Tis the Season

Well, the days are getting shorter. The snow is on the ground and the temperatures are falling. All are signs of the season. If we look a little closer we also see people scurrying back and forth to the accountant, H&R Block doing lines of credit, and people thinking about how much they can charge in December and pay-off with tax refunds in January and February.

Yup, tis the season! Tax Season...

2010 has seen a lot of change on the tax front. It is a great time to start looking at what you will need for your tax return, what credits might be available to you and what changes to start planning for. Over the next 3 weeks or so, I will be out lining several things related to home sales and taxes.

Look for info on the home buyers tax credit for those of you who purchased a home early this year. I will also be sharing info about tax consequences for foreclosures and short sales. This subject will will be helpful to home owners and investors. Energy and improvement credits, tax deductions and potential consequences of the health care program will be other aspects we'll try to touch on.

I hope this series will be informative and beneficial. Please be sure to address specific questions about your situation with your tax professional.

NATIONAL OPEN HOUSE DAY

Join us for the NAR's annual kick off to the spring selling season. April 10 & 11 we will be participating with our friends and colleagues in National Open House Days. Please be sure to register to register for a chance to win a $100 gift card from Danville Gardens.

This should prove to be an exciting month as we see more listings hit the market every day. We also have the Buyers Tax Credit quickly drawing to a close. While I suspect our legislators will use an extension to buy votes as they stand for re-election this fall, there is officially nothing going on. So, if you plan to buy soon, try to get a home under contract by April 30th to take advantage of the 10% refundable tax credit. Oh, and there is no need to wait for next income tax season to get your money. The credit allows you to amend your 2009 taxes and get cash back for needed repairs before the summer is over.

Good luck and good buying.

HOME START

The State of Illinois has finally caught up with many of our neighbors. The Home Start Loan Program is now available through Illinois Housing Development Authority. Home Start features two different programs. While this is good news, there are no Vermilion County lenders appearing on the site's data base of participating institutions.

For our purposes we will be focusing only on the Tax Credit Advance Loan, today. You must first qualify for the 30 Year Fix Rate Loan. You may borrow 3.5% of the loan amount not to exceed $6000. This is an interest free loan if it is repaid by June 30, 2010. Failure to do so will lead to the loan becoming a 10 fixed rate loan. You will be required to attend a homebuyer education program. And finally, if you close on or before 11/30/2009, you will earn the First Time Home Buyer tax credit. So don't forget to file form 5405 with your taxes. For complete details please besure to read the plan overview provided by IHDA.

On a related note HR 2801 currently in committee is a promising piece of legislation. Hear are the high lights:

1. Extend the eligibility for the tax credit to all who are purchasing their primary residence.
2. Extending the purchase date through 12/31/2010.
3. To take effect upon passage of the bill.

There are rumors the top rebate will go up from the $8000 offered in the current legislation. This is in Ways and Means at the moment. But I will keep tracking it and keep you posted.

Referrals

I am writing this post for strictly mercenary reasons. I have two daughters in college. And some day, I will be paying for three weddings. So you see, being mercenary is almost a necessity.

Did you know that as a licensed real estate practitioner, your friend or relative can be paid for a referral on your transaction? It's true. Whether you live in FL, CA, NY or any where in between your long lost cousin or the old classmate can make a few dollars and not cost you any more than the typical commission you would pay.

I have a friend in ID who is a licensed. I am buying property in TN. I can have my friend send my contact information to my agent in TN and when we close, my friend in ID will earn a portion of the commission. The rules will vary a little from state to state. But it is pretty much the same general situation where ever you live. So, why not share the blessings.

The second scenario is only slightly different. Many agents now have vast referral networks. I was recently approached by an agent from AZ to establish a referral network. If I have a client moving from Danville to AZ, I send a referral to my new contact. He will take care of the client, and I can still earn a reward for the relationship.

So friends and family, the next time you are buying or selling a home, please remember me.

Tax Credit Update

I have promised to keep you updated on the changes in the tax credit. Seems I am a little behind. The new wrinkle isn't really applicable to our market. The Feds authorized that the tax credit be "monitized". That is, you could borrow against it, and use it for a down payment. Here is the problem. As often happens in IL our legislature has been caught napping. There is no program in effect for IL home buyers to monetize the tax credit. At the glacial pace Springfield moves, the credit will expire before the program is monetized in IL.

But the good news of the credit remains, any one who hasn't owned a home in the last three years can qualify to get a tax credit on a new home purchase. One point of clarification: The credit is good for 10% of home purchase prices up to $8000. It is not a flat $8000 credit. It means if you buy a home for $50,000, your credit will be 10 % or $5000. If you buy a $100,000 home, you credit will be for the $8000 max.

One other piece of good news to go with that. The IRS has worked it out so we don't have to wait until we file this years taxes next Feb, to get the credit. You can file a 1040X and get your refund in about 12 weeks after closing. You can get additional details at IRS.gov, or by calling your tax preparer. I am also available for other general questions, but I am not a tax pro, so I will still refer you to them for the accounting questions.

Prophets of Doom

I read article that is really quite scary. But I want to reiterate, Danville and Vermilion County are not seeing the same effects as the national numbers. Will the slow market continue? I am not a fortune tell nor do I aspire to the job. But but when you read articles like this, I ask you to think and not accept everything at face value.

We are seeing a modest gain in transactions, but that doesn't necessarily mean, the end is at hand for the slump in our area. As jobs are added to the area, we will see even more improvement. May and the early days of June have been seeing homes sell at a much brisker pace than last year for the same time. But, we are still down for the year to date (a little over 14%). While the last six weeks are a nice change, it's still to early to say the end is at hand.

The picture with selling price is a little different. We continue to see price declines of less than 1%. Our year to date figure is around 3/4% compared with last year.

Days on market continue to be high. The bankers told us in March and April that stricter guidelines on a lot of fronts are adding to processing and underwriting times. One lender suggested the net effect early on might be adding 30 days to the time to close. Averages seem to be running closer to 45 day for conventional mortgage and 60 Days for FHA. These figures are about 2 weeks longer than we have seen in recent years. My personal experience is that I am seeing more FHA buyers than in the past couple of years as well. Both then, have the net effect of increasing our days on market.

But the increase is more than these changes would predict. The reason: homes are still being priced too high. When we examine the selling price verses the listing price at time of sale, we are see 3-4% lower ratios than in past years. It gets worse when we compare the original list prices.

A couple of other considerations. The numbers I cited are averages. The market is more variable than we might expect for the small area we cover. But sales trends vary significantly from Hoopeston to Georgetown. Other variations can be seen based on the value of your home.
Months of inventory on hand is higher as the home value goes up. There just are the number of high end buyers out there that there were two years ago. If you want to know about specific school district and price ranges, ask your Realtor(r), or give me a call. I will be happy to research the specifics and let you know.

Any one who claims to tell you what is happening in Danville while they sit behind a desk in New York, is lying. Any one who tells you what tomorrow will bring, is trying to make headlines.
When we allow the mass media to control what we believe is the truth, then their doom and gloom stories become self-fulfilling prophesies. Remember, if you want to know about Danville real estate trends, check out our blog page.

New Wrinkls to the Tax Credit

Things are slowly moving on the First Time Buyers' Tax Credit. The revision will not help you if you use a conventional mortgage. It will not help you if you still have $0 down. There are organizations that might be able to help you in that situation. Details of the revision were released Friday.

Let's recap the basics of the credit:

1. You are entitled to a tax credit of 10% of the purchase price of your home up to $8000.
2. You cannot have owned a home in the last 3 years.
3. Your income cannot exceed $75,000 ($150,000 for couples.)
4. You must purchase your home before 1 Dec, 2009.
5. Your can file an amended return for 2008 or take the credit on your 2009 taxes when you file next year.
6. The sale must have closed before you do #5.

The new updates:

1. You may get "an advance" on the credit.
2. Your mortgage must be FHA underwritten.
3. You must still have the FHA required minimum 3.5% down payment.

How does this really help?
You may be able to reduce your mortgage amount.
You may be able to buy without the seller assistance with closing costs.
You might be able to buy a slightly better home.

For example, In our market the average selling price is about $65,000 (rounded off to make a simple example). You have a pre-approval from your FHA lender ($55,000). You found a home that you love but the best counter offer you receive is $60,000. Since all you have is the 3.5% down, under the old rules you would have to walk away unless you could raise the down payment. Under the new rules, you would now be able to buy.

Selling Price: $60000.
Required Down Payment: $2275.
Pre-paids and closing costs: $1800.
Mortgage: $55,000.
Shortfall: $4525.
10% Tax Credit: $6000.
Surplus: $1425.

The surplus can be added to the down payment to lower your monthly payment a little.

I read several articles today warning of scams. You can be sure that once the programs role out fully, some one will devise some a way of twisting it to turn a profit. Just be careful. After all these scam artists took advantage of people who were facing foreclosure. They have no shame.

Just to be safe if you have specific questions about the tax implications of this program speak to your tax preparer or accountant. This is not intended to be legal or financial advice.

The details have not yet reached local lenders. In fact, one told me today she hadn't heard this revision is in the works. I will keep you posted.