Twin Cities Real Estate

Some Questions about the Tax Credit

 

There are buyers wanting to know,    

 WHICH HOME PURCHASES QUALIFY FOR THE FIRST-TOME HOMEBUYER CREDIT?

 

 Only the purchase of your primary home within the United States will qualify.  That means vacation properties and rentals do not apply.  You need to buy this home between April 8, 2008 and before July 1, 2009. If you are building a house you must have moved into the house by July 1st 09.

 

Then I am asked,                               HOW MUCH IS THE CREDIT?

 

The credit is 10% of the purchase price of the property with a maximum credit of $7500 for either a single taxpayer or a married couple filing jointly.  The limit is $3,750 for a married person filing a separate return. 

 

It is common for me to hear the question, ARE THERE INCOME LIMITS?

 

The answer is yes.  The credit is reduced or eliminated for higher-income taxpayers. 

 

Today I was asked,                                     WHO CANNOT TAKE THE CREDIT?

 

                                     *if your income exceeds the MAGI

                                     *if you buy from a close relative such as spouse, parent, grandparent

                                     *if you stop using your home as your main home

                                     *if you sell your property before the end of the year

                                      *if you are a nonresident alien

                                     * if you were eligible to claim the District of Columbia first-time buyer credit

                                     *if your homer financing comes from a tax exempt mortgage revenue bond

                                      *if you have owned a main home any time during the three years prior the date of purchase

 

Here is a natural question,                       HOW AND WHEN IS THE CREDIT REPAID?

 

The credit is similar to a 15 year interest free loan.  It is to be repaid in 15 equal annual installments beginning with the second tax year after the year the credit is claimed.  The repayment amount is included as an additional tax on the taxpayer's income tax return for the year.  For example, if you claim a $7,500 first time homebuyer credit on your 08 return, you will begin paying it back on your 2010 tax return at $500 per year from 2010 to 2024.

 

How do you feel?  Take two aspirins and call me in the morning.

                                                                

Buyer Represenative Agreements

Buyers often like to go solo.  They feel they can get a better deal, be in greater control, and not be under the influence of a Realtor.

 

I might be biased, as I am a Realtor, but with 22 years of selling houses behind me, I have no idea why a buyer would like to go it alone.

*Dealing with the listing agent does not give you a better deal on the purchase price it gives you no representation

*A Realtor is paid by the seller via commission so it does not cost the buyer to use an agent

*Trust is part of the process and who can you trust better than someone you have a contract with

 

A buyers' agreement is a contract in which a buyer pledges he will work only with that particular Realtor.  He is saying he will not run around open houses, call other agents to see houses, and will not buy  for sales by owner without having his Realtor evolved in the transaction.  In return the Realtor is pledging his fiduciary responsibility to the buyer.  I feel the agreement puts more responsibility on the Realtor than it does the buyer.  It is having that Realtor be accountable to the buyer.  The Realtor is now saying he will know more, see more, smell more, etc. than if he was not under contract.  It is putting the feet of that agent to the coals.

 

Here is an example.  A buyer who tells his Realtor he loves a certain property because of the open lot next door is putting value on the lot.  If he buys that house and in two weeks a gas station starts being built next door, if he has a buyer rep agreement, he has some reason to go back after his agent.  The agent did not do due diligence to see how that land was to be used.  He had the reasonability to check with the city and see how the land was zoned and the future use of that open space.  A buyer buying without a contract is on his own and only has himself to kick for not checking things out.

 

To me a Realtor is the compass for the buyer to get them to a successful closing.  The Realtor is not an opposing magnet trying to take them off course, but the means to keep them on course and pointed in the right direction.  This Realtor was a Girl Scout and knows how to get you to the end of the trail.

Impossible

 

This summer I was with my family on the North Shore.  I noticed this tree that was growing out of a rock on the shore line.  All the other trees stood straight and tall.  Here was this tree bent and hanging onto the shoreline with roots running close to the surface.  I thought of all the winds, rains, snows, and sunshine that had pushed and pulled this tree so that it grew sideways.  Though it was not straight, it still grew, had leaves, and its own individual beauty.  The seedling did not give up.

 

In life we do give up.  If we can't grow straight and be as beautiful as the best of the best, then we don't want to compete.  We stay within the box and make our decisions based on the tried and true.  This philosophy can work when all is going well.  It is not a line of thinking that should be used in difficult situations.  That is when we start thinking out of the box.

 

A seller and buyer can like this real estate market if they stop trying to be that straight tree and be more like the crooked tree.  Bend with the influences of this market and be creative.I had a buyer with a townhouse in Maple Grove.  There were 42 other townhouses similar to it in Maple Grove and Plymouth.  We priced it under the market but still no sale.  These buyers fell in love with a house in St. Louis Park that had been rehabbed by an investor.  I asked that investor if he ever thought of buying a townhouse and using it as an investment property.I told him if the answer was yes, then he would have sold his listing in St. Louis Park.  The deal went together.  Does this sound impossible?  No, it sounds like a tree hanging onto the shore line and growing crooked.  In other words not the typical approach to buying and selling were used. 

 

I firmly believe we can meet with success in many things we attempt if we just don't try to do it the traditional way.  The impossible becomes the possible if we try.

Interest Rates Drop

 

A week ago lenders were quoting 6.75% on a 30 year conforming mortgage. Today they are quoting 5.75% on the same product. Talk about a surprise. We were thinking we might see 7% soon. Where did the confidence come from to bring rates down? It came from the Federal government buying the two financial backers in the mortgage industry, Freddie Mac and Ginnie Mae.

I do have a concern that the press is not shouting this information from the mountain top. It was mentioned on the business page of Friday's Star and Tribune. It should have made from page news. This means that a buyer will reduce their monthly payment significantly and it can mean they can buy quite a bit more house. The press continues to find the negative aspect of real estate newsworthy but this light shining through our darkness is not worth mentioning.

No one knows how long rates will remain at this lower rate. The mortgage

interest rate jumps more than fleas on a dog. We are now a global economy so many external things can make the rate go up or down.

There are those who do not believe this drop did much for the market. Friday I had some buyers in my car who I had shown 15 houses to. I mentioned to them the great interest rate and said if you see a house you like today go for it. The stars were all in alignment as we saw a great house, the price was right, and in four hours time we put the deal together. They might have made the offer anyway, but I firmly believe that the lower rate gave them a sense of urgency and a fear of loss. We can stop this plane from crashing into the ground and make the nose pull up and reach

Gutters

Builders will tell home owners they don't need gutters.  In fact they will tell them it is a good way to get ice dams.

 

House inspectors will tell a buyer to get gutters on the property to move the water away from the house and keep the basement dry.

 

I guess I will side with the inspector, gutters are good.

 

Gutters are an important part of keeping a basement dry.  They do need maintenance several times a year.

 

*Keep them clean of seeds, needles and leaves.  It is never good to see little trees growing in them.  Gutter guards might seem expensive but they serve a good purpose and will keep one from falling off the ladder.

 

*Keep gutters on.  I show houses with them falling off.

 

*Keep gutters painted.

 

*Keep downspouts attached  to the gutters.

 

*If your kids are climbing out of the house remind them gutters are not real stable and don't hang from them.

 

Gutters are good.

 

Putting A Spin On It

Last night I listed a single family house with a detached single car garage.  I told the sellers we would need to list at a certain price point due to the one car garage. 

 

Here is what they told me.  They said make it a positive.  Tell the buyers about the bus route within four blocks, the great bike paths out the front door, and how they saved money on car insurance owning just one car.  I said okay we would do it.

 

Spin is what we do when we want to make a negative into a positive.  Rather than give away a car with the house I think I should suggest giving away a new bike!

Inspections

One property can have so many inspections you don't know who to believe or trust.

 

*There can be a municipality inspection-The city can require the property to be inspected and certain things repaired or replaced before title can be transferred.  Each city has different degrees of inspections and I would not suggest a buyer to make their decision to buy or not buy a property based on this report.

 

*A pre-inspection-A seller can pay an independent inspection company to view the property and write a detailed report on the property.  Sellers feel this is an honest way to approach the condition of the property.  I find few buyers read this report and even fewer trust it. They think the inspector is doing this for the seller and therefore will be easy on the house.  This is not true, but is it read this way by many buyers.

 

*Time of sale inspection-This is a private inspection paid for by the buyer and is given only to the buyer.  It is very detailed and from this report many buyers make their decision as to how they want to move forward with the sale.

 

*Appraisal-The role of the appraiser is not only to establish value but to decide if any work needs to be done to the property, work orders, in order to get financing.

 

Many purchase agreements are renegotiated or fall apart due to so many differing opinions.  Throw in the opinions of friends and relatives and -- good luck.  I feel it is the role of the listing and selling agent to help the buyer and seller work through these issues.  There is no perfect property and all parties most compromise in the end.  Take two aspirin and call me in the morning. 

Internet Influence

I met with a seller this weekend and they wanted to know how many ads I would run in the newspaper.  I told them none.  Both sellers crossed their arms in front of their chests and sat back in their chairs. That is non-verbal communication walling me out and stopping future messages from being received.  I leaned forward trying to break through their barrier and asked them is they noticed how small the real estate section of the newspaper had gotten.  They nodded yes, put their arms to their sides and were ready to hear more.

 

Realtors would like to stay in control and make the internet go away.  We can wish all we want to, it ain't going to happen.  Rather, I believe in embracing the internet.  Here is how I see the advantages:

 

*The shelf life is endless and will not end at the end of the weekend

*There are no deadlines, information can be posted as needed

*Information is available 24/7.  I tell sellers you don't want people walking through your house at 11:P.M., but you don't mind them doing it on the web at night do you?

*There are no geographic bounds.  People everywhere can access your property.

*Better qualified buyers walk through your property as they have previewed it on the internet and are interested in seeing the property

*Pictures are able to say thousands and thousands of words in color and have a dramatic impact on the consumer

*Buyers can remain at their comfort level until they are ready to come forward

 

The internet is not perfect but it is how we do things now.  A Realtor must reflect the times and not remain stag net.  If I were to remain as how we used to do it, I would arrive at your house in a horse and buggy.  When the horseless carriage first came out, the car, everyone said it was silly and they would never own one. Many Realtors take that same attitude. Not this Realtor.

What is A Handy Man Special?

 

This week I had a buyer call me and ask for me to show them a house they found on the internet.  The information they saw on the internet said nothing about it being a "handyman special."  I mentioned to them that I found that comment under Realtor comments on the Multiple Listing.  They asked me what it meant.  I told them it could mean lots of things.  There is no guideline for Realtors on how to use certain phrases.  So------------we went to see the house.

 

From the curb I questioned  the listing agent.  The steps going up to the house were falling apart.  To me that is more than a handyman.  That means hiring a concrete company to dig out the old steps, put in forms for new steps, and pour concrete.  Concrete to this Realtor means money.  We walked into an old porch that was sagging.  I don't know too many handymen that like to deal with foundation issues.  Porches usually do not have the same footings as the house that sits on the basement and therefore they move at different rates as the house expands and contracts.  More money.  The woodwork in the home was original and amazing.  The box beam ceiling and buffet in the dining room were keepers.  You could feel the grove on the railing in the dining room that was designed to show off the plates of the lady of the house in 1911 when the house was built.  Talk about wallpaper.  It was everywhere, and you would only know how many layers when you started stripping.  Once the paper was off,you most likely would need a plaster person to restore the walls.  I'll stop there.  This was more than a handyman.  A handyman is one who changes out your leaking faucet or replaces torn screens, this was a project for a remodeler.

 

Rhetoric is hard to define, but I feel as Realtors we need to call houses as they really are.  There is a buyer for every house if we just match them up right.

Buying a Townhouse

 

In this market I am asked, "Is it safe to buy a townhouse?"  I guess the consumer feels there is something wrong with townhouses. Townhouses serve an important role in our housing industry.  You need to follow several guidelines when purchasing one.

 

1) Select a unit in a complex that is away from any negative influences.  In general, townhouse complexes are built to buffer a residential area from a highway, commercial area, or power lines.  The units that are close to these less desirable items will always be harder to sell.  Buying a unit within the complex that has pond or wetlands to view will be easier to grow equity.

2) An end unit is always the safest unit to buy.  There is more daylight, less noise, and more air flow.  True, these units will initially cost more, but they will be worth more when you go to sell them.

3) A double car garage townhouse will be easier to sell then a single car garage.  Again it will cost more but it will grown in value faster. 

4) A townhouse with a true laundry room rather that a stackable unit or a side by side in a closet is a good choice.

5) A unit will feel larger if it has taller ceilings and an open floor plan. 

6) Try to purchase a more recently built property or one that has been updated.

7) Be cautious of purchasing in a development with more phases to be completed.  If you go to sell prior to all the units being built, the new units will be more attractive than your used unit.

8) Buy in a development that allows pets.  You might not have a pet or even be partial to them, but think of those who will look at your place in years to come.  They could be pet lovers.

9) Complexes that are FHA approved are important.  That means a buyer can buy using FHA financing which is common in the under $250,000.00 market.

10) Have an inspection on the unit and make sure you are purchasing a property in good condition.  The association does not take care of as many aspects of the townhouse as buyers assume.  Remember, windows are the homeowners responsibility!

 

I enjoy helping people buy townhouses.  They can be purchased at sharp pricing today and will grow in value in the future.  Many of us don't want all that a single family brings with it and many of is can only afford so much in housing right now.  The townhouse can be a great property for many buyers today.