How do you quickly and easily prepare a home to sell without breaking the bank? Let’s jump see…
1. Remember the Masses - Rule # 1 and # 2, I consider the Golden Rules of home staging because this is what separates “home staging” from interior decorating. Interior decorating takes into consideration the personal tastes, personality and preferences of the home owner whereas “home staging” focuses on creating a valuable marketing commodity so that it appeals to the general home buyer who is trying to visualize themselves in the home. Unlike the home seller who is emotionally invested in the home, a Professional Home Stager is trained to see the home is an objective and critical buyer would so that they can position it to the best of it’s ability by focusing on rule #2
2. Keep to the Cosmetic - Only improving those things in the home that will add to the bottom line. Stagers keep to the cosmetic so that it makes financial sense in the sale price of the home. By focusing on the most dramatic transformations on the cheap a professional home stager gets equally dramatic results in the resale of the home. Home Staging in essence is an investment in future home sales earnings by the home seller and sometimes even the Realtor involved.
3. Consider the homes integrity when you prepare it to sell - In other words, it is what it is, what it is. Don’t try and make a Tuscan style home into a craftsman…it just won’t feel right to buyers or anyone else for that matter. A successful home staging works with the personality of the home rather than against it in order to get best resultsCreate Warm Lived In Spaces. Yet No One Lives There - When you walk into a home, you can usually tell exactly what age, style and personality individual lives there? If there are baby toys in the family room, a dog bed in the corner and a dozen family pictures on the mantle that gives you a clue as to who lives there which is as it should be for a home NOT for sale. In order to create broad appeal to buyers however we need to strip the home of the seller’s specific personality and quirks while still giving it warmth and style. There is a definite “fine line” between “lived in” and sterile looking. Shoot for the model home look and if you don’t know what that looks like visit some in your area.
5. Find the Focal Point and Make It Fabulous! - The basis for any good design lies in finding the focal point of a room and making sure it really shines. The focal point is the first place someone looks when they walk into a room. In the home staging sense we want to make sure the eyes are drawn to the best part of the room while conversely playing down any negative aspects of the room. Walk into a room and take note of what you notice immediately…is it positive or negative? Remember, buyers are looking for reason NOT to buy the house…make sure those focal points don’t give them any.
6. Clean is Critical! - This really goes without saying but unfortunately needs to be said and emphasized because many times home sellers cannot objectively clean their own home. Their noses have adjusted to any strange odors that buyer’s notice and that rusty sink drain goes completely unnoticed by the seller who has lived there for ten years now while the buyers are repulsed. How do you combat this lack of objectivity by the sellers without offending them? Quick tip, cleaning windows, walls and reflective surfaces helps to add light and space to a room. I’m dating myself when I say, “be a Felix not an Oscar”.
7. Create the Illusion of Space - This is a standard maxim of home staging. It states that by removing extraneous furnishings you can create the illusion of space within a room. Everything in a room must earn it’s place so it’s usually safe to say that 50% of what’s in a room can be packed away now in order to stage the room effectively and create space WITHOUT stripping it of it’s personality.
8. “Up Down” to Update - The best thing a home seller can usually do to update their home is to remove those purchases over 10 years old. I call this “up down” to update. Take down the old flowery prints, old pink swag drapes and brass chandeliers. It’s usually cheaper and easier just to remove or camouflage those distracting out dated furnishings rather than buy new ones. Every accessory’s sole purpose should be to update or modernize the existing space so given today’s trends the accessory left out should be large and less of them.
9. Let There Be Light! Brainstorm lighting of all types within every room. Whenever you show a home make sure every light is on in the house…no exceptions. Buyers respond to “light and bright” so make sure your rooms have lots of natural light (trim plants and shrubs around windows) as well as artificial in the form of general, task and accent lighting. Kitchens especially need to be sunny and bright so use inexpensive under cabinet light as well as hanging lights over your islands and bars. Make sure every corner of your rooms are well lit by using simple up lights behind trees and tables. Use candles liberally as an emotional connection as well as form of lighting. Rule 10, 11, and 12 are particularly why using a professional home stager makes such a difference in the end result…successful staging is not easy, natural or automatic.
10. Remember It’s Calling, Balance Like A Rowboat, Scale Like a Dinner Plate and Be a Traffic Cop - Make sure each room has a clear purpose by remembering its original true calling. Most Buyers cannot use their imagination so don’t confuse them by having an office dining area or pool table in the front living room. Balance your rooms by evenly placing each piece on the sides of the room (like a rowboat). If you have a large entertainment center in one corner with nothing in the opposite corner to balance it, your room will feel tipped or off balanced and turn buyers away. Your professional home stager knows how to create equilibrium in a room. Make sure each piece in the room is in scale with one another. Like a properly balanced meal, don’t have a gigantic sofa with a tiny coffee table…it doesn’t work. A home stager borrows from other rooms to scale each one effectively. Finally, organize the traffic and flow in a room by making sure your furniture is not placed like wall flowers. It’s uncomfortable for anyone to have to walk through a conversation area to get to another room so make the traffic go around the conversation by pulling your furniture in. Believe it or not it makes the room appear larger rather than smaller as so many believe.
11. Color is Always King and Beige is Boring - I think we’ve all made some color mistakes in the past but Rule #11 can be a particularly fatal mistake many Realtors will make trying to play it safe with the home sellers by telling them to paint the house a neutral color. What you get is a bunch of black holes (furniture) in a white or vanilla setting…not good for those Internet photos. The reason why a Realtor would do this is very sound…most people cannot pick out color very well and use it to their advantage. If you don’t feel comfortable with this tricky skill then play it safe but remember, paint is the easiest and least expensive way to drastically improve interiors. If nothing else, have an experienced professional home stager give you a simple consultation and suggest colors. Decorators and Stagers will have the tools and rules to know when to play it safe and when to use color to highlight or downplay a particular feature.
12. Create “Emotional Connection Points” - Well you made it, point number 12 is like icing on a cake (and what would a cake be like without icing?). Like any great marketer, strive for “buyers envy” when they view your home by creating points throughout each room that speak to buyers emotionally about a lifestyle they can aspire to. This subconscious conversation gives buyers fuel for their imagination and multiple reasons to purchase this “emotionally” staged home. You want a buyer to walk into a house and say, “this is it, this is the one, this is where we FEEL HOME”. There are simple ways to do this: set out a tray on your master bed with a newspaper and cup of coffee, drape a throw and soft pillow over your favorite chair, set out plates, napkins, wine goblets and wine on an outside patio set and stack fluffy towels on your bathroom counter as well as several pillars of lit candles.
I hope these 12 rules have helped you in your efforts to prepare you home to sell. It takes a bit of work but is a small investment in a much bigger reward of selling your home fast and for more money. Good luck!
Meanwhile, Mr. Bernanke indicated that inflation risks are more two-sided, though skewed slightly to the high side -- a nod to the stagflationary mix of weak growth and rising price data of late.
But Mr. Bernanke made it clear where the Fed's main worries lie. "It is important to recognize that downside risks to growth remain," Mr. Bernanke told members of the House Financial Services Committee.
http://online.wsj.com/article/SB120412412525296845.html?mod=hpp_us_whats_news
Yes, Florida is on-sale.
Orlando is one of the best cities for bargain hunters.
According to Forbes magazine Orlando is one of the top ten markets for home bargain hunters. Here they are:
Of the major metros in the U.S., Salt Lake City is adding jobs faster than anywhere. The economic boom in SLC has drawn residents from all over the country, and more than a few home builders trying to make a profit in these otherwise woeful times. Housing supply has gone up quickly, and there hasn't been a high rate of foreclosure.
Raleigh is another market that has been driven by job growth. Like much of the Southeast, the expanding economy here has kept people moneyed enough to make home payments. According to RealtyTrac, there is only one foreclosure per 319 households, one of the lower rates in the country. The inventory of homes available is slightly lower than Salt Lake City (No. 1 on our list), at 14,764, despite Raleigh's larger population of 408,985 people.
South Florida markets aren't often referred to as bargains, but Orlando stands out for two reasons. First, it's adding jobs at a much quicker clip than other cities in the state, especially those in the South. Second, the market didn't go through as much of a speculative boom as did the bigger cities of Miami and Tampa, so it doesn't have as far to fall.
Just like in-state neighbor Raleigh, Charlotte has expanded quickly as the result of an economic boom that has drawn many residents from the North and Northeast. The financial sector is largely responsible and this is something to keep an eye on as banks' woes continue. While the city continues to grow, building activity has supplied plenty of inventory on the market, keeping things in the buyers' favor.
Phoenix has a very high foreclosure rate; there's no way around that. Based on RealtyTrac's estimates, there is one foreclosure for every 87 households in Phoenix. Still, our data suggest that strong job and economic growth in many non-housing sectors of the local economy is enough to offset it, and people are still moving to the Valley of the Sun at a quick rate.
It looked like the good times were never going to end here, but housing price growth has slowed. The local economy continues to add jobs, and the city's port, in particular, has profited from the weak dollar. The market slowdown isn't an indicator of a crash and offers good bargains.
Las Vegas is a market hammered by foreclosures, due largely to extremely high speculation in both residential communities and the condo market. Though the housing slowdown has hurt jobs in the construction sector, Vegas continues to attract businesses and job seekers to its growing economy, making its excess inventory (and there's a ton) less toxic than in other places. According to ZipRealty, inventory is down from its September peak by about 2,500 houses.
Jacksonville didn't go through an obscene speculation boom, making its recovery cycle far less daunting than other Florida spots. Job growth isn't outstanding, about average for the cities we measured, but the foreclosure rate is lower than any of the Florida cities we looked at, making the high inventory rate more likely to improve than get worse.
According to RealtyTrac, Richmond is one of the nation's metros least affected by foreclosures, with a rate of only one foreclosure per 1,103 households. (Compare that to Detroit; it's got one foreclosure for every 33 households). Job growth isn't as strong as in other Sunbelt cities, but it's around the nationwide average. The only thing holding Richmond back from being higher on our list? Builders weren't over-exuberant enough during the boom; there are plenty of homes on the market, but not nearly enough to classify as a glut.
Compared to housing prices in other cities, Houston real estate has always been a bargain, which is partly why the population has expanded so much since 2000. Jobs are being added to the books at the sixth fastest rate of cities measured, and while the city has had more than a few foreclosures, especially in Harris County, it hasn't taken a huge hit. Based on inventory levels and construction projects in the works, buyers still have good standing to negotiate price.
Home prices are forecast to fall more than 30% in some communities in 'the most severe housing recession' since 1945.
Housing markets from Orlando, Fla., to Stockton, Calif., will crash, and some will suffer price drops of more than 30% before the housing crisis is over, a report from Moody's Economy.com said today. I find this funny because once again the media is slow to find out. I’ve been telling people now for a year that we won’t see the bottom until fall of 2009.
We are now in the spring here in Orlando and I’ve sold 4 homes this week and listed another. Does that mean we’re turning the market? My opinion is NO. It’s simply the seasonal shift that we always have. Buyers always come out around the end of February and buying subsides in August.
On a national level, the housing market recession will continue through early 2009, said the report, co-authored by Mark Zandi, chief economist of Moody's Economy.com, and Celia Chen, director of housing economics.
The report paints a worsening picture of the hard-hit housing sector, which is in the midst of its worst downturn since World War II. Again, I say we won’t see an up-tick until 1st quarter of 2010.
While activity will stabilize in 2009, it will be 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said.
Overall, house prices are forecast to fall 13% from their peak through early 2009. After accounting for incentives home sellers are offering buyers, effective declines from peak to trough will total well over 15%, according to the report, which said the housing recession will ultimately be severe enough to be characterized as a housing crash.
Punta Gorda Fla. and Stockton are the hardest hit markets in the United States, with price declines from peak to trough forecast at 35.3% and 31.6%, respectively.
"This is the most severe housing recession since the post-World War II period," Zandi told Reuters.
These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders, Zandi said.
As I personally look at the MLS and each subdivision – community I see that nearly 10% of the homes are in short sales or foreclosure. We’re looking at another 12-18 months before all of those get washed out. However, that means there are some fantastic deals for buyers. The funny thing about is that when the media catches on and says that the market is turning, the great deals will be gone.
In summary, I say if you want a great deal on a house call me now and lets find you that great deal now, before they all disappear.
I've recent some inquires lately as to exactly what is a short sale. Well, below is straight from the Encylopedia. Hope it helps.
In real estate, a short sale refers to the sale of a property in which the sale price is insufficient to pay off all encumbrances and pay the expenses of sale. If the lender is convinced that the owner, for various reasons, is unable to continue making the payments the lender will often agree to take less than the full amount owed to allow the sale to close escrow. The incentive for the bank to approve a short sale is to have the property sell before the loan becomes a problem account on their books.
This Process may be difficult to believe but it is a definite possibility. As stated below there are hoops to jump through. Banks are willing to allow individuals to assume the loan if they meet the required criteria. This is a system that works because the banks do not want to hold property for one but they also do not want to pay a fee (at times up to $25,000) in order to send the property through the foreclosure process.
Before a lender approves a short sale they will make two key decisions.
First, can the owner afford to continue making the payments on the property? If they can there is no reason for the bank to eat the loss. Banks will not look favorably upon a borrower that they determine lied to get the loan.
Second, will approving the short sale leave the bank in relatively the same position as they are likely to be in by going though the foreclosure process and then selling the property? If the bank can do significantly better by foreclosing they are likely to do so.
The seller must not receive any sale proceeds for themselves.
If there is a junior lienholder, the discounts can be substantial, sometimes as high as 90% or more. Question two is the primary determinant here. If the senior lender forecloses the junior may get nothing so they may take a deep discount to get something out of the property.
Short sale sellers need to be careful because there is no free lunch. The seller may end up with taxable income in the amount of the debt that is forgiven. The seller may also end up with adverse entries in their credit history. Any property owner considering a short sale needs to seek the advice of competent legal and tax advisers before entering into the transaction.
I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations. The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the mortgage holder can be anywhere and certainly not aware of local real estate conditions. If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company. The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. Yes, there can be tax consequences. The Seller does receive a 1099 on the forgiven part of the mortgage, but there are provisions in the tax code for the offset of the phantom income due to insolvency. Most Short Sellers will satisfy the insolvency requirements or the Lender would not be allowing the Short Sale in the first place. Be aware too that if the home goes to foreclosure, a 1099 is received for the FULL amount of the mortgage, plus late fees, legal fees etc. Obviously every individual situation is different so a CPA or tax attorney should be consulted.
The process does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.
The Short Sale is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own and that would negatively impact their ability to make more loans.
Mortgage Fraud - What is it? View the video below to view a short clip from Freddie Mac on Mortgage Fraud. If you're having mortgage problems and can't pay your mortgage, talk to your lender. There are many mortgage fraud predators out there. Be Aware. Of course, feel free to give me a call if you have any questions. Jerry at 407-580-7011
Baby boomers, the generation born between 1946 and 1964, and who count more than 76 million, are getting near to retirement but are most definitely not ready for a retirement home! Whether they are selling their homes and heading to Florida or remodeling to accommodate their retired lifestyle, boomers are making an impact on new housing trends. Some features that Orlando builders and remodelers are seeing as they begin to cater to the boomer generation include the following:
Home Offices- As life spans continue to increase, many are choosing to work past the age of 65. However, they want home offices for flexibility. This can also eliminate the hassle of commuting while keeping them active and adding supplemental income.
Tech/Media Centers- The tech-savy boomer generation wants amenities for their homes such as wireless home network, remote control lighting and security systems and media rooms with surround sound for the latest in home entertainment.
Master on the Main- More than 40% of new homes have master suites on the main floor, a 15% increase over a decade ago. Boomers with bad knees and aching backs are fueling this trend. The bedrooms are also bigger, with larger closets and larger bathrooms with separate tub and shower and dual sinks.
Better Lighting/Bigger Windows- The need for more lighting increases as we grow older. To allow for this, builders are adding more windows for more natural light and better light fixtures in areas under cabinets and in stairwells.
Low Maintenance Exteriors/Landscaping- Aging homeowners may opt for homes in maintenance free communities. A great example of a community like this is Village Walk in Orlando in the Lake Nona area. Those that stay in homes without this convenience might make improvements to exterior surfaces such as installing brick or stucco. Landscaping can be made easier to maintain with ground covers or planting beds that can serve as a hobby for gardening enthusiasts.
Flex Space- Flex spaces are rooms that take on the purpose of the present homeowner’s needs but can adjust with changes in lifestyle. What once was a guest room may become a hobby room or library.
Do In-ground Pools Add Value To Real Estate in Florida?The answer may surprise you!For many, many years REALTORS have given the standard answer to their customers that in-ground pools add little value to real estate in Orlando Florida. I have even heard agents reason with their clients that many families do not want pools due to safety issues with small children. They reason that a large number of buyers do not want pools, therefore the value of a home with a pool is not increased. This is interesting logic, but false! In recent years my clients have been getting huge returns of up to and even more than 80% of the pools cost. Unfortunately most REALTORS do not know the value of an in-ground pool and are still relying on old data and false perceptions! This error is perpetuated because houses with pools are statistically rare. Here is what the National Association of REALTORs says: They (in ground pools) do tend to add value to a home - about 7.7%, according to National Association of Realtors statistics. Regionally, in-ground pools will add about 5% to the value of a home in the Northeast part of the country, about 6% in the Midwest and 7.5% in the Southeast and West. In the Southwest, a swimming pool will add nearly 11% to the home's value!
The question beckons - How Low Can You Go?
How much lower can this crazy Orlando Real Estate market go. Well, Here's my thoughts and one way to look at it.
When a renter can pay only approx. 20-30% more in their rent payment and own a home, They'll Buy!
OK, what does that mean?
Right now a 3/2 home at $200,000 would cost approx. $1600 Principle Interest Taxes & Insurance (PITI).
A 3/2 Home to rent in general is renting for $1200-$1300, meaning that when that average 3/2 home comes down to $200,000 that renter would rather buy instead of rent.
Right now that 3/2 Home is costing approx. $240,000. That means that that average home still has to come down $40,000 or 16% for that average renter to BUY.
OK, that's my opinion and we know what they're like!
No one knows. What's clear, however, is that a seller's disaster may be a buyer's opportunity. A Florida retirement may now represent an opportunity to exchange a high-priced home elsewhere for a bargain-priced home in sunny Florida. However universal the decline, this isn't bad news for everyone. It means a half-empty glass for sellers. But it may also mean a half-full glass for buyers.
An opportunity checklist
Here is a precautionary list for bargain hunters.
Though the national index figures reflect the illusion we most favor -- a steady and virtually guaranteed rise in home prices -- a very different picture emerges when you examine price indexes by state or metropolitan area. Here are some examples.
The Texas template tells us we could be in for a 14% to 25% decline and an eight-year to 14-year wait for recovery. That's real history. It's not hyperventilation from the Chicken Little chorus.
You should also know that big-time housing comedowns aren't unique to Texas. Comedowns also hit other markets. Los Angeles peaked in 1990, bottomed in 1995 and wasn't fully recovered until 2000. Boston peaked in 1988, bottomed in 1992 and hit its recovery number in 1997.
Bottom line: Love your house for the shelter and peace it provides.
Until l993, mortgage lenders had traditionally relied on underwriters to determine if a borrower was worthy of a mortgage loan. The underwriter would mail out employment and bank verifications, order a credit report and review each piece of information when it was received. The underwriter or loan committee would meet to determine if the borrower met the guidelines established for the type of loan he was applying for. This process would often take weeks or even months to gather the information and make an underwriting decision. In today’s fast paced market, lenders want to be able to make decisions within 24 hours, if possible. So lenders have had to change the way mortgage loans are underwritten.
One of the first changes made to speed up the underwriting process was to accept verifications of employment through pay stubs, rather than written verifications through the U.S. mail. Likewise, bank statements have replaced the need for written bank verifications. Court papers and canceled checks are often used as proof of additional income sources such as child support or alimony. Next, credit reports started coming with credit scores.
Credit scoring is an numeric way of weighing various financial factors, like income, debts, job history, credit history, and other factors, which can help predict the likelihood of the borrower defaulting on the mortgage. While there are a number of credit scoring models used, most lenders seem to use the Fair, Isaac & Co. (FICO) score that ranges from 450 to 900. The lower the score the higher the risk. Credit scoring is now part of the credit report that the lender gets when a borrower applies for a mortgage.
The formula for the Fair Isaac creditworthiness score deals only with financial information about a borrower and doesn't consider such factors as place of residence, age, race, sex or nationality. The score is developed by giving weight to the following areas: Record of timely payments on loans-35%, the amount and type of outstanding debt-30%, length of credit history-15%, the mix of credit accounts-credit cards, department stores, finance companies, bank loans-10%, number and types of accounts opened recently-10%.
While the credit scores have some merit, there are different systems of scoring and the borrower may actually have three different credit scores at the three major credit bureaus. This is why FNMA recommends that lenders obtain credit scores from two of the three major credit bureaus and compare the scores. The lower score is used when only two scores are obtained. The middle score is used if all three credit bureaus are used.
While the credit score is only a tool to help lenders determine their risk, FNMA conducted tests on one million loans and found that one in eight borrowers with a FICO score below 600 were either severely delinquent or in default. On the other hand, borrowers who had a FICO score of 800, only one in 1300 borrowers were severely delinquent or in default.
While individual lenders are allowed to set up their own requirements for credit scores and there are no established guidelines, most lenders seem to generally agree on the following grading system:
CREDIT SCORE RATING
760-850 A++ This category is reserved for superior financing options such as 125% loans.
700-759 A+ This category is reserved for 100%, 103% & 107% conventional financing.
660-699 A This category entitles borrower to the "prime interest rate".
620-659 A- This category is where "subprime loans" may begin, depending on all facts.
580-619 B This area is definitely "subprime", the lower the score, the higher the rate.
579 & below C-D This is the lowest category that most "subprime lenders" offer mortgages.
When a borrower’s credit is in the “A” range they are entitled to the going rate on 30 year fixed rate mortgages and high ratio loans such as 95% conventional loans. If their credit scores are in the A+ or A++ categories, they may be entitled to even higher ratio loans, such as 100%, 103% or 107%, which requires less cash outlay. “A-“ borrower’s pay .5%-1.0% interest more than the going rate for 30 year fixed rate mortgages. “B” borrower’s pay 1.0%-2.0% more than the going rate for 30 year fixed mortgages. “C” borrower’s pay 2.0%-3.0% more than “A” borrowers and so on.
GET YOUR FINANCES IN SHAPE Use the cash to improve your financial footing, some experts advise.
Consumers for years have done their share of propping up the economy. And what do we have to show for it? Steep credit-card debt. Rising bankruptcies. Late payments on car and home equity loans.Yet now, with the economy in danger, politicians are calling on consumers to spend more. They're even planning to give us the cash to do it.Instead of spending the tax rebate the government plans to send us, maybe you should use it to improve your finances. Pay off high-rate credit-card debt. Invest in a 529 college savings plan. Start an emergency fund. Salt away money for retirement. Do something that will leave you in better financial shape -- not just for a week or month, but longer term.
"You listen to some people and it's almost unpatriotic if you don't take the money out and spend it right away," said Thomas Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. His group co-sponsors a savings campaign called "Feed the Pig," as in piggybank (feedthepig.org)."You can be patriotic and save the money," he said.The proposed rebate is modeled after the one in late summer 2001, when about two-thirds of households received rebates of up to $600.A National Bureau of Economic Research study found that about two-thirds of those rebates were spent within six months. The recession ended in November 2001.Economists say saving or investing the rebate helps the economy in the long run, but what's needed now is a short-term fix.Without a boost in short-term spending, the economy could topple into a recession, and workers could lose their jobs, warns Diane Swonk, chief economist with Mesirow Financial.Those who are living paycheck to paycheck are more likely to spend the money, Swonk said, which is why she favors rebates for lower-income households.Under the proposal, a worker earning at least $3,000 but not enough to pay income taxes will receive a $300 rebate. The maximum rebate will be $600 for single taxpayers with income of up to $75,000; $1,200 for couples with income up to $150,000. Those with children get an extra $300 per child. Rebates gradually phase out for higher earners.David Wyss, chief economist for Standard & Poor's, favors rebates. But he acknowledges that if he were advising an individual, he would suggest using the money to pay off credit cards."If I'm giving advice to the country, you need someone to go out and spend money and eat more meals out and stop cooking for yourself," he said.Wyss is not afraid that his advice to save or invest the rebate will derail the economy."I'm not concerned about people listening to rational advice and not spending," he said. "For most people, if a check shows up in their mailbox, it gets spent really quickly." Not every economist is a fan of the rebate."It's a bad idea," said David Resler, chief economist with Nomura Securities. He said the impact of the 2001 rebates on the economy was exaggerated. The new stimulus package, which includes the rebates, will add about $150 billion to the country's debt."Which means, now or later, interest rates will be higher than they would have otherwise been," he said.Economists, of course, are looking at the big picture. But for financial advisers dealing with financially struggling clients, it's hard to support a spending spree."What drives me most mad about this tax rebate is that it's all about more consumerism," said Joanna Smith-Ramani, director of the Baltimore CASH Campaign. "They are saying 'Buy, buy, buy.' " The CASH Campaign provides tax preparation and financial counseling for the type of workers the rebates are targeting. The group encourages clients to use tax refunds to catch up on bills and salt away what's left in a savings bond, savings account or certificate of deposit.Silver Spring, Md., financial planner Peg Downey said the call to spend infuriates her."It reinforces bad behavior," she said. "You're training people to overspend." Downey recommends using the rebate to start an emergency fund that you can tap, instead of credit cards, for unexpected expenses."If I could wave a magic wand, people would spend it on job training," said Rockville, Md., financial planner Christopher Brown. That, in turn, could lead to a higher-paying job, which in the long run is better for the worker and the economy, he said.Taxpayers should think about how to use rebate money to improve finances and figure out where a small windfall can do the most good, experts say. Then, when that check comes in, use it to put finances in better shape.
