Baltimore Real Estate Market Third Week of February 2010

As we enter the fourth and final week of February, I am reminded as to where the market was last year at this time versus this year.

I have seen showings become more frequent in the past week and the excitement over spring’s arrival in the next few weeks definitely brings people out to look.

The snow storms we had this month really put a halt to the market, as some homes were inaccessible (all of them for a long period of time) until just recently.

February is not notoriously a great time to sell your house. Often times people wait “until spring” to make sure the snow is over and the buyers are out looking.

This year we have the First Time Homebuyer Tax Credit end looming, and sellers are taking notice and attempting to get their homes on the market. The other driving force we have right now is the April 5, 2010 deadline for FHA to avoid the higher up front mortgage insurance premium.

It appears that tomorrow we will have heavy rains which should melt a lot of snow, and may cause some flooding. These are issues that sellers most likely usually don’t have to handle, and buyers need to be aware that these are highly unusual circumstances.

Many gutters have fallen, and one of my clients, who is making a claim on his gutter system said that his insurance company told him they are declaring the Baltimore area a “disaster area”. This means that roofers are overwhelmed and not available, which means this rain tomorrow and possible snow Thursday could be big problems for many Baltimore homeowners who no longer have their usual defense against water coming into their basements and main levels on their homes.

Sellers have to be aware of what is happening, and be prepared. Buyers need to be understanding and patient, and realize that these homes most likely do not usually let the elements enter!

Hopefully March will bring us much needed warmer weather so Baltimore homebuyers can get out and take advantage of these credits and lower upfront PMI, and sellers can have their homes returned to their usual states.

Homebuyers Claiming Tax Credit Cannot E-File

Homebuyers who are claiming either the $6,500 move up credit or the $8,000 First Time Homebuyer Tax Credit cannot file electronically, according to the IRS.

One of my past clients let me know of this after she read an article on MSN. (Thank you for the information and link!)

The reason for this restriction is that unfortunately there were many suspicious claims last year, and the government is trying to curtail tax fraud. There is also an additional form and a decent amount of supporting paperwork that needs to be sent in to prove eligibility for the credit.

The additional paperwork First Time Homebuyers claiming the credit need:

For purchasers of conventional homes, a copy of Form HUD-1, Settlement Statement, or other settlement statement, showing all parties’ names and signatures, property address, sales price and date of purchase.

For purchasers of mobile homes who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.

For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

For those long time homeowners who moved and qualify for the $6,500 credit, this is the additional paperwork they will need to submit:

Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,

Property tax records or

Homeowner’s insurance records.

Here is Form 5405 from the IRS.gov site. For instructions on how to fill it out, click here. For long term owners looking to claim the $6,500, here is Form 1098.

The good news is that homebuyers who are going to claim the credit can still use the electronic tax preparation programs they would to e-file, but instead of clicking a button to submit, they will need to print it, attach the supporting documents, and mail!

(All in all, the few extra steps and the longer time it will take are worth the up to $6,500 or $8,000 credit that the filer will receive!)

Update on Questions on Homebuyer Tax Credit for Married Couples

When the Homebuyer Tax Credit was extended to include long-time homeowners buying new houses and getting a $6,500 credit, a whole new group of questions came into play.

Unfortunately for a few clients of mine (and I am sure many others out there), the answers were not what they were hoping.

• One person owns a house that s/he has lived in for 5 out of the last 8 years. S/he got married in 2009, and the partner has never owned a home. Do they qualify for either credit? Unfortunately, according to the IRS, NO. From the IRS site below, the answer:

A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase, neither you nor your spouse qualifies for the credit. Similarly, both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence, neither of you qualify for the credit.

 

• A newly married couple each has owned their own personal residences for 5 out of the last 8 years. Do they qualify for the $6,500 credit? Also, unfortunately, NO. They must have owned the SAME residence together for that time period. From the IRS site below:

A. No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new principal residence to be eligible for the credit. Since you and your spouse owned and used different principal residences, neither of you qualify.

If these couples were unmarried, and co-buying a new house, they would qualify.

For people who are planning to buy something in 2010 and were counting on that tax credit, this is not very helpful. That being said, if you have a house to SELL, you need to keep in mind that the buyers of the house you are SELLING may still qualify, so you should try to sell while people will still be buying.

Many times sellers forget how these credits may impact the sale of their home, because they are only indirectly affected. My thoughts are that if you are considering selling your Baltimore or Towson home in 2010, get the sale in BEFORE the credit runs out. With the number of days on the market averaging 60-180 in some areas of Baltimore and Towson, then that means getting your home ready to sell NOW!

More Questions on Homebuyer Tax Credit Extension

I have been receiving more emails and questions regarding the newly expanded homebuyer tax credit, so I wanted to address them and share links to documents from the IRS and the National Association of REALTORS (R) to help hopefully address those questions.

1) Do you need to SELL your current home that you have lived in for five consecutive years out of the last 8?

According to this newly released IRS homebuyer credit FAQ, NO (see pg 13). Also, see notation from the National Association of REALTORS (R) site:

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.

Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

 

2) If you SOLD the qualifying home PRIOR to November 6, 2009, but it & you qualify in every other way for you to receive the tax credit on the home you are going to buy prior to April 30, 2010, would you be eligible for the $6500 credit?

According to the National Association of REALTORS (S) explanation, YES.

 

3) Is there any way I would have to repay this tax credit?

YES. If in the first three years of owning this home you purchased using the credit, you sell the home or go into foreclosure, or you buy another primary residence and rent this one out, you would have to REPAY this CREDIT. (See IRS homebuyer credit slideshow page 11).

 

I hope this helps to answer some of the outstanding questions that have been out there. I would like to thank Joseph “Jody” T. Landers, Executive Director of the Greater Baltimore Board of REALTORS (R) for the IRS link and information.

Existing Homebuyer Tax Credit Information Update

The big question that I and many others had about the new $6,500 tax credit for current homeowners, is whether buyers with their houses currently under contract would be eligible under the new bill.

The answer, according to the National Association of REALTORS (R) is YES!

The bill was signed into law today by President Obama, and goes into effect TODAY.

Congratulations to those who qualify!

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Please note, I still recommend speaking with your tax accountant to be certain on dates and qualifications. I am not a lawyer or tax accountant and am not offering tax or legal advice. I am reporting on information provided to the public by the National Association of REALTORS(R) based on their lawyers’ interpretation of the bill.

President Obama Signs Bill Extending Tax Credit — What are the Details?

**Update: According to the National Association of REALTORS (R) , the answer to the main question below is YES, buyers settling houses after November 6, 2009, even if under contract before the bill was signed, would qualify for the credit. I still recommend speaking with your tax accounting professional to determine your eligibility and to be certain on the dates. I am not a tax accountant or an attorney, and am reporting on information given to the public by NAR, not providing legal advice.**

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This afternoon, President Obama signed the tax credit extension bill, making way for more homebuyers to take advantage of an unusual opportunity — to get money back on their taxes AND buy a home!

There are still some questions out there that I have been getting conflicting answers on.

The $8,000 tax credit for first time homebuyers is much the same as it has been all of 2009, except for the income limitations.

According to the National Association of REALTORS(R) in a great explanation of the bill , 

“Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009,  single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.”

The new bill includes a provision and $6,500 credit for current homeowners who are buying a new residence, provided they have lived in their current home for the last five consecutive years out of the last eight.

NAR reports the rules as:

“Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.”

The main question I keep receiving and I have also been asking is, if a homeowner qualifies for the credit in all ways, but is ALREADY UNDER CONTRACT on their new home, are they eligible? The bill says PURCHASING a home. Is that from date of SETTLEMENT or CONTRACT?

The law is very clear for the first time homebuyer side, but is muddy here.

CNN explains it as well as possible too. Again, no mention of this situation.

My best advice to anyone would be to contact your tax accountant to find out their best answer to this question. Hopefully it will be cleared up quickly.

Questions and Concerns on the New Tax Credit Bill Due to be in Effect December 1, 2009

Please see more updated posts on the” tax credit extension” where some of these questions & answers & dates are addressed.

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There are many confusing points and valid questions at the forefront of the “tax credit extension” and new credit for second time buyers, and in delving further, I am not finding the answers needed. I am hoping that once the bill is signed by the President, we will be able to see the bill and be able to clarify a few more points.

Here is a good comparison chart provided by the National Association of REALTORS. It does not appear to address whether if a buyer is under contract NOW for the $6,500 and settling after December 1, if they would or would not be eligible. The effective date of the bill is December 1, 2009.

Again, I am hoping for more clarification once it is signed by the President. I wonder if we will see a large amount of settlements extended into December if it is the case!

House of Representatives Votes to Extend Tax Credit

CNN reports that the House of Representatives voted 403-12 to extend the first time homebuyer tax credit this afternoon. The Senate passed this measure yesterday.
The next step is to go to the President’s desk for his signature.
There are many questions as to whether buyers under contract now will be able to take advantage of the $6,500 credit for second time buyers.
We still do not have the answer to that, but as soon as I find out more details, I will certainly keep you updated.

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