Dale Cosack

Newtown Grant saw 11 townhomes settle during June and July and 4 more go under agreement. Click the Newtown Grant link to see what each home sold for and a list of their attributes. Check back monthly to stay up to date on what homes are selling for in Newtown Grant. Newtown Grant

So the most recent mailing dealt with ROI (return on investment) on your investment properties in Council Rock, or Pennsbury. When I first got into real estate I took a course that really changed my life and the way I viewed my goals that class was called Creating Wealth in Real Estate. A big focus of this group (all Real Estate Agents) was how do you decide which investment is the best one for you. Many of the agents in the class had been investing for years, but I was a rookie with no clue. Still, I was surprised as to how many people said, "I've been told real estate is a great investment and I picked the one that felt right." Now, I like poetry and all, but feelings have nothing to do with investments, and I am definitely not buying an investment property because it ‘feels" like anything. What I (and I'm sure it's the same with you) need to know is what's my ROI, and I don't want some pie in the sky answer I want detailed facts so....before even making an offer on an investment I run a worse case scenario. This way I have a ROI that should be reasonable to expect, and leave myself the chance to be pleasantly surprised. However, as I learnt in my investment class, most people dive in without a real plan, and even after owning the property for a decade, or more, they couldn't tell you exactly how it has performed. Most of the time you'll hear "it stays rented, or it's been a pain, or I hate tenants!" but at the end of the day, what we all really want to know is the cold hard facts "Show me the money!" If you're interested in finding out how your investment has done, give me a call, or shoot me an e-mail. By answering a few short questions I'll be able to give you your ROI so you can find out if your investment was a wise one, or if it might be time to switch gears and find something that will help you meet your goals of early retirement, sending the kids to college, or whatever it may be.

I wanted to expand a bit on the blog I wrote yesterday. I fully believe that green homes are the wave of the future and no matter what will become the standard for new homes being built. The reason why is because green really means quality. Green homes have a better building envelope and use top notch systems that reduce energy consumption reducing monthly costs. These homes take a few extra steps along the way to ensure they perform the best that they can i.e. sealing ducts, and all gaps in the envelope, making sure the highest level of insulation is used, and maybe more importantly used correctly, windows that insulate better etc. One might think that all new homes are already built this way, but that is not always the case. It's not the norm, but from time to time I hear horror stories about people finding out that their ducts are not even hooked up to each other, insulation wasn't installed on an exterior wall, or something else most of us would never expect to find in our homes. There are some new inspections people can perform to find out if their home is performing the best that it can. One way is to get an energy audit. The inspector performs tests such as the blower door test to ensure that the envelope is tight and not leaking, or the duct blower test to determine if the ducts are leaking. Another test they can perform is taking pictures of your home with an infared camera to determine where the majority of heat loss is. This test is the one where folks found out that a section of an exterior wall was missing insulation. These tests are a great way to find out if there is anything you can do to help lower your monthly costs, and I believe builders will be expected to show the results of these tests to potential buyers as more and more of us demand quality. For more info on these types of tests check out. An Energy Audit will usually cost approximately $300 - $400 for an average single family home.

Energy Audits

HERS Ratings

Blower Door Tests

To show the affordability of homes and how the tax credit can actually put money back in a first time home buyers pocket I took a few recent closings so we can look at actual true-life scenarios. I have attached the estimated closing costs for each property both with a seller assist and without a seller assist all except for the case of 1105 Society Place as this property did close with a 6% seller assist so I found no reason to run a different scenario.

1105 Society Place is a 2 bedroom 1 bath condo in Newtown Grant that settled for $190,000 on 2/26/09. The MLS sheet shows the buyers received $11,400 as a seller's assist towards closing costs. However, since a seller assist cannot exceed the buyer's closing costs, and under FHA guidelines the buyer must pay for the 3.5% down payment I had to lower the seller assist by almost $2,000 to $9,490.15 for this example. You will notice the settlement cost estimate includes the breakdown of all of the fees included in buying a new home, but for our purposes the two important sections to focus on are at the bottom of the page under Funds Required to Purchase and Monthly Mortgage Payment (PITI). You'll see with a seller assist of $9,490.15 the buyer only needs $6,650 to purchase the home and the monthly payment including principal, interest, taxes, mortgage insurance, condo fee, and homeowners insurance (estimated at $300 per year) your monthly bill comes to $1,454.67. Not too bad considering it would cost approximately $1,300 or so to rent a similar unit. So, at settlement the buyer must bring $6,650 to purchase their new home, but next year when they go to file their taxes they will apply for the First Time Home Buyer Tax Credit which in this scenario will equal the full $8,000 so in essence they have actually purchased a new home and put $1,350 back in their pockets. Pretty amazing!

In this scenario I reduced the seller assist the buyer actually received since the buyer must pay the 3.5% down payment, but this does not mean the seller assist wasn't $11,400. In a situation like this when the seller assist exceeds the buyers closing costs the buyer has a couple of options. They can use the additional funds to pay for points to reduce their interest rate, or they can ask the seller to reduce the sales price. In this scenario I did not use the extra money at all as I am not privy to what actually transpired.

Now let us look at a townhome in case a condo just isn't right for you. 156 Madison Ct. settled for $207,000 on 10/29/08. There have actually been a few good deals in this neighborhood one selling for $200,000 that needed a bit of work and one at $213,000 that was completely move in ready. The buyer did not receive a seller assist on this property, but a buyer could have easily received a seller assist and had the seller still net their bottom line of $207,000 without any concerns of an appraisal issue. I have attached both scenarios with and without a seller assist to show you how they would both play out. We will focus on the one with the seller assist for our purposes here. You'll see with a seller assist of $11,722.15 the buyer only needs $7,630 to purchase the home and the monthly payment including principal, interest, taxes, mortgage insurance, condo fee, and homeowners insurance (estimated at $800 per year) is $1,645.25. Not too bad considering it would cost approximately $1,500 or so to rent a similar townhome. So, at settlement the buyer must bring $7,630 to purchase their new home, but next year when they go to file their taxes they will apply for the First Time Home Buyer Tax Credit which in this scenario will equal the full $8,000 so in essence they have actually purchased a new home and put $370 back in their pockets. If you compare the two scenarios one without the seller assist and one with the assist the monthly payment including all taxes, insurances, and homeowner fees the difference is only $62.85 rolling the $11,722.15 seller assist in. Considering cash is king it's interesting to see that it would take 15.5 years for the additional monthly payment of $62.85 to equal the $11,722.15 rolled into the mortgage. Since most people won't live in the same house for 15 years it's not a bad idea to role the settlement costs into your mortgage even if you don't have to. Instead, you could use that money to upgrade a kitchen, or bathroom to increase the value of your new home. Not too bad!

closing cost examples.pdf

When you open the link you may have to scroll down to see the info.

There are many tax write offs available to home owners and here are a few not to forget:

Points: Points used to buy down your mortgage rate are tax deductible. However, origination fees that are a service fee are not.

Pre-Payment Penalties: Although pre-payment penalties always sting the fact that they are tax deductible helps ease the borrower's pain.

Pro-Rated Real Estate Taxes: At settlement buyers pay a pro-rated portion of the taxes for the year and their portion is tax deductible.

Pro-Rated Mortgage Interest: At settlement buyers pay a pro-rated mortgage interest for the month which is tax deductible.

Home Construction Loan Interest: As long as the buyers move into the property and use it as their primary residence within 2 years they can write off the interest.

Mortgage Interest: Homeowners can claim an itemized deduction up to $1 million worth of mortgage-debt.

Home Equity Interest: Homeowners can claim up to $100,000 of home equity debt for their principal residence.

You want to make sure that itemized deductions are higher than the Standard-Deduction ($11,400 for Joint filers, $5,700 for singles, and $8,350 for heads of household in 2009). If your itemized deductions are less than the standard you'll make out better just using the standard deduction. In this case you won't see any changes from your taxes before you bought a home. You just want to make sure you remember to compare the standard deduction to the itemized to get a true sense of what additional write-offs are available to you.

Another thing to take into consideration is the High-Income Phaseout Factor. In 2009 if your adjusted gross income (AGI) is over $166,800 for both joint and single filers your itemized deductions are reduced by 1% of the difference between what your AGI is and the $166,800 phaseout line. So if you earned $200,000 your deductions will be reduced by $332. $200,000 - $166,800 = $33,200 x .01 = $332. Although not all itemized deductions are reduced by this factor, the benefits of being a homeowner i.e. mortgage interest and property taxes are.

Of course these are simple guidelines to remember, but be sure to contact a tax proffessional to see how this all effects you. The biggest tax advantage still available is the tax free profit from selling your home which is up to$250,000 for singles and $500,000 for married couples. The other for first time home buyers is the $8,000 tax credit.