Alright, we’ve all know that this is the PERFECT market to be a buyer -especially a first time home buyer. The prices on homes are teasingly low any many current homeowners are kept at bay with “for sale” signs planted their yards; it’s time to get out of the parent’s basement.

And today, if it’s possible, it may have just gotten better for everybody.

The Senate passed a new amendment granting a $15,000 tax credit on the purchase of a primary house. Of course, that means it’s a tag along on the enormous stimulus bill that has yet to pass. As of right now, the entire bill comes with a price of $920 billion.

So this may just be the thing that undoes the log jam releasing all that pent-up real estate pressure -or at least that’s the big hope.

There is some precedent for this. Back in 1975, Then-President Gerald Ford rallied a tax credit for home buyers leading to a housing supply drop to 10 months.

To Search Active Real Estate Listings in Your Area, visit www.webdigs.com and learn about our Buyer Rebates.

Jaime and Michael Proman put down 20 percent when they bought their home this fall in Lowry Hill in Minneapolis as seen in the Money Section of December 5th’s NYT.

The New York Time’s Rob Lieber has now joined the chorus of journalists quoting experts who say the time is now to buy in his recent article, ” It May Be Time to Think About Buying a House.”

Lieber predicts that people “…will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime.”

And he’s probably right.  With interest rates low, prices low and less buyers out there, it may be considered the golden time for first time buyers (especially if they get a rebate from Webdigs!)

There seems to be some evidence that buyers are catching on. Here’s a story I heard on MPR today about buyers starting to pull the trigger on homes - and the possibility that it could start the economic turnaround we’ve all been hoping for.

Special thanks to Tom’s wife for finding the New York Times story.

A friend of mine confessed that she’s upside down. Of course what she meant by that is if they were to sell right now, their home wouldn’t fetch as much as the balance of their mortgage - and she’d be bringing money to the closing.

She’s been doing a fair amount of research on the subject and what keeps coming up are two things: Stay in the house if you can AND if you can’t, use a discount broker (like Webdigs) to salvage as much cash in the transaction as possible.

My friends are planning to ride it out and take the advice that’s out there to fix up their home as nicely as they can afford . This accomplishes a couple things. Like Buddha says, the key to happiness it wanting what you have. By making their little home as nice as possible, they can reframe the feeling of “I’m trapped here” to more of a “bloom where you’re planted” scenrio.

This motivated them to watch the sales and they scored an excellent deal on click flooring at Ikea. It was almost 2/3rds off its normally good price. They’re installing it themselves and then plan to move on to painting their kitchen cabinets.

So now, when they feel the time is right, they’ll be ready to plunge into the market and  avoid that resentful feeling of “I’m doing this all these improvements for the next people.”

My friend was also very interested in the Webdig’s concept of being a full-service brokerage that is able to charge less. I explained that’s because consumers are so savvy now and do some much of the legwork themselves on the Internet - usually way before they ever meet with a Realtor. She was pretty excited about paying a reasonable flat-fee to eventually sell their home, while knowing that there is a professional there to dot the i’s and cross the t’s for her.

You won’t see a For Sale sign in front of their bungalow anytime soon, but when there is she won’t be looking at any Realtor who wants to charge 6.

The interest rate against which adjustable-rate mortgages change is falling — evidence that the global banking system is starting to stabilize.

This is good news for U.S. housing markets.

On any adjustable-rate mortgage, the initial “starter rate” remains fixed for some period of time, and then adjusts according to some pre-determined rules.

For a conforming mortgage, an ARM will typically adjust once per year, based on this formula:

(Adjusted Rate) = (Variable) + (Constant)

Where the variable is often assigned to 12-month LIBOR, and the constant is often fixed at 2.250 percent.

LIBOR is the equation’s variable.  Therefore, it’s of paramount import to holders of ARMs.  LIBOR is the rate at which banks lend money to each other.  The 12-month LIBOR, therefore, is the borrowing rate for a 1-year, interbank loan.

So, to take the formula and apply to an real live mortgage, a homeowner’s adjusted mortgage rate would be equal to whatever the 12-month LIBOR is at the time of adjustment, plus another 2.250 percent.

Looking at the chart, note LIBOR spiked in September.  It’s a direct correlation to the September 15 failure of Lehman Brothers.  That bank shutdown started a wave of “who’s going to be next?” anxiety on Wall Street but as global governments stepped up support for banks, LIBOR predictably fell.

For homeowners with adjusting mortgages, this is terrific news.

However, mortgage markets have rallied a bit this week, created an interesting opportunity for some ARM-holders.  Depending on credit scores and the amount of home equity, mortgage rates on a new loan may be lower that the soon-to-be-adjusted mortgage rate of the old one.

In other words, getting a new loan may be smarter than letting your current mortgage change.  Contact your mortgage lender to see which plan fits you best.  One rule of thumb…look at the whole picture and the total cost of refinancing.  If your rate is about to adjust and it is going down, then stay in your current mortgage.  However, if there is an opportunity to lower your payment even more and lock into a 30 year note, that is something to consider.  Watch the closing costs.  This eats away your equity, so pay close attention to what the lender is charging to refinance you.

A good mortgage professional will act as a consultant, present you with several options and make recommendations based on what makes the most financial sense for you - based on your needs and goals.  If you are working with a mortgage lender, or broker, who does not take the time to go through that kind of exercise, then find a new one to work with.

 It is your money.  Protect it.

You know, it’s easy to blame loan officers when you hear about the mortgage crisis. You think, who the heck would approve THAT loan?

But I read an enlightening article in the Sunday New York Times by Gretchen Morgenson. She interviewed a loan officer for the big dog bank, Washington  Mutual, and in doing so shown a light on the insider practices. (Washington Mutual was seized by federal regulators in September and considered the biggest bank failure in history.)

Turns out that reputable and experience loan officers who would turn down loans would be penalized - and be pressured from the brokers (who were making $10 - $20K in hidden fees and certainly not employing the Webdig’s model of sharing commissions with their clients) and the banks who were interested in the high fees associated with processing these loans (and the adjustable rates that would pay them handsomely in the future).

I was thinking of doing away with the NY Times recently, but now I’m remembering why we started subscribing in the first place.

Ominous Clouds on the horizon? Or a break in the forecast? It’s hard for this homebuyer to tell. 

Alright, I promised to write about our home shopping travails. I should tell you that the brass tacks of buying a house makes my stomach churn and even though I feel like I’m surrounded by Webdig’s people who know what they’re doing & have our best interest at heart, it’s still a scary deal.

I’m not a professional home buyer; I’m a professional worrier.

Here are the facts: we have a lot of money tied up in our unsold, but thankfully rented, home. For reasons kinda vague to me, we have excellent credit. Mine is 806 - why? Not sure, other than I just pay for things. At any rate, I’ll run with it.

Down payment: Not much in hand. As I said, just about everything is tied up in the house we own. It’s like a giant piggy bank I can’t get at- and if that sounds frustrating, you’re right. We worked really hard to pay down an aggressive 15-year mortgage and came out on the wrong end.

More honestly - my little writing business isn’t what is was a couple of years ago. Today I find myself writing lots of  articles for far less money (that’s why I haven’t been around as much) and I have several clients on extended dance version payment plans to settle up.

I have recently expanded my work to public radio. I’ll be doing a piece on the election on MPR’s All Things Considered with Tom Crann on Tuesday afternoon and on December 1st I’ll have a feature on the national show Marketplace Money with Tess Viglen. Sound impressive? Well, with these gigs I’ve managed to pay for my used recording equipment.

There’s a place to sell one’s plasma that I drive by everyday. I have found myself wondering if they’d let me have my laptop while donating and if it is possible to write anything coherent while getting the platelets sucked out of ya. I even (gulp) applied for a regular job this week.

The good news is my husband’s work feels secure. Though it’s still hard to sign on the dotted line and be responsible for another home payment.

The Potential House: We’ve been window shopping this property. It’s really nice, but not perfect. Lots of closets, many new windows, fiber cement board siding, smart location with potential to climb in value- but no dining room, no dishwasher (ugh), no washer or dryer and lots of surfaces that simply aren’t our tastes.

Example: The dark green granite Formica counter top in the kitchen isn’t fooling anyone. And it’s another home where the owner attended the Community Ed Sponge Painting class with mixed results.

Also the home has a lot behind it and we need to go to the Record’s Office and pull the plat and check out the likelihood of backyard neighbors just feet away.

The Plan: We’ve applied for a home equity line of credit on our home, which involved no fees on our end. If we get it, we can put down the 20% needed to avoid paying the insurance product, PMI. However, let’s face it. It’s a nice way of saying “second mortgage.” So in fact, we’d have THREE mortgages going on.  I feel it in my chest whenever we talk about it.

And whenever you buy a house, there’s the money hemorrhage. You walk into Home Depot and everyone knows your name. “Hey Lucie! Here to drop another $300 on miscellaneous piddly items?” Appliances, paint, painting supplies - not to mention furniture - you’ll remember we gave away a lot of stuff .Though this is where getting half of the commission back in the form of a Webdig’s rebate would help lots.

We just moved this summer and the thought of packing it all up again gives me pause. Why would we want to move out of our great situation at the rectory? It’s a lovely spot, but it is on the smallish side, especially as winter clothing is starting to be used. I’m dealing with it, but another factor is our year lease is really only a gentleman’s agreement. Not that I feel there’s a fire under us to find a place, but I’d hate to have to do it in 30 days.

And THIS is a buyers a market - and maybe I should just face my fears and jump. But instead of thinking about it last night, I put on my headphones and treated myself to my first bit of entertainment for the week: Sex & the City, the movie.

Netflix kindly dropped it by and as during other times of real estate stress, a little mindless escape can do a worried head good.

View of Downtown along the Stone Arch bridge from St. Anthony Main

Since I posted about Cathedral Hill in Saint Paul a couple of days ago, I think it’s fitting to write about the area’s closest Minneapolis match. And then I also get to scratch another of the area’s many, many St. Anthonys *. (Scroll below for the gripping answer as to why so many places are named the same name).

St. Anthony Main is located along the Mississippi River in Northeast Minneapolis just up the river from the University of Minnesota campus. From here the view to downtown in unparalleled. Simply put, it’s gorgeous.

Several streets still has the charming cobblestone of its yesteryear and can easily take you to local nightlife, specialty shops, river walking trails and what it probably most important to any neighborhood - the new high-end grocery (Lunds- the one with the green roof) and the long-established liquor store (Surdyk’s). From here happening downtown workers hop on their razor scooters to get across the bridge to cube city, while empty nester folks relish that child rearing and suburban life is in their past. It’s a good mix.

It’s hip loft and condo land that suck up most of the view of J.J. Hill’s Stone Arch bridge and downtown Minneapolis, but there’s retail there with several restaurants that offer patio dining. Honestly, it’s one of those places that I’m always shocked isn’t flooded with people. Between the historic buildings and the river, it’s got the makings of hipper than hip.

You can learn about the area’s interesting past from one of the horse drawn carriage drivers that will tour you around for about $30 and take you on Nicollet  Island. Or while riding or take the Segway tour from the folks at Magical History Tour. And as always, you can start searching for you next home in St. Anthony Main - and then you can hold the Webdig’s rebate check on the site’s homepage.

[Why so many St. Anthonys? One of the first Europeans to “discover” Minneapolis’s Saint Anthony Falls in the late 1600’s was a Catholic missionary named Father Louis Hennepin. He named the falls after his order’s patron saint, Saint Anthony of Padua and apparently the rest of state followed his lead. It’s Friday, now go impress your friends at Happy Hour.]

We have had many inquiries about how the IRS will treat the 2/3 commission rebates which we give to our customers. While we are not CPA’s or Attorneys and can not give tax advice, below is an article about the IRS ruling which online broker Redfin of Seattle, received by request. We wish to thank Redfin for making this request and gaining clarity for us all. Redfin is very similar to Webdigs except that, at Webdigs, we provide full real estate and other services such as mortgage and insurance. Congratulations Redfin on this IRS ruling and on your success.

IRS Rules That Redfin Does Not Have to Report
Commission Refunds as Taxable Income

SEATTLE - March 7, 2007: Online real estate broker Redfin Corporation today announced a ruling from the U.S. Internal Revenue Service that Redfin does not have to issue Form 1099 to customers that receive commission refunds because such amounts generally are not taxable as income. Redfin is notifying all of its home-buying customers by mail that the company will not report their commission refunds to the IRS.

Redfin Direct combines an e-commerce application with the services of a local, experienced Redfin agent who handles home tours, pricing advice, offer presentation, negotiations, inspections and the closing process. Home-buyers who can find a home to buy on their own get two-thirds of Redfin’s commission refunded at closing.

Across Washington and California, Redfin’s average commission refund is more than $10,000. Redfin customers typically apply their refund to closing costs, which include loan fees, local property taxes and escrow-related costs as well as an initial mortgage payment. As the commission refund usually exceeds closing costs by thousands of dollars, Redfin often issues its customers a check for the excess.

Prior to Redfin Direct, commission refunds in excess of closing costs were relatively rare, and no ruling existed as to whether such amounts were required to be reported on Form 1099. Accordingly, Redfin petitioned the IRS in November 2006 for a ruling, which Redfin received from the IRS last week.

Because an individual or corporation can only petition the IRS on its own behalf, Redfin could only seek a ruling to clarify its own reporting obligation, not to address the individual circumstance of each customer’s tax return. The ruling does however state that “a payment or credit at closing from [Redfin] represents an adjustment to the purchase price of the home and generally is not includible in a purchaser’s gross income.’

In support of its ruling, the IRS cites guidance addressing a non-profit’s down-payment assistance to low-income families buying houses or a manufacturer’s rebate on a car, neither of which are taxable. The full text of the ruling is available on Redfin’s blog.

“Seeking a ruling from the IRS is not an insignificant undertaking,” said Redfin VP of Real Estate Operations David Wilner. “Rather than having hundreds of customers make inquiries with the IRS on a case-by-case basis, we felt it was the right thing to do as part of our commitment to supporting customers through every phase of the home-buying process from offer to close and beyond.”

Great article from Inman News

Case may otherwise go to trial in June or July

Thursday, November 15, 2007

By Glenn Roberts Jr.
Inman News

LAS VEGAS — The National Association of Realtors may engage in discussions with U.S. Justice Department officials in an effort to settle an antitrust lawsuit that was filed more than two years ago.

“If we’re unsuccessful in reaching any type of a satisfactory resolution, the case looks like it will go to trial in about June or July of next year,” said Laurie Janik, general counsel for the National Association of Realtors, on Wednesday during a committee meeting at the association’s annual conference.

The lawsuit charges that the association adopted illegally restrictive rules for the online sharing and display of property listings information among real estate market participants that could be used to discriminate against market participants.

She said that the evidence-gathering phase of the lawsuit is nearly complete, and later this month or in December association officials “will take a breather,” assess the status of the case and consider the prospect of settling the lawsuit “on mutually agreeable terms.”

Janik also offered a report on other legal matters, including investigations by several state attorneys general that have led to requests for information from several multiple listing services.

Multiple listing services “are very much under the microscope” these days, Janik said, and are being watched closely by federal agencies such as the Justice Department and Federal Trade Commission, as well as state agencies.

Any actions that MLSs take that could impact their members’ conduct “is going to be scrutinized by them,” Janik said, particularly if it involves an industry participant that is offering a discount or a rebate.

The intense scrutiny, she said, applies to both Realtor-affiliated and non-Realtor-affiliated MLSs.

MLSs should dump any rules on their books that are antiquated, out of date, or are not enforced by MLSs, she said. “If you don’t enforce them, they shouldn’t be there.”

She said that once investigators are drawn to a particular MLS rule, they may expand their investigation to other MLS policies. “Once they are there they’re going to start looking at anything,” she said.

State officials in Illinois, Indiana, Colorado, Minnesota and possibly other states have asked for access to MLS information, she said, to aid in the investigation of mortgage fraud. “They think that MLS statistics will help them in their investigations,” she said.

While it is voluntary for MLSs to provide this access, she said that those MLSs that decline to offer access may lead to subpoenas.

MLSs can work to limit the scope of the access and to track the access, she said. “You don’t want them going on a fishing expedition finding other potential violations of the law.”

She suggested that MLSs can ask investigators to specify the purpose of the access, and to supply investigators with read-only access to data to protect existing MLS data. Also, providing accounts to individual investigators would allow MLSs to track access of the MLS, she said.

The National Association of Realtors has committed more than $800,000 in legal assistance to defend a mapping patent lawsuit filed against a Pennsylvania Realtor.

The patent holders had sought class-action status for that case to charge a larger group of Realtors with infringement, though Janik said that the judge has denied class-action certification.

She also noted that a contentious legal battle between shareholders of a Chicago-area MLS is ongoing. The shareholders have sought to block the merger of a large Realtor association-owned MLS with a smaller, competing broker-owned MLS, and that case is under appeal.

When we first started www.webdigs.com , I was creating an outreach program to inform other real estate agents and brokers about our service. I wanted to let them know that they would be paid their same commission structure as when workin with the 6% brokers. Clearly there would be some concern since our pricing was significantly different from the full commission folks. Things evolved so quickly for us that the outreach program was put on the back burner as we rushed to complete web development and then to make the improvements which would be important to our clients. This Friday, we closed on our first home buyer purchase over $1,000,000 Our buyers bought their new home for $1,250,000 and received a check from www.webdigs.com for $22,500 as a result of our commission sharing program (we give back to our buyers 2/3 of our commission) After the sale closed my agent, Jesse, was berated by the agent for the seller - telling him that our business model was wrong and that he should come learn about what the full commission guys could offer him. He declined the invitation because, as he mentioned, the real estate industry is undergoing a fundamental change in which the consumer will be the winner - benefitting from lower transaction costs. In a way, this story was distressing to me. We were concerned that some might see us as rocking the boat of full commission real estate agents. Seems that some do.

And fortunately, the US Department of Justice is helping to pave the way. Go to

http://www.usdoj.gov/atr/public/real_estate/index.htm

This site was just launched within the last 2 weeks and clearly describes the benefits to consumers of the way we do our real estate brokerage business. Indeed, the DOJ has commenced actions in states which to not allow consumer rebates. Happy reading.