This is an article with sound advice for internet home searching. I hope you find it helpful. Julie
5 top blunders of Internet home buying
Here's some advice to help you avoid the common pitfalls of online real-estate searching.
By U.S. News & World Report
While the painful real-estate swoon appears likely to extend well into 2009 — at least — the number of Americans using the Internet to find the home of their dreams is poised to keep on climbing.
According to the 2008 National Association of Realtors Profile of Home Buyers and Sellers, 87% of homebuyers used the Internet to search for homes last year. That's up steadily from 84% in 2007 and 80% in 2006.
But despite its mounting popularity, the Internet home-buying process can present a host of pitfalls. To help make your online real-estate searching more effective, here's a look at the top five Internet home-buying blunders and what you can do to avoid them.
1. Assuming you can do it all yourself
The Internet allows users to handle for themselves many of the tasks that could once only be performed by real-estate agents. The NAR profile, for example, found that the number of homebuyers who first learned of their homes on the Internet has been rising in recent years, to 32% in 2008, up from a tiny 2% in 1997. Accordingly, the number of homebuyers who first learned of their homes through agents has been declining, to 34% in 2008, down from 50% in 1997.
But although the Internet can provide heaps of helpful tips and research, it would be a mistake to assume that the Web is all you need to buy a house — unless you are an experienced real-estate investor. Purchasing real estate can be extremely complicated from a legal standpoint, and it's easy to make a mistake if you don't have an expert advising you. And when it comes to something as expensive as real estate, those mistakes could cost you thousands of dollars.
"Doing all the paperwork yourself is a huge mistake," says Joshua Dorkin, chief executive officer of BiggerPockets.com, a real-estate networking and information site. "There are so many things you can miss on a contract."
2. Looking too narrowly
The sheer amount of information about the real-estate market online can be overwhelming. As a result, buyers can be tempted to stick to just one or two popular real-estate search engines, such as Realtor.com, for their research. The problem with doing that, however, is that you're missing out on the biggest advantages that the Internet offers. [Realtor.com is a partner of MSN Real Estate.]
First, you're closing yourself off to a smaller cross section of the homes that are out there. "A lot of the sites aren't comprehensive and don't have all of the new listings," says Pat Kitano, a co-founder of Domus Consulting Group, which works with real-estate brokerage firms on technology marketing strategies.
Don't assume that because a house is on one real-estate Web site, it is on all of them, says Greg Healy, vice president of operations at ForSaleByOwner.com. "It's still very fragmented," he says. Healy recommends using several Web sites to get a more complete picture.
Second, you miss all the breaking, up-to-the-minute information on the housing market that can make you a smarter consumer. Blogs have become a popular resource for real-estate agents and others to post information as it happens. "If consumers are interested in a local area, they should find local real-estate bloggers who know this breaking information," Kitano says.
3. Ignoring the independents
One area that major real-estate search engines often overlook is the market for homes sold by the owners. "A lot of people forget to think how many homes are sold without agents," Healy says. The current estimate is that 20% to 25% of homes are listed by owner, he says.
Your dream house could easily fall into that 20% to 25%. So how do you bring homes sold independently into your online searches? "Craigslist is one of the best resources," Dorkin says.
4. Falling for fake listings
Remember, the Internet is a giant playground for scammers, and unfortunately they have penetrated the world of online home buying as well. Combine big dollars for online advertising and a lot of people searching for homes, and the result is a proliferation of fake home listings. There are a number of red flags to look out for.
"If there are no photos [of the house], that's a big warning sign. That's just people trying to collect page views," Healy says.
But even if the listing has photos, it's not guaranteed to be legitimate. Legitimate Web sites will put watermarks on their home photos to brand those photos as their own. If a home's photos have several different watermarks on it, then you can guess you are looking at the work of a scammer.
5. Putting too much stock in home-valuation Web sites
Sites such as Zillow.com and Cyberhomes.com have changed the way people buy homes by putting pricing information at buyers' fingertips. But they're not infallible.
Don't assume to know what the value of a home should be based on what these sites tell you about the neighborhood. There are many elements of a home's value that home-valuation sites cannot incorporate.
"Take their values with a grain of salt," Dorkin says. He recommends using this information merely as a range. Conduct other research to narrow that range. For example, walkscore.com can tell you the number of amenities within walking distance of a location — those are some of the factors that can raise or lower the value of a home.
By Matthew Bandyk, U.S. News & World Report
If you are seriously looking for the home of your dreams, call Julie Nellis, Long Realty, 520-918-3843 to end your search!
Wednesday, January 28, 2009
It Is a Great Time to Buy Tucson Real Estate
Out of the 8,541 current active residential listings, 333 of them are Short Sales and 87 are Bank Owned or Foreclosure.
If you are interested in looking for a great buy, now is the time to buy Tucson real estate! Interest rates are at all time lows and the average sale price is down.
The Tucson MLS statistics for December 2008 shows the average sale price at $200,000.
In March 2006, when the average sales price in MLS was $281,000 and interest rates were 6.25% the monthly PI payment on a $281,000 loan would have been $1,730. Today with the average sales price of $200,000 and rates at 4.75% the monthly PI payment on $200,000 is $1,043. That's $687, a 40% difference!
As you can see......IT IS A GREAT TIME TO BUY REAL ESTATE IN TUCSON!
Call Julie Nellis with Long Realty, 520-918-3843 today to purchase your piece of sunny Tucson.
If you are interested in looking for a great buy, now is the time to buy Tucson real estate! Interest rates are at all time lows and the average sale price is down.
The Tucson MLS statistics for December 2008 shows the average sale price at $200,000.
In March 2006, when the average sales price in MLS was $281,000 and interest rates were 6.25% the monthly PI payment on a $281,000 loan would have been $1,730. Today with the average sales price of $200,000 and rates at 4.75% the monthly PI payment on $200,000 is $1,043. That's $687, a 40% difference!
As you can see......IT IS A GREAT TIME TO BUY REAL ESTATE IN TUCSON!
Call Julie Nellis with Long Realty, 520-918-3843 today to purchase your piece of sunny Tucson.
This is a great article, by Barry Habib, that I wanted to share with you that may help you to understand the current market situation and why we are there.
The ‘Mark to Market’ Accounting Rule:
What it is and why it is important to you now!
Barry Habib
Chairman of the Board, Mortgage Success Source
The financial crisis we are in today was not caused by mortgages or housing, although they were both catalysts. The real reason was an accounting rule called "Mark to Market" (also known as FASB 157).
Few people have a strong grasp of this rule, and even those who do have a tough time explaining it on air due to time restrictions. So let’s take a few minutes to break it down, so you can have the inside track on this very important concept and understand why it represents some great opportunities.
Why does ‘Mark to Market’ exist?
Let’s go back to the stock market crash, which occurred between 2000 and 2002. With the S&P down 49% and the NASDAQ down 71%, many people lost much of their life savings and they were very angry.
Companies like Enron and Arthur Andersen were able to find ways to make their books looks more attractive, which was reflected in an artificially inflated stock price.
Both the public and Congress had a call for more transparency in business and hastened the passage of “Mark to Market” accounting.
This is the notion that all assets should be valued as if they were sold on a daily basis. Under the letter of the law, failure to do this conservatively can now result in jail time.
So what’s the problem?
Before we get into what this means for banks, let me make a quick analogy using a scenario that should make perfect sense to you and your clients.
Let’s imagine that you own a house in a neighborhood where all of the houses are priced at around $300,000. Unfortunately, your neighbor, who owns his home free and clear, falls ill and needs emergency cash quickly. Because he is under duress, he must sell the home for $200,000 in order to get the cash he needs right away, even though the home is worth considerably more.
Now would this mean that your home is now worth the same $200,000 that your neighbor sold his for? Of course not, because you are not forced to sell under duress. It just means that your new neighbor got a great deal.
However, if you were a publicly traded company and had to abide by Mark to Market account rules, you and the rest of your neighbors would now have to say, by law, that your home was worth only $200,000 – not the $300,000 you would get for it if you actually sold. So what's the big deal? Read on.
So how does this principle apply to banks?
Let's say we decide to start a bank . . . call it XYZ Bank. We raise $2 Million to open our doors. Remember that our capital account is $2 Million. Banks make money by taking in deposits and paying low rates of interest to those depositors (maybe throw in a toaster too). We then take that money and make loans with it at higher rates. We keep the difference.
So, we turn that money into $30 Million worth of loans. This puts our ratio of loans to capital (our Capital Ratio) at 15:1 ($15 Million in Loans to $1 Million in Capital). This level is acceptable, as long as we can shoulder some losses and recover.
Because we are very conservative here at XYZ Bank, the loans we make require a minimum down payment of 30%, a credit score of 800 or better (that’s nearly an 850 which is perfect), proof of income and assets, a reserve of at least two years of mortgage payments (normal is two months) and income requirements that only allow 10% of monthly income to cover all expenses (normal is 40%).
We do this and our loans perform perfectly. We make lots of money. Nobody is paying late and our clients are sending us holiday cards. They love us . . . it's a party. You and I are celebrating as we see our stock price soar.
But real estate values decline and, even though all of our loans are paying perfectly, we must re-assess the loan portfolio to account for the decline in real estate values, which leaves us with less of an equity cushion. We had a minimum 30% down payment, which means the loans were 70% of the value of our assets – until we account for the decline in the market. Now, our position goes from 70% to 90%. That's riskier and, therefore, worth less than when our loans had a 70% safety position.
Our accountants tell us that we must “Mark to Market” or risk jail. They say our value is now reduced by $1 Million. Whoa!
We must take (or write down) this loss against our capital account. It is a paper loss - we don't write a check, we have no late payers, no defaults, no bad business decisions. Still, we must reflect this $1 Million paper loss in our Capital Account, which drops from a $2 Million to $1 Million in value.
Here’s where things get problematic.
At this level, with $30 Million in loans outstanding, we now have a capital ratio of 30:1. At this level of leverage, alarms begin to sound.
Our ratios are out of the safe zone; we could go under with just a few losses, deposits are in jeopardy. Hello FDIC examiner, we are on the watch list, the Securities and Exchange Commission (SEC) is asking questions and our stock starts to tumble. The business networks are showing coverage of our now troubled bank. We are in big trouble.
The problem, we are "over leveraged". The solution? We have to “de-lever” . . . and do so quickly. But there are only two ways to do that, and one of them isn’t really an option.
The first way is to raise capital, but that’s not going to happen when our ratios are out of whack and we are in serious trouble as well as on the FDIC watch list. It is unlikely that anyone will be willing to invest cash in XYZ Bank.
The other option is that we can sell assets, like the outstanding loans, which are increasing our capital ratio. Like your neighbor, who owned his home outright but needed cash for medical bills, we are now under duress. The paper we are holding has a lot of value, but we have to sell it quickly and, because of that, cheaply. So, we offload the loans at a loss, which exacerbates the problem because those losses further reduce our capital account.
Very quickly, like a flushing toilet, things start to spiral – we are going down.
The problem multiplies
The problem doesn’t stop there. The fire sale we just had on our loans makes things worse – even for the banks that bought them up and thought they were getting a great deal.
Under Mark to Market, the loans we just sold must be included in the comparables that other financial institutions use to value their assets. This is how the problem spread and got so bad so fast. Other good institutions, with good loans, have to mark down. Just like us, they become over-leveraged. It’s a chain reaction, all triggered by a well intentioned, but over-reaching accounting rule.
Financial institutions fold, sell, or freeze. Credit - the life blood of our economy - is cut off at the source. Because of a lack of available credit, home sales and refinances crawl, auto sales drop and jobs are lost. Additionally, the economy enters a recession.
During the last recession in 2001, the economy recovered relatively quickly thanks to $3 Trillion worth of home equity withdrawals. But, more restrictive programs, a lack of available credit, and lower home values will make it difficult for us to use home equity to help pull us out of a recession this time around.
Fixing the problem
The Federal Reserve has passed a rescue plan, which, over time, will provide some level of help. Some banks will get money to infuse into their capital accounts. Others can sell some assets to the government in an effort to “de-lever”.
But, the big thing that is not talked about, not well understood, is the part of the rescue plan that traces this financial crisis back to the source.
The US Congress has given the SEC its blessing to modify “Mark to Market” accounting. And by January 2, SEC Chairman, Chris Cox has to get back to Congress with ideas, if any, on how to fix Mark to Market accounting.
It won't be eliminated, as we will not want to go back to the Enron days. But he is likely to adjust the Mark to Market provisions.
Here’s one potential solution - even rental or commercial real estate properties can be valued two ways:
1. The comparable sales method, which determines the value based on what other assets have sold for, which is the way Mark to Market work currently.
2. A cash flow method, which values the property based upon cash coming in.
If we see Mark to Market modified to use cash flow to value assets, without requiring a large percentage discounting mechanism - wow! What a shot in the arm that would be. We’d likely see the stock market rally, with financial stocks leading the uphill charge.
Consider that, in today’s market, fund managers are holding 27% of their assets in cash, compared with just 3% they held in cash when the stock market peaked in October of 2007. That means there is a lot of money on the sidelines that can push stock prices higher. Additionally, think about the redemptions from hedge funds that eventually need to be put back to work. That’s another reason to be optimistic about stocks in the first quarter of 2009 – provided that Chairman
Cox modifies Mark to Market accounting in a meaningful way. And a good stock market helps individuals feel better about purchasing homes. Additionally, stronger balance sheets for financial institutions will allow them to lend more money.
The bottom line
With some potentially very good news around the corner, there might be reason for optimism as we head into 2009.
The ‘Mark to Market’ Accounting Rule:
What it is and why it is important to you now!
Barry Habib
Chairman of the Board, Mortgage Success Source
The financial crisis we are in today was not caused by mortgages or housing, although they were both catalysts. The real reason was an accounting rule called "Mark to Market" (also known as FASB 157).
Few people have a strong grasp of this rule, and even those who do have a tough time explaining it on air due to time restrictions. So let’s take a few minutes to break it down, so you can have the inside track on this very important concept and understand why it represents some great opportunities.
Why does ‘Mark to Market’ exist?
Let’s go back to the stock market crash, which occurred between 2000 and 2002. With the S&P down 49% and the NASDAQ down 71%, many people lost much of their life savings and they were very angry.
Companies like Enron and Arthur Andersen were able to find ways to make their books looks more attractive, which was reflected in an artificially inflated stock price.
Both the public and Congress had a call for more transparency in business and hastened the passage of “Mark to Market” accounting.
This is the notion that all assets should be valued as if they were sold on a daily basis. Under the letter of the law, failure to do this conservatively can now result in jail time.
So what’s the problem?
Before we get into what this means for banks, let me make a quick analogy using a scenario that should make perfect sense to you and your clients.
Let’s imagine that you own a house in a neighborhood where all of the houses are priced at around $300,000. Unfortunately, your neighbor, who owns his home free and clear, falls ill and needs emergency cash quickly. Because he is under duress, he must sell the home for $200,000 in order to get the cash he needs right away, even though the home is worth considerably more.
Now would this mean that your home is now worth the same $200,000 that your neighbor sold his for? Of course not, because you are not forced to sell under duress. It just means that your new neighbor got a great deal.
However, if you were a publicly traded company and had to abide by Mark to Market account rules, you and the rest of your neighbors would now have to say, by law, that your home was worth only $200,000 – not the $300,000 you would get for it if you actually sold. So what's the big deal? Read on.
So how does this principle apply to banks?
Let's say we decide to start a bank . . . call it XYZ Bank. We raise $2 Million to open our doors. Remember that our capital account is $2 Million. Banks make money by taking in deposits and paying low rates of interest to those depositors (maybe throw in a toaster too). We then take that money and make loans with it at higher rates. We keep the difference.
So, we turn that money into $30 Million worth of loans. This puts our ratio of loans to capital (our Capital Ratio) at 15:1 ($15 Million in Loans to $1 Million in Capital). This level is acceptable, as long as we can shoulder some losses and recover.
Because we are very conservative here at XYZ Bank, the loans we make require a minimum down payment of 30%, a credit score of 800 or better (that’s nearly an 850 which is perfect), proof of income and assets, a reserve of at least two years of mortgage payments (normal is two months) and income requirements that only allow 10% of monthly income to cover all expenses (normal is 40%).
We do this and our loans perform perfectly. We make lots of money. Nobody is paying late and our clients are sending us holiday cards. They love us . . . it's a party. You and I are celebrating as we see our stock price soar.
But real estate values decline and, even though all of our loans are paying perfectly, we must re-assess the loan portfolio to account for the decline in real estate values, which leaves us with less of an equity cushion. We had a minimum 30% down payment, which means the loans were 70% of the value of our assets – until we account for the decline in the market. Now, our position goes from 70% to 90%. That's riskier and, therefore, worth less than when our loans had a 70% safety position.
Our accountants tell us that we must “Mark to Market” or risk jail. They say our value is now reduced by $1 Million. Whoa!
We must take (or write down) this loss against our capital account. It is a paper loss - we don't write a check, we have no late payers, no defaults, no bad business decisions. Still, we must reflect this $1 Million paper loss in our Capital Account, which drops from a $2 Million to $1 Million in value.
Here’s where things get problematic.
At this level, with $30 Million in loans outstanding, we now have a capital ratio of 30:1. At this level of leverage, alarms begin to sound.
Our ratios are out of the safe zone; we could go under with just a few losses, deposits are in jeopardy. Hello FDIC examiner, we are on the watch list, the Securities and Exchange Commission (SEC) is asking questions and our stock starts to tumble. The business networks are showing coverage of our now troubled bank. We are in big trouble.
The problem, we are "over leveraged". The solution? We have to “de-lever” . . . and do so quickly. But there are only two ways to do that, and one of them isn’t really an option.
The first way is to raise capital, but that’s not going to happen when our ratios are out of whack and we are in serious trouble as well as on the FDIC watch list. It is unlikely that anyone will be willing to invest cash in XYZ Bank.
The other option is that we can sell assets, like the outstanding loans, which are increasing our capital ratio. Like your neighbor, who owned his home outright but needed cash for medical bills, we are now under duress. The paper we are holding has a lot of value, but we have to sell it quickly and, because of that, cheaply. So, we offload the loans at a loss, which exacerbates the problem because those losses further reduce our capital account.
Very quickly, like a flushing toilet, things start to spiral – we are going down.
The problem multiplies
The problem doesn’t stop there. The fire sale we just had on our loans makes things worse – even for the banks that bought them up and thought they were getting a great deal.
Under Mark to Market, the loans we just sold must be included in the comparables that other financial institutions use to value their assets. This is how the problem spread and got so bad so fast. Other good institutions, with good loans, have to mark down. Just like us, they become over-leveraged. It’s a chain reaction, all triggered by a well intentioned, but over-reaching accounting rule.
Financial institutions fold, sell, or freeze. Credit - the life blood of our economy - is cut off at the source. Because of a lack of available credit, home sales and refinances crawl, auto sales drop and jobs are lost. Additionally, the economy enters a recession.
During the last recession in 2001, the economy recovered relatively quickly thanks to $3 Trillion worth of home equity withdrawals. But, more restrictive programs, a lack of available credit, and lower home values will make it difficult for us to use home equity to help pull us out of a recession this time around.
Fixing the problem
The Federal Reserve has passed a rescue plan, which, over time, will provide some level of help. Some banks will get money to infuse into their capital accounts. Others can sell some assets to the government in an effort to “de-lever”.
But, the big thing that is not talked about, not well understood, is the part of the rescue plan that traces this financial crisis back to the source.
The US Congress has given the SEC its blessing to modify “Mark to Market” accounting. And by January 2, SEC Chairman, Chris Cox has to get back to Congress with ideas, if any, on how to fix Mark to Market accounting.
It won't be eliminated, as we will not want to go back to the Enron days. But he is likely to adjust the Mark to Market provisions.
Here’s one potential solution - even rental or commercial real estate properties can be valued two ways:
1. The comparable sales method, which determines the value based on what other assets have sold for, which is the way Mark to Market work currently.
2. A cash flow method, which values the property based upon cash coming in.
If we see Mark to Market modified to use cash flow to value assets, without requiring a large percentage discounting mechanism - wow! What a shot in the arm that would be. We’d likely see the stock market rally, with financial stocks leading the uphill charge.
Consider that, in today’s market, fund managers are holding 27% of their assets in cash, compared with just 3% they held in cash when the stock market peaked in October of 2007. That means there is a lot of money on the sidelines that can push stock prices higher. Additionally, think about the redemptions from hedge funds that eventually need to be put back to work. That’s another reason to be optimistic about stocks in the first quarter of 2009 – provided that Chairman
Cox modifies Mark to Market accounting in a meaningful way. And a good stock market helps individuals feel better about purchasing homes. Additionally, stronger balance sheets for financial institutions will allow them to lend more money.
The bottom line
With some potentially very good news around the corner, there might be reason for optimism as we head into 2009.
Saturday, January 24, 2009
December 2008 Tucson Market Report
"AFFORDABLE" IS RETURNING TO THE TUCSON HOUSING
MARKET....according to the Tucson Association of Realtors Multiple Listing
December 2008 Statistical Report. In comparing December 2008 stats with the
past data we find: * The Median Sales Price of $167,900 is the lowest Median
since August 2004; *The December Average Sales Price of $200,055
is the lowest Average since February 2004; *The December 31, 2008 Listing
Inventory Count of 7,627 was the lowest since March 2006; *The December 2008 New Listings entering the market were the least since February 2005.
Arizona's foreclosures slowed in November and December as we saw Fannie Mae and Freddie Mac suspend foreclosure proceedings and evictions from single family homes. This suspension has been extended through the end of January to allow homeowners facing foreclosure to stay in their homes as they work with mortgage servicers under the Streamlined Modification Program. I have been assisting Fannie Mae also in developing a Short Sale "preapproval" program focused on those listings that may qualify for a short sale. This program is initially being tested in Phoenix and Orlando, where the foreclosure threat is much worse than Tucson. Many are predicting that Tucson's real estate market will show improvement in 2009!!
Home Sales Volume: Declined 19.93% from $193,643,336 in Dec. '07 to $155,042,902 in Dec. '08
Home Sales Units: Increased 2.92% from 753 in Dec. '07 to 775 in Dec. '08.
Average Sales Price (all res. types):
Decreased 22.21% from $257,162 in Dec. '07 to $200,055 in Dec.. '08
Median Sales Price (price at which half the homes were sold above and half below):
Decreased 20.05% from $210,000 in Dec. '07 to $167,900 in Dec. '08
Pending Contracts (New Sales Opening Escrow in Month):
Decreased 23.40% from 799 Units in Dec. '07 to 612 Units in Dec. '08
Active Listing Inventory:
Declined 12.41% from 8,708 in Dec. '07 to7,627 in Dec. '08
New Listings: Declined 5.6% from 1,590 in Dec. '07 to 1,501 in Dec. '08
MARKET....according to the Tucson Association of Realtors Multiple Listing
December 2008 Statistical Report. In comparing December 2008 stats with the
past data we find: * The Median Sales Price of $167,900 is the lowest Median
since August 2004; *The December Average Sales Price of $200,055
is the lowest Average since February 2004; *The December 31, 2008 Listing
Inventory Count of 7,627 was the lowest since March 2006; *The December 2008 New Listings entering the market were the least since February 2005.
Arizona's foreclosures slowed in November and December as we saw Fannie Mae and Freddie Mac suspend foreclosure proceedings and evictions from single family homes. This suspension has been extended through the end of January to allow homeowners facing foreclosure to stay in their homes as they work with mortgage servicers under the Streamlined Modification Program. I have been assisting Fannie Mae also in developing a Short Sale "preapproval" program focused on those listings that may qualify for a short sale. This program is initially being tested in Phoenix and Orlando, where the foreclosure threat is much worse than Tucson. Many are predicting that Tucson's real estate market will show improvement in 2009!!
Home Sales Volume: Declined 19.93% from $193,643,336 in Dec. '07 to $155,042,902 in Dec. '08
Home Sales Units: Increased 2.92% from 753 in Dec. '07 to 775 in Dec. '08.
Average Sales Price (all res. types):
Decreased 22.21% from $257,162 in Dec. '07 to $200,055 in Dec.. '08
Median Sales Price (price at which half the homes were sold above and half below):
Decreased 20.05% from $210,000 in Dec. '07 to $167,900 in Dec. '08
Pending Contracts (New Sales Opening Escrow in Month):
Decreased 23.40% from 799 Units in Dec. '07 to 612 Units in Dec. '08
Active Listing Inventory:
Declined 12.41% from 8,708 in Dec. '07 to7,627 in Dec. '08
New Listings: Declined 5.6% from 1,590 in Dec. '07 to 1,501 in Dec. '08
Home Buyer Tax Credit
Home Buyer Tax Credit: How It Works?
By Dale Martin
CAMDEN AND ROCKLAND (Dec 29): First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.
The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit
Homebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
[Editor's Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]
Source: Chicago Tribune, Mary Umberger (12/28/2008)
By Dale Martin
CAMDEN AND ROCKLAND (Dec 29): First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.
The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.
The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit
Homebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.
[Editor's Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]
Source: Chicago Tribune, Mary Umberger (12/28/2008)
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