8 Tips To Take Advantage of the Home Buyer Tax Credit Before Time Runs Out

March 29, 2010

RE/MAX agents report that the home buyer tax credit currently can deliver meaningful savings, but only for those who, at a minimum, have a binding contract to purchase a home in place on April 30, 2010. With that deadline bearing down, potential buyers who want to capture the tax credit had better get serious about home shopping.

“It is certainly possible to find a great home and get it under contract in a month or less, but doing it requires intense focus on the part of both the buyer and the buyer’s real estate agent,” said Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.

Two versions of the tax credit are still being offered: a maximum credit of $8,000 for first-time buyers (and those who last owned a home 3 or more years ago), as well as a $6,500 credit for current homeowners. Either way, the credit applies only to the purchase of a new principal residence costing $800,000 or less, and there are income restrictions and other limitations, including a requirement to close the sale before July 1.

How can buyers eager to capture the tax credit streamline their home shopping?
Here are some suggestions:
1. Get to Know Your Market: Buyers can do that using Internet sites that permit you to see the homes currently on the market, and by finding a good real estate agent who is ready to expedite the shopping process. “A capable agent can guide buyers through the home search process and save them a lot of time,” contends Debbie Laskowski of RE/MAX Select in Chicago. “New listings can be emailed to buyers as they are posted, and buyers should stay on top of the market on a daily basis, seeing what properties are coming onto the market and which ones have sold.”

2. Line Up Your Financing: Talk to a reputable lender right away and go through the pre-approval process. That will tell buyers quickly how much they can borrow. At today’s extremely low interest rates, that amount may be more than many buyers imagined. But either way, the process will help buyers determine how much they are willing and able to spend on the home.

3. Start Narrowing Your Search: With a large inventory of homes to choose from in the current market, buyers won’t have time to look at everything in their price range. By establishing specific criteria of the home they want, buyers can screen out homes that won’t fit their needs. “If you can give your real estate agent answers to two questions: Where do you want to live, and how much can you invest, you should be well on your way to a successful home search,” said Merl Carberry of RE/MAX Suburban in Arlington Heights, Ill.

“When it comes to geography, buyers should factor in their daily commute. Few of us want to be more than 45 minutes from work. If buyers need access to public transit, then that also shapes their choice, and if they have children, schools are going to be a factor. Ideally, you can narrow you search to one or two communities rather quickly.”

4.Separate Needs from Wants: Buyers can look at fewer homes if they can tell their agent what features the home they buy must have and what features would be nice but aren’t required. “When it comes to must haves, start with the basics,” recommends Dan Bundy of RE/MAX Center in Grayslake, Ill. “How many bedrooms are needed? Is a separate home office essential or just desirable? Do you require a basement? Will a two-car garage be sufficient, or do you need something larger? And don’t forget to consider the type of home. Are you interested only in a traditional two-story single-family detached dwelling, or would a ranch plan work just as well? And what about a townhouse?”

5. Consider Condition: In today’s market, many of the best values are foreclosed homes that aren’t in perfect condition. Buyers should decide up front if they are willing to tackle a home that needs work, and if so, how much.

“Buyers often have a hard time articulating what they will accept when it comes to condition,” explained Jim Hannigan of RE/MAX Properties in Western Springs, Ill. “That’s why it is important for a buyer to get out and walk through some properties with their agent as soon as possible. Buyers’ reactions give an agent the clearest picture of their priorities.”

6. Keep Things in Perspective: As nice as it may be to get the tax credit, don’t let the desire to do so completely control your home search. “Some buyers are quick decision makers, and others aren’t,” noted Debbie Laskowski. “If you like to mull over important decisions, take the time you need. The tax credit is a great incentive, but an $8,000 credit equals just 2.5% of the price of a $320,000 home. Buying the wrong home can end up costing you a lot more.”

7. Leave Time to Handle Standard Contingencies: The typical purchase contract may have several contingency clauses, for such things as a home inspection, attorney’s approval, obtaining financing and even the sale of the buyer’s current residence. Fortunately, standard contingencies in a contract won’t prevent it from qualifying for the tax credit, according to Dan Bundy of RE/MAX Center.

However, “the more contingencies you have in a contract, the greater the risk that it won’t close,” said Bundy. For example, if an issue arises in the home inspection, and it can’t be resolved, the buyer may want to find another house, but doing that after April 30 will mean losing the tax credit. Allowing time to work through the contingencies before the deadline reduces that risk.

8. Be Careful of Short Sales: If the home you want to buy is offered as a short sale, qualifying for the tax credit may become more difficult. “Short sales require that purchase offers be approved by both the seller and the sellers’ lender, and lenders often are slow about responding,” said Merl Carberry of RE/MAX Suburban. “Waiting for lender approval could leave you without a binding contract on April 30.”

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5 Tips for a Successful Home Remodel

March 21, 2010

As spring approaches, many homeowners grow eager to start remodeling projects to update and refresh their surroundings. Before getting started, it’s a good idea to hire a professional remodeler for a workable plan and better results, according to the National Association of Home Builders (NAHB).

“A professional remodeler knows how to translate a homeowner’s dreams and budget into a beautiful reality,” said Donna Shirey, CGR, CAPS, CGP, president of Shirey Contracting in Issaquah, Wash. and 2010 chairman of NAHB Remodelers. “They have the expertise and skills to satisfy a customer while keeping the budget in check.”

Here are five tips for planning a successful home remodel that you can enjoy for many years to come.

1. Compile a list of home remodeling ideas and draft a budget for the work.
You likely have some projects in mind, such as modernizing the bathroom, renovating the kitchen, replacing windows or repairing the roof. Prioritize your wish list: Maybe you don’t have the budget for your dream remodel, but professional remodelers can maximize your dollars by doing the work in phases, suggesting budget-friendly products and materials and implementing creative design solutions.

2. Look for a professional remodeler to help plan the project.
Start by searching NAHB’s Directory of Professional Remodelers at www.nahb.org/remodel. You’ll get a list of nearby remodelers to contact. Asking friends and neighbors for names of qualified remodelers will also help you find a match for your project.

3. Check the references and background of the remodeler.
After you start speaking with remodelers and find one or two who match your project’s needs, be sure to conduct some background research by checking with the Better Business Bureau, talking to their references and asking if they are a trade association member (such as NAHB Remodelers). Remodelers with these qualities tend to be more reliable, better educated and more likely to stay on top of construction and design trends.

4. Agree on a contract.
Talk over the details of the home remodeling project and begin reviewing the contract. You’ll want to check the remodelers’ insurance coverage, ask about any warranties on their work, know who is responsible for obtaining any building permits and understand the process for making any change orders after the contract is signed. Make sure that you and your remodeler see eye to eye before you sign on the dotted line.

5. Take advantage of the energy efficiency tax credits.
If your remodel includes replacing windows or doors, adding insulation, installing new roofing, upgrading heating or air-conditioning units, updating the water heater or installing energy generating products (such as solar panels, heat pumps or wind turbines) then you can take advantage of federal energy efficiency tax credits through 2010 that will help defray costs and maximize your remodeling budget while reducing home energy bills.

For more information, visit www.nahb.org.

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5 Popular Kitchen and Bath Upgrades

March 15, 2010

Instead of playing the trade-up game, more homeowners are staying in their homes, upgrading kitchens and baths and building additions to accommodate their needs instead of moving into a bigger house, but there are also some early signs of an improving real estate market, according to a new survey of architecture firms.

More architects say they’re seeing demand for and inquiries about home-remodeling projects, including kitchen and bath upgrades and home additions. And an increasing percentage of architects say business conditions in the first-time buyer and affordable home market also improved in the fourth quarter of 2009, compared with the fourth quarter a year earlier, according to the American Institute of Architects’ Home Design Trends Survey. The survey of 500 residential architecture firms is conducted each quarter.

A net 28% of architects responding to the survey said they’re seeing greater interest among homeowners for kitchen and bath remodels, up from -16% a year ago, and a net 21% said demand for additions and alterations is improving, versus -14% a year ago. The survey figures are computed as the percentage of respondents reporting an improvement in business conditions minus those reporting a decrease.

Meanwhile, a net -4% of the architects surveyed said the market for homes for first-time buyers is improving, up from -65% a year earlier. A net -31% said the market for move-up homes is improving, compared with -71% a year ago.

“It’s still too early to think the residential market has fully recovered, but there are two encouraging signs—overall business conditions are far better than they were a year ago at this time, and we are seeing improvement in those housing sectors that need to lead a broader improvement in the housing market: remodeling and alterations of existing homes, and at the entry-level of the new construction market,” said Kermit Baker, chief economist of the American Institute of Architects.

Baker said homeowners are making improvements thoughtfully, not banking on recouping the entire cost at resale or over-improving with upscale features as they might have several years ago. And projects are typically smaller in scope these days. “The mentality is evolving that bigger isn’t better for my home, from an investment perspective,” Baker said.

As for first-time home buyers, Baker said that conditions are likely improving due to the first-time home buyer tax credit, low mortgage rates and the ability of these first-timers to buy a home without having to sell an existing home first.

For the most part, kitchens are being upgraded with practical improvements and features to make the space more usable. “A lot of the upscale stuff, like double appliances—two dishwashers or two refrigerators—or over-the-top appliances seem to have disappeared,” Baker said.

The five most popular kitchen products and features, according to the survey include:
-Recycling center, a designated place to put cans, papers, etc., which could be in the form of a nook or even part of the lower cabinetry
-Larger pantry space
-Renewable flooring materials
-Renewable countertop materials
-Computer area/recharging stations, dedicated to such tasks as recharging laptops, cell phones and PDAs.

The same desire for practicality and less glitz can be found in the bathroom. People are moving away from steam showers and towel-warming drawers and racks, and instead focusing on features that will help them better control their utility costs, Baker said.

The five most popular bathroom products and features include:
-Water-saving toilets
-Radiant heated floors
-Accessibility/universal design, or features that are adaptable and allow homeowners to age in place
-LED lighting
-Doorless showers.

(c) 2010, MarketWatch.com Inc.

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Is It the Beginning of the End of the Housing Crisis?

March 9, 2010

A smaller percentage of mortgages were delinquent and the rate of those entering the foreclosure process slowed in the fourth quarter of 2009, possible signs that the foreclosure crisis that has gripped many of the nation’s housing markets is finally starting to ease, a trade group has reported.

“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association, in a written statement.

The delinquency rate for mortgages on one- to four-unit residential properties was a seasonally adjusted 9.47% of all mortgages outstanding in the fourth quarter, down from 9.64% in the third quarter and up from 7.88% in the fourth quarter of 2008, according to the MBA’s quarterly delinquency survey.

Delinquencies include mortgages that are at least one payment or more past due but not yet in foreclosure.

Meanwhile, 1.2% of outstanding mortgages entered the foreclosure process in the fourth quarter, down from 1.42% in the third quarter and up from 1.08% in the fourth quarter of 2008. The percentage of mortgages at some point in the foreclosure process at the end of the fourth quarter was 4.58%, up from 4.47% in the third quarter and 3.3% in the fourth quarter of 2008.

The MBA survey covers about 44.4 million loans on one- to four-unit residential properties, or about 85% of all first-lien residential mortgage loans that are outstanding in the country. No doubt, the foreclosure nightmare isn’t over yet.

The percentages of loans 90 days or more past due and loans in foreclosure process set record highs in the fourth quarter, according to the report. Many of those loans more than 90 days past due are in loan modification programs, and some of them have been seriously delinquent for months waiting for modifications to get finalized.

But the good news is there are fewer problem loans actually entering delinquency—likely a result of fewer layoffs, Brinkmann said. “We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors. Not only did we not see that spike but the 30-day delinquencies actually fell by 16 basis points from 3.79% to 3.63%,” he said. He added that the non-seasonally adjusted 30-day delinquency rate has only dropped three times in the past between the third and fourth quarter—”and never by this magnitude.”

Depending on the fate of seriously delinquent mortgages—whether they are cured with modifications or ultimately enter foreclosure—the percentage of mortgages somewhere in the foreclosure process could start to see a gradual decline in the second half of the year, he said during a conference call with reporters.

If normal seasonal patterns hold, there could be a bigger drop in the 30-day delinquency rate in the first quarter of 2010, Brinkmann said. That would be a positive sign for the months and years ahead. “The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” he said. “With fewer new loans going bad, the pool of seriously delinquent loans and foreclosures will eventually begin to shrink once the rate at which these problems are resolved exceeds the rate at which new problems come in. “It also gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.

According to the MBA data, Florida was the most problematic state, in terms of delinquencies. Twenty-six percent of Florida mortgages were one payment or more past due at the end of the year, and 20.4% of mortgages in the state were 90 days or more past due or already in the foreclosure process.

(c) 2010, MarketWatch.com Inc.

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Realtors Agree Housing Market Stabilizing, But Still Troubled

March 1, 2010

The good news is, it’s a buyers’ market. The bad news is, it’s a buyers’ market. From the rubble of the housing collapse has arisen a seemingly endless supply of houses from which to choose. Good news if you’re buyer. Challenging news if you’re a seller. Mixed news if you’re a Realtor.

The extension of the home buyers’ credit is expected to spur an increase in sales during the first quarter of 2010, normally the slowest quarter of the year, said Gary Walter, executive vice president of the Southwestern Michigan Association of Realtors Inc.

With competitive prices, low interest rates and a huge tax credit on their side, buyers are jumping off the fence. And if you’ve got a house to sell, there are things you can do to make sure they land on your side, Realtors say.

“If you’re looking around your house and you ask yourself: ‘Should I paint this room?’ you probably should,” said Ryan Arnt, associate president of Meredith and Kamp Realtors of Stevensville.

Another piece of advice from area Realtors—be reasonable about the price. And be flexible. “If you’re going to list your house, it’s going to disrupt your lifestyle pattern for awhile. You’ll need to be willing to show at a moment’s notice, be as agreeable and as flexible as possible, and put a little effort into it. The return will be worth it,” said Sharon Halliburton, broker associate with American Homes of Stevensville. She and other area Realtors say the worst is over. “I’m extremely optimistic. We’ve turned a corner,” Halliburton said.

National picture
After a surge last year from September through November, the original deadline for a $8,000 tax credit, existing home sales nationally fell in December 2009. But prices rose from December 2008 and sales overall improved in 2009, according to the National Association of Realtors.

For all of 2009, there were 5.1 million existing home sales, 4.9% higher than the 4.9 million transactions recorded in 2008, the first annual sales gain since 2005.

On the other hand, in Southwest Michigan, residential sales totaled just over $381.6 million in 2009, down 18% from nearly $465.9 million in 2008. It was the area’s third consecutive year of decline in the real estate market.

The number of single-family homes sold in 2009 was within 1% of the number sold in 2008, but the average selling price, $151,190, was down 18%. The median selling price of $93,550 was down 22% from 2008. Total closed sales, including single-family and multi-family houses, vacant land and commercial property, also dropped 18%, from $516.43 million in 2008 to just over $422.2 million in 2009.

In Southwest Michigan, Walter said prices have been influenced by the percentage of bank-owned homes on the market. He said that between May and November 2009, bank-owned houses accounted for about 35% of the total unit sales. In December that figure climbed to 45%.

Arnt said he’s not quick to steer potential buyers to bank-owned listings. “Most of the banks are willing to negotiate, and that brings down the price. But I typically tell my folks that if somebody couldn’t afford to pay their mortgage, what else haven’t they been able to keep up about the house? There’s more risk. You have to be willing to gamble,” he said.

But Art Atilla, a Realtor working primarily in St. Joseph and Benton Harbor, said there’s a reason the average number of days on the market in Benton Harbor in 2009 was 91, down 11% from 2008 and the quickest turn-around time in Southwest Michigan last year. “There’s a greater number of repossessed homes in Benton Harbor, and those are being sold off quickly because investors can pick them up for $15,000 to $30,000, depending on the location,” he said. “Is it better to have empty houses owned by banks, or have an investor buy it, clean it up and get it going? The best thing would be a for a family to buy it. But these houses need to be bought by somebody.”

Economists say the market is going through swings driven by the tax credit. The extension of the tax credit is expected to spur an increase in sales during the first quarter of 2010, normally the slowest quarter of the year. The extension gives buyers until April 30 to buy and until June 30 to close. The credit, up to $8,000, originally was for first-time buyers only, but has been extended to include homeowners who have lived in their home for five of the last 8 years. These people get up to $6,500. Extension of the tax credit adds more potential buyers to the market.

By early summer, the market should benefit from a more balanced inventory, leading to an overall rise in sales in 2010, economists say.

Jobs, jobs, jobs
But a lot could depend on the job market. Realtors say job creation is the key to a continued recovery in the housing market.

Once the home buyer tax credit ends at the end of April, and if mortgage rates rise after March, will the market be in trouble again? Since most of the fuel to the housing market in 2009 was provided by the government, does the market remain too fragile for the government help to end? Arnt predicts the government will let the tax credit expire, then launch some other incentive down the road. That might be a good thing, he said. “I think they announced too early that they were going to extend it, without letting the original one expire. There were people on the fence who didn’t get off because they heard the credit was going to be extended,” he said.

Arnt is optimistic about the housing market’s future. “Personally, I feel very confident. I think the worst is over. I think we definitely have bottomed out, and things are looking very positive. There’s buyer activity that wasn’t there 30-60 days ago.” Arnt said potential buyers are breathing a sigh of relief, having made it through the holidays with their jobs intact. “I think people are more comfortable and feel that the market has been through the worst and is on the way to recovery,” he said.

Realtors are hoping that a shrinking inventory will help improve the average sales price. The December 2009 inventory dropped 7% from December 2008. In Southwest Michigan, there are 2,803 houses listed, which equates to a 13.3-month supply. That is down from a 16.5-month supply in November 2009 and a 14.1-month supply in December 2009.

National figures for January showed an inventory of 3.29 million existing homes, 11.1% below a year ago and 28.2% below the record of 4.58 million in July 2008. Nationally, the median home price in December 2009 was $178,300, 1.5% higher than in December 2008. Economists said that was due to an increased number of mid- to upper-priced houses in the mix.

Prices stabilizing
Halliburton said, after reviewing the January figures, she’s optimistic. She said that in St. Joseph and Lakeshore, there were 26 homes sold in January, a 73% jump over 15 sold last January.

The average number of days on the market for homes sold in St. Joseph and Lakeshore in January was 99, compared to 147 days a year ago. The average sales price in the same area in January was $153,648, down just $132 from a year ago.

For the entire Southwest Michigan area, she said, the average price was up 27% over a year ago. “I’m excited. These are the best numbers I’ve seen in a long time,” Halliburton said. “I’ve been listing at least one house a week since the first of the year. My spring starts in February, marketing-wise.”

To sell your house, she said, it’s got to look better than everybody else’s on the block. “Work on curb appeal outside. Inside, de-clutter, clean, paint, all the things you’ve been meaning to clean anyway- take a third of the stuff out of every room.”

Atilla recommends “staging” a house before putting it on the market. “You get somebody with a good eye and you can cost-effectively make the home as good as it can be. Paint, rearrange furniture, add color accents, put towels in the bathroom. If you need a new roof or furnace, be honest about that in your price.”

Copyright (c) 2010, The Herald-Palladium, St. Joseph, Mich.

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