Home Buyer Tax Credit Extended and Expanded

Good news for home buyers, Not just a first time buyer credit anymore. Once again Uncle Sam is firing up the printing press to give home buyers money as incentive to purchase a first home or to move and buy another (not for investors). The federal housing tax credit (H.R. 3548) for buying a home has been extended from the November 31st deadline to June 30, 2010 and now expanded to offer the credit to current home owners looking to move.

TAX CREDIT OVERVIEW

Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.

 
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.

Below is a quick overview of the program and the changes, for details or to get the info from the source see these resources.

www.MarivicRealty.com
Local: 732-650-9911
Toll Free: 1-866-745-GMAC(4622)
Facebook Blog: www.realrep.com

TAX CREDIT ADDITIONAL RESOURCES
Government Site http://www.federalhousingtaxcredit.com/
NJ Home Buyer info site http://www.realstorynj.com/
Tax Credit FAQ’s - PDF document

ADDITIONAL REAL ESTATE NEWS RESOURCES
Marivic Realty Facebook info page http://www.realrep.com
Realty News Videos http://realtytimes.com/
Inman News http://www.inman.com/
WSJ Real Estate http://www.realestatejournal.com
NJ Real Estate Report Blog http://njrereport.com/
Star Ledger NJ.com Real Estate http://realestate.nj.com/
NJ Business & Economic Issues http://www.njbiz.com/

Top 15 Things A Listing Agent Won’t Tell Sellers … But REALLY Should

We’ve all been there: something happens and you feel like you just HAVE to say something. However, common sense and the manners your mother pounded into you during your childhood keep your lips planted together and those thoughts remain inside your head.

As I talk to a lot of REALTORS, they share with me things they’ve often wanted to say to sellers but never had the guts to do so. But deep inside they felt they really SHOULD have said something. And so … since they won’t say those things out loud, I will!

Here are the top 15 things listing agents want to say to sellers, but won’t …
And I didn’t make ANY of this up. I also know that one or two of these things may offend someone, so please accept my apologies right up front!

1. “I know it’s hard to believe, but as professional Realtors, we actually do know more about selling your house than you do.”
You might be an engineer, doctor, lawyer or tribal chieftain … but as a licensed, highly trained full-time REALTOR, we do this all day long every day. And just like we’d never presume to tell you how to do your job, we REALLY don’t like it when you presume to know more about selling houses than we do.

2. “You have a nice house, but it’s not anything really special.”
We know you live there and have your emotions tied to your home, but as Realtors, we see hundreds and hundreds of homes every year and trust me, yours is … ok. There is absolutely no reason it should be priced higher than other comparable homes in the area. None. Zip. Nadda. In fact, if you want it to sell in the current market, it should actually be priced a bit LESS …

3. “Your upgrades don’t deserve the extra amount you want added to the price.”
We’re glad you’ve added crown molding everywhere. And paid for Ralph Lauren suede paint. And new carpet. Your new toilet seats are great. And we’re really glad you sanded out the dog pee stains in the hardwood floors and refinished them. However, none of your upgrades add a single penny’s value to your home. In the new economy, new windows, nice flooring and a newish roof should be considered standard. Buyers today demand a whole lot more before they are willing to start paying premium prices. They expect designer kitchens with custom cherry cabinets, recessed halogen lighting, new upscale appliances, solid granite counters and more. They want totally upgraded baths with Jacuzzi tubs, tumbled marble, frameless glass doors. And so on …

4. “I know what you think your house is worth.”
Now get real! The seller doesn’t set the price, the market does. And the simple truth is that lower priced homes sell while higher prices homes sit and sit and sit. Sorry. And I truly AM empathetic that you bought your home in 2005 or 2006. At the top of the market. Please remember that I own a house too and my property value has also gone into the toilet …

5. “I’m glad you collect things. We’re selling your house, not your stuff.”
You’re moving anyway, pack all your collections away. Now. And the talking fish needs to be the first thing off the wall and in a box …

6. “Agents are willing to do open houses because they get prospective buyers – who want to buy somebody else’s house, not yours.”
Open houses REALLY are not an effective way to sell your home. Even though they sometimes work, they are the least effective way of getting the job done. Trust us. See point #1 above.

7. “We have some issues with your decorating …”
The Caltrans orange room has to be repainted. And the lime green one. While you are at it, get the midnight blue room as well. Whatever were you thinking? Did you scrounge through the “ooops” bin at Home Depot? It’s nice that you have wallpaper from 1978. Please remove it and repaint the wall. And whatever you do, DON’T paint over it …

8. “I really don’t want to get intimate with your dog.”
I especially don’t like what he’s doing to my leg. And the smell in here is really bad. Please keep Fido in the garage during the time you are selling your home. And the doggy bombs in the back yard gotta go as well.

9. “I will not be responsible for your cat.”
If you are concerned it will bolt out the door when prospective buyers arrive, then please keep Fluffy in a Kitty Crate while you are gone.

10. “Don’t put up ANY roadblocks that may keep sellers out.”
Don’t even THINK about showing your home by “appointment only.” Don’t want a lock box? Trust me, your stuff isn’t that valuable. Don’t want buyers after 5:00 p.m. at night? You’re kidding, right? If a buyer can't get in when it works for them, they are gone.

11. “Prospective Buyers DO NOT want you to give them a tour of your home.”
They actually want you out of the house … so resist the urge to be a tour guide and go for a walk around the block. They’ll find out on their own that you’ve carefully lined the cupboards with new floral shelf liners and put a new TP holder in the master bath.

12. “STOP SMOKING IN YOUR HOUSE!!”
Especially the pot …

13. When a Realtor calls to let you know they’re coming at 11:00 a.m., rings your door bell, knocks VERY loudly, opens your front door and yells, “HELLO, REALTOR,” …
Please get out of bed BEFORE we get to your bedroom … and put some clothes on when you do …

14. What is that smell???
Whatever it is… it’s gotta go … and please don’t cook with curry until you are in your new home … or fry fish right before people come to see your home …

15. “We’re worth our commission.”
Every penny of it. Selling a house is actually hard work. And, for those of us who market extensively, it costs a lot of money that we pay out of pocket up front. You really do get what you pay for. In the same way you’re not going to be able to buy a Honda at a Daewoo or Suzuki dealership, you are not going to get full support, service and top-notch professional representation at bargain basement prices. There’s a very good reason many discount brokerages are going out of business in the current economy. Anyone who is willing to take a cut-rate commission structure is simply not going to be able to make enough off your listing to do the types of advertising necessary to get you top dollar. And since you are competing against REOs and Short Sales, if you go cheap, you will lose every time.
Well … there they are – I've probably managed to offend everyone! I know you will have some of your own to add ... please, be my guest!

IMPORTANT: Short Sale, Refinancing, Loan Modification info

Mortgage Default Income Tax Relief
H.R. 3648

Important information:

Have you recently or are thinking about doing any of the following:

• Refinancing
• Short Sale or Pre-Foreclosure Sale
• Loan Modification
• Loan Restructuring
• Ask your Lender to Reduce or Forgive a Debt

Although disliked today by many people with short memories or who don’t even follow his politics and forgot or never even knew all the good that President Bush has done, it seem hating him is the Politically Correct or PC thing to do these days as so many follow suite.

This is really another great thing President Bush has done which is taken for granted these days but many find themselves so thankful for without giving the proper credit where it is due. Without H.R. 3648 real estate would really be dead in the water today to a degree which would be catastrophic in comparison to what is currently being experienced; so for all the leftists and Bush haters out there, I am certain this bill has touched you or someone you know in ways you cannot even begin to imagine.

Due to the act which this article will address many have been able to keep their homes or sell them and make settlement agreements with their lenders for an amount less than what was owed without having to pay an additional income tax for the amount which was forgiven by the lender.

Many people who are using the short sales method today to sell their homes, which has become so common only makes financial sense to do so and made possible to do so due to this act initiated by none other then George W. himself.

"When your home is losing value and your family is under financial stress, the last thing you need is to be hit with higher taxes. So I'm working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt."

─ President George W. Bush, 9/1/07
VIDEO: President Bush Signs H.R. 3648

Thursday December 20th 2007 President Bush signed into law H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007 to amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes.

So what are we really talking about here?
Tax laws consider forgiven debt as income, which can leave those of you with foreclosed homes with some unexpected tax bills. Let's say I loan you a million dollars. Now I go, "Oh, wait. Never mind. You can keep it." The IRS considers that income. You would have to pay the taxes on your million dollars.

The tricky part comes in when I'm not just loaning you a million dollars. I'm loaning you money to buy an overpriced home that you can't afford and I can't sell for as much as you owe me once I take it back from you.

So how does this bill affect me?
Here is where the Mortgage Forgiveness Debt Relief Act of 2007 comes in to play.

Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.
Under the tax code, a lender who forgives a borrower's debt must provide a form 1099 to the IRS reporting the forgiveness of indebtedness as income to the borrower. The new legislation from Bush provides taxpayers who experience a home loan foreclosure or renegotiation resulting in forgiveness of indebtedness income with three year exclusion up to $2 million.

Bush said during the signing ceremony: "The law will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Ahhh…. You may be scratching your head at this point so let’s simplify that a little further.
Under the Mortgage Debt Forgiveness Act of 2007, some homeowners granted forgiveness of mortgage debt won't have to pay taxes on that amount. But there are some restrictions:

1. There is a limit on the forgiven debt: up to $2 million or $1 million for a married person filing a separate return.
2. The tax break also has a time limit. It only applies to mortgage debt discharged by a lender in 2007, 2008 or 2009.
3. The loan also must have been taken out to buy or build a primary residence, not a second or vacation home. If debt is forgiven on those additional properties, the owner will owe cancellation of debt income as usual.

This law comes with a new tax form which must be filed if you find yourself in the unfortunate situation of having to do a short sale or if you are able to manage to work with your lender and by the grace of god manage to get them to forgive some of the debt and restructure you loan so that you can keep your house among other possible scenarios where you experience a debt forgiveness.
You will be required to file the new IRS tax Form 982.

If home mortgage borrowers are entitled to forgiveness for the income tax consequences of their default, who is to blame? Forgiveness of indebtedness income corresponds with the forgiving lender's bad debt deduction.

The House Ways and Means Committee in September, Rep. Kevin Brady, R-Texas, said that he wished the cost of paying for the relief was more tightly targeted to the lenders and real estate speculators who helped create the subprime lending crisis. Committee Chairman Charles B. Rangel's, D-N.Y. response explains it all for you. "It's so much easier to give the tax break than to pay for it."

Either way without the help of the Mortgage Forgiveness Debt Relief Act of 2007 we would be seeing a lot more of this going around. Read the story

Additional Sources:

• IRS on the Mortgage Forgiveness Debt Relief Act
• Mortgage Work Outs Now Tax-Free
• Hope Now The Home Owner Preservation Alliance 1.888.995.HOPE
• FACT SHEET - The Mortgage Forgiveness Debt Relief Act of 2007
• VIDEO: President Bush Signs H.R. 3648
• Official White House Press Release about H.R. 3648 Mortgage Forgiveness Debt Relief Act of 2007
• Wikipedia About George W. Bush
• George W. Bush Presidential Library
  

Some Banks No Longer Cooperating in Short Sale Process

Everyone knows about the 700 Billion dollar bailout for the banks in the U.S. but who was is it suppose to benefit?

The premise was that this would help free up the flow of money from lenders so that people can get mortgages again and purchase homes from the people in troublesome foreclosure situations in the process clearing up that problem.

So what's going on now? What happened? Business as usuall, Greed taking over and hurting the small guys while the banking industry still remains tight with its lending practices.

I've been noticing a frightening trend lately among the banks just recently after the bailout which is just starting to build momentum.

Since the banks are now hurting less with a lot more cash in their pockets due to the huge cash infusion to them, they are no longer as willing to work with home owners play ball to help the banks sell their houses in lieu of a foreclosure via the short sale method. Citi Bank seems to be one the trend setters in this arena leading the charge in holding home sellers accountable to still pay back the loans for a house they already lost or are losing, wish the banks would have been held accountable like. I guess that is a one way road where only the banks will benefit.

So where are all the safeguards Nancy Peloci the Speaker of the United States House of Representatives was bragging about which would help the home owners out there? Looks like Nancy Peloci and the democratic house are looking to spend 150 Billion more, will they be accoutable to whom they are giving these infrastructure, energy and other grant money to?

The banks are now figuring since home owners are hurting bad enough to sell their homes through a short sale and willing to walk away with nothing, the banks are taking it a step further and not allowing the process to continue at the last minute unless the home seller agrees to sign a personal loan guarantee that they will still pay back so much money from the loan even after they no longer have the house.!!!!

I'm working with a divorced couple who's credit is shot due to their differences and the house which neither of them live in any longer, yet they are holding up their end of the bargain with the banks and maintaining the property and doing what is necessary to allow an easy sale to a new buyer.

What's wrong with this picture?

Wasn't that 700 Billion dollars suppose to help the home owners who are hurting and allow banks assistance so they can be more willing to lend money to new home buyers?

The banks are taking advantage of the bailout and letting greed take over once again. Where are the safeguards?

In one instance I am speaking of most recently Citi Bank is the 2nd lien holder who is normally willing to walk away with one or two thousand dollars vs. the alternative of a foreclosure by the 1st lien holder and getting nothing.

I had an attorney who is a short sale specialist tell me this morning that this is rare but he has seen it before and it is becoming more of a trend as the banks become more stable. They are less willing to work with home owners sell their homes without demanding a personal loan guarantees and in the process making it no longer worth it for home sellers to cooperate. It takes a lot to close the sale on a home especially those in need of work in order to obtain a certificate of occupancy. I don't forsee home sellers will be as willing to do repairs or upkeep on a property they are losing and will still need to pay a mortgage back for in addition to coming up with money for a rental to move to.

Despite Bush's bill called the Mortgage Forgiveness Debt Relief Act of 2007 to prevent 1099'ing and taxing sellers on the forgiven debt as a result of a pre-foreclosure sale, home owners selling in these types of short-sales worked great until now because now the banks are unwilling to cooperate.

If this type of practice becomes more relavant I suspect we will be seeing a lot more foreclosures in the near future. This is not good news for home sellers facing this type of situation because the banks are pulling the last piece of hope from under sellers wishing to get a fresh start like the banks are, only without the government cash infusion.