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Happy July!  I hope you had a fabulous 4th of July holiday celebrating our wonderful country!  June is gone and we are at the beginning of the third quarter of 2009.  This year has brought both positive and negative happenings in the real estate market.

Rates have been low offering a substantial amount of opportunity for home owners to refinance.  However, with many programs limiting guidelines there are fewer people who are able to take complete advantage.  The opportunity is still there, it just takes some education to make sure the timing is right for a refinance.

The first time homebuyer tax credit is offering $8,000 to those who are purchasing and haven’t owned a home in the past three years.  Those who qualify are now finding homes and beginning to make offers.  The May and June purchase activity has shown a significant amount of increase in this segment of the market.  July seems to be shaping up for a better month in the first time homebuyer price range!

Nationally we are still struggling with default rates.  There has been some government efforts to help homeowners who are underwater, but many of the modifications are turning back to default after just a few months.  The waves of homes defaulting have come and gone and will most likely continue to do so throughout the remainder of this year.

The government has been and is continuing to help sustain low mortgage rates.  The future of their involvement is unknown at this time.  Preparation and education for your individual situation is important.  Contact me today and we can discuss your options.

My trusted friend and Realtor James Hauge at Legacy Real Estate in Keizer has provided us with some insight on the current real estate market for the Salem/Keizer area.  Statistics are complementary of Willamette Valley MLS:

The average dollar per square foot for the Salem/Keizer sold homes this year ranges between $111-143 sqft.  The next statistic I wanted to point out is the Inventory supply of homes in the different price ranges.  A healthy market is thought to have a 6 month supply of homes.  Only in one price range are we close to those numbers.

I’ve mentioned the 2009 first time home buyer tax credit in recent posts, but last week I was given this great document from my CPA associate Andrew Bertz at Doty & Company P.C.  There are only 4 months left to purchase a home in order to qualify for the tax credit.  This is an opportunity that you or your friends and family don’t want to miss.  The inventory of homes in the Willamette Valley with asking prices less than $225,000 is amazing.  Please read the highlights of the tax credit below (click here for a printable version):

Andrew Bertz, CPA – 503.362.9152

• Fantastic Opportunity – IRS does not often give us a credit of this magnitude

• Provision of the “American Recovery and Reinvestment Act of 2009″

• Enhancement of the 2008 “First Time Home Buyers Credit”

A first-time home buyer purchasing a principle residence in the United States before December 1, 2009, is eligible for the first-time home buyer credit. The credit is 10% of the residence’s purchase price, not to exceed $8,000, $4,000 for married filing separately.

DEFINITIONS:
First-time home buyer – is an individual (and if married, the individual’s spouse) that did not have any present ownership interest in a principal residence during the 3 – year period ending on the date of the purchase of the principle residence

GENERAL RULES:

• Dollar limitation of the credit can not exceed $8,000 or 10% of the purchase price.

• Phase out of the credit is between $150,000 – $170,000 MFJ and $75,000 and $95,000 for a single tax payer.

• No recapture/payback provision as there was with the 2008 “first-time home buyer credit, however if the home is sold within 3 years after the purchase date the credit may be recaptured.

• 2009 purchase may be claimed by amending the 2008 return to speed up the refund.

• Refundable credit – Do not have to have a tax liability to receive the credit

SCENARIOS:
Question: A young couple is having a home built. Do they qualify for the new home buyer credit?
Answer: Yes if the couple is able to move in to the home prior to the December 1st deadline.

Question: Does a principal residence have to be a house?
Answer: No, a principal residence could be a boat, house trailer, or condo.

Question: Can a single taxpayer who has not owned a home claim the credit for a home purchased in May of 2009 when the taxpayer is married in June 2009 to his/her fiancée who has owned a home?
Answer: Yes, eligibility for the credit is determined on the date of purchase. Therefore if the taxpayer buys a home prior to being married he/she would still qualify for the credit.

Question: A taxpayer and his girlfriend by a home together. The taxpayer has not owned a home but his girlfriend owned a home previous to the purchase of this home. Can the taxpayer claim the first-time home buyer credit?
Answer: Yes, unmarried individuals can allocate the credit as they choose. Since the girlfriend does not qualify the entire credit can go to the taxpayer. (Note: For the same situation and the couple is now married prior to the purchase the credit is not available due to both the taxpayer and spouse needing to meet the three year test (IRC 36(c))

Circular 230 Notice “Pursuant to recently-enacted U.S. Treasury Department Regulations, we are now required to advise you
that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and
enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under
the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed
herein.”

Realistic and open communication with my clients is my number one priority in the financing process.  Regardless of whether I’m helping with a purchase or refinance I establish the means of communication via email and/or my direct line.  For those who are first time home buyers there are many “unknowns” when going through the process, but nonetheless there will be some form of expectations set by either friends, family or the Realtor(s).  For those who have owned and are buying again or those who are refinancing there may be some expectations from a previous financing experience.  In the ever-changing real estate and mortgage industry of 2009 this communication must be realistic and constant.

The variables in a real estate transaction are numerous and have only become more prevalent in recent years.  When a loan application is taken we may know the guidelines for the given loan program, however, something may change through the process.  Although most major changes to lending guidelines have already been implemented, there are periodically new guidelines implemented that may change the course of a transaction.

Appraisals ordered through appraisal management companies and the delays associated with the new Home Value Code of Conduct (HVCC) are becoming increasingly painful for clients and closing dates.  Program changes and appraisal orders are just a couple of variables that may affect a purchase or refinance.

As a part of the loan application process I always communicate with my client (and Realtors for purchases) the potential for an unforeseen obstacle that we may need to work together to overcome.  Communicating current and realistic underwriting  and appraisal time frames from time of application is equally as important.  The ebbs and flows of the real estate business directly correlate to the current time frames.  Setting unrealistic time frames from the beginning is a sure bet to have disappointed clients and Realtors.

All this to say, if you are hearing that your real estate transaction is going to be quick and will absolutely not have any hangups, just be cautious.  None of the things mentioned in this post may happen during your purchase or refinance, but knowing the current conditions of our industry from the beginning will make any unwanted obstacles a little easier to understand if one comes along.