here has been a lot of talk recently about the impact of the Federal First Time Home Buyer tax credit. The newspapers, the talk shows, the blogs, and the radio dj’s have all been talking about how important it is. I wanted to take the opportunity and make clear, in detail, the benefits to first time home buyers, aside from the $8,000, and give some much needed insight into how this program is going to impact the number of home and condo sales in the Cincinnati real estate market in the winter/spring 2010.
The Federal Government extended the tax credit through April 30. This means that you must have an accepted contract signed by both parties by then and must close the sale on or before July 1, 2010. But there is more.
Did you know it now offers $6,500 to people who have already owned a home and are buying another larger or smaller home? So if, for example, you are looking to move out of Hyde Park and into the burbs, this credit is great news for you. The program is designed to create new inventory for first time home buyers. If you have owned and occupied your current home as your primary residence for 5 of the last 8 years then you may be eligible for a $6,500 tax credit depending on your income as there are income limits.
To qualify for the $8,000 tax credit you (and your spouse if you are married) cannot have owned a home within the last 3 years. If you owned a home and sold it back in 2005 to relocate and rented for 4 years then you may qualify! Never have you ever owned a home you say? I’d say it is worth finding out if you’re eligible for an $8,000 credit. There are income limits and sale price limits on this tax credit so please check with your accountant or Realtor to be sure you meet the criteria.
You should also know that you can use the tax credit in a number of ways. You can use it on your 2009 or 2010 tax returns. The credit amount is equal to 10% on the purchase price of the home up to $8,000 of credit, or $80,000 of purchase price. Now that you know there is an $8,000 credit waiting for you, how are you going to take advantage of it? What should you do? Who should you call? When do you need to take action?
The first step is thinking about your home as an investment, an investment you can sleep and entertain friends in. Start evaluating if home ownership is right for you right now. This is not a decision you should rush. It is always better to wait and buy when the time is right for you. Next, you need to speak with a mortgage lender and get prequalified for a loan that is within your financial means. Mortgage brokers or mortgage lenders can help you with this step. The third step is finding a house that is the best fit for you. But with an April 30th deadline when should you start and when should you write a contract?
If possible, you should start your home search in earnest in February, and submit your offer no later than mid April. You have to work backwards and look at the contracting process and the whole market to understand why February is the key month. Sellers who want to capture the surge of these qualified first time home buyers are going to need to get their houses prepared for sale and listed in February to give them the most exposure to the potential buyers. The same thing is true for buyers. If you are not actively looking for your dream home it may be purchased before you even see it. I believe that February is going to be a very active month for new listings and proactive buyers in every neighborhood in Cincinnati.
Typically the process of completing a contract from purchase to closing takes between 30 and 45 days. There are many steps that go into a real estate transaction, including home price negotiations, home inspections, repairs, remediations, loan applications and acceptance, appraisals and more. Another important tip is that it is best to try to secure a property before the April 30th deadline if possible to ensure enough time to find the property and negotiate agreeable terms. Inspectors will be busy, contractors will be booked, and banks underwriters will be backlogged. So the sooner you make an offer the better the chance you have of making the deadline.
If you have any additional questions about the Tax Credit and how you can take advantage of it please feel free to call me and ask questions. I would be happy to provide you resources and information that will make your home buying experience exceptional.
Alison Moss is a 9 year veteran of the real estate industry and can be reached at 513-518-1140 or by e-mail at Alison.moss@comey.com
The University of Cincinnati recently created a map of the more prominent blogs currently discussing urban issues in Cincinnati. On this chart are a number of prominent architecture and real estate blogs including Cincinnati Living Online. As a local Realtor I think it is important to follow the conversations taking place that involve our market.
Click on the image to visit the interactive URL and see how each of these blogs interact and the nature of their content.
Offered at $198,000
Located in Prime Clifton Gaslight District, walk to UC, Ludlow shopping & restaurants. 3 bedroom brick Victorian with an attic loft. The basement has high ceilings for additional storage. Spacious rooms & hardwood floors. Off-street parking with driveway and garage. Add your finishing touches.
Eminent Domain is a controversial issue which involves the government (local, county, state, or federal) condemning a person’s home so that the land it sits on can be used for the betterment of the community. Eminent Domain has been used to acquire land for the development of new highways, airport expansions, and other major public works.
However government has used Eminent Domain to secure land for private development of office buildings, and hotels. In Cincinnati we saw Eminent Domain enacted on a number of residents near the RookWood Commons plaza. In 2005 the Supreme Court ruled on a case involving Pfizer and a local government enacting Eminent Domain to condemn and seize property for a research park. After 10 years of tax abatement and special treatment from the local government Pfizer has moved out leaving a blighted neighborhood where a strong community once stood.
The story represents the caution and care that government must exercise when using Eminent Domain for non-public works projects. When private developers create proejcts there is often the danger that they may abandon the project at any point in the development.
In the recent edition of Cincinnati Magazine the main focus is a review of various school systems. One of the sidebar commentaries suggests that parents consider the community’s support of the school system; and that funding levies are a good indicator of support.
Cincinnati Are School Levys
In the elections last week a number of communities voted to enact, or maintain their school levy. WLWT reported that “The school district said that if the emergency levy doesn’t pass, it will have to cut high school sports including the football team. Extra-curricular activities like choir and likely the prom would also have to be cut.”
Although the quality of a school system is subjective, a school that lacks the funding for any extra curricular activities is at a competitive disadvantage. Potential home buyers may not be drawn to those areas if they have school age children. While the passing or failing school a levy may seem to only impact taxes, it can also have an impact on property values. If demand for a certain area goes down because of an underfunded school system, prices will most likely follow. Click here for more information about Cincinnati School information
We are pleased to welcome our first guest blogger Marc Rasmussen, a Realtor with Michael Saunders and Company in Sarasota, Florida. As the weather cools here in Cincinnati we often think of where we may spend our next winter. We are so happy that Marc is with us to talk about luxury real estate in Sarasota, because it will be nice to see palm trees and waterfronts in December.
Marc Rasmussen
I look forward to his posts about thier local market, and the properties and deals for those of us looking for a winter home. Please welcome Marc and enjoy his entries.
Every home buyer I work with has different criteria that defines what is ideal for them. I often hear phrases like ‘good school district’, ‘low taxes’, and ‘nice neighbors’.As a Cincinnati real estate agent licensed in Ohio, there are certain rules that govern how we present information to clients.
The challenge is defining what ‘good’ is. Families may define good in terms of test scores, athletics, number of extra curricular activities, or even college acceptance rate. As a Realtor the best service I can provide my clients is to point them to district information and let them decide what works best for them. I encourage my clients to consider the cost of private school and property taxes when they are considering areas to live. In some cases the comparative costs make a difference of where my clients choose to live.
I have compiled a relatively complete list of links to the various grade schools throughout Cincinnati. The list includes Public, Private, and Religious institutions. I have them listed on my Cincinnati Area School Information page in the Real Estate Resources section of this website.
This article by Bernice Ross from Inman News highlights important information if you are considering a short sale. I did not condense it because the original content is excellent. This article pertains to real estate in Cincinnati and around the country.
DEAR BERNICE: We are upside down and are thinking about selling our home using a short sale. Our agent said that because we had refinanced our property twice, that we could have a problem with “phantom income.” She advised us to talk to our accountant. What does refinancing have to do with this and what is phantom income? –Paul S.
DEAR PAUL: First, no matter what your financial circumstances are, it’s smart to talk to your CPA or tax attorney before placing any property on the market. For example, you might think that you can claim the $250,000 (for singles) or $500,000 (for couples) tax break on the sale of your primary residence. However, if you haven’t met all the qualifications in terms of the property being your primary residence, you could end up losing the deduction.
In your case, it’s a good thing that you have a well-informed Realtor who advised you to see an accountant first. When you purchase a home, the original loans that you place on the property are known as “purchase money” loans. Depending upon where you live and the type of instrument used to secure the mortgage, the lender may have limited options in terms of foreclosure on purchase money.
For example, in many states, the lenders cannot collect “deficiency judgments” on purchase-money loans. Their only recourse is to foreclose on the property. If you live in a state that allows deficiency judgments, the lender may be able to force you to sell other assets to pay off the debt. Putting it a little differently, if you own a property in a state that does not allow deficiency judgments, only the property that secures the note is at risk. If you live in a state that does allow deficiency judgments, the court can attach your other assets and order you to sell them to pay back the debt.
The situation becomes much more complicated when you refinance your property. Any loan that is made after the point of initial purchase is no longer considered to be purchase money. “Phantom income” occurs when you sell a property using a short sale and you do not pay off the entire amount of the loan. You can also create phantom income by giving what is known as a deed in lieu of foreclosure. (This means giving the keys back to the bank rather than going through the entire foreclosure process.) In either case, phantom income must be reported to the IRS and may be subject to taxation.
For example, assume that you placed a purchase-money mortgage of $150,000 on your property in 2002, then took out a home equity loan of $25,000 to do some remodeling in 2004, and then placed a third of $50,000 on the property to cover emergency medical costs in 2007.
In the example above, any amount over the $150,000 purchase-money loan could result in phantom income. The amount of phantom income is determined by how much debt relief you receive from the sale. The way the IRS looks at it, is that when you refinanced the property, you received the money. When you failed to pay it back to the lender in a short sale, that money then becomes taxable income. Since the money in the example above was used to improve the property and to pay for medical expenses, the owner may be eligible to deduct part of those expenses against any phantom income that results from a sale. On the other hand, if you are someone who has refinanced your property and spent that money to pay off your credit cards or to buy a car, the probability is that your phantom income will be taxed.
For some people, going through foreclosure may be a better choice. Before you decide to do anything with your property, it is absolutely imperative that you discuss the situation with your CPA or tax attorney to find out the potential consequences of any decision that you may make.
