Wednesday, September 10, 2008

1st Time Home Buyer Credit

These are the new tax credit provisions for 1st Time Buyers.  This is a great chance to save on taxes this year if you are in the market to buy.  This a great chance to save up to $7,500.  Between this great cresit and falling interest rates, now is the time to Buy.

 

In our quest to continue to provide excellence to you, please find below the key points of the First Time Homebuyer Tax Credit that became law through the H.R. 3221 Housing and Economic Recovery Act of 2008.      

Feature

H.R. 3221

Housing and Economic Recovery Act of 2008

Amount of Credit

Ten Percent of the cost of home, not to exceed $7500.

Examples: 

Ø        If a home costs $65,000, the allowable credit would be $6,500.

Ø       If a home costs $120,000, then the allowable credit would be $7,500.

Eligible Property

Any single-family residence (including condos) that will be used as a primary residence.

Refundable

Reduces income tax liability for the year of purchase.  Claimed on tax return for that tax year.

Individuals should consult a professional tax advisor for exact tax calculations.

Examples:

Ø        If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.

Ø       If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.

Income Limit

Individuals whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.  Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.  Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.

First-time Homebuyer Only

Purchaser (and purchaser’s spouse) may not have owned a principal residence in three years previous to purchase.

Recapture

A portion (6.67% of credit) is to be repaid each year for 15 years.  If home is sold before 15 years, then remainder of credit is due in the year of the sale. 

Ø        If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.

Ø        If the homeowner dies, their heirs do not have to pay back the remaining balance.

Ø        If the house is sold before fifteen years have passed and the home’s appreciation is less than the amount needed to be to paid back, the loan is forgiven.

Ø       If the home is turned into a rental or investment property, the pay back balance is due in that year. 

Effective Date

Purchases on or after April 9, 2008 until July 1, 2009

 

Posted by Scott Smolen at 14:45:54 | Permalink | No Comments »

Tuesday, September 2, 2008

How Appraisals Work

This article looked interesting to me as we come across this everyday in the business.

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn’t always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and Real Estate Agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren’t uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of homes that have actually settled.

Posted by Scott Smolen at 17:36:07 | Permalink | No Comments »