The NEW IMPROVED Home Buyer’s Tax Credit

On November 6th the President signed a bill passed by the US Senate and House of Representatives extending the current First Time Home Buyers Tax Credit AND creating a tax credit for 2nd time and subsequent primary residence purchasers. The First Time Home Buyer credit has not changed except to be extended through the end of April 2010. Any home buyer qualified under this program and is under contract to buy a home by the end of April; closing by the end of June will be able to receive an $8,000 credit from the government.

The First Time Home Buyer Tax Credit in particular has really help stabilize our area home prices which fall into the typical First Time Home Buyer segment. For example, before the tax credit had been set at an $8,000 credit vs. the previous $7,500 government loan we had been seeing nearly a years worth of inventory in our market in the $100,000-$250,000 price range. That means that if the same number of buyers kept purchasing homes it would have take a year to sale every home in that market segment. That is assume no more homes came on the market, of course. At the end of October 2009 we see that segment at about 7 months of inventory which is very close to having a balanced market.

The NEW tax credit is for 2nd time and subsequent purchases available to individuals and couples who are buying a primary residence to replace the one they currently own. If you have lived in your current primary residence for 5 of the last 8 years and you meet the income limits you would be qualified to receive a $6,500 credit for a couple or $3,500 for an individual. The signing date of November 6th 2009 is significant because any qualified purchase after that date can file for the credit.

One interesting note is that the bill doesn’t seem to say you can’t rent your current home and then buy the new primary residence thereby waiting for a little better time to sale that home. There would be some tax consideration for doing or not doing this but it may be something to consider if you think you may want to be an investment property owner for a little while.

Also of interest, this is truly a CREDIT not a tax deduction. For example if you are due $1,000 back on your taxes at the end of the year and you qualified for the $6,500 credit, you would then receive a check for $7,500.

There are Income limits and home purchase limits with both of these credits. Both are fairly generous. You can not make over $125,000 Single, and $225,000 as a Married couple. The home purchase can not be over $800,000.

For additional information on this credit we have created a side by side comparison for you. Please do not hesitate to contact me if you have additional questions.

Todd Long
Broker-In-Charge
Coldwell Banker United Realtors
todd.long @ cbunited.com

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Timing the market

The most recent Case-Shiller price index shows home prices up in 17 of the 20 markets it tracks. This is a good sign but what does this really tell us about the Real Estate market? The Case-Shiller price index that came out October 27th is actually based on numbers from August. The good news is we should continue to see positive signs from this widely monitored index for at least a few more months. From the indicators I watch September and October have been steady as well. What indicators do I watch that the big economist do not? A less scientific approach for sure. I follow Real Estate Professionals in major markets on Twitter and Real Estate Blogs. I realize true economist can’t rely on a less scientific approach like twitter and individual bloggers, but I can. These ground level Real Estate combatants may not give me a hard fast number to nail down as to price gains in a market or number of sales for the month but it does give me a feel for how the national market is moving, RIGHT NOW. As an example @PhxREguy (Jay Thompson) recently tweeted this blog post that he wrote. He talks about the resurgence of new home construction around his neighborhood in Phoenix. The national media is just now reporting that new home construction was up 9.4% for the month of September. That’s great news from a month ago but the Phoenix Real Estate Guy tells us in his post that new home construction is still gaining ground in Phoenix as of October 31st.

Some people may look at this and say so what, September/October, what is the difference? It may only make a difference to me, and the agents I manage, as we try to guide our clients as to the best course of action in their Real Estate endeavors. I feel like it is my job to know what has happened locally and nationally in the historical past of Real Estate, what the media is reporting with a little market lag time, what is actually happening right now and what the future indicators are forecasting. On a personal note, I really enjoy being knowledgeable about a subject, real estate, that is of interest to a wide variety of people. Real Estate makes for fun social conversations.

I think we are going to see the extension of the first time home buyer $8000 tax credit extended as well as expanding this to move up buyers for $6500 who want to sale a primary residence and buy a new one. We have seen the first time home buyer credit bring our inventory back to a manageable number of homes on the market in the sub $250,000 price points. The expansion of this credit to move up buyers should have a similar effect on price points above $250,000. This credit will most likely end with contracts written in April which is probably an appropriate time because we usually see a small upswing in purchase activity in the summer anyway. We still need to get unemployment under control. I firmly believe the 9-10% unemployment number is estimated low. I think it is closer to 17% nationally and maybe a little higher around Mooresville. No matter what I feel like we are seeing a bottom form in house prices in this area. There is no way to predict the absolute bottom to any market. If you are thinking a home purchase is a good decision for you don’t try to time the market. You will be missing a great opportunity at historic low prices and historic low interest rates if you do not act by the spring of 2010. That is my bit of advice.

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Vacant Home Freeze Warning

With the cold over night temperatures this week it is important to make sure any vacant home in your charge has the heat turned on to a low setting to prevent freezing pipes.  Pipes that freeze often crack.  When they thaw the water begins to flow and then you’ve really got a mess!  Typically setting the thermostat to the lowest temperature, around 50 degrees, should be sufficient. You can also winterize the home by shutting off the water and draining all the water lines. Some pros also force water out with compressed air but I have found that opening the faucet at the lowest point in the home works as well. That is often the outside water faucet for washing your car. You will aslo want to shut off power or the gas to the water heater and drain it as well. Then put a little RV anti freeze down each drain.  That’s the basics but it is always a good idea to consult a professional plumber.

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Lease Option

We are experience a few “out of the box” home selling techniques in this market.  A lease option is one example.  This may be a good option for a buyer and a seller under certain circumstances.  For example: if the seller doesn’t need to cancel the debt on his/her current home in order to purchase another home.  Or, the buyer doesn’t qualify for a loan because they are self employed for less than 2 years.

I’m going to outline one way a lease option may be structured but I highly suggest you and your Real Estate agent enlist the help of a qualified Real Estate attorney if you are going to enter into a Lease with Option to buy or Lease Purchase agreement. 

There are a few details that need to be thought through before structuring your Lease Option.   1) How long of a lease term, 2) how much of the monthly payment will be applied to the option money (down payment), 3) how much will be paid up front to secure the contract, 4) how will repairs be handled 5) at the end or the lease option what will be the purchase price?  So lets cover a few of these.  How long of a lease term many times this will depend on why you are considering a lease option in the first place.  The buyer may just need 6 months to qualify for his loan as in the example above.  Other time the buyer may be trying to place 20% into the option money pool which will then be their down payment for the loan. 

That leads me to number 2 from above.  The amount of the monthly payment will vary depending on many factors: the amount the seller needs coming in each month to cover expenses, the amount the buyer can afford each month, or the amount negotiated towards option and rent.  Normally there is an amount of each payment that applies toward the option amount that is being paid from buyer to the seller to apply to the purchase price if the buyer decides to exercise the option at the end of the term.  For example if the monthly payment is $1000 then $500 of that could be going towards the option and $500 could be rent.  No matter what, that $1000 is paid to the seller each month and is not refundable.  If the buyer exercises the option at the end of say 2 years they would have $12,000 as down payment they have already made to the seller towards the $100,000 purchase price.  Usually the final purchase price is established at the outset of the Lease Option contract.  This can be a little trick to predict what the future value of the property will be in 2yr, 3yr, or 5yrs.

Often the upfront money from buyer/lessee to seller/lessor is considerably higher than a standard security deposit of 1 1/2 times the monthly rent.  The upfront money to secure the contract may be 5%-10% of the purchase price.  But this money does typically apply to the purchase price if the buyer exercises the option.  From the seller’s point of view this upfront money needs to cover any cost that are incurred such as moving expenses and real estate commissions.  Speaking of real estate commissions the NC Exclusive Right to Sell Listing Agreement paragraph 8 details the total fee to be paid from the seller to the agency.  ”Such fee shall be deemed earned under any of the following circumstances:” 8b “If the ……. Seller agrees to sell, exchange, convey or transfer the Property at any price and upon any terms whatsoever, during the Term of this Agreement or any renewal hereof”.  So a fee is due.  My opinion is something could be worked out where the seller pays a portion of the fee at the initiation of the lease option and the rest a closing of the transaction.  However, that is not the wording in the listing agreement and would need to be worked out on a case by case basis.

Repairs can be handled many diffrent ways but I have had a good experience having the buyer/lessee cover all repairs up to $100 and any single repair over $100 is split 50/50 with the seller/lessor.  You will need to work out how estimates are acquired and so on. 

As you have read above, many of the terms and conditions of the lease option are negotiable and can be handled in many diffrent ways.  As I mentioned before I highly suggest you enlist the help of qualified professionals if a lease option seems like it might be a solution to your real estate needs.

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Foreclosure Prevention and Free money to buy a home!

I attended a great presentation a few weeks ago by Louise from Prosperity Unlimited. Here is her presentation. She runs a non profit group that helps people in the surrounding counties around Charlotte such as Cabarrus and Iredell counties. If you or someone you know may be facing foreclosure I encourage you to reach out to her group. She also gave us some great sources of free money to help buy real estate!

Contact them at (704) 933-7405

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Extend and Expand the Homebuyer Tax Credit

I have created this video for you. Check it out.

You may have noticed I didn’t say extend the First Time Homebuyer tax credit.  I really feel this needs to be expanded to anyone who wants to buy a primary residence.  We have seen good, steady gains in selling the inventory in the first time home buyer sector through the $8000 credit this year.  It hasn’t been a run on funds like the cash for clunkers which is probably good.  The benefit has been there but people still have to have good credit and want to make a move to take advantage. 

I have heard that extending this credit for 1 year and expanding it to all homebuyers who want to buy a primary residence would cost us about 1% of the 700 billion that has been set aside to help get out of this recession.  This would be an appropriate move to solidify the housing market in a time of tough economics.  I’ve been telling my agent for months if not a year now that it all goes back to jobs but when a house is sold that creates jobs as well.  Bank personnel, plumbers, contractors, electricians, home inspectors, Realtors, movers, and on and on have a job because a house is sold.

If you are a Realtor please help NAR push for an extension of the tax credit by going to http://bit.ly/extendcredit.  You will login with your NAR number and send a note to your local government representative. 

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Are you having a hard time getting a response to your Short Sale offer?

I received the following email from Abigail Jennings last week regarding the problems we are facing with mounting short sales.  She was out of town this past week in regards to this issue and working with the Banking Commission.  She shared with me that the Banking Commission was unaware of how much difficulty we are having in communicating with the banks about short sales.  Please follow the advice below to help get a response to your short sale offer.  Please comment here and let us know if this gets a response for you in a timely manner.  Thank you Abigail for your hard work to this point.
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Dear Lake Norman Area Real Estate Agents,
 
I have good news for you regarding short sales that I am eager for you to try, and please let me know your results.  Thank you so much to those of you who sent me your short sale nightmares.  It is amazing how similar all of our short sale experiences are.  Recently, I had a very good conference call with the Banking Commission regarding the growing problem of short sales and the many issues that we are facing getting our short sale offers accepted (or even responded to!).

It is going to take an actual law to make the banks do what we need for them to do.  My goals with a new law are for 1) the banks to have a timeline to respond by, 2) an automatic acceptance policy if the offer is within a certain percentage of the loan, 3) and an incentive for bank employees to keep loans out of foreclosure.  These goals may be lofty, but we’ve got start somewhere!  While this will be a timely process, I have a new solution to tell you about for those in current need.  Please make sure every agent you know gets this information! 
For a short sale solution within 7 days:
The commission would like for the consumer to file an online complaint if the bank is not responding to your offer in a timely manner.  Please stand over your customer’s shoulder to make sure they do this if you have to!  It is very simple.  They need to check the box under Complaint Type and choose Foreclosure.  Usually the banks get 3 weeks to reply, but if the customer checks Foreclosure, the banks must respond to the Commission within 7 days.  If it is even more urgent, please ask your clients to call the Commission directly.  For those of you currently in short sale limbo waiting for an offer, please have your clients try this today, the waiting may be over soon!  Here’s the link: https://www.nccob.org/online/cts/complaintOnline.aspx
We are very lucky to have a Banking Commission who truly wants to keep homeowners out of foreclosure.  So far this year they have kept 1400 NC homeowners from going into foreclosure and they earnestly want to help us with a solution to the short sale issue too.  Please keep me posted on your results, and I’m going to continue working with the Banking Commission and their legal counsel to see a law implemented to help us all.

Also, please refer to these links if you know of homeowners facing imminent foreclosure:
http://www.ncforeclosurehelp.org/  or http://www.nchfa.com/Homebuyers/HOhomeprotectionpilot.aspx
 
Sincerely yours,
 
Abigail

Abigail Jennings, President
Lake Norman Realty, Inc
20117 West Catawba Avenue
Cornelius, North Carolina 28031
www.LakeNormanRealty.com  
704.892.9673 Phone
704.896.8924 Fax
http://www.linkedin.com/in/abigailjennings
 

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Coldwell Banker United, Realtors ranks #5 and #9 nationally for 2008

I’ll keep this brief because no one likes to hear me toot my own horn, but I am very proud of the company I keep and want to give some recognition.  In the July/August 2009 issue of Realtor Magazine, pages 31-38, Coldwell Banker United, Realtors for national company rankings in 2008 came in at #5 in Transaction Sides and #9 in Sales Volume.  Great Job!   

Allen Tate Company came in at #11 and #17.  Congratulations.  It looks like those are the only two companies local to the Charlotte area who made the top 100 list.  If I am missing anyone please let me know.

There is a 7 min. video out with interviews of some of the top 100 companies talking about what they a doing to make through these tough times and prepare for the future.

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ReBar Camp Charlotte gets a plug

Attention Realtors:  In your July/August issue of Insight Magazine by the NC Association of Realtors Barbara West writes a piece following up on REBar Camp Charlotte from the spring.  The article is on page 17.  Chad Huck, one of the co-organizers, brought this to my attention today.  Lori Bee and Debe Maxwell were quoted in the article.  I think Barbara West did a very good job covering this event! 

For those that may not know, a ReBar Camp is a conference that follows a very loose organizational structure and leaves the day’s events and learning up to the participants that attend the event.  For the first event of this kind in the area I think it went pretty well.  There will be improvements next year and I hope you will be in attendance next spring.

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