CNN REPORTS:
$8,000 homebuyers tax credit extended
President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.
NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.
The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.
The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.
"The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.
Who qualifies?
Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:
• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.
• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.
• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.
• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.
How it helps the economy
Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.
"This bill will shift demand from the second half of 2010 into the first half," said Pat Newport, a real estate analyst with IHS Global Research. "As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second."
That's not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It's important to stabilize real estate markets quickly to help bring the economy out of its tailspin.
The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.
Would it have happened anyway?
But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.
Furthermore, buyers do not, in reality, receive the entire benefit. "The credit helped prices stabilize," said Newport. "So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it."
The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional "move-up" sales.That did not happen, according to Lawrence Yun, NAR's chief economist.
"It did not have the chain reaction impact it was supposed to," he said. "Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers."
So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.
"Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending," said Yun. "They're more likely to go out to the stores or buy a new car. That provides a boost to the overall economy."
Friday, November 6, 2009
Wednesday, November 4, 2009
Short Sale v. Foreclosure
For years, credit experts and financial advisors have told people that a foreclosure is the worst possible course of action to take if they are behind on their mortgage payments or upside down in their mortgage. One of the alternatives homeowners have been offered is a short sale, which is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship that is usually related to the current real estate market climate and the individual borrower's financial situation. The homeowner sells the property for less than the outstanding balance and turns over the proceeds to the bank. Unfortunately, some of the characteristics of a short sale are changing in a way that can potentially hurt one's credit even worse than a foreclosure, and this is why:
It used to be that only homeowners facing a foreclosure had to worry about being sued for the deficiency amount on a foreclosed sale. Short sales had become a better option because lenders would consider the loan amount to be a paid settlement, and there would be no deficiency amount owed after the property was sold. However, lenders are becoming creative and adding some language to their short sales agreements that read something similar to this:
"Upon the bank's receipt of [the short sale amount] the bank will release the lien and charge off the remaining debt as a collectable balance. Our recovery department will be in contact with you to make arrangements on this balance. We will report the account to the credit bureaus as a charge off with a balance owed."
This type of verbiage leaves the homeowner open to judgments, liens, lawsuits, wage garnishments, and further damage to their credit score.
A foreclosure can hurt a homeowner's credit score by 100-150 points, in addition to points already lost due to late payments. A foreclosure can be reported on a credit report for 7 and a half years from the date of the first late payment.
When it comes to short sales, however, there is very little legal structure surrounding deficiency amounts. Many of the nation's top lenders are taking advantage of this vagueness to pursue lawsuits, liens, and judgments against homeowners who opt for a short sale. If the short sale is reported as a paid settlement or charge off, the item will remain on a credit report for 7 and a half years from the date of the first late payment and hurt the homeowners credit score between 50-150 points, not including the points lost due to late payments. However, if a judgment is filed to collect the deficiency amount, the judgment can remain on the credit report for 10-20 years, and depending on the state laws, can be renewed until paid in full.
Fannie Mae & Freddie Mac both have a waiting period of 2 years before someone can buy another home after short selling a previous home. However, if a judgment is filed for a deficiency balance, the balance must be paid in full prior to loan approval because it can become a lien on the new house.
In conclusion, we must educate our sellers and buyers to find out what their options are and NEVER agree to the short sale agreement language quoted above. The good news is that legislation has not caught up with the short sale phenomenon, and as a result, homeowners still have the opportunity to negotiate credit reporting with their lender.
It used to be that only homeowners facing a foreclosure had to worry about being sued for the deficiency amount on a foreclosed sale. Short sales had become a better option because lenders would consider the loan amount to be a paid settlement, and there would be no deficiency amount owed after the property was sold. However, lenders are becoming creative and adding some language to their short sales agreements that read something similar to this:
"Upon the bank's receipt of [the short sale amount] the bank will release the lien and charge off the remaining debt as a collectable balance. Our recovery department will be in contact with you to make arrangements on this balance. We will report the account to the credit bureaus as a charge off with a balance owed."
This type of verbiage leaves the homeowner open to judgments, liens, lawsuits, wage garnishments, and further damage to their credit score.
A foreclosure can hurt a homeowner's credit score by 100-150 points, in addition to points already lost due to late payments. A foreclosure can be reported on a credit report for 7 and a half years from the date of the first late payment.
When it comes to short sales, however, there is very little legal structure surrounding deficiency amounts. Many of the nation's top lenders are taking advantage of this vagueness to pursue lawsuits, liens, and judgments against homeowners who opt for a short sale. If the short sale is reported as a paid settlement or charge off, the item will remain on a credit report for 7 and a half years from the date of the first late payment and hurt the homeowners credit score between 50-150 points, not including the points lost due to late payments. However, if a judgment is filed to collect the deficiency amount, the judgment can remain on the credit report for 10-20 years, and depending on the state laws, can be renewed until paid in full.
Fannie Mae & Freddie Mac both have a waiting period of 2 years before someone can buy another home after short selling a previous home. However, if a judgment is filed for a deficiency balance, the balance must be paid in full prior to loan approval because it can become a lien on the new house.
In conclusion, we must educate our sellers and buyers to find out what their options are and NEVER agree to the short sale agreement language quoted above. The good news is that legislation has not caught up with the short sale phenomenon, and as a result, homeowners still have the opportunity to negotiate credit reporting with their lender.
Monday, November 2, 2009
Team Trivia
Do you like to play Team Trivia? Check it out at Arena's Deli on November 2, 9, 16, and 23rd at 7:30 PM.
Sunday, November 1, 2009
Rehoboth Property Statistics
Did you know there are 312 Single Family Homes carrying a Rehoboth address that are currently For Sale in the Sussex County Association of REALTORS multi-list service?
There are also 235 condos with a Rehoboth address that are currently For Sale.
These listings represent the listings of all REALTORS who are participants in the Sussex County Association of REALTORS multi-list service. If you would like to know more about any of these listings, call Shirley (302) 236-4254 or Randy (302) 236-1142, and we'd be happy to show any of them to you.
There are also 235 condos with a Rehoboth address that are currently For Sale.
These listings represent the listings of all REALTORS who are participants in the Sussex County Association of REALTORS multi-list service. If you would like to know more about any of these listings, call Shirley (302) 236-4254 or Randy (302) 236-1142, and we'd be happy to show any of them to you.
Beautiful Canal Front Home in RBYCC
Don't wait to see this beautiful 5 bedroom, 3 bath home located on a canal in Rehoboth Beach Yacht & Country Club. Hardwood floors, granite counter tops, Florida room, new decking, a rear screened porch that overlooks the heated pool which opens to the stunning view down the canal. Two boat lifts, bulkheaded dock and walkway. You won't want to miss this one! $1,399,900.
Tax Ditches
Ever wonder what's a tax ditch? Well, we have them here in Sussex County.
A tax ditch is a governmental subdivision of the State. It is a watershed-based organization formed by a prescribed legal process in Superior Court. The organization comprises of all landowners (also referred to as taxables) of a particular watershed or sub-watershed.
The operations of a tax ditch are overseen by ditch managers and a secretary/treasurer. These officers are landowners within the watershed and are elected at an annual meeting by the taxables.
Delaware has 228 individual tax ditch organizations, ranging in size from 56,000 acres as in Marshyhope Creek Tax Ditch in southern Delaware, to a two-acre system in Wilmington. These organizations manage over 2,000 miles of channels and provide benefits to over 100,000 people and almost one-half of the state-maintained roads. Tax ditch channels range in size from six to 80 feet wide and two to 14 feet deep. The dimensions depend on the acreage being drained and the topography.
How Tax Ditches Are Formed
The Delaware General Assembly enacted the 1951 Drainage Law to establish, finance, and maintain drainage organizations (tax ditches). Formation of a tax ditch can only be initiated by landowners who petition Superior Court to resolve drainage or flooding concerns.
This petition results in the Conservation District requesting an investigation by the Division of Soil and Water Conservation to "…determine whether the formation of the tax ditch is practicable and feasible and is in the interest of the public health, safety and welfare." If so determined, the Conservation District files the petition in Superior Court, and the Board of Ditch Commissioners (as directed by the resident judge) prepares a report on the proposed tax ditch.
This report contains information such as drainage ditch locations, needed rights-of-way, associated costs; and is the basis for a hearing held for the affected landowners. At the conclusion of the hearing, a referendum is held for the landowners to approve or disapprove formation of the tax ditch. The Board of Ditch Commissioners files the results of the hearing and referendum in Superior Court. The Court then holds a final hearing for any interested person to object to the formation of the tax ditch.
Following the outcome of the final hearing, and if deemed appropriate, the Superior Court judge issues a Court Order establishing the tax ditch organization. The Court Order establishes permanent rights-of-way for the tax ditch organization for construction and maintenance operations. It also empowers the organization with taxation authority to collect, from all affected landowners, funds to perform this construction and maintenance. The taxation amount for individual properties is also established through the Court Order.
This information was taken from the official web site of the State of Delaware, Division of Soil and Water Conservation. Please call DNREC with further questions.
A tax ditch is a governmental subdivision of the State. It is a watershed-based organization formed by a prescribed legal process in Superior Court. The organization comprises of all landowners (also referred to as taxables) of a particular watershed or sub-watershed.
The operations of a tax ditch are overseen by ditch managers and a secretary/treasurer. These officers are landowners within the watershed and are elected at an annual meeting by the taxables.
Delaware has 228 individual tax ditch organizations, ranging in size from 56,000 acres as in Marshyhope Creek Tax Ditch in southern Delaware, to a two-acre system in Wilmington. These organizations manage over 2,000 miles of channels and provide benefits to over 100,000 people and almost one-half of the state-maintained roads. Tax ditch channels range in size from six to 80 feet wide and two to 14 feet deep. The dimensions depend on the acreage being drained and the topography.
How Tax Ditches Are Formed
The Delaware General Assembly enacted the 1951 Drainage Law to establish, finance, and maintain drainage organizations (tax ditches). Formation of a tax ditch can only be initiated by landowners who petition Superior Court to resolve drainage or flooding concerns.
This petition results in the Conservation District requesting an investigation by the Division of Soil and Water Conservation to "…determine whether the formation of the tax ditch is practicable and feasible and is in the interest of the public health, safety and welfare." If so determined, the Conservation District files the petition in Superior Court, and the Board of Ditch Commissioners (as directed by the resident judge) prepares a report on the proposed tax ditch.
This report contains information such as drainage ditch locations, needed rights-of-way, associated costs; and is the basis for a hearing held for the affected landowners. At the conclusion of the hearing, a referendum is held for the landowners to approve or disapprove formation of the tax ditch. The Board of Ditch Commissioners files the results of the hearing and referendum in Superior Court. The Court then holds a final hearing for any interested person to object to the formation of the tax ditch.
Following the outcome of the final hearing, and if deemed appropriate, the Superior Court judge issues a Court Order establishing the tax ditch organization. The Court Order establishes permanent rights-of-way for the tax ditch organization for construction and maintenance operations. It also empowers the organization with taxation authority to collect, from all affected landowners, funds to perform this construction and maintenance. The taxation amount for individual properties is also established through the Court Order.
This information was taken from the official web site of the State of Delaware, Division of Soil and Water Conservation. Please call DNREC with further questions.
Saturday, October 31, 2009
Delaware Condominium Law
There has been a change in the Delaware condominium law.
Delaware's first condominium law was enacted in 1963 and was called the "Unit Property Act". Until recently, condominium laws in Delaware remained largely the same since the Unit Property Act was first enacted. Amid mounting complaints from buyers regarding problems with the operation and goverance of condo associations, a Senate Bill was introduced, passed, and signed by Governor Minner. There were some Amendments made, but the Act, which is now law, is known as DUCIOA and became effective September 30, 2009.
DUCIOA requires a "resale certificate" to be furnished by the unit owner in a "common interest community" to a purchaser of a unit no later than the time of the signing of the contract to purchase. A "common interest community" under DUCIOA includes condominiums, cooperatives, and planned communities. However, if the condominium contains no more than 20 units, it is not subject to the resale certification requirements of DUCIOA.
DUCIOA Resale Certificate requires the unit owner to furnish a copy of the Restrictions, Declarations, Amendments, By-Laws, Copies of the Minutes for the preceding six months, a statement about fees, common expenses, number of unit owners who are delinquent, budget, and other financial information.
Even though the law requires the unit owner to furnish this information, we believe that the information will more properly come from the property management association.
Delaware's first condominium law was enacted in 1963 and was called the "Unit Property Act". Until recently, condominium laws in Delaware remained largely the same since the Unit Property Act was first enacted. Amid mounting complaints from buyers regarding problems with the operation and goverance of condo associations, a Senate Bill was introduced, passed, and signed by Governor Minner. There were some Amendments made, but the Act, which is now law, is known as DUCIOA and became effective September 30, 2009.
DUCIOA requires a "resale certificate" to be furnished by the unit owner in a "common interest community" to a purchaser of a unit no later than the time of the signing of the contract to purchase. A "common interest community" under DUCIOA includes condominiums, cooperatives, and planned communities. However, if the condominium contains no more than 20 units, it is not subject to the resale certification requirements of DUCIOA.
DUCIOA Resale Certificate requires the unit owner to furnish a copy of the Restrictions, Declarations, Amendments, By-Laws, Copies of the Minutes for the preceding six months, a statement about fees, common expenses, number of unit owners who are delinquent, budget, and other financial information.
Even though the law requires the unit owner to furnish this information, we believe that the information will more properly come from the property management association.
Tax Credit May Be Extended
The House and Senate are still working out all the details, but it looks like the $8000 Tax Credit for first time homebuyers may be extended. Some additional details to the program are:
-$6500 tax credit for primary home buyers that have owned a primary residence in the previous 3 years.
-Increase in the qualifying income limits: Single taxpayers will see the income level raised from $75,000 to $125,000, and joint taxpayers will see an increase from $150,000 to $250,000.
Buyers must have an executed contract by April 30, 2010, and must settle by June 30, 2010.
Stay tuned!
-$6500 tax credit for primary home buyers that have owned a primary residence in the previous 3 years.
-Increase in the qualifying income limits: Single taxpayers will see the income level raised from $75,000 to $125,000, and joint taxpayers will see an increase from $150,000 to $250,000.
Buyers must have an executed contract by April 30, 2010, and must settle by June 30, 2010.
Stay tuned!
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