Mortgage Debt Forgiveness Act extended for 2015

If you owe more than your home is worth, there may be more options than you know.  One such option is a short sale, in which the bank agrees to allow you to sell the home for less than the mortgage balance owed.

If the home is your primary residence, you may also be exempt from paying taxes on the forgiven debt.

What does this mean?  If the lender forgives $10K in debt, the IRS may treat this as income, meaning you could owe taxes.  This Act – the Mortgage Debt Forgiveness Act – is meant to exempt you from those taxes (provided you meet the conditions, etc.).

Questions?  If you’re in Colorado, I’d love to help.  If you’re in one of our sister states, let me know and I will connect you with the local agent!

This is not legal advice.  Always consult a CPA, Attorney and local Realtor as needed!

From the inbox: Can I really buy a home for $780 up front on a VA loan?

I get variations of this question a lot! The short answer is, “Yes, in Colorado Springs and with a VA loan, it is possible (other areas, please consult your local Realtors!).”

Longer answer: there are three costs to a home buyer generally in the purchase process.

1. Earnest money: this is “good faith” money a buyer puts up to compensate the seller if they (the buyer) breaches contract for a non-protected reason.  I’ve had a lot of success w/$500 earnest money in town.  When that hasn’t worked, we try $750 or $1,000. Note: coordinate with your lender but you can often get this money back at closing.

2. Inspection costs: a home inspection costs about $280 in Colorado Springs. This is a sunk cost; even if you choose not to continue with the purchase, this isn’t reimbursable in the normal course of a purchase.

3. Appraisal: there is an appraisal cost that some lenders will charge upfront, others charge as part of the loan costs.

In sum, it is entirely possible to buy a home for an upfront cost of $780-$1280, depending on the lender and the earnest money required…and that earnest money can often come back to you.

Questions, please give me a call! If you’re looking to buy or sell in Colorado Springs or Denver, I’d be honored to earn your business.

Facebook.com/robthompsonrealtor

Food for thought: On “knowledge is power”

I’ve long held to the idea that “knowledge is power.”  However, I read something today that simply clicked. Is knowledge power? Napoleon Hill doesn’t think so, to a degree.

“Knowledge is only potential power. It becomes power only when, and if, it is organized into definite plans of action and directed to a definite end.”  (Hill, Think and Grow Rich)

This, Hill argues (and I agree) is a key component of success.  It should also be noted Mr. Hill isn’t advocating for power for power’s sake.  Rather, the kind of power he’s talking about is the power to act, to make your way through life and build success.  Knowledge is potential power.  Specialized knowledge, applied to building success, is the key to achieving that success.

The short takeaway: education is important — acting on your knowledge even more so.

This is a fascinating book, providing much food for thought.

Quote of the day: we are the product of our thought

“Each of us is what we are because of the dominating thoughts we permit to occupy our mind.”  – Napoleon Hill, Think and Grow Rich

This is a profound quote.  The more I’ve thought about it, the more it’s grown on me. (I am aware of the irony there.)

Personally, I’m driven to advocate for people.  As a father, a military member, as an agent, as a consumer advocate,  I wake up every morning wanting to do battle for and take care of my people.  This is my dominating thought.

What is yours?

From the inbox: what’s up with these application fees?

Good question!  Short answer: property managers generally charge an application fee for the work they do in screening tenants for the properties under their management.

Longer answer: Often, companies will charge an application fee only once. If you don’t get accepted to a given property, they may apply that fee to any property in their inventory.  ALWAYS ask them before paying the fee.

Consider, too, that Company X’s fee doesn’t cover Company Y’s fee, even if you don’t get accepted into X’s properties.

You’re best covered by asking about the fees involved in the application with each management company.

Questions, please don’t hesitate to ask!

– Rob

**NOT LEGAL OR FINANCIAL ADVICE**

From the inbox: (Colorado Springs) why is the rent so high?!

I get asked this question almost daily; it’s a good question and one that bears repeated asking and answering.

Short answer: in my opinion, this is a function of property and mortgage values and cash flow.

Longer answer: it’s a function of the dymanics of the city. As a landlord myself, here’s the analysis/format I use in looking at this. If you want to buy a $150,000 home, as an investment, you need at least 20% down. Let’s assume $1000 a year in insurance and another $1,000 in taxes.

For investment purposes then, this home is going to cost a $30,000 down payment and at a 4.5% APR, cost a landlord $777 a month to pay principal, interest, taxes and insurance.

A landlord is going to need cash flow, too, to be prepared for emergencies and have a return on their investment. In this case, that $150,000 3 Bed, 2 bath home may rent for $1000-1150 in this town.

The landlord is “cash flowing” about $223-373 in this case.  However, that does not account for their costs any time anything breaks.  This isn’t profit for the landlord, necessarily, as there are taxes and maintenance of the home involved, too.

It scales from there…a $175K home requires a 35K down payment (as an investment property) and costs $878 a month to carry in this scenario.

The answer then is that rents rise as property values rise because they must, for an owner/landlord to carry a property.

LARGE CAVEAT: This is for a 20% conventional loan, investment property. An owner occupied home will require much less down but have a higher overall mortgage as a result.

Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626 or email me at robthompsonrealtor@gmail.com.

*This is not legal or financial advise just sharing information and experience.  Always consult a CPA, lender or attorney as needed.

From the inbox: why don’t people rent to own?

This questions comes up a lot!  The answer to this one is complex and heavily market dependent.  Local agents, please chip in here if you’d like.

**THIS IS NOT LEGAL ADVICE**

The short answer is that in the Colorado Springs market, they generally don’t have to. The demand for housing is high and interests rates are so low that the majority of buyers don’t need this type of financing, either.

The longer answer is that a rent to own is not a simple transaction. A lot of folks think this is an easier option than a traditional purchase but that’s not the case.

Rent to own often requires a substantial down payment. Also, this money is usually forfeit to the seller should you the buyer choose not to execute a sale.

That said, they have their place in a market. If a person would like to buy a home but needs time to work on their credit, it’s an option. However, always consult with a lender, Realtor and attorney prior to signing or drafting a lease purchase option contract,

Looking to buy or sell a home in Colorado Springs or Denver? Call Rob at 719-440-6626!

Colorado Springs Realtor