Understanding agency and the different types of relationships is really important when you decide to work with a real estate professional. Whether you’re a buyer or seller, you need to know the basics. Who represents your interest and who doesn’t?
Buyer Agency
When buyer agency exists, a real estate agent represents the home buyer and has a fiduciary duty to work on their behalf and in their best interest.
• Negotiating the best pricing
• Protecting buyers interests
• Disclosing pertinent information that might influence the buyers decisions.
• Working with all buyers, without bias, regardless of race, color, religion, sexual orientation, color or national origin.
Seller Agency
When seller agency exists an agent is working in the best interest of the seller. Surprisingly, even the buyer’s agent who draws up a contract and presents that offer on behalf of the buyer represents the best interest of the seller.
Responsibilities of a seller’s agent are nearly identical to that of a buyer’s agent. Protecting buyer’s interests, obtaining the best pricing and disclosing important and influential information to a seller are all part of the agent’s duty.
Dual Agency
Dual Agency exists when a company has a relationship with both the seller and the buyer. This can occur when a home buyer chooses to represent themselves and not seek the help of a buyer’s agent.
When an agent represents both the seller and buyer, there must be informed consent; in other words, the buyer must understand that the agent is working on behalf of both the seller and buyer. The agent/broker responsibilities include:
• Non-disclosure of how much the seller will accept or how much the buyer is willing to pay.
• Disclose information to one party that might put the other at a disadvantage.
Dual Agency With Designated Sales Associates
This type of agency relationship is similar to a Dual Agency in that one company or broker has a relationship with both the seller and buyer and there needs to be informed consent. Typically, one designated sales associate is assigned to represent the seller and another to represent the buyer; in other words, both the seller’s and buyer’s agent work for the same real estate company. However, each have a fiduciary duty to the buyer and seller, respectively.
It is important to note that neither written nor verbal agreement is necessary to establish an agency relationship and compensation is not required for a relationship to exist.
Monday, November 16, 2009
Monday, November 9, 2009
Congress Extends the $8,000 Tax Credit
Last week Congress voted to extend the $8,000 tax credit for first-time home buyers and expand the bill to include move-up or repeat home buyers. If you’re currently under contract and worried about closing by the November 30 deadline, you’re in the clear. These are the latest revisions and stipulations including income restrictions, credit amounts, purchase price limit, as well as the new filing requirement and revised expiration.
Q Who can take advantage of the newly revised tax credit?
A First-time home buyers defined as individuals or married couples who haven’t owned a principal residence within the past three years. First-time home buyers may have ownership rights in an investment property and will still qualify for the credit provided the property has not been used as their principal residence.
Move-up buyer’s who own their home provided it was used as their principal residence consecutively for five out of the past eight years.
Q How much are the newly revised tax credits?
A First-time home buyers are eligible for 10% of the purchase price of a home with a maximum of an $8,000 tax credit ($4,000 married filing separately); while move-up buyers could claim $6,500 ($3,250 married filing separately) on their federal tax return.
Q What are the revised income restrictions?
A Individuals earning $125,000 and married couple earning $225,000 are the updated income limits. If candidates earn more than the allotted dollar amount, there is a $20,000 phase-out amount. Incomes that fall within those parameters will be eligible for a portion of the tax credit.
Q What is the purchase price limit?
A Purchase price limits have been set at $800,000. Therefore, if the property purchased exceeds this amount the buyer(s) won’t be eligible for the tax credit.
Q What is the Anti-fraud Rule?
A Buyers are required to attach the HUD 1 settlement form (closing statement) to IRS form 5405 when filling their Federal tax return.
Q When do these new rules take effect? Are they retroactive?
A The revised rules are in effect for purchase offers written after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30.) Also, revised income limits apply for sales occuring after November 6, 2009.
(**As a side-note, I advise all home buyers to speak with a tax professional and confirm eligibility for the credit prior to making a purchase offer.)
Q Who can take advantage of the newly revised tax credit?
A First-time home buyers defined as individuals or married couples who haven’t owned a principal residence within the past three years. First-time home buyers may have ownership rights in an investment property and will still qualify for the credit provided the property has not been used as their principal residence.
Move-up buyer’s who own their home provided it was used as their principal residence consecutively for five out of the past eight years.
Q How much are the newly revised tax credits?
A First-time home buyers are eligible for 10% of the purchase price of a home with a maximum of an $8,000 tax credit ($4,000 married filing separately); while move-up buyers could claim $6,500 ($3,250 married filing separately) on their federal tax return.
Q What are the revised income restrictions?
A Individuals earning $125,000 and married couple earning $225,000 are the updated income limits. If candidates earn more than the allotted dollar amount, there is a $20,000 phase-out amount. Incomes that fall within those parameters will be eligible for a portion of the tax credit.
Q What is the purchase price limit?
A Purchase price limits have been set at $800,000. Therefore, if the property purchased exceeds this amount the buyer(s) won’t be eligible for the tax credit.
Q What is the Anti-fraud Rule?
A Buyers are required to attach the HUD 1 settlement form (closing statement) to IRS form 5405 when filling their Federal tax return.
Q When do these new rules take effect? Are they retroactive?
A The revised rules are in effect for purchase offers written after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30.) Also, revised income limits apply for sales occuring after November 6, 2009.
(**As a side-note, I advise all home buyers to speak with a tax professional and confirm eligibility for the credit prior to making a purchase offer.)
Tuesday, November 3, 2009
FSBO or Not?
Next week I have an appointment with a couple who are considering selling their house without a realtor. For Sale by Owner (FSBO) is big business; many potential sellers take the plunge without doing the necessary research and find themselves wasting their time and money. If you’re thinking about selling your home yourself, it’s important you make an informed decision to do so; these are my thoughts:
Your home is likely the single largest investment you’ll ever make. If you’re thinking about selling it, you’ll need to educate yourself about the selling process and all that’s involved.
• Pricing
• Marketing
• Disclosure
• Inspection
• Contract Negotiation
These are a few of the many important issues you need to learn if you want to maximize your proceeds.
Without a solid plan and a clear understanding of current market conditions, selling your home on your own could result in a lot of effort with a great deal of disappointment.
Pricing
Pricing is the single most important factor when selling a home. If a property is priced too high, potential buyers will walk-away, thus wasting your valuable time and the money spent marketing the home.
Although pricing tools like Zillow’s “zestimate” are available through the internet, these tools should only be used as a starting point and not dictate the final price point. It’s a good idea to either ask a real estate professional to do a Comparative Market Analysis (CMA) or call a professional appraiser. Because we have the ability to see your home both inside and out, careful consideration is given to location, curb appeal, upgrades, special features, and property condition. Often there are unstated factors that occur during contract negotiations--factors including seller concessions that aren’t revealed in the analysis supplied by online companies. These factors are relevant and can skew the information.
Marketing
A successful marketing plan includes more than putting an ad in the local newspaper. Today’s digital era requires more than one vehicle to deliver the message to home buyers that your house is on the market. Although print media is important, having an online presence is imperative to getting the message out to the largest number of buyers. One vehicle is not enough and neither is one website. Professional websites as well as social networking sites can assist buyers in spreading the word. Also, marketing a property is NOT cheap and takes considerable time and money. Plan on spending hundreds of dollars and plenty of hours updating ads and online sites, refreshing pictures and content to keep potential buyers interested.
Disclosure—Inspections & Contract Negotiation
Failure to understand disclosures and inspections as well as the inability to execute contract negotiations can cost a seller big money. Did you know that New York State requires sellers to complete the Property Condition Disclosure Statement (PCDS) prior to a potential buyer writing a contract offer? Did you also know this careless mistake can cost the home seller a $500 penalty at closing?
Inspections and contract negotiations many times go hand in hand. Not only must sellers negotiate a purchase price that is acceptable to both parties, they often have to revisit those negotiations if a structural inspection reveals a problem with the house estimated to cost $1,500 or more. When this happens, the buyer has the legal right to walk away from the deal. That being said, if you want to keep the deal together, avoid putting your house back on the market, disclose the structural problem and continue making mortgage payments. I’d say honing your negotiating skills might be a good idea.
Selling your home on your own isn’t necessarily a bad decision, it just needs to be an informed one.
Your home is likely the single largest investment you’ll ever make. If you’re thinking about selling it, you’ll need to educate yourself about the selling process and all that’s involved.
• Pricing
• Marketing
• Disclosure
• Inspection
• Contract Negotiation
These are a few of the many important issues you need to learn if you want to maximize your proceeds.
Without a solid plan and a clear understanding of current market conditions, selling your home on your own could result in a lot of effort with a great deal of disappointment.
Pricing
Pricing is the single most important factor when selling a home. If a property is priced too high, potential buyers will walk-away, thus wasting your valuable time and the money spent marketing the home.
Although pricing tools like Zillow’s “zestimate” are available through the internet, these tools should only be used as a starting point and not dictate the final price point. It’s a good idea to either ask a real estate professional to do a Comparative Market Analysis (CMA) or call a professional appraiser. Because we have the ability to see your home both inside and out, careful consideration is given to location, curb appeal, upgrades, special features, and property condition. Often there are unstated factors that occur during contract negotiations--factors including seller concessions that aren’t revealed in the analysis supplied by online companies. These factors are relevant and can skew the information.
Marketing
A successful marketing plan includes more than putting an ad in the local newspaper. Today’s digital era requires more than one vehicle to deliver the message to home buyers that your house is on the market. Although print media is important, having an online presence is imperative to getting the message out to the largest number of buyers. One vehicle is not enough and neither is one website. Professional websites as well as social networking sites can assist buyers in spreading the word. Also, marketing a property is NOT cheap and takes considerable time and money. Plan on spending hundreds of dollars and plenty of hours updating ads and online sites, refreshing pictures and content to keep potential buyers interested.
Disclosure—Inspections & Contract Negotiation
Failure to understand disclosures and inspections as well as the inability to execute contract negotiations can cost a seller big money. Did you know that New York State requires sellers to complete the Property Condition Disclosure Statement (PCDS) prior to a potential buyer writing a contract offer? Did you also know this careless mistake can cost the home seller a $500 penalty at closing?
Inspections and contract negotiations many times go hand in hand. Not only must sellers negotiate a purchase price that is acceptable to both parties, they often have to revisit those negotiations if a structural inspection reveals a problem with the house estimated to cost $1,500 or more. When this happens, the buyer has the legal right to walk away from the deal. That being said, if you want to keep the deal together, avoid putting your house back on the market, disclose the structural problem and continue making mortgage payments. I’d say honing your negotiating skills might be a good idea.
Selling your home on your own isn’t necessarily a bad decision, it just needs to be an informed one.
Tuesday, October 27, 2009
Just the Facts Jack
Greater Capital Association of Realtors released housing statistics for single family homes in the month of September. This data includes new construction and resale; in addition, RealtyTrac released its third quarter market report for Capital Region Foreclosures—please see below for stats & summary:
Entire Capital Region MLS Compare to
Sept., 2008
• Residential Sales of Contract +9%
• Residential Closed Sales - 4%
• Median Sales Price $185,000 +0%
• Foreclosed Properties Q3(424) +31% from (322)Q2
Albany County
• Residential Sales of Contract - 11%
• Residential Closed Sales + 6%
• Median Sales Price $188,000 - 6% from $200,000
• Foreclosed Properties Q3(198) +19% from (158)Q2
Rensselaer County
• Residential Sales of Contract +20%
• Residential Closed Sales - 15%
• Median Sale Price $172,000 + 4% from $166,000
• Foreclosed Properties Q3(72) +12.5% from (63)Q2
Saratoga County
• Residential Sales of Contract +14%
• Residential Closed Sales + 4%
• Median Sale Price $242,500 - 2% from $246,300
• Foreclosed Properties Q3(60) +36% from (38)Q2
Schenectady County
• Residential Sales of Contract +22%
• Residential Closed Sales - 17%
• Median Sale Price $155,800 - 8% from $169,000
• Foreclosed Properties Q3(89) +30% from (62)Q2
New Construction
• Existing Home Sales (57 sales) - 19% from (71 sales)
• Median Sale Price $289,900 -10.5% from $324,900
For the fourth month in a row, the Capital Region shows an increase in “pending” sales or sales of contract. The $8,000 tax credit and the NYS MCC, both first-time home buyer incentives, may contribute to the increased activity. But with a 45- to 60- day transaction time, one might think closed sales would begin to increase too. Unfortunately, Albany, Saratoga, and Montgomery counties only show a modest increase in closed sales with Albany and Montgomery county 6% higher than September of last year. Overall, the entire region showed a 4% decrease in closed sales.
This month, the median sales price overall shows no change. However, it did recede slightly in Albany and Saratoga counties with its steepest decline in Schenectady County (8% drop). Montgomery County shows the greatest increase by 38% in median sale price.
An increase in Capital Region foreclosures may contribute to the dip in median sales price. RealtyTrac recently released its third quarter foreclosure report and the Capital Region market shows a 31% increase in foreclosed properties compared to the second quarter. Short sales and foreclosures sell for less money than a traditional home sale, sometimes greater than 25%. According to the report, Saratoga County shows the greatest increase in foreclosed properties compared to last quarter with a 36% increase. New construction sales are also down by 19% from September, 2008. The median sale price for new construction dropped from $324,900 to $289,900.
Entire Capital Region MLS Compare to
Sept., 2008
• Residential Sales of Contract +9%
• Residential Closed Sales - 4%
• Median Sales Price $185,000 +0%
• Foreclosed Properties Q3(424) +31% from (322)Q2
Albany County
• Residential Sales of Contract - 11%
• Residential Closed Sales + 6%
• Median Sales Price $188,000 - 6% from $200,000
• Foreclosed Properties Q3(198) +19% from (158)Q2
Rensselaer County
• Residential Sales of Contract +20%
• Residential Closed Sales - 15%
• Median Sale Price $172,000 + 4% from $166,000
• Foreclosed Properties Q3(72) +12.5% from (63)Q2
Saratoga County
• Residential Sales of Contract +14%
• Residential Closed Sales + 4%
• Median Sale Price $242,500 - 2% from $246,300
• Foreclosed Properties Q3(60) +36% from (38)Q2
Schenectady County
• Residential Sales of Contract +22%
• Residential Closed Sales - 17%
• Median Sale Price $155,800 - 8% from $169,000
• Foreclosed Properties Q3(89) +30% from (62)Q2
New Construction
• Existing Home Sales (57 sales) - 19% from (71 sales)
• Median Sale Price $289,900 -10.5% from $324,900
For the fourth month in a row, the Capital Region shows an increase in “pending” sales or sales of contract. The $8,000 tax credit and the NYS MCC, both first-time home buyer incentives, may contribute to the increased activity. But with a 45- to 60- day transaction time, one might think closed sales would begin to increase too. Unfortunately, Albany, Saratoga, and Montgomery counties only show a modest increase in closed sales with Albany and Montgomery county 6% higher than September of last year. Overall, the entire region showed a 4% decrease in closed sales.
This month, the median sales price overall shows no change. However, it did recede slightly in Albany and Saratoga counties with its steepest decline in Schenectady County (8% drop). Montgomery County shows the greatest increase by 38% in median sale price.
An increase in Capital Region foreclosures may contribute to the dip in median sales price. RealtyTrac recently released its third quarter foreclosure report and the Capital Region market shows a 31% increase in foreclosed properties compared to the second quarter. Short sales and foreclosures sell for less money than a traditional home sale, sometimes greater than 25%. According to the report, Saratoga County shows the greatest increase in foreclosed properties compared to last quarter with a 36% increase. New construction sales are also down by 19% from September, 2008. The median sale price for new construction dropped from $324,900 to $289,900.
Tuesday, October 20, 2009
Reach Out
Recently I was a guest on the weekly radio program We Speak House. The show airs every Saturday morning at 9:00 am on the local radio dial. Jason Micare, President of the Capital District chapter of ASHI Certified Home Inspectors hosts the show and does a great job of keeping things fun and conversational. The focus of this segment was the $8,000 tax credit, the New York State MCC and the current state of the Capital Region housing market. Because Jason is not only a home inspector but also a real estate investor, he is acutely aware of what’s happening in the local market and understands how fortunate we are to conduct business in an area that’s significantly more stable than most markets in the country. That being said, I must acknowledge that although I think the Capital Region is fairly insulated from this turbulent economy and that the real estate market here is more stable than most, there are still a number of distressed homeowners in the area who are experiencing economic hardship, can’t make their mortgage payments and, as a result, will lose their home.
As a real estate agent, I’m there to see that glorious moment when house keys are turned over to the home buyer. It is a proud moment—for everyone. Unfortunately, that jubilation doesn’t always last. This past week I received phone calls from home owners who are having difficulty making their mortgage payments. Some have missed payments while others are barely making end’s meet. If you or someone you know is having difficulty meeting their obligations, I’ve listed a few important things to do:
1. Immediately contact your lender or a HUD-approved housing counseling agency (1-800-569-4287). If you’re calling a lender, ask for either the loss mitigation department or a department that deals with distressed home owners. An approved housing counselor can help you understand your options and the law. They can also negotiate with your lender on your behalf. The longer you wait to call either one, the less likely your lender will be willing to negotiate. Also, make sure you can provide your financial information including all monthly income and expenses.
2. Get Educated. Go to the U.S. Department of Housing and Urban Development website to better understand your options.
3. Avoid foreclosure prevention companies. A HUD approved housing counselor will negotiate with your lender for free. Although many of these businesses are legitimate, they aren’t necessary—your lender or housing counselor can provide you with the same information or services.
4. Avoid Scams! Unfortunately there are individuals and companies looking to take advantage of an unfortunate situation. Never sign any legal document without understanding all the terms and always speak with an attorney.
According to RealtyTrac’s US Foreclosure Market Report, the Capital Region foreclosure rate increased more than 31% in the the third quarter over the last, a distinct difference from the first quarter report when the Capital Region finished low on RealtyTrac’s list-- number 186 of the country’s 203 largest metropolitan areas to be exact. But although the number of foreclosures are beginning to creep up, we are still a far cry from what’s happening in the hardest hit areas of this country, and I think we local agents should be grateful for that. I also think we have a responsibility to reach out and educate these distressed home owners. Many of them are looking for answers and don’t know where to turn.
As a real estate agent, I’m there to see that glorious moment when house keys are turned over to the home buyer. It is a proud moment—for everyone. Unfortunately, that jubilation doesn’t always last. This past week I received phone calls from home owners who are having difficulty making their mortgage payments. Some have missed payments while others are barely making end’s meet. If you or someone you know is having difficulty meeting their obligations, I’ve listed a few important things to do:
1. Immediately contact your lender or a HUD-approved housing counseling agency (1-800-569-4287). If you’re calling a lender, ask for either the loss mitigation department or a department that deals with distressed home owners. An approved housing counselor can help you understand your options and the law. They can also negotiate with your lender on your behalf. The longer you wait to call either one, the less likely your lender will be willing to negotiate. Also, make sure you can provide your financial information including all monthly income and expenses.
2. Get Educated. Go to the U.S. Department of Housing and Urban Development website to better understand your options.
3. Avoid foreclosure prevention companies. A HUD approved housing counselor will negotiate with your lender for free. Although many of these businesses are legitimate, they aren’t necessary—your lender or housing counselor can provide you with the same information or services.
4. Avoid Scams! Unfortunately there are individuals and companies looking to take advantage of an unfortunate situation. Never sign any legal document without understanding all the terms and always speak with an attorney.
According to RealtyTrac’s US Foreclosure Market Report, the Capital Region foreclosure rate increased more than 31% in the the third quarter over the last, a distinct difference from the first quarter report when the Capital Region finished low on RealtyTrac’s list-- number 186 of the country’s 203 largest metropolitan areas to be exact. But although the number of foreclosures are beginning to creep up, we are still a far cry from what’s happening in the hardest hit areas of this country, and I think we local agents should be grateful for that. I also think we have a responsibility to reach out and educate these distressed home owners. Many of them are looking for answers and don’t know where to turn.
Tuesday, October 13, 2009
This Land is Your Land
Over Columbus Day weekend, I met with a client who’s looking to purchase land and build a new home. Recently, she found a parcel of land from a MLS listing that I emailed and decided she’s interested in the property. I met with her on Sunday, so we could walk the property together, go over comps and discuss her future plans. I recently called the local municipality on her behalf to confirm that the land is approved for building, find out the set-back requirements, see if there are building restrictions, ask about water, wetlands and soil, see if there are live stock or state parks nearby, and make sure there isn’t anything else that might hinder future construction. My client was happy to know that a perk test has been done and the proposed site is laid out in a property survey. The next step presumably is to make an offer on the land.
As an agent, my next step is pulling comparables of similar properties that have recently sold. This is no different than what I do for clients who are purchasing a home-- we pull comparables from a neighborhood and surrounding area to determine fair market value. Building a home from the ground up is no easy task and this type of construction requires a great deal of leg work by both the agent and the buyer. Finding a suitable piece of land can be a challenge and making sure that the property is a good place to build requires an agent to ask the right questions and reach out to the right people. I couldn’t imagine anything worse than buying a piece of property only to find you’re unable to build or that it would be an extremely lengthy and expensive undertaking to do so. Having as many questions answered up-front is the way to go.
As an agent, my next step is pulling comparables of similar properties that have recently sold. This is no different than what I do for clients who are purchasing a home-- we pull comparables from a neighborhood and surrounding area to determine fair market value. Building a home from the ground up is no easy task and this type of construction requires a great deal of leg work by both the agent and the buyer. Finding a suitable piece of land can be a challenge and making sure that the property is a good place to build requires an agent to ask the right questions and reach out to the right people. I couldn’t imagine anything worse than buying a piece of property only to find you’re unable to build or that it would be an extremely lengthy and expensive undertaking to do so. Having as many questions answered up-front is the way to go.
Monday, October 5, 2009
An Honor and an Answer
Recently, WRGB, CBS6 News asked if I’d be interested in becoming a member of their Answers Team, and be their representative for local real estate. This team is comprised of area business leaders who represent: banking, money management, credit counseling, career development, financial planning, mortgages, taxes, and government relations, to name a few. I was recommended by a past client and friend who is a reporter and fill-in anchor for the station.
The Answers Team convenes every Wednesday from 5:00 pm to 7:00 pm when we participate in a phone bank. Each week, CBS6 viewers either email or call in with real estate, financial or business related questions. The show’s producers screen these inquiries and direct callers to the appropriate person. In addition, producers often request an exclusive interview to talk about relevant issues within the various industries. I gratefully accepted this opportunity, and filled the role in September.
Last week, approximately 80% of all the phone calls I received were inquiries regarding the $8,000 tax credit for first-time home buyers or the New York State Mortgage Credit Certificate (NYS MCC) program. There seems to be alot of confusion about the definition of a “first-time home buyer”, the difference between the two programs, the time frame a home needs to close to be able to qualify, what types of structures are acceptable, as well as what buyers need to do to qualify for both deals.
Because the $8,000 tax credit is set to expire on December 1, first-time home buyers want to make sure they qualify for either one or both of the tax credits. Although I covered both incentives in a recent blog post Who’s the Winner, I think it’s worthwhile to address some of these questions.
Q: What is considered a first-time home buyer?
A: A first-time home buyer is a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, this rule tests the history of both the buyer and spouse. If either have owned or co-owned a principal residence within the past three years, they do not qualify.
Q: What are some of the differences between the two programs?
A: Overall both incentives are a great opportunity for first-time home buyers to save money; however, the NYS MCC is much more restrictive than the $8,000 tax credit and requires more effort from the buyer to obtain. Let’s start with the basics. The $8,000 tax credit can earn qualified buyers a tax credit for 10% of the purchase price of their home; however, that amount can’t exceed $8,000. This is a one-time credit and can be claimed on an amended 2008 Federal tax return or the 2009 return. On the other hand, the NYS MCC is a certificate that allows the buyer to convert 20% of their annual mortgage interest into a tax credit for the life of the loan, potentially saving first-time home buyers more than $30,000. The pitfall is the MCC requires buyers to apply for the certificate through an approved list of lenders, the mortgage loan must be a fixed interest rate, the mortgage loan can not be issued by SONYMA, the income limitations are stricter than on the $8,000 tax credit and there are also purchase price limits. In addition, the tax credit each year can’t exceed the borrower’s federal income tax liability. In other words, you wouldn’t be issued a check for the difference. On the bright side, the unused portion of the credit would be carried forward for up to three years and applied to future liability. Also, the NYS MCC has a one-time application fee associated with it. A house priced equal to or less than $100,000 commands a $250 application fee and a purchase over $100,000 requires $500. Both must be paid at closing by certified check.
Q: When do I need to close to qualify for the $8,000 tax credit and how can I qualify for both of these incentives?
A: First, the $8,000 tax credit is due to expire on December 1, of this year. A first-time home buyer is eligible for this credit if they close on a home on or after January 1, 2009 but before Dec 1, 2009. To qualify for both incentives, the home buyer must close on or after September 2, but before December 1. In addition, they must meet all guidelines issued by SONYMA (see website) including using an approved lender, meeting purchase price and income requirements, as well as applying for the certificate before mortgage approval.
Q: What types of homes are covered under both incentives?
A: Existing or newly constructed one-family homes including townhomes, condos and coops. According to the IRS, mobile homes are covered under the $8,000 tax credit even if the land is leased. The MCC doesn’t include homes that are not permanently attached to land; nor does it include property that exceeds five acres. The MCC does allow for the purchase of two, three and four-family homes provide they meet the SONYMA guidelines.
The above questions are the bulk of what I received last week during my Answers Team session. If you’re interested in learning more, I’ve created a report that compares the two incentives which can be obtained from my website http://www.lisachampagne.com/. I urge all first-time home buyers to speak with their lender and a tax expert regarding these programs.
The Answers Team convenes every Wednesday from 5:00 pm to 7:00 pm when we participate in a phone bank. Each week, CBS6 viewers either email or call in with real estate, financial or business related questions. The show’s producers screen these inquiries and direct callers to the appropriate person. In addition, producers often request an exclusive interview to talk about relevant issues within the various industries. I gratefully accepted this opportunity, and filled the role in September.
Last week, approximately 80% of all the phone calls I received were inquiries regarding the $8,000 tax credit for first-time home buyers or the New York State Mortgage Credit Certificate (NYS MCC) program. There seems to be alot of confusion about the definition of a “first-time home buyer”, the difference between the two programs, the time frame a home needs to close to be able to qualify, what types of structures are acceptable, as well as what buyers need to do to qualify for both deals.
Because the $8,000 tax credit is set to expire on December 1, first-time home buyers want to make sure they qualify for either one or both of the tax credits. Although I covered both incentives in a recent blog post Who’s the Winner, I think it’s worthwhile to address some of these questions.
Q: What is considered a first-time home buyer?
A: A first-time home buyer is a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, this rule tests the history of both the buyer and spouse. If either have owned or co-owned a principal residence within the past three years, they do not qualify.
Q: What are some of the differences between the two programs?
A: Overall both incentives are a great opportunity for first-time home buyers to save money; however, the NYS MCC is much more restrictive than the $8,000 tax credit and requires more effort from the buyer to obtain. Let’s start with the basics. The $8,000 tax credit can earn qualified buyers a tax credit for 10% of the purchase price of their home; however, that amount can’t exceed $8,000. This is a one-time credit and can be claimed on an amended 2008 Federal tax return or the 2009 return. On the other hand, the NYS MCC is a certificate that allows the buyer to convert 20% of their annual mortgage interest into a tax credit for the life of the loan, potentially saving first-time home buyers more than $30,000. The pitfall is the MCC requires buyers to apply for the certificate through an approved list of lenders, the mortgage loan must be a fixed interest rate, the mortgage loan can not be issued by SONYMA, the income limitations are stricter than on the $8,000 tax credit and there are also purchase price limits. In addition, the tax credit each year can’t exceed the borrower’s federal income tax liability. In other words, you wouldn’t be issued a check for the difference. On the bright side, the unused portion of the credit would be carried forward for up to three years and applied to future liability. Also, the NYS MCC has a one-time application fee associated with it. A house priced equal to or less than $100,000 commands a $250 application fee and a purchase over $100,000 requires $500. Both must be paid at closing by certified check.
Q: When do I need to close to qualify for the $8,000 tax credit and how can I qualify for both of these incentives?
A: First, the $8,000 tax credit is due to expire on December 1, of this year. A first-time home buyer is eligible for this credit if they close on a home on or after January 1, 2009 but before Dec 1, 2009. To qualify for both incentives, the home buyer must close on or after September 2, but before December 1. In addition, they must meet all guidelines issued by SONYMA (see website) including using an approved lender, meeting purchase price and income requirements, as well as applying for the certificate before mortgage approval.
Q: What types of homes are covered under both incentives?
A: Existing or newly constructed one-family homes including townhomes, condos and coops. According to the IRS, mobile homes are covered under the $8,000 tax credit even if the land is leased. The MCC doesn’t include homes that are not permanently attached to land; nor does it include property that exceeds five acres. The MCC does allow for the purchase of two, three and four-family homes provide they meet the SONYMA guidelines.
The above questions are the bulk of what I received last week during my Answers Team session. If you’re interested in learning more, I’ve created a report that compares the two incentives which can be obtained from my website http://www.lisachampagne.com/. I urge all first-time home buyers to speak with their lender and a tax expert regarding these programs.
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