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!

HUD Withdraws Offer/Statement on $8000 Tax Credit

On Tuesday I wrote about an exciting new program that HUD & FHA were rolling out to let the $8000 Tax Credit for First Time Homebuyers be used as a downpayment.

That has now been retracted, and the letter removed from the HUD site.

Yet Yesterday, HUD Secretary Donovan said that many states already were monetizing the tax credit, creating a so-called “Bridge Loan” where the money is loaned up front from the credit due down the line. This is, in essence, what the downpayment “credit” would come from. Here are more details from the National Association of Realtors conference where Donovan spoke.

Jeff Belonger, an FHA specialist ,wrote about it this morning, explaining the legal problems with the plan as proposed.

So not totally gone, but may not be available everywhere. OK, Maryland, are we going to be in? Can we get it done like Washington State has?

$8,000 Tax Credit Can Be Used for Downpayment for Baltimore Homebuyers

**Update May 14, 2009, please see my update that HUD has retracted its statement and that this may NOT be the case everywhere.**

The Secretary of the U.S. Department of Housing and Urban Development announced at the National Association of Realtors summit today that the FHA is going to allow lenders to let First Time Homebuyers use the $8000 tax credit currently in place as a downpayment rather than having to wait until they file their tax returns.

Secretary Donovan stated: “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment.”

On the heels of the Fannie Mae & Freddie Mac 105% Refinance Plus Program announced last month, this is a great indication of how the Obama Administration is working hard to stabilize the housing market and the economy in general.

More details will be forthcoming, and until then, the details can be found here.

So, what are you waiting for, Baltimore Homebuyers? THE TIME TO BUY IS NOW! Don’t miss your chance!

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