• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
• Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.

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.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you purchased a home between January 1, 2009 and November 6, 2009, please see: 2009 First-Time Home Buyer Tax Credit.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.

The maximum allowable credit for current homeowners is $6,500.

How is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by two additional factors:

1. The price of the home.
2. The buyer’s income.

Price

Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

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  purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

 As temperates outside drop, it is important to adjust indoor humidity as well to limit condensation.  In small homes or homes with many people living, the house can easily become overhumidified and may require the constant use of bath fans and/or a window cracked open 24/7.  If excessive moisture is building on the windows, it could also be condensing inside the walls, in closets, etc.  That moisture buildup can create damage, both seen and unseen, over time.  I have been in “wet” houses before and can tell you that window damage can just be the start of the problem.  Often I find homes with moisture issues have whole house humidifiers that were set way too high for the conditions.

In larger homes or homes with few people living, the house can get extremely underhumidified due to the dryness caused by the furnace.  In those cases, instead of wet windows you get static electricity shocks and woodwork that shrinks due to the loss of moisture.  A whole house humidifiercan help keep your humidity up in a comfortable range – I suggest the ones that connect to a furnace duct and permanent water supply for ease of use.  Additionally, manufacturers such as Aprilaire are now offering humidifiers with automatic controls that adjust humidity based on outdoor temperature automatically.

Below is the recommended humidity levels for different outdoor temperatures:

1. How stable is my job/job field?

With the ever-changing economy as it is, you may want to gauge the stability of your current job/employer in addition to taking a look at how stable the job market is in your field.  If you’re going to make a long-term investment, you need to make sure you have a reasonable expectation of long-term financial stability.

2. Do I have 3+ months available cash reserves/liquid assets?

Having 3+ months cash reserves as a budget is a good safety net in case of emergency or unforeseen events-i.e. job loss, heath issues, family emergency.

3. Do I have the minimum down payment?

MOST loans require the buyer to have a minimum down payment of 3.5% of the purchase price of the home.  There are some exceptions, however, such as gift money from a family member and some special programs offered by cities and neighborhoods or governmental organizations. Check with a qualified lender as to the down payment required for your loan.

4. Will I be in this home for at least 4-5 years?

It is a good idea to look at how the home you want to buy will be able to meet your needs in the next few years i.e. will you outgrow your home due to life events (i.e. marriage and kids) or is there a chance that you will need to adjust location due to drive time to work, daycare, family or even relocate out of state?  In times like these where the housing market is much more volatile, the near-term direction of the housing market is uncertain and the costs to purchase and sell a home are substantial and so it doesn’t make sense to put that much money into a home if you’re expecting a move in the next few years.

5. Will I have the funds for all the costs of homeownership?

Owning a home includes more costs than just monthly mortgage payment. Many homeowners want to decorate and furnish their new home.  It is truly amazing how quickly little things add up.  Plus, there are the costs of monthly utilities, occasional repair/maintenance items which pop up, and of course, the costs of snow & lawn equipment or service!

6. When something breaks, who will fix it?

You are your own landlord now-are you, your friends or family handy? If not, you will need to hire a contractor or handy man to fix what breaks and to do any improvements.

7. What is my current living situation?

If you are renting, make sure you know what, if anything, it will cost you if you break a rental lease. Also, keep in mind your moving timeline if you are looking to buy a “short sale” property, it may be months before you get a response back from the bank regarding your offer, and there are no guarantees that offer will move forward.  Each situation is different and it is important to discuss your situation with your agent so that he/she can assist you in the transition.

8. How’s my credit?

There are interest rate penalties for buyer’s with lower credit scores and there may be some qualification hitches along the way.  In some cases it may be 3-9 MONTHS before you can get approved for a loan if you have problems on your credit report that need to be fixed.  It’s important to get pre-approved (not just pre-qualified) very early on in the process.

9. Can I find a home that fits my lifestyle?

Buying a new home=buying a lifestyle. If you aren’t around much, buying an association maintained property might work well for you, or depending on your level of activity, you way want to buy in an area where there are many walking/biking/running paths. Other lifestyle issues include: distance to school for kids, proximity to grocery stores, gas stations, shopping, work, etc.  It is important to make a list of your wants and needs to help you narrow down your search.

Hennepin County Foreclosures

Dakota County Foreclosures

Search Foreclosures and Short Sales currently for sale

Unfortunately the other counties have not become user-friendly enough to post their sheriff sales onlines… I really wish they would.  I regularly reference Hennepin County’s data for myriad reasons and I’m sure I’m not the only one.  It’s public data… make it public!

There are other resources for foreclosure information (foreclosures.com, etc. but I have found their data quality to be far less than desired).

Now I’m not 100% sure on this, but my feeling is that most sellers would prefer to sell their homes faster and for closer to their asking price.

Edina Realty tracks their activity and has another good metric to compare against: the average home Edina Realty sells has had 21 showings.

Based of my activity with both buyers and sellers, I have the following suggested rule of thumb that I recommend if you have done the proper marketing and staging of the home:

Drop your list price $5,000 (under $300k) or $10,000 (over $400k) every time one of these happens:

• 30 days pass with no offer (45-60 days October through December)
• 10 showings occur with no offer
• More than 2 of your 10 closest competitors sell

If you price the house right (or quickly re-price if you were wrong) you will find that buyers are still willing to come forward quickly in this market.  If you’re on the market for 100 days and have reduced your house $5,000 or $10,000, the buyer is going to want to take another $10,000 or $15,000 off simply because “it has been on the market so long.”  If you’re at the right price that much sooner, the buyer isn’t going to think they can or should negotiate that much off the price.

Though the foreclosure and short sale report I just co-authored suggests that “traditional sellers” have not seen as substantial of price declines as what MAAR had previously reported, this is not an excuse for sellers to put their foot down and say they’re going to wait for a buyer to give them their price.  Listings for sale today are actually down slightly over the same time last year and new Pending Sales are down only around 6% from last year… this market is slower, but certainly not dead and the informed seller will find this market to be pretty forgiving if they’re willing to accept reality.

The problem with that question is that there is more than one answer.  Are we talking about:

• Lowest sales price?
• Fewest units sold in a month?
• Highest supply of homes on the market?
• Longest days on market?
• Lowest (or highest) affordability?

Depending on who you are and what you are looking for, your opinion of what a market bottom is will be different.  I have a good friend who is a cash buyer and he’s looking for a home that he can pick up for a rock-bottom price since interest rates are not his concern.  I have other buyers that are financing most of the purchase and are much more sensitive to the interest rate changes than they are to the price changes.

In terms of the questions above, here’s my current opinion on them:

• Sales prices have hit a seasonal bottom and won’t touch their previous lows until this fall/winter.  No one knows where they will be by this time next year but almost everyone agrees they will not be higher.
• We’ve also hit the seasonal low for unit sales, which was in January & February.  Unit sales are still trailing behind last year though and that is likely to continue through the rest of this year.
• We’re very close to a “peak inventory” number.  We’re only up 4.7% in inventory for the same week last year and that number has been shrinking nearly every week since the 1st of the year.  At this rate, we will hit peak inventory this summer.
• Days on market are seasonal as well, so market times will be down for the next 6+ months before hitting their max again in early 2009.
• Affordability (interest rate x income x home prices) has hit a 5-year high and may go higher from here but is extremely dependent on interest rates and sales prices.

There is no bell that will ring at the bottom but we are beyond the point of seeing capitulation in this market: buyers are smarter, sellers are more realistic, banks are getting better at short sales and foreclosures, and many of our metric show signs of improvement or at least slowing of the worsening.

I am telling my buyers to look at these homes as a place to live first, a way to fix their housing costs second, and an investment a distant third.  Regardless of what you consider a bottom and when that bottom hits, if you’re looking at 4+ year time frame for living in the home after a purchase, I think you’ll be happy with your decision down the road.

No matter what anyone says or what reports they publish, it is all a best-guess (or sometimes a pluck-from-air guess).  As I’ve said to many people, if I had a crystal ball, I wouldn’t have to sell real estate!

Answer: Houses are selling on average for 91% of their original list price, which is to say that this is an average.  Homes that are dramatically overpriced will not sell for even that much, whereas homes that are priced right might go for near full price, or even for more than full price if there are multiple offers, which is happening more often as of late.

The correct answer to the question is: “it depends on the house.”  If the house is priced reasonably, your offer should be similarly reasonable.  If the house is very overpriced, your offer will obviously have to be much lower than asking.  Each house is different and should be treated different and not with some blanket rule regarding pricing.

Answer: Responses from banks on short sales is typically taking anywhere from 2 weeks to 2 months, with 1+ months being the most typical.  Most lenders are so bogged down with short sales that they’re taking 2+ weeks simply to get to processing your offer.  At that point they’ll order a BPO (Broker Price Opinion) from local agent(s) and ask the seller to submit proof of financial distress.

Depending on how the offer is structured, a buyer may be able to back out at any time or they may be “stuck” waiting for the approval or rejection for a specified time period or until the proposed date of closing.

The moral of the story is that while short sales are often�good deals, there are headaches attached to those deals as well, which makes it important that you discuss all potential options thoroughly.

Answer: The typical definition of finished square feet includes all of the following:

• A permanent heat source (i.e. not a portable heater)
• Permanent lighting
• Finished walls (painted concrete block is ok)
• Finished ceiling (but not necessarily ceiling tiles or drywall, as in a loft)
• Finished floors
• Ceiling height of at least 6′

Answer:  There is no crystal ball that will foretell the future but based on what I’m seeing and hearing in the market, we will have another 1-2 years of flat or declining prices before we see any sort of return to appreciation.  When appreciation does return, it will be much more modest: 2%-5% per year vs. the 10%+ we had for several years.  Interest rates and the economy are just two factors that could play a huge role in future house prices.

Answer: Part of the answer depends on where/what you are selling and where/what you are buying.  The general rule of thumb is that this is a good time to make a move if you’re sensitive to interest rates (which are under 6% again) and if you either have equity in your current home or cash to make up the difference if you owe more than the home is worth.

If you are a homeowner that owes more on your house than it is worth, you might be asking why you shouldn’t wait for the market to come back before selling.  Well, if you “lost” money on your current house you will “gain” money on the new house since it too is selling for far less than it would have a few years ago.  If your desire to buy up is strong and you have the cash to do it now, waiting until you can “break even” on your current house may take several years and then the house you trade up to will be more expensive as well.

Each Q&A will be a separate blog post and there is now a category called: “Questions and Answers” as well, which will contain all the posts.  I hope to answer 3-4 questions per week.