Only 63 days left to claim the homebuyer tax credit!

Congress voted to extend and expand the First-Time Home Buyer Tax Credit program on November 6, 2009.  There is only 63 days (as of Feb 26, 2010) to claim it. 

The $8,000 tax credit expiration date has been pushed forward to Spring, requiring homebuyers to have an accepted written contract no later than April 30, 2010 and to be closed on the purchase by June 30, 2010.

“Move-Up” buyers were also provided an incentive to purchase with the expanded program.  Homeowners that have lived in their current residence for five out of the last 8 years are eligible for a tax credit of $6,500.   Don’t get confused by the “move up” lingo–a current homeowner can purchase a home that has less square footage and amenities than the current residence and still be eligible for the credit.  For example, my folks have decided to move from their 3000-sqft home into a 1000-sqft town home and are eligible to receive the incentive.

The tax credit’s basic eligibility requirement remain the same: 

• A home cannot be acquired through gift or inheritance
• A home cannot be purchased from an entity in which your are a majority owner
• All parties to the purchase must meet eligibility requirements
• A home cannot be purchased from a parent, spouse or child

There are some additional criteria that must be followed, as well.

First, the property being purchased cannot exceed a sales price of $800,000.  Second, household income thresholds have been raised to $125,000 for those who file their taxes singly, and $225,500 for buyers that file taxes jointly.

Don’t forget that the incentive is a true TAX CREDIT—not a tax deduction.  A tax filer who is eligible for the full $8,000 credit would receive a check from Uncle Sam for $8,000 if there is no tax liability for that particular year.  What a time to buy! 

A complete list of qualifying criteria is posted on the IRS website.  It is important to review your qualifications with a tax professional in order to determine your eligibility. 

Interest rates along with home prices are at an all time low.  Contact Matt for additional information and/or to take advantage of this once in a lifetime opportunity:  208-869-3469.

Just over 60 days to go . . .

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Is Buying the Worst House on the Best Street Good Advice?

Thomas Stanley, Ph. D. is back at it again with his newly released book “Stop Acting Rich.” His name should be familiar to you because he is the author of “The Millionaire Next Door” and “The Millionaire Mind.”

I loved his first two books and when I saw his new book, I couldn’t resist buying it. The message that permeates each book listed above is that most people look rich because they live in big homes or drive expensive cars, but when examined closely, they have accumulated very low levels of wealth. In other words, they wear big hats but have no cattle.

For some reason, we seem to measure our success in life by how we compare to others. Is our house bigger than theirs? Is my car nicer than Jim’s down the street? To feel successful, many people fall into the trap of buying things simply to impress others.

One of the main lessons Mr. Stanley makes throughout this book is that the amount of wealth you accumulate in your life correlates directly to the size and value of your home. Here’s a very telling quote from the book:

“If you examine homes by value from the lowest to the highest, you would find that as the value of the homes increases, so does the proportion of people who are living well above their means.”

The more expensive your home, the more you’ll be forced to spend on home repairs, maintenance and upkeep. This is hard enough, before you factor in what you’ll have to spend to keep up with your neighbors. If you buy a high-end home, you’ll end up sending your kids to expensive private schools and you’ll be forced to buy them all of the expensive clothes and gadgets the other kids have in the neighborhood.

The reason this happens is because it’s hard to avoid copying what you see every day. You won’t want to look like some schmuck who drives a rusty old car and sends his kids to the public schools in out-of-style clothes from Kmart.

The trick is to live in a nice home in a nice neighborhood that allows you to live below your means. It’s better to be a high earner in an average neighborhood than it is to be a low earner in a high-end neighborhood. Remember the old saying about “buying the worst house on the best street?” Well, as it turns out, this “best street” might actually lead you to the poor house.

Most of the millionaires profiled by Mr. Stanley live on less than 80 percent of their income. They are frugal and focus their attention on investment rather than consumption. Their goal is to convert income into wealth, which is significantly different than people who act rich.

A psychology study by Ryan Howell, which was written about in the book, found that having “things” isn’t what usually makes us happy. If “things” do, it’s short-lived happiness.

Instead, what makes us happy are life experiences. The good news is that life experiences are free.

**brought to you by Rob Minton

Short Sales 101

Brushing up on your short sale knowledge is essential in this market since nearly 50% if all homes currently for sale are distressed (either short sale or bank owned).  Bank owned homes can typically be purchased within 30 days since the home has been foreclosed upon and title has been transferred to the bank.  Purchasing a bank owned property is very similar to purchasing from a normal seller yet there are much more disclosures involved.  A short sale means that the current owner is requesting the bank to take less than what is owed in order to avoid foreclosure—short the bank on what is owed is a way to look at it.  This requires approval from the lending institution. 

 The process:

 1)     To be a short sale, the homeowner usually is in default or in a position to be in default (divorce, loss of job, injury, etc) The seller most likely has tried to get their loan modified yet to no avail.  Next step is to place the home on the market as a short sale.

2)     The agent marketing the property will advertise to the public as a short sale.  Short sales are typically priced very aggressively yet it is important to remember that the bank determines the final price. 

3)     An offer is submitted to the seller and the seller accepts it in writing (unless the seller feels that the offer would not be accepted by the bank) 

4)     The seller will compile a short sale package for submittal to the lender (or lenders) that includes the executed offer, seller financial statements, bank authorization letters, previous 2 years taxes, a hardship letter and listing agreement. 

5)     Once the package is submitted to the lender the buyer and seller must wait for approval.  The lender will typically request an appraisal to be completed firstly in order to determine value.  Second, they will compare proceeds of the short sale to the proceeds received if the home is foreclosed upon in order to determine whether or not the sale can be approved. Banks such as B of A and Chase can take as long as 4 months for a response.  Patience is a virtue!

6)     The bank approves, rejects or counters the offer.  If there is acceptances of your offer then expect to close w/in 30 days after the approval is obtained. 

 It is important for a buyer who is pursuing a short sale to keep all options open.  Most offers submitted on a short sale can be cancelled at any time prior to bank approval by both the buyer or the seller.  With that, I suggest continuing to look for homes while the offer is working its way through the approval process.  More often than not, an alternate home will come onto the market that fits the buyer’s needs and IS NOT a short sale. 

 The lending institutions are working in association with the US Government to streamline short sales during the year of 2010 and beyond in order to decrease approval timeframes that in turn helps fewer homes go into foreclosure.  Personally, I have noticed that banks are already responding to short sale offers more rapidly and hope that the trend continues.

Report shows home buyers’ negotiating power gains

Home buyers in much of the United States paid thousands of dollars below asking prices in December and for the first time in 11 months gained negotiating power, real estate website Zillow.com said.
According to December Zillow Real Estate Market Reports, buyers paid 2.7 percent less, or a median of $5,618 below the listing price on homes bought in December, up from $5,538, or 2.6 percent, for homes bought in November.

The gain, however, was still far less than December 2008 when buyers bargained a median 4.5 percent, or $10,018, off the last listing price, Zillow said.The data is calculated by comparing the last listing price of individual homes and the final sale price.November had marked the 10th consecutive month discounts shrunk, meaning buyers were negotiating less and less off the final asking price each month.

More buyer negotiating power tends to put downward pressure on overall home prices and may push more mortgages “underwater.” This negative equity has been one of the biggest banes of homeowners, making many unqualified for home loan refinancing and preventing some from selling.

Sweat Equity on the Rise!!

Jim and Kristina have taken advantage of the real estate market.

At the start of 2009 this couple sold their home in Meridian with the intention of moving to California to be near family. After months and months of looking at several homes in the Golden State, the couple became discouraged and began to sense that Boise Idaho’s pricing, along with quality of living, was too good to pass up. With that, Jim, Kristina and I began a search for their new home.

New construction, short sales, bank-owned property and occupied homes alike all had positives and negatives. When the dust settled, however, the couple found that a well-built bank-owned property within a cozy community fit the bill very nicely. Although the floors were ratty, the paint distasteful and curb appeal lacking, the home had much potential. The kitchen was open and bright with plenty of cabinet space, the floor plan flowed with ease and the quality of construction was first rate. In 2006 this home would have sold for the mid 180′s but by working together, the Beans were able to make the purchase for only $130,000.

Jim and Kristina have always been “handy” people. In fact, while in California the couple spent many weeks helping their son and daughter construct their personal home. During this time, Jim and Kristina learned trades that included installing tile, hardwood flooring, siding-you name it!! The knowledge was definitely put to good use.

The work began. Kristina began stripping the countertops and laying tile. Jim started pulling the dirty carpet and ripped vinyl planning to lay a hickory floor. All the while, doing prep work for the full interior paint job. After nearly 30 days of sleeping on cots and eating cold dinners, the Beans completed their project and invited me over to see the results of their “sweat equity”.

I could hardly believe that it was the same home! The smell of fresh paint and lacquer was prevalent while Kristina excitedly directly me toward the kitchen. Granite and tile graced the middle island, countertops and backsplashes; the cabinetry was antiqued while the stainless steel appliances topped it off. “Wow!” I exclaimed. Next, Jim spoke about the hickory flooring that was laid throughout the first floor. It was gorgeous and only cost $1,000 for the material! Jim and Kristina were proud of their work and had every right to be.

Before leaving, Jim and I discussed the market and what the home might sell for right now. At least $150,000, I mentioned, if not more. Jim stated that he and Kristina had put $2,000 (plus or minus) into material and couldn’t be more thrilled that they had realistically made $16,000 for their time. “In a year or so, Matt, we’ll be doing this again. And also, my kids down South are itching take advantage of the pricing around here”.