Here is some interesting information concerning the FIRST-TIME HOMEBUYER TAX CREDIT as modified in the American Recovery and Reinvestment Act enacted in February 2009.
The amount of credit as created July 2008 that applies to all qualified purchases on or after April 9, 2008 is the lesser of 10% of the cost of the home or $7,500. The revised credit – effective for purchases on or after January 1, 2009 and before December 1, 2009 is increased to $8,000.
There have been no changes in eligible single family property which includes houses, condos, co-ops, and townhouses used as a principal residence.
Purchasers will continue to receive refund for unused amount of tax credit when tax return is filed reducing the income tax liability for the year of purchase.
The same income limits continue to apply for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). This phases out above those caps ($95,000 and $170,000).
No change for first-time buyers (and their spouse’s). Purchasers may not have owned a principal residence in 3 years previous to purchase.
While no credit was allowed if home was financed with state/local bond funding between April 9, 2008 and January 1, 2009, after January 1, 2009 purchasers who use bond financing can use credit.
While 6.67% of credit or $500 is to be repaid each year for 15 years starting with 2010 tax filing for properties bought between April 9, 2008 and January 1, 2009, there is no payment for purchases on or after January 1, 2009 and before December 1, 2009.
Prior to enactment of the American Recovery and Reinvestment Act, if a home sold before the 15-year repayment period ends, the outstanding balance of repayment amount is recaptured on sale. After enactment, if the home is sold within three years of purchase, the entire amount of credit is recaptured on sale. This applies only to homes purchased in 2009.
Prior to enactment the termination date was July 1, 2009 (but you should not changes for 209). The termination date after enactment is December 1, 2009.
On purchases on or after April 9, 2008 and before January 1, 2009, repayment is to begin for in the 2010 tax year. All revisions are effective as of January 1, 2009.
Sunday, April 5, 2009
Sunday, November 9, 2008
Now's the time to buy...here are 10 reasons why!
2. The concession stand is open: Home buyers can always ask for concessions, but in today’s market they have increased leverage to get them. In many parts of the country, buyers are not only getting price concessions, but often help with closing costs. Agents who understand the nature of seller concessions can often help buyers get a better deal above and beyond reductions in sale price.
3. There is more than one yardstick: How slow is the real estate market? It depends whom you ask, and how they measure. Real Trends, one of the industry’s most respected research organizations, recently reported year-over-year changes range from -4.6 percent by the Office of Federal Housing Oversight (OFHEO) to -20.01 percent by a group called Integrated Asset Services.
4. Finding value is easier in a tough market: Rich Dad Poor Dad author Richard Kiyosaki uses the example of a sale at the local supermarket to illustrate a common investor mistake – focusing on price movements instead of value. He notes that if a supermarket held a “25% off everything in the store” sale, the store would be packed.
But when prices plunge in the stock market or real estate market, many investors hear the bad news and head for the sidelines until prices begin climbing again. In any market, it’s important to consider value along with price. Supply and demand dictates that real estate values are easier to find in slow periods and become hard to find when markets heat up.
5. There’s no such thing as “the real estate market”: Most media reports about housing market focus on national statistics such as sales volume and median home prices. In reality, the national real estate market is made up of thousands of local neighborhoods, each with its own unique circumstances. The local economy, employment picture, tax situation and government policies will have more influence on local housing markets than any national trends. That’s why home in some neighborhoods continue to sell for the asking price, while across town others languish on the market despite multiple price cuts.
6. Market timing is far from perfect: No one wants to purchase a home only to see its value decline. But should you wait to buy a home until prices bottom out? A quick web search will yield a number of articles and opinions for and against timing the real estate market, but beware of those in favor of market timing who also want to sell you a how-to book or system. The longer you own your home, the better chance you have of building wealth and protecting yourself from the markets ups and downs.
7. Home ownership builds equity: Some people just don’t have the discipline to set aside money each month to save and invest. In this case, a home is more than a shelter; it acts as a sort of an automatic savings account. You can build your savings in two ways:
First, each month a portion of your payment goes toward the principal to build equity in your home. In the early years of the mortgage, most of your payment goes toward interest. Over time, however, that turns around and your equity growth begins to accelerate.
Second,
8. Long term, owning usually beats renting: In recent years, the cost of buying a home in most markets increased while the cost of renting remains flat. But it’s never a good idea to base long-term investment decisions on short-term conditions. If you decide to rent instead of purchasing a home, you may be in a bad spot in the cost to rentals in your area shoot up.
Typically. A weak housing market corresponds with a strong rental market. If the rental market is strong in your area, it may indicate weakness in the local housing market, which typically favors buyers over sellers.
When you buy a home with a fixed-rate mortgage, you can lock in a predictable monthly payment for 15 or 30 years. That means the largest part of your housing costs, principal and interest, are fixed. For some people, that stability, along with the sense of community that comes from being a homeowner, is enough to tip the scales towards ownership.
If the monthly cost of buying vs. renting is comparable, you may consider some related factors to help you decide. When you rent, your landlord receives any appreciation and tax breaks associated with owning the property. If you plan on any significant remodeling, buying may be also preferable to renting.
9. Uncle Sam wants you…to be a homeowner! Wouldn’t it be great if the government kicks in some money to help make home ownership more affordable? Because of deductions on mortgage interest and property taxes, the practical effect is that the government is subsidizing your home purchase. In fact, home ownership provides two of the best ways to reduce your tax bill.
Mortgage interest you pay can be deducted from your gross income to reduce your taxable income. Property taxes may also be deducted from your gross income, lowering your overall annual tax obligation.
Speaking of tax smarts, be sure to also consult your advisor about tax breaks that may be available on the proceeds from selling your current home, and on any “points” paid when taking out a mortgage loan.
10. The news is bad…for a reason:
Quick…which is the more exciting scenario?
A man walks slowly down a flight of stairs, sometimes pausing or retracing his steps until he reaches a floor. After trudging along for a while, he notices another staircase and begins ascending, occasionally pausing or taking a step back before methodically proceeding upward.
A second man hurtles down a terrifically high flight of stairs. Ignoring the safety railings, he runs recklessly downward, dodging obstacles in his path as he goes. He suddenly cries out as he loses his footing, sails through the air, tumbles down several flights of stairs in a spectacular crash. The badly injured man is bandaged from head to toe and attached to a variety of beeping, flashing medical devices that monitor his vital signs. Experts debate his condition but agree that the situation is dire and prospects for recovery uncertain.
Sunday, September 7, 2008
Landlords Should Consider the Benefits of Allowing Pets
LA Animal Services' General Manager Ed Boks provide useful information on the benefits to landlords that allow pets in their rental units:
The City of Los Angeles has a noble goal: To be the first major metropolitan city in the United States to end euthanasia as a tool to control pet overpopulation. Achieving this difficult goal requires robust community participation.
During this time of economic uncertainty, we especially need the help of an important constituency in our community, our landlords.
According to the 2000 Census LA has 1,275,412 households. Of these, 63% or 803,510 households are rentals. According to a report issued by The Foundation for Interdisciplinary Research and Education Promoting Animal Welfare in 2005, 50% of all rentals nationally prohibit pets.
Consider these other report findings: 35% of tenants without pets would own a pet if their landlord permitted; tenants in pet-friendly housing stay an average of 46 months compared to 18 months for tenants in rentals prohibiting pets; the vacancy rate for pet-friendly housing was lower (10%) than “no pets allowed” rentals (14%); and 25% of applicants inquiring about rentals in non-pet-friendly housing were seeking pet-friendly rentals.
The report observes: “With such a sizable potential tenant pool it would seem there would be enough pet-friendly housing to meet the current demand. In fact, according to economic theory, in perfectly functioning markets [where people make rational, profit-maximizing decisions, with full information and no significant transaction costs] pet-friendly housing should be available to renters willing to pay a premium to cover any extra costs to landlords.” Begging the question, “Do landlords overlook opportunities to increase profits by not adding to the pool of pet-friendly housing?”
With nearly half of American households having companion animals and over half of renters who do not have pets reporting they would have one or more pets if allowed, why are there so few pet-friendly rental units available?
Well, among landlords who do not allow pets, damage was the greatest concern (64.7%), followed by noise (52.9%), complaints/tenant conflicts (41.2%) and insurance issues (41.2%). Concerns about people leaving their pet or not cleaning common areas were rarely cited (5.9%).
Although 85% of landlords permitting pets reported pet-related damage at some time, the worst damage averaged only $430. This is less than the typical rent or pet deposit. In most cases, landlords could simply subtract the damage from a pet deposit and experience no real loss. In fact, the report finds landlords appear to experience no substantive loss, and further, there is little, if any, difference in damage between tenants with and without pets.
Other pet-related issues (e.g., noise, tenant conflicts concerning animals or common area upkeep) required slightly less than one hour per year of landlord time. This was less time than landlords spent for child-related problems and other issues. Whatever time landlords spent addressing pet-related problems was offset by spending less marketing time on pet-friendly units by a margin of 8 hours per unit.
While the study finds problems arising from allowing pets are minimal, the benefits frequently outweigh the problems. Landlords stand to profit from allowing pets because, on average, tenants with pets are willing and able to pay more for the ability to live with their pets, (especially in unregulated rent situations such as all market-rate apartment units built in Los Angeles since 1978, which are exempt from rent control).
In the City of Los Angeles nearly 17,000 pets were euthanized over the past twelve months. This is an increase over previous years, reversing many years of steady decline. The increase is attributed to the large number of pets surrendered to City shelters this year because of the housing foreclosure crisis. Imagine if just twenty percent of the 400,000 pet restricted households in LA permitted pets. That could create a demand far greater than the number of homeless pets dying in our shelters, allowing LA to finally achieve its goal.
Landlords have been hearing from their own colleagues and professional journals recently that permitting pets makes good business sense. Nonetheless, the lack of available pet-friendly rentals reveals there is a long way to go to meet current demand. The report reveals many landlords may be overlooking an opportunity to increase revenue and tenant pools/market size by allowing pets. While there are some costs to allowing pets, these costs are relatively low and the benefits appear to be even greater for landlords.
The benefits to the thousands of homeless pets who are dying for lack of a home each year cannot be overstated. Landlords can make a profitable, life saving choice by permitting pets. After all, a house is not a home without a pet.
For more information on what is happening in LA's Animal Community visit From the Desk of Ed Boks.
The City of Los Angeles has a noble goal: To be the first major metropolitan city in the United States to end euthanasia as a tool to control pet overpopulation. Achieving this difficult goal requires robust community participation.
During this time of economic uncertainty, we especially need the help of an important constituency in our community, our landlords.
According to the 2000 Census LA has 1,275,412 households. Of these, 63% or 803,510 households are rentals. According to a report issued by The Foundation for Interdisciplinary Research and Education Promoting Animal Welfare in 2005, 50% of all rentals nationally prohibit pets.
Consider these other report findings: 35% of tenants without pets would own a pet if their landlord permitted; tenants in pet-friendly housing stay an average of 46 months compared to 18 months for tenants in rentals prohibiting pets; the vacancy rate for pet-friendly housing was lower (10%) than “no pets allowed” rentals (14%); and 25% of applicants inquiring about rentals in non-pet-friendly housing were seeking pet-friendly rentals.
The report observes: “With such a sizable potential tenant pool it would seem there would be enough pet-friendly housing to meet the current demand. In fact, according to economic theory, in perfectly functioning markets [where people make rational, profit-maximizing decisions, with full information and no significant transaction costs] pet-friendly housing should be available to renters willing to pay a premium to cover any extra costs to landlords.” Begging the question, “Do landlords overlook opportunities to increase profits by not adding to the pool of pet-friendly housing?”
With nearly half of American households having companion animals and over half of renters who do not have pets reporting they would have one or more pets if allowed, why are there so few pet-friendly rental units available?
Well, among landlords who do not allow pets, damage was the greatest concern (64.7%), followed by noise (52.9%), complaints/tenant conflicts (41.2%) and insurance issues (41.2%). Concerns about people leaving their pet or not cleaning common areas were rarely cited (5.9%).
Although 85% of landlords permitting pets reported pet-related damage at some time, the worst damage averaged only $430. This is less than the typical rent or pet deposit. In most cases, landlords could simply subtract the damage from a pet deposit and experience no real loss. In fact, the report finds landlords appear to experience no substantive loss, and further, there is little, if any, difference in damage between tenants with and without pets.
Other pet-related issues (e.g., noise, tenant conflicts concerning animals or common area upkeep) required slightly less than one hour per year of landlord time. This was less time than landlords spent for child-related problems and other issues. Whatever time landlords spent addressing pet-related problems was offset by spending less marketing time on pet-friendly units by a margin of 8 hours per unit.
While the study finds problems arising from allowing pets are minimal, the benefits frequently outweigh the problems. Landlords stand to profit from allowing pets because, on average, tenants with pets are willing and able to pay more for the ability to live with their pets, (especially in unregulated rent situations such as all market-rate apartment units built in Los Angeles since 1978, which are exempt from rent control).
In the City of Los Angeles nearly 17,000 pets were euthanized over the past twelve months. This is an increase over previous years, reversing many years of steady decline. The increase is attributed to the large number of pets surrendered to City shelters this year because of the housing foreclosure crisis. Imagine if just twenty percent of the 400,000 pet restricted households in LA permitted pets. That could create a demand far greater than the number of homeless pets dying in our shelters, allowing LA to finally achieve its goal.
Landlords have been hearing from their own colleagues and professional journals recently that permitting pets makes good business sense. Nonetheless, the lack of available pet-friendly rentals reveals there is a long way to go to meet current demand. The report reveals many landlords may be overlooking an opportunity to increase revenue and tenant pools/market size by allowing pets. While there are some costs to allowing pets, these costs are relatively low and the benefits appear to be even greater for landlords.
The benefits to the thousands of homeless pets who are dying for lack of a home each year cannot be overstated. Landlords can make a profitable, life saving choice by permitting pets. After all, a house is not a home without a pet.
For more information on what is happening in LA's Animal Community visit From the Desk of Ed Boks.
Tuesday, August 5, 2008
Timing the market can be big risk for first-time buyers
When it comes to real estate in Los Angeles
Well known author, Craig Guillot, with Bankrate.com, suggests they may be outsmarting themselves.
With home prices falling, surging inventories, and the threat of more foreclosures on the horizon, the housing market has been tilting strongly towards buyers in the past year. In some parts of the country, market-rate housing is falling back into affordable territories and those who were once priced out of the market are now taking a second look.
Some experts say real estate values still have a long way to fall, leaving potential first-time buyers wondering if they should hold out for lower prices. No doubt that's a good question, but waiting also carries the risk that interest rates and home prices could start rising. Experts say timing the market correctly is almost impossible and that for a traditional homeowner -- who should be taking a long-term outlook approach -- timing is irrelevant.
According to the National Association of Realtors, or NAR, the median price of a single-family home in the
The risk in waiting is that buyers could end up paying more than they need to, whether on the price of the home or the monthly payment because of the interest rates, says Bonnie Abbott, a professional real estate consultant.
Abbot cautions against generalizing the real estate market on a national level and says to look more at local factors. She says, for example, a community experiencing an influx of job opportunities may prevent the market from declining any further. She also points to the fact that many homes in all markets are still sold based on "life changes," such as births, divorces, deaths, downsizing and relocation, which means that people will continue to buy and sell homes no matter what the economy is doing.
Stuart McAfee, a Realtor with Oakhurst Properties in the
To read this interesting article in its entirety click here: “‘Timing’ market big risk for first-time buyers”
Wednesday, May 28, 2008
Who pays what?
My clients often ask me who pays for which fees when selling or buying a house. Because this is such a common question and there seems to be so much confusion on the subject here is a list of who pays for what:
Real estate commission
Document preparation fee for Documentary transfer tax
Any city transfer/conveyance tax (according to contract)
Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
Interest accrued to lender being paid off, statement fees, reconveyance fees and prepayment penalties
Termite work (according to contract)
Any judgments, tax liens, etc., against the seller
Tax proration for any taxes unpaid at time of transfer of title
Any unpaid homeowner’s insurance
Recording charges to clear all documents of record against seller
Any bonds or assessments (according to contract)
Any and all delinquent taxes
Notary fees
Escrow fees
Title Insurance premium (Owner’s policy)
The Buyer Generally Pays:
Title insurance premium (Lender’s policy)
Escrow fee
Document preparation (if applicable)
Notary fees
Recording charges for all documents in buyer’s name
Termite inspection (according to contract)
Tax proration (from date of acquisition)
Homeowner’s transfer fee
All new loan charges (except those required by lender for seller to pay if applicable)
Interest on new loan from date of funding to 30 days prior to first payment date
Assumption/charge of record fees for takeover of existing loan
Inspection fees (roofing, property inspection, geological, etc.)
Home warranty (according to contract)
City transfer/conveyance tax (according to contract)
File insurance premium for first year
Tuesday, April 29, 2008
The Basics of Buying a Home
Here's What You Need to Know:
Obtain A Mortgage Preapproval Before You Begin House Hunting
> Learn how much financing is available to you
> Strengthen your bargaining position with sellers
Chose a Real Estate Agent
> Select a reputable professional who will listen to your needs and make you feel comfortable
> Ask agents for references from former clients
Find the Right Home
> Determine the needs of you and your family
> Create a wish list of desirable features
> Take notes as your preview homes
Make an Offer
> Your real estate agent presents your offer to the seller, who will accept, counter or reject it
> When the price is settled, you and the seller sign a Purchase Agreement, defining the terms of the sale
Have the Home Inspected
> Hire a professional home inspector after the offer has been accepted to provide an in-depth look at the basic systems of the house, to reveal any safety hazards and give you a chance to reconsider the deal
The Home Will Be Appraised
> An appraisal, required by your mortgage lender, is a formal, written estimate of the home's current market value
Obtain Title Insurance (where applicable)
> This guarantees that the property you are purchasing is free of liens or confusion in rights of ownership
> The policy insures against any losses to the property that result from defects in the title or deed
Close On the Property
> Ownership of the property is transferred
> A closing agent coordinates and distributes all the paperwork and funds
And you become the proud owner of your new home!
Obtain A Mortgage Preapproval Before You Begin House Hunting
> Learn how much financing is available to you
> Strengthen your bargaining position with sellers
Chose a Real Estate Agent
> Select a reputable professional who will listen to your needs and make you feel comfortable
> Ask agents for references from former clients
Find the Right Home
> Determine the needs of you and your family
> Create a wish list of desirable features
> Take notes as your preview homes
Make an Offer
> Your real estate agent presents your offer to the seller, who will accept, counter or reject it
> When the price is settled, you and the seller sign a Purchase Agreement, defining the terms of the sale
Have the Home Inspected
> Hire a professional home inspector after the offer has been accepted to provide an in-depth look at the basic systems of the house, to reveal any safety hazards and give you a chance to reconsider the deal
The Home Will Be Appraised
> An appraisal, required by your mortgage lender, is a formal, written estimate of the home's current market value
Obtain Title Insurance (where applicable)
> This guarantees that the property you are purchasing is free of liens or confusion in rights of ownership
> The policy insures against any losses to the property that result from defects in the title or deed
Close On the Property
> Ownership of the property is transferred
> A closing agent coordinates and distributes all the paperwork and funds
And you become the proud owner of your new home!
Wednesday, April 16, 2008
10 Tax Changes for 2008
Plan now and you’ll be in a better position to know what you’ll owe Uncle Sam this time next year.
1. More money for gas. The standard mileage deduction for business increases to 50.5 cents per mile. Note that mileage rates for medical or moving purposes fall to 19 cents per mile.
2. More money for retirement. You can contribute $5,000 to your IRA ($6,000 if you’re over 50) in 2008.
3. No breaks for sales taxes. The provision permitting taxpayers to deduct state sales taxes – a big plus in states with no income tax – expired at the end of 2007.
4. More tax breaks for retirement savings. Married taxpayers with joint income of up to $85,000 will be able to deduct IRA contributions if they file jointly; individuals with income of up to $53,000 can take the deduction.
5. Higher standard deduction. If you’re one of the two-thirds of taxpayers who don’t itemize, you’ll be able to deduct $10,900 as a married couple filing jointly ($5,450 for singles) in 2008.
6. No tax on some capital gains. Joint filers whose taxable income doesn’t exceed $65,100 and single filers with income that doesn’t exceed $32,550 don’t have to pay any tax on capital gains they realize in 2008; the rate for other taxpayers remains at 15 percent.
7. More time to sell a house when you lose a spouse. Taxpayers who lose a spouse now have up to two years after that death to take the maximum exclusion of $500,000 in gain on the sale of a principal residence. The other requirements for the exclusion must have been met before the death.
8. Less money back for some hybrid cars. While buying a hybrid car can still save you taxes, the tax credit has been phased out on many popular models such as the Toyota Prius. Check out the 2008 Model Year Hybrid List at www.irs.gov before you buy.
9. Tougher taxes for kids. Children 18 and under or full-time students up to 24 years old will pay taxes at their parent’s tax rate for investment income over $1,700. Note that this rate doesn’t apply to wages a child earns.
10. Higher cutoffs for Social Security. The maximum amount of earnings subject to Social Security tax increases to $102,000 in 2008.
1. More money for gas. The standard mileage deduction for business increases to 50.5 cents per mile. Note that mileage rates for medical or moving purposes fall to 19 cents per mile.
2. More money for retirement. You can contribute $5,000 to your IRA ($6,000 if you’re over 50) in 2008.
3. No breaks for sales taxes. The provision permitting taxpayers to deduct state sales taxes – a big plus in states with no income tax – expired at the end of 2007.
4. More tax breaks for retirement savings. Married taxpayers with joint income of up to $85,000 will be able to deduct IRA contributions if they file jointly; individuals with income of up to $53,000 can take the deduction.
5. Higher standard deduction. If you’re one of the two-thirds of taxpayers who don’t itemize, you’ll be able to deduct $10,900 as a married couple filing jointly ($5,450 for singles) in 2008.
6. No tax on some capital gains. Joint filers whose taxable income doesn’t exceed $65,100 and single filers with income that doesn’t exceed $32,550 don’t have to pay any tax on capital gains they realize in 2008; the rate for other taxpayers remains at 15 percent.
7. More time to sell a house when you lose a spouse. Taxpayers who lose a spouse now have up to two years after that death to take the maximum exclusion of $500,000 in gain on the sale of a principal residence. The other requirements for the exclusion must have been met before the death.
8. Less money back for some hybrid cars. While buying a hybrid car can still save you taxes, the tax credit has been phased out on many popular models such as the Toyota Prius. Check out the 2008 Model Year Hybrid List at www.irs.gov before you buy.
9. Tougher taxes for kids. Children 18 and under or full-time students up to 24 years old will pay taxes at their parent’s tax rate for investment income over $1,700. Note that this rate doesn’t apply to wages a child earns.
10. Higher cutoffs for Social Security. The maximum amount of earnings subject to Social Security tax increases to $102,000 in 2008.
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