First Time Home Buyer Tax Credit: Additional Information

The Internal Revenue Service has announced that taxpayers who qualify for
the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special optionavailable for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman.

“This important change gives qualifying homebuyers cash they do not have to pay back.”
The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov.

The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.
This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more
than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

For the form that you will need to claim your tax credit, visit my web site at

http://www.liveinraleighmidtown.com/ and click on the links under the Buyers and Seller's Section on the left.

And if you need anything at all, or have any questions about this great incentive to purchase a home, please feel free to call me at 919-272-4754.

I look forward to hearing from you.

Homeowner Affordability and Stability Plan

Last week, President Obama signed into law the Homeowner Affordability and Stability Plan. This is part of the President's comprehensive strategy to get our economy back on track.

The goal of this plan is to help the up to 9 million Americans facing foreclosure. This does not give them any cash to make thier payments. What it does is it enables those that are truly in destress and cannot make their payments to refinance their high interest and adjustable rate mortgages to more affordable mortgages with better interest rates.

The key components are as follows:

1. Refinancing forUP to 4 to 5 Million Responsible Homeowners to make Their Mortgage Payments More Affordable.
2. A $75 Billion Homewoner Stability initiative to Reach Up to 3 to 4 Million At-Risk Homeowners.
3. Supporting Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac.

Below is a link to this summary:

http://www.mmbaonline.com/Portals/0/Documents/20090218factsheet.pdf

If you think that you may need assistance with re-financing your home, please feel free to contact me. I have two great mortgage brokers in my office, and they are here to help.

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.


Tax Credit Versus Tax Deduction


It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!


Phaseout Examples


According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: 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 $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 homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $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.Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.


Homes that Qualify


The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.


Higher Loan Amounts


More good news – there is an extension on the additional tier of conforming loan amounts which had been first established in 2008. This tier of home loans are those greater than $417,000, and with a maximum that depends on the area, but is not greater than $729,750. These loans will again be eligible for rates that are slightly higher than conforming loan rates, but less expensive than the standard “jumbo” loan rates.


Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient

improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.


Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.


Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.


More Help for Homeowners in the FutureAnother thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.


According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.


While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.


The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.

Feel free to call or email me, or text me at 919-272-4754 with any questions you may have, or if you would like to know how all of this would affect your home purchasing power!

Key Points of the Stimulus Package-as it relates to first time home buyers

The new stimulus package is complex, and hard to understand. Maybe that is why most of the members of Congress that voted on it didn't even read it!! Over 1000 pages long, it is hard to know every detail and how it relates to us as consumers.

One key point is the tax credit for first time home buyers. Although the National Association of Homebuilders and the National Association of Realtors wanted a larger tax credit with more options for it's use, what was proposed will definately help first time home buyers.

A first time home buyer is defined as someone who has not owned a home in the past three years. So if you sold your residence over three years ago, you can use this credit. It does not expire until September 1, 2009. So if you need few months to reach your three year time frame, you have it!

Also, now this is called a credit, not a loan. So it does not have to be repaid! So think about all the ways you can use this money next year: improvements to your new home, fencing in the back yard, new furniture.....the possiblities are endless! Or you can just put it in savings for a rainy day!

Below is a summary of the key points. If you have any questions at all, just let me know. I am here to help!


Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Additional Housing-Related Provisions

Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future

Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.

While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.

The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact Real Estate now and in the future.

As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you.

You can reach me at LisaColeman@hpw.com or text me at

919-272-4754!

I look forward to helping you with all your real estate needs!

Raleigh Real Estate Market Condtions Update--Don't Believe Everything You Read!

We have been reading a lot of negative things News and Observer and on various websites about the condition of the real estate market here in the Triangle Area. I am here to let you know that you don't need to believe everything that you read. The real estate market here in our area is still strong. Is it as strong as it was last year at this time, or even six months ago? Well no, but we are still not experiencing the rapid decline that other markets have had.

I recently received the following information in an email. It was written by Stacey Anfindsen, who is a local appraiser and the real estate market "go to" guy for statistics and information. He has given me permission to put this information on this blog, to share with everyone. I hope you find it informative and useful.

*******

Responding to the News & Observer:

Stacey Anfindsen Shares More Accurate Depiction of Market and Five Reasons Not to Panic Over Local Home Prices

In response to the main headline in the 10/27/08 N&O, I am presenting facts to contradict
the headline, which is yet another attempt to scare local readers by using data from selected national
sources. The writer states five reasons; crashing home prices, investor speculation, complex
investments, job losses and repeat delinquencies. I will respond to each of these to provide some local
perspective.

1) When analyzing our market, I look at data from the counties of Wake, Durham, Orange and Johnston. Within this market, the average closed price of all housing is up 8% and the average closed price of resale housing is up 6%. House price appreciation, which compares the two most recent sales prices of the same house , is an area where the Triangle outperforms the national market. Our current rate of houseprice appreciation in the Triangle is just over 4%. This rate beats the state (+3.6%) and national rates (-4.5%).

2) The Wake County Revenue Department reported +/- 21,000 closed sales within the past 13
months. Roughly 5% of these sales were purchased by buyers from out of town, a huge difference compared to the 20% rate nationally.

3) It is almost impossible to track what percentage of local purchases were made via the subprime loan mechanism. Per the FHFA mortgage metrics survey for the second quarter of 2008, 17% of all outstanding mortgages in the U.S. are rated as subprime. Therefore it would be hard to argue that a majority of house purchases were made via this mechanism.

4) Job losses are real both nationally and locally. The Raleigh/Cary/Durham MSA did not have a workforce increase comparing 8/08 with 8/07 for the first time since the 8/01 versus 8/00 period.

5) The mortgage metrics survey reveals some additional information regarding the national mortgage market. They surveyed over 30 million outstanding loans in the Fannie Mae and Freddie Mac system and found that 98.6% of these loans were rated as current. They also state that foreclosure proceedings were initiated on 432 homeowners per day during the second quarter, a big difference from the 2,700 per day figure stated in the lead paragraph. There are currently +/- 14,000 listings within the four county area in TMLS. Roughly 3% of these listings are classified as foreclosure, bank or corporate owned. I have been tracking the residential market within the Triangle for over 20 years. The foreclosure market has
always accounted for a very small percentage of activity.

Our current market can be summed up with my version of the good, the bad and the ugly;

The Good

Third quarter closings were the 6th highest in history
Current supply of 8 months is lower than national current supply of 11 months
Average house price appreciation is superior to state and national rates
Average re-sale sales price +6%, average overall sales price +8%, average list price +2%
Houses priced correctly have sold in an average of 55 days.

The Bad

Overall inventory grew 7%, making 2 consecutive months of less than 10% growth
Withdrawn listings increased 2% compared to 9/07.

The Ugly

29 consecutive months of inventory growth, 20 consecutive months of lower pending sales
63% of all price points have an oversupply of housing product
9/08 expired listings were 227% higher than 9/07 expired listings

A survey of Wake County house purchases where the house was purchased and then re-sold within the past 12 months reveals a median percent per gain of 0%. I think that is pretty impressive compared to what is happening in the national market.

As we have seen during 2008, our local market is not immune from happenings in the national
market. Our biggest challenges during the fourth quarter of this year and into next year are to grow the workforce and cut down on the number of price points with an oversupply of housing.

Now Is A Great Time A Home!

Now Is a Great Time to Buy A Home!


If you read the main headline to The News and Observer on October 27th, you may have had a panic attack over the current real estate market. The paper made it seem that our current market was in the tank, and there was no end in sight. I wanted to share this information with you about our current market, and hopefully calm some fears and let everyone know why NOW IS A GREAT TIME TO BUY A HOME!!

There are a number of factors that support the belief that now is a great time to buy a home:

Interest rates remain at historically low levels.
Inventory in our markets is abundant, giving consumers exceptional home choices.
Home sales have slowed, giving buyers the additional advantage of being in a “buyers” market.
Sale prices today are more favorable to buyers than they were earlier in the year.
Home buyers who will remain in their homes for several years will nearly always come out ahead in building wealth.

Buying Up in a Down Market

According to the National Association of Realtors®, the average value of the destination home is 50% more than a buyer’s current home. If your current home’s value has decreased by 10%, then the value of your destination home has decreased by 10%. So you will have a NET GAIN by moving up.

For example: if your current home was worth $400,000, now it may be worth $360,000. So you may have a paper loss of $40,000. But if you were looking to buy up in this market, and your were purchasing a home that was worth $600,000, and now came be purchased for $540,000, then you are $20,000 closer to affording your new home. The different between the $60,000 gain in the move up home and the $40,000 paper loss in your current home.

“But we want to wait until the market bottoms out to buy.”

As a real estate agent, and real estate investor, I completely understand your desire to purchase when the market bottoms out. That way you’ll get the lowest price and experience appreciation right away.

How will we know when the bottom has hit?

The answer is, when the market goes back UP! So we will never know when the market IS at the bottom, only when it WAS at the bottom. So it is axiomatic that you will not knowingly purchase AT the bottom. Do you agree? So then you will be buying as the market rises which will achieve one of your goals: experiencing immediate appreciation.

Here are the key benefits of buying before the bottom:

Lower interest rates. They will rise when the market starts rising.

More inventory. In a rising market your choices are fewer.

Relaxed pace. A rising market brings buyer competition and multiple offers.

Time in home. By buying NOW you can ENJOY the home.”

So if you are trying to decide if now is the time for you to buy your new home, give me a call today and let's talk about your options. You can visit my web site at www.LiveInRaleighMidtown.com or email me at LisaColeman@hpw.com. And you can also call me at 919-272-4754.

Change is Good!!

So my little boy was looking for a movie to watch yesterday, and he happened to pull out my Atari Flashback. Yes, I said Atari! Although not the original, this is a system that has all the original Atari games in one console. Centipede, Asteroids, Food Fight and all the other favorites! I purchased it about three years ago on a whim when I went to Best Buy to get my Sirius Radio installed in my car. (See, I am current with technology!) There was a huge display of them at the front of the store, and they were on sale for only $14.99. So I thought it would be fun to go back in time and have some fun.

I know you are thinking, Lisa, what does this have to do with real estate. Actually, there are a ton of similarities between technology, ( or in this case, old video games) and real estate.

For example, where would we be today if video games remained the same. We would still be playing the same old Space Invades, BONG, Asteroids, etc... The same with real estate. In order to survive, it has to move forward and change.

One big change this year was to the current Offer to Purchase and Contract. In years past, a buyer who was under contract had a certain time to get his/her loan approved. However, the date was specified as "Time is of the Essence." So as long as the seller was willing to wait, the buyer could drag out the contract, trying to get loan approval. With the new contract, the buyer has so many days to get full loan approval. If he or she does not, then the seller has the right to void the contract, and keep the earnest money. Now granted, it is not as simple as it seems, but it is easier to move contracts along now, and make sure the seller's property is not tied up for log periods of time buy buyers who are not qualified.

One great change for buyers is on the Additional Provisions Addendum. Now there is a section where the buyer can list things that they want repaired to the home, and this is considered pre-negotiating the repairs. So if the buyer requests that the all items found on the summary page of the inspection be repaired, and the seller signs agreeing to it, repair negotiations are done. This makes it easier for both parties: for the buyer, they know that the repairs are going to be done, and for the seller, they agree in advance to do all the repairs, and they know that the buyer has accepted this agreement, no matter how many repairs are listed on the inspection report. Now this is not a perfect world, and differences on repairs can come up, but this is one of the best changes I have seen in a long time.

One major change this year is pertaining to the commission that agents receive. Now all agents must disclose to buyers the compensation that they are receiving from the sale of the property, including all bonuses and gifts. (Such as gift cards, trips, etc...) For more information on this new change, you can visit the North Carolina Real Estate Commissions Web Site:

http://www.ncrec.state.nc.us/bulletin/bulletin.htm

If you are considering purchasing a home, and would like more information on the current changes to North Carolina Real Estate Rules and Regulations, or if you just have questions in general, please feel free to call me at 919-272-4754, or you can visit my web site at:

http://liveinraleighmidtown.com/