Debbie Brodie’s Chico Real Estate Blog

Short sales-one less thing to worry about

April 14th, 2010 . Posted in Short Sales | Comments Off

Great information from the California Association of Realtor’s legal department! Senate Bill 401 was enacted into law, and will align the state tax rules with the IRS tax rules when it comes to the taxation of the amount of money the bank forgives on a Short Sale.

NO MORE STATE TAX ON FORGIVEN DEBT

Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. Enacted into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a “qualified principal residence,” borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.

The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.

New California home buyer tax credit coming soon

A recent article put out by the California Association of Realtors legal department states that Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state home buyer tax credits.

A new bill, AB 183 will provide $10,000 tax credits to eliglble taxpayers. The taxpayer must purchase a qualified personal residence on or after May 1, 2010, and before the money runs out. (On December 31st, more money will be made available.) The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Purchasers will be required to live in the home for at least two years or forfeit the credit.

To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same time frames to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.

Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010. Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied. The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)). California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)). Other terms and restrictions apply to both tax credits.

Article states short sales are much easier on credit scores

March 23rd, 2010 . Posted in Banking Services, Bankruptcy, Business, Credit, Credit card, Default, Financial Services, Foreclosure, Short Sale, Short Sales, credit score, loan | Comments Off

A recent article on cnnmoney.com discusses the impact of short sales and foreclousres on your credit score.

Short sale are estimated at an 80 to 90 point hit, where as a home foreclosure is near 200 points. Check here for the entire article.

Defaulting on a loan is the single worst thing you can do for your credit, said Rex Johnson, founder of credit union consulting firm Lending Solutions Consulting. And given the down economy, more people are damaging their credit scores through foreclosures, credit card charge offs and bankruptcies.

A home foreclosure, for example, might dock about 200 points off your score and a short sale could cost you around 80 to 90 points, said Johnson. Declaring bankruptcy could lower a good score of 750 by up to about 250 points, Johnson said.

While most negative information stays on your report for seven years (bankruptcies can stay on for 10 years), it’s never too late to start rebuilding your credit.

“People have been hit hard by the economy and those who had really good scores now have scores in the 500s and want to just give up,” Johnson said.

IRS Guidelines for home buyer tax credits

March 3rd, 2010 . Posted in 6500 tax credit, 8000 tax credit, Chico Real Estate, General, Home buyer tips, Home insurance, Housing Market, IRS Form 5405, Internal Revenue Service, Los Angeles Times, Mortgage, Property tax, Tax, Tax Credit | No Comments »

If you have not taken advantage of the $8000 first time home buyer credit, there is still time.

The Los Angeles Times released a story outlining the IRS release of guidelines for the home buyer tax credits.

The Internal Revenue Service (IRS) recently issued new guidelines and clarified documentation that taxpayers must submit to successfully obtain the federal tax credit for home buyers.

The federal tax credit for home buyers was extended and expanded late last year. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010. Repeat buyers may be eligible for a tax credit of up to $6,500. Click here for more information about the federal tax credit for home buyers, including eligibility requirements.

To receive the tax credit, home buyers must comply with the IRS’s documentation requirements, including a fully executed IRS Form 5405. On the form, which is available on the IRS’s Web site, taxpayers provide information supporting their claim of eligibility, such as income and home purchase date.

The IRS also requires home buyers to submit a copy of the closing or settlement statement that proves the transaction took place. The IRS previously said that the statement should show “all parties’ names and signatures, property address, sales price, and date of purchase.” However, since closing or settlement statements vary by state, and in some cases the form does not include both the seller’s and buyer’s signatures, the IRS has revised this requirement. As long as the closing or settlement statement conforms to prevailing local practices, the IRS will accept it.

One stipulation for repeat buyers is they must provide documentation they lived in their former property for a consecutive five years out of the previous eight years. Accepted documentation may include property tax records, hazard insurance records, or copies of annual mortgage interest statements filed with their federal taxes.

To read the full story, please click here.

Sell low, buy lower

February 17th, 2010 . Posted in 6500 tax credit, Chico Real Estate, General, Home Sellers, Home buyer tips, Home buying incentives, Housing Market, Housing Values, Real Estate | No Comments »

Everyone is looking for the right strategy to buy or sell property in today’s changing real estate market.

Seller’s still want to wait until their property is worth the amount they established in their minds at the top of the market. Those numbers may not return for many years. So, what to do?

If you have considered moving up to a nicer property, or down sizing, there are many incentives in place to make it a very attractive time.

With a good Realtor to guide you, you can actually gain an advantage in today’s market. Remember, the “loss” is really only a paper loss if the next property you buy is also a bargain.

The same rule applied if you bought a house at the very top of the market,and sold one at the top as well. The extra money you made on the sale of the first home offset the extra you paid for the new home. Bubble for bubble, bust for bust.

So, find the home you really really want. Make an offer. Put your current house on the market, subject to the new house closing successfully. Apply for the $6500 tax credit. And be happy

Now is better than later-FHA changes are coming

February 3rd, 2010 . Posted in 6500 tax credit, 8000 tax credit, Chico Real Estate, FHA, HUD, Home Mortgage, Home buyer tips, Home buying incentives, Housing Market, Tax Credit | No Comments »

We all know about the $6,500 or $8,000 federal tax credit for people who buy a home, and are in contract by April 30th. But there are more reasons not to wait. FHA buyers will not be able to get all the same benefits as new regulations are passed.

One biggie: the seller will only be able to contribute 3%, not 6% towards closing costs. Another: not everyone will get the low 3.5% down payment.

New Rules for FHA Borrowers
The Federal Housing Administration (FHA) recently outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.

Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.

Policy changes include:

–Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
–Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA?s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
–Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
More info
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016

New rules coming for FHA loans

January 21st, 2010 . Posted in FHA loans, Home Buyers, Home Mortgage, Home buyer tips, Home buying incentives, Housing Market, Interest Rates, credit scores | No Comments »

FHA intends to lower the amount a seller can contribute to the buyer’s closing cost during the sale of their home. The current 6% seller concession, will be capped off at 3%.

Other changes include higher mortgage insurance and stricter credit score requirements.

The Federal Housing Administration (FHA) today outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.

Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.

Policy changes include:

Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.

Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

More info

Fed: It’s Time the Market Stands on its Own

January 20th, 2010 . Posted in Chico Real Estate, Home Mortgage, Housing Market, Interest Rates | No Comments »

I have long heard that the super low mortgage interest rates we have today will not last. This week, I found an article that explains why. And when.

April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent, Boston Fed President Eric Rosengren said Saturday.

Fear of a worldwide perception that the U.S. government is simply printing money to use to purchase mortgage-related securities is a big reason the Fed has pulled back, analysts say. If that fear caused a sell-off of U.S. government bonds, it would push borrowing costs substantially higher and derail the economic recovery.
We are still in uncharted waters,” Fed Vice Chairman Donald Kohn said in an unrelated speech Saturday. “We will need to be flexible and adjust as we gain experience.”

Source: Reuters News, (01/08/2010)

Should we wait for Spring?

January 13th, 2010 . Posted in 6500 tax credit, 8000 tax credit, Chico, Chico Real Estate, Home Buyers, Housing Market, Housing Values | No Comments »

There are homeowners in Chico who need to sell their homes, but want to wait until the timing is right.

All indications are that we won’t see the high values of 2005 for quite awhile. So, for those of us that can hang on for several years, it may work to our advantage. Jobs and wages need to catch up before housing values can edge higher again.

For the rest of us, should we wait until spring? Spring sounds nice, the flowers are blooming and the grass is greener. The weather is warmer, so more people will be out looking, right?

Personally, I think the right time to sell is now. I keep hearing that the ultra-low mortgage interest rates cannot last through the recovery. The rates will have to begin to increase slowly.

But the largest factor in my decision is the federal tax credit. The $8,000 first time home buyer credit has been extended, but you must be in a binding contract before April 30, 2010. Same goes for the $6,500 tax credit for other owner occupied buyers.

I think that the credit will cause a surge in buyers in February, March and especially April. Then, we may see a dip in May if the credit goes away, which is what we think will happen.

I want the extra $6,500 to $8,000 to sweeten my deal. Sound as if I am talking like I have a house to sell? I do. And it will be coming on the market soon. Anyone looking for a four bedroom, two bath in peak condition on a quarter acre for $285,000??

You don’t have to be a first time buyer anymore

January 6th, 2010 . Posted in 6500 tax credit, 8000 tax credit, Chico, Chico Real Estate, Foreclosure, Home buyer tips, Housing Market, Real Estate, Short Sale, Short Sales, Tax Credit | No Comments »

The first quarter of 2010 is a dynamite time to purchase a home! Low interest rates and once-in-a-lifetime tax credits are sweetening the pot. And you don’t have to be a first time home buyer for tax credits anymore.

The Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548) was signed by President Obama on November 6^th, 2009.

This bill extended the $8,000 first time home buyer tax credit, which would have expired on December 1, 2009.

Home buyers now have until June 30, 2010 to close escrow on a qualifying home purchase. But, (and this is important) a binding contract must be entered into on or before April 30, 2010.

First time home buyers may receive up to $8,000 (or 10% of the home’s purchase price).

If you are not a first time home buyer, there is now a $6,500 credit available if you purchase a home as your residence.

There is a limit of $800,000 on the price of the home, and you must be over 18 in order to qualify. Income limits also apply. Eligibility phases out at $225,000 to $245,000 for married filing jointly.

It is best to check with your CPA or tax preparer to make sure that you can get the credit.

Then call me, and let’s find your dream home! There are still a few foreclosures and sales with great deals.

Debbie Brodie’s Chico Real Estate Blog

Short sales-one less thing to worry about

New California home buyer tax credit coming soon

Article states short sales are much easier on credit scores

IRS Guidelines for home buyer tax credits

Sell low, buy lower

Now is better than later-FHA changes are coming

New rules coming for FHA loans

Fed: It’s Time the Market Stands on its Own

Should we wait for Spring?

You don’t have to be a first time buyer anymore

Pages

Archives

Categories

Blogroll

Contributors

Meta