Q. If I bought a home and used the $7,500 home buyer tax credit, can I retroactively receive $15,000 credit if it becomes law?

A. No.

Q. Are there any income restrictions on the tax credit?

A. The Senate version currently has no income limits. The current $7,500 tax credit phases out on buyers with incomes exceeding $75,000 for individuals and $150,000 for married couples.

Q. When will the new tax credit go into effect?

A. The Senate version would take effect when the bill is signed by the president into law, and it would last for one year.

Q. Can I take the tax credit this year?

A. Yes. The Senate proposal would allow buyers — even those who purchase in 2009 — to claim the credit on their 2008 taxes.

Q. The proposed tax credit is nonrefundable. What does that mean?

A. You can only receive the credit to the extent that you owe federal income taxes. The Senate proposal would give home buyers two years to claim the credit, so buyers could claim a $7,500 credit in 2009 and a $7,500 credit in 2010. A family of four that makes less than $82,000, for example, could have a tax liability of less than $7,500 and they would not receive the full value of the credit.

Q. Are there any repayment requirements on the tax credit?

A. No. The Senate proposal does not require the credit to be paid back. The House proposal eliminates a 15-year repayment provision on the existing $7,500 tax credit.

Q. If I am eligible for the current $7,500 credit, am I also eligible for the $15,000 credit?

A. While the $15,000 credit has fewer restrictions than the existing credit, there is one big difference: because the credit is nonrefundable, if you have a low federal income tax liability, you could end up receiving more money with the current credit than the larger, proposed credit.

Q. Are there any increased down payment requirements on the proposed tax credit?

A. No. A separate measure has been introduced in the House that would expand the tax credit to $15,000 but would require a 5% down payment on mortgages. The Federal Housing Administration currently requires a minimum 3.5% down payment.

Q. Can I use the tax credit to buy a second home?

A. No.

Q. How long do I have to live in my home after I purchase it with the tax credit?

A. The Senate version requires buyers to pay back the credit if they sell the house less than two years after they buy it.

Keeping you updated on the market!

For the week of February 9, 2009

Welcome to the Market Matters Advisory, your weekly guide to responding to the market.

Real Estate Market Update:

Housing Stimulus is the Key to Unlocking America’s Economy

The new stimulus bill working its way through Congress has a couple provisions that will be directly pertinent to Real Estate. Besides restoring the jumbo/conforming loan limit to $729,750 in high cost areas, there is now a Republican amendment that would temporarily offer homebuyers a tax credit worth $15,000 or 10% of a home’s purchase price, whichever is less.

This will have the option to utilize all in one year or spread out over two years. The credit does not have to be paid back, unlike the current $7,500 tax credit. It would be available to all purchases of any home from date of enactment for one full year - no longer just a first time homebuyer credit, and borrowers would be able to claim the credit against the 2008 tax return.

Other items: buyers must occupy the home for two years as their principle residence, it includes a two year recapture provision (if they leave the home in two years they lost the credit), and purchases of homes by investors are ineligible.

This is not finalized yet, so stay tuned for updates.

· Home buyers purchasing fixer-uppers, or homeowners looking to update their house with new tile, fresh paint, or modern lighting fixtures may be able to save money by performing some of the work themselves. Some community colleges and most big-box home improvement stores offer do-it-yourself classes to help homeowners save money and improve the look of their homes. Interested participants should check with their local education centers and home improvement stores to verify the types of classes offered and associated prices.

· When selling a home, first impressions are extremely important. Neglecting to maintain a lawn by letting it turn brown or become overgrown may discourage a buyer. To prevent this, homeowners should cut back or remove trees and bushes that are overgrown, especially if they are hazardous. Weeding and laying fresh bark in planter beds also can contribute to a favorable first impression.

Snag a great deal on a short sale
As more homeowners find themselves underwater — owing more on their mortgage than their home is currently worth — and unable to make the monthly mortgage payments, many are turning to short sales, which allows a homeowner to sell their home for less than owed on the mortgage. With the lender’s approval, home buyers can purchase properties in desirable neighborhoods and at favorable prices.

MAKING SENSE OF THE STORY FOR CONSUMERS

· According to real estate Web site Zillow.com, 14 percent of homeowners nationwide are currently underwater. In some areas, especially those hardest-hit by foreclosures thathave experienced the greatest price declines, more than 50 percent of homeowners would owe more than their home is worth if they sold today.

· Unlike foreclosed properties, which may be run-down and vacant for many months, short-sell properties are likely to be better maintained as many owners may still live in the home.

· In a short sale, the homeowner must receive approval from the lender before the sale of the property can proceed. With many lenders overwhelmed by short-sale transactions, it can take between two and six months to execute.

· Working with a REALTOR® who has experience with short sales can help both sellers and home buyers during the transaction. A seasoned REALTOR® will be able to serve as the mediator between the seller and the lender and lead to a successful transaction, while a buyer’s agent can help with offers, counter offers, home inspections, closing, and more.

· It is important to remember that although the seller may be anxious about selling the property and willing to accept any offer, it is ultimately up to the lender to determine if, and at what price, the property can be sold. Therefore, home buyers should work closely with their REALTOR® to submit a realistic offer.

· According to REALTOR® Loni Parmelly, author of Success in Short Sales, buyers should ask the lender to pay for all closing costs as part of the contract. The contract also should specify that the buyer will not conduct an appraisal or inspection of the property until the offer is approved. This added guarantee can protect home buyers from spending money on a home they may not purchase.

Home price plunge helping buyers
Lower home prices, coupled with low interest rates are making this an ideal time for many to purchase a home. According to the Standard & Poor’s/Case-Shiller Index, home prices in 20 metropolitan areas were down 18.2 percent in November compared with the same month a year ago. Phoenix , with a 33 percent drop, posted the steepest decline, followed by Las Vegas at 32 percent.

MAKING SENSE OF THE STORY FOR CONSUMERS

· With homes in the 20-city index losing nearly a quarter of their value since their peak in July 2006, more renters can now afford to buy a home for the first time in many years. According to the NATIONAL ASSOCIATION OF REALTORS® (NAR), the median home price nationwide in December was down 15 percent to $175,400. With current interest rates at or near historic lows, borrowers with a 10 percent down payment could save $254 per month on a median-priced home compared with a year ago.

· The percentage of households that could afford to buy an entry-level home in California stood at 53 percent in the third quarter of 2008, compared with 24 percent for the same period a year ago, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment. The monthly payment including taxes and insurance was $1,870 for the third quarter of 2008.

Mortgage News:

Fed adopts program to stem foreclosures
The Federal Reserve recently announced it will seek to renegotiate mortgages it owns that might otherwise enter foreclosure, according to Federal Reserve Chairman Ben S. Bernanke. Under the program, the Fed could reduce what a homeowner owes on a mortgage; lower the interest rate; lengthen the term of a loan; or take other steps to prevent a loan from defaulting.

The Federal Reserve’s program will focus on reducing the amount of principal owed by those at risk of foreclosure, especially those with loan balances exceeding 125 percent of the estimated value of their property.

Subject: Obama’s stimulus plan regarding foreclosures

ESTABLISH A $10 BILLION FUND TO HELP FAMILIES AVOID FORECLOSURE

In addition to taking important steps to prevent mortgage fraud from occurring in the future and to prevent credit cards from turning into the next subprime housing crisis, Barack Obama has called for establishing short and long-term programs to help responsible homeowners facing foreclosure. Obama’s plan will help people stay in their homes and renegotiate with their lenders. It will not help speculators, people buying vacation homes or people that falsely represented their incomes. It is meant to help responsible homeowners through this difficult period. Given the downturn in the economy, Obama is calling for immediate creation of his Foreclosure Prevention Fund that will dramatically increase emergency pre-foreclosure counseling, and will work through the Federal Housing Administration, Fannie Mae and Freddie Mac to allow families facing foreclosure to responsibly refinance their mortgages or sell their homes. By helping families avoid losing their homes and preventing a further decline in property values, this measure will help lessen the impact of a national foreclosure crisis on state, local and family budgets. Obama was one of the first to speak out about the risks of fraudulent and deceptive lending practices. He will build off of that experience and his work with community based organizations to bring American homeowners and housing markets effective relief when he is president.

My comments:
Lately, investors have snapped up discounted distressed properties (Short Sales & REO/Foreclosure Sales). We saw pending home sales increase to 6.3% nationwide in December. January also experienced increased activity in the short sale & foreclosure market. If Obama’s plan carries out in the near future, the possibility of far less foreclosures exists.. thus pricing may go up sooner.