaeldelaware.com/ or call me direct at 269-441-8182.  I look forward to answering any questions you might have.



Use a Realtor with a comprehensive online marketing plan to sell your home.