Buying A House Using The Home Buyer Tax Credit

Inspite of the new tax credit signed into law yesterday by President Obama, there is still some confusion and many people are now starting to ask questions as to who qualifies, etc.  Yesterday, in my post I submitted an easy to read chart with the particulars.  To emphasize some information in that chart, a purchase to qualify would have to be made after enactment i.e.  it was signed 11/6 by the President which means it is effective  – November 7, 2009:

Who is Eligible

• First-time home buyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit. 
• Existing home owners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit. 
• All U.S. citizens who file taxes are eligible to participate in the program. 

Income Limits

• Home buyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.  
• For married couples filing a joint return, the combined income limit is $225,000. 
• Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.  
• The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000. 

Effective Dates

• The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009 i.e. effective November 7, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.  If a written binding contract to purchase was in effect by April 30, 2010, the purchaser will have until July 1, 2010 to close

 Types of Homes that Qualify

• All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.   

 Tax Credit is Refundable

• A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference. 
• For example:  
  • A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time home buyer tax credit).  
  • A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit). 
• All qualified home buyers can take the tax credit on their 2009 or 2010 income tax return. 

Payback Provisions

• The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.

The www.federalhousingtaxcredit.com site is being updated. Please check the site next week for more detailed information on the new tax credit!  

ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. ©

Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.  Based on a Blog at WordPress.

(For more local and national real estate information, go to www.bettyjung.com).
Portland

Home Buyer Tax Credit – Are You Pre-Approved?

Now Official – President Obama has signed tax credit into law. 10 a.m.

We are very close to getting final approval for extension of the tax credit.  The bill has passed both the Senate and the House of Representatives, and the President’s signature is expected today. 

The legislation includes the following components (here’s a link to a chart with more particulars of the tax credit):

• The $8,000 tax credit will be extended and available for first-time purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010, will be allowed an additional 60 days to complete the transaction. Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.  
• A new $6,500 tax credit will be available for repeat buyers who purchase between December 1, 2009, and May 1, 2010. To qualify for this provision, buyers must have lived in their homes consecutively for 5 of the previous 8 years.

There are many that don’t accept the “Buy Now” propaganda.  However, prices are low, interest rates are historically low, there’s lots of inventory to choose from, and with the additional tax credit, how can one say now is not a good time to buy?  Very rarely in my 34 years, and I’ve written about this before, have I seen where everything falls into place perfectly.  Now is a time where it’s close to being perfect – low prices, low rates, lots of inventory, tax credits, etc.

If you have a job, have savings, have a down payment, what is stopping you from buying a home?  As indicated in previous posts, I’ve always owned and I don’t believe in paying off someone else’s mortgage by renting.  I believe it’s far better to build your own equity than someone else’s. Granted there are reasons and times you should rent instead of buy, however, for the most part, I believe in buying a home of your own (I know you’re thinking, but I’m the Realtor®).

Now is the time to get pre-approved for a loan if you are planning on utilizing the tax credit.  Time passed quickly during the first tax credit time period and you don’t want to waste precious time this go-around — get pre-approved now.

Let me help, I’d love to be your Realtor®!

ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.  Based on a Blog at WordPress.

(For more local and national real estate information, go to www.bettyjung.com).

Portland

Market Update: Apartment-Multi Family Stats In Portland

It has been awhile since I posted any information on apartments (multi-family) units here in Portland.  This time I am focusing on the three areas my blog covers:  RMLS#147 Lake Oswego, West Linn, RMLS#148 West Portland, and RMLS#151 Tigard.  First, however, here’s the latest information from Western Real Estate Business  about Portland:

WESTERN SNAPSHOT, OCTOBER 2009

Portland, Oregon, Multifamily Market

1. MARKET MOVES

Three significant Portland multifamily buildings delivered downtown in the first two quarters of 2009: Cyan/PDX (352 units developed by Gerding Edlen Development), the Ladd (332 units developed by Opus Northwest) and the Riva on the Park (294 units developed by Trammell Crow). Downtown Portland has historically been a healthy submarket for multifamily and much recent construction has been centered there, so the area is now becoming very competitive. All three of the aforementioned projects are also pursuing LEED certification, which appeals to Portland’s urban tenant.

2. MARKET MEASURE

Vacancy is an important factor in Portland’s multifamily market as it is an indicator of the overall market’s health. The vacancy rate has been trending upwards in recent quarters, which should continue in the second half of the year. It’s important to note that the increase in vacancy is due to economic pressure on tenants, not migration of people out of the metro area. Expect vacancy to regain its footing in the summer of 2010 or when economic conditions improve.

3. THE MARK OF A MARKET

Portland’s Urban Growth Boundary (UGB) sets it apart from other multifamily markets in the West. The UGB has prevented overbuilding in both the single-family and multifamily markets in the last 5 years. So despite the recession, Portland’s apartment market has remained relatively healthy and under built, aside from some significant building downtown. This leaves Portland’s multifamily market in a strong position and set for a robust recovery when the economy improves.

— Robert Black is an associate vice president specializing in multifamily investment sales at NAI Norris, Beggs & Simpson in Portland.

Norris Beggs & Simpson reports that:

Landlords are doing everything they can to attract the fewer active renters in the market. Concessions today in certain submarkets are sizeable, including up to two months free rent on a 13-month lease for some new properties in the downtown area. Renters looking for a new place to live are shopping around for the best deals they can get, and existing tenants are also tuned in and looking for bonuses to extend their leases on expiration.

Despite the impact of the recession on the apartment market, Portland is in a good position for the upswing. U.S. News & World Report recently named Portland and its commercial market one of the ten cities “primed for a real estate recovery,” due to its green economy and overall economic health. When the job market and overall economy starts to improve, Portland’s multifamily market will be in a strong position for a rebound.

APARTMENT – MULTI-FAMILY STATS (Click on the RMLS# for property specifics and will only be in effect for a limited number of days):

APARTMENTMulti-FamilySTATS
	RMLS #147 Lake Oswego	RMLS# 147West Linn	RMLS#148West Portland	RMLS#151Tigard
Q1
# Complexes Sold	0	0	2	0
			RMLS#8106826
			RMLS#8101633
High Sold $			$1,050,000
Low Sold $			$792,500
Average Sold $			$921,250
Days on Market			62
% of Sold Price vs. List Price			87.24%
Q2
# Complexes Sold	0	1	5	1
		RMLS#8071839	RMLS#8044472	RMLS#8048377
			RMLS#9016980
			RMLS#8101280
			RMLS#7083661
			RMLS#8106074
High Sold $		$525,000	$825,000	$280,000
Low Sold $		$525,000	$320,000	$280,000
Average Sold $		$525,000	$447,957	$280,000
Days on Market		300	276	275
% of Sold Price vs. List Price		95.45%	81.1%	93.65%
Q3
# Complexes Sold	0	0	1	1
			RMLS#9008727	RMLS#9011509
High Sold $			$251,400	$249,000
Low Sold $			$251,400	$249,000
Average Sold $			$251,400	$249,000
Days on Market			154	189
% of Sold Price vs. List Price			100.6%	89.89%
FOR SALE NOW
# Complexes For Sale as of10-28-09	5	8	32	10
Source:  RMLS

 

How To Calculate The Cap Rate

Short for capitalization rate, Cap Rate is one of the most widely used formulas by real estate investors when analyzing investment property. It’s a component of return on investment for an investment property as it relates to the Purchase Price and based on the amount of Annual Net Operating Income the property will yield (not including mortgage payments or considering income tax) in proportion to the purchase price of the property. 

Cap Rate is calculated by taking the Annual Net Operating Income of the investment property and dividing it by the Purchase Price. 

So, the Cap Rate formula is: 

Cap Rate = Annual Net Operating Income (not including mortgage payments)/Purchase Price 

Note: when calculating Cap Rate, a higher resulting number is better.

Cap Rate Example: Let’s say you purchase a property for $100,000 that produces an annual net operating income of $5,000; this property would have a Cap Rate of 5% (5,000/100,000). Based on this calculation the property will generate 5% of the purchase price in income (not considering income tax) per year. If you were looking at another property with a purchase price of $100,000 that produced an Annual Net Operating Income of $8,000, this would obviously be a better deal with a calculated Cap Rate of 8% (8,000/100,000).

Note: A typical Cap Rate for investment properties ranges between 5 – 8% with an 8% cap rate typically viewed by seasoned investors as the more desirable type of investment.

Source:  In part – InvestorLoft

ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.  Based on a Blog at WordPress.

(For more local and national real estate information, go to www.bettyjung.com).

 
Portland

A Big Headache: Where’s The Note?

I’ve written a couple of posts where MERS electronically kept track of notes rather than recording the title at the required county recorder offices throughout the U.S.  Now, it is not only becoming a problem but a headache for many states.

Real estate agents may also now be required to issue a disclosure to buyers when purchasing a short sale or foreclosure indicating there could be a “cloud” on the title in regards to not only first but also second mortgages.

I haven’t heard of it becoming a problem here in Oregon because we weren’t as involved in the sub-prime mortgage market as many other areas. However, it takes one person to test the validity of their foreclosure to bring the problem to the forefront.  We may still see a wave of issues here locally as well.  You can read more about it here.  There are many states that are having lots of problems because of the electronic tracking that MERS initiated.  I wonder who thought of that great idea??

Laws are written for a reason.  To determine chain of title, it has always been that a transfer of deed needed to be recorded along with the note, in the appropriate county.  Afterall, that’s what closing is – recording. 

Somewhere, someone got the idea to by-pass that law, make a lot of money and just keep track of the note rather than processing the required and necessary recording.  Now it’s coming back to haunt everyone from title companies, lenders, attorneys, courts, real estate agents and not to mention sellers and buyers.  Just one more chapter in this foreclosure crisis that everyone now is becoming aware of and we’re probably not through yet.

ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.  Based on a Blog at WordPress.

(For more local and national real estate information, go to www.bettyjung.com).

Market Update: First-Time Home Buyers In Portland

I had a different post written for today, but I will wait to post that until the end of October.  In the meantime, our RMLS™ blog posted this information about first-time home buyers in Portland:

Homes below $400k make up 85% of sales in September

I recently read that in Phoenix,  93% of September Home Sales were below $400k.  The author says that Phoenix is essentially a “tale of two markets”, one where homes in the lower priced spectrum are selling & where high-end homes are sitting.

We’ve looked at similar numbers before to see how the homebuyer tax credit was effecting the Portland market, so I figured it was time to take a look at these numbers again & see how we compare to the Phoenix sales by price range – here’s what I found:

% of Portland Home Sales by Price Range (September 2009)

	Sept. 2009	% of Sales	Sept. 2008	% of Sales
$0-$150k	190	10.4%	115	6.6%
$150-$200k	383	20.9%	235	13.6%
$200k-$250k	416	22.7%	420	24.3%
$250k-$400k	569	31.0%	633	36.6%
$400k-$500k	142	7.7%	170	9.8%
$500k-$750k	96	5.2%	114	6.6%
$750k – $1 million +	38	2.1%	44	2.5%

% of Sales by Price Range, Combined (September 2009)    Sept. 09 Sept. 08 Below $250k 53.9% 44.5% Below $400k 85.0% 81.1% Above $500k 7.3% 9.1% As you can see, not quite as high as Phoenix, but still 85% of sales in Portland were below $400k, which is up about 4% from last September. Also note that sales below $250k are up 9.4% from last September. I suspect a lot of those sales can be attributed to the $8,000 tax credit (although some investors may also be cashing in on some lower priced homes as well). The tax credit is set to expire on November 30, and the debate rages on in Washington over its extension. It seems to have given the market here a boost, so it will be interesting to see how the market fares if/when it expires. If the tax credit does indeed expire, it would still take a lot for things to get worse this winter compared to last year. Last January we saw sales activity drag to the lowest total in the Portland metro area that we had seen since RMLS™ began keeping records in 1992.

ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.  Based on a Blog at WordPress.

(For more local and national real estate information, go to www.bettyjung.com).