Military Buyers Have an EXTRA Year to Use Tax Credit!

If you are currently serving in the military or if you are a veteran, member of the Foreign Service or an employee of the intelligence community, your service has earned you a one-year federal homebuyer tax credit extension.

Military service personnel now have through June 2011 to buy a principal residence in the U.S. and claim the federal tax credit. The deadline for entering a binding contract is April 30, 2011; the deadline to close a purchase is June 30, 2011.

The extension applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010. All other home buyers must be under contract by April 30, 2010 and close by June 30, 2010 to qualify for the federal tax credit.

Home Sellers and Landlords

If you are planning to do some renovation to your home before you sell, or if you are a Landlord, and your property was built before 1978, it may pay you to read on.

Starting April 22, renovations that disturb lead-based paint in older homes and child-occupied facilities must now generally comply with the Lead-Based Paint Renovation Rule of the Environmental Protection Agency (EPA).

Under the newly implemented rule, renovators of target housing built before 1978 must now be trained and EPA-certified to perform safe work practices to prevent lead contamination. Landlord's renovating their properties must deliver EPA's lead renovation pamphlet to their tenant within 60 days before a project begins (and, if mailed, at least seven days before a project begins). Renovators must also obtain the tenant's signed acknowledgment of receipt or substitute documentation as specified.

The EPA issued this rule in 2008, but delayed implementation until now. The rule generally applies to building contractors, handymen, residential landlords, property managers, and anyone else who is paid to perform renovations or to direct workers to perform renovations as specified. The lead renovation rule does not apply to homeowners renovating the homes they live in. However, sellers of target housing must, among other things, disclose to their buyers any known lead-based paint and lead-based paint hazards (C.A.R. Form FLD). Home buyers today are certainly more environmentally aware than ever, so when in doubt, it always pays to seek the advice of an informed real estate professional.

Renovation work covered by the lead renovation rule is defined as a modification of an existing structure that disturbs a painted surface, such as surface restoration or surface preparation activity. Excluded are minor repair and maintenance activities that disrupt up to 6 square feet of interior painted surface or 20 square feet of exterior painted surface. Demolitions and window replacements are not considered minor repairs.

If you need more information about the lead renovation rule, just email me and I will send you a legal article entitled Federal Lead-Based Paint Renovation Rule. You can also go to the EPA's Renovation, Repair and Painting webpage which includes the new requirements, pamphlets, and other resources. To locate an EPA-certified renovation firm contact me for a company nearest you, or go to http://cfpub.epa.gov/flpp/searchrrp_firm.htm.

So, Should You Buy or Should You Rent?

Awhile back I posted a question on my Facebook page asking what the pros and cons were about buying a home and renting a home. Some of the pros of renting were that repairs would be made by the landlord and renters don't have to pay that dreaded property tax bill!

Some of the cons of renting: All landlords don't jump to make needed repairs and some tenants, afraid that their rent will be raised, won't ask! Also, you never know when you may have to move should the landlord need to sell his property.

Well, it turns out that financially speaking, the cost gap has narrowed. Affordable home prices and low interest rates have created an ideal time for many diehard renters to purchase homes, and now a new week-long look at homeownership confirms it.

A national study, conducted for The Associated Press, shows that the difference between monthly rents and mortgage payments is at its lowest level in nearly 20 years!

The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent has declined to $256. In some areas, the difference is as low as $100, according to the study. The last time the price gap was that close was in 1993, when it decreased to $264!

The study, conducted by Marcus & Milichap Real Estate Investment Services, used median prices for the last three months of 2009 and calculated mortgage payments by assuming a 10-percent down payment and a 30-year fixed loan at 5.07 percent. It also assumed borrowers paid for private mortgage insurance and didn’t include repair costs and tax benefits.

And don't forget, owning a home does have significant tax benefits, including deductions for those dreaded property taxes and loan interest. Homeowners also can enjoy building equity and creating a means of forced savings as they pay down the principal on the home.

If you are a renter and think you might want to wade in to a home purchase, you can prepare by ensuring your credit reports are up to date and save for a down payment of at least 20 percent, or at least enough to pay for your closing costs.

Although home buyers should not focus solely on future home price appreciation, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) over the last 40 years, homeowners who purchase a median-priced house, live in it for at least five years, and sell it at the then-current median price, have averaged an annual rate of return of more than 11 percent.

As a long-term homeowner, in my opinion, owning our home has rewards that far outweigh any cons. Planting a tree and knowing that more than likely we will be here to see it get bigger each year! Christmas dinners and our traditional Easter egg hunts. Yes, it is good, and Lord willing, will continue to be so.

$10,000? Going, Going .....

Attention First-Time Home Buyers and Buyers of New Construction: CALIFORNIA'S TAX CREDIT MONIES MAY GO FAST

The $100 million allocated for California's first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.'s Economics team. California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.'s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes. The FTB will update its website when the 2010 application form and other information become available.

What does this mean for East County buyers? Get yourself pre-qualified ASAP, and call or email me for a list of Santee Lake view homes, Eucalyptus Hills homes, Granite Hills homes, Rancho San Diego Homes, or any homes in our beautiful East County! Foreclosures go fast, so be ready, and there are still traditional sales available, many at bargain prices. Get started today and YOU may be a recipient of that $10,000 California tax exemption!

No More CA State Tax on Forgiven Mortgage Debt

Can California afford this? Will it make "walking away" from a mortgage that much easier? Or is this a necessary exemption to get the economy going again?

Governor Schwarzenegger on Monday signed SB 401 (Wolk) into law providing distressed homeowners with state tax exemption on debt forgiven in a short sale, foreclosure, or loan modification. Effective immediately, this bill generally aligns California's tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a qualified principal residence, borrowers now will be exempt both from federal and state income tax consequences.

"Qualified principal residence" indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified. If a homeowner used the equity in the home to purchase a boat, technically that would not qualify!

The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board's Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service's Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

Mike Wilmers & Co make REMAX 100% Club Award

Would You Rather Rent or Own?

And the survey says ...

Americans prefer homeownership!

A new national survey gauging attitudes toward housing finds 2/3 of Americans (65%) still prefer owning a home, despite the challenging economic environment and the housing downturn. The Fannie Mae National Housing Survey, conducted between December 2009 and January 2010, polled homeowners and renters to assess their confidence in homeownership as an investment, the current state of their household finances, views on the U.S. housing finance system, and overall confidence in the economy.

Being More Careful!

The survey did reveal that homeowners and renters alike are taking a more cautious approach to homeownership. Nearly a quarter of renters polled (23%) said they will buy a home later than once planned. In addition, Americans with traditional, fixed-rate mortgages with predictable payments are significantly more satisfied than those with other types of mortgages.

Why Do We Want To Own? Getting Rich Quick Days Are Over!
Respondents cited non-financial reasons such as safety (43%) and quality of local schools (33%) as driving factors in wanting to own a home, ahead of financial considerations.

Should You Walk Away If You Can't Make Your Payments?
Most respondents (88%) believe that walking away from an underwater mortgage is NOT acceptable, but those who know someone who has defaulted are more than twice as likely to have seriously considered stopping payments on their mortgage.

How about you? Would you rather own or rent, and why? And how do you feel about walking away from a mortgage you can no longer afford?

How to Time the Real Estate Market

A good time to buy? Yes, but no need to rush.

Many housing economists have said that for borrowers with stable incomes, good credit history, and FICO scores of at least 620, now is an opportune time to purchase a home. Although inventory rates are below the long-run average, there still are plenty of options available for buyers.

Are you trying to time the market so you can purchase your home when prices are likely to rise again? You might consider taking a different approach. According to one real estate consultant, while home prices have stopped declining in most areas of the state, and even have risen in many areas of San Diego County, mortgage rates may rise, offsetting any potential savings.

Early last year, the Federal Reserve began purchasing mortgage-backed securities, which helped maintain low interest rates for consumers. However, the Fed’s purchase program ended in March, and some analysts forecast interest rates to increase throughout the rest of the year. One financial publishing company predicts that rates likely will rise to 5.5% by mid-2010 and close the year at 5.75% to 6%. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) projects rates on 30-year fixed-rate mortgages to average 5.6% this year.

Timing the market, even for economists, is a 50-50 chance at best. What we see now are home prices lower than they have been in many years, along with very low interest rates. For those who are ready to buy a home, this is a very good TIME.

Struggling Homeowner? Some Welcome News!

The Obama administration on Friday announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) program to assist homeowners struggling to meet their mortgage obligations. The program adjustments target three groups: Unemployed homeowners who are unable to make their mortgage payments; underwater homeowners; and homeowners behind on their payments and seeking loan modifications.

Unemployed Homeowners: You may qualify for three to six months of reduced payments while searching for new employment. During this time, payments will be reduced to 31 percent of their current gross monthly income. To qualify, borrowers must, among other things:
1. Be living in their homes.
2. Have loan balances less than $729,750.
3. Provide verification of unemployment benefits.
4. Request assistance within 90 days of delinquency on the mortgage.

Underwater homeowners— If you owe more than your home currently is worth and you are current on your mortgage payments, you may be eligible for a new FHA refinance option that will allow you to refinance your mortgages into new FHA-insured loans equal to no more than 115 percent of your home’s current value. The difference between the original loan balance and the new balance gradually will be forgiven if the homeowner remains current on payments for three years.

Homeowners Seeking Mortgage Modifications Under HAMP, you may be eligible for mortgage principal reductions. Although lenders always have had the option to do so, many have chosen instead to reduce interest rates. However, under the new guidelines, lenders reducing mortgage principal may receive higher financial incentives. The incentives will be paid jointly by the private sector and the federal government through a $50 billion allocation from the Troubled Asset Relief Program (TARP).

The program changes are expected to go into effect in the fall. However, a measure to offer larger incentives to lenders who facilitate short sales or deeds-in-lieu of foreclosure, as well as assistance for unemployed homeowners, will be in place within a few weeks or months, according to the administration.

I will keep you posted!