National Existing Home Sales Data

Home Sales Pace

Existing U.S. home sales rose in April, according to data from the National Association of Realtors. Sales were up 2.9 percent to a seasonally adjusted annual rate of 4.68 million units during the month, up from the upwardly revised 4.55 million units in March. Total sales were still down from a year earlier however, when the annual pace reached 4.85 million units.

The national median home price in April fell, though, to $170,200 from $175, 200 in March. The current price is down 15.4 percent from the same time last year.

The NAR defines existing homes as all previously-owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units that sold in one year if the current rate were to continue unchanged.

Sales Pace by Region

Sales rose in all areas but the Midwest in April. The Northeast led the rise with an 11.6 percent increase in the annual pace of its sales. The rate quickened to 770,000 units. Sales are still down 10.5 percent from April 2008.

The West saw a 3.5 percent increase in sales in the latest month, with the rate climbing to 1.17 million. Sales are also up a whopping 19.4 percent from last year.

Sales in the South inched up by 1.8 percent to an annual rate of 1.74 million, but in a year-over-year comparison, they were down 8.9 percent.

The Midwest experienced a 2.0 percent drop in sales as the pace slipped to 1.00 million units, accounting for a 9.9 percent decrease from the previous year.


Home Prices

The median home price, the point at which half of all homes sold for more and half sold for less, fell in April led by losses in the West and the Midwest, and tempered by gains in the Northeast and South.

The median price for the West fell dramatically in April to $222,600, down from $252,400 in March, continuing to reflect the high volume of foreclosed properties on the market. The new figure is also down 21.8 percent from the previous year.

In the Midwest, the median sales price fell to $138,800 from $141,300 in March. The price is down 11.7 percent in year-over-year comparisons.

The median price in the South grew to $148,000 in April up from $146,900, but it has fallen 12.8 percent in the past year.

In the Northeast, the sales price rose to $237,400, an increase from $231,700 in March. The price is down 9.6 percent from April 2008 though.

Inventory

As sales grew in April, so did the number of homes for sale. Market inventory rose to 3.97 million units, an 8.8 percent increase from 3.737 million in March. At the current sales pace, the current total inventory represents a 10.2-month supply of homes. In March, there was only a 9.6-month supply.

Personally, I feel that the numbers are inaccurate because of all the moratoriums placed on foreclosures. Homeowners are long over due for receiving notice of defaults on their properties. The lenders and the government continue to hold onto these toxic assets in order to try and stabilize the economy but this is just delaying the inevitable.

Statistics tell us that even those who are able to obtain a loan modification on their current loans more than 60% still end up back in foreclosure.

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Foreclosure Crisis Spreads to Good Credit Homeowners

Foreclosure Crisis Spreads to Good Credit Homeowners

The current recession has finally pushed even homeowners with good credit ratings to start filing in droves for foreclosure. What started with mass defaults of subprime, or poor credit loans, has now spread in the form of general economic downturn to those who actually took on mortgage debt sensibly.

According to the latest Mortgage Bankers Association National Delinquency Survey released Thursday, a record 9.12 percent of all homeowners were behind on their mortgage payments in the first quarter of 2009, an increase of 2.77 percent from last year and an all-time record high. The total percentage of mortgages already in foreclosure during the first three months of the year grew to 3.85 percent, also a record high.

It is no surprise that a significant portion of these mortgages are those of subprime borrowers with risky adjustable rate mortgages (ARMs). In fact, almost half of all such poor credit loans are in default or foreclosure, confirming that it was never a good idea to start lending willy-nilly to those who hadn't been able to keep up with their financial obligations in the past.

What was a surprise, however, is that prime or good credit borrower loans are now rapidly entering foreclosure territory.

"In looking at these numbers, it is important to focus on what has changed as well what continue to be the key drivers of foreclosures," said MBA chief economist Jim Brinkmann

"What has changed is the shifting of the problem somewhat away from the subprime and option ARM/Alt-A loans to the prime fixed-rate loans. The foreclosure rate on prime fixed-rate loans has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures. In addition, almost half of the overall increase in foreclosure starts we saw in the first quarter was due to the increase in prime fixed-rate loans. More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults."

The MBA report found that almost 6 percent of all prime borrowers with fixed rate loans are now in foreclosure or behind on their payments. The subprime crisis of 2006 that led to the broader financial market crisis has now left many generally fiscally responsible people jobless and without means to keep up with their loan payments. The number of people filing for unemployment benefits has dropped in each of the past two weeks, but the overall unemployment rate in the U.S. has risen to 8.9 percent, with 13.7 million Americans out of work as of April, according to government figures.

Are we likely to see an end to these good credit delinquencies anytime soon? Well, if you consider the end of next year soon, then yes. Brinkmann made it clear he thinks the broader economy will have to stabilize first.

"MBA's forecast, a view now shared by the Federal Reserve and others, is that the unemployment rate will not hit its peak until mid-2010. Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that," said Brinkmann.

If you enjoyed this post you may also want to check out.....

Buyers Don't Know about Short Sales.

Short Sale Before Foreclosure

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Buyers Don't Know about Short Sales.

Buyers don't know what a short sale is. Many real estate agents don't even know what a short sale is. So why would we, in the real estate profession, expect a buyer to understand the process?

I talk to buyer's almost every day. One of the first questions I ask is, "Do you know what a short sale is?" Even if they tell me they do, I explain the process.

We all need to do a better job at educating our buyers.

I would love it if all my buyer agents would educate their buyers about how the Short Sale process works.

Just a few things to talk to our buyer's about:

1. Short Sales can take a long time. Every lender is different, and every negotiator who is assigned a file is different. Some are very good and do their job well, others not so good.

2. Short Sale Lenders are not like traditional sellers. The transaction is only about the numbers. There is no emotion involved. The lenders do not care about the buyer’s time lines nor the sellers.

3. Every Short Sale approval letter is specific to one buyer. They are not interchangeable. The process starts all over again with each buyer.

4. Short Sale lenders will communicate only when they want to. Nothing we as agents can say will light a fire under them to hurry. Most asset manager won't communicate with the agent until they are ready to approve the file. At best, we get to speak to customer service and they will tell us if there are any notes in the file.

My short sale listings have all been approved.

My shortest listing went 50 days from listing date to close of escrow. Not one bump in the road. Many thanks to the buyer's agent.

My longest short sale listing is going on 524 days. It's a lovely property and I have had many offers but every one of the 6 buyers, got tired of waiting for the approval and canceled. The agent's always tell me they have counseled the buyer and the buyer understands, but obviously they don't really understand how frustrating this process can take.

My short sale buyers always stay the course with the contracts we write. Sure they get discouraged and frustrated but I tell them of the successes. They have all gotten great buys and always thank me.

Spending time and educating our buyers will save us all alot of time and energy.

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2009 Summer Season at the Moonlight Amphitheatre

When I first moved to North San Diego county, a wonder neighbor introduced me to the Moonlight Amphitheatre, located at Brengle Terrace Park‎ right here in Vista.

I fell in love and have been a season ticket holder ever since.

The amphitheatre offers summer musicals with full orchestra and a mixture of professional and local artists.

This summer, there are three staged productions each running for two weeks.

Guests can sit in reserved seats, or sit on the lawn in lawn chairs. Almost everyone brings a picnic dinner (alcohol is allowed). The productions are always first rate and of extremely high quality. There is not a bad seat in the place.

The tickets are very affordable and a good time is had by all, both young and old. Tickets run from $22.00 to $44.00 for a most pleasant fun-filled evening. Season tickets run from $54.00 to $102.00.

The first production is 42nd Street which will run from Jul 15 to Aug 1. Click here for more details.

Second production will be Phantom which will run from Aug 12 to Aug 29. Click here for more details.

The third production is Cats and it's run is Sep 9 to Sep 26. Click here for more details.

Call Vistix 760.724.2110 for more information.

I hope you will give it a try and tell your friends!

Why Aren't Real Estate Agents Marketing Their Listings in a Favoriable Light?

When I'm searching the MLS I am so shocked by the pictures that agents are posting of their properties. Do they even look at them before posting?

There seems to be a new trend where the picture is so small, one can't even tell the details of the house. Is it stucco, wood or what?

I can't help but think that, surely the sellers have no idea how badly the agent they've hired is working on their behalf. Is the agent so uninterested in the property that they can't invest in software to make the homes appealing to potential buyers?

All seller's deserve our best efforts on their behalf.

Barbara Whisenant

Your Friend in the Business

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

Short Sale Before Foreclosure

If you are about to miss a mortgage payment, or have missed a couple already, I can help you avoid the trauma associated with the foreclosure process. There is a FREE, legal alternative to a foreclosure called a "Short Sale".

Foreclosure is something many people didn't think would ever happen to them. The reality is, it can happen to anyone. Here are just a few of the reasons people are faced with foreclosure:

• Rising Interest Rates
• Unemployment
• Personal Tragedy
• Health Problems
• Death of a Family Member
• Re-deployment
  

Our Team of professionals are currently assisting other home owners minimize the impact on the credit rating by negotiating a short sale with their bank/lender.

Are you having trouble making your current mortgage payment and absolutely dreading the day when your interest rate adjusts? Minimize the impact on your credit rating and utilize a FREE, legal, lender approved solution to a foreclosure. Do a "Short Sale" before foreclosure!

Barbara Whisenant

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

New Rules for 760 Area Code

New 760 area code dialing changes.

As of May 2nd, new area code rules for the 760 began to take effect. All local and long distance calls will require the use of "1' + ten-digit number in order to place calls.

Current 760 area code users of both cellular and landlines will retain their current 760 area code. New phone orders will be given the new 442 area code.

The transaction period will only last until October 24, 2009. On that date, the full number will be required.

The 10 digit dialing required a user to dial "1" plus the area code and phone number to place a call.

Suggestions:

1. Start updating your contact information with security and alarm companies.
2. Re-program speed dial, auto dial, modems and other telephone equipment with your 10-digit number.
3. Update the contact information of friends, family, neighbors, family doctor, etc.
4. Start providing your area code when you give out your phone number.
5. Inform family and friends of the need to dial 10 digits.

The ability to dial 911 or 411 will not be affected.

For more information go to www.arc.asm.ca.gov/GD

Barbara Whisenant

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

Carlsbad 92008 Activity for the Last 6 Months.

Current Market Activity for Carlsbad, CA 92008 as of 6/4/09.

78 Active Listings

Beds Baths SqFt List Price List Price/SqFt DOM

High 6 6 6,800 $10,800,000 $1,588.23 661

Low 1 1 875 $325,000 $200.32 3

Average 3 3 2,838 $1,370,280 $464.88 95



8 Contingent Listings

Beds Baths SqFt List Price List Price/SqFt DOM

High 5 5 4,344 $920,000 $878.51 217

Low 2 1 996 $425,000 $167.82 34

Average 3 2 2,444 $665,862 $331.42 100



14 Pending Listings

Beds Baths SqFt List Price List Price/SqFt Days on Market

High 4 3 3,408 $1,170,000 $678.26 451

Low 3 2 1,102 $349,000 $196.95 2

Average 3 2 1,930 $608,221 $323.23 78



49 Sold Listings

Beds Baths SqFt List Price LP/SqFt Sold Price LP/SqFt SP/LP DOM

High 5 5 3,495 $1,399,000 $842.26 $1,275,000 $767.61 122% 284

Low 2 1 864 $320,000 $162.52 $310,000 $162.52 83% 0

Average 3 2 1,922 $580,351 $315.69 $565,821 $300.53 97% 59



149 Total Listings

Beds Baths SqFt List Price LP/SqFt Sold Price SP/SqFt SP/LP DOM

High 6 6 6,800 $10,800,000 $1,588.23 $1,275,000 $767.61 122% 661

Low 1 1 864 $320,000 $162.52 $310,000 $162.52 83% 0

Average 3 2 2,434 $1,003,923 $395.41 $565,821 $300.53 97% 82



Barbara Whisenant
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Did You obtain a Stated Income Loan and Are Now Considering a Short Sale?

First of all, I am not an attorney nor am I a CPA. I am a Realtor in North San Diego County who has been successfully closing Short Sales for my clients for the last 2 years.

Before you jump into a short sale, take a breath and do some research...

1. Obtain legal advice from a competent real estate lawyer
2. Call an accountant to discuss Tax Ramification

If you need referrals, just drop me a line and I'd be happy to do that. E-Mail

All Real Estate Agents are not equal but this has never been a truer statement as it is in today's short sale atmosphere.

There could be reasons not to do a short sale, but most real estate agents will never tell you this.

The drawbacks that you should be aware of are:

1. Do you know that you must submit the last 2 years of your tax returns to the lender?
This could become problematic if you did not state your income correctly on your original loan application. If there were fraudulent statements involved, the lenders always reserve the right to pursue legally.

2. The effects on your credit and possible tax consequences is another one. While a short sale is not as derogatory towards your credit as a foreclosure, the risk is still there. In prior years, the amount of debt forgiven by the lender(s) had to be claimed as income on the following years tax returns. A new house bill has done away with that in certain situations.

For complete details on how this can and will affect you, it is best to seek advice from a CPA or other tax specialist.

Please visit my website for more information on Short Sales & Foreclosures.
http://www.homes4salesandiego.com/3/W0000017753/P0000325604.htm

Barbara Whisenant

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

Did You Get Your Check?

Whow! What a surprise I received in my mailbox today. I received a refund on my San Diego county property tax.

I applied for a reassessment last year around May. I knew that the values had come and that my property would reassess for a much lower value, but I had not idea that they were issuing refunds.

Off to the bank!

Hope you all get yours soon.

FIRST-TIME HOMEBUYER TAX CREDIT Q&A

FIRST-TIME HOME BUYER TAX CREDIT
Q 1. What is the $8,000 tax credit for first-time home buyers under the new law?

A A first-time home buyer as defined may receive a refundable tax credit up to $8,000 for purchasing a principal residence in the U.S. from January 1, 2009 to November 30, 2009, inclusive. No repayment is required if the buyer owns and occupies the property for 36 months. What is a tax credit? A tax credit is a dollar-for-dollar reduction of tax owed. In contrast to a tax credit, a tax deduction is merely a reduction of taxable income. Hence, a tax credit is generally more valuable to the taxpayer than a tax deduction. To illustrate, an $8,000 tax deduction for a taxpayer in a 25% tax bracket would only save the taxpayer $2,000 in taxes, whereas an $8,000 tax credit would save the taxpayer $8,000 in taxes.

Q 2. What is the significance of a “refundable” tax credit?

A “refundable” means that any credit amount not used to reduce the tax owed may be added to the taxpayer’s tax refund check. In other words, a taxpayer may receive a tax credit even if he or she has no tax liability to offset that credit. As an example, let’s say a taxpayer filing his tax returns on April 15 would have owed $2,000 to the IRS. If the taxpayer can now claim an $8,000 refundable tax credit, he can expect to receive a refund check from the IRS for $6,000.

Q 3. Who is eligible as a “first-time home buyer” for the $8,000 tax credit?

A For purposes of the $8,000 tax credit, a “first-time home buyer” is defined as any individual (or spouse) with no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which the tax credit applies (26 U.S.C. § 36(c)(1)).

Q 4. How is the amount of the tax credit calculated?

A The maximum tax credit for an individual first-time home buyer is 10 percent of the purchase price, not to exceed $8,000 (26 U.S.C. § 36(b)(1)(A)). For married individuals filing separate tax returns, the tax credit is capped at $4,000 (26 U.S.C. § 36(b)(1). For a purchase price over $80,000, the first-time home buyer tax credit will be capped off at $8,000. “Purchase price” under this law is defined as the adjusted basis of the principal residence on the date such residence is purchased (26 U.S.C. § 36(c)(4)).

Q 5. Is there an income restriction to be eligible for the $8,000 tax credit?

A Yes. The first-time home buyer tax credit may be restricted by the taxpayer’s income. The tax credit starts to phase out for an individual taxpayer with a modified adjusted gross income from $75,001 to $95,000 (or $150,001 to $170,000 for joint filers). The tax credit is eliminated entirely if an individual’s modified adjusted gross income is over $95,000 (or $170,000 for joint filers). (26 U.S.C. § 36(b)(2).)

Q 6. What is a modified adjusted gross income?

A First, a modified adjusted gross income or MAGI is a taxpayer’s adjusted gross income (AGI) plus certain items, such as IRA deductions, student loan deductions, higher education costs, foreign income, and foreign housing deductions, among other things. Second, an adjusted gross income (AGI) is a taxpayer’s gross income minus certain deductions, which are often called “above the line” deductions. Most tax deductions are “above the line” deductions, except itemized deductions from Schedule A and personal exemptions.

Q 7. When must a first-time home buyer purchase a property to qualify for the $8,000 tax credit?

A To be eligible for the $8,000 tax credit, a first-time home buyer must purchase a principal residence from January 1, 2009 to November 30, 2009, inclusive (26 U.S.C. § 36(f) and (h)). The deadline is November 30, 2009, and not December 31, 2009. That the deadline is not at the end of the year may work as a trap for unwary buyers.

If you have any questions feel free to contact me.

Barbara Whisenant

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

Who Wants to Save Some Money?

Everyone is looking for bargains these days.

Here are a few website that will help you and your family save lots of $$$'s.

• dealalerter.com
• slickdeals.com
• fatwallet.com
• Sundaysaver.com
• salescircular.com
• pricespider.com
• emoney.com

These are great websites and I hope you have wonderful results.

Let me know what you think.

Barbara Whisenant

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California tax credit for Homebuyers March 1, 2009 thru March 1, 2010

California announced it’s own, $10,000 tax credit for any homeowner buying a new home between March 1, 2009 and March 1, 2010 regardless of whether they’re a first-time buyer or not. This comes on top of the federal first-time home buyer tax credit of $8,000 announced by the Obama administration as part of the federal stimulus package. Unlike the federal bill the California home buyer tax credit does not have restrictions on income qualifications, nor do you need to be a first time buyer to participate. The credit was part of a Democratic concession to pass a new state budget that Governor Schwarzenegger signed on Friday.

Details of the California Home Buyer Tax Credit

While it is still unclear exactly how the California Home Buyer Tax Credit program will work, here is what we do know:

• Eligible on NEW homes purchased between March 1, 2009 and March 1, 2010 (must be new construction to qualify)
• $10,000 credit paid in 3 annual installments of $3,333. Home buyers get the $3,333 off their taxes for the first three years after purchasing the new home.
• No income restrictions, meaning that all home prices and incomes can participate.
• Any home buyer buying a new home qualifies. You do not have to be a first-time buyer as in the Federal Home Buyer Tax Credit.
• Pending escrows or recent home sales have not been determined to be eligible at this point, although it will be determined shortly.
• The total credit is $100 million (h/t CR) which works out to 10,000 home sales that would qualify under the California Home Buyer Tax Credit program.

Personally, this seems like a terrible idea pushed through by the home builders for their personal profit. Encouraging builders to build new homes when California is the most overbuilt state in the country is foolish. We have a fundamental problem of supply and demand, and now California is going to artificially (and temporarily) try to increase demand, while in reality we’re really just encouraging builders to add to supply.

Keeping builders building when we need to clear out this glut of homes just makes no sense. But if you’re in the market for a home, you now have 10,000 reasons to consider buying new.

Did you know that a Realtor can help you negotiate the purchase on New Construction?

Let me know how I can help you.

Barbara Whisenant

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A Division of Richard Realty Groups, Inc 6986 El Camino Real, Ste. H, Carlsbad, CA. 92009 Cell: (760) 583-2107 eFax: (760) 496-1649

First-time home buyers credit Questions & Answers

Guidlines from http://www.federalhousingtaxcredit.com/2009/faq.php

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
   
   
2. What is the definition of a first-time home buyer?
   The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
   
   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
   
   
3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
   
   
4. Are there any income limits for claiming the tax credit?
   Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
   
   
5. What is "modified adjusted gross income"?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
   
   To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
   
   
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
   
   
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
   
   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
   
   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
   
   
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
   
   
9. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
   
   
10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
    
    
11. I read that the tax credit is "refundable." What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
    
    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
    
    
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
    
    
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.
    
    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
    
    
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
    
    
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
    
    
16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
    
    
17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
    
    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
    
    
18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
    
    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
    
    Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
    
    The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
20. The Secretary of Housing and Urban Development has announced that HUD will allow "monetization" of the tax credit. What does that mean?
    It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
    
    Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.
    
    The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.
    
    Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.
    
    In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.
    
    More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf).
21. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
    
    Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Using the $8,000 First Time Buyer Tax Credit as Down Payment

I was going to write about the recent changes announced by the FHA that allow the $8,000 first time homebuyers tax credit to be used to offset some costs in a home purchase (as opposed to waiting to get the $8K at tax refund time).

But Heather Barr, agent and blogger extraordinaire, beat me to it.

Might as well let her do the work.

Read Heather’s post, Bridge Loans Using $8,000 Homebuyer Tax Credit.

There is already some bad information out there on these new guidelines. I also suspect there will be people popping up that will claim to be able to “help you” get these funds advanced. Naturally this “help” will have a price attached to it. Be very careful, and consult with your lender and tax professional.

Barbara Whisenant

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