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NEW YORK (CNNMoney.com) — Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.

“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”

These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.

And Bank of America (BAC, Fortune 500), the country’s largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.

Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”

This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.

Beware: You lost your house but still have to pay

“In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.

“Things would just fall into a black hole and not come out again,” added Weintraub.

And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.

In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.

But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”

And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.

Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.

The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.

Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.

Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.

The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.

The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.

Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale

Here are some common mistakes to avoid

There is no doubt that when you turn on HGTV, A&E or any of the other channels that follow “flippers” they make it look so easy. Investors of all levels from first timers to seasoned vets buy run-down houses, fix them up and sell them for huge profits. The term flipping has been coined for this process and make no mistake about it… many millionaires were created doing this especially during the recently passed real estate boom.  So yes it can be lucrative and contrary to many stories out there now it is still lucrative WHEN DONE CORRECTLY! Go in blind and hopefully the only thing you lose is the shirt on your back.

We sat down with several other seasoned “flippers” and came up with some of the most common mistakes made by novice investors and decided to share that list with you in hopes that you are able to avoid them on your flipping endeavors.

Not knowing enough about the market:  The biggest mistake made… not understanding where you are buying; if you don’t know about the comparable homes in the neighborhood and what they sold for you cannot make an educated decision on whether the investment property you are considering buying is a solid deal. If you don’t buy at the right price you have a much harder time making a decent profit.  Another important detail many investors over look when accessing the neighborhood is the days on market. How long are properties taking to sell? Until it sells it’s your expense and each day lessens your profit.

Over-improving the property:   Yes, there is little debate that if you update the kitchen and bathrooms you are generally going to increase value. However you can quickly get in over your head especially when you start making structural changes to the property or putting upgrades that do not fit the neighborhood demographics.  Typically paint, new carpet and cosmetic updates to the kitchen and bathrooms may be all you need to make a profit. Keep in mind if you improve your flip to the most expensive home in the neighborhood you may have a problem selling it.

Decorating to your tastes instead of buyer’s tastes:  I love bold colors and contemporary decorating but the safest choices to make when trying to appeal to mass amounts of buyers is to stay neutral. One our first flip I remember spending much money on little “designer” touches that; while they looked good they did not add to our bottom line profit, in actuality they took away from it. Needless to say they were left out of every flip after that one.

Under-Budgeting:  Golden Rule… Over estimate the cost on everything! It’s better to come in high and have money left over from your repair budget than to come in low and searching for additional money. Oh yeah and by the way when you under estimate you also give yourself a “false” profit, be upfront with yourself and when you come in under your budget you’ll have a bonus to your end profit! By the way while we are talking about budget here, do not forget to spend some of your budget on curb appeal. I cannot stress to you how big curb appeal is. If the inside is beautiful but the outside still looks like the Sahara desert you not going to get folks in the front door!

Indecision aka no exit strategy:  Here is a cold harsh fact… If you don’t know what you want to do with a property as soon as you close your deal, or you dare go into it without having contractors already lined up, you are wasting your time!, and with flipping…TIME IS MONEY.

It is important to understand that what you really need to know about a house often may not be visible to your eye!

It goes without saying that no house is perfect; features that one buyer may absolutely love may send the next buyer running right back out the door. Understanding this is critical when you begin looking at homes for yourself. It’s important to know what you like, what you are looking for, what features you must have and what features you would like to have and conversely what features you can live without or are just not important to you. Here are seven tough questions you should arm yourself with and ask about each home that you look at:

Q: Has this home ever been damaged in a fire or other major disaster like a flood or earthquake? Just like a car that’s been part of a major accident, a house that has been damaged requires repairs and the quality of the home is a direct result of the quality of work done for the repairs. Some of these repairs may lie behind covered walls and you should at least understand what the house has been through. Don’t forget to ask this about other structures of the property as well like detached garages or swimming pools.

Q: Is there and HOA (Homeowner’s association), tax assessment district or any other entity?  These entities can have collect dues, charge fees, set fines, and limit what a homeowner can and cannot do with their property. You want to know if you have to deal with one of these and what the cost are. It’s another expense that you have to put into your budget. Not paying them can lead to liens placed on your property!

Q: Have you experienced any nuisances such as noise or other problems in the area or with neighbors? There are a lot of noises in a neighborhood, some people like the sound of the city some don’t, if you don’t like loud engines and you find out the neighbors kid rides motorcycles and he and his buddies frequently get together Saturday morning to work on their bikes and engines that may just be a problem for you. It’s best not only to ask this question but in addition visit the neighborhood at different times of the day and night week days and weekends so you can see it for yourself and also take note of traffic patterns during this time.

Q: Have there been any serious crimes in the neighborhood like burglaries, car thefts, or crimes against people?  Few places are completely free of crime yet some places due tend to have more crime than others. You want to know this if car thefts are common then a garage to keep your car off the streets may be very important if you want to live in that location.

Q: Have there been any renovations to the home and if so were they completed with or without a permit?  It’s true that many older homes will have experienced some upgrades and remodeling and that’s just fine. What is important to find out about these changes is where they permitted? If they don’t comply with county codes authorities can force homeowners to bring them up to code or take them down. If there were structural renovations done it’s always good to ask for a copy of the permits.

Q: Has this home been vacant or occupied by tenants and if so for how long? Occasionally a home that was occupied by a renter may not have been well kept or if it has been vacant for awhile it may have other problems. Make sure that if it has been that the owner of the property has taken responsibility for repairs and keeping the property excellent condition. Also take note of the neighborhood and see if there are many vacant homes around there.

Q: Is there any additional information that you can share with me about this house? This is a “catch-all” question that can help you to discover other facts about the home that you may not have found out otherwise.

The home buying process is one filled with many excitement moments and the more you know the better off you will be. As always you should also surround yourself with professionals that know how to get the job done, and of course that’s where we come in. We have been doing this for years and helping individuals just like you achieve the homeownership dream time and time again. The only thing stopping you from realizing this dream is… You picking up the phone and calling us at 1-888-210-6134. Don’t wait any longer, get on the path now and realize the dream!

DID YOU KNOW THE GOVERNMENT IS GIVING AWAY AN $8,000 HOUSEWARMING GIFT FOR BUYING A HOME THIS YEAR? 

We know you have been watching what’s going on with the real estate market, right? Prices and interest rates are the lowest they have been in 37 years! Are you one of the many people who want to take advantage of this opportunity to buy a home? Great! You have made a wise choice! If you are serious about buying a home, keep reading…….How long are you going to keep renting and watching yourself waste money every month? When you pay rent, there is no investment in your own future. You need to buy a home so you and your family can have an investment for the future. You need a mortgage for the tax benefits as well. The government is giving you $8000 “housewarming” gift for purchasing a home this year.  Although the money can’t be used for a down payment, you can actually claim the home purchase on your 2008 taxes if you do an amendment, and therefore, you can get the money a lot sooner than you think. While YOU faithfully pay your rent every month, YOUR LANDLORD is receiving the benefits of homeownership from YOUR hard work. It’s time to invest in YOU! Don’t think you can afford a mortgage? After all, as a renter, you ARE paying a mortgage every month, just not your own. YOU need to receive the benefit of homeownership. Stop and do me a favor before you keep reading, go get a calculator, its o.k., I’ll wait………… got it? Good. Now, multiply what you pay in rent every month by 12. Example: $1650 a month in rent multiplied by 12 months in a year. What did you get? $18,000, $20,000, $30,000 or more? You didn’t pass out did you? Your answer is the amount of money you have given your landlord for his/her mortgage this year; I thought you said you didn’t have any money. Now you see why you don’t. Now, one more task, take the amount in rent you have paid this year and multiply that number by the number of years you have been renting that house. Example: $1650 a month x 12 months = $19,800 a year in rent. $19,800 x 4 years living in your rental= $79,200. That’s enough to pay for a small condo! Do you see what we’re getting at now? You can afford to buy a home; you just need to apply your money differently. THIS MONEY NEEDS TO BE GOING IN YOUR POCKET! Now is the best time to buy, prices are low and so are interest rates. As you know, the lower the interest rate, the lower the monthly payment! Get in now before the spring boom! O.k., so now we know how important it is to buy and we know now is a good time. Now we have to figure out HOW to buy, it’s easy, keep reading……….AS LONG AS YOU HAVE A JOB, YOU CAN BUY A HOME, THAT’S ALL YOU NEED, WE WILL TAKE CARE OF THE REST! Please don’t waste your tax return this year. Remember last year? The shoes, trips, cars….. What have they done for you lately? What investment did those items give you? This year, invest you tax return. Save it to help save the money you need to buy a home! O.k. now that we have the financial part of buying a home out of the way. Here are our 5 simple steps to buying a home. Trust me, it’s easer that in sounds.

STEP 1: Get qualified to buy a home. This means talking to a lender to see if your credit and income are sufficient to buy a home. It may seem backwards to shop for a mortgage before you shop for the house, but there are several reasons for doing this. First, you’ll find our how much you can borrow, which has a lot to do with how much house you can buy. If you have a credit union or bank you trust, start there. If not, we can refer a lender to you. If your credit is bad, don’t worry, we have a credit repair department to fix that. Once you are approved, you will get a form called a Pre-approval letter. This letter is very important, you need this letter so you can start looking at homes and so you will be taken seriously when you offer to purchase one of our homes.

STEP 2:  Come up with a down payment; without a down payment, you don’t own even a piece of the house. The bank owns the whole thing.

STEP 3:  Start house shopping! Make a list of what you want and need in a home. Also keep in mind your plans for the home. Example: Is this a starter home or a home I plan to stay in for several years?  We have lists of homes for sale that we can show you. I’m sure we can find the right home for you!

STEP 4: CLOSING DAY! You have done steps 1-3 and now it’s time for your reward! You are now a homeowner! Closing day consists of you and our team coming together to sign the papers to sign the home over to you.

STEP 5:  YOU GET THE KEYS.  It’s all over. The home is yours. CONGRATULATIONS!!!!!!!!!!!!!!! So, now we’ve covered all the basics for you, all you have to do is call to get started. Don’t wait on the side lines while everyone else is buying a home. Buy now while you still have the power! Take a look at what we have available and some of the most recent homes our clients have purchased @ http://www.asginvestments.com.

 And remember, SAVE, SAVE, SAVE! CALL 1-888-210-6134 TODAY!

Because of the nature of real estate the trends that exist within it move and change much slower than other markets. Real estate trends tend to get moving in one direction for long periods of time until they reach a “Bubble” (as it’s commonly being called right now). When this inflection point is reached the balance of power changes, the other side of the table begins to realize that they are now the ones holding the cards and setting the rules. There usually are some big problems for the participants involved when these changes begin to take place, that problem… They usually don’t realize the changes are occurring. For instance in a seller’s market it usually takes a homeowner a year or two to realize and accept that the buyer is actually back in control now and that they must adapt their expectations and price to the buyers.

2006 was the height of the last seller’s bubble, where sellers were holding all the chips. The agent’s job was simple and there was no need for a marketing strategy other than list it on the MLS. Pricing the house for the realtor was really simple; look at the recent comparables and price their listing about 5% to 10% higher than the last one that sold. Then they sat back as bidding wars started and many offers came in above the already inflated asking price.  The belief was that prices were going to continue to go up and no matter what price a buyer purchased the house at it would be worth more very shortly afterwards. The laws of supply and demand are no exception here and since houses were in huge demand with little supply prices continued to increase.

This frenzy continued its course and buyers bought, and as they did the pool of qualified buyers shrank. Home prices remained inflated and a surplus of homes began to enter the market. Top this off with a shrinking pool of qualified buyers and soon sellers are forced to bring prices down. They must adjust realizing that those who could buy have already done so and there are fewer buyers on the market.

What we are currently in is without a doubt a buyer’s market; sellers are now competing with one another to get the attention of any buyer who is looking to buy a home. This causes home prices to drop, closing cost to be paid in full by seller; we have even seen cases where sellers agree to pay two months mortgage payments to us in order to off load the property. This is the time when many part-time real estate agents drop out the game, and those with experience are challenged with having sellers accept the reality that they are not going to get top dollar for their home right now.  Failure for a realtor to correctly educate their seller simply ends up wasting both parties time.

Sellers must realize in a buyer’s market getting top dollar for their property is highly unlikely, regardless of what comparable sales come in at, a buyer simply does not have to pay top dollar in this market. Even harder to accept for some sellers is if their home has some negatives such as repairs, outdated rooms, lack of curb appeal, etc they can expect offers 15% or more lower than recent comps. If a seller is stubborn in their way they will be stuck with the property, simply put there is no amount of marketing that is going to convince a buyer to overpay in a buyer’s market.

P.S. If you are a seller who really wants to sell your house don’t hesitate to call us today 1-888-210-6134.

P.S.S You can email us for more information at info@asginvestments.com

P.S.S: Buyers if you are ready to take advantage of the 2008 Housing Tax Credit and receive your $8,000.00 you need to call us today! @ 1-888-210-6134 or sign up here to get the free special report http://www.asginvestments.com/buyer-welcome.htm

We are very glad to hear from so many who found yesterdays part 1 very informative. Today in part two we break down the exact meaning to each qualification along with answering some of the most common questions that have been asked. We are sure you will find todays information extremely useful to you.

Part 2…

We have had tons of people emailing us asking if this tax bill is just a renewal of the one enacted by Congress in July 2008 and the answer is a BIG “NO”. There are a few key differences between the two and probably the most important one to you is that this new tax credit does not have to be repaid. The previous one (which is still available to those who may not qualify for this specific one) basically was an interest free loan that you had to pay back. This new credit is truly that… a credit, however the home being purchased must be the principal residence for the taxpayer for a minimum of three years or you will be faced with a recapture of the credited amount, and like all rules there are some exceptions that will apply to that.

Here’s some additional good news; participating in the tax credit is really easy and simple. All you have to do is claim your tax credit on your federal income tax returns for 2009. More specifically home buyers will complete IRS form 5405 to determine their tax credit amounts, and then claim this amount on Line 69 of their 1040 returns, that’s it nothing else to do not even a pre-approval or screening all you have to do is make sure you fit the guidelines that have been laid out under the tax credit (hopefully this is being accomplished with the reading of this article).

Looking back through the thousands of emails we received that prompted us to write this article there were two other very common questions being asked and they were, what types of homes will qualify for the tax credit and what does it mean when they say the tax credit is refundable? The first question has a simple answer and that is ANY home qualifies from a single-family, to an attached home i.e. townhomes and condo’s, new construction (regardless if by a builder or if you hire your own contractors to build a home), manufactured homes (mobile homes) heck they have even included houseboats. As long as it’s your principal residence it qualifies. Principal residence is determined identically to how you may qualify for the $250,000 / $500,000 capital gain tax exclusion.

Something else we wanted to make clear here before we move on; if you decided to have your home built by contractors yourself you still qualify as long as your first occupy the residence on or after January 1, 2009 and before December 1, 2009.

So what about the refund and what does that mean?  This simply means that the tax credit can be claimed even if the home buyer has little or no federal income tax liabilities to offset. In other words if there are not enough debts to cancel out the tax credit a surplus from the tax credit may remain, in that case the federal government would then send the home buyer a check for any remaining portion. So for example if a qualified individual expected a tax liability of $6,000 and had tax withholdings of $4,000 then without the tax credit the individual would owe the IRS $2,000 on tax day (April 15^th). However if the individual taxes advantage of this tax credit and is qualified for the full $8,000 then on April 15^th they would be receiving a check for $6,000 ($8,000 tax credit - $2,000 tax liability).

For those individuals who purchase their home under the mortgage revenue bond (MBR) program you can combine the two together this is another notable change from the July 2008 tax credit where you could not combine it with your MBR.  As some of you may know there is also a nice home tax credit for first time homebuyers in the District of Columbia but unfortunately you can only claim one.

Tax credit versus tax deduction, are these two the same? The answer is NO. A Tax credit is a dollar for dollar reduction in what you will owe on your taxes. That means if you owed the IRS $8,000 on tax day and qualified for the housing tax credit you would owe the federal government nothing. A tax deduction is subtracted from the amount of income that you are taxed. So in our previous example let’s assume are individual is in the 15% tax bracket and received the $8,000 tax deduction the individuals liability would be reduced by $1,200 ($8,000 x 15%) so your tax liability would be lowered to $6,800 ($8,000 liability - $1,200 deduction). As you can see there is a significant difference between the two, and I am willing to bet a million dollars on which one you would prefer to have; kudos to this administration for really taking the route of tax credit and bringing greater value to the home buyer.

Another interesting note of this tax credit is that home buyers do not have to wait until they file their 2009 tax returns to access this credit. As long as you qualify you are permitted to reduce your income tax withholdings. By doing this by the amount of the credit you will receive will enable you to accumulate cash by raising his/her take home pay. In turn you can take this money and apply it to your down payment. To do this you would need to adjust your W-4 through your employer. Be warned that if you do reduce your withholdings and do not qualify for the tax credit you would then be liable for repayment and possibly interest charges and penalties.

There are some additional rule changes that were made with the economic stimulus that you may be able to take advantage of like the tax-exempt bonds. There are a few states whose housing agencies are introducing programs that will provide short term credit acceleration loans that may be used to fund a down payment.  Check with your state housing agency to determine the availability of such programs. Too our knowledge Maryland has not finalized any such program as of yet, but we have seen a lot about Missouri currently implementing this program.

With regards,

Antoine and Shonda Grier
ASG Investments, LLC

1-888-210-6134
Info@asginvestments.com

A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a primary residence on or after January 1, 2009 and before December 1, 2009. Unlike the first tax credit enacted in 2008, the new credit does not have to be repaid. One thing is for sure, the enhanced tax credit is providing an excellent opportunity for new home buyers. It’s no secret that we are in a struggling economy and the government has been taking steps to try and revive it, especially the housing market which many say is the heart of the problems. 

The American Recovery and Reinvestment Act of 2009 (The official name of the tax credit) has a few key components that home buyers should be aware of.  Most importantly … it’s for first time home buyers and the credit does not have to be paid back. The credit is equal to 10% of the homes purchase price or a maximum of $8,000.00, and is available for any home bought on or after January 1, 2009 and before December 1, 2009.  Single taxpayers with an annual income up to $75,000 and married couples with an income up to $150,000.00 can receive the tax break.

So with all this talk about first time home buyers lets be sure that you understand exactly what the government defines as a first time home buyer. The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the past three-year period prior to the new home purchase. In addition for married couples, the law looks at both parties individually but it affects the couple as one. In other words, if you have not owned a property  in the past three years but your spouse has owned a principal residence, neither you or your spouse qualify for the tax credit.

However, the tax credit can work for unmarried joint purchases where one party can allocate the credit amount to any buyer who qualifies as a first time buyer. So a parent may jointly purchase a home with a son or daughter allowing the child to get the tax credit. In addition, ownership of vacation or rental properties that are not used as primary residence do still qualify as first time home buyers for the tax credit.

Now let’s take a closer look at the income limits and what all the small legal print exactly means.  It’s funny as I sit here and type this, a phrase that a good friend says popped into my head.  He would always say “Check the fine print, because what the good Lord giveth the fine print take away”.  Now what the income limits state specifically is that the tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) more than $75,000 for single buyers and $150,000 for married couples who file joint tax returns. If an individual makes greater than $95,000 or a couple makes greater than $170,000.00 then the tax credit is reduced to zero.  For individuals and couples who’s MAGI falls in between these ranges the tax credit is reduced proportionally.

Okay so I can just feel a few of your sitting there reading that last part and scratching your heads thinking  ”I thought you were going to explain this for us in easy terms”.  We are so — let’s first define exactly what this MAGI means. The IRS defines MAGI as the Modified Adjusted Gross Income.  To find yours you must first determine your “adjusted gross income” or “above-the-line deductions”, keep in mind this number is before itemized deductions from Schedule A or personal exemptions are subtracted. Simply put on your 1040 and 1040A tax forms your AGI.  It appears as the last number on page 1 and the first number on page 2. If you use the 1040-EZ, then your AGI shows up on line 4.  It is important to understand that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

Remember that was to discover your AGI, we still need to get to the MAGI and in order to do that we need to add to the AGI any foreign income, foreign-housing deductions, student-loan deductions, IRA-contributions deductions and deductions for higher-education cost as well. Once you have done that the number that is sitting in front of you is your current MAGI. To reiterate if your MAGI is over the limits either individually ($75,000) or jointly ($150,000) you still possibly can get partial credit of less than $8,000.

If you are like me you might work best with examples so let’s do one for both individuals and couples. Assume a single home buyer has a MAGI of $80,000, that buyer exceeds the single limit of $75,000 by $15,000. We take the $15,000 (amount over the limit) and divide it by $20,000 you get a 0.75 yield. Subtract that 0.75 from 1.0 and the result is .25, we then multiply $8,000 by the .25 and we discover that the homebuyer can still receive a tax credit of $2,000.

The same holds true for a married couple, for our example let’s say jointly they make $160,000 and the maximum amount is again $150,000 which means they are $10,000 over the limit. We take the $10,000 and divide it by $20,000 and we get a 0.5 yield. Subtract that 0.5 yield from 1.0 and we are left with 0.5. Then to determine their tax credit we take $8,000 and divide it by 0.5 to discover they still qualify for a $4,000 tax credit.

Another nice plus is that the law allows you to elect (choose) a qualified home purchase in 2009 as if the purchase occurred on December 31, 2008. I know, what does this mean for you? Well what it means is that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed. (Tax filling for 2008 returns instead of for your 2009 returns) This is a nice benefit to you the buyer because you know your 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who do wish to claim it on their 2008 returns, but have already submitted them to take advantage of the $7,500 tax credit but qualify for this tax credit can file an amendment to your 2008 tax returns (form 1040x) and then use the new tax credit that you will not have to repay.

Please remember ASG Investments is not a tax authority, and what we have just provided are examples of how the tax credits might be applied in different circumstances, you should always consult your tax advisor for information related specifically to you. Sorry folks, I had to get that disclaimer out of the way.

Stay Tuned for Part 2 coming 03/05/09.  Please feel free to contact us with any questions that you may have.

By: Antoine and Shonda Grier
ASG Investments, LLC
1-888-210-6134
Info@asginvestments.com

We found this interesting article on CNNMoney, and thought we would share it.

Repossessed homes and short sales make up a large percentage of sales in many real estate markets

By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — Real estate values around the nation have collapsed, and sales of foreclosed and “underwater” homes now dominate many housing markets, according to a report released Tuesday.

The report, from Zillow.com, a real estate Web site, revealed that with foreclosures soaring, nearly 20% of the nation’s home sales in 2008 were of bank-repossessed properties. Another 11% were short sales, in which homeowners owed more in mortgage debt than their homes were worth.

Madera, Calif., had the highest percentage of these distressed sales: 54.6% of all transactions there were foreclosed homes, and another 3.4% were short sales.

In Merced, Calif., 53.4% of sales were foreclosures and 4.8% were short sales. In nearby Stockton, 51.1% were foreclosures and 5.4% were short sales.

“As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing,” said Stan Humphries, Zillow’s vice president in charge of data and analytics.

“More value [was] wiped out in the fourth quarter of 2008 than was eliminated in all of 2007,” Humphries said.

About $3.3 trillion in home equity was erased in 2008, with $1.4 trillion of that wipeout coming in the fourth quarter alone, according to Humphries. More than $6 trillion in value has been lost since the market peaked in 2005.

Those equity losses have put many homeowners underwater, where they’re extremely vulnerable to foreclosure. These owners can’t tap home equity for the cash they need to pay bills when they run into rough financial patches, and they often find it impossible to refinance - lenders will not loan more than the property is worth.

In the United States, 17.6% of all homes are now underwater, according to Zillow, as are 41.2% of all mortgages for homes bought in the past five years.

The worst-hit cities are in the once-booming Sun Belt. In Las Vegas, 61.4% of all homes are underwater.

Because so many homes are worth less than their mortgage balances, an increasing number have to be sold short. But short sale transactions can take a long time to complete, because lenders have been having trouble keeping up with the flood of requests.

“The speed of short sales is a function of the resources being allocated to them by lenders, and those resources are being stretched to the limit,” Humphries said.

That means lenders may not act on approving short sales for months. The deals cannot go forward without their approval, because the banks must agree to forgive the difference between what they’re owed and what the sale brings in.

As the time it takes to arrange short sales lengthens, they become harder to complete.

One example of how price declines can doom a short sale occurred recently in Phoenix. Curtis Johnson, a real estate broker there, worked with a health care worker whose hours were being cut and who could no longer afford her mortgage. She fell behind and decided to sell.

Johnson was able to find a buyer willing to pay $183,000, and got an approval form the lender. The owner confidently moved out, got a new place and started a new life. But the lender folded and the mortgage went to a new servicer, who took six weeks to approve the deal.

“Unfortunately, the buyers who were approved were no longer interested because the real estate market had dropped significantly,” Johnson said. “They wrote a new offer, considerably lower then the first, and it was time to start over.”

Two more offers eventually fell through before a new buyer was found and the owner’s bank approved the price, this time at $163,000. On the day of that closing, however, the parties discovered that the buyer’s lender had run out of funds and dropped out of the deal. The home went to foreclosure auction before another sale could be arranged.

The house is now on the market for $139,900.

“[The house is] listed for less than what would have been received had the bank been willing to work with us, and still has not yet sold,” Johnson said.

Distressed sales like that depress the market for all homeowners. Regular sellers in cities dominated by foreclosures have to adjust their prices downward to compete.

The percentage of homes sold for less than what their owners originally paid has leaped up in the past couple of years. In the United States as a whole, 34.6% of the sales made in 2008 were done at a loss. In Merced, 71.6% of all sales last year were for less than the seller paid. Stockton, Modesto and Las Vegas all had in excess of 68% of all homes being sold at a loss.

Foreclosures beget more foreclosures by adding inventory to the market, which depresses prices, which increases foreclosures, according to Humphries.

“The vicious cycle continues,” he said.