Closing Before Spring Will Save You Exponentially 

Not only is the Home Buyer Tax Credit ending on the last day in April this year, there has also been a few changes that could increase the amount of money you will pay purchasing a house by thousands of dollars if done so after March 31, 2010.  

The mortgage insurance premium that is required for loans approved and guaranteed by the Federal Housing Authority (FHA) will increase to 2.25%. On a $200,000 mortgage, that would mean an increase of $1,000 up-front. The .5% rate increase is scheduled to begin April 5th.  

Adding to upfront costs, as it stands right now sellers can return up to 6% of the purchase price of their property to the buyer at closing. This benefit can substantially decrease the amount of money the buyer has to come out of pocket during the closing. Expected early this summer, the allowable seller concessions will be reduced by half from 6% to 3%. That can be the difference of $6,000 on a $200,000 home.  

Also early this summer, there will be new requirements for down payments on FHA loans depending on the buyer’s credit score.
Don’t wait until these changes affect you; look into your options now and it could save you thousands of dollars. 

Please contact me for any questions regarding these changes. 

Cathy Manchester
The Cathy Manchester Team
Keller Williams Realty
(207)653-7653
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Tax Credit Extended! 

For all of you Realtor’s and homebuyers who have been praying and crossing your fingers for the last couple of months, now is the time to rejoice! The Senate passed legislation to extend the first-time home buyer tax credit until May 1, 2010. The tax credit was extended not only to first time home buyers, but now to repeat buyers who have lived in the same house for at least 5 of the last 8 years. Repeat home buyers are eligible for a tax credit of $6,500. Also, the income limits have been expanded to $125,000 for individual buyers and $225,000 for couples or joint buyers. Also, a reduced tax credit will be available for those individuals with incomes under $145,000, and couples or joint buyers with an income of under $245,000. So all of you considering buying a house to take advantage of the tax credit, you need to be under contract by April 30, so don’t hesitate! Take advantage of this once in a lifetime opportunity, it's free money! 

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New Changes in Maine Law effects residential landlords, builders and home buyers!!  

“ An act to Protect Maine Residents from Home Fires and Carbon Monoxide” requires that all single-family dwellings and multi-family buildings in the State have properly installed smoke detectors in an area within or giving access to a bedroom. The detectors may be powered by electricity or battery except that after October 31, 2009, smoke detectors installed in multi-family buildings and newly constructed single-family dwellings must be powered by both. An owner must install a carbon monoxide detector in each area within or giving access to a bedroom in: (i) each apartment in a multi-family building; (ii) any addition to or restoration of a single-family dwelling that adds at least one bedroom; and (iii) any conversion of a building to a single family dwelling. A person constructing a new single-family dwelling must install at least one carbon monoxide detector in each area giving access to any bedroom in the dwelling. In all cases, the carbon monoxide detectors must be powered by both electricity and battery. Tenants shall keep all smoke detectors and carbon monoxide detectors in working order, test them periodically and refrain from disabling them. Tenants must also notify landlords in writing if a smoke detector or carbon monoxide detector is not working. After October 31, 2009, buyers of single-family dwellings and multi-apartment buildings must certify at closing that the building is provided with smoke detectors and carbon monoxide detectors in accordance with the law.  

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First-Time Homebuyer Credit: Scenario (by the Internal Revenue Service- United States Department of the Treasury)
Taxpayer A is a single first-time home buyer. Taxpayer B (parent) cosigns for A and does not qualify. Both names are on the mortgage. Can Taxpayer A claim the credit and, if so, how much? 

Answer: Yes! Taxpayer B is not a first-time homebuyer and cannot claim any portion of the credit, but A may claim the entire credit ($7,500 for purchase in 2008; $8000 for purchase in 2009), if the home was purchased as Taxpayer A's primary residence.  

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Today’s Real Estate Market: A Snapshot 

How would you like an $8,000 gift from the government just for buying a house? This is just one of 3 major factors driving a recent jump in home purchases right now. According to the National Association of Realtors home sales rose 5.1% in February, the largest month hike up since December 2003. A tax incentive for first time home buyers, low interest rates and Bank driven sales are all responsible for this recent hike in activity. 

If you have not owned a home in the past 3 years and you buy a home between January 1, 2009 and December 1, 2009 you may qualify for an $8,000 tax credit! Buyers must have an income of less than $75,000 for a single person or $150,000 for a couple to qualify for the full credit. The purchase must be for a single family primary residence. The credit will be for 10% of the purchase price or $8,000 whichever is less. If you sell the home within 3 years you may be required to pay a recapture penalty. You will get the tax credit when you file your 2009 return OR you can file an amendment to your 2008 return and get the $8,000 NOW!
30 year residential interest rates have not been lower in decades! A 30 year fixed conventional mortgage with no points as of 4/20/09 is just 5%! If you pay 1 point (1% of the loan amount in prepaid interest) the rate drops to 4.75%! There is plenty of financing available for those with good credit and an income. Rural Development loans are still offering 100% financing, no money down purchases!  

Short sales, bank owned properties and foreclosures have driven home prices down to where home ownership is possible for many more people than it was just one year ago. Short sales happen when a seller owes more than his property’s value and the bank agrees to a mortgage payoff which is less then the amount the seller owes them.  

The Gray area has been a hotbed for buyer opportunity. The medium sold price of homes in Gray for March 2009 was down 6% from March 2008. And with 35% more homes available for sale in Gray there are more choices now then ever before. The National Association of Realtors reports that over half of the home sales in March went to first time home buyers. And with ever increasing Bank-driven sales and the new tax credit, economics are not speculating for home sales to slow down any time soon!  

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Recently I received an email from an investor asking whether this was the right time to flip properties. Let’s explore the answer.  

First we need to define what “flipping” is. My definition of flipping is to purchase a property with the intent to resell that property at a profit. Personally I buy every property with the intent of someday selling it at a profit and I suspect everyone does with the exception of the rare few that buy a home to live in for the rest of their lives. The variable is the amount of time you intend to hold the property before selling it at a profit. What we are really talking about is investing in real estate. Before you invest in real estate you need to determine what your personal goal is. Is your goal to instantly have a monthly positive cash flow? Are you looking to immediately make improvements to the property and sell as soon as possible? Do you intend to hold the property for a period of time that allows equity build up and dept reduction work on your behalf? For today let’s first look at the purchase of a property you hope to quickly resell for a profit.  

My first rule of investing is that I never buy a property today that I can not sell tomorrow for a profit. In other words make sure you are able to get a ROI (return on investment) on day one if you need to. You make your money when you buy. You must buy under market value. If your intent is to quickly flip a property that rule is of utmost important, especially in today’s market.  

Secondly you need to be very sure that you can resell the property AT A PROFIT! This means either you are incredibly in tune with the market conditions and values OR you have a real estate agent you can trust to give you accurate advice and counsel regarding property values and marketing trends. Remember to figure in the cost of sale when computing your numbers as well as the cost of the money used to buy the property.  

If your plan involves rehab of a property get written estimates upfront and plan for overruns! Inspect high ticket items such as: septic system, water systems, furnace, environmental concerns (mold, radon, etc.) Remember in a buyers market the only properties that sell are either steals in fair condition, great deals in good condition or good deals in great condition. Make sure you get written contracts for the repairs and keep your costs under budget.  

Know your targeted buyer and possible finance options. Some loan programs require a seller own a property for 90 days before they will finance a resale. It is always a challenge to finance a property that has recently been purchased for much less than the current sale price. Be prepared for this challenge.  

In general my answer to this customer is Yes……a buyers market is a great time to invest in real estate! Just know your goal, your plan and your market!  

If you have a real estate question you would like answered please feel free to email cathym@maine.rr.com