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Got your eye on a new Palm Harbor home? Don’t drag your feet.

I just sold a house to a couple who had been working with me since last November.  That’s right, it took them a full year to find the house they wanted to buy.

Were these people unusually picky, or were their requirements so specific that the right house simply wasn’t available for a really long time?  I would say “no” to both counts; I think they just wanted to be very careful in what they considered a very volatile market.  They wanted to make sure they didn’t pay too much in case the real estate market continued to free-fall, and they wanted to be sure they didn’t end up with a house that was going to cost a lot to upgrade.

This couple looked very actively during the past year, and they actually made offers on several houses. But if the negotiations on those houses began to bog down, or if the sellers didn’t act like they wanted to significantly drop their prices (and do so quickly), these people would back away.

I think their attitude was exactly the opposite of buyer attitudes two or three years ago, when buyers thought they had to act very swiftly in order to get the home they wanted. Now, caution rules the day for buyers, along with low-ball offers. I don’t think the low offers come so much from a desire to play hardball as from a fear of paying too much in a market where prices may have a way to go before hitting bottom.

The point of all this is the new first-time homebuyer tax credit, which the Congress just recently passed. This new tax credit offers an $8,000 tax credit to first-time homebuyers, and a credit of $6,500 to repeat buyers. That credit for repeat buyers MIGHT entice some move-up buyers to come back into the market, which has mostly been dominated by first-time buyers.

The original tax credit, which was launched last spring and which was to run only through the end of November, made home ownership possible for many first-time buyers. This new version continues to offer that, while also offering a tidy tax credit to people who are NOT first-timers.

But here’s the bad part (and the reason why I started out by talking about those buyers who took a full year to find a home they wanted to buy); this new tax credit is authorized only through April – buyers have to have a binding contract in place by April 30, 2010.

If you think your home search may take a number of months, you’d better get started now. April will be here before you know it.

Tags: first time home buyer, Palm Harbor, real estate, tax credit

New homeowner tax credit may mean tax windfall for builders

Last week, the Congress extended the first time homeowner tax credit. But what wasn’t so obvious about that legislation is that it provides some really big tax breaks for home building companies.

Big builders like Lennar and Pulte could end up with hundreds of millions of dollars in refunds from the U.S. Treasury on taxes they paid as far back as five years, according to the Wall Street Journal. Those refunds are designed to help the companies cope with the big losses they have experienced in the past two years or so.

The tax break will apply to large companies of all kinds. But it may be of particular benefit to the country’s biggest home builders, because they have experienced some really hefty losses as the economy has tanked over the past couple of years.

Some critics say they home builders don’t really need that much help because they have been selling off assets, such as land and unsold inventory, and bargain prices and then hoarding the proceeds. One source estimates that the 10 largest home building companies are sitting on average of $1.2 billion in cash each, quite a lot more than the $616 million cash average they had just a couple of years ago.

Pulte Homes says it may receive more than $450 million in tax refunds; Lennar Homes may get refunds of as much as $300 million.

One benefit to the tax refund news: stock prices for Lennar and other builders went up last week as the legislation was announced.

Tags: home builders, tax credit

Tax credit money available UP FRONT — right here in Pinellas County

I’ve written on the blog several times about the $8,000 federal tax credit. Now, the federal government has tinkered with it to make that $8,000 more useable in the form of cash that can be used up-front for down payments.

The tax credit, which is available to first-time homebuyers through Nov. 30, provides up to $8,000. The money becomes available in the following year, when the buyer files his or her tax return.

And that has been the problem.  Most buyers need the $8,000 for the down payment or other up-front costs, but the money actually arrives later, not sooner.

Some states (including Florida) have taken the initiative to provide money that can be advanced or borrowed in time to use it for the down payment, then paid back later when the federal dollars actually arrive. The Florida Legislature just did that, providing a pool of a little more than $30 million that first-time homeowners can draw on in anticipation of the federal tax credit money.

Well, now the federal government has woken up to this issue. First time homebuyers who apply for financing that is insured by the Federal Housing Administration may be able to get cash advances or loans that will provide the tax credit money up front, in time to use for the down payment or closing costs.

Housing and Urban Development Secretary Shaun Donovan says the idea is to “monetize” the tax credit, meaning that the government policy will now change to turn the tax credit into immediate cash money. That’s important, because the government estimates that half of all first-time home buyers, and maybe more than that, don’t possess enough money to cover the down payment on their new home; making that money available up-front could double the number of people able to buy a new home, according to the National Association of Homebuilders.

Here is how the FHA plan will work:

Approved lenders (that is, those lenders who have been approved to do business with the FHA) get authorized by the FHA to provide bridge loans at closing. Those bridge loans are secured
only by the tax credit. And government agencies and nonprofits will be authorized to offer bridge loans or second mortgages, financing that is secured by the value in the property being purchased.

Visit the HUD site at www.hud.gov to learn more. And get in touch with me at 727-643-7100 or at beth@bethfrederick.com – I can provide good professional counsel and advice on how to get and leverage the tax credit to your best advantage.  It’s a good idea to stop back frequently at www.pinellasnewsboy.com, also — as new tax credit developments happen, I’ll post them here.

Tags: Add new tag, Palm Harbor, pinellas county, tax credit

Buy that Pinellas home with down payment dollars from the state

Florida's old state house

A few posts ago I discussed how some states were finding ways to provide that $8,000 federal home purchase tax credit BEFORE the sale of the home, so buyers could use the tax credit money as a down payment. I said that about 10 states had come up with programs to make that happen, most of them variations on bridge loans.

One state, Missouri, put several million dollars ina pot, and then advanced funds to homebuyers who qualified for the federal tax credit. The buyers could use the state’s money for the down payment, then pay it back when the tax credit check came in the mail. Other state programs were variations on that same theme.

At the end of the post, I asked if you thought the state of Florida should come up with a similar program and, if you did, that you might want to get in touch with your state legislator and say so.

Well, no sooner did I write that post but the Florida Legislature approved its own program.

The Legislature adjourned yesterday (Friday), but before it did it passed a bill providing $30.1 million that can be used for down payments by homeowners. The program goes into effect July 1, and the money will be distributed to qualifying homebuyers (that is, homebuyers who qualify for the federal $8,000 tax credit) by county housing housing administrators.

Details are still being worked out, and I’ll keep you up to speed as that process moves forward. But don’t let the lack of down payment money stand between you and the purchase of a Pinellas County home.

Tags: Add new tag, down payment, Florida, pinellas, tax credit

Tax credit money UP FRONT for your Pinellas County home?

  If you read my earlier post on the $8,000 first time homeowner tax credit, you know how you can turn the purchase of a new home into some much-needed cash.
     “But,” you wail, “I’ll have to wait until sometime next year to get the cash, and I really need it NOW — in fact, it would sure come in handy as down payment money on the new house.”
     If you live in Florida, you’re right — you do have a bit of a dilemma. You can get an $8,000 tax credit if you buy a new house, but you can’t get the house without a down payment, and you aren’t really expecting any extra cash until, well, next year, when the tax credit money comes in.
     However, if you live in a number of other states — 10, to be exact — your governor and legislature has already considered your problem, and come up with a fix.
      Let’s say you live in, oh, Missouri. In that state, you can get something called a “tax credit advance.” The state will advance you up to 6 percent of the home’s selling price, and you don’t have to pay it back until next August (That’s August of 2010.)
     If you fail to pay the money back once you get your tax credit, it is still not a mortal sin — the state of Missouri will simply roll that advance into a second mortgage with a 10-year payback.  The interest rate on that second mortgage is half a percentage point higher than the first mortgage’s interest rate.
Colorado, New Mexico, Delaware, Tennessee, New Jersey, Washington State, Ohio, Idaho and Pennsylvania now have similar versions of this bridge loan idea. Not every plan is exactly the same, but they all share the idea of providing that tax credit money sooner rather than later.
     Do you like the idea? Do you think we should have something similar here in Florida? Write or call your state representative and say so.
     “But,” you cry again, “I don’t know who my State Rep is!”
     No problemo. Go to the Florida House of Representatives web site and punch in your ZIP code — the site will tell you who you should write or call. Here’s the link: http://www.myfloridahouse.gov/sections/Representatives/myrepresentative.aspx

Tags: pinellas county, tax credit

Pinellas County homebuyers: Don’t miss the $8,000 first time homeowner tax credit

    More than half of the people who plan to buy a home in the U.S. this year are first-time homebuyers. And ALL of them should look into the $8,000 tax credit that is being offered to first-time homebuyers this year by the federal government
 
      This is a pretty exciting to for first-time homebuyers to get into the market, what with very low prices and historically low interest rates. The $8,000 tax credit is just icing on the cake. It’s hard to imagine that such a “perfect storm” of home-buying advantages will come together again, at least in the lifetimes of most of us.

      Are people really aware of the first time homeowner tax credit? Apparently so – the IRS says that of all the 2008 tax returns filed by March 6, more than a half-million returns claimed the first-time home buyer credit.

      If the tax credit sounds good to you, don’t wait too long – it is only available until Dec. 1, 2009.

 Here are the nine most important things you need to know about the tax credit:

     1. The credit is available to all first-time buyers of any kind of home, new or re-sale.
 First time home buyers are defined as people who have not owned a residence during the three years prior to the purchase date.

     2. The tax credit is an amount of money equal to 10 percent of the home’s purchase price, up to a credit of $8,000.

     3. The income limit for a single taxpayer is $75,000; for married taxpayers filing jointly, income must not exceed $150,000.

     4. If you exceed the income limits, you may qualify for a partial tax credit.

     5. The tax credit does not have to be repaid. Previous tax credits were really interest-free loans.

     6. People who buy homes and claim the tax credit must use the home as a principal residence for at least three years. Those who fail to do that may have to pay the credit amount back to the government.

     7. Claim the tax credit on your federal income tax return by using IRS Form 5405. No other application or form is necessary.

     8. The credit may be claimed even if you have little or no federal income tax liability. An example: You had withholding in the amount of $4,000, but ended up owing taxes totaling $5,000. Normally, you would owe the government another $1,000 on top of what was withheld. However, if you purchased a home and claimed the tax credit, the IRS would send you a check for $7,000 – the $8,000 tax credit minus your $1,000 tax liability.

     9. The tax credit is a dollar-for-dollar reduction in your tax liability. In other words, if you owed the IRS $8,000 in income taxes for 2008 and you claimed the $8,000 tax credit, you would owe the IRS nothing.

Want to know more? Take a few minutes to listen to an expert – Robert Dietz, the tax economist for the National Association of Home Builders. Click on the YouTube icon above.

Tags: Add new tag, first time homebuyer, pinellas county, tax credit