Let me start out by saying that I generally try and stay away from political comments. I prefer to stay on topic and discuss the facts, but this time I have no choice but to comment on politics. This latest round of political games has my blood boiling and I can’t hold back any longer.

Congress just passed another $1 billion dollar emergency homeowners relief fund. You can read all about it on MarketWatch, here is the link: www.marketwatch.com.

Were shall I start?

I guess I will start out with the phrase “emergency homeowners relief”. Emergency, really??? The emergency was almost two years ago when they pasted the TARP funds to help, if you remember, homeowners and bail out the banks and financial institutions, but once the TARP funds were approved by congress, they decided it would be better to just buy stocks in the companies they chose to keep solvent. It didn’t seem to be that much of an emergency to congress in 2008, otherwise they would have spent that money on what they told us was the reason in the first place to pass the TARP funds. I think the only reason it is an emergency right now, is because the midterm elections are in 4 months.

So now that we understand the congressional definition of an “Emergency” we can then start to talk about the facts. They are as follows:  More...

In the 11th inning, the House of Representatives finally passed the closing date extension to September 30th for the first time homebuyer’s $8,000 tax credit. This is good news as an expected 180,000 transaction that were successfully signed and finalized by the April 30th deadline that supposed to close by June 30th, didn’t close.

There are many reasons why these transactions are taking so long, but the primary reason is because the most of those transactions are short sales and getting to the closing table with short sales can be a headache to say the least. But now they have an additional 90 days to rap them up and close by September 30th.  More...

Look at the drop starting on May 1st. This graph should be all you need to realize that the first time home buyers tax credit drove a lot of sales at the moment, but they would be sales that were pulled forward. In other words, if the tax credit wasn’t there, the sales would probably still have happened, but they would have been spread out over time rather than pushed back into April.

First of all, the banks are short staffed, so they can’t file NOD (Notice of Defaults) and complete the foreclosure process as fast as new borrowers are falling into default. The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics. That is the first part to Shadow Inventory.

Click To Enlarge

This has also created other problems. I had a closing that kept getting pushed back because FHA hadn’t review the file to release the funds because they were so backed up. We finally closed last week and from talking to the buyers at the closing, they just wanted to close before they lost the credit, but it wouldn’t have stopped them from buying, they just bought now rather then this summer when they originally planned on moving.

The tax credit has helped a lot of first time home buyers get into a new house with little or nothing down. This has spurred a lot sales that would not have otherwise occurred if there was no first time homebuyers tax credit. This has also helped the economy and the housing market stabilize.

So why wouldn’t congress extend the $8,000 First Time Homebuyers Tax Credit? There are many reasons for and against it. I don’t really care which way they go, I just need to know, so that I know how to plan ahead. And today they just announced that More...

As part of President Obama’s American Recovery and Reinvestment Act the $8,000 First-Time Home Buyer Tax Credit gives first time buyers incentive to buy in an effort to increase demand and get a handle on the falling home prices. This provides investors with another means of getting buyers to buy, which is something we all should take advantage of. The details and requirements are fairly straight forward:

• The buyer must not have owned a home in the past three years
• The new house must become the buyer’s primary residence for 3 years, if not, then you must pay back the $8,000
• This credit will only apply if the buyer buys between January 1, 2009 and November 30, 2009.

The 2009 Credit is a true, money in the pocket deal. Those that bought a home under the 2008 version, which was basically an interest free loan to be paid back over the course of 15 years) cannot claim the 2009 credit.

The income qualifications hinge on the Modified Adjusted Gross Income (MAGI)

Adjusted Gross Income is your total annual gross income less your standard deductions or if you itemize, then the deduction would be your total itemized deductions. Example, if you make $50,000 a year and you have $10,000 in itemized deduction then your AGI would be $40,000.

For single tax payers the breakdown is as followed in terms of MAGI:

• Full Credit - x < $75,000
• Partial Credit - $75,000 < x < $95,000 – Partial Credit
• Not Eligible - $95,000 < x

Married Partners who file separately each having a MAGI <$75,000 are eligible for $4,000 each.

Filing jointly with a combined MAGI of $150,000 < x < $170,000 will be able to get a reduced credit.

When a buyer is looking to take advantage of the 2009 Tax Credit and meet the qualifications they have two options that they can take and in some cases it may be better to do one over the other:

Claim it for 2008 – If the buyer has already filed their 2008 return they can file a 1040x amendment and claim the credit after the purchase. This would be worthwhile if their MAGI fell in the range of getting a full credit and/or if they are expecting to be earning more in 2009 that would push them into partial credit territory.

Claim it for 2009 – The buyer can claim their credit on their 2009 tax return by using the 5405 form. If the buyer isn’t expecting to make as much this year, but made $75,000 < x in 2008 it would be worth considering waiting for the 2009 tax season.

Anyone selling homes should take measures to integrate this incentive into their marketing materials. It would be a savvy idea to incorporate the 2009 First Time Home Buyer Tax Credit into a special report, into your flyers, handouts, internet ads, pretty much anything across the board when it comes to pushing the sale of a property to an end buyer. Those who can do this the best will have an advantage over those who don’t in what will possibly end up becoming a lucrative but competitive field. As home prices fall to levels where renters, who didn’t have their credit ripped apart by the foreclosure wave, will fit these tax credit qualifications will be looking to move up, especially with a $8,000 sweetener.

If you have a house for sale, or are planning on selling one, then you need to know about the first time home buyers tax credit for 2009. This tax credit will give first time home buyers upto an $8,000 tax credit this year if they purchase a house by December 31, 2009.

IRS - First-Time Homebuyer Credit

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately. http://www.irs.gov/newsroom/article/0,,id=204671,00.html

This credit does not have to be paid back like the $7,500 tax credit/loan issued in 2008 as long as the buyers remain in the property as thier primary residence for at least 36 months (3 years).