Homebuyer Tax Credit Brief

NAR Issue Brief of Homebuyer Tax Credit

Homebuyer Tax Credit Aiming for the End Zone!

Not only is the homebuyer tax credit extended until April 30, 2010 but there is also an expansion to include the following: increase income cap and number of homeownership years with a stipulation.

"More than 1.4 million Americans have claimed the homebuyer credit at a cost so far of about $10 billion, according to the Treasury Department. The legislation approved today would allow the credit for couples earning up to $225,000 a year and individuals earning up to $125,000. That’s up from the current $75,000 limit for individuals and $150,000 for couples.
"It would allow homebuyers who have owned their residence for at least five years to receive a $6,500 credit. Those who sell their new home or no longer use it as their main residence within three years would have to repay the credit. Homes worth more than $800,000 wouldn’t be eligible...

"Extending the credit to those who already own homes won’t reduce the excess inventory of housing blamed for the slump because “every buyer taking advantage of the move-up credit would necessarily be a seller,” Goldman Sachs said. It said the plan may increase housing prices by 1 percent because “sellers are likely to incorporate a fraction of the credit amount in their sale prices.” See Full Article by Brian Faler with Bloomberg.com

I like to say that this extension is a good change, however, it has very serious and dire consequences, at the end of the tunnel, whether we choose to acknowledge it or not. Who will pay for the cost of the extension and expansion? I'm all for selling more houses because that is my business but at what cost and to what end?

"We", seemingly the majority, claim that we are fed up with the avalanche of mortgage fraud, money sucking CEOs, and dishonest political dealings that has entrenched us in an insurmountable deficient and yet we the people are not up in arms about the homebuyer tax credit extension and expansion. Don't mind the extension, what about the expansion?

I think that most of us feel a disconnect with events far away or events that we do not feel a part of, to some respect, and don't fully comprehend their tidal affect until it hits our shore, i.e. our pocket book, our retirement account, more taxes, increased food prices. Should we not act now to secure our future by putting aside our desire for immediate gratifications by investing in our nation's financial future, so we and our future generations may reap of its benefits and rewards, later?

Smart Market Report (SMR) October End 2009

(Double click on image to enlarge)

Smart Market Report courtesy of Ron Sparks, designated broker of Coldwell Banker Bain of Bellevue.

SMR strategy is to determine if it is a buyer's market or a seller's market. Once you can decipher which it is and at what range, price the property accordingly. If neutral is at 4.5 and 1 and 9 are the extremities then numbers nearing or surpassing these extremities requires aggressive pricing; whether that aggressive pricing requires an increase or a decrease, it may exceed more than a few thousand, it may require several thousand, or tens of thousands.

Eastside Market Statistics

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Eastside and Mercer Island Market Trends Jan 2007-Sept 2009Graph courtesy of Alan L. Pope & Associate appraisal

Jumbo FHA and Buyers Tax Credit to extend & HVCC will be ousted

FHA Conforming Loan Limits

House and Senate have extended the high-cost loan limit, $729,750, until the end of 2010, December 31; and thereafter it may fall back to $625,000. DS News

Buyer Tax Credit extension

"Under the new language in the Senate, homeowners who have lived in their home for five of the past eight years would be eligible to receive a $6,500 tax credit, while first-time buyers would still be eligible for an $8,000 credit, [expansion proposal].

"The proposal would also increase the income limits of those eligible for the program, to $125,000 per year for individuals and $225,000 for couples...

"[The] expansion would cost about $10.2 billion over 10 years and would be paid for with offsetting cuts elsewhere in the budget. Simply extending the current tax credit is estimated to cost $1 billion a month...

"Analysts say the credit has helped the housing market, although critics question whether the value is worth the cost" (Full Report on Reuter ).

November 4, 2009 - Home Buyer Tax Credit extend until April 30, 2009

see Bloomberg article by Brian Faler

HVCC (Home Valuation Conduct Code)

The HVCC which was instigated to prevent appraisal coercion, appraisal fraud. During the "hot" market, some appraiser felt the banks and real estate agents pressured them to appraise more then the property was worth, thus manipulating their valuation and putting some reputable appraisers out of business because of steep competition to conform and placing the consumers at risk for default. Read more on HVCC by Dave Biggers at Appraisal Press. A highly recommended article.

Excerpts from article:

1. Under the HVCC, any lender using a professional appraiser incurs substantial
regulatory risks and additional costs, whereas AVMs, BPOs, and other valuation
alternatives are expressly and repeatedly exempted from the same regulations and
liabilities.

2. The HVCC unduly restricts the appraiser's ability to operate a business in the same

manner as the other parties already in the transaction.

3. Lenders must be prohibited from owning or controlling, in whole or in part, any sort of

valuation entity or mechanism used in the origination of a loan.

4. All valuations, regardless of method employed, must be provided to the borrower in the

same manner.

5. Any complaints regarding the valuation process should be reported solely to the IVPI,

not to the lender overseeing the origination.

"We do believe that these five areas can be addressed, and that to fail to do so would fly in the face of the original intent of the agreement which spawned the HVCC - namely, to strengthen the independence and reliability of the valuations backing what is for most Americans the single largest source of their net worth. Eliminating coercion of appraisers is essential to ensuring that we have maximum transparency and accountability in the real estate transaction and the financial markets which depend upon them. However, a regulation which damages and circumvents the very industry it seeks to protect - and which in turn harms consumers and investors - will not get us as a nation any closer to that goal."

HVCC was to implement independent appraisal valuation of properties, independent from the influence of sales agents and independent from the influences of banks thus protecting the consumers and supporting reputable appraisal practices. However, when HVCC was implemented, it created higher cost for consumers, devastated the appraisal industry by putting many companies out of business, created profitable avenues for banks by eliminating the competitions and loop holes for them to get around HVCC requirements which resulted in questionable regulatory practices. It is because of these that it is due to go away on the 1st of January 2010.

Are you ready for Winter? It's time to bundle up!

Inspect Roof, Gutters & Downspouts

• Replace warn shingles or tiles
• Clean out the gutters, flush out debris
• Check integrity of flashings to prevent water from entering
• Direct all down spout away from the foundation
• Correct and repair areas where water may erode the perimeter foundation
• Consider having leaf guards installed especially during the winter as it may become difficult to clean during slick weather

Openings, Doors & Windows

• Inspect, repair & seal exterior cracks
• Weather strip doors and windows
• Replace cracked windows
• Replace windows with broken seals, if within your budget
• Use shrinkable plastic sheets over windows with broken seals, alternative to replacing windows
• Install storm windows in place of summer screens, not typical in the Northwest
• Use shrinkable plastic sheets over basement windows to minimize heat lose

Prevent liquid freezes

• Remove water from the garden hose
• Drain liquid from air conditioning pipes
• Remove standing water from sprinkler system
• Keep the internal temperature at least 55 degrees when on vacation
• Insulate plumbing pipes
• Know where water shut off valves are in case of emergency

Weather proof service equipments

Drain service equipments, any equipment that uses fuel and left in unheated storages

Equipments to have for this coming winter

1. Snow blower! It will be worth your investment, could even possibly make some money like mowing the summer lawn, except you can plow the snow for the neighborhood(s).
2. Snow shovel, a standard must haves
3. Bags of Ice melt or sand

Be Aware of Furlong Days

What in the world is a furlough (pronounced as "fer-lo") day? Most of you who've been through a real estate transaction know that it is a term referring to courthouse closure.

In a real estate sale, a property isn't considered sold until it gets recorded. This also means that if you are the selling party you will not get your funds until it gets "officially" recorded and as a buyer, you can't get the keys until the funds gets dispersed.

Since the economic down turn, some public sectors (i.e. government) have created created a day off, a measure to work around employment expenses by having a non-paid day off for its employees. What does this have anything to do with us in real estate? It can affect our closing dates and can cause unnecessary stress if not seriously considered when determining closing dates.

From any given perspective having an un-intended closing date falling on or near a furlough day can create momentary havoc and frustration when closing gets deferred especially if there are other events depending on this one closing date, i.e. first time home buyer's tax credit, a contingent sale of another resident, moving trucks due to arrive, rate locks. The potential worst case scenario is that one can either lose a buyer or a house; the buyer can lose their Ernest money deposit and/or loose a rate lock; or a lost opportunity for a one time deal or benefit(s).

So, when you plan for a closing date not only should you include your vacation days but a furlough day or two.

Events to consider when choosing a closing date:

1. Beginning and ending of the months are chaotic for escrow and lending
2. Government holidays
3. Weekends
4. Furlough days
5. Qualified first time home buyers $8,000 tax credit must close by the 30th or on or before the 25th of November
6. Preplanned personal events, i.e. graduation, weddings, etc.
7. Rate lock expiration day; some lenders will not allow for extensions
8. Benefit and incentive expiration dates

Courthouse closures:

• Monday October 12, 2009
• Wednesday November 11, 2009
• Wednesday-Friday November 25-27, 2009
• Thursday December 24-25, 2009

New License Law: Turning Sales Agents into Brokers

2010 JULY 1

RCW 18.85 Real Estate License Law


The new real estate license law will require all existing real estate licensees to upgrade their sales license by taking a Transitional course which may entail legal and duty updates. I believe the primary reason for this new addition is to divert more accountability and responsibility on sales agents and have more newly licensed agents become more competent with real estate practices and real estate law. Every licensed real estate agent is required, yearly, to take 30 clock hour course plus a 3 clock hour core class to renewal their license.

†Parties interested in obtaining their first time real estate license will be required to:
1. Be 18 years or older
2. Have a high school diploma or an equivalent
3. Take a 60 clock hour Fundamentals Course*
4. 30 clock hour Washington Real Estate Practices Course*
5. Pass the course exam and the State Broker's exam
6. Submit application and pay for license fee
7. Complete fingerprint & background check

†Real estate agents who are renewing their license for the first time will be required to:
1. Take a 30 clock hour Advance Washington Real Estate Practice (WREP) Course**
2. 30 clock hour Real Estate Law Course
3. 3 clock hour Course class
4. 3 clock hour Transition Course

†Real estate agents who are completing their consecutive renewal will be required to:
1. Take a 30 clock hour continuing education course
2. 3 clock hour Transition Course
3. 3 clock hour Core class.

Associate Brokers, Branch Managers or Designated Brokers will need to take a Transition Course before renewing their licenses after July 1, 2010.

Pre-licensing Managing Brokers are required to:
Current requirements of 120 clock hours are required with proof of 2 years of active licensure will be replaced with:
1. 90 clock hours after July 1, 2010
2. The following 3(three) classes are required:
a. brokerage management
b. business management
c. advanced real estate law
3. proof of 3 (three) years of active licensure

Everyone will be required to complete fingerprint & background check to renew their license every 6 (six) years. If their background checks don't come clean they may be subject to Real Estate Department of Licensing board for review to decide the fate of their license.

However, if a licensed individual is delinquent in child support or default in their education loan, their license can be revoked or inactivated.


*Real Estate Fundamentals and Real Estate Practice courses must be completed within two years of taking the exam.

** Those that have completed the standard WREP course may be able to apply some/all of the hours towards their continuing education credits. Check with your real estate company to confirm.

†The salesperson's license will automatically become a Broker's license after course completion & renewal of license after the law takes effect.

Links:

• WA State of Licensing: Real estate
• Washington State Department of Licensing: Salesperson requirements, Broker requirements, Broker renewal
• Interested in getting a real estate license? Rockwell Institute