By SARA LEPRO and TIM PARADIS (AP) – 6 hours ago

NEW YORK — Investors halted a three-day losing streak on the stock market Monday, sending prices broadly higher on a weaker dollar and better-than-expected home sales numbers.

Major stock indexes soared more than 1 percent, including the Dow Jones industrials, which rose 133 points to a 13-month high. Volume was thin ahead of the Thanksgiving holiday, which can exaggerate the size of swings in the market.

Investors found plenty reasons to buy as the day’s developments pointed to two trends: an improving economy and interest rates that are expected to stay low.

_ The National Association of Realtors reported that October home sales rose more than 10 percent revived investors’ optimism after disappointing data on the housing industry last week raised concerns about the strength of the economic recovery.

_ Charles Evans, head of the Federal Reserve Bank of Chicago, was quoted as saying he saw little risk that the economy would slide back into recession, although unemployment is unlikely to fall until next summer. And James Bullard, president of the Federal Reserve Bank in St. Louis, said the U.S. Fed should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.

_ The dollar, a key factor in stock trading in recent months, extended its pullback, sending prices for commodities including gold and oil higher and in turn, the stocks of companies that produce them.

Meanwhile, bond prices retreated as investors regained their appetite for risk.

Low interest rates and a resulting slide in the dollar have been big drivers behind the stock market’s eight-month rally. Low interest rates enable investors to borrow cheaply and buy assets like stocks and commodities that have the potential to earn higher yields than cash.

Investors were buying Monday on somewhat contradictory forces in the market. The strength in housing is a sign of an improving economy, which could argue in favor of raising rates, while the dollar’s weakness points to rates remaining low. Analysts say investors who still have plenty of available cash are primed to buy, and so the market may also be rising on its own momentum.

“There’s still $2 trillion of cash that needs to find its way into the stock market,” said Phil Orlando, chief equity market strategist at Federated Investors.

Orlando said investors will continue to look for dips in the rally as a way to get into the market, not wanting to end the year without participating in some of the big gains stocks have made.

“Bearish managers are sweating bullets that they’re not going to be able to get that cash in the market and they need to do that,” he said. “That is why any pullback we’ve seen this year has been met with a wave of cash that has pushed stocks up higher.”

At the same time, many portfolio managers have cooled their buying, not wanting to risk losing the big returns they’ve made since stocks began rallying in March. Those opposing forces are likely to result in choppy trading over the next few weeks, analysts said, which will be exacerbated by light volume as the holidays approach.

According to preliminary calculations, the Dow rose 132.79, or 1.3 percent, to 10,450.95, after losing 120 points over the previous three days. The Dow rose as much as 177 points to a 13-month trading high of 10,495.61.

The Standard & Poor’s 500 index rose 14.86, or 1.4 percent, to 1,106.24, while the Nasdaq composite index rose 29.97, or 1.4 percent, to 2,176.01.

Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to a low 979.9 million shares, compared with 1.1 billion Friday. Many traders were already on vacation for Thanksgiving, and the decreased volume can contribute to price swings.

The ICE Futures U.S. dollar index, a widely used measure of the dollar against other currencies, fell 0.7 percent. As the dollar fell, gold prices surged to a new high of $1,174 an ounce. Oil rose 9 cents to $77.56 a barrel on the New York Mercantile Exchange.

The spike in commodities lifted the shares of energy companies and materials producers. Chevron Corp. rose $1.97, or 2.6 percent, to $78.74. Weyerhaeuser Co. gained $1.25, or 3.3 percent, to $39.11.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.36 percent from 3.37 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.02 percent from 0.01 percent.

The yield on the three-month bill briefly dipped into negative territory last week as worries about the economy took hold and investors retreated to safe havens like the dollar and government debt as they sold stocks.

Investors wanting to lock in profits as the year comes to a close are willing to earn very little to park their cash in a safe place.

“It’s not a time for taking chances,” said Quincy Krosby, market strategist at Prudential Financial.

The National Association of Realtors said home sales rose 10.1 percent in October to the highest level in two and a half years, spurred by a tax credit for first-time homebuyers. Analysts had been expecting a 1.4 percent increase in sales. The credit, due to end at the end of the month, has been extended into 2010.

“You could be completely cynical and say this market is moving up today because volume is low and the dollar is weak, but I would have to add that we’re getting confirmation on the sustainability of the economic recovery by the actual fundamentals,” Krosby said, referring to the housing report.

In other trading, the Russell 2000 index of smaller companies rose 10.13, or 1.7 percent, to 594.81.

Overseas, Britain’s FTSE 100 rose 2 percent, Germany’s DAX index soared 2.4 percent, and France’s CAC-40 jumped 2.3 percent. Markets in Japan were closed for a holiday.

Copyright © 2009 The Associated Press. All rights reserved.

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Real Estate Sales Agents: How To Choose One That Would Work Well For You!

There are so many real estate agents who are willing to work for you out there. But finding the one that would work out things well for you is another story. The selection is often the most difficult. While there maybe lots of brokers and agents that are more than willing to offer their services, you can never be sure of their efficiency unless you have put them on trial.

Thus, it is best to find a real estate sales agent that could really spin things in his own hands and

give you the best of what your property and the other conditions could present.

The performance of a real estate sales agent is defined by various factors. For example their formal education and the years of training they have gone through could have massive effects on your guarantee for the best deals. However, those two factors do not tell everything. Certain circumstances could also promote their best performance and other aspects of real estate sales could contribute largely to the outcome of your sale.

Before you get on with your search for the real estate sales agents of the topmost caliber, you must understand first the terms that are often used interchangeably in the business.

Real estate sales agent and brokers are different from each other. The brokers are more like firms that offer the services of a number of agents who are directly connected in their company as freelancers or employees. The agents, however, are the main workforce of such real estate brokers. As implied in our definition above, they may be working solo or they are being managed by certain companies or firms that have larger scope of services. A realtor, on the other hand, is not so distinct with real estate sales agents. Nevertheless, they still differ since the realtors are those who have additional certification coming from national Association of Realtors.

Having said that, we can then assume that you have a more defined criteria on who or what to choose when looking for the services of someone or an institution to sell or promote the sales of your property.

But the titles are not so affective of the character your real estate sales agent should have. It is true that it’s not typically easy to find extremely dedicated and committed people to work for your property. They come in scarce number but are nevertheless worth searching for. Here are some ideas for you to help you in seeking for the services of am efficient and effective real estate sales agent:

Remember that there are various types of institutions that offer you the services for real estate sales. But the titles should not be your main point for judging which firm or person you should be consulting with. What matters most is that you select the best performing people to secure the easy selling of your property.

Consider also the type of representation you are after for. Typically, real estate sales are the seller’s agents. They only represent the bets interest of their clients and go no further than that unless they want to redirect such interest towards more productive and better transactions.

It will be worth it if you are going to do some legwork. While most real estate sales agents and brokers have websites that you can easily access, there is nothing far better than personally contacting these people to give you your advantages and disadvantages once your contract begins.

We have mentioned only a few points you must look into to help you in your search for the best-yielding real estate sales and firms.

By Mario Churchill

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Frequently Asked Questions About the Home Buyer Tax Credit!

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?
2. What is the definition of a first-time home buyer?
3. How is the amount of the tax credit determined?
4. Are there any income limits for claiming the tax credit?
5. What is “modified adjusted gross income”?
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
7. Can you give me an example of how the partial tax credit is determined?
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
9. How do I claim the tax credit? Do I need to complete a form or application?
10. What types of homes will qualify for the tax credit?
11. I read that the tax credit is “refundable.” What does that mean?
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
16. I am not a U.S. citizen. Can I claim the tax credit?
17. Is a tax credit the same as a tax deduction?
18. I bought a home in 2008. Do I qualify for this credit?
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
20. The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
21. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
2. What is the definition of a first-time home buyer?
   The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?
   Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What is “modified adjusted gross income”?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

   To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
11. I read that the tax credit is “refundable.” What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

    Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

    The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

20. The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
    It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

    Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

    The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.

    Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.

    In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.

    More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

21. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

    Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

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Things you Should Ask your Realtor!

There are so many realtors working in any given real estate market, how can you be sure that you have the right one? Selling your home is a huge undertaking and it requires both time and professionalism. Here are a few things that you can ask your prospective realtor to ensure that you are getting the best possible representation in the market.

1. Are you a full time realtor? This is important because selling your home is a full time job. You need a representative that can dedicate their full attention to the task at hand.

2. Are you always available? This goes hand in hand with #1. A dedicated realtor will always be available to field questions about your property and to show off your home. The real estate market runs 24/7, so should your realtor.

3. What’s your track record like? One of the best indications of the ability of a Realtor is how many homes they have sold. This is also a good indication of how much effort your realtor is willing to put into a given project.

4. What’s the marketing plan for my home? This is definitely an area that you should spend some time researching. In real estate, marketing is one of the single most important aspects of the home sale. A good realtor will cover all of the primary media outlets that are available. Full color newspaper ads, open houses and a web site are essential.

5. What kind of web presence do you have? In today’s real estate market the importance of a solid web presence cannot be stressed enough. Most buyers will look on the internet long before they start visiting homes and you want your home to be easily accessible on the web.

6. Do you work with a team? Agents that utilize teams have some distinct advantages in that more people and hours can be dedicated to the selling of your property. Also, people can be reached to answer questions and relay information about your home at all hours. Many teams also have buyers agents as members, this can help in bringing more potential buyers to your home.

7. References. Never be afraid to ask your realtor for references. Nothing will speak more highly of their abilities than the testimonials of happy and satisfied customers. If they are hesitant to give references, you should be hesitant to give them your business.

The real estate business is a high stakes game. What’s on the line? Your home. You should always be comfortable and completely confidant in the ability of your realtor to help you realize the best possible profit when you sell your home. Take some time and do your homework when choosing someone to sell your home. It’s likely one of the most important transactions you will ever be involved in.

Tyler Fawcett

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VA Gets Top Rating for Pro-Business Environment     
Richmond, Va.
Posted: 2:50 PM Jun 24, 2009
Last Updated: 2:50 PM Jun 24, 2009
   
Gov. Timothy M. Kaine announced Wednesday that Virginia’s pro-business environment has garnered the Commonwealth its latest No. 1 ranking nationally.

The top slot accorded to Virginia this week by Pollina Corporate real estate Inc., a top U.S. corporate site relocation expert, marks the third time the company has recognized the state with its highest ranking and is the sixth time overall that the Commonwealth has received national recognition as the most business-friendly state under the leadership of Kaine.

Titled Pollina Corporate Top 10 Pro-Business States for 2009: Rebuilding Americans’ Economic Power, the annual study examined job retention and creation by all 50 states and the federal government. Other states rounding out the top five are Utah, North Carolina, Wyoming and South Carolina.

Virginia also held the top spot in the Pollina study in 2003 and 2007. The Commonwealth ranked second from 2004 to 2006 and third in 2008.

“As governor, I’ve made it a priority to foster opportunity and quality jobs for Virginians while ensuring our workforce has the educational resources and skills it needs to compete globally,” says Kaine. “During these tough economic times in particular, reclaiming the No. 1 ranking speaks volumes about the consistent way in which Virginia does business and demonstrates that we’re up for the challenge.”

The Pollina study evaluated states based on 33 factors including taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, workers compensation laws, economic incentives programs and state economic development efforts.

During Kaine’s administration, Virginia has been recognized as the most business-friendly state in America (Forbes.com 2006-2008), one of the best states for business (CNBC 2007 and 2008), the top-performing state government in America (Governing Magazine 2008) and the state where “a child is most likely to have a successful life (Education Week 2007).”

Earlier this month, the Commonwealth also ranked second in Directorship magazine’s first annual Boardroom Guide to the Best States for Business. The guide assesses the litigation climate in each of the 50 states, as well as the economy, tax climate, cost of living, education, and other measures.

In Directorship’s study, Virginia ranked in the top ten on quality of life, higher education, economy and the state litigation ranking.

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Going once, going twice, sold to the highest bidder — usually. With the large number of home foreclosures dominating the news, opportunities for big savings at home auctions flash before the hopeful eyes of many first-time homebuyers. And, although there are plenty of deals to be had, it’s important to do your homework before raising your paddle.
Once a bank takes back a property,  and generally after attempts to sell it directly have failed, banks may assign its sale to an auction house — usually as part of a group of homes.
“Those auction companies will then conduct what’s usually a ballroom auction at a hotel,” Sharga said. “Usually in those cases, the homebuyer will have the chance to go visit the property, perhaps during an open house. The banks have already cleared title on the properties and made sure there were no other outstanding financial problems, so it’s a lot safer situation for a buyer. Usually at the auctions themselves, there will be some lenders participating who might even be able to get them loans right on the spot.”
Commercial auction houses hold three types of auctions. The most common is the reserve auction, in which the seller has a price in mind but does not publish it. The seller can accept, reject or counter any bid, even the highest one. In absolute auctions, the highest bid wins. The third type is a minimum-bid auction, which entails publishing the minimum amount a seller is willing to take for the house.
But how do you decide which house on the auction block is the right one for you? You need to plenty of research ahead of time.
“The same rules that would apply when you’re purchasing a home on the traditional market apply when you go to a bank-owned real estate auction,” said Crystal Wright, a spokeswoman for auction firm Hudson and Marshall.
Browse the homes available through the auction and then go see them, she said. “You should never bid on anything you haven’t seen,” Wright added. “If anybody is encouraging you to do that, you need to run the other way.”
Because auctioned homes are sold as-is, take an inspector and a contractor with you to estimate the cost of fixes or changes you would want to make, Sharga said.
Next, Wright said, find out what houses in the neighborhood are selling for and find out how long the home was on the market before it went to the auction house.
“By the time you get to a real estate auction … it’s not unusual that you could expect a 20 percent discount on the last list price on the home,” she said, adding, “This is not a guarantee.”
Though real estate agents are not needed for auction sales, “it probably wouldn’t hurt to work with a Realtor if you’re a first-time homebuyer to get a better idea of what that actual property should be [priced] to make sure you’re actually getting a good bargain,” Sharga said. “Just because a property is selling for less than it sold [for] last time doesn’t necessarily mean it’s a good deal.”
Lastly, get prequalified for a loan so you know how much you can bid, Wright said.
See something listed that you love? Don’t wait for the auction. Many firms allow buyers to make offers directly to listing agents or lenders before auction day.
Don’t be intimidated by auctions, said Todd Gladis, vice president of client management at Real Estate Disposition LLC. About 75 percent of the people who attend REDC auctions are first-time buyers, he said. “It truly is what we call here a perfect storm for a first-time buyer. You’ve got a motivated seller, you’ve got excellent financing and you’ve got the auction, so it really works to the advantage of the first-time buyer.”

Court house auctions: Risky business

Before a bank fully takes back a property there is a type of auction that is actually part of the legal foreclosure process, said Rick Sharga, senior vice president of RealtyTrac, which tracks and aggregates foreclosure data nationwide. The rules differ by state, but this kind of foreclosure auction typically takes place at a courthouse or at the property itself and is conducted by a trustee or by a sheriff. Buyers do not get to inspect the property, and they must pay cash on-site - either the full amount of the price bid or a percentage with a deadline of 24 to 48 hours to pay the remainder.
Other risks are involved, Sharga said. For instance, if the house has other outstanding liens against it, the new owner could be responsible for them. “Because of the risks, we tend to encourage first-time homebuyers not to take a look at those auctions as the primary way of buying a foreclosure property,” he said. “It’s very easy to wind up with more problems than you anticipate.”

Smart auction buying

There are deals to be had. The average discount on market value at an auction of bank-owned properties is usually about 10 to 20 percent, industry experts estimate.

You can inspect in advance. Just like an REO purchased directly from a lender with the aid of a real estate agent, buyers can inspect the auction properties before bidding. But the properties are sold “as is,” so prospective buyers should inspect carefully, ideally with the help of a professional.

Deposits are typically non-refundable. Hudson & Marshall, which recently auctioned nearly 200 homes in D.C., Maryland and Virginia, required winning bidders to make a cash or certified check deposit of $2,500 for each property. But the company cautions on its Web site that the down payment will be lost unless the bidder secures financing for the deal and closes within 30 to 45 days.

The sales are not contingent on financing. That means even someone who is preapproved for a mortgage is taking a risk. If he loses his job or incurs a major debt, such as buying a car, before a deal closes the lender may not approve the mortgage and the deal will fall through.

Auctions often charge a buyer’s premium. Expect to pay an extra 3 percent to 10 percent to cover the company’s fees and marketing expenses. Check ahead and factor any premium into your costs.  — Noreen Seebacher

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