Expanded Homebuyer Tax Credit Legislation

Tax credit extended for first-time homebuyers and expanded to include qualified current homeowners

November 11, 2009- Thanks to legislation recently passed by the United States Congress and signed into law by President Barack Obama on Nov. 6, qualified first-time homebuyers and current homeowners have what is likely to be their best and final opportunity to receive substantial assistance with the purchase of a home

The American Recovery and Reinvestment Act of 2009, offering an $8,000 credit for qualified first-time homebuyers and which was set to expire at the end of November, has now been both extended and expanded in scope.

The Homebuyer Tax Credit will now be available for first-time homebuyers who sign a binding contract by April 30, 2010 and close on the purchase by June 30, 2010. In addition, the scope of act has been expanded to include a $6,500 credit for current homeowners who purchase a new primary residence. Under the terms of the legislation, current homeowners must have used the home they have sold, or that is being sold, as their primary residence consecutively for five of the past eight years.

Other eligibility requirements apply, including income limits, but individuals who exceed the limit may be eligible for a partial credit, and buyers should seek advice from a professional tax advisor for specific tax calculations. For a summary (in PDF format) of eligibility requirements for both first-time homebuyers and current homeowners, visit http://www.era.com/eraresources/buyingadvice/taxcredit.jsp.

This legislation will help stimulate a significant level of home buying activity in the market and, more importantly, it will have a terrific impact on our economy. Given that many leading economists believe the U.S. economy is in the early stages of a recovery, I don’t foresee the tax credits being extended beyond the April expiration date. I caution all potential buyers that this is likely to be their last opportunity to take advantage of this generous tax credit.

To find out more about the American Recovery and Reinvestment Act temporary federal income tax credit and whether it may be available to you, contact your tax professional or legal adviser; and contact me at kenneth.brown@erakirsch.com or 781-250-0126 to help you find your new home.

According to the National Association of Realtors (NAR), about 1.4 million first-time homebuyers have qualified for the tax credit through August; NAR estimates that 350,000 of these buyers would not have purchased their homes without the credit.

The worst part of every sale...

is the home inspection! All parties involved with the sale, dread the home inspection, the real estate sales people do, the sellers do and yes, the buyers do too. Why? It is the fear of the unknown.

Real estate sales people dislike the home inspection for many reasons. For the most part it could be a lot of extra work negotiating or even worse a loss of a deal. Realistically, home inspections go well. However, from time to time when a problems arises, sales agent have to work very hard finding straightforward cost effective solutions for the problems and then tend to their client's emotions. Even after looking at all the possible options, sometime no amount of negotiation can keep a seller and buyer in the transaction. If the buyer is unreasonable in their request or the seller is unreasonable in the solution, there can be no sale.

Most sellers take pride in their home, so when an issue arises in the home inspection they may get a little more emotional over the situation. After all it is their home. It's not unusual that the seller may question the inspector's report and question the inspector's own knowledge. Once an offer is signed on a property, the seller has emotionally and financially committed to the sale. To them, a home inspection may effect their bottom dollar or possibly jeopardize a much needed sale or a selling time frame, effecting moving dates and the purchase dates on another property.

During this part of the transaction, buyers also have emotionally and financial commitment to the property., When the "expert", discovers an issue, the buyer's comfort level of the house is lowered and disappointment sets in. Buyers are always "cash strapped" for the most part and usually don't have the extra money available to make the recommended repairs. This is where the help of the real estate professional can aid in the buyer's next move.

Rectifying problems can be easier than you think. One of the most popular ways of addressing the smaller issues that don't require immediate attention, is to get several repair costs on those items and negotiate out an amount that is acceptable to both the seller and buyer, reduce the sale price accordingly and leaving the repair(s) to the buyer. If an issue needs more immediate attention, then the seller should take on the responsibility of repair. All work should be done professionally and proof of completion and payment should be brought to the closing.

A great way for the seller to avoid "surprises" is to be proactive by hiring their own home inspector before they list the house for sale. This way if a issue is discovered, the seller can fix it prior to listing the house for sale. This can actually increase value and will make for a very smooth transaction. Buyers should never rely on the seller report alone. Buyers should ALWAYS hire their own home inspection as well.

To help in the sale of a property, I always attach a ERA Home Protection Plan to every transaction I'm involved with. It creates a safety net for the buyer after the sale and protect the property from many mechanical breakdowns that may happen in the first year of ownership.

Good bad or indifferent, home inspections are a necessity and every buyer should have one done, even when purchasing new construction.

Kenneth Brown

Buyers and lending problems. You just don't know.

In today's real estate climate, sellers and REALTORS alike have to pay more attention to details. Getting buyers financing can be, sometimes challenging however, more importantly, is making sure the property for sale is financeable.

I recently ran into a situation with a four family rental property that is being converted to condominiums. I have two of the four units actively on the market and shortly the other two will become available. I will tell you there is no shortage of buyers walking through the property! There was an offer submitted on one of the units and another coming in for the other. Sounds great doesn't it! But, the reality is the buyer(s) will not be able to secure financing for these two units. The buyer with the first offer, has been pre-approved with a 10% down payment. Well, guess what? The unit doesn't qualify for 10% down financing! If the buyer wants to proceed he/she has to come up with an additional 10% down.

Why you ask is this happening? It's a bit complicated, so let me explain. As you know, the property is being converted to condominiums. Because its being converted, no "unit ownerships" have been created. When a buyer goes out to purchase any property, their down payment determines if the bank/lender will required PMI (mortgage insurance) as part of the mortgage. If he/she/they have less than 20% to put down on the property, then PMI will be required. PMI protects the bank from a loss if property value is less than the loan amount if the buyer can't pay back the loan. PMI requires that a condo"complex" have some sort of Owner Occupied percentage for the property to qualify. Since there are no Owner Occupied units, PMI will not insure the loan and in turn the lender will not write the mortgage for the buyer. The buyer does have the option to put down an additional 10%; but, lets face it, they don't always have more money to put down!

As yo can imagine the seller is in a bit of a pickle. He was told by the "bank", who loaned him the money to purchase the building, that they would finance the first two units knowing they were going to be the toughest to sell, as long as the buyer would qualify for the mortgage. The kicker is, to have the buyer qualify, he/she/they have to put down 20% because of the PMI issue. Its a vicious circle. There is an alterative options available using creative financing. This option can be complicated and involves the buyer borrowing and securing a 2nd mortgage from the seller for the additional 10% down payment, and the bank/lender agreeing to allow this 2nd mortgage to be put on the property.

I know in the end these units will sell. The lesson, if there is one, is to remember to do your home work when buying or selling. PAY ATTENTION TO CURRENT LENDING PRACTICES. My seller is a very seasoned investor/contractor and he underestimated this problem.

Kenneth Brown

Make your house more appealing to Buyers

The days have gone by which you could just post a "For Sale" sign on a property and it would sell over night. Today the the home seller must be more diligent to know the competition and figure out a way to attract the buyer. The age old question from the a seller is, "How do I make my house more appealing to Buyers?"

Look at the bigger picture; from the moment a home is placed on the the market, it's now a PRODUCT. How do we WOW the buyer and "sell" the house?

Start by cleaning and tiding closets, kitchen counters, storage area, bathrooms and garages. Open up all shades, blinds and drapes to let the sunshine in and remove all personal effects, family photos, trophies and such.

Give the house a though cleaning and remove clutter. Sometime you may want to even remove some furnishing to give a room the appearance of more space. Have the carpets cleaned and add a vase of flowers to a dining room table or counter.This adds visual interest and effects all the scenes of the buyer.

Curb appeal is another very important aspect to selling a home. If the house doesn't look good out side, the buyers won't come in side. Keep the lawn cut, trim hedges, plant flower in bed, season permitting, fix any broken or damage wood, weed walkways and gardens and put planters on the front steps for some visual flair.

Sometime its necessary to spend some money; a little paint can go a long way. Purple walls won't attract buyers. Consider painting a more neutral colors. Paint adds a look of cleanliness and freshness. Refinishing hardwood floors is also a great option, especially if you have wall to wall carpet over them. Most buyers like hard wood floors and once re-finished they help sell a house faster and at a better price.

Upon a showing appointment, all lights must be turn on, even on a bright and sunny day. All the beds should be made and every seller should quickly walk through the house picking and up anything out of place.

By preparing a home to sell it shows the potential buyer that the seller really cares about their home and gives the buyer a sense of comfort with the property.

I've only scratched the surface of this subject. I have tons of ideas available for review. Just give me a call and I'll help.

Kenneth Brown