February, 2009:

First-time homebuyers: How to get the $8,000 tax credit

This has been a hot topic, so we thought that this article may help answer a lot of common questions:

First-time homebuyers: How to get the $8,000 tax credit

WASHINGTON – Feb. 17, 2009 – How does a first-time homebuyer take advantage of the $8,000 tax credit that President Obama is expected to sign into law tomorrow? It comes with a few rules. According to the most recent analysis, the following rules will apply – though things could change as tax professionals weigh the details:

• The deduction is worth 10 percent of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.

• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.

• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.

• If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.

• It’s a tax credit, not a deduction. That means the entire amount goes back to the first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.

• The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 31, 2009.

• The tax credit does not have to be paid back, providing the homebuyer keeps the property for at least 36 months and resides in the home.

• To qualify as a first-time homebuyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.

• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.

• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.

The tax credit is not a downpayment, but it could be used toward a downpayment if first-time homebuyers plan ahead. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.

By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, these buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.



Fannie Mae rescinds 4-property limit for investors

If you turn down Pandora and listen closely, you can hear real estate investors in Chicago cheering all the way from Cincinnati.

Read the Fannie Mae official announcement — you get the sense that the nationalized group is getting with the program. This excerpt comes from the lead paragraph: “Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery.”

The use of the phrases “high-credit quality,” “bona fide” and “experienced” was a conscious one, by the way. Fannie Mae is averse to first-time investors and other foreclosure opportunists. Instead, it wants to serve individuals with a history of owning and successfully managing rental property.

To that end, Fannie Mae will now finance the purchases of one-unit homes for investors with an interest in between 5-10 properties, provided that all of the following guidelines are met:

* 25 percent down payment on the investment property;

* Minimum credit score of 720;

* No mortgage payments late within the last 12 months;

* No bankruptcies or foreclosures in the last seven years;

* Two years of tax returns showing rental income from all rental properties;

* Six months of principal, interest, taxes and insurance reserves on each of the financed properties.

And lastly, to reduce fraud, Fannie Mae will now require all real estate investors to sign a form granting lenders permission to verify supplied tax returns against the official, IRS-filed version. This document is less commonly known as a 4506-T.

But lest we think this guideline change is Fannie Mae’s olive branch to the people, let’s remember that our nation’s banks are holding record numbers of foreclosed homes on their balance sheets right now while the most likely buyers of those homes have been to-date locked out from financing.

Real estate investors want to buy REO, but Fannie Mae had made it impossible. The guideline change is meant to extend banks and lenders a lifeline first; bringing experienced investors back into the fold is just how it’s getting done.

That said, real estate investors are lovin’ it.

For the first time since September, investors can go to auction and know that (relatively) cheap financing will be available from the government. This should speed the reduction of REO inventory nationwide. In addition, with more investors eligible for financing, expect greater competition for prime foreclosed properties, helping to keep home prices from falling into the abyss.

The rollback gives a secondary benefit to investors, too — even those not buying additional property.

See, when the four-property restriction went into effect it was a surprise, 11th-hour announcement made on the Friday before Fannie Mae’s nationalization. This date, meanwhile, has come to be known as the day before the refi boom started.

So, on the following Monday, when mortgage rates instantly plunged three-quarters of a percent, homeowners with five properties or more found themselves ineligible.

They couldn’t refinance their investment homes; they couldn’t refinance their vacation homes; and they often couldn’t refinance their primary homes, either. While rates fell for nearly every borrower class, experienced real estate investors were locked out. Today, that’s no longer the case. “High-credit quality, bona fide” real estate investors are back in the game.

It’s good for them; it’s good for the banks; and it’s good for housing.

Not every bank sells loans to Fannie Mae, however, so if you think the new guidelines will impact your mortgage plans, be sure to check with your loan officer first.

Originally posted at The Mortgage Reports blog

Copyright (c) Dan Green

Bills to address flaws in condo-insurance law

MIAMI – Jan. 27, 2009 – A controversial law requiring condo owners to have property insurance has many of them up in arms, but lawmakers already are working on bills that would change the requirement this spring.

Letters from condo associations to unit owners demanding owners to show proof of insurance within 30 days or the associations will buy coverage on their behalf have prompted hundreds of complaints, lawmakers said.

The law, which took effect Jan. 1, also requires condo owners to add the association as an insured party on the policy.

Associations typically buy insurance that covers the building, while owners are responsible for buying policies to cover their units’ interior – flooring, cabinets, appliances and the like. Many owners, however, opt not to spend the money and were not required to – until now.

After the 2004 and 2005 hurricanes, many associations faced the problem of damaged or destroyed units that were not repaired because unit owners had no insurance. The associations wanted to be able to force owners to have the proper coverage. Before Jan. 1, only lenders could buy coverage for a home or condo if the owner let it lapse or canceled the policy.

The new law has owners confused and worried about the cost.

“Condo owners are coming and saying, ‘Tell me what I should buy,’” said Carol Everhart, an agent with BB&T Insurance in St. Petersburg.

Everhart, who sits on the board of Citizens Property Insurance, the state-run insurer, works with more than 200 condo associations.

‘Economic issue’

“It’s not such a bad law. But it’s an economic issue,” said Dulce Suarez-Resnick, an executive at Brown & Brown Insurance.

A condo policy for a small apartment (about 750 square feet in a modest building) can cost about $1,000 a year. A luxury condo with plenty of marble and granite and a high-end interior could cost as much as $5,000 a year, she said.

In addition, the law is flawed, agents said, because no insurer in Florida will sell coverage for an individual unit to a condo association and then have the association bill the owner.

The problem, says Donna Berger, general counsel for the association lobbying group Community Advocacy Network, is that the new law makes having the insurance mandatory rather than voluntary.

Already two bills – one by Rep. Ellen Bogdanoff of Fort Lauderdale and the other by Sen. Dennis Jones of Seminole – have been filed that will make some fixes in the “glitches” in new law.

Both bills would make the insurance coverage voluntary – not mandatory – for unit owners and would allow the associations to buy the coverage if they choose to and then bill the owners.


Rep. Julio Robaina of Miami said his office has fielded hundreds of calls from condo owners all over the state who have gotten letters from their associations and don’t know how to proceed.

“They’re unhappy with the mandates of the new law. But [an owner] might have to buy a policy until a new law is passed,” said Robaina.

There is no penalty for not following the law, so associations could decide not to enforce it with their owners.

But agents like Suarez-Resnick and Gaby Dominguez at Avanti Insurance in west Miami-Dade County say buying insurance to cover the contents of their units as well as the interior is a good idea for condo owners to do anyway.

“The biggest mistake condo owners make is to not buy insurance because they think their units are covered by the association’s master policy,” said Suarez-Resnick.

Another aspect

One provision in the new law that isn’t controversial requires unit owners to purchase loss-assessment coverage of at least $2,000. That coverage would help pay for an additional charge levied by the association after a major storm to cover any shortfall to pay needed repairs.

Right now, most policies include coverage of $1,000 and many carriers were already increasing it voluntarily to $2,000, said Everhart.

But she said this coverage should be applied to the assessment deductible so that the additional cost does not burden unit owners.

Copyright © 2009 The Miami Herald, Beatrice E. Garcia. Distributed by McClatchy-Tribune Information Services.

When does the tourist season actually start in Destin?

Tourist season begins in earnest in March during the first spring break. The spring breaks actually hit us in waves in March and April as most of the southern states have staggered vacation schedules. This is occurring at about the same time that our winter “snow bird” guests are packing up to go home.

Our area attracts many families during spring break, as opposed to the stereotypical spring break locales featured on late night TV. With our upscale dining, shopping and accommodations, the Emerald Coast naturally lends itself to a more adult clientele.

Tourist season here will wind down around Labor Day, making the months of September and October two of the nicest times to visit.  While we do have very serene peaceful stretches of beachfront here year round, September and October usually bring lots of sunshine and great weather, and the restaurants and beaches less crowded.

We bought a house 4 years ago and just found previous termite damage that had been covered up. What can we do?

We are sorry to hear about your problem.  However, that is not an easy question to answer. The discovery of such an item four years after the sale is problematic. There are several issues to consider:

You should have received a copy of a termite inspection report when you purchased four years ago. Did it mention any problems at that time? But please bear in mind that even the best termite inspector cannot see behind or through the walls. The inspector should have flagged any visible signs of wood rot, termite damage, as well as previous or current termite activity, if any.

You may have obtained a home inspection prior to closing.  but as in the case of the termite inspector, they cannot see behind or through the walls. Their disclaimers will typically state that the inspection is non-invasive in nature and that the inspector is only responsible for detecting that which is visually and readily observable.  

Another issue is that this previous damage may have even been covered up by a seller prior to the one who sold to you. If the property has been through several owners, your seller may not have been aware that a pre-existing problem existed.  The origin may be very difficult to determine.

If the problem is severe, you may wish to contact an attorney to see what your legal rights may be.

We are first time buyers and like everyone else, are wondering if now is a good time to buy a home?

The answer is yes, now is a great time to buy! It is unprecedented that interest rates and real estate prices are low at the same time. While property values may not rise for a while longer, interest rates may not be this low for long.  Even a slight rise in interest rates can have a pronounced effect on your monthly payment. So yes, take advantage of the fabulous opportunities that exist today. They won’t last forever.



One last thought … If you wait for the robins to sing, spring will be over.