Reasons to Buy Real Estate Now

The “Three Reasons” below is a repost from the pages of REALTOR Magazine online, but essentially is what I’ve been saying for weeks, nay months!

The tax credits expired and everyone climbed under a rock! For a measly $8 to $18K in conditional tax credits buyers were jumping through hoops like they were handing out bars of gold. Do the math on 4% interest over 30 years on a distressed property that you bought for 10% below market. . .

So STOP listening to all the fearmongers and their media puppets screaming that the sky is falling. They’ve all got agendas. Be smart, do your homework and if it makes sense buy a home.

As a point of reference, interest rates on 30-year fixed conventional mortgages went to double digits in late 1978 and peaked at nearly 19% in late 1981. It wasn’t until early 1986 that rates dipped (briefly) below 10% again and were not permanently in single numbers until late 1990. In November of last year (2009) they were right at or just below 5%.

Three Reasons to Buy a Home Now

Stocks are up 50 percent from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World Investor stock newsletter.

As a result, Murphy is advising investors to buy now for these three reasons:

Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.

Little competition: Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.

Low rates: Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.

Source: MarketWatch, Michael Murphy (08/19/2010)

Posted at REALTOR Magazine online

For more information regarding this post or other real estate information visit LARealEstateINFO.net or contact Robert Dixon at RE/MAX Palos Verdes Realty, Telephone (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed. DRE License #01828273

Serving the Palos Verdes Peninsula & South Bay Beach Cities, Hollywood and the Hollywood Hills, Silver Lake, Echo Park – Angelino Heights, Los Feliz, the Greater Los Angeles area and Palm Springs.

SoCal Sales and Median Price Fall in July

July sales traditionally fall from June however a nearly perfect storm of elements combined last month to produce one of the worst Julys on record. I say “nearly” because interest rates are still fantastic and we can only imagine how ugly it may have been if the cost of money had gone up as well. 

  Sales Volume Median Price
All homes Jul-09 Jul-10 %Chng Jul-09 Jul-10 %Chng
Los Angeles    8,082 6,515 -19.4% $321,000 $339,000 5.6%
Orange         3,128 2,527 -19.2% $420,000 $450,000 7.1%
Riverside      4,699 3,529 -24.9% $185,000 $200,000 8.1%
San Bernardino 3,549 2,556 -28.0% $140,000 $155,000 10.7%
San Diego      3,809 3,070 -19.4% $320,000 $338,000 5.6%
Ventura        837 749 -10.5% $375,000 $370,000 -1.3%
SoCal          24,104 18,946 -21.4% $268,000 $295,000 10.1%

With record low interest, falling prices and an increase in inventory there is great opportunity for well qualified buyers. Even with a potential double-dip in property value, the amount saved in interest should more than balance out.  As the saying goes, you make money when you purchase real estate and with the abundance of distressed properties out there and buyers’ market environment, there is plenty of opportunity.

Cash buyers are definitely is the best position to take advantage, whether changing a primary residence or considering income properties. There’s a lot of single, multi-family and vacation homes currently on the market that have the potential to cover some or all of the cost of ownership. In the best case scenarios owners will see positive cash flow. There some situations where financed income properties can produce a profit, however these are generally larger and much more complex investment s than say 3 to 10 unit properties.

Whether buying and especially if selling, know you market. Be patient and understand what constitutes the best value in your chosen area. The most important thing for a seller now is to be realistic and understand that their home may be worth much more to them than the market will bear.

My job as is to educated my clients so that they know the right deal when it comes along.

For more information regarding this post or other real estate information visit LARealEstateINFO.net or contact Robert Dixon at RE/MAX Palos Verdes Realty, Telephone (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed. DRE License #01828273

Serving the Palos Verdes Peninsula & South Bay Beach Cities, Hollywood and the Hollywood Hills, Silver Lake, Echo Park – Angelino Heights, Los Feliz, the Greater Los Angeles area and Palm Springs.

Southern California Home Sales and Median Price Dip in July

August 17, 2010

La Jolla, CA—Southland home sales saw their biggest year-over-year drop in more than two years last month as the market lost most of the boost from the federal home buyer tax credits. The median sale price dipped for the second month in a row, the result of a shaky economic recovery, continued uncertainty about jobs, and the expiring tax breaks, a real estate information service reported.

A total of 18,946 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July. That was down 20.6 percent from 23,871 in June, and down 21.4 percent from 24,104 for July 2009, according to MDA DataQuick of San Diego.

This was the slowest July since 2007, when 17,867 homes were sold, and the second-slowest since July 1995, when 16,225 sold. Last month’s sales were 27.4 percent lower than the July average of 26,085 sales since 1988, when DataQuick’s statistics begin. The average change in sales between June and July is a 6.7 percent decline – about one-third the drop seen this year.

Last month’s 21.4 percent sales drop from a year ago marked the steepest year-over-year decline for Southland sales since March 2008, when sales fell 41.4 percent.

“It appears some of the sales that normally would have occurred in July were instead tugged into June or even May as buyers tried to take advantage of the expiring tax credits. Some of last month’s underlying technical numbers were largely flat, indicating that the market is treading water,” said John Walsh, MDA DataQuick president.

“We do expect some sideways buying and selling to kick in, especially among homeowners who have owned for more than seven years and didn’t take out equity during the frenzy. You may have to ‘discount’ your self-perceived home value, but if the person you’re buying from has to do the same thing, it doesn’t matter. And you may get a spectacularly low mortgage rate.”

The median price paid for a Southland home was $295,000 last month. That was down 1.7 percent from $300,000 in June, and up 10.1 percent from $268,000 for July 2009. The low point of the current cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 34.2 percent of the resale market last month, up from 32.8 percent in June but down from 43.4 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 36.0 percent of all mortgages used to purchase homes in July, down from 38.8 percent in June and 39.2 percent in July 2009.

Last month 21.9 percent of all sales were for $500,000 or more, compared with 21.6 percent in June and 19.2 percent a year ago. The low point for $500,000-plus sales was in February 2009, when 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 25.4 percent of homes sold for $500,000 or more.

Viewed a different way, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 30.8 percent of existing single-family house sales last month, up from 30.4 percent in June and 27.7 percent a year ago. Over the last decade those higher-end areas have contributed a monthly average of 33.3 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

High-end sales would be stronger if adjustable-rate mortgages (ARMs) and “jumbo” loans were easier to obtain. Both have become much more difficult to get since the credit crunch hit three years ago.

Last month ARMs represented 6.1 percent of all purchase loans, down from 6.7 percent in June but up from 3.4 percent in July 2009. Over the past decade, a monthly average of nearly 40 percent of all home purchase loans have been ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 18.4 percent of last month’s purchase lending, up from 17.6 percent in June and from 15.2 percent in July 2009. Last month’s figure was the highest since January 2008, when it was 18.7 percent. Before the August 2007 credit crisis, jumbos accounted for 40 percent of the market.

Absentee buyers – mostly investors and some second-home purchasers – bought 21.9 percent of the homes sold in July, paying a median of $220,000. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 26.7 percent of July sales, paying a median $218,250. In February this year cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.2 percent.

The “flipping” of homes has trended higher over the past year. Last month the percentage of Southland homes flipped – bought and re-sold – within a six-month period was 3.7 percent, while in June it was 3.4 percent and a year ago it was 2.0 percent. Last month flipping varied from as little as 2.8 percent in Orange County to as much as 4.4 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,204 last month, down from $1,251 in June, and up from $1,180 in July 2009. Adjusted for inflation, current payments are 46.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 56.1 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

Source: DQNews.com

Interest rate lower still…

Among the list of reasons for buying a home now verses later are historically low interest rates. Even if the market remains somewhat flat or depreciates again, rising interest rates would help to equalize any loss/gain. 
LA Times May 27, 2010
By E. Scott Reckard
Anyone out there still have the old-fashioned notion to retire their mortgage sooner rather than later?
Homeowners able to refinance were finding lenders offering 15-year fixed-rate mortgages at an average of 4.21% this week, according to Freddie Mac — the lowest rate since the mortgage company started tracking the 15-year loan in 1991.
Heavy demand for 10-year U.S. Treasury bonds has pushed their yield to the lowest level of the year. That’s the typical benchmark for fixed mortgages — and boy have rates followed, with Freddie Mac reporting the average for a 30-year fixed home loan falling to 4.78%.

That’s down from 4.84% a week earlier and not far from the record low of 4.71% set back in December.

Since the Freddie Mac survey reflects what lenders are offering, not actual contracts for loans, the rates obtained by well-qualified borrowers are often slightly lower, experts say.

Freddie Mac gathers information about rates available to well-qualified borrowers who make a down payment of at least 20% or have equivalent equity in their homes if they are refinancing. The borrowers in this week’s survey would have paid 0.7% of the loan balance to the lenders in upfront fees and discount points, Freddie Mac said.

Last year, the experts expected residential mortgage rates would be rising by now, as federal housing and home-loan support programs expired, home prices stabilized and inflation became more of a concern.

Then the latest default scare reared its head — this time involving not U.S. home loans but the debt loads carried by Greece and other weaker European economies. And just like that, the flood of money began to the safe haven of debt issued by Uncle Sam.

“Just when we thought we were finally experiencing [the anticipated rate increase] we got the PIGS,” said Stew Larsen, head of mortgage banking operations for Bank of the West, referring to an acronym for the nations Portugal, Italy, Greece and Spain.

For those hungry for lower rates, is this the last big chance to head to the trough?

Big Banks want MORE!!!

Big Banks and Financial Companies, the same institutions that set the stage for our current downturn, got billions in tax-payer bail-outs and are already becoming profitable (while many American’s continue to struggle or worry) would like yet another pound of flesh from those caught in the cross-fire.


It’s important to note that most of the recent and pending foreclosure activity IS NOT subprime, but prime loans and mortgages. These are A-paper borrowers succumbing to extreme economic challenges.


The piece below, from the CALIFORNIA ASSOCIATION OF REALTORS® provides information and background.

When is Enough, Enough?
The Big Banks are Opposing C.A.R.’s Bill to Protect Borrowers

C.A.R. is sponsoring SB 1178 (Corbett) to extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and are now facing foreclosure. Most homeowners didn’t even know that when they refinanced they lost their legal protections, and now may be personally liable for the difference between the value of the foreclosed property and the amount owed to the lender. SB 1178 will be voted on soon by the entire Senate.

One can’t help but think, “when is enough, enough?” Banks have already foreclosed upon a family’s home and now lenders can continue to hound them for additional payment. How much more money can today’s families afford to pay when they’ve already lost their homes and most likely their jobs? Are they never to have the opportunity to begin again?

Action Item
Call Senator Rod Wright Today at 1-800-672-3135
Urge him to vote “Yes” on SB 1178.
Non-C.A.R. members enter PIN number — 182003468

Background

California has protected borrowers from so called “deficiency” liability on their home mortgages since the 1930s, but the evolution of mortgage finance requires the statute to be updated.

Current law says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner’s liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers who are brought down by financial crisis to get back on their feet.

Unfortunately, the 1930s law does not extend the protection for purchase money mortgages to loans that re-finance the original purchase debt — even if the re-finance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to re-finance their mortgages, yet almost no one realized that by re-financing their mortgages to obtain a lower rate, they were forfeiting their protections. These borrowers became personally liable for the balance of the loan.

C.A.R. is Sponsoring SB 1178 Because:

SB 1178 is fair. Home buyers, and lenders, entered into the purchase with the idea that the mortgage would be non-recourse debt, and that the lender would look to the security (the house) itself to make good on the debt if the borrower cannot. It meets the legitimate expectation of the borrowers, who have no idea that they are losing this protection by a re-finance. Homeowners didn’t know that their re-finance exposed them to personal liability, and new tax liability, on the note. It would be unfair to allow a lender, or someone that has purchased a note from a lender, to pursue the borrower beyond the value of the agreed upon security.

SB 1178 is consistent with the intent of the orginal law and simply updates it for modern times. Current law was intended to ensure that if someone lost their home to foreclosure, they wouldn’t be liable for additional payment. Since the law was passed over 70 years ago, homeowners re-financing from the original loan to lower their interest rate has become commonplace. The 1930s legislature didn’t anticipate how mortgages would change over time.

Lenders could pursue families to collect this “deficiency” debt years down the road. Under current law, lenders have up ten years to collect on the additional debt after a judgment has been entered on the foreclosure. Years after a family has lost their home, they could find themselves in even more financial trouble. Lenders could even sell these accounts to aggressive collection agencies or even bundle them into securities. The end result would be banks who didn’t lend responsibly in the first place coming after families for even more money that they don’t have.

SB 1178 does NOT apply to “cash-out” re-finances, unless the money was used to improve the home and it doesn’t apply to HELOCs.

October home sales rise 10.1% from September

Obviously this is based on National sales and South Bay in general; the beach cities, Palos Verdes Peninsula and surrounding communities are affected to varying degrees as well, however we are somewhat different when compared to the country as a whole. For instance median home value in Torrance alone is $492k, more than twice the national average. You can nearly double that again for Rancho Palos Verdes. There are currently 24 financially “distressed” properties (Short Sale, REO, NOD) listed on the MLS on the Palos Verdes Peninsula and 102 in the western extreme of the area from El Segundo south to the peninsula. RD

October home sales rise 10.1% from September

From the Associated Press
November 23, 2009 7:40 a.m.

WASHINGTON — Home sales far exceeded expectations last month, surging to the highest level in 21/2 years as first-time buyers rushed to take advantage of an expiring tax credit.

The National Association of Realtors said today that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.

The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.

The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. “There was a lot of rush and hurry to complete sales” before the deadline, said Lawrence Yun, the trade group’s chief economist.

But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.

The new deadline means that “we’re going to see some good activity coming out of the spring,” said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.

Sales, which were nearly 24 percent above last year’s level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.

The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.

In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.

The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That’s a 7 month supply at the current sales pace, and close to a healthy stock of about six months.

Nationwide sales are up nearly 37 percent from their bottom in January, but are still off about 16 percent from the peak in autumn 2005.

Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.

But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.

A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.

Source: The Los Angeles Times

New $6,500 federal tax credit for ‘MOVE-UP’ Home Buyers

If you fit the criteria and are considering buying another house in the coming year, you might want to speed up the process and close by the June 30 expiration date.

Reporting from Washington – Take a close, hard look at the new $6,500 federal tax credit for so-called move-up home buyers that passed the Senate and House recently. Though it’s been getting second billing to the original $8,000 credit for first-time purchasers — now extended by Congress through June 30 — the $6,500 credit for current homeowners just might have your name on it.

How does it work? When will it be available?

The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation that created it. This means that if you fit the key criteria — you’ve owned and lived in your home for a consecutive five out of the last eight years, and your adjusted household income doesn’t exceed $125,000 if you file taxes singly or $225,000 if you are married filing jointly — you can claim the credit as soon as you close on a qualifying house.

That could be next week, next month or next spring. There is no “move-up” requirement in the new credit. In fact, homeowners who plan to downsize into a smaller dwelling may prove to be significant users of the credit, along with people who are moving because of employment changes.

If you fit the criteria and are considering buying another house sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had planned, hey, why not?

Some other key features of the $6,500 credit you ought to know about:

* Whatever you intend to buy, the house cannot cost more than $800,000.

* The replacement house must become your main home. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure that you move into the new house on the day you close so that there is no question it was your principal residence at that time.

* Like the first-time buyer credit, the $6,500 version permits a variety of dwelling types for your purchase. These include new or existing single-family homes, condominiums, manufactured or mobile homes, and boats that function as your principal residence. You cannot claim the credit if you are buying a second home or an investment property.

* The Internal Revenue Service is required by Congress to scrutinize claims for tax credits — both for the $6,500 and the $8,000 credits — far more closely in the coming months than it did earlier this year. This is because federal investigators have documented significant instances of fraud — supposed home buyers who were as young as 4, and “sales” that were fabricated. Investigators also found numerous cases of technical violations, such as purchase transactions among immediate family members, which are prohibited.

The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress’ new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer’s filings from claiming the credit.

* Home buyers in 2009 — those who go to closing after Nov. 6 but no later than Dec. 31 — can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. Talk to your tax advisor regarding timing decisions.

* If you aren’t sure if you can make the deadlines established for the new credit — a binding contract by April 30 and a settlement by June 30 — do not assume that Congress will provide another extension. All the political and budgetary signs point the other way, and some of the primary authors of the credit insist that this is it — no more extensions next year. Take them at their word.

One consumer resource that answers frequently asked questions about both the $6,500 and $8,000 extended credits is http://www.federalhousingtaxcredit.com, sponsored by the National Assn. of Home Builders.

Source: LA Times.com November 15, 2009 by Kenneth R. Harney

Federal Homebuyers Tax Credit EXTEDNDED!

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,

2. Right to obtain legal title upon full payment of the purchase price,

3. Right to construct improvements,

4. Obligation to pay property taxes,

5. Risk of loss,

6. Responsibility to insure the property, and

7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)

• They do not use the home as your principal residence.

• They sell their home before the end of the year.

• They are a nonresident alien.

• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.(This does not apply for a home purchased in 2009.)

• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)

• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Source: Andre Hemmersbach, Mortgage Planner at American/California Financial Services, Inc. (310) 792-7539