My New Blog

In a previous blog I discussed the $8,000 Federal (new buyers) and $10,000 State (new construction) tax credits available to home buyers.  In an effort to further encourage home buying, the FHA has announced that it will allow home buyers to use the $8,000 Federal tax credit as part of the down payment at closing.

This would apply only to FHA loans.  Its good news for first time buyers anxious to get in the market but struggling with the down payment.  Now the buyer no longer needs to wait to file his or her tax return to get the credit, it can be applied to the down payment at closing.  Keeping in mind the FHA loans generally only require a 3.5% down payment--so this is great news and a large contribution toward that amount.

Although details are yet to be announced, it seems the federal tax credit will be applied to the down payment by utilizing a bridge loan.  We'll wait for details, but so far it sounds like a great gift for first time FHA buyers. 

As we discussed before, this little present is only available for homes that close by the December 1, 2009 deadline...so get shopping!

Questions or comments, email or call me.  Melinda johnsonlaw@sbcglobal.net or (714) 863-5485

If you purchased a home in Orange County since January of 2002, you may want to go to http://www.ocgov.com/assessor/ and fill out a form asking the assessor to review the value of your home. It generally requires 3 comparable properties--recent sales of homes similar to your home and located relatively near your home. 

This year the assessor's office is stating that the comparable properties are not "mandatory"  but I highly encourage that YOU provide them--don't leave it to the assessor (call me crazy, but I wouldn't rely on a government entity that benefits from taxing you to provide you with the best comparable sales). 

Any real estate agent, appraiser or broker can help you with comps---including me.  You can reach me at (714) 863-5485 or johnsonlaw@sbcglobal.net

One final word of advice, you can click on the link to see if the assessor already plans to review your property. If so, you still may want to fill out the form so you have the opportunity to provide the comparable properties.  It could make a significant difference on the assessed value if you provide the comparable sales information rather than waiting to see what the assessor's office pulls up.

If you miss Thursday's deadline, do not panic--assessed values are mailed out in July and you have until September 15, 2009 to appeal if that value is too high.  

Melinda

(714) 863-5485 or johnsonlaw@sbcglobal.net

REVISED VERSION -- corrected after I miscalculated the credit. -m

The $8,000 Federal Tax Credit.

The tax credits are broken down into to two credits. The first, the Federal tax credit, is up to $8,000 for first time home buyers purchasing a primary residence (so not for a second home, vacation home or investment property). The credit is equal to 10% of the sales price, not to exceed $8,000. So, if you purchase even a median priced Orange County home for $385,000 home, you would get the full credit of $8,00.

The credit is available to first time home buyers (which generally means you, and your spouse if you are married, have not owned a home in the last 3 years). The income limit is $75,000 for single filers and $150,000 for those filing jointly. There is a reduced amount for incomes up to $95,000 for single filers and $170,000 for those filing jointly. To take advantage of the credit, buyers must purchase by December 1, 2009

The credit is a true credit—in other words it wipes out, dollar of dollar, your tax bill until the full credit is used. So, if you’ve been waiting to jump in the market, and you want to eliminate some of the taxes you owe next year, you’ve got until December 1, 2009 to wipe out an amount equal to 10% of the purchase price of the home, up to $8,000.

The $10,000 State Tax Credit

The second credit is up to a $10,000 State tax credit. This credit is not limited to first time home buyers but is limited to “new” (called “never occupied”) homes. The home must be your primary residence for at least the next two years and you must purchase it between March 1, 2009 and March 10, 2010.

The credit is equal to 5% of the sales price or $10,000, whichever is less. The State has limited the number of credits available to $100,000,000. In order to claim the credit, you must submit an application the California Franchise Tax Board. As of April 15, 2009, the State has received over $34,000,000 worth of applications, representing over 34% of the available funds in the first 1 ½ months of the program. (Translation: the credit is going fast). The credit is applied to your State taxes over three years (a maximum of $3,333 per year, over three years, starting with your 2009 tax returns).

So what are the chances of getting the whole $10,000? Taking the same example we used in the Federal credit, if you purchase a brand new home for a $385,000 price, you would get the full State tax credit and (assuming eligibility). A nice reduction in your tax bill.

Combine these tax credits with low mortgage interest rates and low prices and it can be a great time to buy.

For information on applying for the State credit, click California FTB

If you would like to discuss your eligibility for these programs, or if you have other real estate questions, call or email me. 714) 863-5485 or johnsonlaw@sbcglobal.net.

If you have appraisal or valuation questions, email Neal at nealjf@pacbell.net

-m

The Abosrbtion Rate

Yesterday morning my appraiser husband was sharing his view on some signs that the market may be stabilizing. One of the items he noted was the balance in the Absorbtion Rate. What you ask, is that? Roughly it calculates the balance of supply and demand over a period of time then looks at the current supply of homes available for sale and determines how long it should take for that supply to be “Absorbed” in to the market.

Generally a one to four month supply of homes for sale represents a balanced market. Since the start of the market decline in October 2006, demand has exceeded supply and the Absorbtion Rate has run as high as an 18 month supply in some local Orange County markets (think Ladera Ranch) and as high as a 36 month supply in parts of the Inland Empire---clearly a Southern California market out of balance. Since first quarter of 2009, however, absorbtion rates in Orange County are averaging closer to 2 ½ months. A good sign of a stabilizing market.

Marketing Time

As every good Realtor® with an appraiser husband must do, I further took advantage of his willingness to share his thoughts about recent changes in the market and he offered one more indicator: reduction in average marketing time. When preparing an appraisal, the appraiser must report the average marketing time for the particular neighborhood where the home is located. In other words, how long does a typical house in a particular market sit on the market before its “sold”. Where the average Orange County marketing time was close to or just under 90 days, there has been significant change. Again, the change is dramatic since first quarter 2009, with the average marketing time down about 30 days.

Median Housing Prices – DataQuick Reports

Data compilation service providers are also reporting some balance in this current market. MDA DataQuick complies housing information for California, including the Median House Price. The most recent report showed that the Median House Price for the state stabilized for the first time in over a year. According to DataQuick, the Median Home Price for California has declined month after month since May 2007, until now. The Median Home Price for the state is $224,000. Locally, the news is even better. In Southern California the Median Home Price is $250,000 and has remained stable for the last three months.

The Real Estate Agent Experience

What I am seeing in the trenches is also consistent with a stabilizing market. Buyers are out there in droves right now. I have multiple offers on my listings (except one listing in San Diego County—but that’s another, harder hit market) and buyers who are ready to purchase. Buyers are stating that the current low interest rates combined with low home prices are tempting them to enter or re-enter the market. A few are also tempted by the $8,000 federal first time home buyer tax credit. Some have mentioned that they are concerned that while prices may drop a bit more, they are more concerned that with high federal spending, interest rates will not stay this low—so they are jumping in while the jumping is good. Apparently, they are not alone.

If you have any real estate questions or comments call or email me at (714) 863-5485 or johnsonlaw@sbcglobal.net

If you have an appraisal questions or comments, call or email Neal at (714) 863-4043 or nealfj@pacbell.net.

Melinda

If you are new to the market and looking to take advantage of today's discounted home prices or if you have not been in the market for some time, it can be helpful to be educated on today's market transactions.  There are three primary types of sales (short sale, foreclosure and a traditional sale) and few odd balls (relocation, probate sales). Here is a break down with a few tips on each.

1.  Short Sale - the net proceeds from the sale will not be enough to pay off the amount the seller owes under his mortgage(s).  As a result, the bank is involved in sale.  The bank first reviews the financial situation of the seller and the value of the home (typically ordering an appraisal or broker price opinion).  The bank then reviews the offer to see if its at or near fair market value and then either consents or does not consent to the sale.  This is often a timely process and typically is not done in less than 60 days (with 90 -120 not being unusual).  It requires a different expectation when it comes to the time frame and the more lenders (first lender, second lender and/or equity line), the longer the time frame.

Short sales also require an experienced agent who will submit the appropriate addendums and provide the proper advice.  For example, without the proper short sale paperwork, your good faith deposit could be tied up needlessly for months on a transaction that is uncertain...or without the proper advice you could be encouraged to incur the cost of a home inspection before the bank approves the short sale--a risky proposition. 

Short sales can have an advantage over a foreclosure because the home owner is still around and is required to provide you with disclosures.   They can be a great deal if you have the time, patience and right advice.

2.  Traditional sale - these are the easy ones.  You submit an offer and within 3 days you should know if you an accepted offer.  Most people are familiar with this type of sale.   The seller generally has enough equity to pay off the lender(s) and the transaction moves along as it has in times past.  

3.  Foreclosures/REO - these are homes that are owned by the bank.  The bank has acquired them through either a foreclosure or a deed in lieu of foreclosure (where the seller "gives" the home back to the bank rather than forcing the bank to go through the foreclosure process). 

Once you make an offer on a foreclosure (also called an "REO" for Real Estate Owned), you can expect to hear back within 24 hours to one week.  Often times the bank will require that you execute all documents first and sign some additional, bank specific addendums before the bank signs the acceptance of your offer.  Sometimes the counter offer negotiations are verbal and then confirmed in writing.  Not exactly legal or enforceable, but reality and the law are often not compatable.  Its just how the banks do it. 

The risk with a foreclosure is that the homeowner is not around.  You do not get the benefit of knowing anything about the property from the home owner.  The disclosures about the property are limited because the bank knows little to nothing about the history of the property when it comes to thinks like plumbing, maintenance etc.  You can offset some of this risk by carefully selecting a good home inspector.  Do not hesitate to hire specific, additional inspectors for things like pool equipment. 

4.  Probate - this is the sale of a property after the death of an owner.  It does not mean the owner died in it (if he did, that is a separate disclosure).  The proceeds are used to pay off any creditors and the heirs.  These types of sales may require court approval--which is a relatively simple process.

5.  Relocation - this is the type of sale where the owner is being or has been relocated.  Depending on the terms of the seller's relocation package he may benefit from an incentive to sell the property himself (receiving a fee from the relocation company if he sells it before the relocation company takes over).  These types of sales generally require some additional addendums prepared by the relocation company.  Otherwise they are much like a traditional sale.

If you have any questions about a type of sale or any real estate related questing, do not hesitate to email me or give me a call.  johnsonlaw@sbcglobal.net

Happy home shopping.

Melinda (714) 863-5485