Are We There Yet!??

Like a ten year old on a road trip, people are wondering if real estate prices have hit the bottom… are we there yet?  It goes beyond the usual “how’s the real estate market?”  More than ever, it’s:  Is this a good time to buy?  How do you buy a foreclosure?  Is it hard to get a mortgage?  Are homes selling … How long would it take to sell my home?  What if we buy and prices continue to go down?  Are interest rates going to increase?
 
It does seem that prices in the Seattle Bellevue Redmond real estate market are starting to level off.  While this is not true in the counties of Pierce, Thurston and areas in Snohomish County… King County and specifically Seattle and the Eastside have seen increases in home sales and a stabilization of pricing.  This is especially true for King County condos and homes under $400,000.  Many first time home buyers and those who have been waiting on the sidelines are jumping in and taking action as they find more affordable pricing and terrific interest rates.  Even if prices slide a bit more, all it takes is an interest rate bump and buying power can diminish.

Though it is a buyer’s market, it is only a buyer’s market if you buy.

If you are in the market to buy, Now is a great opportunity. Home sellers are still anxious as their home prices have fallen and many homes continue to sit waiting for a buyer.  Home foreclosures and short-sales have increased.  Interest rates are incredibly low.  There are also many First Time Homebuyer products available.  And the Housing Stimulus Bill provides a First-time Home Buyer credit of $8,000.   These facts, along with lower prices and tax advantages, even if the market hasn’t hit bottom, a buyer could loose money by waiting to purchase.

But the main point in home ownership is not even the economics.  While it is a fact that buying and holding real estate has been a great wealth generator, there is still ‘no place like home.’  Home is where families create memories.  Our home is our sanctuary.

Even with investment considerations, the main reason to purchase a house or condo is to live there.

Ways to use $8000 tax credit to purchase first home

I was just reading that the National Association of Realtors is working with the State of Washington in exploring ways that will put the federal $8000 First-Time Homebuyer tax credit and economic stimulus money coming to the state to use at the closing of a sale.

I’ll be following this to see if this develops into something real.  It would be a tremendous benefit for the First Time Home Buyer.  It is usually the lack of down payment that is the main barrier to home ownership.  Especially for those who have stable incomes and good credit.

In researching this subject, I came across a couple of innovative ways to be able to use this credit as a source to come up with a down payment:

1) get a loan from a family member for the down payment.  FHA loans allow the down payment to come from family members, assuming they are in the position to help.  Then after the buyer closes on the purchase, amend the 2008 tax return and repay the loan to the family member.

By the way, many conventional loans allow money for the down payment to be gifted.  It has to be considered a gift.  But I don’t think anything says you couldn’t gift the gift giver back!!

2) buyers can increase their W-4 exemptions so less money is withheld from their paychecks. Then they can file for the tax credit with their 2009 tax return. The buyers just need to make sure they do not change their exemptions to net more than $8,000, the amount of the tax credit.

I also read one way that seems clever, but don’t think I would recommend this without talking with a CPA first.

Here’s what was said: If you meet the qualifications for the First Time Home Buyer Tax Credit (click here for details), you would claim the credit now on your 2008 income tax return.  Yes, even if you haven’t purchased a home yet, they’re saying claim the credit now.  Then get the money and put it toward the down payment or closing costs.  I thought this was clever.  Never said it was smart … or legal.  Might check with your accountant though, you never know.

The family gift and restructuring your W-4 are legitimate and positive ways to come up with a down payment and be able to take advantage of, not only the $8000 tax credit, but the low interest rates and affordable pricing to purchase your first home now. 

Did you know that you may also be able to get money from your IRA or even your 401k?  Here’s an article with ten more ways to come up with a down payment to buy your first home. 

 

2009 First Time Home Buyer Tax Credit

As an update to a previous post, details are now in on the First Time Home Buyer Credit in the Economic Stimulus Bill (formally called The American Recovery and Reinvestment Act of 2009).  The bill was signed into law on Tuesday, February 17th.

 

Here’s an overview of the provisions in the bill that will benefit First Time Home Buyers:

 

·   The tax credit is for first-time home buyers only.  A First-Time Home Buyer is defined as someone who has not owned or lived in a principle residence within the past three years.   

·   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.  (ex:  Home purchase price $300,000 x 10%= $30,000   Max Tax Credit = $8,000)

·   The tax credit does not have to be repaid.  (unlike the previous credit enacted in 2008)

·   There is a limited window of opportunity. The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

·   The tax credit is income qualified so is subject to income limitations: single taxpayers will need an adjusted gross income of up to $75,000 for the full credit.  Married couples with incomes up to $150,000 qualify.  Those earning more than these limits may qualify for a reduced credit.

·   The tax credit is “refundable”, meaning even if you have little tax liability and don’t itemize deductions when filing your tax return, a qualified first time home buyer can still take advantage of the credit.

·   You will have to own the home for at least three years to capitalize on the credit.  Should you sell the home before three years, with the exceptions of death or divorce, there is a ‘Recapture’ provision where you would have to return a portion of the credit back to the government.

 

A note for those first time home buyers who purchased a home prior to Jan 1st, 2009… this bill is not retroactive.  It seems that this bill is to encourage those who have been thinking of purchasing a home to get off the fence to help spur the economy.

 

However, if you did purchase a home as a first time buyer between April 9, 2008 and December 31, 2008 you may qualify for the $7,500 tax credit and claim this credit on this year’s tax return. 

 

 A good source for FAQ explanations is http://www.federalhousingtaxcredit.com/2009/faq.php

 

I encourage you to explore Item 19 especially.  This is an interesting strategy for someone planning to purchase their first home this year and how you can take advantage of this tax credit without having to wait till the 2009 tax returns are filed.

 

I am an instructor of Washington State Housing Finance Commission sponsored First-Time Home Buyer classes, and will be conducting a class on the evenings of Tuesday, March 10th and Thursday, March 12th.  View a schedule of all the sponsored classes at www.wshfc.org

 

Complete details of the bill:  http://www.whitehouse.gov/the_press_office/ARRA_public_review/

 

The White House opened a website to provide some transparency as to where the money is being spent:  http://www.recovery.gov/

 

New Group on Facebook

One of my philosophies is to support local business.  I especially place emphasis on supporting and promoting the businesses of my friends and clients.

An example of the talent is Rob Heim.  Rob and his wife Amy used my services to help them sell their Duvall home and acreage.  They later called on me to help them find their current home in Maple Valley.  Rob and Amy are very active paragliders that fly off Tiger Mountain.

Professionally, Rob is a very gifted Landscaper.  Landscape artist actually.  After his move to Maple Valley, Rob jumped off the ledge.  He left his lead position at the company he where he worked and started his own landscape business.

View Rob’s site online at www.cedarrocklandscapes.com.  He works all around the Eastside and King County.  When you look at his portfolio, and should you get the opportunity to meet Rob & Amy, you will find two talented professionals and a very silly and terrific couple!

I’ve created a group on Facebook called The hello Real Estate Network.  My goal is to encourage discussion and networking among those interested or involved in real estate.  Consumers, real estate agents, as well as vendor and contractors.  It is an open Facebook group so anyone can join.

One of the tasks I am working on is that of compiling a list of contractors and vendors that would not only service my target markets, but would also service the various communities of those in the hello Real Estate Network Group.

First point of emphasis is always … quality first!

Rob’s business is one that I have no concerns in supporting and is an example of the many quality professionals I hope will become part of my Concierge list within the hello Real Estate Group.

You’re invited to share a story of someone that you would like to get noticed