Waller, TX Real Estate Blog

• Last week, the U.S. Senate and House passed legislation that included an extension and expansion of the tax credit for homebuyers. President Obama signed the bill into law at the end of the week.
• The $8,000 first-time homebuyer tax credit will continue until April 30, 2010, and the income limits have been increased to $125,000 for single filers and $225,000 for join filers.
• Additionally, current homeowners who have lived in their home for five of the previous eight years are eligible for a $6,500 tax credit.
• There is a purchase price limit of $800,000 for the home, and it must be maintained as the purchaser’s primary residence for three years or the tax credit will be due back to the IRS.
• Unlike the current tax credit program, the extended program allows any purchaser who has a binding contract in place by April 30, 2010 to close by June 30, 2010 and still qualify.

Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics. 

Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.

More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.

“We’re sure working hard,” said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company’s low success rate. “We don’t want to be down there.”

There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Young people just starting to invest and buying their first homes are potentially the winners in this recession.

First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®

“This is a historic time,” says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. “It’s a great opportunity to make some great gains in the future.”

A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.

“We need to be shouting from the rooftops that this is not the time to get out of the market if you’re young,” says Christine Fahlund, a senior financial planner with T. Rowe Price. “This is the time to be in the market.”

The IRS is cracking down on people who don’t qualify for the first-time homebuyer tax credit but try to claim it anyway.

The IRS says it is investigating 24 cases of people who falsely claimed the first-time homebuyer credit on their federal income tax returns. Getting caught making a false claim carries a penalty of up to three years in jail and a fine of as much as $250,000.

The First-Time Homebuyer Credit, enacted in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser must be someone who has not owned a primary residence in the previous three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. 

The home purchase must close before Dec. 1, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.

While most people think the worst of the housing crisis is over, there are some skeptics who predict that the industry will face further serious challenges.

A new analysis compares the cost of renting to the cost of buying and concludes that they are now close to equal. It also predicts that because of persistent joblessness there will be fewer buyers and more renters in the future. 

The study, released Thursday by two think tanks — the Center for Economic and Policy Research (CEPR) and the National Low Income Housing Coalition (NLIHC) — also says current home owners with mortgages will remain underwater for “some time,” increasing the likelihood that foreclosures will continue.

“In communities where foreclosure remains a problem, home owners should be given the opportunity to remain in their homes as renters paying the fair-market rent,” says Dean Baker, Co-Director of CEPR and an author of the study. 

The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.

It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.

Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.

Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.

The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.

Source: The Associated Press, Alan Zibel (08/04/2009)

Appraisals can be tricky these days. Here’s some advice from Maureen Sweeney, a Chicago-area owner of an appraisal firm, on getting an accurate and fair appraisal.

• Both the real estate practitioner and the owner should be present for the appraisal and follow the appraiser around. Make sure he doesn’t miss anything important.
• Ask questions to determine if the appraiser has identified the correct neighborhood boundaries and if she’s comparing the home to similar properties.
• Bring a copy of a recent tax bill and a survey of the property, and give them to the appraiser.
• Provide a list of improvements to the home.
• Offer your professional opinion about what makes this property worth more than other properties in the area.

Why do some houses sell and others don’t?

There’s no ultimate answer to this question, but Tribune Media Services columnist Ilyce Glink has a theory. 

Here are her six top reasons properties linger on the market:

• Lousy pictures on the Web.
• Priced too high for the neighborhood.
• Blah interior; ho-hum landscaping.
• Little online marketing and hard-to-find MLS listings.
• Low commissions. Practitioners make sure their customers see properties that offer a payoff.
• Miserable maintenance, including ceiling stains, leaky faucets, and ancient furnaces.

The appraisal system imposed by Fannie Mae and Freddie Mac last May is under attack by the House Financial Services Committee and could be on its way out.

The “Home Valuation Code of Conduct” could be terminated by the proposed Consumer Financial Protection Agency under a bipartisan amendment approved by the House committee.

The amendment would require the new agency’s director to replace the code with a set of rules developed through regular administrative procedures and public comment periods used by all federal agencies. The valuation code was the product of a settlement among New York Attorney General Andrew Cuomo, Fannie Mae and Freddie Mac, and the Federal Housing Finance Agency.

Critics say the code created more problems than it solved and has encouraged lenders to use inexperienced appraisers who don’t know the areas where they are doing the work, which is resulting in lowball valuations as well as higher fees.

The legislation under which this code would be scrapped is likely to pass the full House, but may have a tough road in the Senate.