2010 Home Buyer Tax Credit

It’s still not too late to get up to $8,000 Homebuyer Tax Credit. On November 6th, 2009, the government has extended and expanded the Homebuyer Tax Credit (formally known as The Worker, Homeownership and Business Assistance Act of 2009).

Under the new law, a homebuyer “must buy, or enter into a binding contract, a principal residence, on or before April 30, 2010 and close on the home by June 30, 2010″.

The maximum tax credit amount is $8,000 for a first-time homebuyer (a buyer who has not owned a primary residence during the 3 years up to the purchase date).

The new law also provides up to $6,500 credit for current homeowners, who used their current primary residence for at least 5 consecutive years during the past 8-year period prior to purchase of a new primary residence.

New Income Limits:

The new law has raised the income limits, so individuals making up to $125,000/year (or joint-filing couples making up to $225,000/year) can qualify for the full credit. A reduced credit is offered to those making between $125,000 and $145,000 (or joint-filing couples making between $225,000 and $245,000).

Please note that no credit is available if the purchase price of the home is more than $800,000. This information is provided as a general news brief. You are advised to consult a tax professional to seek advice before making any financial decisions.

Home Buying 101

A great home in a pristine condition, and competetively priced, may get scooped up hours after being listed (regardless of the market conditions). So when competition is fierce, you need your offer to stand out from the competitor's offers. To increase the likelyhood that a seller accepts your offer, consider adopting one or more of these strategies:

Price. Obviously, price tends to be the primary consideration to the sellers. In a hot market, when buyers outnumber the inventory, offers often come in at a full price or above it. When you're competing for a home, to get an edge, consider adding a clause stating that you will beat the highest offer by "x" dollars up to "x" amount. Cash offers can be more attractive to sellers as well. Although the sellers will receive their money at closing whether the buyers pays cash or takes out a loan, cash offers don't require lender's approval. And loan approval is never a certainty - it may delay closing.

Financing. It's not enough to be pre-qualified. Prequalification only tells you how much you can afford. Pre-approval goes a step further. Having your loan pre-approved gives you a sizable advantage by putting you on equal footing with cash buyers.

Good Faith Deposit. Buyers offering larger-than-customary amount of "earnest money", a deposit that accompanies an offer, may get a seller's attention. By commiting more money up front, buyers demonstrate greater sincerity and motivation to close the transaction. I will guide you as to the appropriate sum for your specific transaction.

Contingencies. Consider minimazing contingencies, those clauses that allow buyers to back out of a contract if certain conditions are not met. For example, it's common for buyers to make the purchase contingent on their securing satisfactory financing. Obviously, offers with the fewest conditions tend to be more attractive to sellers.

From a contingency standpoint, first-time home buyers are often better prospects for seller's home than move-up buyers. Here's why: very often, buyer's offers are contingent upon the sale of their present home. Even if a move-up buyer presents an offer, the buyer's offer may be contingent on another contingency, and so on down the line. If one transaction derails, they all might.

Relationship. Help the seller get to know and identify with you by looking for ways to connect. The connection could be in a form of a shared interest, such as shared love of gardening. You'll want to persuade the seller that his prize roses will be well tended.

Naturally, the sellers would like to receive top dolar for their home, but remember, they also want an easy trouble-free transaction. Thus, as a rule, the fewer the contingencies and the greater the commitment, the more attractive your offer may look.

Have questions? Call us at 718-FOR-SALE (367-7253) to discuss your home buying needs.

 My credit is less than perfect. Can I still buy a home?

Perhaps in recent years, you've had financial difficulties that caused you to make a few late payments to creditors or even possibly not pay some bills at all. You may have even had to file for bankruptcy. Now your difficulties are over and you want to buy a home. Will it be possible to get a home loan with a blemished credit history? Although it may be a little harder than if you had A+ credit, the answer is yes.

One of the first things you want to do is order a credit report. There are three main credit reporting agencies: Equifax (800-685-1111), Experian (888-397-3742), and Trans Union (800-888-4213). [Because not all creditors report information to the same agencies, you may want to request a report from all three.] Once you have the report in hand, study it to make sure that the information is accurate. If there are discrepancies, make sure you follow the steps provided by the credit reporting agency to dispute the information and get it changed. In addition, you may want to add a consumer statement on your credit report to explain any late or non-payment to creditors.

Depending on how damaged your credit is, you may want to put off buying a home for another year. Use that time to repair your credit by paying off creditors and create a history of paying your bills on time and consistently.

When you are ready to apply for a loan, realize that your previous credit history may limit your eligibility for prime loans and low interest rates. When lenders are deciding on whether to issue a potential borrower a loan, they use various criteria in addition to payment history to evaluate the borrower such as employment, income, assets and liabilities. Based on this evaluation, borrowers are offered loans rated on a scale from A to D. The more damaged your credit history, the higher of a risk you are to lenders.

Because of your blemished credit history, you will more than likely have to get a "sub-prime" loan. These types of loans come with higher interest rates and more points. Don't assume that just because a lender offers sub-prime loans, that you will automatically be embraced. Be prepared to explain to the lender why you had credit problems and what you have done to prevent the situation from occurring in the future.

Remember your past financial problems don't have to stop you from experiencing the joys of homeownership.

Foreclosure and short-sale homes

Foreclosure homes are bank-owned properties, also known as REOs (Real Estate Owned). This type of homes are listed by various real estate brokers, on behalf of the financial institution that repossessed them from their previous owners. They are almost always sold "as-is", without any repairs being done by the bank. Most often these homes have had their utilities (gas, water, electric) turned off, to preserve their condition. This means that you typically cannot properly test the heating system, boiler, etc., before you buy the property. Some homes can require extensive renovations, and or remedification of existing violations. On a flip side, Staten Island bank-owned properties may be a good bargain for someone who's handy, or has the means to make the improvements.

Short-sale homes are properties owned by private individuals, who have outstanding mortgage balances higher than their home asking price. Such scenario requires that the sellers enter into an agreement with their lender(s) to sell the properties for less than what is owed to the lender. Seller's lender(s) have the deciding say in the sale, even if the seller has accepted the offer, and both parties signed the contract. The downside is that the short sale may take much longer that a regular buy-sell transaction, due to most seller's lender(s) prolonged time frame of accepting any offers. In the end, if prolonged closing is not an issue, the buyer might score a property for less than comparable homes.

We have access to all foreclosure and short-sale properties thoughout Staten Island. Call us for a current list of these properties.

Want to invest in Staten Island real estate, but not live in it?

Turn on any financial news program and at some point you'll hear the experts extolling the virtues of diversification. Real estate has long been considered a conservative, long-term strategy to growing wealth. While some seasoned real estate investors make it look easy, to be successful, beginners should follow some basic principles.

• Learn all you can. Before committing your cash, you should have a fundamental understanding of real estate. For example, be aware that, in general, investment properties are not liquid investments. Barring exceptional circumstances, real estate does not sell at a moment's notice. It could take days or months to sell a property, depending on the strength of the market in a particular region.
• Consider cash flow. You'll need to have enough capital on hand to cover any short-term losses due to vacancies between tenants.
• Start small. Look into buying a single family home or a duplex. Leave large apartment buildings and commercial properties to the pros.
• Inquire at the local Chamber of Commerce about companies relocating into or out of the area. Company movement is one indicator of demand for rental and/or office space.
• Find a property that will be in demand. Look for a moderately priced home with three or four bedrooms, two bathrooms, and a garage that sits on a quiet street.
• Research the property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond the front door. Investigate the reputation of the school district, the crime rate, and plans for expanding a nearby highway or developing vacant land. Ask about the area, its history, and how fast (or slow) properties are moving.
• Inspect the home you're considering for signs of water damage, such as stains on the ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away resale profit. Because even the best inspection can't always predict problems, try to set aside some of the rental income for unexpected repairs.
• Spend time driving the streets of the neighborhood noting the condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?
• Be ready to make fixes quickly and respond to the renter's needs. If you're not prepared to be a hands-on landlord, consider hiring a property management firm. Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate.

We're here to help! Give us a call today, at 718-FOR-SALE (367-7253).