The Cost of Waiting to Buy

Many purchasers have been sitting on the sidelines waiting for home prices to hit bottom. They want to guarantee that they are purchasing at the best possible price. Like them, we also believe that prices still have some room to fall in most markets. However, we disagree that waiting is a good financial decision. The buyer should not be concerned about housing prices.They should be concerned about cost.

The cost of a house is made up of the price AND THE INTEREST RATE they will be paying. Two different pieces of news released yesterday highlight this point.

PRICES

The National Association of Realtors (NAR) released their 4^th quarter housing research report. In the release, they reported that home sales rose 15.4% in the 4th quarter over the 3rd quarter. They also showed that prices remained stable during the year:

The national median existing single-family price was $170,600 in the fourth quarter, up 0.2 percent from $170,300 in the fourth quarter of 2009.

A buyer who delayed a purchase might find solace in the fact that prices have not increased. However, the other news released yesterday paints a different picture.

INTEREST RATES

The Primary Mortgage Market Survey was released by Freddie Mac which showed that the 30 year fixed rate mortgage was at 5.05%. Frank Nothaft, vice president and chief economist of Freddie Mac said:

“Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week…As a result, interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.”

So prices have remained stable but interest rates have risen dramatically in the last 90 days. What does that mean to a buyer looking to purchase a home this year?

The price is the same. It just costs more.

Let’s show you what the news means:

By sitting on the sidelines for the last 90 days a purchaser lost:

• $89.44 a month
• $1,073.28 a year
• $32,198.40 over the thirty year life of the mortgage

If you buy a $340,000 home, double all these numbers.

Bottom Line

Even if prices fall another 10% this year, the cost of a home will increase if interest rates go up more than 1%. Buyers should not worry where prices are going. They should be concerned where costs will be later in the year.

- written by the KCM Crew

What to Do When Property is Owned by a Person Lacking Legal Capacity

It is an incredibly difficult situation both emotionally and financially when someone you love has become mentally incapacitated and the responsibility for them and their real property lands on you. I recently had a listing where I was dealing with this issue so I thought I would share some pointers.

People with Alzheimer’s disease, dementia, or other debilitating mental conditions do not have the legal capacity to handle transactions. With our society of people living longer, these issues are more and more common in real estate transactions.

If the legally incapacitated adult executed a Durable Power of Attorney while competent, then the designated Attorney in Fact may have the legal authority to sell or refinance property, and of course all proceeds will go to the actual owner.

Otherwise, the relatives or other representatives of the owner will be required to petition the Probate Court for a Guardianship:

1. Guardianship of the Person– a Guardian with the right to handle the everyday affairs of the incapacitated adult;

2. Guardian of the Property – a Guardian with the right to handle mortgage payments, taxes, insurance, and other management issues with property;

3. Guardian ad Litem – a Guardian appointed by the Judge of the Probate Court, sometimes an unrelated party or attorney (often used to protect the assets inherited by a minor child);

4. Guardian with Leave to Sell Specific Property – a Guardian with authority to sell property owned by a person lacking legal capacity. This process may require an appraisal, contract review, an arm’s length transaction affidavit, a draft HUD-1, and many of the components seen in a short sale.

Real property affected by a guardianship must have the Leave to Sell (#4) before a closing. Although the process is complicated and can be time-consuming, the job of the Probate Court is to protect people who are unable to handle their own affairs and assets.